ATA Creativity Global
Q3 2021 Earnings Call Transcript

Published: 11 Nov 2021

[Operator:]

Greetings, welcome to the ATA Creativity Global's Third Quarter 2021 Financial Results Call. At this time all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Please note this conference is being recorded. And I'll now turn the conference over to your host, Carolyne Sohn. Thank you. You may begin.

[Carolyne Sohn:]

Thank you, operator, and hello, everyone. Thank you for joining us. The press release announcing ATA Creatively Global’s or ACG’s results for the third quarter ended September 30, 2021, is available at the IR section of the company’s website at www.atai.net.cn. As part of this conference call, the company has an accompanying slide presentation available on its website. A replay of this broadcast will also be made available at ACG’s website for the next 90 days. Before we get started, I would like to remind everyone that this conference call and any accompanying information discussed herein contain certain forward-looking statements within the meaning of the safe harbor provision of 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, intent, 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 and market acceptance and competitiveness of ACG's portfolio training programs and other education services, the impact of the COVID-19 pandemic and the acumen on ACG and its operations and ACG's plan and anticipated benefits of the measures implemented in response to the COVID-19 pandemic. Although the company believes that the expectations reflected in the forward-looking statements are reasonable as of today, those statements are subject to risks and uncertainties that could cause the actual results to differ dramatically from those projected. There can be no assurance that those expectations will prove to be correct. Information about the risks associated with investing in ACG is included in its filings with the Securities and Exchange Commission, which we encourage you to review before making an investment decision. The company does not assume any obligation to update any forward-looking statements as a result of new information, future events, changes in market conditions or otherwise, except as required by law. Regarding the disclaimer language, I would also like to refer you to Slide 02 of the conference call presentation for further information. All U.S. dollar amounts in this conference call relating to financial results for third quarter ended September 30, 2021, are converted from RMB using exchange rate of RMB6.4434 to US$1, the noon buying rate as of September 30, 2021. All historical conversions are accurate as of the time reported, unless otherwise noted. The company reported its financial results under U.S. GAAP in RMB, and all percentages calculated in the presentation are based on RMB, unless otherwise noted. For those of you following along with the accompanying PowerPoint presentation, there is an overview of the company on Slide 03. In addition, we are more than happy to take investor questions during today's Q&A session or via e-mail to the company. On today’s call, the company’s CFO, Ms. Amy Tung, will provide a brief overview of operating and financial highlights for third quarter of 2021. Chairman and CEO, Mr. Kevin Ma, and President, Mr. Jun Zhang, will follow with an update on the company’s outlook and its long-term growth strategy before opening the floor for questions. With that, I’ll turn the call over to ACG's CFO, Ms. Amy Tung. Please go ahead, Amy.

[Amy Tung:]

Thank you, Carolyne, and welcome, everyone. Good evening to those in America. We appreciate everyone's time. We are pleased to have achieved strong topline growth while increasing gross margins year-over-year during the first quarter of 2021. This was primarily contributed by increased services delivered during the period across all of major line of business

[Kevin Ma:]

Thank you, Amy. We are well-pleased with the during the period of uncertainty and in Shanxi in China education industry. The global pandemic had a significant impact on several days as they were unable to finishing it in all routine and which had include a sort of a test were operational with and presenters were implement in China. This will then except they did file a new opinion released by the government in later July, which focus the own company needs provide the off-school academic course; that's how we affiliate for students receiving computer education. I think it was able to successfully mitigate and they write about that and will put it in by the COVID-19 and always do it anticipated towards material impact on our business as a result of that with internet the last 40 week. This height on doing and so it's with regard to the pandemic, we're able to have strong quarter of performance in the third quarter of 2020. Highlighted by COVID, certain percent of gross of a topline and year-over-year improvement in gross margins. And Amy noted before, we are seeing increased demand for our research-based further inside which tend to be short-term programs that provide project base and high time learning experience. And we are exploring different options for expanding our operating's with the increased study time. We believe we are well-positioned as to prove our existing line of business with our current profile of growth of program offering us being mindful of the changing education landscape at a holiday leave of our students and substantial few students are involving as well. While the topic has to be great, and China has demanded a late purely stable with demand big demands and they continue through month. And it is as was closely, I'll enter that forces. Why the asset needs within the education that shipped where you had to continue investing our business and it's finished. If we did it, the partnership is within the industrial which we're served as probation for future growths. I will now like to hand it over to Jun Zhang, ACG's President to provide an update on our current growth initiatives. Jun will make his remarks in Mandarin, which will be followed by English translation. Jun, please go ahead.

[Jun Zhang:]

Thank you, Kevin.

[Carolyne Sohn:]

Thank you, Kevin. We are pleased with the resounding favorable response to alternative programs this summer. In spite not being able to offer our visual international study of art programs this past summer, we saw the students remained eager to learn and experience new things. We continue to explore various sites for themed domestic travel programs during the past summer such as Chuzhou in the province of Anhui. We also cooperate with new partners within the arts related industry both domestic and overseas in launching new offerings. For example, we partner with different businesses to launch the OpenHack series program which gave students hands-on learning opportunities onsite at various enterprises such as certain within car design and fashion design workshops. These students participated in a work piece showcase competition held at the close of the program and certain students who demonstrated excellent workmanship were invited to apply for future work or internship positions within these enterprises. These programs were very well received by our students. We've seen opportunities here to expand our research base learning services business due to current pent-up demand and are seeing the enrollment in these programs has remained strong beyond this summer months. As Kevin mentioned, the education landscape is changing and we are working to not only expand our course offerings but the way in which we structure art programs to offer students more flexibility to meet their needs. While some companies happen to force to close their doors and several others remaining, continue to struggle as a result of the pandemic, we have turned the corner and believe we're well-positioned to serve these students who wish to pursuing education and to extend the creative arts. With over 20 campus locations mix nationwide and a proven track record of our students going on to well-known creative institutions around the world, we remain confident in ACG's ability to stand out from our competitors. With that, I'll turn it back to Kevin.

[Kevin Ma:]

Okay, Jun and Carolyne. In closing, ACG has proven its ability to overcome challenges and withstand and have been strong on the outside. We've heading into mitigate the changing environment particularly from a regulatory perspective but remain confident that we will be able to use it on our growth initiatives despite they have certainties surrounding the education industry in China today. We're changing it to strive towards becoming the leading international provider of creative arts day-today in China by putting our students first. We look forward to winning our students new experience and learning opportunities that they are all to enhance their education. Everyone pays visits in here. With that, operator, may open up for questions.

[Operator:]

[Kevin Ma:]

Thank again to all of you who have joined us. If anyone has questions for us, please feel free to reach out directly to us or our Investor Relations firm, The Equity Group. We are always available to speak to investors and look forward as to speaking with you or during our next quarterly call. Thank you.

[Operator:]

This concludes today's conference. You may disconnect your lines at this time. Thank you, for your participation. And have a great evening.