Q3 2023 Cango Inc Earnings Call
Speaker 1: Good morning and good evening everyone. Welcome to Kango Inc's third quarter 2023 earnings conference call.
Good morning, and good evening everyone.
Welcome to shingle Inc's third quarter 2023 earnings conference call.
Speaker 1: At this time, all participants are in a listen-only mode.
At this time all participants are in a listen only mode.
Speaker 1: This call is also being broadcast live on the company's IR website.
This call is also being broadcast live on the company's IR website.
Speaker 1: Joining us today are Mr. Jia-Yin Lin, Chief Executive Officer, and Mr. Yang Jie-Zong, Chief Financial Officer of the company.
Joining us today are Mr. Xiao Yan Lin Shen.
Executive Officer and Mr Young zone.
Chief Financial Officer of the company.
Speaker 1: Following management's prepared remarks, we will conduct the Q&A session.
Following managements prepared remarks, we will conduct the Q&A session.
Before we begin I refer you to the Safe Harbor statement in the company's earnings release, which also applies to the conference call today.
Management will make forward looking statements.
As a reminder, today's conference is being recorded.
Speaker 1: With that said, I am now turning the call over to Mr. Chai-Yen Lin, CEO of Kango. Please go ahead, sir.
With that said I am now turning the call over to Mr. Xiao Yan Lin CEO of Canada. Please go ahead Sir.
Speaker 2: Hello everyone and welcome to the Kango Circular 2023 earnings call.
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Speaker 2: In the third quarter of 2023, both production and demand continue to be understriped, despite the introduction of economic stimulus measures, overall consumer confidence has yet intensive care feels lasting in the
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Third quarter, all countries when history, both production and demand continue to be on the strength. Despite introduction of economic stimulus measures overall consumer confidence have yet to fully recover.
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The automotive market in China is characterized by interested intricate dynamics, although the post pandemic era in 2023 so a resurgence in consumer demand for automobiles. It has been slow to pick up pace as a result major auto manufacturers have rolled out this kind of policy. So when you call purchases leading towards.
Speaker 2: Although the post-pandemic era in 2023 saw a resurgence in consumer demand for automobiles, it has been slow to pick up pace. As a result, major auto manufacturers have rode out discount policies on new car purchases, leading to a sustained decrease in retail prices.
Thank you, Chris and retail prices in the first three quarters. The overall sales in the automotive market exhibited the modest recovery, whereas new energy vehicles that you'd be using Shaw and airports, serving as the primary drivers of market growth.
Speaker 2: In the first three quarters, the overall sales in the automotive market exhibited a modest recovery with new energy vehicles and easing short- and net ports serving as the primary drivers of market growth.
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Speaker 2: On distribution, the profitability of car dealers has been severely impacted by pricing wars. Consequently, they have transitioned towards an own demand vehicle purchasing to alleviate inventory of accumulation and operational stress.
On distribution the profitability of car dealers have been severely impacted by pricing Wars consequence, they may have transitioned towards an all demand vehicle purchasing to alleviate inventory accumulation on operational stress. That's put data released by the China automobile dealers Association, 50% of auto dealers.
Speaker 2: As per data released earlier by the China Automobile Data Association, 50% of auto-dilis reported losses in the first half of this year the highest level in recent years.
Reported losses in the first couple of bps, the highest level breathing yes.
Speaker 2: Indeed, the impact extends beyond cardinals, all parties in the automotive final chain, including Kengo, have faced unprecedented pressure.
The impact extends beyond cockiness all parties in the automotive finance automotive find out what shang, including Tango have faced unprecedented pressure.
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Speaker 2: In Q3 2020, the company's total revenues amounted to $354 million R&B, making a year-old year decline of 15.1%.
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Lots of people with Q3 'twenty two 'twenty three the company's total revenues amounted to 354 million RMB, making a year over year decline of 15, 1%. Despite incurring a net loss of 40 909 million RMB due to goodwill impairment our.
Speaker 2: Despite the current net loss of 49.09 million R&B due to good willing payment, our overall operating efficiency and reduced financial provisions helped us achieve a smaller net loss compared to 130 million R&B in the same period of last year.
Overall operating efficiency and reduce financial provision helped us achieve a smaller net loss compared to 130 million RMB in the same period of last year as of September 30th 'twenty to 'twenty three we managed to shrink the total all spending pattern so financing transactions.
Speaker 2: As of September is thirtieth 2023. We managed the shrinkth the total and ING imbalance of financing transactions to the 13.1 billion RMB, while maintaining M one plus and M mysty plus at a steady rate of 2% and one point two. Four percent Re.
I can try 1 billion RMB, well, maintaining I'm, one plus and.
Three plus at a steady rate of 2.42% at 1.24% respectively.
Speaker 3: Since the founding of Zhang Guzhi, he has been dedicated to the needs of car dealers.
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Speaker 3: In 2022, Canggu launched a substantial transformation upgrade and entered the field of automobile transactions with greater intensity. In the field of new car transactions, Canggu was launched later.
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Speaker 3: with good cars, small programs, and apps. In October of the same year, standardized service products were gradually launched. Through multi-system, all-in-one platforms for new cars across the country, car manufacturers provided a temporary vehicle transaction comprehensive solution with the core of the car yard. Establish a network of warehouses and logistics covering nearly 100 cities in 31 provinces and provinces across the country. Register more than 11,000 new car manufacturers.
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Speaker 2: In the beginning, we have strived to gain an in-depth understanding of dealers' needs. In 2022, we initiated a significant transformation of our business by venturing into the automobile trading sector.
Since the beginning we have strive to gang and in depth understanding of theaters.
<unk> 22, we initiated a significant transformation of our business by Sun jewelry, including automobile trading segment to serve.
Speaker 2: To facilitate new car trading activities, we launched the CanGo How-To app and mini program and gradually introduced the standardized service products for October 2022. With our multi-system, all-in-one platform, CanGo offers a comprehensive one-stop solution for automotive transactions across the country. Presently, we have built a robust network of warehouses and logistics operations in nearly 100 cities across 31 provinces with over 11,000 registered new car dealers.
Sunny days, new car trading activities, we launched the Kindle how to have a mini program and gradually introduced a standardized service products for October 2022 with a multi system. All in one platform can go offers a comprehensive one stop solution for automotive transactions across the country person stay we have.
Our robust network of warehouses and logistics operations.
Hunter cities across 31 provinces with over 11000 breakfast, a new car dealers.
Speaker 3: In terms of second-hand vehicles, in May 2022, the CanGu YouChe app will be launched, and at the end of the same year, the CanGu YouChe app will be launched to cover functions such as vehicle source, vehicle search, real-time pricing, transaction support services and digital services, to fully meet the needs of second-hand car dealers.
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Speaker 2: In relation to used car transactions, we launched the CanGo U-Car mini program in May 2022. By the end of 2022, we introduced the CanGo U-Car app to the market. Equipped with a range of features such as used car listings, car searches, online auctions, transaction support services, and digital services, CanGo U-Car addresses a wide array of business needs for used car dealers.
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Jean did you tell him what you Jim Jong in relation to used car transactions, we launched the tango you'll call. Many progressing they tend to send it to them by the end of 'twenty 'twenty. Two we introduced the Kangaroo you would call out to the market equipped with a range of features such as used car. These teams cost such as online auctions transfection support services and digital services can go.
Your college trustees, a wide array of business needs for used car dealers to date. The total number of register used car dealers without platform has to pass the 7000.
Speaker 2: To date, the total number of registered used car dealers on our platform has surpassed 7,000.
Speaker 3: With the continuous expansion of products and services on the industrial chain, as well as the continuous deepening of cooperation between car manufacturers and partners, the company's perception of the market of transactions is becoming more and more clear. The entire Chinese new car market is now in an unstable state.
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Speaker 2: As we are continuing to expand our product and service offerings across the entire industry value chain and strengthen our partnerships with dealers, we are gaining a more precise understanding of the market. The new car market in China is reaching saturation, with a significant decline in first-time new car buyers.
As we are continuing to expand our product and service offerings across the entire industry value chain and strengthen our partnerships with theaters, we are gaining a more precise understanding of the market then you'll call marketing Chinese reaching saturation with a significant decline in first time, new car buyers. However, we noticed an increase in <unk>.
Speaker 2: However, we noticed an increasing trend among consumers to extend their car collection as well as a growing demand for vehicle replacement and upgrades.
Trend among consumers to expand alcohol collection as well as a growing demand for vehicle replacement that operates both for us and not for our students are exploring used car business well used car dealers of central range that a suite of new cost traditional boundaries between cost sales channels are becoming increasingly blurred.
Speaker 2: Both forest and non-forest dealers are exploring used car business, while used car dealers are venturing into the sale of new cars. Traditional boundaries between car sales channels are becoming increasingly blurred.
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Speaker 3: After integration, the ancient Youcef platform will further integrate resources and improve operating efficiency.
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Speaker 3: Next, Changgu Youche platform will focus on building a multi-storey model based on the basics of self-driving vehicles, insurance, and other stores.
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To show you, which was on cool hotter food she's done cohort in light of the changing market trends and demands we have made some adjustments to our strategy.
Speaker 2: In light of the changing market trends and demands, we have made some adjustments to our strategy. Our goal is to offer a comprehensive end-to-end service for both new and used car dealers across the country. To achieve this, we have integrated our offerings on the CanGo HaoChe platform into the CanGo YouCar platform.
Going through all the comprehensive end to end service for both new and used car dealers across the country to achieve this we have integrated our offerings on the Tango household platform aimed to the tango Youll car platform. These integration upgrades will allow us to focus our resources on cot kangol, you'll call them significantly enhance operational.
Speaker 2: This integration and upgrade will allow us to focus our resources on Kangaroo Car and significantly enhance operational efficiency. Moving forward, we aim to develop a multi-store model and expand our ecosystem beyond self-operated stores. This will include vehicle sources, insurance services, and more by welcoming more third-party stores to our platform.
Efficiency moving forward, we aim to develop a multichannel model and expand our ecosystem beyond self operated stores. This will include vehicle sources.
The Orange services are more by welcoming more third party stores to our platform as of now some regional logistics companies don't call generation service providers have already joined all community. Their feedback is highly valuable as it allow us to continually refine our offerings and improve.
Supply chain services, ultimately, enabling downstream dealers to better serve customers.
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Speaker 2: During the third quarter of 2023, we sold 2,399 new cars, including 27 vehicle models across 18 autobrands and 23 car series. In the first nine months of 2023, we sold a total of 12,138 cars, including 3,151 new energy vehicles.
So quite often they don't these three we sold 2300 on much of our new cost, including 20000 vehicle models across 18 auto brands up 23 car series in the first nine months of 'twenty to 'twenty three we sold a total of 12138 costs, including 3151, new energy vehicles in terms of used car at all.
Speaker 2: In terms of use card, the auto-orction transaction volume on the TangleU card platform reached nearly 300 in the third quarter of 2023, doubling quarter over quarter. We also facilitated over 600 transactions, marking a 20% increase quarter over quarter.
The auction transaction volume on the Tango, you'll cut platform reached nearly 300 in the third quarter of 2023 doubling quarter over quarter. We also facilitated over 600 transactions, marking a 20% increase quarter over quarter.
Speaker 3: With the continuous improvement of our online service capabilities and the supply chain service system, online and offline are integrated and efficiently operated. Overall, the ability to operate logistics has also been further improved, ultimately achieving a self-operating self-circle.
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Speaker 3: As we upgrade our strategy and services, we need to speed up the digital platform construction. We need to stick to the pursuit of technology-enhanced capabilities, which is the unwavering pursuit of carbon. We need to use big data and technological innovation as the driving force, and continue to improve the service productization and optimization process. At the same time, we need to enhance the carbon platform performance and operation capabilities, and enable more areas and partnerships. In September this year, we will use AI asset management and digital innovation.
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Speaker 2: As we continue to improve our online services system to slide chain management, while fostering greater industries across online offline operations, we are building a self-reinforcing closed loop ecosystem. In addition to strategic and service upgrades, we remain committed to accelerating our digitalization and leveraging advanced technologies to empower business.
We continue to improve our online services.
Supply chain management, while fostering burritos in Australia across online and offline operations. We are building a self reinforcing commscope ecosystem. In addition to strategic and says I service upwards, we remain committed to accelerating our digitalization and leave for a bank of Boston technologies to empower business.
Speaker 2: With a focus on big data and technological innovation, we are fully dedicated to standardizing our services and optimizing our.
With a focus on big data and technological innovation, we are fully dedicated to standardizing all services and optimizing our processes. Our ultimate goal is to achieve heightened productivity and operational excellence and to enabling our partners to achieve increased efficiency in September.
Speaker 2: Our ultimate goal is to achieve heightened productivity and operational excellence in turn enabling our partners to achieve increased inficiency. In September , our innovative digital product, the ISN God, won the 2023 CDI Product Digital Innovation Award. This recognition is a testament to the digital innovations that we have implemented across our business operations.
Digital product and I ask that God, while the 20th 23 PDI product Digital Innovation Award. This recognition is a testament to the digital innovation that we have implemented across all business operations.
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Turning your attention to.
In the future, we want to leverage the power of big data and digital technologies to more accurately classify our dealer partners and launched value added products and services tailored to their specific needs.
Finally, we will actively explore new areas to seek growth opportunities, including a potential expansion into used car markets abroad by continuously refining our business operations out of 18 profitability and strengthening our core competitive edges, where coffee does now we can secure the sustained momentum required to navigate the ever.
The evolving business environment.
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With French opens up what you should do this help US you know so I will hand over to Michael Jolliffe CFO for a review of the company's financial performance.
Thanks, Joe Hello, everyone and welcome to our third quarter 2023 earnings call.
Before I started to review our financials. Please note that unless otherwise stated all numbers are in RMB terms all percentage comparisons.
Year over year basis.
Our total revenues for the third quarter to a third quarter worth $353 6 million a month on revenues from the car trading transaction finished with $263 8 million or 74, 6% of total revenues now.
Now, let's move on to our costs and expenses during the quarter total operating cost and expenses in the so called out to Saddam 20th Street were $441 4 million compared with $608 8 million in the same period of 2022.
Cost of revenue in the third quarter two was at 23.
Was $304 6 million compared with $388 7 million in the same period of 2022.
As a percentage of total revenues cost of revenue in a so called out towards auto 23 was 80 86, 1% compared with 93.3% same period 2022 sales and marketing, especially in this third quarter 2023 decreased to $9 9 billion from $17 9 million in the same.
Here at 2022.
At the center of your total revenues sales and marketing expenses in the so called out to Saddam twenty-three were two 8% compared with four 3% same period 2022.
General and M streets, especially in search of so called out Tucson, I'm twenty-three decreased to $34 7 million from.
58, or $57 8 million in the same period of 2022.
As a percentage of total revenues general and administrative especially as you know so called out two southern twenty-three, what 9.8% compared with 13, 9% in the same period of 2022.
Research and development, especially if you're in a so called our Tucson or 20th Street decreased two 7 billion from $10 2 million in the same period 2022.
As a percentage of total revenues.
Research and development, especially the so called out 223, 2% compared with two 4% in the same period of 2022 net loss on contingent risk assurance liabilities. So quarter. Two was at 23 was $3 5 billion.
That recovery on provisions for credit losses in a so called out to solve them 20th Street was 66.9 billion. The recovery was primary due to the positive impact from collections of finance receivables impair.
The impairment loss from the so called out 2023 was 148.7 million the provision for goodwill impairment is based on the profit forecast associated with historical track at a prevailing current conditions a market downturn.
We recorded a loss from operations of 87 8 million in the same period of 2023 compared with $192 3 million in the same period of 2022.
Net loss in the third quarter 2023.
$49 1 billion non-GAAP adjusted net loss in the third quarter of 2023 was $41 2 million.
On a per share basis basic and diluted net loss per E. D. S third quarter 2023, what Bose 0.45, respectively, and a non-GAAP adjusted basic and diluted net loss per share in the same period.
But both 0.38, respectively.
Moving on to our balance sheet as of September 32023, we had cash cash equivalents of $665 6 million compared with $589 4 million as of June 32023.
As of September 32 started I'm trying history. The company has short term investments of.
2.43 billion compared with 2.06 billion as of June 32023.
Looking ahead to the fourth quarter of 2023, we are now predicting our total revenues to be between 100 million and $150 million. Please note that this forecast reflects our current and preliminary view.
The market and operational conditions, which are subject to change.
This concludes our prepared remarks, operator, we are now ready to take questions.
Yeah.
Thank you.
Like to ask a question. Please press Star then one on your telephone keypad.
If your question has been addressed and he would like to enjoy your question. Please press Star then two.
Once again Thats Star then one if you have any questions.
And today's first question will come from.
You will see a P C.
T I C Securities. Please go ahead.
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My first question is about.
How do we think about the ultimate markets, Florida, all fourth quarter, but have you had these three I know what about next year and Oh, well the price a price war between the Oems well continue and then my second question is about whatever.
Our dividend plan for this year. Thank you.
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Thank you very much for your questions to answer your first question on our outlook for the auto market net quota the nestea in this third quarter, we saw a Philadelphia and passenger vehicles radio shows up our volume growth and sales for the fourth quarter, what boosted by the National day holiday on the singles Day shopping festival at the market as a protein euro.
With strong sales promotions, we expect our strong these costs to continue.
Driving our quarter over quarter, increasing sales volumes and for all little nastier, well I'd like to share my thoughts from two perspectives first let me. Thank you Ana just vehicles will continue to outperform according to the C. P. C. I that is trying to passengers called association's data as of the end of the Tampa AEP.
As market penetration rate has already reached the 36, 9% and their profile mentioning is that it can continue throughout next year, driven largely by more targeted and effective incentive policies from national and regional governments secondly on the used car market. We expect it to continue to grow for the first nine months of AC.
Used cars total sales volume exceeded 15 million is the total market I mean G M P.
It's a market that is close to.
About 860 billion RMB.
He is a trillion dollar market and we fell out of China used car market still has great growth potential.
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On your second question about the dividend payment.
Our IPO can go has distributed cash dividends totaling nearly 500 million USD. Meanwhile, since April 'twenty 'twenty. One the company has been active fleet rewarding our investors improving stock value in various ways, including share repurchase program looking ahead, kengo Wilkins well remain prudent.
Regarding financial management, and continuing to enhance capital allocation efficiency, while prioritizing investments in areas with ha high Oh I am sorry.
Creating long term stake.
The value.
Sure. Thank you that's all for me and I'll make one as well.
Thank you and our next question comes from Emerson Zone with Goldman Sachs. Please go ahead.
Hey, guys, you got plenty of time, what you're bearish or bullish as well.
Oh, Yeah go ahead.
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Hi, Thank you very much for giving me this opportunity to ask two questions. The first question is.
Has the Adidas operational environment improved in the lower tier market, it's about the pandemic restrictions being lifted and the second question is what is the rationale behind the much of that can go.
How to account for them in a tangle ucas platform could you elaborate on that.
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Thank you for your questions. Your first question on the lower tier market well kick those customers are primarily based in third and fourth tier cities. So we have deeply felt it changes in a little lower tier market over the past two years. According to C. P. C. H data, 40% of theaters in China shut down their business. They think 2022 more.
Hop off dealers are now operating at a loss and on average about 11, four I suppose close down every day smaller medium auto dealers are having an even greater difficulty staying afloat. They had filed a motion we thought as specified pools, which still used car transactions. So I might also try new sales channels such as live streaming.
Speaker 2: at the same time consumer demand differs from regional regions. AEB's sales volume is higher in the market compared to the North, for example. And AEB's penetration rate is also higher in cities with more charging stations. Follow more A0 clouds and below as well as luxury clouds are selling better than other clouds.
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Speaker 3: Considering the combination of the two platforms, mainly based on the market perception of the past two years, we found that the entire Chinese new car market has been in balance. From the perspective of C-end consumers, the first purchase of new cars has reduced the number of customers, and the demand for new cars and second-hand cars has increased.
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Speaker 3: From the point of view of B-end car manufacturers, the demand for CS and Qimao electric cars has changed based on consumer demand, and they have started to build their own second-hand car channels. The sales line between new cars and second-hand car stores has become blurred.
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Speaker 2: Our decision to integrate Kengo Health's offerings into the Kengo YouCar platform is primarily based on our deep market insights gained over the past two years. We noticed that China's new car market is near saturation on consumption. There is a noticeable decline in first-time new car buyers while there is an upward trend in consumers looking for additional cars and rising demand for vehicle replacement and upgrades.
Our decision to integrate can go voucher.
And so that's kind of your car platform is primarily based on our deep work insights gained over the past two years, we noticed that chinas new car market is near saturation on consumption. There was a noticeable decline in first time, new car buyers well there is an upward trend in consumer is looking for additional Pos.
Well I think demand for vehicle replacement and upgrades.
Speaker 2: on the distribution side. Both four our dealers and youth car dealers have begun establishing our own youth car sales channels in response to changing consumer needs.
Distribution side, both for theaters or used car dealers have begun establishing hill ROM used half our sales channels in response to changing consumer needs.
Speaker 2: This is a blurred area now because the boundary between the traditional new car and use car sales channels are becoming increasingly integrated. So that's why we are integrating the two platforms, Tango Houttu and Kango Yucar platform. Solar customers cannot purchase new cars while trading in their use cars on the same platform. This integration will believe we are not home-made. It will greatly improve our operational efficiency.
This is a blood area now.
Because the boundary between the traditional new and new car and used car sales, China without becoming increasingly integrated. So that's why we are integrating the two platforms can go how to add cagle Yoko platform. So that customers can now purchase new cars, while trading inkjet ink used cars on the same platform. This integration will be.
Well not only.
To improve our operational efficiency.
Speaker 2: but also will enable us to better serve our car dealers.
It also will enable us to better serve our car dealers.
Speaker 2: I think that's all from my side.
I think that's all from my side.
Yes.
Speaker 1: Thank you. And ladies and gentlemen, there are no further questions. So I'd like to turn it back to management for closing remarks.
Thank you.
Ladies and gentlemen, there are no further questions I'd like to turn it back to management for closing remarks.
Okay.
Speaker 2: Thank you all for joining us. Thank you all for your support. Back to you today's Ernie Cole.
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So it <unk> tend to work with docs you superstitious. Thank you all for joining us. Thank you all for your support that closes today's earnings call.
Thank you. This concludes today's conference call. Thank.
Thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.
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