Token Cat Ltd (TC) 2021 Q3 法說會逐字稿

Good morning, and good evening, ladies and gentlemen. Thank you for standing by for TuanChe Limited's Third Quarter 2021 Earnings Conference Call. (Operator Instructions) Today's conference call is being recorded. Now I will turn the call over to your speaker host today, Ms. Cynthia Tan, IR Director of the company. Please go ahead, ma'am.

Hello, everyone, and welcome to TuanChe Third Quarter 2021 Earnings Conference Call. We released our earnings results earlier today, and it is now available on our IR website as well as on Newswire services. Before we continue, please note that discussion today will contain forward-looking statements made under the safe harbor provision of the U.S. Private Securities Litigation Reform Act of 1995.

Forward-looking statements involve inherent risks and uncertainties. As such, our future results may be materially different from the views expressed today. Further information regarding this and other risks and uncertainties is included in our earnings release and our registration statements filed with the SEC. TuanChe does not assume any obligation to update any forward-looking statements, except as required by law.

Today, you'll hear from Mr. Wei Wen, the company's Chief Executive Officer, who will provide an overview of our growth strategies and business development. To be followed by Mr. Chenxi Yu, Ronnie, the company's deputy Chief Financial Officer, who will provide additional details on the company's financial results and discuss the financial outlook. Following management's prepared remarks, we'll open up the call to questions. With that said, I would now like to turn the call over to our CEO, Mr. Wei Wen. Please go ahead, sir.

Thank you, Cynthia. Hello, everyone. Thank you for joining us today on our third quarter 2021 earnings call. In this quarter, we persevered against a challenging macro environment with COVID-19 flare-ups and global chip supply shortage that constrained order production. While our revenue contracted by 38.9% year-over-year to RMB 61.1 million, primarily due to cancellation of a number of our offline auto shows in response to pandemic conditions.

We forged ahead with our online initiatives, streamlined our cost base and narrowed our net loss attributable to the company's shareholders by 10.7% year-over-year to RMB 36.8 million. Before we discuss our third quarter results in more detail, let's first talk about our strategic plan to expand our business into EV manufacturing.

Catering to the rising consumer demand of electric vehicles, leveraging our existing platform, we are establishing a new EV business line, including design, R&D and a manufacturing team. While holding open discussions with potential strategic partners, we will announce the progress of major business transactions, if any, in a timely manner.

China is the largest NEV market in the world, with sales reaching over 1.3 million in 2020, representing close to 44% of all NEVs sold globally in 2021. NEV retail sales penetration in China rose to 14.8% throughout the year and 22.6% in December from 5.8% in the year 2020. According to the China Passenger Car Association, in 2022, NEV sales in China are virtually expected to reach 5.5 million, growing at a CAGR of 106%, much faster than the overall passenger vehicle market, supported by the expedited establishment of EV, infrastructure and technological advancements that have lower vehicle costs as well as improved interactive smart features.

While government regulation and the industry standards on environmental protection and emission continue to be favorable, many of the emerging NEV OEMs are building a direct-to-sales network so they can interact firsthand with their users to ship their purchase experience and efficiently receive feedback on our user needs and prepare us to continuously enhance their products and services.

In this context, we believe we are well positioned to capitalize on consumers' rising demand for EVs given our tremendous customer base. Under the depth and the breadth of our customer insights, we have cumulatively sold over 30 million customers and facilitated more than 1.4 million automobile sales transactions with GMV of approximately RMB 200 billion we're -- our integrated automotive marketplace.

Furthermore, we have extensive sales operations covering 125 cities as of September 30, 2021. To enable the success of our EV manufacturing, we will harness our leading auto sales capabilities and the sales network spanning from first-tier cities to provincial countries nationwide. Through seamlessly integrating our existing platform with the top-tier electric vehicle design, R&D and the manufacturing team we are building, and in-depth operation with potential strategic partners, we are confident the strategic expansion will drive significant synergistic value and ensure we secure an important stake in the EV revolution.

Now let me provide third quarter highlights from our business segments. First, we further enhanced our solid leadership position in off-line marketing services by creating new retail consumption scenarios through innovative platforms and strategic cooperation with partners. Due to resurging COVID-19 cases and the industry-wide chip shortages that affected the production schedule of many OEMs, the number of auto shows we organized were reduced to 65 across 55 cities compared to 152 auto shows in 107 cities in the third quarter of 2020. These shows generated a net revenue of RMB 33.1 million, representing a 59.9% year-over-year decrease.

Looking ahead, we will continue to enhance our off-line marketing services by leveraging our powerful base and analysis capabilities and continuing to strengthen our collaboration with strategic partners and diversify our retail events and scenarios with more creative marketing solutions.

We will also conduct further in-depth studies to identify in granular detail errors with relatively higher potential ROI and fine-tune our off-line presence and the mix of off-line and online marketing services autonomy.

Next, let's move on to our growth initiative in virtual dealership and online marketing services. During the third quarter of 2021, we extended our online marketing services penetration by providing best-in-class user management. Online training and event management services to OEMs and dealers. These improvements led to a 72.6% year-over-year increase in net revenues for virtual dealership and online marketing services.

Going forward, we will further build on our existing business as an integrated automotive marketplace, while leveraging our innovative foundation to expand into EV manufacturing. Following our announcement on January 5, 2022, to expand our strategic focus to EV manufacturing, we continue to open discussions with potential strategic partners and are on track to identify candidates with highly complementary strengths that will allow the creation of substantial synergistic value.

We are optimistic that as China's auto market undergoes structural changes towards a smarter and more energy-efficient mobility solutions. Our innovative business model, massive customer base, strong customer insights and our leading auto sales network, coupled with the top-tier design, R&D and manufacturing teams, we are building as well as the in-depth operation with potential strategic partners will unlock significant value and lay a solid foundation for success.

Now I will turn the call over to Chenxi, our deputy CFO for a closer look at our financial performance in the third quarter.

Thank you, Mr. Wen. Hello, everyone. Thank you for joining us. Our third quarter results were in line with our expectations given the weakening auto market and the impact from the pandemic with net revenues of RMB 61.1 million. To navigate the challenges in the third quarter, we remain squarely focused on cost management, cutting our net loss attributable to the company's shareholders to RMB 36.8 million from RMB 41.2 million in the same period last year.

We are excited our decision to enter the EV manufacturing and are ready to charter a new path forward, while continuing to pursue innovation and positioning the company to capitalize on future consumer demand. Next, I would like to walk through our third quarter 2021 financial results.

Before I start, please note that all numbers stated in my following remarks are in RMB unless otherwise noted. Our total revenues in the third quarter were RMB 61.1 million, decreasing by 38.9% from RMB 100 million in the same period last year. This was a result of 59.3% year-over-year decrease in revenues generated from offline marketing services.

As we purposely resumed our off-line auto shows, off-line marketing services revenue generated from these auto shows decreased by 59.9% to RMB 33.1 million from RMB 82.6 million in the third quarter of 2020.

Revenues from special promotion events in the third quarter of 2021 were RMB 1.3 million compared with RMB 2 million in the third quarter of 2020. Revenues from our virtual dealership services, online marketing services and others increased by 72.6% to RMB 26.6 million during the quarter compared with RMB 15.4 million in the third quarter 2020, primarily due to the continuous expansion of our collaboration with 3 Webank.

Our gross profit in the third quarter decreased by 35.1% to RMB 46.8 million from RMB 72.1 million in the third quarter of 2020. Gross margin was 76.6% in the third quarter of 2021 compared with 72.1% in the same period last year, primarily due to the change in revenue mix.

In the third quarter, selling and marketing expenses decreased by 34.6% to RMB 59.9 million from RMB 91.6 million in the third quarter of 2020. The year-over-year decrease was primarily due to the decrease in promotion expenses and staff compensation expenses as a result of decreased volume of off-line events. G&A expenses increased to RMB 17 million from RMB 15.9 million in the third quarter of 2020 and RMB 14.4 million in the second quarter of 2021.

Research and development expenses were RMB 9.2 million compared with RMB 7.1 million in the third quarter of 2020 and RMB 8.8 million in the second quarter of 2021, primarily due to higher stock compensation expenses for research and development personnel.

Our loss from continuing operations were RMB 39.3 million in the third quarter, lower compared with RMB 42.6 million in the same period last year and higher compared with RMB 9.3 million in the second quarter of 2021.

Excluding the effects of share-based compensations, adjusted net loss attributable to the company's shareholders was RMB 34.4 million in the third quarter compared with RMB 38.3 million in the same period last year. Adjusted basic and diluted net loss per ordinary share were both RMB 0.11 in the third quarter compared RMB 0.13 in the same period last year. Adjusted EBITDA was a loss of RMB 33.5 million in the third quarter compared with a loss of RMB 37 million in the same period last year.

Now turning to our balance sheet. At the end of September 2021, we had cash and cash equivalents and restricted cash of RMB 134.3 million. For further details regarding our 2021 third financial results, please refer to our earnings press release.

In the fourth quarter of 2021, we expect our net revenues to be between approximately RMB 70 million and RMB 80 million, representing a year-over-year decrease of approximately 57.8% to 51.7%. This is primarily attributable to the estimated decline in the expected number of offline events to be held in the fourth quarter of 2021, including auto shows and special promotion events due to the COVID-19 pandemic as well as the impact of global microchips supply shortage on the auto industry.

This forecast reflects the company's current and preliminary views on the market and operational conditions as well as the influence of the COVID-19 pandemic, all of which are subject to change. This concludes our prepared remarks for today. Operator, we are now ready to take questions. Thank you.

(Operator Instructions) As there are no further questions now, I'd like to turn the call back over to the company for closing remarks.

Thank you once again for joining us today. If you have any questions, please feel free to contact.

This concludes this conference call. You may now disconnect your line. Thank you.