Q2 2020 TuanChe Ltd Earnings Call
Good morning, and good evening, ladies and gentlemen, thank you for standing by and welcome to truncate limit.
Limited second quarter 2020 earnings conference call at this time, all participants are in a listen only mode. After.
After prepared remarks by the management team there will be a question and answer session. Today's conference call is being recorded.
I would now like turn the call over to your host today Ms. you attend IR director of the company. Please go ahead ma'am.
Hello, everyone and welcome to the tranches the good quarter can you talk to our net income.
Yeah at least on the results earlier today and is now available on our website as well as on Newswire services, we continue.
We continue to note that the discussion today will contain forward looking statements made under the safe Harbor provision of the U.S. Private Securities Litigation Reform Act 1994.
Forward looking statements in Bloomington, Columbus Circle [laughter].
I think the result would be materially different from the they expressed today further.
Major regarding this and other this uncertainty is included in our earnings release and I would just say can seem as though with a DC.
It does not assume any obligation to update any forward looking statements, except as required by law.
You will hear from Mr. <unk>, one the Companys Chief Executive Officer will provide an overview of our strategy and business development.
Hold on this touches he boggy accompanist Deputy Chief Financial Officer will provide additional details on the company's financial results and discuss the financial I look forward and much less prepared remarks, well open up the call to questions lets us that I would now like to turn the call over to our CEO Mr. weight. When this go ahead Sir.
Hello, and thank you everyone for joining us today on our second quarter.
One day on his call.
The start of the quarter.
Please go to report a fixed.
663.3% year over year reduction.
Walter.
Visible to the common shareholder.
And that really caused by the acceleration of our reserves.
Copper layoffs and all eyes treated.
Five a year over year decrease well.
Oh.
73 upon the wall.
Okay.
Uh huh.
Net revenue.
Our young yard to create.
71, well that you got it.
Perfect.
Due to the Caribbean Khalid Tonight, so related to the impact.
Not at all.
Good work towards a common their shareholder refresh mccorkell alternate hunting.
Well.
I can't really be comparatively well hungrier, though and.
And 8.9 million I'd be interested in the quarter, Oh I'm sorry.
[noise], let's take a closer look at the.
Second quarter performance of our business segments.
While also providing.
Additionally, could tell from our strategic and operational priorities [noise].
Berke, Oh online marketing affirmative.
As we have discussed with you.
Our first quarter earnings call and they ended up press releases prior to today uncles concern.
Public health.
He corridor.
With our national and local.
Right.
That's right.
Got a lot of color on corridor 19 prevention under control.
How old are they still all kinds of them yes.
Crow independently.
Good for you then.
The deliberately lately.
He loves after that [laughter].
[laughter] I shouldn't Oh event love could afford a significant part of the second quarter.
Operating and the financial performance for offline marketing services.
Continue to to be materially affected by the endemic.
We opened eyes, though.
60 watt.
Her show a core [noise].
Can fix it.
How do we see the hungry the <unk> auto show.
Wanted to it.
Yes, six it is in the second quarter all comes in I'm sorry.
[noise] not be afraid.
Well off line auto shows and if they show a promotional event.
No more color back to normal or in some cities we operate.
China's older Mike.
That's also gone too.
Sure that's true.
In July.
On Oh, the hotel itself increase.
7.7% year over year I've never assume they condemn 18.
In this context.
Well optimistic we can deliver a good luck on the quarter over quarter improvement in the third quarter Wow, All blind luck student services.
Why are making will show the health and assess it all of our employees and the customer and that's our <unk> priority.
Priority [noise].
[noise] typically [noise].
So technically we will continue to assess on a job that pays off the assumption I'll follow up offline business and the focus on generating higher ROI as well.
Also further leverage our deep inside the older more tailored transaction.
And to develop customized stuff on the targeted.
They show promotion events for its although its killer for.
For each auto dealer Oh, yes.
No.
Let me move on to our cool <unk> in vitro dealership on online marketing services [noise].
Our revenue from dealership online maxing southern yes on the other.
Rich the 19.9 million I am to be increasing longer than the 18% year over year.
Can I really try them by success for online sales events.
<unk> that were held during the second quarter and the most notably.
A lot of being streamed live streaming promotion events conducted in collaboration with T. more although during the week of June 18 [noise].
And there are some good.
[noise] suck encouraging bizarre.
Propelled by or you want me to go.
Question I'll touch upon.
And 10, our online customer acquisition and the marketing with offline promotion activities.
Which alone will only create a seamless.
And Uh huh.
Well, let's take shopping experience for customers for consumer.
Or perhaps auto OEM and the dealer.
Effectively reach customers and acute increased sales conversion rate.
Now I would like.
Sure.
So at a more color or live streaming and its role in automotive itself.
First of all.
<unk>.
That's fair.
Facilitate it facilitated by live streaming have excel around the various pockets go in recently yeah.
It can be a 19th lots.
Lot of streaming content.
Accounted for about 4% of China ecommerce generally.
As consumer behavior shifted a fast car online.
Sure due to the impact of the pandemic [noise] lie.
Lot of streaming and.
Penetration is expected to reach a grateful.
7% to 9% according to our media research.
On the other hand, there for <unk> since that purchase isn't surrounding a car is much more.
Dynamic and for.
For collected a comparative to agenda to general consumer products.
Completing our although transaction entirely.
Online have been proven difficult but.
Given our success is in combining online live streaming with offline.
Brett infrastructure and capability here.
Back to live streaming promotion event took the com that central components for the acceleration Oh for digitalization automotive markets.
On the refi.
I would say will increasingly [noise].
Our position.
Cool.
Our boast about consumer.
Under the manufacturer.
Dealer in the end.
And capturing the enormous opportunity.
[laughter] associated with that changes in the automotive retail industry.
No I wrote pound this car, although Tennessee.
Our best in Seattle for a closer look at our financial performance in the second in the car.
And the second or Florida.
Thank you Mr. Wang Hello, everyone. Thank you for joining us.
As our CEO Mr., Wang just mentioned well comment 19 pandemic, what's effectively contained in China.
The China the company continued to hold fewer auto shows, especially promotion events during the second quarter up 10 to 20.
In accordance with the government guidelines and for the best interest of public Health [noise].
This has resulted in a 73.8, 0.1% year over year decline net revenues to 54.7 million RMB in the second quarter.
Nevertheless, Assad offline men's gradually resumed operations since late may and our.
Richard dealership and online marketing services registered strong growth, our net revenues and gross profit both rebounded strongly from first quarter achieving 464.9%.
658.3% quarter over quarter growth respectively.
I missed the comment 19, a macroeconomic challenges.
We remain focused on optimizing our cost structure, which resulted in a 66.8% year over year reduction in operating expenses.
And if he currently reduced our net losses, both year over year and sequentially weaker.
We are closely monitoring the scum circumstances and will adjust our operation strategy.
Accordingly, while keeping a disciplined cost structure in order to deliver positive returns for our shareholders in the long run.
Now I'd like to walk through our second quarter Twentytwenty financial results.
[noise] before I start. Please note that all numbers states. My following remarks are in RMB.
Unless otherwise noted.
Total revenues in the second quarter was 50 454.7 million RMB, increasing 73.1% from 203.5 million RMB in the same period last year. This.
This was a result of the adverse impact of the cobot 19 pandemic sluggish Chinese economy [noise].
The decrease was partially offset by the steady growth of glitches dealerships and online marketing services and others.
Pat with the first quarter. This year total revenues increased by 464.9 cents I'm sorry.
Offline services recovered and our online services made strong progress.
Due to the continued positive is part of the covenants in pandemic offline marketing services revenues generated from photo shows decreased by 82.5% to 33.4 million RMB from 190.6 million on be it in the same quarter in the second quarter of 2019.
The the offline marketing the on the offline marketing services revenue generated from older shows increased 286.5% for the first quarter of 20 to 25.7 million RMB.
Revenues generated from special promotion events in the second quarter of 2000 21.5 million non be compact with five.
5.8 million on beat in the second quarter of 20 90.3 million RMB in this first quarter Twentytwenty.
Revenues from our virtual dealership online marketing services and others increased by 180% to 19.9 million RMB.
Quarter, compared with 7.1 million RMB in the second quarter of 2019 and achieved a quarter over quarter growth of 438.3 cents.
Primarily due to our continuous expansion of online marketing services, including Commencements of live streaming promotion events.
The year over year growth was also helped by revenues generated from our completed acquisition of longer International limited generate twentytwenty.
Our gross profit in the second quarter decreased by 17.1% truth 43 million RMB from 144 million RMB in the second quarter of 2000 2019, but.
But increased.
566 hundred 58.3% quarter over quarter.
Our gross margin increased to 78.6% from 70.8% in the same period last year, primarily due to the.
The change in the revenue mix in the second.
In the second quarter, selling and marketing expenses decreased by 77.7% to 48.6 million RMB from 200.
17.5 million on being the second quarter of 2019 and increased by 53.1% compared with the first quarter of 2000.
The year over year decrease was primarily due to decrease in promotional expenses and stock compensation.
Our results calls measure controls cost control measures taken by the company and reduce offline events.
General and administrative expenses were 28 million RMB compared with $28.1 million.
In the second quarter of 2010 to 19, and 24.3 million RMB Gn expenses in the first quarter of Twentytwenty.
Research and development expenses decreased by 8.3 million RMB from 9.9 million RMB in the second quarter of 2019, primarily due to the company cost control measures.
R&D expenses were flat compared with the.
The first quarter of Twentytwenty.
Our loss from continuing operations was 41.8 million RMB in the second quarter.
Which is lower compared with.
111.4 million RMB in the same period last year and for 59 million non being the first quarter of Twentytwenty.
Excluding the effects of share based compensation expenses adjusted net loss attributable to the company's shareholders was 32.8 million RMB in the second quarter compared with 29 point.
RMB in the same period last year improved an improved significantly from a loss of 51.9 million RMB in the first quarter of 2017, but.
Adjusted basic and diluted net loss per ordinary share both 0.11 RMB in the second quarter compared with <unk> 0.1, RMB in the same period last year.
Adjusted EBITDA was a loss of 32.1 million RMB in the second quarter compared with a loss of 30.4 million RMB in the same period last year and improved substantially from a loss of 50.7 million RMB in the first quarter. This year.
Now turning to our balance sheet.
End of second quarter of 2025 cash and cash equivalents term deposits and short term investments of 200 point 200.4 million on B.
For the third quarter of 220, we expect our net revenues to be between approximately 19 million RMB 95 million RMB, representing a year over year approximate decrease off such a 3.6% and 29.9%. This is primarily due to the estimated decline.
Any number of offline mens not is not is expected to how in the third quarter of 2022 to the Kobin 19 pandemic.
This forecast reflects the company's current and preliminary review abuse and in market and operational conditions as well as the impact of the coming onto pandemic, which are subject to change this.
This concludes our prepared remarks for today, operator, we're not ready to take your questions.
Thank you.
Thank you we will now begin the question and answer session to ask a question. Please press Star then one on your Touchtone phone. If you are using a speakerphone. Please pick up your handset before pressing the keys. If you would like to withdraw your question from the queue. Please press Star then two for the back.
For the benefit of all participants on today's call. If you wish to ask your question can management in Chinese. Please immediately you repeat your question in English at this time, we will pause momentarily to assemble the roster.
The first question today comes from Jack the Enormity of Maxim Group. Please go ahead.
Hi, good morning, guys.
Thanks for taking my questions as well.
I guess I'll, just start with the China auto environment as a whole.
If you could just kind of summarize what you're seeing in terms of new vehicle sales and the opportunities or.
Or it's basically the the mortgage getting more healthy and steady and consistent if there is any green sky or Blue skies ahead, or do you expect it to remain choppy relative to where you were a few months ago. When we last spoke.
Okay, Great nice to talk to you again, Jack and let me translate the first question I should they said one woman historical or to the arduous and essentially social data shows on the whole.
The whole Buffalo, Chotia, Contentedly, Adobe and I will not let I kind of like $10 ontological Niemela hedges. So yes. Good question Alan will then conduct the CPQ shutdowns.
Thank you Shannon.
Yes.
Yes, just one I can go from grocers on the accounting for the links will shut down especially completion.
Hi, Louis and trigger any if I'm not sure how many of them don't have that lead impossible to potential that's about she doesn't know from what you had initially southern cone and then 11. She didn't cheat sheets is already you Banja Weird thing that's exciting for me to see them, each and she's you're talking censorship.
Oh, Yeah do you.
Sure look when they come I'm wondering if you're seeing blazing the trail closure you.
To the total trading today, so I don't know Glenn is under their control.
Our second quarter or the new car sales in China has started to rebound increased by 1.8% and 2.9% year over year, respectively. In May and June and in July the auto retail sales increased by 7.7% year over year. Oh. This is the highest level we've seen since may 28th.
And this is also helped by the Governor a measure to contained a I'll call. It not in kind of that mix domestically as well as if I local governments have taken policies to promote auto sales and domestic consumption. So the monkey Robin is much.
Happy much improved since the second quarter.
We are happy so quite optimistic forecast for now on the market side.
It's only occur.
Are the other question Doug.
Yeah, Yeah that was fantastic and then another question I have is as it relates to the second quarter in your results gross margin while revenue continues to be pressured.
So.
Gross margin was was pretty significantly high.
Hi, Seventys, which was a pretty exceptional performance for gross margin and you guys mentioned in the prepared remarks at this is due to to mix, primarily but is there anything else that was helping the gross margin profile this quarter. Besides just mix.
Oh, Danny My translation.
Let me take your question.
Hello, Jack So yes, the gross margin for our company has improved significantly from.
Well I'd say at a high Seventys. This is mainly due to the change in revenue mix because the intersect second quarter, our online marketing services has grown strongly so and and the gross profit for the revenue side, Yes has been over 80 so.
Not the main reason add our gross I was gross margin has improved.
Okay understood Thats helpful.
That's helpful.
Yes mhm.
Yes. It does thank you and.
I guess just in terms of in terms of how about automobile transaction sales are you guys noticing any of the automobiles you did facilitate to sell during the quarter.
Are there any noticeable trends or I don't know I guess in terms of the the market you serve within China do you see a noticeable trend shift in how how many vehicles are able to sell through the virtual dealer platform or at least in how your enticing.
Hi, maybe new leads.
Is that is that driving the virtual platform just wondering if there's anything longer term or mid term in the strategy for the for the the offline business that you have and how that relates to the online business. You're you have how's the omnichannel strategy working as a whole basically.
Oh, Yeah sure Jack I, let me translate your question and maybe we'll take Oh for that on a lotta it's better.
Let's back Okay, Oh, gosh, well formation doesn't know systems I mentioned gudger that she showed on the Oh sure Antonio elimination appeal by the whole.
Your shoulder to shoulder with either 200 in general for the last week of local dealerships.
Sure Hi that just curious just what maybe the actual amelie just kinda social justice cells are the lead our July they make oh.
Oh.
Okay going up is especially concerned well huh.
Other solutions for sure.
Five of them or something that's not something that hurts you on survival, Yeah, I've got them down. So you claims looking good from what's different about how should that gives you the nickel equivalent GAAP measure.
Oh actually I'm, not trying to learn Georgia I'm Tom Baker.
Sure the several onto leftover digital dining and nutrition. So you will know something well Neil.
Having sold it to sound too.
As you know.
Saudi because I'm, a little hotter shut that down.
From a bottom line GAAP book, which we can satellite.
So how did you oh.
Oh, Oh Oh.
We were still seeing upside trend on that trying to know China's auto market and <unk> New car sales in August and we are expecting to traditional high consumption season in a in this fourth quarter starting from September and so if there is no another hit from that because I didn't.
Yes, Dan we had positive market are those trends.
Those trends in the overall market [noise].
[noise] that time.
The Central Bank will come in a you did not show a magician second Nick honored by by the cumulative <unk> issues that Liberal I actually see the vaccines logic chip all come up a giant gushing or two things are there you go that's happening now.
Oh sure isn't as high as you can knock element that at a young phones, yeah actually that's what we're talking about being Hilton can you hear me say just had Oh, well you know yeah, I kind of you hit a golf.
But as we mentioned in our prepared remarks, a the user behavior is shifting online now. So this year, we have to make significant progress in our online other shows an online special promotion event, although we have been cooperating with Ali Baba things off with several yes. My now adopt after cooperation have improved significantly.
Since the end of last year, we have lunch along a number of online live streaming, especially promotion events or light and our online program provides a solution that it's win win for both the Oems dealers and consumers.
Yeah.
So to cardio when Oh sure someone that's all I'm going to come out from held to have somebody should we got caught up.
No woman Cliniqa include I'll come back to the news flow.
Okay. That's what I saw that you don't there sounds like you've been reluctant metrics. It all is gonna annika.
Sure.
So honestly if you go to check on that will do it.
And that's really the time Hema she's a.
Oh, sorry, how you know how many are to Clark.
Molly sure if they don't go to kinda Womans up and that's what a horrible went out of your cloud that neutral yeah way.
Eating the BT that attrition.
And so from our perspective, the online business has generated a higher much higher gross margins as Tracy just nation, a it should be around 80% or even higher and on the other side. Besides team auto will happen also cooperate tell us by doing your job and that is the auto stockman of that by two portal, which is a lot.
Just search engines in China. So we have been there a sales representative in all the China and <unk> generated a related data products. So this also contributed to our online marketing avenues.
Since our first quarter of this year and will continue to be a pick apart on my model prominent throughout the year.
Does that answer your question Jack.
Yes, absolutely that is that more of an answer my question I appreciate the added color.
The last thing is just as you look at the AFFO.
Forward looking question again.
Yes, it does a nice job, especially Q2 again have a controlling your operating expenses during.
During this call.
This climate that we're in today.
Just in terms of the directional pattern for the rest of the year.
How would you expect the operating expenses to trend up as you look forward or and how much of it.
It's kind of variable and it just depends as we go along here or.
Is there anything concrete you can say about operating expenses in the trend.
Okay, then we will take your questions.
Well in terms of operating expenses, we expect that the operating expenses will grow because some of it are related to our cloud to our operations truck.
While our operations to our trial offline to online services. So I saw revenues come but recover the expenses will grow pets in terms of the overhead side of the operating expenses will try our best to control that too to take more cost cutting measures. So.
Well the overall.
Operating expenses will grow but for that for their overhead stooge will remain the same.
Well similar.
Okay understood. Thank you.
Yes, Ronny thank you.
That's it for me guys keep up.
Keep up the good work over there.
I look forward to speaking again soon.
Great. Thanks, and other question Oh, I'm looking forward to see you next let Tom add.
Operator.
[noise] [noise] conclude.
<unk> conference call today.
You may now disconnect your line.
Thank you. Thank you. Thank you.