Cango Inc. Reports First Quarter 2023 Unaudited Financial Results
SHANGHAI, June 8, 2023 /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 first quarter of 2023.
First Quarter 2023 Financial and Operational Highlights
Total revenues were RMB542.6 million (US$79.0 million), compared with RMB787.7 million in the same period of 2022. Car trading transactions revenues were RMB429.8 million (US$62.6 million), or 79.2% of total revenues, in the first quarter of 2023, compared with RMB599.3 million in the same period of 2022.
The total outstanding balance of financing transactions the Company facilitated was RMB20,716.5 million (US$3,016.6 million) as of March 31, 2023. M1+ and M3+ overdue ratios for all financing transactions that remained outstanding and were facilitated by the Company were 2.33% and 1.29%, respectively, as of March 31, 2023, compared with 2.61% and 1.38%, respectively, as of December 31, 2022.
“Cango Haoche” had engaged 10,469 dealers in China’s 31 provinces and 305 cities as of March 31, 2023. As of the end of March 2023, total sales were 3,867 cars, including 1,713 new energy vehicles (the “NEVs”), resulting in an NEV penetration rate exceeding 44%. Since the “Cango Haoche” APP was launched at the end of the second quarter of 2022, it had attracted a total of over 877,000 page views and more than 78,000 unique visitors as of the end of March 2023.
“Cango U-Car” APP was launched in January 2023, following the successful debut of the “Cango U-Car” mini program. As of March 31, 2023, “Cango U-Car” APP and mini program had attracted a total of over 513,000 page views and more than 26,000 unique visitors.
Mr. Jiayuan Lin, Chief Executive Officer of Cango, commented, “China’s automotive industry remained sluggish in the beginning of 2023 as it continued to be severely impacted by the challenging macro environment and depressing industry landscape. In the first quarter of 2023, our total revenues were recorded at RMB542.6 million, down 31% year-over-year, but up 11% quarter-over-quarter. During the quarter, our traditionally low season, we sold a total of 3,867 new cars through ‘Cango Haoche,’ marking a solid performance compared with the fourth quarter of 2022. Moreover, our car trading transactions business contributed 79% of the total revenues in the first quarter, further solidifying its position as our largest revenue contributor. In April 2023, we launched our AI customer service on ‘Cango Haoche,’ further reaffirming our ability to stay at the forefront of industry innovation as we refined our service process with the power of digitalization and technology.”
“We continued to expand and upgrade our services for used car trading transactions with comprehensive offerings available through our ‘Cango U-Car’ mini program and APP. Additionally, during the quarter, we upgraded our auction services and launched the market’s first offering to enable dealers to list their used cars for B2B auction. Supported by our dedicated in-house technician teams, we are actively deepening our service capabilities and core competencies along the used car value chain.”
“Empowered by big data and technological innovation, throughout 2023, Cango will continue to strengthen its position in the digital and technology-led evolution within China’s auto industry and explore additional long-term growth opportunities with our dealer partners,” concluded Mr. Lin.
Mr. Yongyi Zhang, Chief Financial Officer of Cango, stated, “We had another steady quarter despite the volatile external environment. We continued to refine our operations and deepen our penetration along the value chain, while further solidifying our competitive strengths. Meanwhile, backed by improvement of asset quality and our solid balance sheet, we are confident in our ability to weather a complex industry environment, while driving sustainable growth over the long term.”
Accounting Policy Changes
The Company has adopted the Financial Instruments – Credit Losses (ASC 326): Measurement of Credit Losses on Financial Instruments on January 1, 2023, using the modified retrospective transition method. This standard requires the measurement of all expected credit losses for financial assets measured at amortized cost and off-balance sheet credit exposures not accounted for as insurance at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts.
Upon adoption of the standard on January 1, 2023, the Company recorded RMB302.4 million (US$44.0 million) increase in risk assurance liabilities, RMB14.5 million (US$2.1 million) increase in the allowance for finance lease receivables, RMB13.8 million (US$2.0 million) increase in the allowance for financing receivables and RMB3.2 million (US$0.5 million) increase in the allowance of other current and non-current assets. After adjusting for deferred taxes, RMB306.9 million (US$44.7 million) decrease was recorded in beginning retained earnings on January 1, 2023 through a cumulative-effect adjustment.
First Quarter 2023 Financial Results
Total revenues in the first quarter of 2023 were RMB542.6 million (US$79.0 million) compared with RMB787.7 million in the same period of 2022. Revenues from car trading transactions in the first quarter of 2023 were RMB429.8 million (US$62.6 million), or 79.2% of total revenues in the first quarter of 2023, compared with RMB599.3 million in the same period of 2022. The guarantee income, which represented the fee income earned on the non-contingent aspect of a guarantee, in the first quarter of 2023 was RMB64.1 million (US$9.3 million) which was presented separately from contingent aspect of a guarantee pursuant to the adoption of ASC 326 since January 1, 2023.
OPERATING COST AND EXPENSES
Total operating cost and expenses in the first quarter of 2023 were RMB490.8 million (US$71.5 million) compared with RMB976.8 million in the same period of 2022.
Cost of revenue in the first quarter of 2023 decreased to RMB480.5 million (US$70.0 million) from RMB687.0 million in the same period of 2022. As a percentage of total revenues, cost of revenue in the first quarter of 2023 was 88.6% compared with 87.2% in the same period of 2022.
Sales and marketing expenses in the first quarter of 2023 decreased to RMB12.5 million (US$1.8 million) from RMB53.8 million in the same period of 2022. As a percentage of total revenues, sales and marketing expenses in the first quarter of 2023 was 2.3% compared with 6.8% in the same period of 2022.
General and administrative expenses in the first quarter of 2023 decreased to RMB39.8 million (US$5.8 million) from RMB50.9 million in the same period of 2022. As a percentage of total revenues, general and administrative expenses in the first quarter of 2023 was 7.3% compared with 6.5% in the same period of 2022.
Research and development expenses in the first quarter of 2023 decreased to RMB8.1 million (US$1.2 million) from RMB14.5 million in the same period of 2022. As a percentage of total revenues, research and development expenses in the first quarter of 2023 was 1.5% compared with 1.8% in the same period of 2022.
Net gain on contingent risk assurance liabilities in the first quarter of 2023 was RMB1.6 million (US$0.2 million). The gain was recognized due to the release of obligations from the contingent aspect of the risk assurance liabilities.
Net recovery on provision for credit losses in the first quarter of 2023 was RMB48.6 million (US$7.1 million). The recovery was primarily due to the positive impact from the collections of financing receivables.
INCOME FROM OPERATIONS
Income from operations in the first quarter of 2023 was RMB51.8 million (US$7.5 million), compared with a loss of RMB189.1 million in the same period of 2022.
Net income in the first quarter of 2023 was RMB78.8 million (US$11.5 million). Non-GAAP adjusted net income in the first quarter of 2023 was RMB92.8 million (US$13.5 million). 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
Basic and diluted net income per American Depositary Share (the “ADS”) in the first quarter of 2023 were RMB0.58 (US$0.09) and RMB0.56 (US$0.08), respectively. Non-GAAP adjusted basic and diluted net income per ADS in the first quarter of 2023 were RMB0.69 (US$0.10) and RMB0.66 (US$0.10), respectively. Each ADS represents two Class A ordinary shares of the Company.
As of March 31, 2023, the Company had cash and cash equivalents of RMB696.6 million (US$101.4 million), compared with RMB378.9 million as of December 31, 2022.
As of March 31, 2023, the Company had short-term investments of RMB2,017.7 million (US$293.8 million), compared with RMB1,941.4 million as of December 31, 2022.
For the second quarter of 2023, the Company expects total revenues to be between RMB600 million and RMB650 million. This forecast reflects the Company's current and preliminary views on the market and operational conditions, which are subject to change.
Share Repurchase Program
• Pursuant to the share repurchase program announced on April 22, 2022, the Company had repurchased 2,846,285 ADSs with cash in the aggregate amount of approximately US$5.7 million up to April 25, 2023, the day on which the program expired.
• Pursuant to the share repurchase program announced on April 21, 2023 (the “New Share Repurchase Program”), the Company had repurchased 289,868 ADSs with cash in the aggregate amount of approximately US$337,288.2 up to May 31, 2023.
On June 1, 2023, under the New Share Repurchase Program, the Company entered into an ADS purchase agreement with an institutional investor pursuant to which the Company will repurchase an aggregate of 24,300,562 ADSs for an aggregate purchase price of approximately US$31.6 million. The Company expects to settle the repurchases with such shareholder by the end of June 2023.
The above share repurchases were conducted pursuant to resolutions of the Company’s board of directors, which authorized that the Company’s proposed repurchases may be made from time to time on the open market at prevailing market prices, in privately negotiated transactions, in block trades and/or through other legally permissible means, in accordance with applicable rules and regulations. The repurchases will be funded from the Company’s existing cash balance.