Q2 2019 Earnings Call
At this time all participants on this and only though.
After managements prepared remarks, there will be question and answer session.
Today's conference is being recorded.
Do you have any objections you may disconnect at this time.
Now I'd like to try to meeting over to your host for today's conference.
Welcome to <unk> second quarter 2019 earnings conference call.
Speakers from the company today are Mr., Andy Johnson CEO .
Is there a telco the old COO and Mr. makes you CFO .
After management's prepared remarks, and each Opco and me will be available to answer your questions. In addition, Katherine the old CFO of each and will be available to answer your questions related to your question.
Before we proceed. Please note that discussions today will contain forward looking statements made under the safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995.
Forward looking statements are subject to risks and uncertainties, which may cause actual results to differ materially from our current expectations.
Potential risks and uncertainties include but are not limited to those outlined in our public filings with the FCC, including registration statement on form F. One.
The auto does not undertake any obligations to update any forward looking statements, except as required under applicable law.
This call will include discussions of certain unaudited non-GAAP financial measures.
Please refer to our earnings release, which was issued earlier today.
For reconciliations of these unaudited non-GAAP measures to the most directly comparable unaudited GAAP measures.
As a reminder, this conference is being recorded.
In addition, a live and archived webcast of the conference will be available on our website.
I'll now turn the call over to Abbie John CEO .
I'll hit on it.
Hello, everyone and thank you for joining us for our second quarter 29, <unk> earnings Conference call.
Q2 remained a challenging quarter for the auto industry as a whole. According to the Chinas Association bottom about manufacturers. China's total sales of new passenger vehicles decreased by approximately 14.3% year over year in the second quarter to 29 team.
In spite of the sustained weakness in passenger vehicle sales in China.
The auto continued to achieve steady top line growth in the second quarter.
With total revenue, reaching RMB 2.79 billion.
Up 8.9% year over year in particular, our transaction services business expanded market share amid the industry downturn with revenue increased by 17.2% year over year in the second quarter to RMB 1.49 billion and the transaction volume up 34% year over year to get to 38000 units.
Revenue from our advertising and the subscription business was RMB 1.01 billion for the second quarter compared to RMB 1.07 billion.
In the corresponding period in 2018, reflecting reduced marketing spending is by our automaker and dealer customers. We are however, pleased to see further improvement the mobile traffic as well as in call quantity and the quality of our sales leads.
Our continuous efforts to enhance content on the user experience starting without the rollout of our upgraded auto media up in October last year continues to pay off looking at our traffic. According to quest mobile in July 2019, Yeah, you'll get auto media increased by over 200% compared with that of the October 2018. In addition to combine Diego both the auto media and auto pricing have increased by over 60% during the same period.
Our total number of sales leads increased in that in the second quarter by 37% year over year more importantly, our organic sales leads which I typically.
Feature better quality at a higher conversion rates accounted for over 50% of our total sales leads in the second quarter and the continued to rise in July and August during the second quarter during the quarter. We further enhanced user generated content areas, including user review Q and eight and the retail pricing, particularly for new car models. These efforts helped us strengthen our competitive advantage in the market and attracted more users.
We also made substantial.
Progressing hezi, our product offerings already I based marketing solution, which we launched in the first quarter of this year has already achieved very positive feedback from automaker customers. We're working on enhancing this product offering and they expect to rollout rolled it out to all of that make automaker customers and see more meaningful revenue growth in the coming quarters.
Our network of independent dealers continue to grow to over 30000 during the second quarter with more than 33006 on your paying customers at the end of August we will look to further tap into this market segment and explore tailored offerings to increase monetizing.
Going forward.
Now moving to our transaction services business, you should continue to strengthen its industry leadership and the grew faster than the overall industry facilitating approximately 130000 financed automobile transactions during the quarter, representing a year over year increase of 34% you. She is low facilitation services grew over 250% year over year and that contributed 45% of its total finance automobile transactions up from 19% in the same period last year. It's a new core service revenues, which include revenues from low facilitating transactions had a new self operated financing lease transactions facilitated in the period reached RMB 589.9 million, representing a 46.9% year over year increase looking ahead, we will continue to focus on executing our core business strategies first we will continue to enhance the autos value propositions through improving content and the user experience. We're also looking at ways to better promote the good auto.
And it's improved brand awareness and they enlarge our user base, which we believe still strength and our ability to bring higher quality sales leads to our automaker and the dealer customers and they enable them to raise the effectiveness of their marketing spending on get auto media platforms.
Second we will further rollout.
Based marketing solutions to automaker customers to achieve incremental growth in our advertising business.
Third we will drive revenue growth in our subscription business through enhanced the ARPU as we mitigate.
As we might migrate more dealers customers, so premium and the deluxe premium packages and the through expanding our dealer coverage network and the increasing monetization.
Among independent dealers fourth issue will continue to increase its low facilitation services and the further improve its technology capabilities to provide better product at a services to consumers.
Financial institution partners and auto dealers.
As we continue to see has been autos value proposition.
Through improving content to user experience, increasing traffic and the developing products, which enable automakers and dealers to raise the effectiveness of their marketing spending we're confident in our strategy to build the auto into China's top online.
Auto mobile media and transaction services platform.
With that I'll turn the call over two minutes to go over the financials.
Thank you Andy Good evening, everyone. We delivered positive topline growth in the second quarter, despite a challenging industry environment more importantly, our effort to improve traffic and content up Brett bearing fruit.
And our increasingly recognized by our automaker and dealer customers that they focus more on the effectiveness and ROI on their marketing spend looking ahead. In addition to continuous improvement in traffic with content. We will also focus more on but all of this brand building initiatives to accelerate the growth of our user base.
Although our efforts to enhance our topic content and brand awareness level higher operating expenses. We believe these inputs will bring long term value to our business and it would view them as investments rather than merely expenses.
As we continue to strengthen the competitiveness of fit all the products and services expand our user base and enhancing the user experience.
We are confident that we will continue to grow revenue and reduce customer acquisition costs in the long run.
Now, let's look at our Q2 2019 financial highlights before moving to coordinate. Please note that I will reference may need to financial figures in RMB in the following discussion.
They don't have reported revenue of RMB $2.979 billion for the second quarter 2019, representing 8.9% increase from the corresponding period in 2018.
The increase in revenue was attributable to the growth of the Companys transaction services business revenue from the advertising and subscription business for the second quarter of 219 was RMB $1.01 billion compared to RMB 1.07 billion in the corresponding period in 2018.
Mainly due to decreased spending marketing spend by or automakers and dealers customers, reflecting the sustained decline in new car sales.
Revenue from the transaction service business for the second quarter 2019 was RMB 1.49 billion, representing a 17.2% increase from RMB 1.27 billion in the corresponding period in 2018, mainly attributable to the growth of the company's loan facilitation services.
Revenue from the digital marketing solutions business for the second quarter of 2019 was RMB 294.7 million.
Representing a 31.2% increase from RMB 224.7 million in the corresponding period in 2018.
Cost of revenue for the second quarter of 2019 was RMB $1.21 billion, representing an 18.7% increase from the corresponding period in 2018. The increase was primarily due to the increase in commissions associated with non facilitation services cost of revenue as a percentage of revenue in the second quarter of 2019 was 40% compared to 76.7% in the corresponding period in 2018.
Gross profit for the second quarter of 2019 was RMB 1.67 billion, representing a 3.1% increase for the corresponding period in 2018.
Selling and administrative expenses were RMB $1.64 billion for the second quarter of 2019, representing a 17.1% increase.
From the corresponding period in 2018. This increase was primarily due to the increase in marketing expenses associated with the company's mobile apps and the increase in allowance for doubtful accounts receivable from the services easy no longer provide due to the general economic slowdown in recent periods.
Product development expenses were RMB 142.1 million for the second quarter of 2019, representing a 12.7% decrease from the corresponding period in 2018.
Share based compensation, which was allocated to the related line items of operating expenses was RMB 990 $99.9 million in the second quarter of 2019 compared to RMB $151.6 million in the corresponding period in 2018 non-GAAP income from operations in the second quarter of 2019 was RMB $215.4 million compared to non-GAAP income from operations.
RMB $429.1 million in the corresponding period in 2018 net loss in the second quarter of 2019 was RMB $136.2 million compared to a net income of RMB $27.4 million in the corresponding period in 2018.
Net loss attributable to bit auto in the second quarter of 2019.
It was RMB $145.5 million compared to net income attributable to bid auto of RMB 2.7 million in the corresponding period in 2018 non-GAAP net income in the second quarter of 2019 was RMB $216 million compared to non-GAAP net income of RMB $353.7 million in the corresponding period in 2018, non-GAAP net income attributable to bid auto in the second quarter of 2019 was RMB $155.3 million compared to non-GAAP net income attributable both to bit auto of RMB 257.3 million in the corresponding period in 2018 basic and diluted net loss for adss, each representing one already know share the second quarter of 2019 amounted to RMB 2.06, and RMB 2.06, respectively.
non-GAAP basic and diluted net income per Ats and the second quarter of 2019 amounted to RMB 2.2, 0.17, U.S. dollar 30, 332 cents and the RMB 2.21, I want to U.S. dollar 31 cents respectively.
As of June Thirtyth 2019, the company had cash and cash equivalents restricted cash outflow of RMB 7.45 billion.
Cash provided by operating activities cash using investing activities and cash used in financing opportunity activities in the second quarter of 2019 were RMB 110.3 million RMB 190, $696.2 million and RMB 1.8 billion respectively.
Numbers of employees totaled 8396 as of June Thirtyth 2019, including employee from entities, which Bitauto has acquired and hosts control interest as I'll such date. This represents a 6.4% year over year increase in addition.
Given eating scale and the significance of it although I would also I will also like to share with you some of <unk> operating and financial highlights for Q2 2019.
As of June Thirtyth 2019, it seems accumulated total finance automotive automobile transaction reached approximately 1.4 million and its accumulated aggregate, although financing Mount exceeded RMB 100 billion as a leading player in this industry eating has enjoyed leadership advantages joint business development. Despite the substantial witness in.
Passenger vehicle sales in China in the second quarter of 2019 machine facilitated approximately 138000 financial automobile transactions and the equity.
Automobile financing amount facilitated through its an office as efficient services and self RPD. The financing business was approximately RMB 11.01 billion in the quarter.
Having achieved the faster growth and the industry is financed automobile.
Transactions, both new and used achieved the increase of a profit of approximately 34% from the corresponding period, while China's total sales of new and used passenger vehicles decreased five process approximately 7% compared to the same period last year. According to the data from China Association of automobile manufacturers and the China automobile dealers Association in the quarter through its not facilitation services for financing partners Mushing facilitated approximately 67000 finance automobile transactions.
Representing an increase of over 250%.
From the corresponding period in 2018, and approximately 49% of eating total finance automobile transactions.
In the second quarter of 2019 on the U.S. GAAP <unk> total revenue reached RMB 1.5 billion, New core services revenue, which include revenue from loan facilities and services and a new self operated financing the financing lease transactions eating facilitated during the period reached RMB 589.9 million gross profit reached RMB 689 million net income was RMB 4.4 million and non-GAAP net income was RMB 94.4 million in the second quarter of 2019 <unk> non-GAAP net income is calculated as net income excluding share based compensation of RMB 55.8 million amortization of intangible assets, resulting from asset then business acquisition of RMB $34.2 million and offset by tax effect of RMB 0.0, 4 million. It in the second quarter of 2019 eating entered into certain.
Sanctions with other seniors fit auto which has been eliminated eliminated a pump it out of consolidation of eating the cost of revenue and expenses that you recorded for the services purchased from those procedures have been auto amounted to RMB four hoping to me there.
As of June Thirtyth 2019.
We had cash and cash equivalents and the fish Attash of RMB 4.38 billion total finance receivables of RMB 34.44 billion and total borrowings, including Becker bank borrowings and asset backed securitization that's.
Of RMB 20, 703 billion as of June Thirtyth, 2019, 90, plus days 90 day plus.
Including 180 day, plus past due ratio and a 180 days plus past due ratio for all finance transactions, including the third party loan syndication, 1.06% and a 0.58% respectively.
90 day past, including 180 day Pos.
Past due ratio and 180 day pass a day plus past due ratio for self operated financing business or arm or 1.29% and a 0.77% respectively.
To give you some background on the increase.
In our past due ratios since 2019, various local governments started to implement much stricter rules and the guidance on delinquent consumer account payable a payment of collection and in order to better comply with this new rules and guidance, we use the litigation as our primary apart our T collection method litigation, usually take a longer time for collection and our delinquent.
Ratios increase accordingly in the near term. However, we believe in the long term this will help recoleta rice.
The overall industry practice and further improve consumer usage user experience.
On the U.S. GAAP eating is provision for credit losses on finance receivables for the second quarter of 2019 was RMB 195.8 million that by then so provision for credit losses of finance receivables was RMB 403, 437.3 million as of June Thirtyth 2018.
For the second quarter of 2019, there was an increase in allowance for doubtful accounts receivable from the services to auto dealers easy no longer provides in consideration of the general economic slowdown in recent periods eating made such allowance for doubtful doubtful account receivable allowance for doubtful accounts receivable was RMB $137 million in the second quarter of 2019 compared to RMB 1.9 million in the corresponding period in 2018.
He expects the allowance for doubtful accounts receivable to decrease significantly in the future with that I will turn to guidance for the third quarter of 2019.
But although currently expects to generate revenue in the range of RMB, one point I sort of RMB 2.65 billion to RMB 2.75 billion in the.
Third quarter two is on the 19th representing a 2.8% decrease to 0.9% increase from the corresponding period. In 2018. This forecast takes into consideration of seasonality factors and bid on his business and excludes an impact of foreign currency.
Fluctuation it reflects managements current and preliminary view, which is subject to change.
Now, let's now start to kick in recession, Andy Schenker myself and eating fearful CASMED you are available to take your questions operator.
Go ahead.
Thank you.
And answer session of this conference call started enrollment in order to be fair to all callers, who wish to ask questions. We'll take one question time from each caller. If you have more than one question. Please.
Nice to join the question queue again. After your first question has been addressed and ask a question. Please press, Taiwan on your telephone keypad and wait.
And to answer the question please press the pound.
Once again it is star wants to ask a question.
Your first question comes from the line of Binbin the of JP Morgan. Please go ahead.
Oh, Thanks management for taking my question. My first question is a high level one about the auto market. So can management give us some color in terms of the trend of passenger vehicle sales.
For the rest of <unk>.
And maybe potentially.
It seems that July and August .
And it should be noted that Nick.
No.
One of these all the consumption of the Hana all goods. So shall we expect these policies to help auto sales.
In the next few months.
My question is on the transaction.
So in the second quarter <unk> I noticed that your loan divisions contributed to roughly.
But then the total fast automobile transaction.
And nothing seems to have declined from 60% in Q. So how should we look at the future churn out the contribution from <unk>.
Engine services.
And from operational and technology perspective, how do you balance consumed with exposure to your own self.
Financing put backs.
What is our goal.
Thank you.
Thank you Kevin so our our steel shopko or answer the first question and happening will answer the second question.
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Ah you can sell it was yeah, Oh, sorry, I love, what Jonathan They go home probably shift towards yeah. No. She could I think they were told to go set a goal that you. Okay. So let me translate refi so as you can see.
So you can see the.
Oh, that's helping to recover it briefly but we believe that was mainly caused by by the temporary demand or a a for a cost of by the migration pharma, China five to kind of fix emission standard.
After that.
We see the auto Southcross dropping again in July .
It.
It actually dropped by 5% year over year, and a 16% month over month year to date. It was still in a from from January to July we'll still have a minus 8.8% decrease.
And in August we as according to the data from the CP CPC a actually in the first week, we saw the wholesale data decreasing by 31% year over year Ed.
Recovered slightly in Q2, and Q3, but still quite weak in Q4 of 'em, we saw a farming.
Entirely from our web site, we saw a slight increase in our consumer purchasing a passionate reflected by the willingness of.
To the TV southeast, but that was only a very mild increase we still need to monitor that data.
Closely.
And in terms of in terms of inventory, we saw that even though even though like in June .
The clearance sales, how many dealers help them to clear some inventory, but the overall inventory level in July and August remain quite high.
So in July and the latest development in July so far we still see the auto demand quite weak and.
For example, this week.
The sum to auto shows are.
Ah today actually and we saw from the attendance number and also from the activities carmakers that actually if you still have very little warm attendance number and this number now.
Towards the end of August we saw the government actually release, some central government really someday. These policies to support the auto industry. We believe that was quite encouraging but still it takes time for the local governments to implement those policies and so far we believe it's the we the process you steel I know, we haven't see a very.
With that I'll go clear timetable from the local government and also like today for example of the Ministry of Commerce also.
Uh huh.
Now the certain Oh, sorry, an intention to help the automakers and auto industry. We believe this is encouraging because the government seems that the government has set up now I realize important what I see the significance and importance of auto industry and it started to offer a willing willing to offer help but still it takes time for the four for more detail policies to come out and to be implemented. So simply speaking, we believe that the auto industry remain challenging.
Well from what we see.
That's for the first question and testing will answer your second question.
Hi, I'm sorry, your second question in the first quarter issued long facilitation contributed over 60% of the total transaction volume and in the second quarter. It contributes a 29% which reflects some short term adjustment that I started a quarter from the current alone facilitation business and and we expect our loans with annotation well still increase and we think we expected that in the second half of the year, our loan facilitation or will or the percentage of the long facilitation well be back to over 60%.
Okay.
Thank you and the follow up is on the how to balance your consumers exposure to yourself and if anything for that.
Third party home.
I think there should be some I'll go to decide.
What kind of protest will be recorded.
Currently we actually have a what we are working with about 10, a financial institution for our long facilitation services and then also we have self operated financing businesses. So for our stuff, Okay financing business, we view it as one of the capital a channel for us So Amanda, let's say 11 or above a channel we will balance it.
Based on such a bit on a lot of factors such as the cost of the capital being the convenience of being or the approval process et cetera. So we that that's our goal to have a more mark sort of matching system for various founding tunnels and then review our stop offering its financing business just as one of the funding channel.
Okay. That's helpful. Thank you very much.
Thank you. Our next question is from the line of Hillman Chan Hillman Chan of Citigroup. Please go ahead.
Grew even then Andy Salka Kathryn. Thank you for taking my question I also just a follow up on that question previously.
Management share more on the.
Auto advertising outlook for second half typically.
Hey, if and channels <unk> offline and also the AD formats and.
Also possible to share more feedback from your Oems and custom that's out there.
It's a tightening but the rest of it. Please thank you very much.
No legal you will actually have to convert a woman, though it's another phone call that you should achieve.
I think if a question Alcoa answer the question.
Yeah.
One challenge alert or one called Oh, Yeah life, when a woman can now Oh show, which he shared the data of one dollar.
Actual Virginia and that it's only easy to adopt Archie to Doyle, Tony that you shared a shaft outage.
Yeah.
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So Oh Hell, Matt as you know you.
We actually see a in the first quarter and second quarter a lot of the other online media platform actually reported declining growth in there the ethics <unk> actually a year a year over year decline in their online advertising revenue.
I actually don't know to all sure sure much and usually shows how the job.
Sure Tom we challenged them home Hello screen not come down not to leave those for the young small ups and others.
So the main reason, we believe is that because of the weak auto cells and the outlook.
The automakers are cutting their branding spending.
Turning to need home Hmm shares contingent view that he or she wishes home argue too harsh they become increasingly focused.
Focusing their advertising spend on the hour.
The performance at.
And take advantage of them, which I'm not sure how is yet.
So that's a that's a brief overview of our what what's what is happening in the advertising online advertising market.
Thank you very much just some one.
A follow up question has the whole industry, including US and also autocam are delivering more and more online athletes.
For the industry, but meanwhile, the.
The folio the.
Carl retail 40, I'm always trending down so how should we think about that going forward the discrepancy going forward.
Thank you.
Oh, Thank you don't <unk>, yes, you're right. So we we believe this this so as you know this basically implies the effectiveness Oh the quality of this health needs. If if not declining and I think this actually means that the dealers and and increasingly they will yens. So previously <unk>, mainly the dealers care about leads and the quality by now increasingly <unk> are also kept hearing about healthy and the <unk> tying the south lead with their with their spending on our platform. So going forward, everyone every advertiser big and small with a pair of pay more attention to to the effectiveness of their spending and to south quality of healthy.
So actually we believe this is both a challenge and <unk> and the opportunity for us by opportunity.
We think that this requirement that you will actually be more beneficial to the bigger leading platforms like us and like our main competitor because we are able to deliver cells needs and a and a large quantity of cells need to the customer to the advertisers, but the smaller profit them actually are are weaker in their in their ability to provide <unk> and even weaker in their ability to have ability.
To provide high quality <unk> these to to the customers.
And so we are actually working internally both on the on our product and also on our commercial solutions to the customers. So that we could come up with new ways to a intuitive to encourage more users to leave their self these and to ensure that these people were actually go to the store a <unk> well, we're actually interact with the dealers and we we we we try to retire by us to make sure that they will they will they will eventually by car hopefully. So this actually also opens a window for us to and to try out different <unk> different ways of pricing our product without the particularly without dealer customers. This is where we were trying out different forms of.
Ah commercial products to reach that goal.
Thank you for that much I mean, okay. Thank you.
<unk> next question.
This kind of.
Good evening and do so coming on concerning thanks for taking my question I know too.
Sure if the very encouraging your so traffic grows on so slow it's gross.
The <unk> <unk>.
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And our branding.
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Oh, no no youre liquid eyes hurt somewhat LNG. So thank you for the question Nigel Coe will answer your two questions.
Oh on the day to Yens hold true for Acacia Chinchilla, a usual HIV the guy, but I don't want to have major and a woman's I go down to a separate run, though partially gold they'll have a single.
So as you know we roll out the upgraded.
Starting from October of last year, and so far we are we're still we still achieving very healthy growth in both our traffic and southeast that the app generates.
So you know won't show major woman died down line, where a woman she will adopt shen swap so in a table in the insurance or or me a similar talent on the swap Oh on the Genco slice. It a woman gourmet, we'll mention that whole I was homeless chance or a jeweler sure Youre, how you reach a woman homework the other should all else equal.
Yeah. So.
As we are speaking now the.
The the self leaf generated by our two apps actually are now contribute contributing to the majority of our total self leaves generate every day and through very close tracking and the market from other channels.
Function or Jim we're of course, you should really geared toward older genial or malaria died down there and I wish all of them in chiller, one nothing were surveyed all marketplace litle trees or draw you I am sure youre cold or warm and Yacov, increasing budget all time hitting later.
So through our through our operation in the past a 10 month, we all we have also.
A further.
Ah Ah Ah Ah.
Focus on our on our strategy on a position number up as a marketplace going forward and we believe this ER. This positioning is it's based on the is also in line with the cost we see a users perception of our rap of our services.
Uh huh.
When shell warm boucheron arbitron gotten a push or unable to your team will usually the timing the shoulder that youre.
Some gala talent dog emotional attachment you laid out chance Walker into general question, but you should Oh sure what the whole they'll warm less chance or traction the shoulder controller Dolby today or can call that you got to show.
So even in the recent months as we are also adding more ER.
Content and also particularly attack driven content for example, AI driven big data driven content and also user generated content into our into our App and the focus the purpose for that is to further increase the conversion of a peak of users, leaving a healthy and also to improve the quality of those sell fleets.
Jay Leno warmer halfway there our sense was there some kind of a challenging since you would run the yanks show coral hone the Duncan Dale you couldn't avail coach weather trends order trends similar to those he or she is a woman. She she owns shell wonder settle with Gelclair.
Oh sure know what many years and will that show how you sitting in the OHA. John That's just what are you sure that handy.
So going forward, we will further diversify the selfie generation used cases and to extend the use case from a purely.
Price to cover if Korea to cover the whole pot purchasing and ownership cycle of a car. So that we can generate more southeast out of our users and torture no woman, yes, Homewood suites in the Union fighting and Mike Selfridge.
You grew up you got the I'd say a woman July away since young Shin Ji luncheon either try more down the Colombian I should say you laid out a warm the young star crunched gold or shouldn't do that ginger.
So are we through the.
So the.
Our efforts, we also realize that the.
The consumers brand perception of our different although a information platform or different verticals actually have a pace a role in the willingness to leave a contact and also context, a compound to leave a healthy and also payroll important role in the quality of our eventual quality of those healthy so ER. So.
As a result, we we plan to roll out a a a campaign to further promote our brand and help to raise the awareness and brand perception of the each brand among the potential car buyers and the car owners own assumption answer a little warm and the human portion Looney on Josh function either.
More so it doesnt rely the sandy losses, either one than the women valuable down four cents or how you don't flip obviously, you got they'll have assumed on attrition.
Yeah, well so with this effort was this a continuous focus and ultimate optimization on our on the on the user acquisition channels and also on this.
Brent.
Branding campaign, we believe that in the fourth third and fourth quarter in the coming quarters, we will.
Maintain this amount with strong momentum in user acquisition and end user and this healthy growth.
Oh, So you got to think it was still actually starts to go so I don't want to either come down on that international workshop on senior and junior come Hell or Charlotte for these politicians idea going door the equivalent of shelf since your news on that front.
So now turn to the opportunity for a question about the monetization.
So with this growth in our in our user base. We are also looking at ways to monetize its users and we notice as as Weve mentioned before that the Oems are increasingly focus on the effectiveness of their marketing spend on the performance of their marketing spending.
So you know Ginnie unknown Woman's RG two quick follow on there should we use all the time here So angel.
So in Q2, we roll out the formally roll out our AI based on marketing solutions to the Oems, a insulin or shouldn't do woman baffled urea or UAN for the symbol wash out food rather you should get a sense for later Tonight. The role. They did have you gone can John counsel's, Jim two cents or shares or 10 cents or one other show Chandler damn good or to the content, which we hope you have dollar growth. So this product based on our technology.
Technology capabilities in big data in the user profiling to provide a more effective and.
A more effective way for the Oems to get sell seats.
And particularly high quality southeast with their marketing spending and owns whole woman Mattel and handle their social this year War and told you will further efforts you are for each of the owners and the 70 to make sure you're on the social the tis or somatic cookware. Yeah. Those are that poultry. He got some got Uh huh.
So in in the past few months is since I may actually we are seeing increasing.
A number of cancer customers and use our AI marketing solution in the past year over a month over month.
In general I know for the individual trial quadrangle Gorda, Joe on the shelves for the tons in the quarter of it to John He won't come border control for the time, he or she should it so as I mentioned before going forward. We will we will provide this basis, our AI AI marketing solution on a more diversified.
Self lead generation user cases, and provide these product commercial products to our customers.
Oh on television or realized through the Intel that an awful lot 10 Mg She does yeah sure.
July so.
Passage will get harder yeah.
Quality of there on the effectiveness of their marketing spend so we believe that this is a trend that to a not dollar not only us or a competitor, but actually across the Oh, my marketing a industry that Ah Ah.
The problem for using technology to to attempt to raise the effectiveness of their marketing solutions and we believe we are also this trend also benefit that benefit us add too and this going forward were becoming a.
Increasingly important contributor to our advertising revenue.
Oh Scissor George when you sign up with us. Thank you.
Hi, Thank yourself.
Thank you. Our next question is funding line of Gary channels see I see these kind of had.
Good evening management. Thanks for taking my question. This is Derek drums actually say on behalf of Charlie team I have two questions. First one is about the same as Bill mentioned loan facilitation services contributed roughly 49% of total transactions in the quarter and a mind to reach over 30% in they have a second half year and the what is your expectation for racial ramps are more long term vision and how do we reach this target and the second question about our cash flows.
Could management give more color about the aacs long, our cash and what's the reason behind that thank you.
Oh, Thank you Gary I have to answer your first question about I don't facilitation and Oh address the second question regarding cash flow.
Our North American Education services is our business focus and so we will keep us increase our loan facilitation partners and our businesses are we thinking the next day or two or three years, our loan facilitation services will still keep increasing.
I think you know.
Eventually you will you will be sort of.
Majority of our our business.
I hope this answers your question.
Thank you very helpful.
Thank you Gary and regarding your second question about cash flow.
The cash outflow and investing activities is mainly caused by the up by the the the new self operated out of finance businesses of machine and a yeah. That's the main reason for the investing our cash outflow for the financing.
Outflow, if maybe cost by two reasons first one is.
The repayment of our borrowing and sit back securities by IGI, and secondly is as we have announced before in the second quarter, we actually a payback the commerce a convertible bond that we borrowed front, we issued two PDG in the.
In the.
In 2019, I'm, sorry in 2016, and the so we repay that the remainder remaining outstanding amount of that convertible bonds in Q2.
I was just signed over 100 million U.S. and so that caused that's the main reason for the two reasons for cash outflow in the financing activities. However, as you can see the cash flow of hours and also ourself and also including the whole group is remains very healthy and robust.
Thank you.
Thank you. Your next question is from the line of manage long Bank of America. Please go ahead.
Thank you management for taking my questions I have a quick question. So we have seen that accompanies our digital marketing business, which is essentially you know auto at agency business deliver very strong girl shelved over 30% year over year.
He didn't add to drill hole, you know auto advertising budget is declining so I'm curious to learn the reason behind the growth of the business and how should we think about the business for the second half of the year and my second question is related to the auto finance and so yeah. So again very inspiring to see the very strong gross often auto finance volume, which is clearly outperformed the industry. So suggesting that he she is taking market share and so I'm curious to know that in your mind to who are we getting the market share phone like is it more from the banks or Oh, it's cease all our though on your auto finance these companies and toward the mid to long can do we have any takeaway for easing smokies here.
Thank you.
A second Myrna I'll answer your question regarding strategy and Katherine anywhere answer the question on the machine. So regarding says you have to know the they actually the revenue is a includes mainly two parts. The one number one is the traditional revenue stream of agency, which is the rebate from media as well and for that part actually in Q2. The performance is in line with the overall advertising online advertising market of China and the they have and at the same time. We also have a second part part of our revenue, which is more a project based prop basically projects they do with.
Are they.
They do with the their customers so actually in Q2, we see a very strong growth in these are project based revenue.
I'm going to second part of are these projects actually are more AD hoc and its very difficult. We have a very limited visibility on these are on the on the on the obvious partner based revenue and before the rebates actually into go in going into the second half I think it's more it's very closely in line with what will happen in the auto industry, if the auto industry remain.
Weak.
And the advertisers will will will remain a very careful in their marketing spend and that will also influence I see I'd use business.
Kevin you want to answer your question on market share.
Oh sure I think to your second question you. She is taking market share I think you know generally because the industry is consolidating.
I think from a since the beginning of last year the tool the whole financing the story the experienced I think the macro from Micrel.
Situation wise, there is general credits tied to new policies.
And also I think from the.
Primary market and the secondary market.
I think the auto finance companies a valuation is.
Revalued, which I think resulted a lot of the I think the capital is not.
Does not flow into this market as much as.
Yeah, let's see 2016 2017.
So as a result, I think our competition, we think it's it's less and also.
For the auto finance industry. This is actually.
An industry with pretty high entry barrier.
So I think from the competition wise, we think that.
As the leader in the industry, we're enjoying the consolidating benefit so thats why we enjoy the faster growth than the industry growth.
As as to your to your point are we competing I think we aren't we're competing but we're also cooperating with banks and and auto finance companies for for for for example, our loan facilitation services.
We have partners that are banks and and.
Possibly auto large auto finance companies as well so.
We have four dose for dose institutions, we are actually partners with them, but of course in terms of the product wise.
We are competing with other banks or other auto finance companies products in the market.
But I think from his past experience.
We started the business.
In 2015.
We have demonstrated we have pretty strong execution team and.
Attractive products for consumers. So thats. The reason why we are gaining market share and to become the leader and we believe that.
With this leadership and our execution team, we will continue to be the leader in the industry and enjoyed the leadership.
Advantages and we were also trying to enlarge our work.
Competitive advantages by improving our technologies and.
And increasing our non facilitation partners.
An increase in our operating efficiency.
Hope this answers your question.
Okay sure. Thank you.
Thank you and now approaching the end of the conference call I'll now turn the call over to beat on his CFO Ming shoes for closing remarks.
Once again, thank you for joining US today, please don't hesitate to contact us if you have any other further questions. Thank you for your continued support and we look forward to talking with you in the coming months.
Thank you for your participation to the participation in today's conference. This concludes his presentation. You may now disconnect good day.