Greetings. Welcome to ATA Creativity Global Second Quarter 2024 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. I will now turn the conference over to Alice Zhang of The Equity Group. Thank you. You may begin.

Thank you, operator, and hello, everyone. Thank you for joining us. The press release announcing ATA Creativity Global's or ACG's results for the second quarter and six months ended June 30, 2024 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, intend, look forward to, outlook, guidance, plans, should, will and similar terms that 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; ACG's 2024 guidance; market demand for and market acceptance and competitiveness of ACG's portfolio training programs and other education services. Although the company believes that the expectations reflected in its 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 marketing conditions or otherwise, except as required by law. Regarding the disclaimer language, I would also like to refer you to Slide 2 of the conference call presentation for further information. All U.S. dollar amounts in this conference call relating to financial results for the second quarter and 6 months ended June 30, 2024, are converted from RMB using an exchange rate of RMB 7.2672 to $1. The new buying rate as of June 30, 2024. All historical conversions are accurate as of the time reported, unless otherwise noted. The company reports the financial results on 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 3. In addition, we're more than happy to take investor questions during today's Q&A session or via e-mail to the company. If you wish to ask questions, you can send your questions to the e-mail address [email protected]. And please specify whether you would like to have your name read during the Q&A session. On today's call, the company's CFO, Mr. Ruobai Sima, will provide a brief overview of operating and financial highlights for the second quarter of 2024. 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, Mr. Ruobai Sima. Please go ahead, Mr. Sima.

Thank you, Alice, and welcome, everyone, and good evening to those in America. We appreciate everyone's time. We were pleased to see student demand for portfolio training services continue to trend positively in the second quarter of 2024. This is our core business and primary driver of growth contributing RMB 40.2 million in revenue during the period, a 41.9% year-over-year increase. As a result, we achieved significant top-line growth, a 42.8% increase in total net revenue to RMB 41.8 million. During the second quarter of 2024, enrollment was 5,084, an increase of 15.8% from the prior year period. Of those students, 612 were enrolled in ACG portfolio training programs compared to 540 in the second quarter of last year. 42,841 portfolio training credit hours were delivered during the period, up 49.3% year-over-year. We are excited to see continued expansion across all our business including research-based learning and overseas study counseling services. We strongly believe in the value our comprehensive offerings provide to students and the impact that the enrollment growth we have seen thus far in the year has. We also saw strong performance in the second half of 2024. Our investment in expanding the teaching and sales staff has contributed to those results and serves as a foundation for future growth. With that, let's move to financials for the second quarter of 2024. Total net revenues for the second quarter of 2024 were RMB 41.8 million, an increase of 42.8% from RMB 36.2 million in the second quarter of 2023. Gross margin improved to 49.6% during the second quarter of 2024 from 39.5% in the prior year period, primarily as a result of significantly increased revenue. Net loss attributable to ACG was RMB 15.8 million during the second quarter of 2024 compared to RMB 17.2 million in the prior year period. Bottom line results were impacted by a 30.2% increase in operating expenses related to increased G&A expenses for higher professional fees and expenses for business retention and increased sales expense due to performance bonuses in line with increased sales and additional sales personnel. During the first half of 2024, total net revenues increased 27.2% to RMB 99.9 million compared to RMB 78.6 million in the prior year period. Gross margin improved to 47.7% from 42.1% in the prior year period. Net loss attributable to ACG was RMB 34.7 million compared to RMB 35 million. Moving to the balance sheet, we reported $5.5 million in cash and cash equivalents at the end of the second quarter of 2024. Working capital deficit was $40.7 million and total shareholders' equity was $11 million at June 30, 2024, compared to a working capital deficit of $34.4 million and shareholders' equity of $15.9 million, respectively, at December 31, 2023. With that, I'd like to turn it over to Kevin, who will expand upon our outlook and growth strategy. Kevin?

Thank you, Sima. We are pleased to see ACG's portfolio of offerings continue to resonate with students, translating into meaningful financial results. As our portfolio training service grows, we believe the demand for overseas study counseling and research-based learning services will also expand. During the first half of 2024, we made mindful investments to add resources to help drive student enrollment and support the growing student population, which is imperative to enable positive student outcomes and our ability to achieve long-term success. We reported RMB 99.9 million in net revenues in the first half of 2024. As the second half of the year has historically been stronger than the first, we anticipate this trend will continue in 2024. We are reiterating our revenue expectations for the year ending December 31, 2024. We expect total revenue to be in the range of RMB 230 million to RMB 235 million, reflecting a 5% to 50% increase over fiscal year 2023. ACG remains focused on growing our student base and expanding our current business while exploring potential acquisition opportunities. As any material developments arise, we'll be sure to update the market and provide guidance as appropriate. ACG is a product of its ability to identify and fulfill students' needs in a supportive and creative environment. This is the cornerstone of our product design and execution, especially as our students are increasingly immersed in devices with academic and creative backgrounds. To that end, we have not only continued to engage teaching staff in the sales and product design process, but we also hosted the ACG Arts Education Exhibition in April across five major cities in China including Beijing, Shanghai, and Shenzhen. We invited former and current advisory committee officials from prestigious overseas universities such as MIT and Stanford University to join us in sharing their insights on overseas studies, applications, and career planning. The exhibition was met with extraordinary interest across all of our service offerings. Through a series of marketing efforts, we continue to increase our market exposure and engage with students interested in pursuing creative arts education in the future. During the second quarter of 2024, we successfully hosted the second session of the United Nations Sustainable Development Goals Arts Boot Camp for 70 students. Participating students ranged from high school to college age, and they collaborated on projects addressing sustainability topics including climate change, regenerative energy, and environmental protection. Our program provided students with hands-on experiences and individual works to strengthen their portfolio for school applications. We are very excited for many of our graduate ACG students who will begin their next phase of creative arts education at overseas institutions this fall. For all of 2024, we have seen significant growth in the number of offers received by ACG students. These offers have come from schools all over the world, including top institutions such as Harvard, Oxford, and the University of Pennsylvania, as well as leading arts institutions like the School of Visual Arts, the Pratt Institute, and the Parsons School of Design. We believe this positive trend in received offers is a strong indicator of increased student demand for overseas study opportunities, which bodes well for our overseas study counseling service business. We expect these trends to continue into the upcoming application period. Now I will hand the floor 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 an English translation. Jun, please go ahead.

Thank you, Kevin. As we have invested in the expansion of ACG's business, the quality of our products and services has remained top-notch. At the end of the day, our well-rounded offerings and our ability to support students in this journey are what really make all the difference. We have been pleased to host a variety of research-based learning experiences this summer, covering a wide range of topics and immersive cultural experiences. In July, we hosted a second session of the United Nations Sustainable Development Goals Arts Boot Camp inspired by the success of our May session, which was once again highly rated by participating students. In addition to online masterclasses taught by renowned art institution lecturers, we also hosted two intangible cultural heritage-themed camps in Dunhuang, Gansu Province, and West Sichuan Province, led by instructors from the Rhode Island School of Design and Yale University. In Dunhuang, students visited the Mogao Caves and Yulin Caves to study Dunhuang-style colored sculpture and traditional techniques. In West Sichuan, students were introduced to Asian music and cultural traditions while experiencing Tibetan culture. We believe these types of experiences provide students with unique learning opportunities and perspectives, enabling them to go beyond their familiar world. The ability to adapt and be open-minded is particularly valuable for those applying to study overseas and must create a strong application portfolio that demonstrates an understanding and passion for art, as well as different cultures and traditions. We are also facilitating overseas experiences for students this summer in Japan, the United States, and the United Kingdom through summer schools and campus visits. Understanding that education is the cornerstone of a student's lifetime success, both academically and professionally, ACG is proud of our ability to establish and maintain collaborative relationships with world-renowned institutions. We look forward to growing our partnership network to access more world-class educational resources for our students. We expect to enter the overseas study application season soon and are prepared to serve as a trusted guide to support our students during this exciting yet stressful time. We remain fully committed to our mission of enabling positive outcomes for students and look forward to a busy and productive remainder of the summer as we approach the fall. In the balance of 2024, we are focused on growing our current business, which includes portfolio training services, overseas study counseling, and research-based learning services. We are very confident in ACG's superior competency in the market while continuing to invest in the operational infrastructure to ensure we provide students with the exceptional education and support system they have come to expect. With that, I'll turn it back over to Kevin.

Thanks, Jun. We are pleased with our progress in the first half of 2024 and are optimistic that the positive momentum we have experienced thus far will enable us to finish the year on a strong note. As a leading player in the Chinese creative arts education market, we are proud to see that we have always strived to find ways to improve our sales and help our students achieve their full potential. We believe we are on the right track to execute our growth initiatives and drive success for our students and ACG's shareholders. With that, operator, let's open it up for questions.

Thank you. There are no questions at this time. I would like to hand it back over for closing comments. Alice, do you have any closing comments?

Kevin?

Thanks again to all of you for joining us. If anyone has questions for us, please feel free to reach out directly to us or our Investor Relations team. We are always available to speak to investors and look forward to connecting with you all 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.