Cheche Group Inc (CCG) 2023 Q4 法說會逐字稿

Good day and welcome to the Cheche Group fourth-quarter and 2023 earnings conference call. (Operator Instructions) Please note this event is being recorded. I would now like to turn the conference over to Miranda Davidson, Investor Relations. Ms. Davidson, the floor is yours.

Thank you, operator. Hello, everyone, and thank you for joining us to review Cheche's 2023 fourth-quarter and full-year results. This morning, Cheche posted both the earnings release and related investor presentation to its website at ir.chechegroup.com. With me on the call today our Lei Zhang, Cheche's Founder and Chief Executive Officer; Wenting Ji, Cheche's Chief Financial Officer; and Ting Lin, Cheche's Chief Strategy Officer. After prepared remarks are concluded, we will open the call for questions.

But before we begin, some statements in this teleconference are forward-looking within the meaning of federal securities laws. Although we believe these statements are reasonable, we can give no assurance that they will prove to be accurate because they are prospective in nature. Actual results could differ materially from those we discuss today.

We encourage you to review the most recent Form F-4 and subsequent filings for risk factors that could materially impact our results. And as I mentioned, the earnings release and investor deck are available at ir.chechegroup.com, and we encourage you to review the reconciliations of certain non-GAAP measures contained within.

With that, I'll turn it over to Lei Zhang, Chief Executive Officer. Lei, please go ahead.

Thank you, Miranda. Good morning, everyone. It's a great pleasure to host our first earnings call. We are glad you have joined us. Cheche Group is China's largest auto insurance technology platform by digital auto insurance transaction premiums and is an active driver in the digital transformation. Through our cutting edge, embedded policy and the unique SaaS offerings, Cheche is well positioned to capture significant opportunities resulting from accelerating digitalization of the auto insurance market in China.

As of December 31, 2023, Cheche had facilitated a wider range of auto insurance transactions, having provide the quotes for over 44 million vehicles, placing over USD6 billion in written premiums and collaborating with over 100 insurance carriers between 2021 to 2023. We believe that the depth and breadth of our network provide a strong competitive barrier. For auto intermediaries, Cheche provide integrated platform to generate additional revenue stream and deepen their customer relationships.

But (inaudible) access to utilize our flagship digital insurance transaction products through Easy-Insur, personalized for insurance agents and other services professionals. We also have SaaS solution for insurance carriers, intermediaries, and regulatory bodies -- include Digital Surge, an intelligent one-stop SaaS group of products that have insurance intermediaries and enhance operating efficiency and meet the evolving regulatory requirements.

As an EV insurance platform, a SaaS platform following EV jointly developed by Twitter and the Shanghai Insurance Exchange or SIE. That allows us the SIE to analyze and manage risk for electrical vehicle. These products are designed to be delivered, and we have mobile, web, WeChat, and the third-party applications. Our platform's open architecture also enables its interoperability with many applications, systems, and other offerings adopted by the ecosystem participants.

EV Insurance Solution 2.0 is the integrated platform connected to more than 10 of the leading insurance companies and currently serving more than 10 of top [energy] companies. The platform then started the innovative products and the digital operation, providing data-driven insights to our sales netwaork of over 400 people located in more than 110 branches across 25 provinces nationwide. Our scalable, self-reinforcing, cloud-based model reaches consumers constant -- efficiently and the accumulated valuable data insights that in turn contributed to the precision of our products.

China's auto market is undergoing [unprecedented] period of change driven by three major forces. One, the rapid shift from internal combustion to new energy vehicles. Second, the market adoption of smart vehicle technologies, including an advanced autonomous driving. The third, and the rise of China as a major auto exporter given the consolidation of the domestic market.

While Apple recently terminated its car development program, China's Xiaomi launched their first electric vehicles today as an extension of our immersive consumer experience. In many ways, China is leapfrogging the US and Europe with a next generation of NEV, including a far wider selection of vehicles, a more rapid innovation cycle, a low-cost structure, and the more intensive investment into core technologies.

NEV are projected to cause serious order of 50% of new vehicle sales in China as early as this coming May. And as of 2024, sales volume of NEV is expected to exceed [RMB12 million] with over 100 new models coming to market this year. At the same time, there is a massive consolidation underway that will favor the most innovative cost competitive and a well-funded player.

This [transaction] also have several implications for how auto insurance is designed and delivered. Increasingly, insurance is issued and then renewed through some other vehicle's touch screen or app, resulting in a stickier consumer experience and generating additional revenues for the automakers. Cheche is currently serving as a technology partner for EV manufacturers such as [Samsung], VITA, and other higher profile brands.

Second, the density of sensors in the latest generation of NEV means that the insurers and automakers can shift towards automating the claims management experience and significantly reducing the incidence of fraud. Cheche is providing the technology to make this happen to improve both the consumer claims experience and the insured risk management.

Leveraging sensor and AI technology in NEV, it is now possible to record data before [incidence] and automatically monitor what happens thereafter. This data can be swift transmitted to the insurance company, allowing them to quickly obtain accident-related information, build up the claims settlement process, and reduce human errors and the delays. By analyze [work expense] data, the insurance companies can also (inaudible) determine an extent of vehicle damage and the repair costs that's [awarding] unnecessary disputes.

Third, at the level three and the level four, automation become reality, liability. We will increasingly rely on data streams to determine whether an accident was due to the automakers, the operator or some hybrid of the two. Cheche is collaborating closely with the relevant regulatory authorities and industry stakeholders to address these questions. As NEV intelligence and the connectivity increase and the autonomous driving technology becomes a reality, future NEV policies will be more accurately priced, and our liability will be divided into autonomous driving liability insurance and the traditional vehicle insurance.

Auto manufacturers will begin to undertake a portion of a liability, [allotting a paradigm] auto policy for the consumer and then reducing the total cost of our NEV ownership. Electric vehicles -- [so that's what's] real-time and the precise data on vehicle usage and the driver behavior, which would be revolutionized -- the actuarial models, traditional auto insurance that currently rely on [state] historical data, coupled with application of AI in the insurance industry, particularly in the actuarial science in insurance pricing, we are shifting from a mode simply this pricing model to a diversified and [the free side]. This will result in more diverse product performance such as (inaudible) based insurance and even the potential for customized pricing for each vehicle.

Cheche's goals for this year are aligned with the growth strategies we have been falling under the critical dynamics that are impacting the automotive industry in China. I see the transition rapidly to a green, intelligent, and a global-facing future. We will maintain our position as the most comprehensive ecosystem for auto and related insurance products in China.

As illustrated recently by continued expansion of our relationship with Sinopec, we will align ourselves with the leading NEV brands in China as a key technology partner that helps insurance and claims management directly into the vehicle experience. We will continue to leverage the rich data streams from intelligence vehicles and AI to enhance efficiency, risk management, and the bottom line of the insurers.

We'll be working with industry stakeholders and directors to increase compliance and transparency in the industry. While it heavily required them for the rapidly approaching what is autonomous driving, we will also thoughtfully pursue opportunities to expand overseas at our manufacturing partner can transact -- [transaction] in markets, including Southeast Asia, the Middle Eastern and Europe.

In summary, we expect that 2024 will be an exciting year for our industry and for Twitter. Thank you for your interest in our story. I will now turn the call over to our CFO, Wenting Ji. Thank you.

Thank you, Lei. I'd like to begin by touching on our fourth-quarter and full-year operational and the financial highlights and providing our expectations for 2024 before taking questions.

Cheche continues to scale the business with a technology-driven, capital-efficient approach. As a result, total written premiums placed for the quarter increased 24.7% to RMB6.4 billion or USD894 million. While total written premiums placed for the full year increased to 36.2% year over year to RMB22.6 billion or [USD3.2 billion].

The total number of policies placed grew 26.3% in the fourth quarter to 4.8 million, where for full year, the number increased to 28.5% year over year to 15.8 million. For the quarter, 155,000 policies and RMB511 million of the corresponding premiums were embedded in new NEV deliveries, growing 391.7% and 322.7%, respectively, year over year.

Policies embedded in the new NEV deliveries and the corresponding premiums for the full year reached 416,000, an RMB1.45 billion or USD204.2 million, representing growth of 536.7% and the 525.3%, respectively, compared to the prior year.

Cheche's chart records of strong positive growth has been largely organic and highly efficient from the marketing standpoint, with a substantial amount of business generated through word-of-mouth referrals and the local industry relationships. This is illustrated by the addition of over 50 and the 700 new referral partners in the quarter, contributing to over 1.1 million total referral partners at the year's end.

In a similar vein, insurance intermediaries totaled over 4,500 and insurance company contracts were over 1,900 at the year end. These are driven in part by our growing partnerships with NEV manufacturers and the retail networks, such as the recently announced expanded partnership with Sinopec's 5,000 gas stations nationwide.

Next, let's go to financial update part. In terms of top-line results, we generated RMB867.8 million or USD122.2 million in the fourth quarter, up 12.1% year over year. The increase was mainly attributable to growth in insurance transactions conducted through our platform by referral partners and third-party platform partners.

For the year, net revenues saw even stronger growth, increasing 23.2% to be RMB3.3 billion or USD465 million. Cost of revenues in the fourth quarter was RMB824.2 million or USD116.1 million, up 13.4% in the quarter and 24.6% for the year to RMB3.16 billion for -- or USD445.2 million. The total operating expenses growth increasing 50.1% in the fourth quarter and the 19.3% for the year has primarily been driven by the increase of share-based compensation expenses and the lifting-related professional service fees.

Excluding these non-GAAP expenses, our adjusted total operating expenses increased 8.1% in the quarter, mainly due to the increase of post-listing professional service fees. For the year, our adjusted total operating expenses decreased by 16.6% from the prior year. While as a percentage of net revenues, adjusted total operating expenses decreased from 8.5% for the prior year to 5.7%, resulting from the growth of our net revenues and the improvement of our operational efficiencies.

Our net loss in the quarter was the RMB32 million or USD4.5 million, greater than the comparable loss in the fourth quarter of 2022. The adjusted net loss for the quarter was only RMB4.9 million or USD0.7 million, compared to a gain of RMB4.2 million in the prior year's quarter. The change was mainly driven by an increase of RMB5.6 million in post-listing growth professional service fees and a decrease of RMB3.7 million in gross profit due to the decrease of SaaS revenues.

Full-year net loss grew RMB159.6 million or USD22.5 million, from RMB91 million in the prior year, while excluding non-GAAP expenses, the adjusted net loss improved 35.7% from RMB51.6 million to [RMB33.2 million] or USD4.7 million.

Turning to our balance sheet, our cash position remains strong with RMB264.9 million in cash, cash equivalents and short-term investments, providing us with healthy financial flexibility. As we look ahead, Cheche expects its net revenues for the year of 2024 to range from RMB3.5 billion to RMB3.7 billion, representing the increase of 6.1% to 12.1% compared to a full year of 2023.

Our total written premiums placed are expected to range from RMB24.5 billion to RMB26.5 billion, representing an increase of 8.4% to 17.3% compared to the full year 2023. With that, we are really happy to address your questions. Thank you.

(Operator Instructions) [Yuyu Zhang, CICC].

Thanks, management. Yu Zhang from CICC. Here I have one question. So could you give us some more color on your future strategy of your new energy vehicle insurance business? Thanks.

(interpreted) Okay. As the largest NEV auto insurance provider in China, we have served the top 10 major NEV makers in China such as Xpeng, Li Auto, Avatr, and [BYD Auto]. And this year, the NEV insurance will still be the focus of our growth strategy. And this year, the NEV sales have accounted for over 50% of the total new cars in China. So we believe that we will continue to work with our NEV partners and benefit from the explosive expansions of the NEVs.

And on the other hand, the NEVs are more about the autonomous driving and the more intelligence. So we will -- we can expect that we will work with more NEV makers to provide more services on the precise insurance pricing. And we expect that the smart pricing, insurance pricing cannot go without the big data and the artificial intelligence technology. So we will continue to invest in this aspect to meet the needs of the smart auto insurance and the needs of our partners.

Thank you very much.

Mark Long, Prime Impact Capital.

Hi, Lei and [Sandra], Ting, congratulations on a very strong 2023 and positioning the company for a very strong 2024.

My question, Lei, was about your plans for continuing to develop AI-based technology for the auto insurance market in especially the EV space. Could you elaborate on your plans for deploying AI and machine learning as you continue to expand your product set?

Thank you, Mark. (interpreted) The smart insurance depends on the data that we gain from the autonomous driving. And at present, China and the smart NEVs has connected into the IoT system and can provide a rich driving data, driving behaviors, the mileage and the scope of its behavior and there's a battery information.

And there are two aspects as to how we will deploy the artificial intelligence. On our hand, we will assist the insurance carriers to realize a diversified -- the pricing for the IoT vehicles and to support their anti-fraud efforts. And on the other hand, when the accident happened, our smart claims system will update the information to the claims center of the insurance carriers. So the smart insurance and the precise pricing cannot be -- cannot go without the rich data.

So we believe that the auto insurance, we are on target from the current financial product into a more IoT-based and online services with a precise insurance pricing and the other financial services with the growth of more smart vehicles.

Thank you.

(Operator Instructions) I would like to turn the conference back over to Lei for any closing remarks.

Thank you, everyone, for joining the call. If you have any follow up-questions, please contact Investor Relations team. Have a great day. Thank you, everyone. Thank you.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Portions of this transcript that are marked (interpreted) were spoken by an interpreter present on the live call. The interpreter was provided by the company sponsoring this event.