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 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 website, including the replay, which will be available for the next 90 days. ACG's CFO, Mr. Ruobai Sima, will start this call by highlighting the company's key operational achievements and financial highlights for second quarter 2025, and we will provide an overview of financial and operating results for second quarter and first half 2025 and briefly discuss expectations for full year 2025. 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. Ruobai Sima. Please go ahead, Mr. Sima.
Thank you, Alice, and welcome, everyone. Good evening to those in America, and we appreciate everyone's time. As Alice mentioned, we please refer to our earnings deck available on the IR side of our website, and we go through our prepared remarks. Second quarter 2025 was marked by a year-over-year increase in net revenues and gross profit. Growth in net revenues was mainly attributed to increased contribution from overseas study counseling services, other educational services, and research-based learning services, combined revenue of which increased by more than 50%. Continuing to the first half of 2025, we delivered strong growth for the 6-month period, highlighted by a double-digit increase in both net revenues and gross profit. While we recorded growth across all business lines, our value-added offerings, including research-based learning, overseas study counseling, and other educational services were the primary drivers. Moving on to second quarter operational highlights. During the second quarter of 2025, our main revenue 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 of 2024 and contributed to about 76.7% of total credit hours delivered. Revenues from research-based learnings, overseas study counseling, and other educational services accounted for an 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 typically being a slower quarter for its parental 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 Goals Article 10. Additionally, we introduced the film festival United Tour, bringing students interested in film production to the forefront of one of the world's most prestigious and influential film festivals for an immersive experience. We recorded significant revenue growth in overseas study counseling services. As a result of more services delivered, students continue to explore study abroad options in world-class universities and colleges. For 2025 admission results, we are excited to announce that ACG students have received more than 4,000 offers. These offers and scholarships come from prestigious institutions across all of our 6 major art disciplines. Highlights include offers in computer design at Cornell University and Carnegie Mellon University, architecture at Columbia University and Appen, music at the Royal College of Music and Le conservatoire, film, games, and animation at California Institute of the Arts and Sheridan College, Fine Art at Royal College of Arts and RCA, as well as Fashion and Patent School of Design and Central Saint Martins College of UAL. We also have students being accepted into the Master of Arts in Design Engineering, a double major program co-designed by Boral University and Rhode Island School of Design, where students will have access to academic resources from both these schools and top art institutes. Moving on to the second quarter of 2025 key financial metrics. Total net revenues for the second quarter of 2025 were RMB 55.9 million, an increase of 8% from RMB 51.8 million in the second quarter of 2024, which were primarily due to increased revenue contributions from overseas study counseling programs, other educational services, and research-based learning services. Gross profit for the second quarter of 2025 was RMB 28.3 million, an increase of 10.2% from RMB 25.7 million in the second quarter of 2024, primarily due to higher net revenues. Gross margin also improved to 50.6% during the second quarter of 2025 from 49.6% in the prior year period. Total operating expenses were RMB 42.1 million in the second quarter of 2025, a decrease of 9.4% from RMB 46.5 million in the second quarter of 2024. As a percentage of net revenues, total operating expenses decreased to 75.3% during the second quarter of 2025 compared to 89.8% in the prior year period. The decrease in operating expenses was due to a RMB 2.6 million decrease in sales expenses related to lower headcount in sales personnel and decreased sales incentives, and a RMB 1.5 million decrease in general and administrative expenses as a result of decreased professional fees, as well as a RMB 0.3 million decrease in research and development expenses as ACG system development was completed in Q2 2024. As a result of higher net revenues and slightly lower operating expenses, loss from operations in the second quarter of 2025 narrowed to RMB 13.7 million from RMB 20.8 million in the second quarter of 2024. Net loss attributable to ACG during the second quarter of 2025 was RMB 10.8 million compared to RMB 16.8 million in the prior year period. During the first half of 2025, total net revenues increased by 11.8% to RMB 111.7 million from RMB 99.9 million in the prior year period. The increase was primarily attributable to increased contributions from research-based learnings, overseas study counseling, and other educational services. Gross profit for the first half of 2025 was RMB 53.7 million, an increase of 12.8% from RMB 47.6 million in the first half of 2024. As a result of increased revenue during the period, gross margin also improved to 48.1% from 47.7% in the first half of 2024. Total operating expenses were RMB 84.3 million in the first half of 2025, a decrease of 6.4% from RMB 90.1 million in the first half of 2024. As a percentage of net revenues, total operating expenses decreased to 75.5% from 90.2% in the prior year period. The decrease was primarily due to a RMB 3.8 million decrease in sales expenses as a result of lower headcount in sales personnel and decreased sales incentives compared to the first half of 2024 and a RMB 0.6 million decrease in research and development expenses, which was partially offset by a RMB 2.5 million increase in general and administrative expenses related to the development of new projects carried out in the fourth quarter of 2025. As a result of increased revenues and decreased operating expenses, loss from operations in the first half of 2025 narrowed to RMB 30.5 million compared to RMB 42.4 million in the first half of 2024. Net loss attributable to ACG in the first half of 2025 was RMB 24.1 million compared to RMB 34.7 million. Moving to the balance sheet highlights. As of June 30, 2025, we had RMB 34.7 million in cash and cash equivalents, total assets of RMB 444.2 million, total liabilities of RMB 388.4 million, and total shareholders' equity of RMB 55.8 million. Moving on to year-to-date enrollment trends. Starting with student enrollment. For the second quarter of 2025, total student enrollment was 1,050, a decrease of 3.1% from the prior year period. The decrease in student enrollment was a result of normalized demand for our services in 2025 versus the rebound of student demand in 2023 and the first half of 2024. Portfolio training student enrollment for the second quarter of 2025 was 553, and student enrollment for all other programs for the second quarter of 2025 was 494. Moving on to credit hours delivered. For the second quarter of 2025, credit hours delivered slightly increased by 0.3% compared to the prior year period. We reported a 25.7% increase in project-based programs, which in recent years have accounted for an increasing percentage of total credit hours due to their flexibility and customization by design. The growth in total credit hours delivered was offset by decreased time-based programs credit hours as the majority of newly enrolled students opted for the project-based track. With that, let's move to our expectations for full year 2025. We expect to report total net revenues of between approximately RMB 276 million to RMB 281 million for the year ended December 31, 2025, representing a year-over-year increase of around 3% to 5% from full year 2024. We anticipate portfolio training to remain the main pillar of revenues, accompanied by increased contributions from all other lines of business. As we continue to improve current offerings and introduce new programs, our fiscal year 2025 guidance range and related assumptions are based on the company's current business options initiatives and rate for the year end December 31, 2025, and the current and preliminary view of existing domestic and international market conditions are 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.
Speaker 3
Thank you, Sima. 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 art education services. While we see increased competition this year due to the release of pent-up demand in 2024, we believe we are well positioned to achieve expected growth and continue being a trusted partner for 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. Organic growth remains at the core of our business expansion. We take pride in the quality and value our portfolio of offerings provide to ACG students. These offerings will continuously improve and be supplemented with new services and classes that address evolving student demand. Our project-based programs have become a significant contributor to our training services, and our students appreciate this efficient, flexible, and customizable track that can easily adjust based on their needs and timelines. We're catering to a more diverse student population with varying backgrounds and levels of knowledge and experience in their chosen art majors. Our expansion is not limited to older adults and younger generations, but also includes supporting an increasing number of students with diverse arts backgrounds and hybrid skill sets. Our role is to help students showcase the breadth and depth of their artistic skills in their application portfolios, supported by our knowledgeable teaching team. In a time of heightened global competition, we assist students in planning for early preparation, building flexible and long-term pathways from the moment they consider studying abroad. For summer 2025, we have an exciting pipeline of new research-based learning projects for ACG students. These include our regular offerings like summer school camps to Japan and the U.S., which feature programs focused on Chinese and tangible cultural heritages in Donghai Jiangsu province and West Sichuan province, along with in-person sessions and master classes in Beijing, covering a wide range of art topics presented by reputable international colleges including MIT, Yale, the University of Southern California, and Oxford University. In the third quarter of 2025, we launched several new theme travel programs to diversify our offerings and enhance student experience, including the Singapore Top School Art Study camp, Berkeley Music Performance Intensive camp, and an ACG exclusive Harvard University Studio for Electroacoustic Composition Summer School co-developed with Harvard University and UNESCO. Additionally, in response to changing student interests in career-oriented and practical disciplines, we're launching more projects and experiences that align with long-term career paths, particularly those focused on computer design and interdisciplinary studies. In 2025, we will continue to strengthen and expand our geographical reach. Expanding our international partnership network is an ongoing strategy for ACG, particularly in regions where we see growing student interest. Along with traditionally popular countries like the U.S. and the U.K., we have observed more students applying to top schools in South Korea and Northern Europe, as well as well-known markets like Australia, France, Italy, Japan, and Singapore. We have explored new approaches to streamline our business by strategically allocating marketing resources to higher-performing campus locations. For the rest of the year, we aim to implement cost-effective methods, including maintaining a lean sales team and utilizing cost-efficient student acquisition channels such as online marketing and partner platforms. We have also started organizing online group classes led by our top teachers in regional centers like Beijing to maximize classroom utilization, providing more students across the country with access to excellent support in portfolio creation and application counseling. These initiatives have resulted in reduced operating expenses, and we believe they will effectively improve our bottom line for the rest of 2025. As we move through 2025, we remain focused on driving success for our students and helping them reach their full potential. We're optimistic about finishing the year strongly and believe that our competitive advantages and multi-track growth strategies will continue to solidify our position in China's creative art education market. With that, operator, let's open it up for questions.
