Cheche Group Inc.

Good morning and welcome to CHCHR's second quarter 2024 conference call. All participants will be in listen-only mode. If you need assistance, please signal a conference specialist by pressing the star key followed by zero. 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 today's conference is being recorded. I will now turn the conference over to Crocker Coulson, Investor Relations for the Cheche Group. Mr. Coulson, the floor is yours.

Thanks a lot, Operator. Good morning, everyone. Thank you for joining us to review Cheche's 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 Chang, Checha's Founder and Chief Executive Officer, and Sandra Gee, Checha's 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 perspective in nature. Actual results could differ materially from those we discussed 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, the earnings release is available on ir.chechergroup.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, Clark. Greetings, everyone. We are glad you have joined us. Our platform has continued to grow, with Churchill providing costs for about 49 million workers, blessing over $8 billion in written premiums, and collaborating with about 100 insurance carriers 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 active driver in the ongoing digital transformation. Globally, the NEV industry continues to experience substantial growth lead by the Chinese NEV manufacturers. As NEV adoption rates in China climb, seeing 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 products. Today, positioned on the cusp of profitability in this arena, we continue to push forward, working 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 appoints Churchill as an exclusive service provider to Volkswagen EV insurance business. The following month, we announced a collaboration with NIO Insurance Broker, the insurance arm of NIO. where we committed the customizing digital insurance service system for the well-known EV manufacturer. BAIC Group is one of the largest auto manufacturers in China, producing and selling vehicles through its own brands as well as foreign-branded joint ventures. The agreement we announced with the BAIC Group's insurance subsidiary names as a co-partner with the opportunity to develop relationships with brands under its umbrella, with NEB or traditional internal combustion workers. The partnership has already led to several successes, including Beijing Automotive System, which is expected to cover 200 dealerships by year end. Beijing Hyundai system, which is planned for 100 dealerships over the same time horizon. And the robust partnership with ArcFox, that is set to include more products in addition to the service system, being launched as direct sales channel. Most recently, we signed an agreement with Dongfeng Motor Group's insurance arm, naming us an approved provider for its family of brands. Our first established partnership in this group is with a luxury NEV brand, Woya, which provides national listening and other comprehensive insurance services across China, including more than 900 Woya delivery stores. As of June 30, 2024, the number of embedded policies continues to grow up 147% year-over-year to 224,000 policies. NEV growth premiums are most doubled from the prior year, going 99% to 91 million USD 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 valuable data insights that are organically leveraged to drive increasing precision of our products. Churchill's primary revenue driver continues to passenger vehicle sales As such, the company's strategies are related with an underlying dynamic that propels the automotive industry in China. To ensure a thriving future, we have leveraged our unique position in the industry, passing the ever-increasing quantities of inbound data streams to enhance all touchpoints with the user, from renewal to claims. We assess the refined risk profiles to better update pricing models and predict trends better. Helping manufacturers command a great understanding of driving behavior and the large ecosystem. Working together, we will generate more value for our partners and higher margins for Churchill. In the long term, We will work to extend our partnership with auto manufacturers beyond China and into additional regions such as Southeast Asia, the Middle East, and Europe, where local insurance companies might struggle to underwrite embedded policies. Our platform, given our valuable data collected in the space, would be able to help develop a customized pricing model. We are pleased with our progress in 2024 and look forward to the opportunities 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 return premiums placed for the quarter remain steady at RMB 5.6 billion, or U.S. dollar, 780 million. The total number of policies placed grew 11.1% in the second quarter to 4 million. As I mentioned, 225,000 policies and RMB 662.6 million of corresponding premiums were embedded in new NEV deliveries. growing 147.3% and 99.6% respectively year-over-year. In terms of revenues, we generated RMB $851.8 million or US dollar $117.2 million in the second quarter, representing an increase of 2.5% year-over-year. The cost of revenues in second quarter was RMB 820.9 million or U.S. dollar 113 million, up 1.9 percent from the prior year quarter. We reported selling and marketing expenses growth of 14.2 percent to RMB 19.3 million or U.S. dollar 2.7 million due to the increase in staff costs, marketing, and the share-based compensation expenses. General and administrative expenses increased to RMB 27.7 million, or US dollar 3.8 million, from RMB 19.6 million in the prior quarter, primarily due to increased share-based compensation, one of dispute resolution expenses. Research and development expenses decreased 21.1% to RMB 9.1 million, or US dollar 1.3 million, mainly driven by reduced debt costs. The total cost and operating expenses increased 2.7% to RMB 877.1 million, or US dollar 120.7 million, from RMB 854.1 million in the prior quarter. including share-based compensation expenses, amortization of intangible assets related to acquisitions, listing-related professional service fees, and one of dispute resolution expenses. The adjusted total cost and operating expenses increased only 1.9% from the prior quarter. Our net loss in the quarter was on the 23.6 million, or US dollar, 3.2 million, improvement from the comparable RMB 28.2 million loss in the second quarter of 2023. The adjusted net loss for the quarter decreased 38.8% to RMB 12.2 million or US dollar 1.7 million from RMB 20 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 RMB 204.6 million in cash and cash equivalents and short-term investments. Looking ahead, Churchill is reaffirming its previously stated guidance. We continue to expect that net revenue 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 fourth year of 2023. The total recent premium placed are expected to range from RMB 24.5 billion to 26.5 billion, representing an increase of 8.4% to 17.3% compared to the fourth year of 2023. That concludes our prepared remarks. Next, we will be happy to address your questions. Thank you.

Thank you. If you would like to ask a question, please press star then 1 on your telephone keypad. If your question has already been addressed and you'd like to remove yourself from queue, please press star then 2. Once again, that's star then 1 if you have a question. Today's first question comes from Michael Legg with Benchmark. Please go ahead.

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

I'll answer in Chinese. Our contract with BAIC, which is Beijing Motor and the public, is probably in the first half of this year and the middle of this year. And we and the public should have made an announcement at the beginning of the year. We are using a long-term SaaS service and operation payment method, including short-term cost and subscription-type payment. There are two forms. The payment standards of each family are not consistent. It is also a business secret of both parties. There is no external announcement.

So basically we have announced our partnership with H Group and the Volkswagen Envy in the first half of this year. So basically we provide a long-term subsystem, system services and operations for the NUE makers, but it's based on different types of charging standards. There will be short-term charging and also And also the other one is based on the script. And the charting standards are different, and it's not, we think it's not okay to disclose it.

Okay, thank you.

Thank you. And our next question today comes from Steve Silver at Argus Research. Please go ahead. I apologize, everybody. Steve, I apologize, sir. I'm going to place your line on mute for one second. Looks like we have lost our speaker connection. If you can just stand by for one moment, please. Thank you. And pardon me, everybody. This is the operator. We've rejoined the speaker line. Steve, you may proceed with your question now, sir.

Thank you. Okay. Sorry about that, operator. 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 acquisition through M&A? Okay.

We will focus on the insurance product innovation around the NUA ecosystem, for example, in areas of charging for infrastructure, the maintainers, and other types of value-added services.

Besides, we will pay attention to the value exploration and capital 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 NEV manufacturers, should that have a favorable effect moving forward on longer-term sales and marketing requirements?

OK. We now find that the current start of new energy is actually very important to insurance. Because insurance will determine the income of its after-sales service. At the same time, choosing car technology as a solution provider for new energy and car insurance will have a very positive impact on the entire car insurance market. Hello, everyone.

the NUV automakers attaching great importance to the insurance business because the auto insurance business has a great impact on their after sales service, on the revenue of their after sales services. And at the same time, the truth of the church of leading NUV insurance solutions will have a great influence on the auto insurance market.

At the same time, by sharing our technology know-how,

we can help the insurance companies to reduce their cost ratios and to improve their research levels. And also in the future, when they are faced with risks related with new scenarios such as intelligent driving or autonomous driving, we can equip them with the digital capabilities to address risks in such new scenarios.

Thank you. Thank you very much.

Thank you. And our next question comes from Alan Clee at Maxim. Please go ahead.

Yes, hi. Can you talk a little about how what you're offering improves the technology for the insurance companies in terms of their efficiencies and then any things that can also improve the driver safety and claims? Thank you.

OK. We will answer your question in two ways. The first way is that the global insurance companies are lacking in the experience and data for the risks of new energy vehicles. China now has 25 million new energy vehicles. As an insurance company, the experience of new energy vehicles

So we're going to answer this question in two aspects. The first is for the global insurance companies, they have limited experiences in terms to underwriting the annual insurance. But in China, there are 215 million, there are 2.5 million So, basically, for the companies in China, they have accumulated a large amount of experiences and data.

So, as a digital solution provider for new energy vehicles in China, we will also distribute this ability to all insurance companies, not only Chinese small and medium-sized insurance companies, but also global insurance companies.

So, as a service provider for the annual insurance solutions, we will share our technology know-how with the insurance companies from both China and the global. 第二个问题就是,我们都知道现在智能汽车,新能源汽车基本上都是智能汽车,所以有大量的车联网的数据。

The second one is, as we all know, the NUE cards are basically intelligent cards.

It has a great amount of data which can be accumulated from underwriting this cost. This data can be used in pricing and underwriting so we can provide the insurance companies with underwriting capabilities as well as claim system.

Thank you.

Thank you. And this concludes our question and answer session. I'd like to turn the conference back over to Lei for closing remarks.

Thank you. Thank you, everyone, for joining the call. If you have any follow-up questions, please contact IR. Thank you.

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.