Cango Inc (CANG) 2024 Q2 法說會逐字稿

Good morning and good evening, everyone. Welcome to Cango Inc's second quarter 2024 earnings conference call. (Operator Instructions) This call is also being broadcast live on the company's IR website.

大家早安，晚上好。歡迎參加 Cango Inc 2024 年第二季財報電話會議。（操作員說明）本次電話會議也在公司的 IR 網站上進行了現場直播。

Joining us today are Mr. Jiayuan Lin, Chief Executive Officer; and Mr. Yongyi Zhang, Chief Financial Officer of the company. Following management's 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 as management will make forward-looking statements.

今天加入我們的是執行長林嘉源先生；張勇毅先生，公司財務長。在管理階層準備好發言後，我們將進行問答環節。在我們開始之前，我請您參閱公司收益發布中的安全港聲明，該聲明也適用於今天的電話會議，因為管理層將做出前瞻性聲明。

With that said, I'm now turning the call over to Mr. Jiayuan Lin, CEO of Cango. Please go ahead, sir.

話雖如此，我現在將電話轉給 Cango 執行長林嘉源先生。請繼續，先生。

Hello everyone and welcome to Cango's second quarter 2024 earnings call. In the second quarter of 2024, the automotive market remains sluggish, presenting significant challenges for the industry.

大家好，歡迎參加 Cango 2024 年第二季財報電話會議。2024年第二季度，汽車市場依然低迷，產業面臨重大挑戰。

According to the China Association of Automobile Manufacturers, vehicle production and sales in June reached 2.500 million and 2.552 million units, respectively, reflecting a year-on-year decline of 2.1% and 2.7%, respectively. Passenger vehicle sales in June fell by 2.3% year-on-year. Although sales of new energy vehicles continue to outpace the market, their growth has not been sufficient to alter the industry's overall downward trajectory.

根據中國汽車工業協會統計，6月汽車產銷分別完成250萬輛和255.2萬輛，較去年同期分別下降2.1%和2.7%。6月乘用車銷量較去年同期下降2.3%。儘管新能源汽車銷售持續跑贏市場，但其成長不足以改變產業整體下滑的軌跡。

In response to these challenges, we continue to implement strict cost control and risk management strategies, reinforcing our financial stability through disciplined expense management and cost efficiency measures. Meanwhile, we maintain meticulous oversight for current assets and liabilities, closely monitoring our risk exposure. As of June 30, our total outstanding loan balance stood at approximately RMB6.2 billion with [M1plus] at 2.93% and [M3plus] at 1.57%. Our credit risk exposure has been decreased to a low level with only RMB2.7 billion of outstanding balance of loans where the company bears credit risks have not been provided with full bad debt allowance, or full risk assurance liabilities.

為了應對這些挑戰，我們繼續實施嚴格的成本控制和風險管理策略，透過嚴格的費用管理和成本效率措施來加強我們的財務穩定性。同時，我們對流動資產和負債保持細緻的監管，密切監控我們的風險敞口。截至6月30日，我們的未償還貸款餘額總額約為人民幣62億元，[M1plus]為2.93%，[M3plus]為1.57%。信用風險敞口已降至較低水平，公司承擔信用風險的貸款餘額僅27億元，未全額提列壞帳準備，也未全額提列風險保證責任。

(spoken in foreign language)

（用外語說）

As the new car market grows [ph], we are increasingly recognizing the used car markets immense potential opportunities. As such, we have further streamlined our business processes, enhanced service quality, and strengthened the customer experience. Over the past quarter, we focused on enhancing the competitiveness of Cango U-car by ensuring a consistent supply of high-quality vehicles, optimizing dealer experience, I mean, optimizing dealer service experiences and supply chain management, and improving the convenience and security of cross-regional deliveries, which drove steady business growth. By the end of the second quarter, our Cango U-car app has accumulated over 130,000 page views. During the quarter, we facilitated the transaction of 266 vehicles and successfully auctioned 124 vehicles across our platform.

隨著新車市場的成長，我們越來越認識到二手車市場巨大的潛在機會。因此，我們進一步簡化了業務流程，提高了服務質量，並增強了客戶體驗。過去一個季度，我們重點提升燦果優車的競爭力，確保高品質車輛的持續供應，優化經銷商體驗，我是說，優化經銷商服務體驗和供應鏈管理，提高車輛使用的便利性和安全性。截至第二季末，我們的Cango U-car應用程式已累積超過13萬次瀏覽量。本季度，我們在平台上促成了 266 輛汽車的交易，並成功拍賣了 124 輛汽車。

(spoken in foreign language)

（用外語說）

Meanwhile, we identified and on boarded new partners with a strong reputation and abundance vehicle inventories to ensure a diverse range of listings on Cango U-car. To enhance operational efficiency, we implemented rigorous management practices, refined key processes such as vehicle listing, transaction facilitation and customer service. These efforts have increased resource utilization efficiency and improved overall operational effectiveness.

同時，我們物色並加入了具有良好聲譽和豐富車輛庫存的新合作夥伴，以確保 Cango U-car 上的車輛種類多樣化。為提高營運效率，我們實施嚴格的管理規範，細化車輛掛牌、交易便利、客戶服務等關鍵流程。這些努力提高了資源利用效率，提高了整體營運效率。

(spoken in foreign language)

（用外語說）

We also established strategic partnerships with numerous major used car markets nationwide in the second quarter enabling real-time synchronization of their vehicle listings with Cango Ucar to better meet users' specific demands. Currently, Cango U-car holds over 260,000 vehicle listings. By integrating extensive offline vehicle inventory, we have effectively enhanced user engagement on the Cango U-car app.

第二季度，我們還與全國眾多主要二手車市場建立了戰略合作夥伴關係，將其車輛清單與Cango Ucar即時同步，更好地滿足用戶的特定需求。目前，Cango U-car 擁有超過 26 萬輛車輛。透過整合廣泛的線下車輛庫存，我們有效提升了Cango U-car應用程式的用戶參與度。

(spoken in foreign language)

（用外語說）

We have further enriched our user experience by establishing exclusive member communities through private (inaudible) management, regularly providing members with benefits and event updates to boost user engagement and loyalty. We have also established a set of refined operational processes and management guidelines focused on safeguarding seller dealers rights. This includes implementing streamlined transaction rules and risk prevention mechanisms as well as providing comprehensive training and support, all of which are designed to help seller dealers improve their operational efficiency.

我們透過私人（聽不清楚）管理建立專屬會員社區，定期為會員提供福利和活動更新，以提高用戶參與度和忠誠度，進一步豐富了我們的用戶體驗。我們也建立了一套以維護賣家經銷商權益為重點的精細化操作流程和管理指南。這包括實施簡化的交易規則和風險防範機制，以及提供全面的培訓和支持，所有這些都是為了幫助賣家經銷商提高營運效率。

(spoken in foreign language)

（用外語說）

Next, I would like to highlight some key advancements that Cango has made in the area of cross border used car transactions. Since China began allowing the export of used vehicles in 2019, export volumes have surged over tenfold, with a significant increase in the average value of exported vehicles. Supportive guidelines and favourable policies from government departments and authorities have fostered the growth of the used car export sector. We are optimistic about the promising prospects in the export market for used vehicles, particularly those in the NEV segment.

接下來我想重點介紹Cango在跨國二手車交易領域取得的一些關鍵進展。自2019年中國允許二手車出口以來，出口量增加了十多倍，出口車輛平均價值大幅增加。政府部門的支持和優惠政策促進了二手車出口產業的發展。我們對二手車出口市場尤其是新能源汽車出口市場的前景持樂觀態度。

(spoken in foreign language)

（用外語說）

Since its launch in March 2024, our international used car platform, AutoCango.com, has quickly gained traction among global audiences. To date, it has attracted over 180,000 visits with more than 20,000 registered users across 207 countries and regions worldwide. Autocango.com hosts over 85,000 high-quality used car SKUs offering more than 60,000 different models. In the second quarter, we significantly expanded Autocango.com's market coverage as well as its range of products and services offerings.

自 2024 年 3 月推出以來，我們的國際二手車平台 AutoCango.com 迅速受到全球受眾的關注。截至目前，其訪問量已超過18萬，註冊用戶超過2萬，遍佈全球207個國家。Autocango.com 擁有超過 85,000 款高品質二手車 SKU，提供超過 60,000 種不同的車型。第二季度，我們大幅擴大了 Autocango.com 的市場覆蓋範圍及其產品和服務範圍。

(spoken in foreign language)

（用外語說）

Under our traffic-first strategy, Cango has been focusing on establishing a primary traffic gateway connecting China's used car dealers with overseas buyers. We believe that this streamlined, asset-light and traffic-focused operational approach will enable us to control operating costs while creating sustained value across our core business lines. Our website allows overseas buyers to more conveniently and directly access China's high-quality used car inventories and we aim to position this website as the premier gateway for exporting Chinese used cars.

在流量優先的策略下，燦谷一直致力於打造連結中國二手車經銷商與海外買家的主要流量入口網站。我們相信，這種精簡、輕資產、以流量為中心的營運方式將使我們能夠控制營運成本，同時在我們的核心業務領域創造持續的價值。我們的網站讓海外買家能夠更方便、更直接地取得中國優質二手車庫存，我們的目標是將該網站定位為中國二手車出口的首要門戶。

(spoken in foreign language) Moving forward, Cango will continue to deepen our partnership with overseas markets, further refining Autocango's functionality and services to better serve car users both at home and abroad.

（外語演講）未來，Cango將繼續深化與海外市場的合作，進一步完善Autocango的功能和服務，更好地服務國內外汽車用戶。

Next, I will turn the call over to our Chief Financial Officer, Yongyi Zhang, for a review of the company's financial performance.

接下來，我將把電話轉給我們的財務長張勇毅，以審查公司的財務表現。

Thanks, Jiayuan, and hello, everyone, and welcome to our second quarter 2024 earnings call. Before I started to review our financials, please note that unless otherwise stated, all numbers are in the RMB terms and all percentage comparisons are on a year-over-year basis.

謝謝佳源，大家好，歡迎參加我們的 2024 年第二季財報電話會議。在我開始審查我們的財務數據之前，請注意，除非另有說明，所有數字均以人民幣計算，所有百分比比較均以同比為基礎。

Total revenue in the second quarter of 2024 was RMB45.1 million compared with RMB675.4 million in the same period 2023. Guarantee income, which represented the fee income earned on a non-contingent aspect of a guarantee, was RMB20.9 million in the second quarter of 2024. This was presented separated from the contingent aspect of a guarantee in pursuit to the adoption of ASC 326 since January 1, 2023.

2024年第二季的總收入為人民幣4,510萬元，而2023年同期為人民幣6.754億元。2024 年第二季度，擔保收入（即非或有擔保所賺取的費用收入）為 2,090 萬元人民幣。這是與自 2023 年 1 月 1 日起尋求透過 ASC 326 的擔保的或有方面分開提出的。

Now let's move on to our cost and expenses during the quarter. Cost of revenue in the second quarter decreased to RMB26.5 million from RMB615.8 million in the same period 2023. As a percentage of total revenues, cost of revenue in the second quarter of 2024 was 58.8% compared with 91.2% in the same period of 2023.

現在讓我們繼續討論本季的成本和支出。第二季營收成本從 2023 年同期的 6.158 億元降至 2,650 萬元。從佔總營收的比例來看，2024年第二季的營收成本為58.8%，而2023年同期為91.2%。

Sales and marketing expenses in the second quarter decreased to RMB4 million from RMB12.2 million in the same period of 2023. General and administrative expenses in the second quarter were RMB39.2 million compared with RMB36.8 million in the same period of 2023.

第二季銷售和行銷費用從2023年同期的人民幣1,220萬元減少至人民幣400萬元。第二季的一般及行政費用為 3,920 萬元，而 2023 年同期為 3,680 萬元。

Research and development expenses in the second quarter of 2024, decreased to RMB1.7 million from RMB7.7 million in the same period of 2023. Net gain on contingent risk assurance liability in the second quarter was RMB10.3 million compared with a net loss of RMB1.6 million in the second period of 2023. Net recovery on provision for credit losses in the second quarter of 2024 was RMB33 million compared with a net loss of RMB10.2 million in the same period of 2023.

2024年第二季的研發費用從2023年同期的人民幣770萬元減少至人民幣170萬元。第二季或有風險保證負債淨收益為人民幣1,030萬元，而2023年第二季淨虧損為人民幣160萬元。2024年第二季信用損失撥備淨回收額為人民幣3,300萬元，而2023年同期淨虧損為人民幣1,020萬元。

We recorded $47 million in income from operations in the second quarter of 2024 compared with a loss of $8.9 million in the same period of 2023. Net income in the second quarter of 2024 was RMB86 million. Non-GAAP adjusted net income in the second quarter of 2024 was RMB90.7 million. On a per share basis, basic and diluted net income per ADS in the second quarter of 2024 were RMB0.83 and RMB0.76, respectively. And non-GAAP adjusted basic and diluted net income per ADS in the same period were RMB0.87 and RMB0.8, respectively.

2024 年第二季度，我們實現營運收入 4,700 萬美元，而 2023 年同期虧損 890 萬美元。2024年第二季淨利為人民幣8,600萬元。2024年第二季非美國通用會計準則調整後淨利為人民幣9,070萬元。以每股計算，2024年第二季每股ADS基本淨利及攤薄淨利分別為人民幣0.83元及人民幣0.76元。同期非美國通用會計準則調整後每股美國存託股基本淨利及稀釋淨利分別為人民幣0.87元及人民幣0.8元。

Moving on to our balance sheet, as of June 30, 2024, the company had cash and cash equivalents of RMB949.5 million compared with RMB1.2 billion as of March 31, 2024. As of June 30, 2024, the company had short-term investment of RMB2.7 billion, compared with RMB2.3 billion as of March 31, 2024.

看看我們的資產負債表，截至 2024 年 6 月 30 日，該公司的現金和現金等價物為人民幣 9.495 億元，而截至 2024 年 3 月 31 日為人民幣 12 億元。截至2024年6月30日，公司短期投資為人民幣27億元，截至2024年3月31日為人民幣23億元。

Looking ahead to the third quarter of 2024, we are now predicting our total revenue to be between RMB20 million and RMB25 million. Please note that this forecast reflects our current preliminary views on the market and operational conditions, which are subject to change.

展望2024年第三季度，我們預期總營收將在2,000萬元至2,500萬元人民幣之間。請注意，這項預測反映了我們目前對市場和營運狀況的初步看法，這些看法可能會改變。

This concludes our prepared remarks. Operators, we are now ready to take questions.

我們準備好的演講到此結束。接線員，我們現在準備好回答問題。

(Operator Instructions)

（操作員說明）

[Waylon Jiong], CITIC Securities.

[Waylon Jiong]，中信證券。

(spoken in foreign language)

（用外語說）

Thank you very much. I'm (inaudible) from CITIC Securities. I have two questions on used car market development. So my first question is how's your strategic partnership with major used car markets help improve your market position? And what about the contribution by these partnerships to your financial performance?

非常感謝。我是中信證券的（聽不清楚）。我有兩個關於二手車市場發展的問題。所以我的第一個問題是，你們與主要二手車市場的策略夥伴關係如何幫助你們提升市場地位？這些合作關係對您的財務表現有何貢獻？

(spoken in foreign language) Thank you for your questions. So by collaborating with major used car markets, we have expanded our supply channels and diversified our vehicle offerings. In addition, these partnerships allow us to leverage their geographic coverage and market penetration, providing our customers with a broader range of choices. So our extensive offerings comprehensively address our clients' evolving needs, increasing their stickiness on our platform.

（用外語發言）謝謝你的提問。因此，透過與主要二手車市場合作，我們擴大了供應管道並使我們的車輛產品多樣化。此外，這些合作夥伴關係使我們能夠利用他們的地理覆蓋範圍和市場滲透力，為我們的客戶提供更廣泛的選擇。因此，我們廣泛的產品全面滿足客戶不斷變化的需求，增加他們在我們平台上的黏性。

(spoken in foreign language)

（用外語說）

And as our vehicle inventory grows and market the coverage expands, our transaction volume has naturally increased. This higher volume not only creates economies of scale, reducing unit costs, but also strengthens our bargaining power. This enhanced position has enabled us to negotiate more favourable terms with suppliers and customers alike, further improving our profit margins.

而隨著我們的車輛庫存增加，市場覆蓋範圍擴大，我們的交易量自然也就增加了。產量的增加不僅創造了規模經濟，降低了單位成本，也增強了我們的議價能力。這一增強的地位使我們能夠與供應商和客戶談判更優惠的條款，進一步提高我們的利潤率。

(spoken in foreign language) Thank you very much. That's for your first question.

（用外語發言）非常感謝。這是你的第一個問題。

(spoken in foreign language)

（用外語說）

Thank you. And my second question is that the Chinese government has actually published a lot of favourable policies to support the development of used car market. So what about the challenges that your company faces in promoting the used car cross-border transactions?

謝謝。我的第二個問題是，中國政府實際上推出了許多支持二手車市場發展的利多政策。那麼貴公司在推動二手車跨境交易方面面臨哪些挑戰呢？

(spoken in foreign language)

（用外語說）

Thank you for your question. So, for the challenges, first of all, the cross border transactions come usually come with relatively high logistics costs, including expenses for transportation, for insurance, and also for warehousing. And to better control these costs, we have partnered with third-party companies who have established and well established the cross border logistics capabilities. (technical difficulty) , we will continue to monitor policy changes and develop flexible strategies to adapt to these changes.

謝謝你的提問。所以，針對挑戰，首先，跨境交易通常會帶來較高的物流成本，包括運輸費用、保險費用、倉儲費用。為了更好地控制這些成本，我們與已經建立並完善跨境物流能力的第三方公司合作。 （技術難度），我們將持續監控政策變化並制定靈活的策略來適應這些變化。

(spoken in foreign language)

（用外語說）

Also, regulations and standards for used vehicles vary across countries, including safety, emissions and quality requirements. To address this, we will ensure that all vehicles traded meet the standards of the target market.

此外，各國的二手車法規和標準各不相同，包括安全、排放和品質要求。為了解決這個問題，我們將確保所有交易的車輛都符合目標市場的標準。

(spoken in foreign language)

（用外語說）

In addition, used car transactions very often involve a relatively long transaction cycle due to their unique market characteristics, including but not limited to vehicle condition assessment, selection by buyers, multiple rounds of price negotiations, and necessary legal and financial reviews. Buyers typically need more time to look into the vehicle's maintenance history, performance and pricing before making a purchasing decision. So naturally, this extended transaction cycle also poses a challenge for cross border used vehicle transactions. Thank you. That's for your second question.

此外，二手車交易因其獨特的市場特點，往往涉及較長的交易週期，包括但不限於車況評估、買家選擇、多輪價格談判以及必要的法律和財務審查。買家在做出購買決定之前通常需要更多時間來了解車輛的維護歷史、性能和價格。當然，這種延長的交易週期也為跨境二手車交易帶來了挑戰。謝謝。這是你的第二個問題。

Thank you very much. No more questions from me.

非常感謝。我不再提問了。

Emerson Zhao, Goldman Sachs & Co. Inc.

趙艾默生，高盛公司

(spoken in foreign language)

（用外語說）

Thank you. I have two questions. The first question is on finance. So I noticed that the company has decreased your revenue guidance. So will you continue to do that in the future? And the second question is how will the management balance your long-term strategy against your short-term performance pressure?

謝謝。我有兩個問題。第一個問題是關於金融的。所以我注意到該公司降低了您的收入指導。那麼今後您還會繼續這樣做嗎？第二個問題是管理階層將如何平衡你的長期策略和短期績效壓力？

(spoken in foreign language)

（用外語說）

Okay. On your first question on guidance, that of revenue, we are strategically (technical difficulty) impact our existing business, we have reallocated the company's resources, optimize starving, and we have also implemented effective measures to reduce operational costs in response to market changes and internal demand. (spoken in foreign language)

好的。關於你關於指導的第一個問題，即收入問題，我們在策略上（技術難度）影響我們現有的業務，我們重新分配了公司的資源，優化飢餓，我們還採取了有效措施來降低營運成本，以因應市場變化和內部需求。（用外語說）

Moving forward, we will continue to evaluate business development from a strategic perspective while leveraging our unique business model to drive ongoing cost reduction and efficiency improvements. We are confident that these adjustments and refinements will enable us to respond more agilely to market changes and deliver greater value to our shareholders.

展望未來，我們將繼續從策略角度評估業務發展，同時利用我們獨特的商業模式推動持續降本增效。我們相信，這些調整和完善將使我們能夠更敏捷地應對市場變化，為股東創造更大價值。

(spoken in foreign language) On your second question, firstly we have adopted an integrated approach to strategic planning. We have established a comprehensive strategic planning process to ensure alignment between short-term performance goals and our long-term vision. This involves maintaining continual communication to ensure all stakeholders have a clear understanding of the company's strategy and direction. In the short term, we will focus on enhancing execution, efficiency, controlling costs and driving revenue growth to ensure robust financial performance.

（外語）關於第二個問題，第一，我們採取了綜合策略規劃。我們建立了全面的策略規劃流程，以確保短期績效目標與我們的長期願景保持一致。這涉及保持持續溝通，以確保所有利害關係人清楚了解公司的策略和方向。短期內，我們將專注於加強執行力、效率、控製成本和推動收入成長，以確保穩健的財務表現。

(spoken in foreign language)

（用外語說）

Secondly, we have broken down our goals into different phases and also made flexible adjustments. So we have established a very clear objectives and targets for different phases that support both short-term performance and long-term strategic implementation. At the same time, we maintain strategic flexibility allowing us to adapt our plans in response to market and technological changes and swiftly respond to external environmental shifts. Thank you.

其次，我們把目標分成不同階段，也做了彈性調整。因此，我們為不同階段製定了非常明確的目標和指標，既支持短期績效，也支持長期策略實施。同時，我們保持策略靈活性，使我們能夠根據市場和技術變化調整計劃，並迅速應對外部環境變化。謝謝。

And that concludes the question-and-answer session. Thank you once again for joining Cango's second quarter 2024 earnings conference call today. Have a great day.

問答環節到此結束。再次感謝您今天參加 Cango 2024 年第二季財報電話會議。祝你有美好的一天。

(spoken in foreign language)

（用外語說）

Thank you all for your participation. Thank you.

感謝大家的參與。謝謝。