| Xiaofeng Ma | executive |
| Ruobai Sima | executive |
| Jun Zhang | executive |
Greetings. Welcome to ATA Creativity Global's Third Quarter 2024 Financial Results Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Alice Zhang with the Equity Group. Thank you. Alice, you may begin.
Thank you, operator. Good morning to all of you joining us from China, and good evening to all of you joining us from the United States.
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 various factors that could affect these projections and assumptions. 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 2 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 webcast -- of ACG's website, including the replay which will be available for the next 90 days.
ACG's Chairman and CEO, Mr. Kevin Ma, will start this call highlighting the company's third quarter and 9 months key operational and financial achievements. CFO, Mr. Ruobai Sima, will provide an overview of financial and operating results for third quarter and 9 months 2024, expectations for the remainder of 2024 and full year guidance. 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 company slide presentation, please refer to the slides for further details.
With that, I'll turn the call over to ACG's Chairman and CEO, Mr. Kevin Ma. Please go ahead, Mr. Ma.
Thank you, Alice. Welcome, everyone. Good evening to those in America. I appreciate everyone's time.
As Alice mentioned, please refer to our earnings taken a variable on the IR site of our website so we go through our prepared remarks.
During the third quarter of 2024, ACG continued to focus on providing curative service to our valued students and parents, -- product and service offering to the -- to our students growing and evolving needs, exploring new partnership with institutions within the art industry as well as seeking collaboration opportunities through different industries.
As [indiscernible], last third quarter of 2024 was a strong quarter for ACG in terms of net revenues and student enrollment. We reported double-digit growth in net revenues and overall student enrollment rates. This is highlighted by a secure student enrollment for our portfolio training programs as well as increased create our deliveries during the period.
For 9 months 2024, we saw equal strong year-over-year improvement on net revenues, overall enrollment rate and quick -- deliveries, all increased by more than 20% compared to 9 months 2023.
Portfolio trading service remains our main source of revenues, contributing more than 70% of our total revenues for both third quarter 2024 and the 9 months 2024. Within this part of the service, we continue to encourage students to sign up for project-based profiles.
As a result, this segment continues to account for the majority of our portfolio training services, responsible for 70% of total [indiscernible] in our [indiscernible] during the third quarter.
Thanks to our continuous -- in developing various programs and offerings, we are also seeing a growing in -- in other parts of our service. Student enrollments for research-based learning and overseas study considering increased by more than 20% compared to the third quarter 2023.
For this summer, our -- project has the same -- of the United Nations Sustainable Development Goals Arts Boot Camp to integrate a heritage category in China, 1 U.S. K-12 and 2 summer campus in London and [indiscernible].
In addition, for the first time since the pandemic, our [indiscernible] online market [indiscernible] with also positive ACG [indiscernible] providing students with the opportunity to study in person with actual joiners on the institutions and they are [indiscernible] general. We believe they have provide those various experience is one of ACG's core competence in the [indiscernible], which is due from our continuous investments in -- ongoing of the [indiscernible] in the academia and the industry as well as a strong global financial network that allow us across the world class resources.
During third quarter 2024, we continued to expand our partnership network by devising new strategic partnership with [indiscernible] consolidate in the U.K. and also started educational technology, which Jun will [indiscernible].
With that, I will hand over the call to Sima for a detailed overview of our financial and operating results for the third quarter and 9 months 2024 and our guidance for fiscal year 2024.
Thank you, Kevin, and I will start with third quarter and 9 months key financial metrics.
Total net revenue for third quarter 2024 were RMB 67.3 million, an increase of 13.1% from RMB 59.5 million in third quarter 2023, which was primarily due to increased revenue contributions from research-based earnings and portfolio training services.
Gross profit from third quarter 2024 was RMB 30 million, an increase of 2.6% from RMB 29.2 million in the third quarter 2023. Gross margin was 44.6% during third quarter 2024 compared to 49.2% in the prior year period. The decrease in gross margin was mainly a result of higher costs related to more teaching staff here as compared to third quarter 2023 to accommodate increased numbers of children and larger outsourcing costs related to research-based learning services.
Total operating expense was RMB 47.7 million in third quarter of 2024, an increase of 28.4% from RMB 37.1 million in the third quarter 2023. The increase was primarily due to an RMB 5.4 million increase in sales expenses related to increased number of sales personnel and marketing events as well as RMB 5.6 million increase in general and administrative expenses related to increased professional fees and business expansion-related investments.
As a result, loss from operations in the third quarter 2024 was RMB 17.6 million compared to RMB 7.9 million in the third quarter 2023. Net loss attributable to ACG during third quarter 2024 was RMB 14.7 million compared to RMB 7.3 million in the prior year period.
Turning to 9 months 2024. Total net revenues increased 21.1% to RMB 167.1 million from RMB 138 million in the prior year period. The increase was primarily attributable to increased contribution from portfolio training, research-based learning and overseas study [indiscernible] services.
Gross profit for 9 months 2024 was RMB 77.6 million, an increase of 24.6% from RMB 52.3 million in 9 months in 2023.
As a result of increased revenues during 9 months 2024, gross margin slightly improved to 46.4% from 45.1% in 9 months 2023.
Total operating expense was RMB 137.7 million in 9 months 2024, an increase of 22% from RMB 112.9 million in 9 months 2023. The increase was primarily due to RMB 14.4 million increase in sales expenses related to increased number of sales personnel to drive sales growth as well as RMB 10.5 million increase in general and administrative expenses related to increased professional fees and business expansion-related investments.
As a result, loss from operations in 9 months 2024 was RMB 60 million compared to RMB 50.6 million in 9 months 2023. Net loss attributable to ACG in 9 month 2024 was RMB 49.4 million compared to RMB 42.2 million.
Moving to the balance sheet highlights.
As of September 30, 2024, we had RMB 39.4 million in cash and cash equivalents, total assets of RMB 459.4 million, total liabilities of RMB 393.2 million and total shareholders [indiscernible] of RMB 66.2 million.
Moving on to year-to-date enrollment trends.
For 9 months 2024, total student enrollment increased by 20% as compared to 9 months 2023, supported by strong student interest growth in both CV portfolio training and our other programs. Portfolio training student enrollment for 9 months 2024 increased by 20.7% to 2,220, and our other program student enrollment for 9 months 2024 increased by 19.1% to 1,523. [indiscernible] delivered for portfolio training services and historically higher due to seasonal reasons and students start their portfolio creation work in the second half of the year for enrollment in the following fall semester.
For 9 months 2024, credit hours delivered significantly increased by 28.5% whereby time-based programs by the hour increased by 29% and progress-based programs by the hour increased by 28.3%.
We remain committed to offering high-quality services across our business line and to [indiscernible] guidance and [indiscernible] in their pursuit of study and career.
With that, let's move into guidance to full year 2024. We believe we are on track to achieve our full year 2024 revenue guidance for RMB 233 million to RMB 255 million, representing a year-over-year increase of 5% to 15% for full year 2023.
Our belief is based on the strong enrollment trend we are seeing and our ability to expand current services and offering.
For the remainder of 2024, portfolio training services will continue to serve as a primary growth driver for our business as well as important student acquisition channel for our other business.
I'd like to turn it over to Jun who will expand upon our long-term growth strategy. Jim, please go ahead.
Interpreted] Thank you, Sima.
Our growth strategy surrounds 4 main pillars: Organic growth; strengthening and expanding geographic footprint; launch of new services and potential M&A opportunities.
Starting with organic growth.
As Sima mentioned, we have been encouraging students to enroll in our portfolio training services to join the project-based track, which offers more flexible and customizable programs based on student needs. The overall strong enrollment trend that we're seeing in today's market is also exciting. We see more students from portfolio training services showing interest in our value-added offerings, such as research-based running and overseas study counseling services, resulting in increased student enrollments and hence, increased revenue contribution.
The engagement of our teaching staff in sales and product design process has also helped us improve program quality and boost sales.
We have expanded training center coverage in existing cities and concentrated regional resources from larger centers.
For example, we expanded our Shanghai and Beijing centers to serve more students during 2024. We recently opened the ACG London Center, extending ACG services to our students who have been admitted to U.K. colleges and are just embarking on their overseas life. At the London Center, we provide academic assistance student and an online networking events as well as to create support in addition to helping students settle down on the first few months of studying abroad.
Innovation and introduction of new research-based learning programs have been crucial to growing that line of business. To that end, we actively invest and explore new trends in art from computer-based arts majors such as visual art, user interaction, gaming design and AI-generated content to new art scenes and career options such as art therapists, green architecture, urban design and so on.
We continue to extend our global reach through growing our domestic and international network of institutional partnership. In third quarter 2024, we signed a new institutional partnership with Leeds Conservatoire, a procedures music conservatory in the U.K. with our Leeds Conservatoire lecturers will work with ACG in providing application insights and portfolio preparations to ACG students.
In addition, we also recently initiated a strategic cooperation with Oasis Star Educational Technology to jointly promote the integration of art and artificial intelligence. Utilizing Oasis Star's AI technologies and cloud platform, we expect to introduce AI support in upgrading our existing offerings and service delivery model, fueling our long-term growth via better products and services to our students.
This October, we again hosted the United Nations Sustainable Development Goals Arts Boot Camp, marking the third section of this series since we initially introduced it this May.
We also hosted our Shanghai Fashion Week program in October, students to the forefront of fashion week for students interested in fashion study in career in fashion design and brand management.
During October, ACG toured 10 cities in China as part of our awesome art education exhibition, inviting professors from institutions such as Rhode Island School of Design to get themed speeches and share applications tips and ACG alumni to share study experience and career advice.
We remain focused on growing our student registration, expanding demographics from students who want to pursue overseas study opportunities to working professionals who look to expand their career opportunities and to the general public who are willing to explore multiple topics of Art.
ACG's mission remains to act as a trusted partner for our students regardless of where they are in their academic or career path. We're well equipped to do so, and we'll continue to invest in our infrastructure and the teaching team to always make high-quality offerings available to our students.
With that, operator, let's open it up for questions.
[Operator Instructions] There are no questions at this time. I would like to turn it back over to Kevin for closing remarks.
Directly to us or our Investor Relations from the Equity Group.
We are always available to speak to investors, and look forward to speaking with you during our next earnings call. Thank you.
Thank you. This will conclude today's conference.
You may disconnect your lines at this time, and thank you for your participation.
[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]