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, 2022
(“First Quarter 2022”).
First Quarter 2022 Highlights
- During First Quarter 2022, student
enrollment was 997, an increase of 3.4% from 964 in the prior-year
period. Of these students, 537 were enrolled in ACG’s portfolio
training programs. Approximately 27,494 credit hours were delivered
during First Quarter 2022, compared to 27,865 in the prior-year
period
- First Quarter 2022 net revenues of
RMB42.1 million (US$6.6 million), an increase of 12.1% from RMB37.6
million in the prior-year period
- First Quarter 2022 net loss
attributable to ACG improved to RMB15.9 million (US$2.5 million),
compared to RMB19.0 million in the prior-year period
- RMB62.4 million (US$9.8 million) in
cash and cash equivalents as of March 31, 2022
Management Commentary
Mr. Kevin Ma, Chairman and CEO of ACG, stated, “We were
pleased to begin 2022 on a positive note, delivering stable
year-over-year growth in total revenues driven primarily by growth
in our portfolio training and overseas study counselling services
businesses, which helped us to continue reducing losses. We saw a
modest increase in student enrollment with credit hours delivered
remaining stable during the period. Students have continued to
express interest in our research-based learning offerings including
a variety of themed domestic travel programs. For example, our
Environmental Protection Cultural and Creative Design Camp held in
Xidao, an island in Hainan province, received positive feedback
from participating students who had the opportunity to learn from
artists at the Xidao Protection Center, recycle marine products and
create both individual and group original artwork. We are very
pleased that many of our students have received offers of admission
from top schools, some of whom have also been awarded scholarships.
ACG is committed to enabling positive outcomes for its students and
will strive to maintain the quality of our continually expanding
offerings and teaching staff.”
Outlook
Mr. Jun Zhang, President of ACG, stated, “We continue to be in a
state of gradual recovery as ACG navigates the ongoing challenges
caused by the recent resurgence of COVID-19 throughout China, which
has had a notable impact on some of our core cities such as
Shanghai. We believe that our performance throughout the pandemic
is a testament to ACG’s resilience and resourcefulness in the face
of unprecedented circumstances. In light of temporary lockdowns in
certain cities, we have successfully transitioned the majority of
our offline courses to online delivery for students impacted by
lockdowns and will continue to operate in line with local
government guidelines. Since launching our research-based learning
services business in 2020, students have embraced the possibility
of learning through hands-on experience, and we continue to see
demand for these offerings grow, resulting in increased revenue
contributions over time. As countries around the world begin to
relax travel restrictions, we believe the demand for research-based
learning and overseas study counselling services will continue to
gradually increase. Meanwhile, we continue to explore opportunities
to develop new programs that would enable ACG to better serve
existing students and potentially open doors for other student
populations interested in an arts education. With China’s national
educational efforts in mind, we remain positive in the future of
the creative arts education industry while being vigilant and are
constantly exploring new partnerships with schools and institutions
for future business opportunities.”
Operating Review
Enrollment Update
ACG student enrollment for First Quarter 2022 was 997, of which
537 were enrolled in its portfolio training programs, which consist
of time-based programs and project-based programs.
A total of 27,494 credit hours were delivered for portfolio
training programs during First Quarter 2022, of which 13,070 credit
hours were delivered for time-based programs and 14,424 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 2022, compared
to those for the prior-year period:
|
|
FirstQuarter Ended Mar. 31,
2022 |
|
|
FirstQuarter Ended Mar. 31,
2021 |
|
|
% Change |
|
|
No. of Credit Hours |
|
|
No. of Credit Hours |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Time-based Program |
|
|
13,070 |
|
|
|
16,135 |
|
|
|
(19.0%) |
Project-based Program |
|
|
14,424 |
|
|
|
11,730 |
|
|
|
23.0% |
Total |
|
|
27,494 |
|
|
|
27,865 |
|
|
|
(1.3%) |
During First Quarter 2022, 460 students were enrolled in ACG’s
other programs, which mainly consisted of overseas study
counselling, research-based learning services and foreign language
training services.
First Quarter 2022 Financial Review – GAAP
Results
ACG’s total net revenues for First Quarter 2022 increased 12.1%
to RMB42.1 million (US$6.6 million), from RMB37.6 million in the
prior-year period, which was primarily due to increased
contributions from the portfolio training and overseas study
counselling services businesses. Revenues from portfolio training
programs were RMB26.7 million, or 63.3% of total net revenues,
during the period. Revenues from overseas study counselling,
research-based learning services and other educational services
were RMB15.4 million, or 36.7% of total net revenues, during the
period.
Gross profit for First Quarter 2022 increased 29.6% to RMB19.3
million (US$3.0 million), from RMB14.9 million in the prior-year
period. Gross margin improved to 45.7% during the period, compared
to 39.6% in the prior-year period.
Total operating expenses for First Quarter 2022 were RMB38.0
million (US$6.0 million), compared to RMB38.1 million in the
prior-year period. Sales and marketing expenses increased by RMB1.4
million due to increased labor costs associated with increased
headcount, which was offset by a decrease in general and
administrative expense of RMB0.6 million mainly due to decreased
professional fees as well as a decrease in research and development
expense of RMB0.8 million, which was primarily caused by a decrease
in research and development expense related to the K-12 education
assessment business, which was disposed of in June 2021.
Loss from operations for First Quarter 2022 improved to RMB18.8
million (US$3.0 million), compared to RMB23.2 million in the
prior-year period, primarily as a result of the increased gross
profit mentioned above.
Net loss attributable to ACG for First Quarter 2022 improved to
RMB15.9 million (US$2.5 million), from RMB19.0 million in the
prior-year period.
For First Quarter 2022, basic and diluted losses per common
share attributable to ACG were both RMB0.25 (US$0.04), compared to
RMB0.33 for the prior-year period. Basic and diluted losses per ADS
attributable to ACG were both RMB0.50 (US$0.08), compared to
RMB0.66 in the prior-year period.
Non-GAAP Measures
Adjusted net loss attributable to ACG for First Quarter 2022,
which excludes share-based compensation expense and foreign
currency exchange gain, net (non-GAAP), was RMB15.6 million (US$2.5
million), compared to adjusted net loss of RMB18.9 million in the
prior-year period.
Basic and diluted losses per common share attributable to ACG
excluding share-based compensation expense and foreign currency
exchange gain, net (non-GAAP) for First Quarter 2022, were RMB0.25
(US$0.04). Basic and diluted losses per ADS attributable to ACG
excluding share-based compensation expense and foreign currency
exchange gain, net (non-GAAP) for First Quarter 2022 were RMB0.50
(US$0.08).
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 2022 were 31.4
million. Each ADS represents two common shares.
Balance Sheet Highlights
As of March 31, 2022, ACG’s cash and cash equivalents were
RMB62.4 million (US$9.8 million), working capital deficit was
RMB204.9 million (US$32.3 million), and total shareholders’ equity
was RMB174.7 million (US$27.6 million); compared to cash and cash
equivalents of RMB71.3 million, working capital deficit of RMB192.6
million, and total shareholders’ equity of RMB190.9 million,
respectively, as of December 31, 2021.
Conference Call and Webcast Information (With
Accompanying Presentation)
ACG will host a conference call at 9 p.m. Eastern Time
on Thursday, May 12, 2022 (9 a.m. Beijing time on Friday, May 13,
2022), during which management will discuss the results of the
quarter ended March 31, 2022.
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://services.choruscall.com/mediaframe/webcast.html?webcastid=BHbBajpE.
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 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,”
“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; market demand for ACG’s portfolio
training programs and other education services mainly including
research-based learning and overseas study counselling services;
the impact of COVID-19 on ACG and its operations; and ACG’s plan
and anticipated benefits of the measures implemented in response to
COVID-19.
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 COVID-19
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, 2021,
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,
2021.
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,
2022, into U.S. dollars are included solely for the convenience of
readers and have been made at the rate of RMB6.3393 to US$1.00, the
noon buying rate as of March 31, 2022, in New York for cable
transfers in RMB per U.S. dollar as set forth in the H.10 weekly
statistical release of the Federal Reserve Board. Such translations
should not be construed as representations that RMB amounts could
be converted into U.S. dollars at that rate or any other rate, or
to be the amounts that would have been reported under U.S.
generally accepted accounting principles (“GAAP”).
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 |
|
415-568-2255 |
simaruobai@acgedu.cn |
|
csohn@equityny.com |
|
|
|
|
|
Alice Zhang, Investor Relations
Analyst |
|
|
212-836-9610 |
|
|
azhang@equityny.com |
ATA CREATIVITY GLOBAL AND
SUBSIDIARIESUNAUDITED CONDENSED CONSOLIDATED
BALANCE SHEETS
|
|
December 31, |
|
|
March 31, |
|
|
March 31, |
|
|
|
|
2021 |
|
|
2022 |
|
|
2022 |
|
|
|
|
RMB |
|
|
RMB |
|
|
USD |
|
|
ASSETS |
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
Cash and cash equivalents |
|
71,339,361 |
|
|
62,413,833 |
|
|
9,845,540 |
|
|
Accounts receivable |
|
938,189 |
|
|
352,000 |
|
|
55,527 |
|
|
Prepaid expenses and other current assets |
|
3,129,600 |
|
|
6,629,687 |
|
|
1,045,807 |
|
|
Total current assets |
|
75,407,150 |
|
|
69,395,520 |
|
|
10,946,874 |
|
|
|
|
|
|
|
|
|
|
Long-term investments |
|
38,000,000 |
|
|
38,000,000 |
|
|
5,994,353 |
|
|
Property and equipment, net |
|
36,503,984 |
|
|
35,829,815 |
|
|
5,652,014 |
|
|
Intangible assets, net |
|
93,352,778 |
|
|
89,224,444 |
|
|
14,074,810 |
|
|
Goodwill |
|
194,754,963 |
|
|
194,754,963 |
|
|
30,721,840 |
|
|
Other non-current assets |
|
26,739,026 |
|
|
26,085,747 |
|
|
4,114,925 |
|
|
Right-of-use assets |
|
42,417,409 |
|
|
40,523,614 |
|
|
6,392,443 |
|
|
Total assets |
|
507,175,310 |
|
|
493,814,103 |
|
|
77,897,259 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
Accrued expenses and other payables |
|
48,174,095 |
|
|
48,130,774 |
|
|
7,592,442 |
|
|
Lease liabilities-current |
|
17,351,427 |
|
|
17,451,419 |
|
|
2,752,894 |
|
|
Deferred revenues |
|
202,453,092 |
|
|
208,692,644 |
|
|
32,920,456 |
|
|
Total current liabilities |
|
267,978,614 |
|
|
274,274,837 |
|
|
43,265,792 |
|
|
|
|
|
|
|
|
|
|
Lease liabilities-non-current |
|
23,365,840 |
|
|
22,106,024 |
|
|
3,487,140 |
|
|
Deferred income tax liabilities |
|
24,931,322 |
|
|
22,767,992 |
|
|
3,591,562 |
|
|
Total liabilities |
|
316,275,776 |
|
|
319,148,853 |
|
|
50,344,494 |
|
|
|
|
|
|
|
|
|
|
Shareholders’ equity: |
|
|
|
|
|
|
|
Common shares |
|
4,720,147 |
|
|
4,720,147 |
|
|
744,585 |
|
|
Treasury shares |
|
(9,818,754 |
) |
|
(9,580,716 |
) |
|
(1,511,321 |
) |
|
Additional paid-in capital |
|
540,583,564 |
|
|
540,576,988 |
|
|
85,273,924 |
|
|
Accumulated other comprehensive loss |
|
(37,559,847 |
) |
|
(37,594,335 |
) |
|
(5,930,361 |
) |
|
Accumulated deficit |
|
(310,156,018 |
) |
|
(326,009,894 |
) |
|
(51,426,797 |
) |
|
Total shareholders’ equity attributable to
ACG |
|
187,769,092 |
|
|
172,112,190 |
|
|
27,150,030 |
|
|
Non-redeemable non-controlling interests |
|
3,130,442 |
|
|
2,553,060 |
|
|
402,735 |
|
|
Total shareholders’ equity |
|
190,899,534 |
|
|
174,665,250 |
|
|
27,552,765 |
|
|
Commitments and contingencies |
|
— |
|
|
— |
|
|
— |
|
|
Total liabilities and shareholders’ equity |
|
507,175,310 |
|
|
493,814,103 |
|
|
77,897,259 |
|
|
ATA CREATIVITY GLOBAL AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE
LOSS
|
|
Three-month Period Ended |
|
|
|
March 31, |
|
|
|
March 31, |
|
|
|
March 31, |
|
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2022 |
|
|
|
|
RMB |
|
|
RMB |
|
|
USD |
|
Net revenues |
|
|
37,589,545 |
|
|
|
|
42,138,629 |
|
|
|
|
6,647,205 |
|
|
Cost of revenues |
|
|
22,716,005 |
|
|
|
|
22,867,238 |
|
|
|
|
3,607,218 |
|
|
Gross profit |
|
|
14,873,540 |
|
|
|
|
19,271,391 |
|
|
|
|
3,039,987 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
|
2,516,726 |
|
|
|
|
1,683,070 |
|
|
|
|
265,498 |
|
|
Sales and marketing |
|
|
13,322,987 |
|
|
|
|
14,652,264 |
|
|
|
|
2,311,338 |
|
|
General and administrative |
|
|
22,264,258 |
|
|
|
|
21,713,488 |
|
|
|
|
3,425,219 |
|
|
Total operating expenses |
|
|
38,103,971 |
|
|
|
|
38,048,822 |
|
|
|
|
6,002,055 |
|
|
Other operating income, net |
|
|
6,238 |
|
|
|
|
5,505 |
|
|
|
|
868 |
|
|
Loss from operations |
|
|
(23,224,193 |
) |
|
|
|
(18,771,926 |
) |
|
|
|
(2,961,200 |
) |
|
Other
income: |
|
|
|
|
|
|
|
|
|
|
|
|
Interest income, net of interest expenses |
|
|
280,739 |
|
|
|
|
209,165 |
|
|
|
|
32,995 |
|
|
Foreign currency exchange gain, net |
|
|
87,620 |
|
|
|
|
1,191 |
|
|
|
|
188 |
|
|
Loss before income taxes |
|
|
(22,855,834 |
) |
|
|
|
(18,561,570 |
) |
|
|
|
(2,928,017 |
) |
|
Income tax benefit |
|
|
(2,719,696 |
) |
|
|
|
(2,130,312 |
) |
|
|
|
(336,048 |
) |
|
Net loss |
|
|
(20,136,138 |
) |
|
|
|
(16,431,258 |
) |
|
|
|
(2,591,969 |
) |
|
Net loss attributable to redeemable non-controlling interests |
|
|
(437,032 |
) |
|
|
|
— |
|
|
|
|
— |
|
|
Net loss attributable to non-redeemable non-controlling
interests |
|
|
(655,349 |
) |
|
|
|
(577,382 |
) |
|
|
|
(91,080 |
) |
|
Net loss attributable to ACG |
|
|
(19,043,757 |
) |
|
|
|
(15,853,876 |
) |
|
|
|
(2,500,889 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive
income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment, net of nil income
taxes |
|
|
90,499 |
|
|
|
|
(34,488 |
) |
|
|
|
(5,440 |
) |
|
Comprehensive loss attributable to ACG |
|
|
(18,953,258 |
) |
|
|
|
(15,888,364 |
) |
|
|
|
(2,506,329 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted losses per
common share attributable to ACG |
|
|
(0.33 |
) |
|
|
|
(0.25 |
) |
|
|
|
(0.04 |
) |
|
Basic and diluted losses per ADS
attributable to ACG |
|
|
(0.66 |
) |
|
|
|
(0.50 |
) |
|
|
|
(0.08 |
) |
|
RECONCILIATIONS OF NON-GAAP
MEASURESTO THE MOST COMPARABLE GAAP
MEASURES
|
|
|
Three-month Period Ended |
|
|
|
|
March 31, |
|
|
|
|
March 31, |
|
|
|
|
|
2021 |
|
|
|
|
2022 |
|
|
|
|
|
RMB |
|
|
|
RMB |
|
GAAP net loss attributable to
ACG |
|
|
(19,043,757 |
) |
|
|
|
(15,853,876 |
) |
|
Share-based compensation
expenses |
|
|
225,231 |
|
|
|
|
234,690 |
|
|
Foreign currency exchange
gain, net |
|
|
(87,620 |
) |
|
|
|
(1,191 |
) |
|
Non-GAAP adjusted net loss
attributable to ACG |
|
|
(18,906,146 |
) |
|
|
|
(15,620,377 |
) |
|
|
|
|
|
|
|
|
|
|
GAAP losses per common share
attributable to ACG |
|
|
|
|
|
|
|
|
Basic and diluted |
|
|
(0.33 |
) |
|
|
|
(0.25 |
) |
|
|
|
|
|
|
|
|
|
|
Non-GAAP adjusted losses per
common share attributable to ACG |
|
|
|
|
|
|
|
|
Basic and diluted |
|
|
(0.32 |
) |
|
|
|
(0.25 |
) |
|
ATA Creativity Global (NASDAQ:AACG)
Historical Stock Chart
From Aug 2024 to Sep 2024
ATA Creativity Global (NASDAQ:AACG)
Historical Stock Chart
From Sep 2023 to Sep 2024