Q4 2019 Earnings Call

Thursday

good morning, and good evening. Everyone. Welcome to a kangaroo fourth quarter 2019 earnings conference call at this time. All participants are in listen-only mode. This call should be broadcast live on the companies. I our website joining us today or mr. John Lynn chief executive officer mister young. He's young Chief Financial Officer of the company following month prepared remarks. We will conduct a Q&A session before we begin our for you do the Safe Harbor statement of the company's earnings release which also applies to the conference call today as manageable Angela forward-looking statements with that said I was trying to call over to mr. John Lin CEO can go go ahead sir.

Sasha Hub. Thank you for joining us today. Cool. Well cancel you in English. We Are Young Person's Life by macroeconomic uncertainty and the downtown in China's Automotive Market. We ended the year on a high note deliver exceptional financial and operating results in the fourth quarter on the back of steady growth and business education notable a total revenues in the fourth quarter increased to 438.5 million hour and be representing a year-on-year increase of 36.6%

But you do the changing shape young woman teenage. Yeah, she's your wife the same time. So she eats a phone for our robots the full movie demonstrates our continuous progress in the following areas firstly upgrading our auto loan application services to post our Market leadership dragons day refining our cross-selling strategy strategy to drive for us in our aftermarket service facilitation business and Thursday strength all existing relationships with core strategic Partners in the seeking out new opportunities to diversify funding sources and revenue streams. So she she's dead.

One moment.

Because people quote unquote took off some business. We implemented a series of initiatives our Market leadership during the quarter. For example, we focused on growing the reach of our dealership Network by adding approximately approximately $1,800 new dealers to our Network off at the same time. We began to actively refine our Network efficiency as such we have terminated relationships with approximately $2,000. Like did not meet our standards for operating risks wage.

Generation capabilities as on December 31st 2019. The company has covered the total number of $49,238 across 353 cities Nationwide. God uses to say your Watchdog forgot most of them when we get home. But I do you use one more time off during the process as far as we further the penetration of our model our system is growing the number of direct link of the dealers in our Network currently maintain direct coverage of 94 points off.

No network the high penetration of our direct coverage combined with our removal of underperforming dealers has enabled us to standardize and augment the quality of our service offerings off the network during the quarter these advances help to increase the total number of financial transactions facilitated to 9.575 billion RMB in this quarter off. So did you flunk woman's shoe? You show you that you suck she like she thought you when you go to a club called the. You know, something side we continue to work closely with our existing Financial Partners to ensure full compliance with the latest Market regulations in addition to our established partner.

We have begun to work with other financial institutions such as Bank of China my bank and pinion one connect going forward. We plan to work with work with these institutions to develop new financing a products that will further diversify our catalogue of service offerings.

Yep. Yep. You wanting Popeyes time Palm Beach Post Office in order to accelerate the growth of our Optima Kia Services business. We actively refined our cross-selling strategy during the quarter in particular our car insurance facilitation business office responded exceptionally well to leave efforts during the quarter, for example, the number of coinsurance transactions that we completed increased to ten point eight thousand transactions in total representing a ninja

So 56.8% on a sequential basis, please up to demonstrate the substantial progress that we have made in establishing a foothold within China's car insurance Market further evidence of Life transport see distracted by the court date performance of our Optima Market Services business, which recorded H 9.6 million RMB in Revenue representing 20.4% of the total revenues in this quarter of the woman's issue with the 3-g. You sure you turn off the eat Union T. When were you go outside or once and say something fun, their life time being huge in Thursday, we continue to strengthen our relationships with our strategic Partners at the first auto financing service platform to complete wage.

I can give you some system for new car purchases our cooperation with ICBC continue to make good progress during the quarter as of December 2019. The total package volumes made through our cooperation with ICBC, exceeded 3.1 billion RMB as for subsidized the product we also continued our joint efforts and expect these products to the market soon. Only you may see what my boss. Talk to your daughter. Yeah. Yep.

Hold on.

The success of our relationship with ICBC and highly attractive value proposition has enabled us to forge additional collaborations with key players in China's Auto industry in November 4th sample, so our coordination with 5gb see we we started providing services to Tesla upon reaching an agreement. We promptly implemented our services in all of Texas dealership from outer shell High despite being at an early stage. The cooperation has already begun to show encouraging results based on our positive experience with tell customers in China and a growing in popularity of electric vehicles. We are optimistic about our ability to develop additional collaborations with other manufacturers in the future.

Ami Ki Tor bapp KO you can talk to your link to your home ownership with oems as mentioned in previous quarters value the opportunity to access our well-developed dealership Network and a broader pool of Automotive customers in doing so, I'm not I'm not only able to boost your sales but also in power to diversify their product offerings with value proposition is particularly attractive in the context of macros Loudoun during which time

Increasingly interested in alternate alternative selling Solutions going forward we plan to continue exploring further cooperation opportunities with oems in retail Wholesale Club thing and other areas. So you did you talk to Jim Rome. That's an update for our partnership with facilitated 737 purchase transactions for licensed drivers during the fourth quarter. In addition. We continue to provide you need drivers with a complete Suite of Auto Solutions including castles in auto financing insurance and an operator licensing.

Somehow so so hardly eaten yet light bulb you Virginia put on the Moto Don't Walk In Summer 2019 the challenges we Face from macroeconomic pressure and underwhelming market for automobiles automobiles in China tested the strength of the nation business model importantly. I was successful navigation through the exact conditions have provided us with opportunity to further cement our industry leadership and grow our speed of Automotive facilitation 6 throughout the industry value chain.

show me

I shot sushi.

I would like now to take a moment to discuss the impact of the covid-19. So Thursday Thursday, we would like to express our support to those who have fought and continue to fight on the front lines of the epidemic. They are contributions to society are enormous and will not be thought. I saw Triple woman. I don't type of woman so my culture but she's a friend who you picked off your concentration while I reach in the ocean.

This is to protect in the health and well-being of our employees consequently. We are allowing employees work from home remote until our health authorities deem a safe for the general public to return to work. We also mobilized our procurement team to secure and distribute face masks and took years to our colleagues and their families across China, especially those currently residing in the regions mostly most impacted by the outbreak in addition to these items. We also provide free coffees nineteen Personal Insurance to all employees to ensure that our staff remains up to date. We have set up a special support team to provide consultation to our employees and their families during the epidemic on Thursday basis.

Being charged for the two daughters took me to Thursday. We have also implemented a number of measures to help positive small platform to resume operations. As soon as they deem to be feasible through our club our partnership with an insurance company that we were able to set up the special-purpose want to pay for a considerable portion of our dealers and their families with special health insurance policies. In addition. We are actively collecting and sharing information regarding the oil and dealership operations to keep our partner dealers updated.

Who who they teach you? What woman you are you are traveling from June 10th to ensure normal services to our customers and dealers except for for big parties.

So yeah, well for me in so each in gentle and a good did you guys on the team who will I give the engine wage and some softball business performance. The academic has severely disrupted of auto dealers operations so far in the first quarter of 2020 and the situation involves. We will continue to click the market and the brakes impact on both our current and future operations. However, regardless of the track on Automotive Sales in the short-term, we remain confident in the strength of our business model and health of our underlying fundamentals of the month.

See what you thought about this record in the league then changing the bulb off such confidence is not based on Blind Faith. But our track record for example in the past year during the previously mentioned challenges besides the previously mentioned challenges wage was due able to perform expectations and Achieve double-digits results due to our proven business model leading Market position position increasing economies of scale and refined operating to The Villages.

In addition our effective cost control positive cash flow and large cash balance has afforded us the ability to survive temporary challenges and strife going forward will we will remain committed to maximizing our market share through the strengthening of our dealership Network expansion of our partnership base and diversification of our service offerings.

Well, my son she wouldn't when she saw the support page or you can go with that. She said yes male, you got $20 you like a long-term demand automobiles remains intact in China covid-19. May temporary suspend but we may not eliminate such demand. Once the epidemic is contained the pent-up demand will will revise shoot the covid-19 virus May delay, the transformation and growth of China's auto financing Market in progress towards consolidation is inevitable as it as it has been said winter will eventually parts and spring is sure to come.

What is your hot dog? Show me one moment. Thanks, Joshua. Hello, everyone and Welcome to our fourth quarter 2019 earliest call before I started to review our financials for the quarter. Please note that unless otherwise stated all numbers. I I am the terms and all percentage comparisons are on a year-over-year basis in the face of macroeconomic had wings and ongoing concern is not domestic automotive industry. We maintain our growth momentum in the fourth quarter of 2019 to deliver a strong financial and operating performances our total package increased by 36.6% to 438.5 million from 321.1 million in the same period of 2018 outperforming wage.

The high end of the company's guidance by 9.6% of Market Services facilitation business. Also continue to wrap up in the first quarter as its Revenue down to eighty nine point, six million or 20.4% of our total revenue cost of Revenue in the fourth quarter of 2019 increased by 1.8% to 157.2 million or 35.9% of total revenue from 154.5 million or 48.1% of total revenue in the same. Thursday the 18th as a result.

Gross margin in the first quarter of 2019 expanded to 64.1% from 41.9% in the same. The 2018 such expansion pack was mainly attributable to the successful implementation of a series of cost control initiatives and our increase the average as a result of our growing economies of scale wage sales and marketing expenses in the fourth quarter of 2019 increased by 17.5% to 55.2 million from 47 million in the same. 2018 as a percentage of total revenue sales and marketing expenses in the fourth quarter of 2019 decreased to 12.6% from 14.6% in the same. 2018. This decrease further illustrate our commitment to improve our sales and marketing efficiency while continuing to drive Revenue growth.

General structure of expenses in the fourth quarter 2019 increased by 26.3% to 66.1 billion from 52.3 million in the same. Or 2018. This increase was mainly caused by higher share-based compensation expenses during during the quarter as a percentage of total revenue our general and administrative expenses in the fourth quarter of 2019 decreased to 15.1% from 16.3% in the same. The 2018 research and develop expenses in fourth quarter, 2019 decreased to eighteen point six million from nineteen point nine billion the same. 2019 with the percentage of total revenue our R&D expenses in fourth quarter 2019 decrease to 4.2% compared to 6.2% in the same. The 2018. Yep.

the result of our

Revenue growth a successful optimization of cost management income from operations in the fourth quarter of 2019 increased by 231% compared to the same period of 2018 that income in the fourth quarter of 2019 increased by $96 8% while Duncan took income in the fourth quarter of the 2019 increased by 86.7% compared to the same period of 2018 on a per-share basis with that income for a DS in the first quarter of 2019. What time 6 to and diluted adjusted income areas in the same. What is your point? Seven six?

Moving on to our balance sheet as of December 31st 2019. We had cash and cash equivalents of two thousand and two point three million computer weighs 1851.2 million as of September 30th, 2019 looking forward to the first quarter of 2012 or twenty weeks that our total revenues to be between 180 million and 210 million. Please note that this forecast reflects. Our current pre-owned no views on the market and operational conditions as well as the uncertainty in off the market costs by the comic 1903 which are subject to change. This concludes. Our prepared remarks operator. We are now ready to take precautions.

Yes, thank you. We will now begin the question-and-answer session to ask a question you'd be press * then 1 on your touchtone phone. If you are using a speaker phone, please pick up your handset before pressing the keys to withdraw your question, please press star than to when asking a question, please State your question in Chinese first and immediately, please repeat your question in English for everyone's convenience at this time. We will pause momentarily to assemble the roster.

And the first question comes from y'all see with Morgan Stanley.

Hi, my name is John take a bath so woman so you can check back with you sound. So the whole week when I can depend on them for easy to repair order number is 28 if we can call me. What kind of Jake Jake Jake a

Answer just how may I take a give us a warranty to take place about the virus outbreak impact on the on the delinquency and and it's equality. So just wonder how much increase of of the delinquency have you observed and and what's the office. To transfer movies and an outlet, Do we see the risk to further pick up at this level and then and when will be the peak so the second question related to the outbreak is on off the voting recovery. So the first two months this year we facility below forty thousand a financing transactions versus in the same period last year we facilitate.

Roughly, um, um, um, um, 72,000, so just wonder what's the number in March and what would be the recovery that wage expand and and maybe in the second quarter is it likely for us to recover to a a normal volume? Thank you.

How's your day going? So Monday through Thursday 1:00 a.m. To the Ichi to the soul from you. Just eat the lemon law teaching the constitution do.

So doing for your questions while let me take your two questions first day at the Quality. Well the static by the operator, we have seen increasing over the ratios and have taken a series of measures to control the impact of a psychology including enhancing recruitment efforts of collection stuff strengthening customer service support and assisting customers to apply for July free payment in accordance with one of the Reps. Thanks for calling so far. The overall asset quality is under control and we have full confidence in maintaining this trend and regarding your second question recovery of our business in q1. I'll send it says quarter of 2020. We expect total revenues will be between 180 million R&B and 210 million R&B approximately forty to fifty percent know Thursday 6:40 to 50% lower than the same period of last year. Well the situation in the second quarter depends on the containment of the epidemic and the resumption of our partner.

dealers so all of the

Is that the market will recover gradually from the second quarter of 2020, but we believe the turning point of the market won't be seen until at least the third quarter.

John like to make some addition to your first questions and we do see that our overdue ratio is dead going up a little bit. We expected to the + 1 + May reach to a little bit over 1% at the end of May first quarter and also for the and 3 + weeks back. Maybe the ratio will reach very close to 0.5% off. That's all what expectacion and based on the data is our tune up and we still need maybe one or two quarters to to do more works. I mean off on the delinquent as a management tool to control the asset qualities and you know that due to the topic nineteen operating time.

The delinquent Asset Management, I mean on the work is not as usual do too. I mean the off the lockdown of the of the of all the work in China. So we started to to to resume the the linkage document work at the end of the salary. So we still need some time but we are very confident that we will control and we will manage the the quality of life of the asset asset as as well as we we do before and as due to those jobs, I mean current situation. We already raised up our day one provision in the 40 guarantee. I mean for the dog

Along with the city for the bank in the fourth quarter of 2019. That means we already raised up our daily Provisions to Thursday reflect maybe the the current status of our asset quality of the uh Credit Credit asset off. Thank you. Thanks. Can I say, what are you doing?

Sorry, I have to translate that into Chinese. Sorry 6 a.m. To leave a message and sent out at home. Actually. She doesn't go to a shot, She just have the big one woman. You didn't go off $1.

Yes, I sure would be the what would you most energy?

Do you go down both, Taekwondo?

Thank you. And once again, please press * then 1 if you would like to ask a question.

All right is there are no more questions at the present time. It would like to return the money management for any closing comments.

Yeah, no, it's not. Well, you've no further options have like to announce that off today for now. Thank you all for joining us.

Thank you. He conference has concluded. Thank you for attending. Today's presentation me now. Disconnect your lines.