Q4 2022 Cango Inc Earnings Call
Speaker 1: By optimizing our automotive financing facilitation business, we have continuously improved the quality of assets, resulting in a healthy balance sheet. The total outstanding balance of financing transactions we facilitated decreased from 46.7 billion as of December 31, 2021.
Speaker 1: give us the confidence to fully embrace our transformation and grasp new opportunities in the post-pandemic world.
Speaker 2: Now I would like to take you through more details of our business development.
Speaker 2: So, thanks again for watching. Please like, share and subscribe. Please subscribe.
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Speaker 2: Thank you for watching.
Speaker 1: Now let's begin with the new car trading transactions business. As of December 31, 2022, Kanggu Haozhe has engaged 10,112 dealers, up 58% year-on-year. During the fourth quarter, we saw the total of 3,938 cars, up 11.8% from the previous quarter.
Speaker 1: and unique visitors on CanGo, HaoZhi, and App, were over 660,000 and 57,000 respectively.
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Speaker 1: For our self-earned new cars, we have established cooperation with various OEMs and car suppliers, expanding our vehicle sources while also diversifying by brand and model.
Speaker 1: Specifically, we forged deep collaborations with GAC Mitsubishi, Dongfeng Motor Group, FAW Volkswagen, and FAW Audi in the fourth quarter. Furthermore, our sales teams continue to develop vehicle sources and sales models based on the characteristics of each regional market, prompting a steady increase in the number and thickness of channels.
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Speaker 1: With respect to our transaction facilitation services, we have largely completed Kengo How-to service product metrics with the addition of several upgraded, intelligent tools and products during the fourth quarter, further improving facilitation efficiency and dealer experience. Dealers can now easily access a wide range of transaction supporting services on the web page of Believe in Sure s o 1- endless abstraction Linu OSocking s & m
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Speaker 2: While enhancing our new car platform, we also continue to build our youth car platform.
Speaker 1: Following the launch of the Kengo UCAR Mini program in mid-2022, we focused on acquiring new users and increasing engagement. At the same time, by leveraging our advantages such as abundant use-card sources and one-on-one matching services, we groomed dealers' behavior on our platform and improved their platform thickness. To learn more, visit kengoucar.com.
Speaker 1: professional technician teams, and car service teams across the country in the fourth quarter, providing dealers and customers with one-stop value-adding services, including car viewing, car inspection, and car loan transfers to further improve our matching conversion rate.
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Speaker 2: Thank you for your attention.
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Speaker 1: As of the end of 2022, there were 4,492 registered dealers on Kango Yooka. We expect a number of transactions on the platform to pick up over time. As of 31 December 2022, the accumulated page views and unique visitors on Kango Yooka Mini Program were over 410,000 and 23,000 respectively.
Speaker 1: In January 2023, we officially launched Kanggu Youkop app.
Speaker 1: dealers evolving demands with five functional modules covering vehicle sourcing, car searching, online options, transaction support services and other digital services. Moving forward, we will continue to improve Kengo U-Car on its related products and services.
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Speaker 2: Through eliminate can going vehicle digital platform we aim to former brought and bill network for the useful segment efficiency, connecting youth call sources, customers, and funds.
Speaker 1: supplemented by standardized support services spanning the entire transaction chain. With these advantages, Kengo can promote truly efficient cross-regional circulation of use cards across the country, streamline the use card transaction process and increase dealers' operating profits. Going forward, we will continue to advance the platform's digitalization.
Speaker 1: to improve dealers' thickness and enhance their engagement on our platform, leveraging Tango's solid channel network and customer base developed over 10 years to provide them with premium car resources.
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Speaker 1: New digital infrastructure is an essential part of our transformation. In 2022, we continue to enhance our R&D efforts to holistically improve our digital business capabilities by building a proprietary information and digital center that integrates digital and intelligent technologies.
Speaker 1: Kengo has created a unique competitive advantage to propel the sustainable development of our automotive transaction service platform. Kengo's dual platform framework has taken shape and we expect to steadily increase our operation capacity and efficiency as we improve each function.
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Speaker 1: Forging a new path through uncharted territory is never easy. And as we transform from a leading auto financing service provider to an integrated automotive transaction service platform.
Speaker 1: Both the scope of our offerings and our business model have undergone a sea change. However, one thing never wavers. Our determination to accompany small and medium-sized dealers in lower-tier markets on their journey to success and empower them to achieve their goals by providing them with the products and services they need.
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Speaker 1: When we established Cango 12 years ago, we honed in on the huge consumption potential and imbalance between the supply and demand in the lower tier markets. Automotive financing facilitation services are the launchpad.
Speaker 1: Kango gradually built a solid network covering nearly 50,000 dealers nationwide, and we have worked closely with our dealers to provide premium financing facilitation services to our customers ever since. A decade later, many of the small and medium dealers we partner with have grown into larger and more diverse businesses.
Speaker 1: multiple services and diverse needs. We have been with them every step of the way, continuously pushing our business boundaries to offer effective solutions to address their unmet needs as well as one-stop services to help our dealers lower their operating costs and refine their business efficiency.
Speaker 1: As always, our ultimate goal is to make car purchases easy, simple, and enjoyable.
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Speaker 2: The macro economy and the overall auto industry are undergoing profound and lasting changes.
Speaker 1: Although we still see challenges ahead in 2023, we have high expectations for the future and great confidence in the long-term development of China's auto industry. Hangar will continue to focus on our vision and mission while further improving our standardized automotive transaction service ecosystem. Together with our dealer partners, we remain dedicated to promoting the recovery and development of the overall economy.
Speaker 3: to our fourth quarter and four-year 2022 earnings score. Before I started to review our financials, please note that unless otherwise stated, all numbers are in RMB terms and all percentage comparisons on an over-year basis.
Speaker 3: Our fourth quarter performance once again illustrates the strength and resilience of our strategy and business model.
Speaker 3: Fourth quarter total revenues were $487.1 million.
Speaker 3: Car trading transaction business delivers revenues of $431.1 million, continuing to play an essential role in our platform.
Speaker 3: Now let's move on to our cost and expenses during the quarter. Total operating cost and expenses in the fourth quarter of 2022 was $698.7 million compared with $1,207.6 million in the same period 2021. Cost of revenue in the fourth quarter of 2022 decreased to $1,200,000
Speaker 3: 33.8% in the same period 2021.
Speaker 3: The change was primarily due to a higher contribution for our card trading transaction to total revenues.
Speaker 3: Cartridge trading transaction normally presents higher cost revenue ratio, thus pushing up the overall ratio.
Speaker 3: Sales and marketing expenses in the fourth quarter of 2022 decreased to $19.2 million from $73.8 million in the same period 2021. As a percentage of total revenues, sales and marketing expenses in the fourth quarter of 2022 was 4% compared with 7% in the same period 2021.
Speaker 3: General and administrative expenses in the fourth quarter of 2022 decreased to 66.2 million from School District striving to build more equity in business to stay complicit in the
Speaker 3: $2.1 million in the same period of 2021. As a percentage of total revenues, general and administrative expenses in the fourth quarter of 2022 was 13.6% compared with 8.2% in the same period of 2021. Research and development expenses in the fourth quarter of 2022 decreased to $8.4 million from $23.6 million in the same period of 2021.
Speaker 3: As a percentage of total revenues, research and development expenses in the fourth quarter 2022 was 1.7% compared with 2.2% in the same period 2021. Net loss on risk assurance liability in the fourth quarter 2022 was $62.8 million compared with $84.6 million in the same period 2021.
Speaker 3: We recorded loss from operations of 211.6 million in the fourth quarter of 2022, compared with 157 million in the same period 2021. Net loss in the fourth quarter of 2022 was 558.9 million.
Speaker 3: Non-gap adjusted net loss in the fourth quarter of 2022 was 539.9 million.
Speaker 3: On a per share basis, dilute net loss per ADS in the first quarter of 2022 was 4.13 and diluted non-gap adjusted net loss per ADS in the same period was 3.99.
Speaker 3: For the full year 2022, our total net revenues were $2 billion, total operating costs and expenses were $2.9 billion. Net loss was $1,111.2 million and non-gap adjacent net loss was $952.7 million.
Speaker 3: Diluted net loss per ADS was 8.11, and diluted non-gap adjusted net loss per ADS was 6.95.
Speaker 3: Moving on to our balance sheet, as of December 31, 2022, we had cash and cash equivalence of $378.9 million, compared with $745 million as of September 30, 2022.
Speaker 3: As of December 31, 2022, the company had a short-term investment of $1.9 billion, compared with $2.7 billion as of September 30, 2022.
Speaker 3: Looking ahead to the first quarter of 2023, we are now predicting our total revenues to be between $550 million and $500 million.
Speaker 3: Please note that this forecast reflects our current preliminary view on the market and operational conditions, which are subject to change.
Speaker 3: This concludes our prepared remarks. Operator, we are now ready to take questions.
Speaker 4: Thank you. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced.
Speaker 4: If you wish to cancel your request, please press star 2.
Speaker 4: If you are on a speakerphone, please pick up the handset to ask your questions.
Speaker 4: Your first question comes from Shelley Lang from Logan Stanley. Please go ahead.
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Speaker 1: Thank you, good morning. I have two questions. The first question is, as Kengo has optimized its automotive financing facilitation business, we have also observed a significant decrease in the company's risky assets. So how does this positively impact the company's transformation?
Speaker 1: And the second question is based on the data disclosed by Kengo, appears that the company has made substantial progress in transformation towards a car trading transaction service platform. So, what are your advantages compared with your industry peers like other platforms and also what are your advantages?
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Speaker 1: I will take your two questions. Thank you, Shelley, for your two questions. So to answer your first question, our automotive financing facilitation business generated assets on a larger scale that significantly affected the company's cash flow and could even direct their impact on our viability.
Speaker 2: The total standing balance of financing transactions we facilitated decreased from 46.7 billion as of December 31, 2021.
Speaker 2: And your only second question, currently both our new car and used car platforms have taken shape.
Speaker 1: fully running and smoothly, our next steps will be to holistically scale up the business operations and improve profitability. Thank you, let's all from me.
Speaker 1: running and smoothly, our next steps will be to holistically scale up the business operations and improve profitability.
Speaker 4: Thank you. Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced.
Speaker 4: Your next question comes from John Lin from Goldman Sachs. Please go ahead.
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Speaker 1: Thank you for giving me this opportunity to ask questions for the management. So I have two questions. The first question is what is your outlook for China's auto market in 2023 and specifically what is your outlook for your automotive transaction service platform in 2023?
Speaker 1: And the second question is could you give us more colors on the development of the current used car business in detail? Thank you.
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Speaker 1: Thank you, John . I will take your two questions. On the first question, on the demand side, three years of pandemic policies actually have created a backlog of consumer demand and we believe this pent-up demand for car purchases will gradually be released.
Speaker 2: Of course, this is subject to the overall level of economic recovery and policy support.
Speaker 1: On the supply side, traditional car brands launched many new models at the beginning of the year and NEV new energy vehicle production costs have also decreased as lithium battery supply prices have fallen. Furthermore, NEVs will continue to enjoy an exemption from vehicle purchase taxes.
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On your second question about our used car business we launched the Hail UN der Weus car app, at start of 2023 including an exceptional range of function covering historical vehicle condition reports
vehicle evaluation, online auctions, online car searching, used car listing, and other digital services. As of the end of 2022, there were 4,492 registered users on Kanggu Yuka. As of December 31, 2022, the accumulated page views and unique visitors on Kanggu Yuka Mini Program were over 410,000 and 23,000 respectively.
We expect a number of transactions on the platform to pick up over time.
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sold by the consumers and also those repossessed cars. Of course, we also have our own cars. So by taking advantage of these abundant used car sources and one-on-one matching services, we have successfully groomed the dealers' platform usage behaviour and improved their platform.
Thank you, that's my answer to these two questions.
Thank you, that's my answer to these two questions.
Thank you. Thank you. Your next question comes from Brent Lee from Bamboo Works. Please go ahead.
Thank you.
Hello, this is Ben from BambooX. I'll just ask a question directly in Chinese.
I hope you enjoyed this presentation. Please like, share and subscribe to our channel.
My question is that only abandoned car sources is one of the company's strongest advantages. How will the company leverage and consolidate this advantage in the future?
that owning abandoned car sources is one of the company's strongest advantages. How will the company leverage and consolidate its advantages in the future?
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Car sources is one of our strongest advantages in our new car and used car service platform. Our goal is to provide a better service experience to car buyers and car dealers through our car trading transaction business. With a more diversified vehicle supply, we can better meet the individual needs of customers in the lower tier markets.
We hope to leverage our advantages in car sources to increase customer sickness and encourage customers to use other services on our platform.
extracting a similar type of information from foreign o healers is an important part of the trading strategy that whole industry
So on the new car sources, we will step up our efforts to explore and develop further our collaborations and partnerships with OEMs. In the fourth quarter, we built deep collaborations with JAC, Mitsubishi, Dongfemotor, FAW Volkswagen and FAW Audi. We also became the most important...
the panther today.
On used car sources, historically we have these advantages of having access to a lot of repossessed cars. So in the future we will use this as a leverage to fully grow and scale up our used car business.
Thank you. Thanks, got it. Thank you, we have no further questions at this time.
Thank you all for joining us. That closes today's poll. Thank you.
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