Cango Inc. Reports Third Quarter 2018 Unaudited Financial Results
SHANGHAI, Nov. 22, 2018 /PRNewswire/ -- Cango, Inc. (NYSE: CANG) ("Cango" or the "Company"), a leading automotive transaction service platform in China, today announced its unaudited financial results for the third quarter of 2018.
• Total revenues in the third quarter of 2018 were RMB285.2 million (US$41.5 million).
• Net income in the third quarter of 2018 was RMB106.3million (US$15.5 million). Net income per ADS in the third quarter of 2018 was RMB0.73(US$0.11). Each ADS represents two of the Company's Class A ordinary shares.
• The number of dealers covered by the Company increased to 44,279 as of September 30, 2018, representing a year-over-year increase of 45.1%.
• M1+ and M3+ overdue ratios for all financing transactions which the Company facilitated and remained outstanding were 0.83% and 0.36%, respectively as of September 30, 2018, as compared to 0.92% and 0.46%, respectively as of June 30, 2018.
The Company has made significant progress under the strategic cooperation with Industrial and Commercial Bank of China ("ICBC") and Didi Chuxing ("Didi"). The Company has completed the system integration with ICBC, and started to facilitate auto loans for ICBC. The Company has also established 39 subsidiaries in key ride-sharing cities across China for Didi, among which we have started operations in 7 cities, including the pilot city Changzhou.
Mr. Jiayuan Lin, Chief Executive Officer of Cango, stated, "During the third quarter of 2018, we adhered to our asset-light business model, focused on high-quality services for consumers, dealers and financial institutions, and pushed forward strategic growth initiatives. First, we continued to expand and optimize our dealer coverage. Leveraging our extensive dealer network, our proprietary SaaS management system helps dealers with loan facilitation, supply chain financing, and car sourcing. Our dealer relationship has become more deeply integrated in many operational fronts, which provided multiple sustainable monetizing opportunities for Cango. Second, our after-market service, has become a meaningful source of revenue despite being launched for less than a year. We observed a satisfying attach rate, along with the potential for providing after-market services as a standalone product."
Mr. Lin continued, "Third, our strategic cooperation with ICBC and Didi has been progressing as planned. Our system integration with ICBC has achieved initial success. Auto loan products with OEM subsidies represent a tremendous market segment we currently have little presence in. As to the cooperation with Didi, we have established 39 subsidiaries in key ride-sharing cities. Looking ahead, we expect the growth rate of car transactions in China to remain soft. Our strategy is to grow our market share with competitive products and solid execution; and to enter into new market segments through cooperation with our strategic partners. We have confidence in the transparent growth path ahead. We believe we will continue delivering value to our shareholders.”
Mr. Yongyi Zhang, Chief Financial Officer of Cango, stated, "During the third quarter of 2018, our business remained highly profitable and our operation cash flow positive. Third quarter revenues increased by 2.4% year-over-year, and after-market services started to make a meaningful revenue contribution. Our after-market services incurred minimum incremental labor and system costs and expenses, resulting in high profit margins and generating great return on our investment. As we continue cultivating dealership and customer life-long monetization opportunities, and developing operations and systems for new market opportunities, we believe we are well positioned to implement our growth strategies."
Total revenues increased by 2.4% to RMB285.2 million (US$41.5 million) in the third quarter of 2018 from RMB278.4 million in the corresponding period of 2017. The increase was primarily due to the contribution of after-market services. Total revenues for the first nine months of 2018 were RMB770.3 million (US$112.2 million), an increase of 4.0% compared to the corresponding period of 2017.
Revenue from after-market services in the third quarter of 2018 was RMB39.0 million (US$5.7 million), which accounted for 14% of total revenues.
Total operating cost and expenses in the third quarter of 2018 were RMB209.0 million (US$30.4 million), compared to RMB103.1 million in the corresponding period of 2017. The increase in operating cost and expenses was primarily attributable to the increases in cost of revenue, general and administrative expenses as well as sales and marketing expenses.
• Cost of revenue in the third quarter of 2018 increased by 50.9% to RMB113.5 million (US$16.5 million) from RMB75.2 million in the corresponding period of 2017. As a percentage of total revenues, cost of revenue in the third quarter of 2018 increased to 39.8% from 27.0% in the corresponding period of 2017. The increase was due to a higher average amount of commissions paid to dealers in each financing transaction.
• Sales and marketing expenses in the third quarter of 2018 increased to RMB48.5 million (US$7.1 million) from RMB23.3 million in the corresponding period of 2017. As a percentage of total revenues, sales and marketing expenses in the third quarter of 2018 increased to 17.0% from 8.4% in the corresponding period of 2017. The increase was due to the expansion of the Company's sales personnel to 2,203 as of September 30, 2018 from 1,260 as of September 30, 2017, to further improve the Company's dealer coverage and dealers' stickiness. The Company expects its sales and marketing expenses as a percentage of total revenues to decrease in the future due to economies of scale.
• General and administrative expenses were RMB40.7 million (US$5.9 million) or 14.3% of total revenues in the third quarter of 2018, compared with RMB16.5 million or 5.9% of revenues in the corresponding period of 2017. The increase was primarily due to increased administrative staff headcount and compensation, as well as the share-based compensation expenses.
• Research and development expenses in the third quarter of 2018 increased to RMB10.8 million (US$1.6 million) from RMB3.8 million in the corresponding period of 2017. As a percentage of total revenues, research and development expenses in the third quarter of 2018 increased to 3.8% from 1.4% in the corresponding period of 2017, mostly due to the expansion of the Company's research and development team.
Net income was RMB 106.3 million (US$15.5 million) in the third quarter of 2018, compared to RMB135.5 million in the corresponding period of 2017. Non-GAAP adjusted net income was RMB120.2 million (US$17.5 million), compared to RMB135.5 million in the same period last year. Non-GAAP adjusted net income excludes the impact of share-based compensation expenses. For further information, see "Use of Non-GAAP Financial Measure."
Net income per ADS was RMB0.73 (US$0.11) in the third quarter of 2018, and RMB0.73 (US$0.11) on a diluted basis. Non-GAAP adjusted net income per ADS was RMB0.82 (US$0.12) in the third quarter of 2018, and RMB0.82 (US$0.12) on a diluted basis. Each ADS represents two of the Company's Class A ordinary shares.
As of September 30, 2018, the Company had cash and cash equivalents of RMB3,643 million (US$530.4 million), compared with RMB3,121 million as of June 30, 2018.
For the fourth quarter of 2018, the Company expects total revenues to be between RMB280 million and RMB295 million. This forecast reflects the Company's current and preliminary views on the market and operational conditions, which are subject to change.
Cango Inc. (NYSE: CANG) is a leading automotive transaction service platform in China connecting dealers, financial institutions, car buyers, and other industry participants. Founded in 2010 by a group of pioneers in China's automotive finance industry, the Company is headquartered in Shanghai and engages car buyers through a nationwide dealer network. The Company's services primarily consist of automotive financing facilitation, automotive transaction facilitation, and after-market services facilitation. By utilizing its competitive advantages in technology, data insights, and cloud-based infrastructure, Cango is able to connect its platform participants while bringing them a premium user experience. Cango's platform model puts it in a unique position to add value for its platform participants and business partners as the automotive and mobility markets in China continue to grow and evolve. For more information, please visit: www.cangoonline.com.
We define "M1+ overdue ratio" as (i) exposure at risk relating to financing transactions for which any installment payment is 30 to 179 calendar days past due as of a specified date, divided by (ii) exposure at risk relating to all financing transactions which remain outstanding as of such date, excluding amounts of outstanding principal that are 180 calendar days or more past due.
We define "M3+ overdue ratio" as (i) exposure at risk relating to financing transactions for which any installment payment is 90 to 179 calendar days past due as of a specified date, divided by (ii) exposure at risk relating to all financing transactions which remain outstanding as of such date, excluding amounts of outstanding principal that are 180 calendar days or more past due.
In evaluating the business, the Company considers and uses Non-GAAP adjusted net income, a non-GAAP measure, as a supplemental measure to review and assess its operating performance. The presentation of the non-GAAP financial measure is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with U.S. GAAP. The Company defines Non-GAAP adjusted net income as net income excluding share-based compensation expenses. The Company presents the non-GAAP financial measure because it is used by the management to evaluate the operating performance and formulate business plans. Non-GAAP adjusted net income enables the management to assess the Company's operating results without considering the impact of share-based compensation expenses, which are non-cash charges. The Company also believes that the use of the non-GAAP measure facilitates investors' assessment of its operating performance.
Non-GAAP adjusted net income is not defined under U.S. GAAP and is not presented in accordance with U.S. GAAP. This non-GAAP financial measure has limitations as analytical tools. One of the key limitations of using Non-GAAP adjusted net income is that it does not reflect all items of expense that affect the Company's operations. Share-based compensation expenses have been and may continue to be incurred in the business and is not reflected in the presentation of Non-GAAP adjusted net income. Further, the non-GAAP measure may differ from the non-GAAP information used by other companies, including peer companies, and therefore their comparability may be limited.
The Company compensates for these limitations by reconciling the non-GAAP financial measure to the nearest U.S. GAAP performance measure, all of which should be considered when evaluating the Company's performance. The Company encourages you to review its financial information in its entirety and not rely on a single financial measure.
Reconciliations of Cango's non-GAAP financial measure to the most comparable U.S. GAAP measure are included at the end of this press release.
This announcement contains translations of certain RMB amounts into U.S. dollars ("US$") at specified rates solely for the convenience of the reader. Unless otherwise stated, all translations from RMB to US$ were made at the rate of RMB6.8680 to US$1.00, the noon buying rate in effect on September 28, 2018 in the H.10 statistical release of the Federal Reserve Board. The Company makes no representation that the RMB or US$ amounts referred could be converted into US$ or RMB, as the case may be, at any particular rate or at all.
This announcement contains forward-looking statements. These statements are made under the "safe harbor" provisions of the United States Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" and similar statements. Among other things, the "Business Outlook" section and quotations from management in this announcement, contain forward-looking statements. Cango may also make written or oral forward-looking statements in its periodic reports to the SEC, in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about Cango's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: Cango's goal and strategies; Cango's expansion plans; Cango's future business development, financial condition and results of operations; Cango's expectations regarding demand for, and market acceptance of, its solutions and services; Cango's expectations regarding keeping and strengthening its relationships with dealers, financial institutions, car buyers and other platform participants; general economic and business conditions; and assumptions underlying or related to any of the foregoing. Further information regarding these and other risks is included in Cango's filings with the SEC. All information provided in this press release and in the attachments is as of the date of this press release, and Cango does not undertake any obligation to update any forward-looking statement, except as required under applicable law.