Cheche Group Inc.

Hello and welcome to the CHCHA group first quarter 2024 results call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing star then zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Crocker Colson, Investor Relations for Checha Group. Please go ahead.

Thanks so much, Operator. Good morning to all of you joining us here in the US. Good evening to those of you joining us from Asia. And we'd like to welcome you all and thank you for joining us to review Checha's 2024 first quarter results. This morning, Checha posted both the earnings release and the related investor presentation to our website, and you can find that at ir.chechagroup.com. Now, with us on the call today are Lei Zhang, Checha's founder and chief executive officer, Sandra Gee, Checha's chief financial officer, and also Ting Lin, Checha's chief strategy officer. After the repaired remarks are concluded, we're going to open up the call for your questions. But before we begin, I'd like to note that some statements in this teleconference are forward-looking within the meeting 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 perspective in nature. Actual results could differ materially from those we discussed today. So we encourage you to review the most recent Form F4 and subsequent filings for risk factors that could materially impact our results. As I mentioned, the earnings release is available at ir.chechegroup.com, and we encourage you to review the reconciliations of certain non-GAAP financial measures that are contained within. With those formalities now out of the way, it's my pleasure to turn this call over to Lei Zhang, Chief Executive Officer. Lei, please go ahead.

Thank you, Crocker. Good morning, everyone. We are glad you have joined us. As China's largest auto insurance technology platform by digital auto insurance transaction premiums and an active driver in the digital transformation, we are continuing to gain market share through our cutting-edge embedded insurance capabilities. powerful ecosystem, and unique SaaS offerings, Chochu remains well positioned to capture significant opportunities resulting from accelerating digitalization of auto insurance market in China. As of March 31, 2024, Chochu facilitated a wide range of auto insurance transactions, providing quotes for about 49 million workers, placing over US$7 billion in writing premiums and collaborating with over 100 insurance carriers between 2021 and the first quarter of 2024. The EV market in China has the highest penetration rate in the world, which has attracted several international automakers to begin manufacturing electric vehicles here, driving further industry competition and potential. We have capitalized on this new market segment with our recently announced partnership with Volkswagen Digital Sales and Service to amplify the presence of Volkswagen's NEV insurance business. We also began collaborating with Beijing Houji, the insurance brokerage firm in Xiaomi Group, this quarter. Xiaomi recently entered the NEV market with a big splash. We will leverage our technology platform and SaaS solutions to help them provide auto insurance services and products to consumers in multiple cities across China. We remain the industry's leading provider of embedded insurance solutions, and our technology roadmap continues to prioritize winning additional higher-profile EV manufacturers and growing our current market share of 11 partnerships. As a result of its efforts, our number of NEV embedded policies is up to 124.5% year-over-year to 119,000, with the corresponding written premium growing 78.5% to $51 million over the same period. period last year. Our self-reinforcing cloud-based model is highly scalable and steadily collects valuable data in sites that are organically leveraged to drive increasing efficiencies of our products. In April of this year, NEV crossed over to account for more than 50% of new work sales in China. The range of offerings are now available on EV to Chinese consumers is more affordable, more intelligent, and makes driving more entertaining than the comparable IC offerings. Chushu continues to align its growth strategy with many of critical dynamics driving the automotive industry in China, and it sets the standard for affordable, functional, and sustainable vehicles. The first phase of the strategy is established collectively as embedded insurance technology and operating service providers so that NEV manufacturers can capture insurance sales and renewals as part of their direct consumer relationship. We are later focused on securing relationships with the remaining large NEV players. In phase two, We foresee that NEV insurance will boast the following features. The first is embedded and subscribed insurance models will become mainstream. Embedded and subscribed insurance will feature integrated products, smart accommodations, one-click renewal, and digital claims with NEV makers as the new shopping and service portal. Insurance will be data-driven and provide real-time pricing. The data-driven model will capitalize on data analytics and AI actuarial modeling capabilities, such as data connection, real-time pricing, and smart risk management to reshape auto insurance. Third, AEB makers will offer lifetime services to users and will be more involved in well-aided services such as financing, used cars, and new car services than insurance. Phase three will leverage the enormous data stream emanating from AEVs to help manufacturers understand driver behavior and risk profile at a granular level. This data stream will grow over richer as auto transition towards L3 and L4 autonomy, and the driver steps back as an active participant when cars are in a supervised automatic mode. With the foundation of the body's set of insurance-relevant driver data, Churchill is positioned to embed AI deeper into the tech stick and rule out capabilities such as automated claims management, automated fraud prevention and individualized risk-adjusted pricing that generate more value for our partners and higher margins for Che Che. Our strategy is to develop and leverage the network effort effect of being the hub of the NEV industry to build sustainable competitive advantage and help our partners survive and thrive in the years to come. In the long term, we may consider global expansion opportunities in regions such as North America and Southeast Asia. We are pleased with our progress in 2024 and look forward to capitalizing on the industry's evolving opportunities. I will now turn the call over to our CFO Sandra Ji. Thank you.

Thanks, Lei. I'd like to begin my touch on our first quarter operational and financial highlights before taking questions. For the operational updates, Chochua continues to grow its business with its CapEx Lite technology-focused strategy. As a result, total return premiums placed for the quarter increased 9.2% to RMB 5.4 billion, or $751.1 million. The total number of policies placed grew 21.2% in the quarter to $4 million. As Lei mentioned, 119,000 policies and RMB $370.3 million or $51.3 million of the corresponding premiums were embedded in NEV deliveries, growing 124.5% and 78.5% respectively year-over-year. Word-of-mouth referrals and local industry relationships remain central to Churchill's organic growth strategy for the installed base of auto insurance markets. The quarter's addition of over 49,600 new referral partners contributed to the company's approximately 1.2 million total referral partners at the quarter's end. For the financial update, in terms of net revenues, we generated RMB $7.1 million or $109 million in the first year, up 1% year over year. Our cost of revenues in the first quarter was RMB $753.4 million or $104.3 million, also up 1% year-over-year, along with the revenue growth. The total operating expenses decreased by 18.5% to RMB $65.7 million, or $9.1 million, from RMB $80.7 million in the prior year quarter, mainly due to the decrease in share-based compensation expenses, marketing expenses, and step costs. Excluding the impacts of share-based compensation expenses and listing-related professional service fees, the adjusted total operating expenses increased by 3.4% from the prior quarter, mainly due to the incurrence of RMB 5.2 million in post-listing professional service fees. Net loss decreased 28.8% to RMB 31.3 million, or $4.3 million over the prior year quarter, excluding non-GAAP expenses. The adjusted net loss was RMB $12.2 million or $1.7 million, increasing by RMB $4.4 million compared to the adjusted net loss of RMB $7.8 million for the prior year quarter, mainly due to the incurrence of RMB $5.2 million in post-listing professional service fees. Turning to our balance sheet, we had RMB 234 million or 32.4 million U.S. dollars in cash, cash equivalents and short-term investments, which provides us with healthy financial flexibility. Looking ahead, Churchill is reaffirming his previously stated guidance, which is we continue to expect that net revenues for 2024 will range from RMB 3.5 billion to 3.7 billion, representing an increase of 6.1% to 12.1% compared to the full year of 2023. Total rates and premiums placed are expected to range from RMB 24.5 billion to 26.5 billion represent an increase of 8.4% to 17.3% compared to four year of 2023. With that, we are happy to address any of your questions. Thank you.

We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. Once again, it is star then one to ask a question. We will now pause momentarily to assemble our roster. The first question comes from Yi Yi Zhang with CICC. Please go ahead.

So I have one question, and this is about the potential upside of the new energy vehicle. So what's the potential upside of new energy vehicles or insurance markets, and what's the role Churchill plays and will play in this market? Thanks.

Thank you. I'm Zhang Lei, CEO of Car Car. Thank you very much for asking this question. We currently see that the data of the car insurance market in China, the cost of new energy, actually accounts for more than 60% of the cost of using new energy vehicles. From this background, the start-up of China, especially the start-up of new energy, has already put car insurance as one of the most important core businesses. Unlike in the past, Thanks for your question. As we can see now that the premiums of the auto insurance has accounted for over 60% of the total ownership of the NEVs and the

the EV market has become the main service, the EV insurance has become the main service of the EV makers, and it is no longer served as affiliated offerings of the EV makers, but it is served as the core business of their total offerings. 那么我们预测明年呢,

And next year, we believe that

The revenue will grow from the 200 billion RMB to the 300 billion RMB. And in terms of the revenue from the repair parts and from the aftermarket services with these, it will exceed 500 billion RMB. So the total market size will range between the 500 billion to 800 billion RMB.

So, as a service provider, there are two roles that we play in this ecosystem. First of all,

We will help and assist the EV makers to become the main participants in the market. We will help them to build the self-system and empower them with the operating services.

Our second role is to help the insurance companies in the new energy car market, including the car rear market. And on the other hand, as the EV insurance becomes more intelligent and subscribes services, we will help the insurance carriers

with their smart risk management and the real-time pricing, and also with the innovations in terms of the insurance product as the self-driving mode is becoming more and more mature.

We believe that we are the main leaders of the Chinese new energy market, especially the new energy car market, and will occupy the main market share of this market in the next three to five years.

And I would believe that we are one of the leaders in the NEV insurance market in China, and we will occupy the major market share in the next three to five years.

Thank you.

Did you have a follow-up, Ms. Zhang?

No, thanks very much, Leah.

Thank you. Again, if you have a question, please press star then 1 on a touch tone phone. This concludes our question and answer session. Oh, excuse me, just a moment. I do have a question from Edwin Liu with CLSA. Please go ahead.

Hey, thank you for giving me the opportunity to ask this question. I am the analyst of Zhongxin Liang, Liu Da Edwin. I would like to ask the management two questions. One is, we also see that the company has some new cooperation with some car manufacturers. For example, the Xiaomi machine mentioned by the management just now. So I would also like to ask if we can uh, uh, uh, uh, Thank you for your question. I will translate it quickly. So thanks for management for the opportunity to ask question. I have two quick questions. Firstly, in terms of the partnership with the NEV OEM for the insurance broker or SaaS platform, do we have a rough idea for the percentage of our market share? The second question is, Based on the guidance for the adjusted net loss, we think that implies a sequential improvement in terms of the profitability from the first quarter this year. Is our understanding correct? And what would be the driver behind the improvement? Thank you.

Thank you, Mr. Liu. I'm Zhang Lei. Let me answer the first question. As you just mentioned, especially like Wei Xiaoli, including Xiaomi, these Chinese new energy manufacturers, they are currently using our services in three aspects. The first is that when the new car insurance is paid, 80% to 90% of the new cars can now be made through our platform. Then in terms of maintenance, after the second year, Then our current target penetration rate will also reach more than 50% through the official channel of the main airport, that is, through our SaaS platform to invest. The third piece is the Li Pei system. We are now considering to help some of the main airport or car companies to build this kind of digital system that reports to its after-sales network. So these three aspects are the service content we provide. Please translate Julia.

So we would like to answer your first question. As you have mentioned, we have worked with many major Chinese EV makers, such as NIO and Xiaomi. And there are three services that we are offering them now. The first one is the new car delivery. About 80% to 90% of the new cars will purchase the auto insurance through our platform. The second one is the renewal juncture that about 50% of the cars will choose to renew their auto insurance on their app through our SaaS platform. And the third one is the services that we provided in terms of the claims management. We will help the EV makers to build their digital platform That will help the car owners to report about the car accidents.

We are a private service. This is 100% of the electric vehicles produced by Anhui Factory in the Chinese public. From new cars to Xubao and Li Pei, they are all provided by us. As the most popular brand among the new cars, we also have more than 60% to 70% of the share, including Xubao and new cars. Especially like Xubao, Li Xiang is 100% provided by us. As we have mentioned that we have worked with the major EV makers. For example, the first one is the Volkswagen and factory.

This is where they launched their first electric vehicles in China, and we have established the exclusive partnership with them to offer our services in covering the new car insurance and the insurance renewal and to the claims management. And as to another major EV makers and the largest EV sales in China, the Li Auto, we we have served more than 60% to 70% of their auto insurance offerings, including the new car insurance and the renewals. And in particular, we have like 100% service for their renewal services. And the next one is a new EV maker, Xiaomi, and we have served 50% of their total car owners. So we can say that we are a leader in the auto insurance sector, especially in the EV insurance.

And more and more EV makers have realized that insurers have contributed a lot to their

in the aftermarket services. And 50% of their revenues are coming from the repair parts and aftermarket services. And among them, insurers have accounted the biggest part. So more and more EV makers have made insurance the major strategies of their future growth. So we believe that in the next five to ten years, we will see the vast growth opportunities and the resources in this end.

Thanks. This is Sandra. I will answer the second question in terms of the adjusted net loss. Yes, there was a increase in adjusted net loss in the first quarter of 2024. Actually, there are a few special reasons resulted in this result. Firstly, as we mentioned in the ER, we incurred RMB 5.2 million post-listing professional service fees like lawyer fees, audit fees, et cetera. compared to the first quarter of last year. The second reason is that there was a 1.4 million exchange gains due to the fluctuation of RMB and US dollars exchange rate. That's a kind of non-operating related issue. And the third reason is that there was a That was close to 5 million RMB government grants, which was due to the preferential tax policies regarding the value-added tax. Since the beginning of this year, the government canceled this preferential policy. That's why we didn't enjoy the benefits this year. To sum up those three reasons, there are almost 10 million RMB difference increase compared to the first quarter last year. Including this non-operating one-off issues, actually, we would have been delivering much better results compared to last year. That would be over 50% improvement in terms of the adjusted net loss. Thank you.

Once again, if you have a question, please press star then one.

This concludes our question and answer session. I would like to turn the conference back over to Lei Zhang for any closing remarks.

Thank you. Thank you, everyone, for joining the call. If you have any follow-up questions, please contact IR. Have a good day. Thank you. Thank you, everybody. Thank you.

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