ATA Creativity Global Reports 2020 Third Quarter Financial Results

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(Neutral)

Rhea-AI Sentiment

(Positive)

Tags

earnings

Rhea-AI Summary

ATA Creativity Global (AACG) reported its preliminary financial results for Q3 2020, showing a resurgence in student enrollment and revenues amid ongoing COVID-19 challenges. Net revenues reached RMB42.2 million (US$6.2 million), with a significant net income of RMB19.3 million (US$2.8 million), marking a turnaround from last year's loss. Total enrollments stood at 1,225 students, with a 50% increase in portfolio training. The company reported cash and equivalents of RMB111.9 million (US$16.5 million) as of September 30, 2020, indicating strong liquidity.

Positive

Net revenues increased to RMB42.2 million (US$6.2 million) in Q3 2020.
Net income of RMB19.3 million (US$2.8 million) compared to a net loss of RMB25.2 million in the prior year.
Student enrollment rose to 1,225, with 666 in portfolio training programs, a 50% increase in enrollment.

Negative

Ongoing COVID-19 impact affecting student enrollments and educational travel services.
Nine months 2020 net loss from continuing operations attributable to ACG of RMB33.3 million (US$4.9 million), although improved from RMB56.3 million in the previous year.

11/12/2020 - 04:05 PM

Conference Call on Thursday, November 12, 2020, at 8 p.m. ET with Accompanying Investor Presentation

BEIJING, China, Nov. 12, 2020 (GLOBE NEWSWIRE) -- ATA Creativity Global (“ACG” or the “Company”, Nasdaq: AACG), an international educational services company focused on providing quality learning experiences that cultivate and enhance students’ creativity, today announced preliminary unaudited financial results for the quarter and nine months ended September 30, 2020 (“Third Quarter 2020” and “Nine Months 2020”, respectively).

Third Quarter 2020 Highlights

During Third Quarter 2020, student enrollment was 1,225, of which 666 were enrolled in ACG’s portfolio training programs. Approximately 44,203 credit hours (i.e., the standard unit measuring educational credit for the portfolio training program; each credit hour equates to roughly one hour of time committed) were delivered during Third Quarter 2020.
Third Quarter 2020 net revenues of RMB42.2 million (US$6.2 million), primarily driven by revenues from portfolio training services
Student enrollments and net revenues, particularly those related to the educational travel services business, continued to be impacted by the coronavirus disease (“COVID-19”) during Third Quarter 2020.
Third Quarter 2020 net income attributable to ACG of RMB19.3 million (US$2.8 million), compared to net loss attributable to ACG of RMB25.2 million in the prior-year period
Nine Months 2020 net revenues of RMB101.3 million (US$14.9 million)
Nine Months 2020 net loss from continuing operations attributable to ACG of RMB33.3 million (US$4.9 million), compared to RMB56.3 million in the prior-year period
RMB111.9 million (US$16.5 million) in cash and cash equivalents as of September 30, 2020

Management Commentary

Mr. Kevin Ma, Chairman and CEO of ACG, stated, “During the third quarter of 2020, enrollment levels within our portfolio training program increased by 50% with credit hours delivered increasing by over 58% from the prior sequential quarter, which we feel is an incredible achievement considering many students continued to pursue their studies via online delivery when most would likely prefer to do so in-person. The public health situation in China continues to improve, and we are pleased that nearly all of our training centers have been able to resume traditional in-person delivery of coursework. ACG’s acquisition of Beijing Huanqiuyimeng Education Consultation Corp. (‘Huanqiuyimeng’) took place at an opportune time as the two companies had substantially assimilated by early 2020 when the pandemic hit, and it played a key role in our successful transitioning of coursework to the online platform. We worked to develop technology systems that would support Huanqiuyimeng’s daily operations and leveraged our leadership in finance, management and analysis, all of which were crucial elements contributing to our successful navigation of challenges created by the pandemic. The unique circumstances of the pandemic necessitated a transition to an online education model, which has proven advantageous for students who require the increased flexibility remote learning provides and for institutions that can now serve a much wider student population thanks to technology. We believe there remains a great deal of runway for growth, and we are optimistic for our future as we head into 2021.”

Outlook/Impact of COVID-19

Mr. Jun Zhang, President of ACG, stated, “We were pleased to see continued strong enrollment in Third Quarter 2020 as traditional in-person delivery of coursework became increasingly available and many students continued their educations online during the period. The fourth quarter tends to be our busiest time of the year as students are working in earnest to complete their portfolios ahead of year-end application deadlines for entry in the fall of 2021. Given the effects of the pandemic, we anticipate fourth quarter enrollments in our Portfolio Training Program will remain steady. While our educational travel business will continue to be impacted through the remainder of the year, the fall and winter tend to be lighter travel seasons, and we plan to continue offering alternatives to our traditional travel programs, mitigating the overall impact on our business. While the pandemic has undoubtedly overturned the economy and countless lives have been devastated by this disease, our students have shown a great deal of resilience, and we are proud that ACG as an institution has risen to the challenge of continuing to provide the educational opportunities our students seek. We believe we will emerge from the pandemic stronger than before and look forward to supporting our students with additional offerings and improved infrastructure well into the future.”

Operating Review

Enrollment Update

ACG student enrollment for Third Quarter 2020 was 1,225, of which 666 were enrolled in its portfolio training programs, which consist of time-based programs and project-based programs.

A total of 44,203 credit hours were delivered for portfolio training programs during Third Quarter 2020, of which 26,117 credit hours were delivered for time-based programs and 18,086 credit hours were delivered for project-based programs. These courses were delivered either in person through ACG’s nationwide training center network or via online platform.

The following is a summary of the credit hours delivered for ACG’s portfolio training programs, for the period beginning July 1, 2020, to September 30, 2020, compared to those for the prior-year period:

July 1 – Sept. 30, 2020

July 1 – Sept. 30, 2019

% Change

No. of Credit
Hours

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