Q4 2019 Earnings Call

Outpacing the overall auto market. We are handling the short-term that back in stride and remain fully.

Committed to our strategic.

exclusion for long-term girls in three specific areas this include

optimization of our Auto Show Business with a focus on generating higher arrives accelerating the development of or they show promotion events and the finally our girls initiatives in Virtual dealerships and online marketing services.

Not letting me provide highlights on our business segments for the first quarter.

For applying marketing services will continue to optimize our core Auto Show Business with a focus on generating higher wage.

We're successful organized 321 Auto shows across 149 cities compared with 331 Auto shows in 167 cities in the fourth quarter of 2018.

We expanded our self operation to 148 cities compared with 138 cities a year ago.

Going forward the plan to strategically focused on cities with higher potential allies in the airport to ensure satisfactory. Marja, and the suspendable girls for our business.

additionally in the fourth quarter, we leveraged our deep insights in automotive transactions and the focused on the development of special promotion you then

Which we customize the for each auto dealer and OEM. This allows them to further monetize their customer bases by improve the customer experience leading to improved sales conversion rates.

The fourth quarter with organized 269 special promotion events achieving achieving revenues of about 7.1 million.

representing 18.3% quarter-over-quarter Improvement

next let's move on to our girls initiative inverter dealership and online marketing services in the fourth quarter of 2019 Chef rescue the revenues off a re-recorded revenues of 5.3 million for this segment, which represented a pack of 8.2% year-over-year.

in terms of ownership Auto Sales

we continue to see opportunities in larger cities as far as ownership in these cities is still at our

relatively

low low level compared with the with the first and the second. Here. It is in China more of a many Auto Brands Lake strong Prestige presenting these larger cities due to inadequate inadequate resources. We believe our virtual dealership mother took sides ideal solution to the OEM in these markets as it is as it's our breed complimentary sales and marketing channel to the existing traditional 4S dealer systems.

Specific order is for for cost-efficient efficient Geographic coverage.

For online marketing Services. We met further progress with the close of the Longyear International acquisition in January.

2020 while averaging long as leading social CRM cloud system for China's automotive industry and with major deadline Partners such as team, or we can now for the online-offline model.

This empowers odms with the ability to reach customers more directly and more efficiently.

truth

just a match digitalization of our massive offline customer traffic and our accumulate accumulated consumer insights.

Our Innovative under state drive an online Automotive transaction progress process. We are also provide the Chinese consumers with Superior smarter and the more transparent Automotive was shopping experience.

As most most well our nation under the rest of the world have been facing typical difficult challenges during their career choice.

Endemic in light of the continuously developing status of the pandemic and the vital importance of command Evers with a panda or order shows and the special promotion events.

Probably ugly scheduled in February and March in addition. We believe it's in the best interest of Public Health to continue with suspending more. Most of the companies off lines of line sales events in April.

but expects a gradual recovery of offline sales events in May and June with the pace of subject to talk about development of the and then a pandemic

search anticipating both financial and operating results for the first quarter and a significant part of the 2nd Thursday 2nd quarter to be materially and adversely impacted by the epidemic which will be reflected in the revenue guidance. I was there for Troy we are provide letter in on on this car.

That being said we believe with opportunities often arise from the voltage.

We have seen an increase in public interesting in online Automotive Sales demonstrated by the rising populate popularity of online streaming on sales promotion events and online car going through and read a panoramic VR.

We will continue to increase investment in our online systems and explore our new online marketing methods. We are optimistic optimistic way, we can leverage our power for offline Network and expertise in data analytics analogous analogous to capture the opportunity being being presented by increasing the awareness of all of online Automotive marketing services.

If part of the challenges you are facing we will continue to compliment compliment compliment compliment or fax order show dealership with special promotion events virtual dealerships and online marketing services

capitalization capitalizing on our data analytics capabilities and the collaborating Strategic along with Moe with more stakeholders in the automotive value of chat. We are striving to provide additional compelling value propositions to dealers and the consumers ultimately reshaping the auto retail.

landscape and the four-door 45 unique position as how many Channel Automotive Marketplace

No, I will pull this car over to Troy. I was also for a closer look at our financial performance in the first quarter.

Thank you, buddy. Hello, everyone before I start please note. That phone number is stated in my following remarks in R&D terms unless otherwise noted.

No, I would like to work through our fourth quarter 2019 Financial results our total revenues in the fourth quarter 482 for the a traded the truck 19.3% from R&B to 126.4 million in the same period last year and as a result of stagnation in the automotive industry in China, the decrease was partially offset by the steady girls of the company's new business initiatives, including virtually dealership and online marketing Services as a new car sales in China continue to be solved our offline marketing Services revenues generated from Auto shows in the fourth quarter 2019 decreased by 23.1% to arm the $170 a month from two hundred twenty one point five million in the prior year.

I'm ready due to the slowing macro economy and Industry by the challenges.

Revenues generated from a special promotion event in the first quarter of 2019 were arming 7.1 million compared with Neil in the prior-year period in the fourth quarter ton, either that rub off of new business operations revenues from abortions dealership a lot marketing services and others reached R&G 5.3 million during the quarter comparable to the Army for about nine million in the fourth quarter 2018 or gross profit in. The first quarter was armed 132.1 million decreasing 19.1% year-over-year song from R&B 163 for the 3 meeting in conjunction with Revenue declines.

I

Gross margin expanded into 72.3% from 72.1% in the same period last year the margin Improvement was driven by the enhance the efficiency of our Auto Chicago station process our input bargaining power with the third party lenders as well as the lower cost of operations in lower-tier cities.

In the first quarter and the marketing expenses increased to 159.6 million from 144.9 million in the same period last year off due to the increase in promotion expenses.

General and administrative expenses decreased R&B 27.8 million from 29.8 minute in the same period last year largely due to the fact of a staff compensation expenses.

Research and development expenses increased to R&B 13.8 million from R&B 5.9 million in the same period last year as a result of efforts to add her come along companies a recent a business expansion.

Consequently of loss from continuing operations was 69.1 million in the fourth quarter compared to R&B 17.3 meeting in the same period last year excluding the fact that we share a piece of the conversation expenses or just in that loss attributable. The company's shareholders was R&B 58.0 million in the first quarter compared to a gain of R&B eight point two million in the same period last year

well, just hear you turning first year was the loss of the arm be twenty cents in the fourth quarter compared to a gain of R&B four cents in the same period last year adjusted ebitda was off of 57.8 million in the first quarter from again of armed eight point five million in the same period last year

before moving on to a balance sheet and the guidance for the first quarter 2020. Let me briefly go over our full year 2019 results for the four years of 2019. Our total revenues decreased by 1.0% to RMB 644.8 needed with revenues from offline marketing Services decreasing 3.3% to RMB 623.2 million offset a bit of stress, you know our new growth initiatives or gross profit during the full year of 2019 remained mostly flat with a decrease of 2.0% to earn be $4,058. Well, our gross margin was 71.1% compared with 71.8% in 2018.

Well, Jesse, no loss attributable. The company's shareholders was 139 for the southern meted comparative was again of meeting in 2018, It was a loss of R&B 143.9 million comparable to king of R&B 7.5 million in 2018.

All turning twelve buttons sheet at the end of December 2019. We had a cashier the cash equivalent of 193.9 million.

Well, the first quarter of 2020 we expect a lot of revenues to be between approximately on the 9.0 immediate and R&B 10.0 meted representing a year-over-year approximately dikhao often 92.07% to 91.9% due to the impact of the covid-19 outbreak the temporary suspended many business activities in China as much life away with these forecasts reflect over currents and the preliminary views on the market and operational conditions as well as the influence of the covid-19 panda, make sure to change these forecast includes a partial quarter of Revenue contribution from the companies who completed acquisition of longing International Limited starting January 13th, 2020.

This concludes our prepared remarks for today operator. We are now ready to take questions.

We will now begin the question-and-answer session to ask a question. You may 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 * then two for the benefit of all participants on today's call. If you wish to ask your question to management in Chinese, please immediately repeat your question and English at this time. We will pause momentarily to assemble our roster.

First question today comes from Laura, please. Go ahead.

Thank you. All good morning. Can you just discuss like the parent the current information of the auto market in China and also like the impact of this coronavirus to the company?

Okay. Thank you Laura. Let me translate usual woman.

Nicole Smith, she's got a showdown some according to official statistics impacted by Chinese spring festivals. And this conflict 19 pandemic Total Auto transaction numbers in China drop by 18.7% and 79.1% off effectively in January and February. What's your name is Jean

so

As far as the market trends concerns on the variable factors such as decreased travel consumers, then reduce the number of dealership visits Michael economic uncertainties extending the cycle of vehicle replacement and reduce household expenditures that will particularly affect Big Ticket items such as Autos may continue to impact the Automotive Sales in the medium-to-long-term.

Let me confirm that actual each month. She said she said well did you know at all but on the other hand the good news is is that the increased risk of public transportation during a pandemic may also partially increase the demand. So entry level cost for families without private vehicles. In addition. We have recently observed that various birth entities have introduced stimulus policies to promote Auto consumption as the Auto industry is one of the most important industries in Choctaw.

So that you will know could you could hold you the tell me the colour of the month according to the China Automobile Dealers Association by the date of April 10th, 76.5% of 4 is dealers have already resume operations throughout the country with consumer traffic recovered to around 70.8% indicating a gradual recovery of Auto transaction Market wage each of the insurance.

Which will continue to monitor the degree and duration of the macroeconomic impact by the Pentatonix going forward Laura. Does that answer your question?

Yes, thank you very much. Just have another question. So how does this affect the companies like business especially like in for the company structure?

Please wait a minute 1922.

Please your shoulder to the eating table saw the education to children for you. I'm going to contact due to the spring festival and pandemic as mentioned in our previous press releases on this impact of truck drivers. Most of our business lines were basically suspended in the first quarter.

Yeah, so you do any good eating oranges. I'm not sure what you're going to her shipping to go car. I was the domestic evening after coronavirus outbreak and the continued relaxation of prevention and control measures throughout China. We expect our offline business to graduate recover starting in the second half of the second quarter, but we still face significant uncertainties in term of the pace of the recovery at the moment. We believe it remains difficult to carry out month.

A flying other shows in April and our progress in returning to normal operations will depend on the specific situation regarding the pandemic in different regions across China.

Woman during this for sure to ask for Jose. How about you go off? That's all can go shorter. I was I was strategy in response to the challenges is mainly to expect online business proactively, especially with the further deepening of cooperation without we are launching a number of new on my programs such as turbo live streaming Auto shows and online special promotion events leveraging our years of solid track record and insight from offline Auto shows and marketing to build a new and more efficient model of Auto marketing service online.

The appointment with 130 Colonia the Sugar Shack. Yeah, you only shut off. If you go to the other room are you in addition to that? We completed the merger and integration of long hair by the end of the fourth quarter of 2019. It's social system off dealers can help us back a track athlete looking online and increase conversion rates, which which customers are unable to visit dinner stops during this special. Org.

it's a whole well, my family actually you close your time, but

I'm actually going to do offer a lot of colleges you a hand with her proof and according Jamba Juice using the chalkboard last not least will focus on reducing costs and improving operational efficiency with our offline activities suspended the variable costs associated with the new construction sales and customer acquisition are all significantly reduced. The rest of our cost is primarily related to Star salaries and some other fixed costs to mitigate a challenge by pandemic. We have adopted a series of cost control measures and have already mixed in progress.

Not at this time, she'll question. Yes. Yes, it's great. Thank you very much.

The next question today comes from Jacks and party of Maxim group, please go ahead.

Hi guys. Thanks for taking my questions. I'll start with did I hear this correctly in response to the channels this question that as of April 10th. 5% of all dealers locations have reopened was that was that all China auto dealerships or just those related to to launch a know that that would be a vet statistics for all the dealerships across China?

Okay. All right, that's helpful. And then you also mentioned in that same response at consumer traffic levels that have returned about 70% or so. It's just 70.8% That's also from the same data source that's announced by the China dealership Association.

Okay, and then if I look at look at your outlook for the first quarter you guys you guys provide a revenue Outlook, you know as expected. It's it's certainly nice down here rear quite a bit. I'm wondering if if you could talk about those your your q1 Revenue guidance from a a segment contribution perspective maybe kind of which what percentage of revenues you expect each segment to contribute to that number.

Hi Jackie, this is Troy. I would take a question officially. We don't make breakdowns for our Revenue guidance. We only have a very limited auto insurance organized in January very limited because it's just right before the Chinese New Year. Just running the Chinese New Year. We had called a virus pandemic so forth, you know Public House for say we have a consultant old February and March, although shows definitely with any with another supplement for about online marketing services for dealerships. We will see some contributions from data segment. Also, we mentioned earlier we expect the we will always occur to you, you know effects from the acquisition with a loaner International.

Got it. That's that's helpful. And then

Okay. So if you if if all auto events have been canceled through March, but it doesn't sound like any of them cancel as far as I know from a press release for April or Beyond yet off. When when I know it's you guys don't provide this explicitly but one kid in can we maybe think about when you start to see sequential Revenue growth throughout the year? I know it's a very tough question, but would you expect you to to be higher than q1 in terms of Revenue cuz know obviously events have been canceled or would you expect maybe that's too uncertain. Maybe it'd be higher than Q to offer any thoughts there.

Even though we haven't given any guidance here, but for sure with gradual recovery expected in May and in June, we will see the bulb, uh, you know the increase in revenue streams. Also, we as a our CEO we mentioned we put a lot of efforts are all our marketing Services initially, including online streaming of Auto Sales, you know from from that part with that they expect the recovery and also the supplement to the revenue stream. So the answer is yes, we will see the gradual recovery starting from Q2, but definitely expect the more recoveries in Q3 and Beyond.

Okay, that's helpful. And then, you know giving your partnership by just touch on this specifically with easy home. Is there anything you could say about how many locations sort of easy home locations are opened have all easy home locations been opened or is that a work in progress?

We we believe most easy home locations are opened. But again, it's a similar to our other venue locations for auto shows, you know for us interests of public house. It is still not good to have any possible Auto shows organized at the easy home values across the country.

Sure, and that that makes sense and then my last question is that you guys, you know, you've talked about your how you're focused on making investments in your online infrastructure long. Can you talk about what what what specific Investments are you making that what what do you expect to be? Like what how do you expect a benefit? I was calling to expect to benefit from these investments from a revenue perspective throughout the rest of this year.

Please wait a second and I'll translate woman that can be a woman. I'm not sure that's sugar for Thursday. Okay for for the first point under this special. Under this pandemic. Due to most of our life, although shows on suspended there due to various in support of Public Health. So online new initiatives and online products will be one of our main phone number.

is off, news for

for now

Well, my life has to expand our online product offerings and increase the manifestations of our online products to build. Our strategic could take your positions on online Automotive Sales marketing platform across China Gorge your streams from our online products will actually be reflected in our following quarter reports.

Does that answer your question?

Yeah, yeah, it's helpful and maybe I'll just add then, you know if you had to think about Auto Show revenue and then you think about virtual dealership Revenue which which would suck to be recovered the most the quickest. I guess when you look at the rest of this year.

I know I know auto show events are the majority of the revenue but just relative to each bucket where they've been in the past.

Well, either second quarter would definitely expect the revenue coming from Porsche dealership. We will get recover the faster the older show business, but definitely respect. Definitely. We hope I'm starting from Q3 the the revenue coming from Auto shows where people even faster.

Okay, that that's very helpful. Thank you guys. That's it for me.

Thank you.

There are no further questions now. I'd like to turn the call back over to Cynthia 10 for any closing remarks.

Thank you all for joining us today. And if you have any further questions, please feel free to contact us. Looking forward to seeing you all next quarter's.

The earnings conference call you may now disconnect your line. Thank you.