Cheche Group Inc (CCG) 2024 Q2 法說會逐字稿

Good morning and welcome to Cheche's second quarter 2024 conference call. (Operator Instructions) Please note today's conference is being recorded. I will now turn the conference over to Crocker Coulson, Investor Relations for Cheche Group. Mr. Coulson, the floor is yours.

Thanks a lot, operator, good morning, everyone. Thank you for joining us to review Cheche Group 2024, second quarter results. This morning Cheche posted the earnings release and related investor presentation to its website, which you can find at ir@chechegroup.com. With us on the call today are Lei Zhang, Cheche's Founder and Chief Executive Officer; and Wenting Ji Chief Financial Officer. After the prepared remarks this morning are concluded. We're going to open up the call to your questions.

But before we begin some statements in this teleconference are forward-looking within the meaning of the Federal Securities Laws. Although management believes these statements are reasonable, we can provide 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 filings with the SEC for risk factors that could materially impact our results.

As I mentioned in the earnings release, is available on ir@chechegroup.com, and we encourage you to review the reconciliations of certain non-GAAP measures contained within. With that, it's my pleasure to turn the call over to Lei Zhang, Chief Executive Officer. Lei, please go ahead.

Thank you, Crock. Greetings, everyone. We are glad you have joined us. Our platform has continued to grow with future, providing support for about a 49 million workers. Blessing over USD8 billion in written premiums and collaborating with about 100 insurance carriers pre between 2021 and the second quarter of this year.

We remain China's largest auto insurance technology platform by digital auto insurance, transaction premiums and the active driver in the ongoing digital transformation. Globally the NEV industry continues to experience substantial growth needed by the Chinese EV manufacturers. As EV adoption rates in China [come see me] the second highest sales on the record in this quarter alone. We have maintained our leadership role as a provider of customized system and embedded insurance product.

Today positioned on the cusp of profitability in this arena. We continue to push forward [broking] strategic partnership and leveraging our innovative solutions to further create opportunities. We kicked off the quarter with the previously published Volkswagen digital sales and service partnership, which a point Cheche as the exclusive service provider to Volkswagen EV insurance business.

The following month, we announced the collaboration with new insurance broker, the insurance arm of meal, where we committed to customizing our digital insurance service system for the well-known EV manufacturer. BAIC group is one of the largest auto manufacturers in China producing and selling wavels through its own brands as well as foreign branded, the joint ventures, the agreement we announced with BAIC Group Insurance subsidiary names as a core partner with the opportunity to develop relationships with brands under its umbrella with (inaudible) or traditional internal combustion vehicles.

The partnership has already lead to several successes, including Beijing automotive system, which is expected to power 200 dealerships by year end. Beijing Hyundai system, which is planned for 100 dealerships over the same time arising under the robust partnership with Volkswagen that is set to include more products in addition to the service system being launched as a direct sales channel.

Most recently, we signed the agreement with Xiaomi Group, insurance up naming us a approved provider for its family of brands. Our first and established a partnership in this group with a luxury and EV brand, while which provides national listening and other comprehensive insurance services across China, including more than 900 VOYAH deliveries store as of June 30, 2024, the number of embedded policies continues to grow up 147% year on year to 224,000 policies. Our EV gross premium, it's almost doubled from the prior year, growing 99% to USD91 million over the same period.

Our technology roadmap continues to prioritize winning additional higher profile EV manufacturers and growing our current market share. Our self reinforcing cloud-based model is easy to scale and collects well, able data insights that organically leveraging to drive increasing processing of our products. To a primary revenue driver continues to passenger vehicle sales volumes as such the company's strategies are related with a underlying, a dynamic that prepares the automotive industry in China.

To ensure deriving future. We have leveraged our unique position in the industry, passing the ever-increasing quantities of inbound in the data streams to enhance all touch points with the user from renew or to claim. We assess the refine risk profile to beta, updated pricing models and predict trends beta. Happy manufacturers command a great understanding our driving behavior. And as a large ecosystem working together, we will generate more value for our partners and higher margins for treasury.

In the long term, we will work to extend our partnership with auto manufacturers beyond China and into additional regions such as South East Asia, the Middle East and Europe where local insurance companies might struggle to underwriting embedded policies, our platform, giving our valuable data collected in the space, would it be able to have developed a customized pricing model. We are pleased with our progress in 2024, and I look forward to the opportunity to be in the back half of the year.

I will now turn the call over to our Chief CFO, Sandra, thank you.

Thank you, Lei. I want to begin by touching on our second quarter operational and financial highlights before taking questions. While total written premiums placed for the quarter remained steady at RMB5.6 billion or USD780 million. The total number of policies placed grew 11.1% in the second quarter to 4 million. As I mentioned, 225,000 policies and RMB662.6 million of corresponding premiums are embedded in new annual deliveries, growing 147.3% and 99.6%, respectively, year over year.

In terms of revenues, we generated RMB851.8 million or USD117.2 million in second quarter, representing an increase of 2.5% year over year. Cost of revenues in second quarter was RMB820.9 million, more or USD113 million at 1.9% from the prior year quarter. We reported a selling and marketing expenses growth of 14.2%, RMB19.3 million or USD2.7 million, mainly due to the increase in staff costs, marketing and share-based compensation expenses.

General and administrative expenses increased to RMB27.7 million or USD3.8 million from RMB19.6 million in the prior year quarter. Was primarily due to increased share-based compensation. One of this dispute resolution expenses, research and development expenses this quarter decreased 21.1% to RMB9.1 million or USD1.3 million, mainly driven by reduced staff costs. The total cost and operating expenses increased 2.7% to RMB877.1 million or USD120.7 million from RMB854.1 million in the prior year quarter.

Excluding share-based compensation expenses, amortization of intangible assets related to acquisition. This is related to professional service fees and the one-off dispute resolution expenses. The adjusted total cost and operating expenses increased only 1.9% from the prior year quarter. Our net loss in the quarter was on the RMB23.6 million or USD3.2 million movement from the comparable or the [28.2 million] loss in the second quarter of 2023.

The adjusted net loss for the quarter decreased 38.8% to RMB12.2 million or USD1.7 million from our the RMB13 million in the prior year quarter, resulting from the growth of our revenues and the improvement of our operational efficiency. Turning to our balance sheet, we reported on the [RMB204.6 million] in cash and cash equivalents and short-term investments. Looking I have choice reaffirming previous to this stage of the data. We continue to expect that net revenue for 2024 will range from are theRMB3.5 billion to RMB3.7 billion, representing an increase of 6.1% to 12.1% compared to the four year old 2023. The total written premium placements 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 of 2023. That concludes our prepared remarks. Next, we'll will be happy to address your questions. Thank you.

(Operator Instructions)

Michael Legg, Benchmark.

Good morning. Could you just comment on when you sign these new partnerships with likes of BAIC telephone Volkswagen, how much the ramp starts the immediate impact and then how you expect them to grow over time? Thanks

(spoken in foreign language)

So basically, we have announced our partnership with [Xiaomi] Group and the Volkswagen family in the first half of this year. So basically, we provide a long-term service system for associates and operations for the engine makers. But based on different types of charging standards, they will be short term charging and also the other one is still based on The (inaudible) are different. And if not, we mean (inaudible)

Okay. Thank you.

Steve Silver, Argus Research.

So my question is as the company continues to expand the platform's offerings. Are there any areas of interest that you see for either internal development or for acquisitions through M&A?

(spoken in foreign language)

And we will focus on the insurance for that innovation around the new ecosystem, for example, in area of charging for infrastructure, the maintainers and other types of value added services. Besides, we are paying attention to the well exploration and camps operation opportunities with related companies from the upstream and downstream companies.

Thank you. And one more, if I may. Given the momentum of the referral and partnership programs and the relationships you have with the largest insurance carriers and EV manufacturers, should that have a favorable effect moving forward on a longer term sales and marketing environment?

(spoken in foreign language)

So it really the annually automakers attaching great importance to the insurance business because the auto insurance busy has agreed in on the after-sales service on the revenue there after sales services and the same time the choose the charges eating the insurance solutions. Will have a greater influence on the auto insurance market.

(spoken in foreign language)

Adding at the same time by sharing our technology (inaudible) we can help the insurance companies to reduce their cost ratios to improve their service levels. And also in the future, they are faced with the risks related to these new scenarios, such as intelligent, driving autonomous driving, we can increase them with the digital capabilities to address risk the session your scenario.

Thank you.

Thank you very much.

Allen Klee, Maxim.

Yes, hi. Can you talk a little about that, how on what your offering improves the technology for the insurance companies in terms of there are efficiencies and any things that can -- that can also improve the driver safety and claims.

(spoken in foreign language)

So we're going to answer this question in two aspects. Firstly, so the global insurance companies. They have limited experiences when it comes to the two underwriting any reinsurers. But in China, there are at [215 million] there are [2.5 million] recourse. So basically for the companies in China, they have accumulated -- cumulative large amounts are experiencing and data.

(spoken in foreign language)

So service provider for the in the Insurance Solutions, we really share our technology know-how with the insurance companies from both China and global.

(spoken in foreign language)

Secondly, as we all know, the annual costs are basically in carrying costs, so it has a great amount to Data, which can be accumulated from underwriting this costs. This data can be used as strict pricing and underwriting. So we can provide the insurance companies with underwriting capabilities as well as claims system.

Thank you.

Thank you. And this concludes our question-and-answer session. I would like to turn the conference back over to Lou for closing remarks.

Thank you everyone. Again, I'd like to join the call. If you have any follow-up questions, please contact IR. Thank you all.

Thank you. This concludes today's conference call. We thank you for joining the call. If you have any follow-up questions, please contact the IR team. Have a great day, and thank you for your attendance.