ATA Creativity Global Reports First Quarter 2024 Financial Results
ATA Creativity Global (NASDAQ: AACG) reported a net revenue increase of 13.7% year-over-year for Q1 2024, reaching RMB48.1 million (US$6.7 million). Student enrollment grew by 24.9% to 1,370, and credit hours delivered rose by 21.3% to 33,527. However, the company posted a net loss of RMB17.9 million (US$2.5 million), consistent with the previous year's net loss. Gross profit increased by 16.8% to RMB21.9 million (US$3.0 million) with a gross margin of 45.5%. ACG maintained cash and cash equivalents of RMB57.6 million (US$8.0 million). Operating expenses increased to RMB43.6 million (US$6.0 million), attributed to hiring additional sales personnel. The company reaffirmed its 2024 revenue guidance of RMB233-255 million, predicting a 5-15% year-over-year growth.
- Net revenue increased by 13.7% year-over-year to RMB48.1 million (US$6.7 million).
- Student enrollment grew by 24.9% to 1,370.
- Credit hours delivered increased by 21.3% to 33,527.
- Gross profit rose by 16.8% to RMB21.9 million (US$3.0 million).
- Gross margin improved to 45.5% from 44.3% in the prior-year period.
- Cash and cash equivalents stood at RMB57.6 million (US$8.0 million).
- The company reaffirmed its 2024 revenue guidance of RMB233-255 million, predicting 5-15% year-over-year growth.
- Net loss increased to RMB17.9 million (US$2.5 million) compared to RMB17.8 million in the prior-year period.
- Operating expenses increased to RMB43.6 million (US$6.0 million), from RMB40.1 million in the prior-year period.
- Loss from operations was RMB21.7 million (US$3.0 million), compared to RMB21.3 million in the prior-year period.
- Working capital deficit increased to RMB266.3 million (US$36.9 million), from RMB244.0 million at the end of December 2023.
- Total shareholders’ equity decreased to RMB96.1 million (US$13.3 million) from RMB113.0 million as of December 31, 2023.
Insights
The financial results for ATA Creativity Global show a mixed performance for the first quarter of 2024. On the positive side, net revenues increased by
While the revenue growth is promising, the net loss indicates that the company’s aggressive expansion strategy is impacting short-term profitability. Investors should weigh the potential long-term benefits of increased student enrollment and course offerings against the immediate financial drawbacks.
Another point to consider is the company’s cash position. As of March 31, 2024, ACG had
Rating: 0 (Neutral)
ATA Creativity Global’s increase in student enrollment by
The strong enrollment growth in portfolio training programs, which constitute
However, the overall educational market is highly competitive and maintaining this growth trajectory will require continuous innovation and effective cost management. Investors should monitor the company's ability to sustain enrollment growth while balancing operational costs.
Rating: 1 (Positive)
Conference Call on Wednesday, May 15, 2024, at 8:30 a.m. ET with Accompanying Investor Presentation
BEIJING, May 14, 2024 (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 ended March 31, 2024 (“First Quarter 2024”).
First Quarter 2024 Highlights
- During First Quarter 2024, student enrollment was 1,370, an increase of
24.9% from 1,097 in the prior-year period. Of the 1,370 students, 863 were enrolled in ACG’s portfolio training programs. 33,527 credit hours were delivered during First Quarter 2024, an increase of21.3% from 27,630 in the prior-year period. - First Quarter 2024 net revenues of RMB48.1 million (US
$6.7 million ), an increase of13.7% from RMB42.3 million in the prior-year period. - First Quarter 2024 net loss attributable to ACG of RMB17.9 million (US
$2.5 million ), compared to RMB17.8 million in the prior-year period. This was primarily due to increased sales expenses related to the hiring of additional sales personnel, partially offset by increased gross profit during the period. - RMB57.6 million (US
$8.0 million ) in cash and cash equivalents as of March 31, 2024.
Management Commentary
Mr. Kevin Ma, Chairman and CEO of ACG, stated, “We are pleased to have achieved solid top line growth in First Quarter 2024, driven by continued growth in our core portfolio training services business, which reported a
Outlook
Mr. Jun Zhang, President of ACG, stated, “Following the success of our Arts Study Tour to U.S. universities in First Quarter 2024, we launched a boot camp in May focusing on Sustainable Development Goals (‘SDGs’), a concept created by the United Nations (‘UN’) to address global development issues concerning social, economic, and environmental sustainability. Lecturers at this boot camp include officers from United Nations Educational, Scientific and Cultural Organization (‘UNESCO’) and arts professors from institutions across Italy, and participating students have the opportunity to receive an internship certificate from UNESCO and to attend the United Nations University annual conference taking place this summer. In the current quarter, we have been offering online Master Classes, covering arts themes such as interior design, photography, and visual communication, which are taught by lecturers from renowned institutions including The University of Arts London and Rhode Island School of Design. We believe our institutional partnerships set us apart from other international creative arts education providers by enabling us to design and execute experiential learning projects such as these, and we remain committed to introducing relevant and state-of-the-art courses and programs to our students to enrich their academic journeys.”
Operating Review
Enrollment Update
ACG student enrollment for First Quarter 2024 was 1,370, of which 863 were enrolled in its portfolio training programs, which consist of time-based programs and project-based programs.
A total of 33,527 credit hours were delivered for portfolio training programs during First Quarter 2024, of which 10,825 credit hours were delivered for time-based programs and 22,702 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 First Quarter 2024, compared to those for the prior-year period:
| First Quarter Ended Mar. 31, 2024 | First Quarter Ended Mar. 31, 2023 | % Change | ||||
| No. of Credit Hours | No. of Credit Hours | |||||
| Time-based Program | 10,825 | 9,768 | ||||
| Project-based Program | 22,702 | 17,862 | ||||
| Total | 33,527 | 27,630 | 21.3% |
During First Quarter 2024, 507 students were enrolled in ACG’s other programs, which mainly consisted of overseas study counselling services and research-based learning services.
First Quarter 2024 Financial Review – GAAP Results
ACG’s total net revenues for First Quarter 2024 were RMB48.1 million (US
Gross profit for First Quarter 2024 was RMB21.9 million (US
Total operating expenses for First Quarter 2024 increased to RMB43.6 million (US
Loss from operations for First Quarter 2024 was RMB21.7 million (US
Net loss attributable to ACG for First Quarter 2024 was RMB17.9 million (US
For First Quarter 2024, basic and diluted losses per common share attributable to ACG were both RMB0.29 (US
Non-GAAP Measures
Adjusted net loss attributable to ACG for First Quarter 2024, which excludes share-based compensation expense and foreign currency exchange losses, net, was RMB16.9 million (US
Basic and diluted losses per common share attributable to ACG excluding share-based compensation expense and foreign currency exchange losses, net for First Quarter 2024, were RMB0.27 (US
Please see the note about non-GAAP measures and the reconciliation table at the end of this press release.
Other Data
The number of weighted average ADSs used to calculate both basic and diluted earnings per ADS for First Quarter 2024 were 31.4 million. Each ADS represents two common shares.
Balance Sheet Highlights
As of March 31, 2024, ACG’s cash and cash equivalents were RMB57.6 million (US
Guidance for Fiscal Year 2024
ACG is reiterating its previously provided guidance of total net revenues of between RMB233 million and RMB255 million for the year ending December 31, 2024, which represents a year-over-year increase of
Conference Call and Webcast Information (With Accompanying Presentation)
ACG will host a conference call at 8:30 a.m. Eastern Time on Wednesday, May 15, 2024 (8:30 p.m. Beijing time on Wednesday, May 15, 2024), during which management will discuss the results of the first quarter ended March 31, 2024.
To participate in the conference call, please use the following dial-in numbers about 10 minutes prior to the scheduled conference call time:
| U.S. & Canada (Toll-Free): | +1 (877) 407-9122 | |
| International (Toll): | +1 (201) 493-6747 |
| Local Access | ||||
| China: | (400) 120 2840 | |||
| Hong Kong: | (800) 965561 | |||
A live webcast of the conference call can be accessed at: https://event.choruscall.com/mediaframe/webcast.html?webcastid=tom9IqcJ.
An accompanying slide presentation will also be made available 30 minutes prior to the conference call at the investor relations section of ACG’s website (https://ir.atai.net.cn/). To listen to the webcast, please visit ACG’s website a few minutes prior to the start of the call to register, download, and install any necessary audio software.
A Q&A session will follow management’s prepared remarks. We welcome investor questions submitted by email in advance to the investor contacts listed below and ask individuals to please specify whether they would like to have their names and/or firms shared during the live Q&A session.
A replay will be available shortly after the call and will remain available for 90 days.
About ATA Creativity Global
ATA Creativity Global is an international educational services company focused on providing quality learning experiences that cultivate and enhance students’ creativity. ATA Creativity Global offers a wide range of education services consisting primarily of portfolio training, research-based learning services, overseas study counselling and other educational services through its training center network. For more information, please visit ACG’s website at www.atai.net.cn.
Cautionary Note Regarding Forward-looking Statements
This announcement contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the Private Securities Litigation Reform Act of 1995.
These forward-looking statements can be identified by terms such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,” “future,” “intend,” “look forward to,” “outlook,” “guidance,” “plan,” “should,” “will,” and similar terms and include, among other things, statements regarding ACG’s future growth and results of operations; ACG’s plans for mergers and acquisitions generally; ACG’s growth strategy, anticipated growth prospects and subsequent business activities; ACG’s 2024 guidance; market demand for, and market acceptance and competitiveness of, ACG’s portfolio training programs and other education services.
The factors that could cause the Company’s actual financial and operating results to differ from what the Company currently anticipates may include its ability to develop and create content that could accommodate needs of potential students, its ability to provide effective creative related international education services and control sales and marketing expenses, its recognition in the marketplace for services it delivered and branding it established, its ability to maintain market share amid increasing competition, its ability to identify and execute on M&A opportunities within the education sector and its ability to integrate the acquired business, the economy of China, uncertainties with respect to China’s legal and regulatory environments, the impact of the political tensions between the United States and China or other international tensions, and the impact of actual or potential international trade or military conflicts, and other factors stated in the Company’s filings with the U.S. Securities and Exchange Commission (“SEC”).
The financial information contained in this release should be read in conjunction with the consolidated financial statements and related notes included in the Company’s annual report on Form 20-F for its fiscal year ended December 31, 2023, and other filings that ACG has made with the SEC. The filings are available on the SEC’s website at www.sec.gov and at ACG’s website at www.atai.net.cn. For additional information on the risk factors that could adversely affect the Company’s business, financial conditions, results of operations, and prospects, please see the “Risk Factors” section of the Company’s Form 20-F for the fiscal year ended December 31, 2023.
The forward-looking statements in this release involve known and unknown risks and uncertainties and are based on current expectations, assumptions, estimates, and projections about ACG and the markets in which it operates. The Company undertakes no obligation to update forward-looking statements, which speak only as of the date of this release, to reflect subsequent events or circumstances, or changes in its expectations, except as may be required by law. Although the Company believes that its expectations and assumptions expressed in these forward-looking statements are reasonable, the Company cannot assure you that its expectations and assumptions will turn out to be correct, and investors are cautioned that actual results may differ materially from the anticipated results.
Currency Convenience Translation
The Company’s financial information is stated in Renminbi (“RMB”), the currency of the People’s Republic of China. The translations of RMB amounts for the quarter ended March 31, 2024, into U.S. dollars are included solely for the convenience of readers and have been made at the rate of RMB7.2203 to US
About Non-GAAP Financial Measures
To supplement ACG’s consolidated financial information presented in accordance with U.S. GAAP, ACG uses the following non-GAAP financial measures: net income (loss) excluding share-based compensation expense and foreign currency exchange gain or loss, and basic and diluted earnings (losses) per common share and ADS excluding share-based compensation expense and foreign currency exchange gain or loss.
The presentation of these non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. ACG believes these non-GAAP financial measures provide meaningful supplemental information about its performance by excluding share-based compensation expense and foreign currency exchange gain or loss, which may not be indicative of its operating performance.
ACG believes that both management and investors benefit from these non-GAAP financial measures in assessing its performance and when planning and forecasting future periods. These non-GAAP financial measures also facilitate management’s internal comparisons to ACG’s historical performance. ACG computes its non-GAAP financial measures using a consistent method from period to period. ACG believes these non-GAAP financial measures are useful to investors in allowing for greater transparency with respect to supplemental information used by management in its financial and operational decision making. A limitation of using non-GAAP net income (loss) excluding share-based compensation expense and foreign currency exchange gain or loss and basic and diluted earnings (losses) per common share and per ADS excluding share-based compensation expense and foreign currency exchange gain or loss is that share-based compensation charges and foreign currency exchange gain or loss have been, and are expected to continue to be for the foreseeable future, a significant recurring expense in ACG’s business.
Management compensates for these limitations by providing specific information regarding the GAAP amounts excluded from each non-GAAP measure. The table captioned “Reconciliations of Non-GAAP Measures to the Most Comparable GAAP Measures” shown at the end of this news release has more details on the reconciliations between GAAP financial measures that are most directly comparable to the non-GAAP financial measures used by ACG.
For more information on our company, please contact the following individuals:
| At the Company | Investor Relations | |
| ATA Creativity Global | The Equity Group Inc. | |
| Ruobai Sima, CFO | Carolyne Y. Sohn, Vice President | |
| +86 10 6518 1133 x 5518 | 408-538-4577 | |
| simaruobai@acgedu.cn | csohn@equityny.com | |
| Alice Zhang, Associate | ||
| 212-836-9610 | ||
| azhang@equityny.com |
| ATA CREATIVITY GLOBAL AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||||
| December 31, | March 31, | March 31, | |||||||
| 2023 | 2024 | 2024 | |||||||
| RMB | RMB | USD | |||||||
| ASSETS | |||||||||
| Current assets: | |||||||||
| Cash and cash equivalents | 60,167,232 | 57,592,646 | 7,976,489 | ||||||
| Accounts receivable | 2,235,490 | 1,367,395 | 189,382 | ||||||
| Prepaid expenses and other current assets | 8,042,169 | 19,796,035 | 2,741,719 | ||||||
| Total current assets | 70,444,891 | 78,756,076 | 10,907,590 | ||||||
| Long-term investments | 38,000,000 | 38,000,000 | 5,262,939 | ||||||
| Property and equipment, net | 30,235,985 | 31,078,594 | 4,304,336 | ||||||
| Intangible assets, net | 58,886,111 | 54,577,778 | 7,558,935 | ||||||
| Goodwill | 196,289,492 | 196,289,492 | 27,185,781 | ||||||
| Other non-current assets | 31,691,417 | 33,523,410 | 4,642,939 | ||||||
| Right-of-use assets | 23,391,247 | 36,319,671 | 5,030,216 | ||||||
| Total assets | 448,939,143 | 468,545,021 | 64,892,736 | ||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||
| Current liabilities: | |||||||||
| Accrued expenses and other payables | 49,146,103 | 50,231,121 | 6,956,931 | ||||||
| Lease liabilities-current | 13,110,449 | 16,341,694 | 2,263,298 | ||||||
| Deferred revenues | 252,145,949 | 278,490,583 | 38,570,500 | ||||||
| Total current liabilities | 314,402,501 | 345,063,398 | 47,790,729 | ||||||
| Lease liabilities-non-current | 9,496,422 | 18,671,249 | 2,585,938 | ||||||
| Deferred income tax liabilities | 12,066,513 | 8,682,345 | 1,202,491 | ||||||
| Total liabilities | 335,965,436 | 372,416,992 | 51,579,158 | ||||||
| Shareholders’ equity: | |||||||||
| Common shares | 4,730,128 | 4,730,128 | 655,115 | ||||||
| Treasury shares | (8,201,046 | ) | (8,201,046 | ) | (1,135,832 | ) | |||
| Additional paid-in capital | 545,222,465 | 546,295,081 | 75,660,995 | ||||||
| Accumulated other comprehensive loss | (37,004,507 | ) | (36,991,696 | ) | (5,123,291 | ) | |||
| Accumulated deficit | (391,709,172 | ) | (409,640,249 | ) | (56,734,519 | ) | |||
| Total shareholders’ equity attributable to ACG | 113,037,868 | 96,192,218 | 13,322,468 | ||||||
| Non-redeemable non-controlling interests | (64,161 | ) | (64,189 | ) | (8,890 | ) | |||
| Total shareholders’ equity | 112,973,707 | 96,128,029 | 13,313,578 | ||||||
| Commitments and contingencies | — | — | — | ||||||
| Total liabilities and shareholders’ equity | 448,939,143 | 468,545,021 | 64,892,736 | ||||||
| ATA CREATIVITY GLOBAL AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | |||||||||
| Three-month Period Ended | |||||||||
| March 31, | March 31, | March 31, | |||||||
| 2023 | 2024 | 2024 | |||||||
| RMB | RMB | USD | |||||||
| Net revenues | 42,318,375 | 48,125,819 | 6,665,349 | ||||||
| Cost of revenues | 23,559,317 | 26,215,352 | 3,630,784 | ||||||
| Gross profit | 18,759,058 | 21,910,467 | 3,034,565 | ||||||
| Operating expenses: | |||||||||
| Research and development | 956,105 | 1,030,262 | 142,690 | ||||||
| Sales and marketing | 18,586,014 | 22,561,908 | 3,124,788 | ||||||
| General and administrative | 20,563,305 | 20,006,938 | 2,770,929 | ||||||
| Total operating expenses | 40,105,424 | 43,599,108 | 6,038,407 | ||||||
| Other operating income, net | — | 23,088 | 3,198 | ||||||
| Loss from operations | (21,346,366 | ) | (21,665,553 | ) | (3,000,644 | ) | |||
| Other income (expense): | |||||||||
| Interest income, net of interest expenses | 226,151 | 333,145 | 46,140 | ||||||
| Foreign currency exchange losses, net | (52 | ) | (564 | ) | (78 | ) | |||
| Loss before income taxes | (21,120,267 | ) | (21,332,972 | ) | (2,954,582 | ) | |||
| Income tax benefit | (3,387,555 | ) | (3,384,168 | ) | (468,702 | ) | |||
| Net loss | (17,732,712 | ) | (17,948,804 | ) | (2,485,880 | ) | |||
| Net income (loss) attributable to non-redeemable non-controlling interests | 19,304 | (28 | ) | (4 | ) | ||||
| Net loss attributable to ACG | (17,752,016 | ) | (17,948,776 | ) | (2,485,876 | ) | |||
| Other comprehensive income (loss): | |||||||||
| Foreign currency translation adjustment, net of nil income taxes | (49,622 | ) | 12,811 | 1,774 | |||||
| Comprehensive loss attributable to ACG | (17,801,638 | ) | (17,935,965 | ) | (2,484,102 | ) | |||
| Basic and diluted losses per common share attributable to ACG | (0.28 | ) | (0.29 | ) | (0.04 | ) | |||
| Basic and diluted losses per ADS attributable to ACG | (0.56 | ) | (0.58 | ) | (0.08 | ) | |||
| RECONCILIATIONS OF NON-GAAP MEASURES TO THE MOST COMPARABLE GAAP MEASURES | ||||||
| Three-month Period Ended | ||||||
| March 31, | March 31, | |||||
| 2023 | 2024 | |||||
| RMB | RMB | |||||
| GAAP net loss attributable to ACG | (17,752,016 | ) | (17,948,776 | ) | ||
| Share-based compensation expenses | 553,284 | 1,072,616 | ||||
| Foreign currency exchange losses, net | 52 | 564 | ||||
| Non-GAAP adjusted net loss attributable to ACG | (17,198,680 | ) | (16,875,596 | ) | ||
| GAAP losses per common share attributable to ACG | ||||||
| Basic and diluted | (0.28 | ) | (0.29 | ) | ||
| Non-GAAP adjusted losses per common share attributable to ACG | ||||||
| Basic and diluted | (0.27 | ) | (0.27 | ) | ||
FAQ
What were AACG's net revenues for Q1 2024?
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