• Total Net Revenue: RMB51.8 million, up 42.8% from RMB36.2 million in Q2 2023.
• Portfolio Training Services Revenue: RMB40.2 million, up 41.9% year over year.
• Gross Margin: Improved to 49.6% from 39.5% in the prior-year period.
• Net Loss: RMB16.8 million, compared to RMB17.2 million in Q2 2023.
• Enrollment Growth: 1,084 new enrollments, a 16.8% increase from the prior year.
• Cash and Cash Equivalents: USD5.5 million at the end of Q2 2024.
• Working Capital Deficit: USD40.7 million, compared to USD34.4 million at December 31, 2023.
• Total Shareholders Equity: USD11.0 million, down from USD15.9 million at December 31, 2023.
• Revenue Guidance for 2024: Expected to be in the range of RMB233 million to RMB255 million, a 5% to 15% increase from fiscal year 2023.

• Warning! GuruFocus has detected 2 Warning Sign with AACG.

Release Date: August 08, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• ATA Creativity Global (NASDAQ:AACG) reported a significant 42.8% increase in total net revenue for the second quarter of 2024, reaching RMB51.8 million.
• The company's core business, portfolio training services, saw a 41.9% year-over-year revenue increase, contributing RMB40.2 million.
• Enrollment in portfolio training programs increased by 16.8% year-over-year, with 612 students enrolled compared to 540 in the previous year.
• Gross margin improved significantly to 49.6% in the second quarter of 2024, up from 39.5% in the same period last year.
• AACG successfully hosted various educational events, including the United Nations Sustainable Development Goals Arts Boot Camp and the ACG Arts Education Exhibition, enhancing its market exposure and student engagement.

Negative Points

• Despite revenue growth, AACG reported a net loss of RMB16.8 million for the second quarter of 2024, only a slight improvement from RMB17.2 million in the prior-year period.
• Operating expenses increased by 30.2%, driven by higher general and administrative expenses and increased sales expenses due to performance bonuses and additional sales personnel.
• The company reported a working capital deficit of USD40.7 million at the end of the second quarter, compared to USD34.4 million at the end of 2023.
• Total shareholders' equity decreased to USD11.0 million as of June 30, 2024, from USD15.9 million at the end of 2023.
• AACG's financial results are subject to risks and uncertainties, which could cause actual results to differ significantly from projections.

Q & A Highlights

Q: Can you provide more details on the growth in student enrollment and its impact on financial performance? A: Ruobai Sima, CFO, explained that student demand for portfolio training services expanded significantly, contributing RMB40.2 million in revenue, a 41.9% increase year-over-year. Total net revenue grew by 42.8% to RMB51.8 million. Enrollment increased by 16.8%, with 612 students in portfolio training programs, leading to a 49.3% rise in training credit hours delivered.

Q: What are the expectations for revenue growth in the second half of 2024? A: Xiaofeng Ma, CEO, reiterated revenue expectations for the year ending December 31, 2024, projecting total revenues between RMB233 million and RMB255 million, representing a 5% to 15% increase from fiscal year 2023. The second half is historically stronger, and this trend is expected to continue.

Q: How is ACG planning to expand its business and student base? A: Xiaofeng Ma, CEO, stated that ACG is focused on growing its student base and expanding current business offerings. The company is also exploring potential acquisition opportunities and will update the market on any material developments.

Q: Can you elaborate on the recent educational initiatives and their reception? A: Jun Zhang, President, highlighted the success of the United Nations Sustainable Development Goals Arts Boot Camp and other immersive cultural experiences. These initiatives have been well-received, providing students with unique learning opportunities and enhancing their portfolios for overseas applications.

Q: What is the outlook for ACG's overseas study counseling services? A: Xiaofeng Ma, CEO, noted a positive trend in the number of offers received by ACG students from top global institutions. This indicates increased demand for overseas study opportunities, which bodes well for the counseling services business.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.