ATA Creativity (AACG) - 2025 Q3 - Quarterly Report

Financial Performance - Net revenues for the nine-month period ended September 30, 2025, were RMB 178,985,729, representing an increase from RMB 167,144,553 in the same period of 2024, a growth of approximately 11%[3] - Gross profit for the nine-month period ended September 30, 2025, was RMB 80,069,251, compared to RMB 77,600,911 for the same period in 2024, reflecting a gross margin improvement[3] - The net loss attributable to ATA Creativity Global for the nine-month period ended September 30, 2025, was RMB 21,743,641, a decrease from RMB 49,336,811 in the same period of 2024, showing an improvement of approximately 56%[3] - The company reported a basic and diluted loss per common share attributable to ATA Creativity Global of RMB 0.34 for the nine-month period ended September 30, 2025, compared to RMB 0.78 for the same period in 2024, indicating a reduction in losses per share[3] - Net loss for the nine-month period ended September 30, 2024, was RMB 49,336,883, compared to RMB 21,743,669 for the same period in 2025, indicating a significant reduction in losses[7] Assets and Liabilities - The total current assets decreased to RMB 66,639,674 as of December 31, 2024, from RMB 126,538,828 as of September 30, 2025, indicating a significant reduction of approximately 47%[2] - Total liabilities decreased to RMB 377,281,073 as of December 31, 2024, from RMB 403,711,466 as of September 30, 2025, a reduction of about 7%[2] - Cash and cash equivalents as of December 31, 2024, were RMB 36,523,995, a significant decrease from RMB 96,807,261 as of September 30, 2025, reflecting a decline of approximately 62%[2] - Total shareholders' equity attributable to ATA Creativity Global increased to RMB 79,710,448 as of December 31, 2024, from RMB 58,885,029 as of September 30, 2025, an increase of approximately 35%[2] Cash Flow and Investments - The company recorded an investment income of RMB 11,932,630 for the nine-month period ended September 30, 2025, which was not present in the same period of 2024, indicating new revenue streams[3] - Cash paid for property and equipment was RMB 2,408,489 in 2025, a significant decrease from RMB 18,581,054 in 2024, indicating reduced capital expenditures[7] - The company received RMB 32,063,829 from short-term loans in 2025, enhancing liquidity[7] Expenses and Cost Management - Research and development expenses for the nine-month period ended September 30, 2025, were RMB 2,359,214, down from RMB 2,924,091 in the same period of 2024, a decrease of about 19%[3] - Employee benefit expenses for the nine-month period ended September 30, 2025, totaled RMB 12,323,801, a decrease of 5.56% from RMB 13,046,270 in 2024[92] - Sales and marketing expenses decreased significantly to RMB 2,948,340 in 2025, down 25.1% from RMB 3,930,139 in 2024[92] - General and administrative expenses for the nine-month period ended September 30, 2025, were RMB 2,447,738, a decrease of 3.43% from RMB 2,534,935 in 2024[92] Regulatory and Legal Matters - The Company faces potential regulatory actions that could adversely affect its business and financial position, including fines and operational restrictions[28] - The Supreme People's Court ruled that shareholder approval was not required for the sale of the ATA Online Business, dismissing all claims from the plaintiffs[187] Shareholder and Equity Information - As of September 30, 2024, Mr. Ma holds approximately 40% of the total ordinary shares of the Company[24] - The total accrued expenses and other payables as of September 30, 2025, amounted to RMB 45,416,644, down from RMB 56,372,960 as of December 31, 2024[133] Taxation - The Company has been granted a preferential income tax rate of 15% as a high-and-new technology enterprise (HNTE) effective from January 1, 2020, to December 31, 2022[141] - The Company has not accrued income taxes on earnings of RMB 76,559 generated by its PRC consolidated entities as of September 30, 2025, planning to reinvest these earnings indefinitely in the PRC[142] Share-Based Compensation - The share-based compensation plan allows for the issuance of up to 6,965,846 shares, with a vesting schedule generally providing for 25% vesting on the first anniversary of the grant date[154] - The total share-based compensation expense for the year ended December 31, 2024, was RMB 1,016,353, with significant allocations to general and administrative expenses[175]