
Report Overview Financial & Operational Highlights ACG reported a 14.1% increase in Q3 2023 net revenues to RMB 59.5 million, a 24.1% rise in portfolio training credit hours, and narrowed net losses, maintaining a strong cash position Q3 2023 Financial and Operational Highlights | Indicator | Q3 2023 | Q3 2022 | % Change | | :--- | :--- | :--- | :--- | | Net Revenues | RMB 59.5 million | RMB 52.1 million | +14.1% | | Net Loss Attributable to ACG | RMB 7.3 million | RMB 12.0 million | Narrowed | | Student Enrollment | 1,093 | 1,106 | -1.2% | | Portfolio Training Credit Hours | 44,723 | 36,031 | +24.1% | Nine Months 2023 Financial Highlights | Indicator | Nine Months 2023 | Nine Months 2022 | % Change | | :--- | :--- | :--- | :--- | | Net Revenues | RMB 138.0 million | RMB 128.3 million | +7.6% | | Net Loss Attributable to ACG | RMB 42.2 million | RMB 49.9 million | Narrowed | - As of September 30, 2023, the company held RMB 65.5 million (US$9.0 million) in cash and cash equivalents3 Management Commentary & Outlook Management attributes strong Q3 performance to increased portfolio training and research-based learning, driven by resumed overseas programs, with plans to expand experiential offerings and art institution partnerships - Portfolio training services are considered the primary growth driver, with a 24.1% increase in credit hours delivered in Q3 20234 - ACG resumed its overseas summer programs for the first time since the COVID-19 pandemic, resulting in a 104.5% YoY increase in revenues from research-based learning services to RMB 5.2 million4 - The company is building on its success with plans for online Master Classes and other experiential offerings, and recently partnered with the 798 Art Festival in Beijing to promote creative arts education5 Operational Performance Enrollment and Credit Hours Q3 2023 saw total student enrollment of 1,093, with portfolio training credit hours increasing 24.1% to 44,723, primarily driven by a 34.6% rise in project-based programs - Total student enrollment for Q3 2023 was 1,093, with 651 in portfolio training programs and 442 in other programs like overseas study counselling67 Portfolio Training Credit Hours by Program Type | Portfolio Training Program | Q3 2023 Credit Hours | Q3 2022 Credit Hours | % Change | | :--- | :--- | :--- | :--- | | Time-based Program | 13,624 | 12,923 | 5.4% | | Project-based Program | 31,099 | 23,108 | 34.6% | | Total | 44,723 | 36,031 | 24.1% | Financial Performance Review Third Quarter 2023 Financial Results (GAAP) Q3 2023 net revenues grew 14.1% to RMB 59.5 million, with gross margin improving to 49.2%, leading to a narrowed net loss attributable to ACG of RMB 7.3 million Q3 2023 GAAP Financial Results | Q3 Financial Metric | Q3 2023 (RMB) | Q3 2022 (RMB) | Change | | :--- | :--- | :--- | :--- | | Net Revenues | 59.5 million | 52.1 million | +14.1% | | Gross Profit | 29.2 million | 23.5 million | +24.4% | | Gross Margin | 49.2% | 45.1% | +4.1 p.p. | | Loss from Operations | (7.9 million) | (16.3 million) | Narrowed | | Net Loss Attributable to ACG | (7.3 million) | (12.0 million) | Narrowed | | Diluted Losses per ADS | (0.24) | (0.38) | Narrowed | - The increase in gross profit and margin was primarily due to higher net revenues. The decrease in operating expenses was mainly driven by lower general, administrative, and selling expenses9 Nine Months 2023 Financial Results (GAAP) Nine-month net revenues increased 7.6% to RMB 138.0 million, with gross profit growing 13.5% to RMB 62.3 million, leading to a narrowed net loss of RMB 42.2 million Nine Months 2023 GAAP Financial Results | Nine Months Financial Metric | 2023 (RMB) | 2022 (RMB) | Change | | :--- | :--- | :--- | :--- | | Net Revenues | 138.0 million | 128.3 million | +7.6% | | Gross Profit | 62.3 million | 54.9 million | +13.5% | | Gross Margin | 45.1% | 42.8% | +2.3 p.p. | | Loss from Operations | (50.6 million) | (61.5 million) | Narrowed | | Net Loss Attributable to ACG | (42.2 million) | (49.9 million) | Narrowed | | Diluted Losses per ADS | (1.34) | (1.60) | Narrowed | Balance Sheet Highlights As of September 30, 2023, cash and cash equivalents increased 19.1% to RMB 65.5 million, while working capital deficit widened to RMB 262.3 million and total shareholders' equity decreased to RMB 103.5 million Key Balance Sheet Figures | Balance Sheet Item | Sep 30, 2023 (RMB) | Dec 31, 2022 (RMB) | | :--- | :--- | :--- | | Cash and cash equivalents | 65.5 million | 55.0 million | | Working capital deficit | 262.3 million | 227.3 million | | Total shareholders' equity | 103.5 million | 143.5 million | Non-GAAP Financial Measures Excluding share-based compensation and foreign currency impacts, ACG's Q3 2023 adjusted net loss was RMB 6.4 million, a significant improvement from the prior year - Non-GAAP measures are used to supplement GAAP results by excluding non-cash or non-operating items like share-based compensation and foreign currency exchange gains/losses1428 Q3 2023 Non-GAAP Financial Measures | Non-GAAP Metric (Q3 2023) | Amount (RMB) | Amount (USD) | | :--- | :--- | :--- | | Adjusted Net Loss Attributable to ACG | (6.4 million) | (0.9 million) | | Adjusted Diluted Losses per ADS | (0.20) | (0.02) | Financial Statements Unaudited Condensed Consolidated Balance Sheets The unaudited consolidated balance sheet as of September 30, 2023, details total assets of RMB 466.3 million and total liabilities of RMB 362.7 million, compared to year-end 2022 Unaudited Condensed Consolidated Balance Sheets | Key Balance Sheet Figures | As of Sep 30, 2023 (RMB) | As of Dec 31, 2022 (RMB) | | :--- | :--- | :--- | | Total Current Assets | 75,466,731 | 65,262,522 | | Total Assets | 466,256,544 | 474,464,769 | | Total Current Liabilities | 337,805,877 | 292,542,513 | | Total Liabilities | 362,740,255 | 330,950,579 | | Total Shareholders' Equity | 103,516,289 | 143,514,190 | Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) This section presents detailed unaudited consolidated statements of comprehensive income (loss) for the three-month and nine-month periods ending September 30, 2023, with comparative data Three-Month Period Ended September 30, 2023 Q3 2023 income statement shows net revenues of RMB 59.5 million and a net loss of RMB 7.3 million, a significant improvement from Q3 2022 Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) - Q3 | Income Statement Item (Q3) | 2023 (RMB) | 2022 (RMB) | | :--- | :--- | :--- | | Net revenues | 59,450,108 | 52,099,904 | | Gross profit | 29,224,857 | 23,501,987 | | Loss from operations | (7,879,014) | (16,272,515) | | Net loss | (7,301,576) | (11,733,818) | | Net loss attributable to ACG | (7,250,862) | (11,986,167) | Nine-Month Period Ended September 30, 2023 The nine-month income statement shows net revenues of RMB 138.0 million and a net loss of RMB 42.3 million, an improvement from the prior-year period Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) - Nine Months | Income Statement Item (Nine Months) | 2023 (RMB) | 2022 (RMB) | | :--- | :--- | :--- | | Net revenues | 138,010,273 | 128,283,578 | | Gross profit | 62,291,363 | 54,897,185 | | Loss from operations | (50,607,054) | (61,483,279) | | Net loss | (42,264,467) | (50,360,602) | | Net loss attributable to ACG | (42,215,847) | (49,910,070) | Reconciliations of Non-GAAP Measures This section reconciles GAAP net loss to non-GAAP net loss for Q3 2023 and the nine-month period, showing a Q3 non-GAAP net loss of RMB 6.4 million after adjustments Reconciliation of GAAP to Non-GAAP Net Loss - Q3 2023 | Reconciliation (Q3 2023, RMB) | Amount | | :--- | :--- | | GAAP net loss attributable to ACG | (7,250,862) | | Add: Share-based compensation | 818,922 | | Add: Foreign currency exchange losses | (2) | | Non-GAAP net loss attributable to ACG | (6,431,942) | Reconciliation of GAAP to Non-GAAP Net Loss - Nine Months 2023 | Reconciliation (Nine Months 2023, RMB) | Amount | | :--- | :--- | | GAAP net loss attributable to ACG | (42,215,847) | | Add: Share-based compensation | 2,029,817 | | Add: Foreign currency exchange losses | 380 | | Non-GAAP net loss attributable to ACG | (40,185,650) | Supplementary Information Conference Call Information A conference call and live webcast were scheduled for November 13, 2023, at 8 p.m. ET to discuss the Q3 and nine-month 2023 financial results - A conference call was scheduled for November 13, 2023, at 8 p.m. ET to discuss the results18 - An accompanying slide presentation was made available on the investor relations section of the company's website 30 minutes prior to the call19 About the Company, Forward-Looking Statements, and Other Disclosures This section provides a company overview, disclaimers on forward-looking statements, and details on currency translation and non-GAAP measures, highlighting risks and uncertainties - ACG is an international educational services company focused on portfolio training, research-based learning, and overseas study counselling21 - The report includes forward-looking statements and warns investors of risks including competition, regulatory changes in China, and geopolitical tensions2324 - Financial information is stated in RMB, with USD translations provided for convenience at a rate of RMB 7.2960 to US$1.00 as of September 30, 202327