ATA Q2 2025 Earnings Call Transcript

Quartr
Provided by Quartr
August 6, 2025

Key Takeaways

  • Positive Sentiment: Strong Q2 financial results: net revenues rose 8% to RMB55.9 million and gross profit increased 10.2% with margin up to 50.6% YoY.
  • Positive Sentiment: Operating efficiency improved as total expenses fell 9.4%, narrowing Q2 operating loss to RMB13.7 million from RMB20.8 million a year ago.
  • Positive Sentiment: Value-added services led growth with research-based learning and overseas study counseling revenues up 54.2% YoY, driving over 50% increase in combined offerings.
  • Negative Sentiment: Total student enrollment dipped 3.1% YoY in Q2 to 1,050, despite a 25.7% increase in project-based credit hours delivered.
  • Positive Sentiment: Full-year 2025 revenue guidance of RMB276 million to RMB281 million implies 3-5% growth, underpinned by portfolio training and expanded educational services.
AI Generated. May Contain Errors.
Earnings Conference Call
ATA Q2 2025
00:00 / 00:00

There are 3 speakers on the call.

Operator

Thank you, operator. Good evening to all of you joining us from The United States and good morning to all of you joining us from China. Please be advised that the discussions on today's call may include forward looking statements. Such forward looking statements involve certain risks and uncertainties that may cause actual results to differ materially from those contained in the forward looking statements. Please refer to the company's most recent SEC filings for a more complete description of risk factors that could affect its projections and assumptions.

Operator

The company assumes no obligation to update forward looking statements as a result of new information, future events or otherwise. Regarding the disclaimer language, I would also like to refer you to Slide two of the conference call presentation, which is accessible via the IR section of ACG's website. A simultaneous audio webcast is also accessible via the IR section of ACG's website, including the replay, which will be available for the next ninety days. ACG's CFO, Mr. Robai Sima, will start this call by highlighting the company's key operational achievements and financial highlights for second quarter twenty twenty five and will provide an overview of financial and operating results for second quarter and first half twenty twenty five and briefly discuss expectations for full year 2025.

Operator

President, Mr. Jun Zhang, will conclude the prepared remarks with an update on the company's long term growth strategy before opening the floor for questions. For those of you following the accompanying slide presentation, please refer to the slides for further details. With that, I'll turn the call over to ACG's CFO, Mr. Robai Sima.

Operator

Please go ahead, Mr. Sima.

Speaker 1

Thank you, Alice, and welcome everyone. Good evening to those in America and we appreciate everybody's time. As Alex mentioned, please refer to our earnings deck available on the IR side of our website and we go through our prepared remarks. Second quarter twenty twenty five was marked by year over year increase in net revenues and gross profit. Gross in net revenues was mainly attributed to increased contribution from overseas study counseling services, other educational services and research based learning services.

Speaker 1

Combined revenue of which increased by more than 50%. Continuing to fourth half twenty twenty five, we delivered strong growth for the six month period, highlighted by double digit increase in both net revenues and gross profit. We always recorded growth across all business lines. Our value added offerings including research based learning, overseas studies, counseling and other educational services were the primary drivers. Moving on to second quarter operational highlights.

Speaker 1

During second quarter twenty twenty five, our main revenues contributor remained portfolio training services, accounting for 68% of total net revenues. Our project based programs credit hours delivered increased by 25.7% compared to the second quarter twenty twenty four and contributed to about 76.7% of total credit hours delivered. Revenues from research based earnings, overseas study companies and other educational services accounted for increasingly important part of net revenues. Which grew by 54.2% compared to the prior year period as a result of more services delivered during the period. Despite Q2 normally being a slower quarter for its preferential offerings, we delivered a variety of high quality research based learning projects to ACG students, including several master classes and a new session of our Signature Program, the United Nations Sustainable Gold Art Gold Test.

Speaker 1

In addition, we introduced Cannes Film Festival United Tour, bringing students interested in film production to the forefront of one of the world's most prestigious and influential film festival from an immersive experience. We recorded significant revenue growth in overseas study counseling services. As a result of more services delivered, all students continue to explore study abroad options in world class universities and college. For Fall twenty twenty five admission results, we are more than excited to announce that ACG students have received more than 4,000 offers. And these offers and scholarship come from prestigious institutions across all of our four six major art disciplines, highlight results including offers in computer design at Cornell University and Carnegie Mellon University, architecture at Columbia University and Athens, music at Royal College of Music and Leeds Conservatoire, Film, Games and Animation at California Institution of Arts and Sheridan College Fine Arts at Royal College of Arts and SVA, as well as Fashion and Peasant School of Design and Central Science Martin's College of UAL.

Speaker 1

We also have students being accepted into the Master of Arts in Design Engineering, a double major program co designed by Boran University and Rhode Island School of Design. We are students who will have access to academic resources from both an Ivy League school and top art institutes. Moving on to the second quarter twenty twenty five key financial metrics. Total net revenues for second quarter twenty twenty five were RMB55.9 million, an increase of 8% of RMB51.8 million in the second quarter twenty twenty four, which were primarily due to increased revenue contributions from overseas study counseling programs, other educational services and research based learning services. Gross profit for second quarter twenty twenty five was RMB28.3 million, an increase of 10.2% from million in second quarter twenty twenty four, primarily due to higher net revenues.

Speaker 1

Gross margin also improved to 50.6% during second quarter twenty twenty five from 49.6% in the prior year period. Total operating expenses was RMB42.1 million in the 2025, a decrease of 9.4% from RMB46.5 million in the 2024. We will as a percentage of net revenues, total operating expenses decreased to 75.3% during second quarter twenty twenty five compared to 89.8% in the prior year period. The decrease in operating expense was due to an RMB2.6 million decrease in sales expenses related to lower headcount in sales personnel and decreased sales incentives. And RMB1.5 million decrease in general and administrative expenses as a result of decreased professional fees as well as RMB0.3 million decrease in research and development expenses as the APG system development was completed in Q2 twenty twenty four.

Speaker 1

As a result of higher net revenues and slightly lower operating expenses, loss from operational in second quarter twenty twenty five narrowed to RMB13.7 million from RMB20.8 million in the second quarter twenty twenty four. Net loss attributable to ACG during second quarter twenty twenty five was RMB10.8 million compared to RMB16.8 million in the prior year period. During the fourth half twenty twenty five, total net revenues increased to 11.8% to RMB111.7 million from RMB99.9 million in the prior year period. The increase was primarily attributable to increased contributions from research based learnings and overseas study counseling and other educational services. Gross profit for fourth half twenty twenty five were RMB53.7 million, an increase of 12.8% from the RMB47.6 million in fourth half twenty twenty four.

Speaker 1

As a result of increased revenue during the full period, gross margin also improved to 48.1% from 47.7 in fourth half twenty twenty four. Total operating expenses was RMB84.3 million in fourth half twenty twenty five, a decrease of 6.4% from RMB90.1 million in the fourth half twenty twenty four. Though as a percentage of net revenues, total operating expenses decreased to 75.5 percent from 90.2% in the prior year period. The decrease was primarily due to an RMB3.8 million decrease in sales expenses as a result of lower headcount in sales personnel and decreased sales incentives compared to full half twenty twenty four and RMB0.6 million decrease in research and development expenses and was partially offset by RMB2.5 million increase in general and administrative expenses related to development of new projects carried out in fourth quarter twenty twenty five. As a result of increased revenues and decreased operating expenses, loss from operations in the fourth half twenty twenty five narrowed to RMB30.5 million compared to RMB42.4 million in the fourth half twenty twenty four.

Speaker 1

Net loss attributable to ACG in the fourth half twenty twenty five was RMB24.1 million compared to RMB34.7 million. Moving to the balance sheet highlights. As of 06/30/2025, we had million in cash and cash equivalents, total assets of RMB444.2 million, total liabilities of RMB388.4 million and total shareholders' equity of RMB55.8 million. Moving on to year to date enrollment trends. Starting with student enrollment.

Speaker 1

For second quarter twenty twenty five, total student enrollment was ten fifty, decreased by 3.1% from the prior year period. The decrease in student enrollment was the result of normalized demand in our service in 2025 versus the rebound of student demand in 2023 and 2024. Portfolio training student enrollment for second quarter twenty twenty five was five fifty six and student enrollment for all other programs for second quarter twenty twenty five was four ninety four. Moving on to credit hours delivered. For second quarter twenty twenty five, credit hours delivered slightly increased by 0.3% compared to prior year period.

Speaker 1

We reported a 25.7% increase in project based programs, which in recent years have accounted for a continuously increasing percentage of total credit hours due to their flexibility and customization by design. And growth in total credit hours delivered was offset by decreased time based programs credit hours as majority of newly enrolled students opt for the project based track. With that, let's move to our expectation for full year 2025. We expect to report total net revenues of between approximately RMB276 million to RMB281 million for the year ended December 2025, which represent a year over year increase of around 3% to 5% from full year 2024. We anticipate paid portfolio training to remain the main pillar of revenues accompanied by increased contributions from all other lines of business.

Speaker 1

As we continue to improve current offerings and introduce new programs, our fiscal year twenty twenty five guidance range and related assumptions are based on the company's current business options, initiatives and rates for the year ended December 2025 and the current and preliminary view of existing domestic and international market conditions where all subject to change. I'd like to turn it over to Jun, who will expand upon our long term growth strategy. Jun, please go ahead.

Operator

Thank you, Sema. I will now discuss some recent execution highlights of our long term growth initiatives. We remain confident in our market position as a leading provider of high quality creative arts education services. While we see intensified competition this year after the release of pent up demand in 2024, we believe we're well positioned to achieve expected growth and continue to be a trusted partner to our students. Our financial and operational focus for the remainder of 2025 is on driving organic expansion across all lines of business and enhancing cost discipline and overall efficiency to improve bottom line results.

Operator

Organic growth remains at the core of our business expansion. We take pride in the quality and value our portfolio of offerings provide with ACG students. And keep in mind that these offerings are to be continuously improved and supplemented with new services and classes that address evolving student demands. As we have discussed over the past quarters, our project based programs have become a dominant contributor to our portfolio training services with a conscious effort, and our students have expressed their appreciation towards this efficient, flexible, and customizable track, which can be easily adjusted based on students' needs and application timelines. We're catering to a growing and diversified student population with different backgrounds and all levels of knowledge and experience in their interested ARC majors.

Operator

The extension of our student base is not limited to reaching older adults and younger generations, but also includes supporting a growing number of students who come from different arts backgrounds and possess hybrid skill sets across disciplines. Our job is to help students amplify how they demonstrate both the breadth and depth of their artistic capabilities in their application portfolios, and our strong, knowledgeable, and competent teaching team enables us to excel in this job. In a time of increased global competition, we help students plan for early preparation, building flexible and long term pathways from the moment they begin exploring the idea of starting arts abroad. For summer twenty twenty five, we have an exciting pipeline pipeline of new research based learning projects for ACG students. These include our regular recurring offerings such as the summer school camps to Japan and The US, two domestic themed travel programs focused on Chinese intangible cultural heritage in Dunhuang, Gansu Province and West Sichuan Province, as well as various in person sessions of master classes in Beijing, featuring a wide range of arts topics taught by lectures from reputable international colleges, including MIT, Yale University, University of Southern California, and Oxford University.

Operator

In third quarter twenty twenty five, we also launched several new theme travel programs to further diversify our offerings and enhance student experience, which include the Singapore Top School Art Study Camp, Berkley Music Performance Intensive Camp, as well as an ACG exclusive Harvard University Studio for Electroacoustic Composition Summer School co developed with Harvard University and UNESCO. Additionally, in response to the evolving student interest in career oriented and practical disciplines, we're planning and launching more new projects and experiences that align with long term career path such as those with a focus on computer design and or those that are interdisciplinary. In 2025, we will continue to strengthen and expand our geographic footprint, Expanding our international partnership network across the globe is an ongoing strategy of ACG, especially in the regions where we observe growing student interest. Besides traditionally popular countries like The US and The UK, we have noticed more students applying to top schools in South Korea and Northern Europe, alongside slightly more developed and better known markets such as Australia, France, Italy, Japan, and Singapore. We have explored and deployed additional approaches to streamline our business following the existing initiative to strategically allocate marketing resources to higher performing campus locations.

Operator

For the remainder of the year, we hope to continue implementing cost conscious methods, which include maintaining a lean sales team and using cost efficiency to the acquisition channels such as online marketing on partner platforms. In addition, we have begun organizing online group classes led by our most popular teachers in regional centers like Beijing to maximize classroom utilization, giving more students across the country access to best in class support and portfolio creation and application counseling. These initiatives have led to reduced operating expenses and we believe will serve as effective ways to improve our bottom line for the rest of 2025. In the balance of 2025, we remain focused on driving success for our students by helping them achieve their full potential. We're optimistic that we'll finish the year with strong note and believe that our competitive advantages execution of multi track growth strategies will continue to strengthen our role as a leading player in China's creative arts education market.

Operator

With that, operator, let's open it up for questions.

Speaker 2

Thank There are no questions at this time. I would like to turn the conference back over to Mr. Souma for closing remarks.

Speaker 1

To our Investor Relations forum, the Equity Group. We are always available to speak to investors and look forward to speaking with you all during our next earnings call. Thank you.

Speaker 2

Thank you. This will conclude today's conference. You may disconnect your lines at this time and thank you for your participation.

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