Q1 2021 Cango Inc Earnings Call
Good morning, and good evening, everyone welcome to Kangaroo of Incorporated's first quarter 'twenty 'twenty, 1 earnings conference call.
At this time all participants are in a listen only mode.
This call is also being broadcast live on the company's IR website.
Joining us today on Mr. Jai on men, Chief Executive Officer, and Mr. Young He's Yang Chief Financial Officer of the company.
Following managements prepared remarks, we will conduct the Q&A session.
Before we begin I refer you to the Safe Harbor statement and the company's earnings release, which also applies to the conference call today and its management will make forward looking statements.
With that said I'm now turning the call I'd like to Mr. Jai on Lynn C. R of Kangaroos. Please go ahead Sir.
Okay.
Hi, Joe how are you and tons out of town.
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Hello, everyone and welcome to <unk> 'twenty 'twenty, 1 first quarter on earnings calls.
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So search of consumer spending continued to gain momentum in the first quarter of 'twenty tranche, 1 well and out of the hands. We also noticed that the pressure on the supply side cost of by auto parts shortage has increased and will likely bring uncertainties and the overall case, both the industry's recovery.
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You bet I can go we made steady progress across all business lines and the first quarter of total revenues grew to $1.1 billion RMB, surpassing the high end of our previous guidance range by approximately 7% operating income sustained its growth momentum and the quarter and came in at 460 million RMB compared to the loss from operations of.
$81.3 million RMB and the same period of 2020 net loss for the quarter was 274 million RMB primary attributable to a new class of investment losses of 447 men on all of them being the OTO.
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And we first launched the pengo Husky voted for building, a reliable efficient and exceptional automotive transaction services platform and those core values and aspirations remain just as important to us today as we aim to provide consumers with creative products and the best customer service experience, while also propelled and China's automotive industry for what Mike.
<unk> dealers financial institutions, Oems and dialing district resources.
We remain firmly committed to our long term vision and I've continued to study the fossil business default on plans during the quarter on the deepening our roots across the 3 main business lines car trading the transactions after market services facilitation and automotive financing specification and form of closed loop with our services as a result, we of record.
The <unk> the relationships among different parties I'm on the auto value chain, while also empowering and creating value for all of them.
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And that makes sense I would like to start with I'll call trading transactions business of Congo's main growth driver car trading transactions generating revenues of 500, and I'm talking to the 10 million of lumpy in the first quarter accounting for approximately 59.
9% of total revenues, bringing supply and demand and the auto market and relying on our technology, driven online platform and expense and extensive dealership network and the lower tier market. We have swung the current partnerships with various traditional car manufacturers and new energy vehicle makers building on its foundation, we have integrate.
All the participants along the call tried and transaction Chang to jointly explore you know for 2 channel strategy in the lower tier market.
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Well, maybe you can go to just on the flow through of sometimes the twitching zone and April Tango entered a strategic agreement with Joe and Jonathan to jointly develop a new retail model for automotive transactions and China's lower tier market under the terms of the agreement both parties will collaborate on.
And areas of automotive sales and marketing and loyalty of markets through the development of the new automotive free to model. Additionally, can't go well, what's the provide auto financial products and services to all customers of General news on 35 secondary dealer stores. Meanwhile, well and currently in negotiations for potential collaborations with.
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During the first quarter and we also continually enhancing our service capabilities related to car trading transactions first of all independent sales reps Hot runs the carver momentum conferences and bringing.
Private traffic flow and that pockets of more segmented customer groups.
And the end of the first quarter, we have momentum thousands of independent sales reps and 456 update us the continuous expansion of our traditional dealership network plus the part of the traffic generated by our independent sales reps helps us effectively reach our customers and knows the more quality products and services and the lower tier market.
In addition, we continue to improve the layout of our warehousing and logistics by the end of first quarter. We have co developed for 100 on 1 warehouses with the total capacity of approximately 33000 parking spaces and covering 79 cities across the country boosting the expansion of our distribution network and the lower tier market.
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And as Chinas auto market and just the new phase of development. After the use of high speed growth the transition from meeting the needs of first time purchases to the replacement on operating needs.
And of boosting the growth potential of aftermarket services and rely on a network of nearly 50000 registered do not just the theaters nationwide and more and 1.8 million automotive financing customers. After market. So of it is facilitation is now and integral part of our total construction services platform and Q1 after market services facilitation.
Revenues were $62.5 million RMB, we continue to optimize the organizational structure and operating mechanisms all of our sale of swaps I mean, our direct sales team during the quarter achieving a significant increase in the per capita productivity. We are also simultaneous continuously.
Deepening our cooperation with MD of the manufacturers by embedding auto insurance products and services into the mobile apps to help them better provide insurance products and services to their customers and improve overall efficiency.
We are also he's brought on an after market services deeply to discover and more opportunities and create a brand new industrial ecology of people until end of life.
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Finally, our automotive financing facilitation of business schools throughout the day in this quarter, we facilitated for $10.4 billion RMB financing transactions of 134% year on year on automotive financing facilitation revenues for 412 million RMB, 243% year on year I saw from on.
The 31st the total outstanding balance of financing transactions facilitated by the company reached 47.5 billion RMB.
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Turning to asset quality as of March the 31st lien and 1 class and I'm 3 classroom for the ratio increased to 1 point to the British pound and zero point.
The 5.4% respectively to address rising overdue ratio, we continue to strengthen on slide from channel risk controls along with additional digital measures such as feature of recognition of engines and model improvements to deliver differentiated risk controls on the same time, we have assembled the dedicated team to improve the.
The efficiency of postponed collection.
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It's all of what you would change us as still being used toward yacht dodging. The June shows on did you talk price at all in terms of the dealership network. We continue to work on improving our network efficiency and as the result, we have terminated relationships with dealers that do not meet our standards for kinds of its traffic quality and try.
Generation capabilities by the end of first quarter, we had 47017 buttressed. The Ddos. Meanwhile, we have expanded into the Hyatt and settlements with the innovative product offering.
As of March 31st we have carved out of more than 9000 for us dealers of approximately 40 high and Oems, including Mercedes Benz and.
BMW and established partnerships with several leading dealer groups in China.
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Optimistic about the huge potential in this market and that's the same cooperates with leading and UV makers and China aiming to leverage each other's the advantages to explore new distribution channels and the lower tier markets.
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Looking ahead, we see the impact of international supply chain uncertainty lingering the chip shortage in the automotive industry will likely persist for a long time.
And is expected to have an impact on all of the overall business concur.
Concurrently domestic financial supply and regulatory environments are also undergoing profound changes we will closely watch the and actively respond to the situation as it develops proactively setup the pop over to cope with any form of uncertainty and keep pace with the changing industry trends through continuous product innovation.
Which place us on the step by step pace to achieve our established a strategic.
<unk> close.
JJ line, you'll chew on the so she's had once all of the last week, which of course, the step 1 and people just how good of share with that I will now turn the corner of the tallest CFO and Michael John for reveal all the financial performance in more detail.
Thanks, Joe you're right and the Hello, everyone and welcome to our first quarter 2000, and trying to 1 earnings call.
And I started to review our financials. Please note that unless otherwise stated all the numbers on your RMB terms and all percentage comparisons are on a year over year of basis.
We're excited about our soldiers and start to the year as first quarter revenue of search 357 per cent year over year to reach a new record high of 1 point of 1 billion once again exceeding our guidance range of.
On the car trading transactions business continued to perform well and has served as a crucial growth driver with revenue contribution of climbing to more than 50 per cent of the total revenue at 570 of 1.6 million.
Revenue was for auto financing and facilitation and off market services for say the tissue were also robust.
$411.7 billion and the $62.5.
The 5 million, respectively, and the first quarter.
Now, let's move on to our cost and expenses during the quarter total operating cost and expenses and the first quarter 2021 were 900 of $64.2 million compared to $327.3 million in the.
The same periods of 2 of southern countries the.
Increase was mainly due to the related costs incurred by car our car trading transaction of business, primarily as a result of increasing revenues for all of our car trading transactions and sales and marketing expenses general and administrative expenses and the research and development expenses each decreased as a percentage of the total revenue in the first quarter of.
2 of southern and 'twenty, 1 compared to the same period of last year.
Cost of revenue and the first quarter, 2 southern and 21 increased to 769 million from 96 million of in the same period 2020 as a percentage of total revenue cost of revenue in the first quarter was 68.4 per cent compared to 36, 8% and the same people.
For 2020, and the change was primarily due to an increase and the amount of car trading transactions for automotive financing and facilitation of the off market services facilitation cost of revenue as a percentage of relevant revenues was around 35, 6% in the first quarter 2020 of west.
Sales and marketing expenses in the first quarter of 2021 were 57, and 8 million compared to $45.8 million of in the same period of 2020.
As a percentage of total revenue sales and marketing, especially the you know first quarter of 2021 was $5.1 per cent compared to 18, 6% in the same period of 2020.
General and administrative expense in the first quarter of 2020 of 1 word $61.4 million compared to 57.4 million and the same period of 2020 as a percentage of total revenue general and administrative expenses and the first quarter of 2020 of 1 was $5.5 per cent compared.
For 223, 3% of in the same period of 2020.
Research and the tape out of our expenses in the first quarter 2021 were $13.6 million of compared to 12.6 million and the same period of 2020 and.
As a percentage of total revenues research and development expenses in the first quarter of 2 southern and 20 of what was 1.2 per cent compared to $5.1 per cent and the same periods of 2020.
Net loss on a risk assurance liabilities and the first quarter of 2 of southern tide of tier 1 was $21.7 billion compared to a net loss of $76.9 million of in the same period of 2020 net losses on risk assurance liabilities and the first quarter of 2020 of why it was mainly due to an uptick in.
Delinquent loan balance and default rate since the beginning of 2020 of what.
We reported income from operations of 115, 9.5 million in the first quarter of 2020 of 1 compared to a loss from operations of $81.3 million of in the same period of last year.
Due to the fair value change of the company's investment and the auto we recorded and net loss of $273.9 million in the first quarter of 2020 of what non-GAAP adjusted net loss in the first quarter, 2 southern and 'twenty of 1 was $254 million.
On a per share basis diluted net loss per Ats and the first quarter 2 southern tide here, what was 1.8 for and diluted non-GAAP adjusted net loss per ADR for the same period was 1.7.
Moving onto our balance sheet as of March the 31st 2020 of 1 we had cash and cash equivalents of 1.6 billion compared to $1.4 billion as of December 31, 2020.
And as of March started the first 2020 of 1 the company had the short term investment of $2.6 billion compared to $4.3 billion as of December 31st 2020.
The decrease was mainly due to the partial disposal and the change your fab out of change of the company's investment in the auto locally.
Okay, and I had the 2 the second quarter of 2020 of what we expect our total revenue is to be between 900 million and $950 million. Please note that this forecast reflects all of our current and preliminary views on the market and operational conditions, which are subject to change.
This concludes our prepared remarks, operator, we're now ready to take questions and thank you.
Thank you we will now begin the question and answer session to ask the question you May Press Star then 1 on your touch time for them.
If you are using a speakerphone please pick up your handset before pressing the case too.
Withdraw your question. Please press Star then 2.
At this time, we will pause momentarily to assemble our roster.
Okay.
Okay.
Your first question comes from Shelley <unk> with Morgan Stanley. Please go ahead.
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I'm sure the Wan from Morgan Stanley I have 2 questions. The first question is what is your outlook for the.
Demand in the second half of 'twenty 'twenty, 1 and.
And in particular, it has something to do with your business of auto loan facilitation and so that's why I asked the question and also in particular I would like to know about your outlook for the demand in the lower tier cities and the second question is of all your partnership and collaboration with New energy vehicle.
Factories, we understand that actually these manufacturer of the manufacturers usually atop of direct sales model. So in your collaboration with the and EV makers. How is there based on your observation is there a model different from traditional car manufacturers and.
And how is your collaboration with them different from the collaboration with traditional car manufacturers.
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So to answer your first question.
So far we see demand and the auto market remains strong and we have but we have concerns about the supply side, we think that the pressure of institutions of supply well likely persist for some time to come and also on <unk>.
And there is this issue of the chip shortage, and we think cloud and the needs of high end brands and for our stores and magazines will be prioritized. So we expect the domestic auto brands and lower tier markets to face more pressure in the second half of lithium.
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And to answer your second question with traditional auto manufacturers and we spend on automotive financing and facilitation business.
All of them.
And a nationwide the dealership network.
And the latest mostly enough link collaboration but in terms of collaboration with and you've seen the on manufacturers. It is of online based on motto, because the and UV manufacturers they adopt direct selling model and they have now around the showrooms and also they have a very simple and easy process.
<unk> enables customers to complete the test driving on the vehicle ordering online. So we are currently of deepening our cooperation with <unk> and EV manufacturers by embedding auto insurance products and services and for the Unbilled AR apps for example to help them better provide insurance products and services to and our customers and this kind of collaboration model and not only.
The improved overall efficiency, but also confirms to our partners the business models. So under the direct selling model on automotive financing facilitation service is embedded in the <unk> platform and this helps boost all of a so our.
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Yes.
Thank you and your next question comes from Derek share with Goldman Sachs. Please go ahead.
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This is Derek from Goldman I have 2 short questions. The first is about the cod trading business.
And more about the margin generally speaking how much is the cost of the purchasing cars and how much of asps.
And what is the guidance for 2020, 1 and the second question is about the off the market services.
Do we have any and all of expanding the services. Besides the injury cells, such as collaboration and be repairing thoughts.
Gotcha.
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Thank you Derrick so on.
And so your first question we.
We have the super.
For enterprise and strategies across car models on the regions for all car trading transaction business it really depends on the.
And the results of on research and also the <unk> of.
Judgment of all of the team.
For us it is more important to empower due to the spike.
Getting no price from Oems and sharing more profit profit with dealers to improve the trading because of the capacity.
And for the current trading transaction business of gross margin and the first quarter.
And it has improved.
Up to about 1.3% and Q1 lithium.
And weeks about the chip shortage and the auto industry to continue.
And this will definitely have an impact on our car trading transaction business and the other thing time, we are pushing on hot on partnerships with various Oh, yes. So if all goes if all goes well then the and we're trading volume. It just basically start to reach 45000 units.
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And on some of the southern question the hours of.
Some of its range and the Pope in the after market.
The business, while the focus of our after market service precipitation remains on the insurance product for now while we are also trying to reset to the inflammation referral I mentioned the services.
However, so far it is due in early stage of development since the start of this year, we have introduced pilot vehicle delivery and repair services.
The difference in some regions.
As we develop more business as we expand our market and the future we will integrate the resources and try to standardize the management on the surface of all of of all upon the web shops of course, we will.
In fact more in selecting the right partners and gradually develop auto.
Perfect.
The components of services as well that the auto care service and also like a definite change driving business. So of overall speaking we planned to cover.
Okay.
And so obviously the specifications with me.
With all of them.
And that's all for me.
Okay.
Thank you.
We have nice adequate at this time I will hand, the call back to management for closing remark.
Oh, yes, she is on Jeff.
Did you do in a good type of hotel hopefully thoughts just from tissue. Thank you for joining us that causes the Q1 since you don't you want on these calls.
Yes.
Thank you. The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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