Cheche Group Inc.

Good day and welcome to the CheChe Group second half and full year 2025 earnings conference call. All participants will be in a listen-only mode. Should 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 a touch-tone phone. 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 Coulson, Investor Relations. Please go ahead.

Thank you, Betsy. Hello, everyone. Thank you for joining us to review CHACHA's second half and full year 2025 results. This morning, CHACHA posted both the earnings released and a related updated investor presentation to our website, which you can find at ir.chechegroup.com. I'm very pleased to say that with us on the call today, we have Lei Zhang, Cheche's founder and CEO, and also Sandra Gee, Cheche's CFO. After the prepared remarks are concluded, we're going to open up the call for your questions, and they'll be happy to address them. But before we begin, I'd like to remind you that some statements in this teleconference will be forward-looking within the meaning of the federal securities laws. Although we believe these statements are reasonable, we can provide no assurance that they will prove to be accurate because of their perspective in nature. Actual results could differ materially from those we discussed today. So, we encourage you to review the most recent filings with the SEC for risk factors that could materially impact our future results. As I mentioned, the earnings release is available for you at ir.chechegroup.com. And again, we also encourage you to review the reconciliations of certain non-GAAP financial measures contained within that we're going to discuss on the call today. With that, it's my great pleasure to turn the call over to Lei Zhang, Cheche's Chief Executive Officer. Lei, over to you.

thank you grok greetings everyone thank you for joining us today to review church's second half and full year 2025 results uh 2025 was a defining year for church group one that validated both the resilience of our business model and the power of the strategy transformation we have been executing despite ongoing We rate compression driven by rapid growth of AEV premiers within our revenue mix. We deliver the growth profit growth, dramatically reduce the operating losses, and for the first time, achieved adjusted net profitability on a full year basis. We are not incurring mental results. they marked an inflection point on our evolution from a transactional insurance platform to an AI-powered intelligent insurance ecosystem. Let me begin with what I believe is the most meaningful headline from this period. A treasure group achieved at just operating profitability for the full year 2025 and delivered a positive net income in the second half of 2025. Our adjusted net income reached RMB 11.6 million of the US dollar 1.7 million for the full year compared to an adjusted net loss of RMB 24.8 million in the prior year. That is a swing of more than RMB 35 million achieved while we focus on newer capabilities and adopt meaningful structural change on our revenue mix. This reflects this flying cost management across every line of operating expenses, which we reduced in total by more than 19 year-over-year even as we grew total written premiums placed by 11 percent and the total policies ensured by three million uh we demonstrated that scale and efficiency can do at once together as a church and we intend to continue building uh that foundation in 2026 the profitability a story also has a structural dimension. NEV premiums, which carry a lower service fee rates than the traditional auto insurance, now represent the 23% of our total recent premiums for the full year, up from the 13% in the prior year. This shift initial creates a revenue headwinds, as we are mentioning, but it also drives higher growth margins. As our AI-powered tools allow us to capture higher tech rates in the EV insurance market and to deploy capabilities that command premium pricing, we expected the margin profile to continue improving. I also want to highlight the significant progress we have made in translating our AI strategy into operational capability. We are actively deploying AI price model in the collaboration with several of China's leading insurance companies, as well as through data partnerships with intelligent connected works manufacturers. Our insurance anti-fraud and risk control model, which was recognized in the prestigious top 100 AI product of the 2024 last year. It's one example that integrate a big data, artificial intelligence, and the biometrics, enabling insurers to identify fraud earlierly, price risk more precisely, and process claims with greater efficiency. This partnership position has to expand our footprint in the renewal insurance market. Beyond our insurer facing tools, we are developing and testing AI agent to the fundamental change out. We engage with the car owners and the point of renewal. With AI agent, we can standardize scale and improve the dialogue with the car owners. Deploying consistent, intelligent, real-time outreach that is more effective than traditional method and significant more cost-efficient. On the R&D side, our team leverage AI tools and LLM to accelerate product development and shortly development circles. Their tools are expanding our capability roadmap without proportional increase in the and spending. Looking for ahead, we intend to extend the operational and analytical capability across the full auto insurance value chain from pre-policy risk assessment and pricing through in the policy risk monitoring and intervention to claim survey and loose assessment. Combined with our growing advantage in the driven behavior data from NEV ecosystem, we believe the position us to move the industry from the static pricing towards to dynamic risk management and to build a data-driven competitive mode and strengths over time. The quality of our OEM partnership continue to deepen. We currently have the partnership with 16 annual manufacturers. And as our business and relationships mature, our strategy focus on the shifting from adding new relations to the dipping existing ones. That means expanding the work's tempo. samples and the models we serve within the partnership, ending the dealer channel progress, and maximizing renewal premiums capture across installed based workers we already service. Our work with Volkswagen reflects our ability to partner with both domestic champions and the global automakers operating in China's intelligent, connected with market. We are building the full lifecycle relationships with these partners, not transactional arrangements. And the deeps of those relationships is what creates the durable and recurring value for the CCG and our shareholders. Looking ahead, we expect to share additional partnership news in the incoming months that we believe will further demonstrate the strength of our position within China's most intelligent connector works system. We are also preparing to announce a significant advance in our AI-driven auto pricing capabilities, a development that reflects our capabilities with data science and risk modeling and that we believe significantly expand our addressable market in the renewable insurance segment. We look forward to sharing more details in the near term. Let's turn to the progress we are making internationally, which represents one of our most important long-term growth vectors. Chinese automakers now export over 8 million workers annually, and has expanded globally. The demand for intelligent data streaming insurance and financial services infrastructure follows. Churchill Group is uniquely positioned to meet and demand, bringing the digital insurance capabilities and the financial technology capabilities We have built in China's most demanding market to automotive ecosystem around the world. We are also advancing our international roadmap across the border, Asia, Pacific, and the Latin American markets, leveraging our fintech solution for automakers abroad. A toolkit of digital insurance and finance services is infrastructure, designed to support Chinese automakers and their global partners as they build out new market operations. To summarize, 2025 demonstrated what the social growth is capable of. We achieved adjusted profitability, depend our AI capabilities, formed a landmark partnership with a global automotive leader and took our first meaningful steps into the international markets. We entered the 2026 with clear priorities, continue growing renewable insurance, penetration through the AI power tools, expand our platform relationships with Huawei, Volkswagen, and other NEV partners, and invest selectively in the international expansion where we see the clearest path to probability. We are confident in the trajectory of the business and grateful for the support of our investors and partners. I will now take a call over to our CFO, Sandra Ji. Thank you.

Thank you, Lei. I'd like to begin by touching on our second half and the four-year 2025 operational and financial highlights before taking any questions. First is our operational updates. Our total rate and premium placed for second half 2025 increased 16.9% year-over-year to RMB 15.5 billion or US dollar 2.2 billion. For the four year 2025, the total written premium increased 11% to RMB 27 billion or US dollar 3.9 billion. The total number of policies issued increased from 9.3 million in the prior year period to 12 million in the second half 2025. For the four year, total policies issued grew from 17.3 million to 20.3 million. On the NEV side, our 16 partnerships generated 1.2 million budget policies and RMB 3.7 billion in corresponding written premiums in the second half of 2025, representing year-over-year growth of 61.8% and 63.9% respectively. For the four-year 2025, IEV-embedded policies reached 2.0 million, and the corresponding premium reached the 6.3 million, growing 85.3% and 91.0% respectively. Our IEV premiums represented 24.1% of total return premium placed in the second half of 2025, up from 17.2% in the prior year period. and 23.4% for the four-year 2025, up from 13.6% in the prior year. Next is our financial results. The net revenues for the second half 2025 were on the 1.7 billion, or US dollar 237.5 million, representing a 9.4% year-over-year decrease. As Lee just mentioned, This decline reflects the higher proportion of annual premiums within our mix, which carry lower service fee rates. We are actively managing this structural transition through AI-enhanced pricing capabilities and a renewal market penetration. For the full year 2025, net revenues were on the $3.0 billion, or U.S. dollar for $130.4 million, a decrease of $13.3 percent year-over-year, driven by the same and even mixed dynamics. For the second half of 2025, cost of revenues decreased 10 percent year-over-year to RMB 1.6 billion, or U.S. dollar 224.0 million, driven by lower next revenues and continued improvement in our gross margin profile. For the full year 2025, cost of revenues decreased 14% year-over-year to RMB 2.8 billion, or U.S. dollar, for 107.5 million from the prior year. The gross profit in the second half increased 0.5% to RMB 94.6 million, or U.S. dollar, 13.5 million, despite the lower next revenues. which is a direct result of our improved business structure. This is an important signal. Like, even as revenue compresses through the fee rate transition, our gross profit is still growing. Gross margin expanded as the higher margin in the business represents an increased share of the mix. For the fourth year, The gross profit increased 1% to RMB $160.4 million, or $22.9 million, with gross margin expanding as the business grew as a proportion of the mix. For the second half of 2025, the selling and marketing expenses decreased 18.1% to RMB $31.0 million, or $4.4 million. General and administrative expenses decreased 16.5 million to RMB 38.5 million or US dollar 5.5 million. Research and development expenses decreased 2.5 million to RMB 18.9 million or US dollar 2.7 million. The total operating expenses decreased 14.4% to RMB 88.4 million or US dollar 12.5 million. while the adjusted total operating expenses decreased by 22.2% to RMB 77.1 million, which is US dollar 11.0 million. The total operating expenses for the four-year decreased 19.6% to RMB 181.2 million, or US dollar 25.9 million. while adjusted total operating expenses decreased 17.0% to RMB 156.9 million, or US dollar 12.2, sorry, 12, or US dollar 22.4 million. Operating income for second half 2025 was RMB 6.1 million or U.S. dollar 0.9 million compared to operating loss of RMB 9.3 million in the prior year period. Adjusted operating income was RMB 18.5 million or U.S. dollar 2.6 million compared to adjusted operating loss of RMB 1.5 million in the prior year period. Operating loss for the four-year 2025 narrowed dramatically by 68.6% to RMB 20.9 million or US dollar 3.0 million. The four-year adjusted operating income was RMB 5.6 million or US dollar 0.8 million compared to adjusted operating loss of RMB 28.2 million in the prior year. Net income for second half of 2025 was RMB 7.8 million, or U.S. dollar 1.1 million, compared to net loss of RMB 6.4 million in the prior year period. Adjusted net income was RMB 22.2 million, or U.S. dollar 3.2 million, compared to adjusted net loss of RMB 0.3 million in the prior year period. Net loss for the four-year 2025 was RMB at 17.8 million, representing an improvement of 71.0% from RMB 61.2 million in the prior year. Adjusted net income was RMB 11.6 million, or US dollar 1.7 million, compared to an adjusted net loss of RMB $24.8 million in the prior year. This marks the first four-year adjusted profitability in such a history as a public company. Let's turn into our balance sheet. We reported on the $160.8 million, or U.S. dollar, $24.4 million in cash equivalents, restricted cash and short-term investments, as of December 31st, 2025. Looking ahead to the fourth year of 2026, we are anticipating an approximate range of RMB 3.0 billion or to RMB 3.2 billion for net revenues. Our range of RMB 28.0 billion to 30.0 billion for total rates and premiums. a range of RMB 10.5 billion to 12.0 billion for NAV return premiums. And we also expect adjusted net income to multiply several-fold compared to the full year of 2025. I think that concludes our remarks. Next, we'll be happy to take any other questions. Thank you.

We will now begin the question-and-answer session. To ask a question, you may press star, then 1 on your touchtone phone. 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 2. At this time, we will pause momentarily to assemble our roster.

Hello. Operator, please go ahead.

The first question comes from Wenzhou Xiao with Cynics. Please go ahead. It appears we've lost that questioner. The next question comes from Alan Klee with Maxon Group. Please go ahead.

Yes, hi. Congratulations on your progress. advances with NAVs and moving to profitability. In your guidance, you said that you're projecting 2026 NAV premiums to increase between 66.7% and 90.5% year over year. Can you just highlight what in your offerings is going to result in such strong adoption, maybe highlighting how you're helping with pricing risk and fraud? Thank you.

Okay. Thank you, Alan. This question. The first, we think the AI as a key tool for upgrading the company's innovation and operational capabilities. The first, at the R&D level, AI is being integrated across the entire workflow. from requirements analysis and development testing and delivery significantly improving our overall efficiency and stability of outcomes. The second, at the business application level, our company will continue to promote the coordinated use of multiple AI tools and further leverage our advantage in the driving behavior data within the NEV ecosystem. This will gradually extend AI capabilities across the full insurance value chain from the pre-underwriting risk assessment and the pricing to in policy risk monitoring and intervention and intelligent claims inspection and loose assessment. Through its initial team, we aim to drive transformation of auto insurance from static pricing to the dynamic risk management while continuously strengthening our long-term competitive advantage. Thank you.

Thank you very much. You also said on the call that internationally, there's a large demand and you said you're going to advance across Asia and Latin America with fintech solutions. Could you explain what you mean by what your fintech solutions are?

Okay. In terms of global expansion, company has formed a strategy partnership with several automotive brands that focus on international growth. We have already established a solid presence in markets such as Australia, New Zealand, Latin America, and the Middle East. have successfully launched the business operations in the collaboration with partners, including Guangzhou Auto Company and Cherry and BYD and . By supporting Chinese automakers in the overseas expansion, we leverage our metro digital insurance capabilities and the financial technology capabilities to bring our technology to international markets as a China solution, helping build a global financial and insurance ecosystem in such country. Thank you.

Thank you. I just can comment. I was talking to somebody from Australia yesterday. And they said the demand for Chinese electric vehicle cars is dramatic, the waiting list, especially with what's going on with oil prices.

Lei, do you want to tell Alan where you're joining us from?

Yeah, because the oil price is increased.

So, but it's actually in Australia today, so.

Yeah. Okay. Yeah. I just traveled to Australia for the Great Wall Motel and the Cherry Auto in Australia.

That's great. Okay. I'll pass it along to let other people ask questions. Congratulations. Thank you.

Thank you very much.

The next question comes from Wenzhou Xiao with Cynics. Please go ahead.

Hello, everyone. I'm Qiao Wenzhou from the Central Business Center. I'm sorry to interrupt you. I have a few questions. First of all, I would like to ask about the ability of the company to use AI to reduce operating costs internally. And I would also like to ask about the help of the AI solution to the internal business. And the third one is to ask about the current internationalization of the company. Thanks for taking my question. I'm curious about your ability to leverage AI internally to reduce operating costs. I'd also appreciate an update on how AI solutions are supporting internal operations and any comments on plans for international expansion. Thank you.

谢谢。 首先第一方面就是我们刚才提到用AI工具的话, for our internal development and innovation is very helpful. On the one hand, it can reduce costs. On the other hand, in many product designs, including user interaction, AI tools can be used to quickly realize. So this is from an internal point of view. Then from the outside product and application side, because our service is China's This kind of smart network, this kind of new energy car, it has a lot of data, including driving behavior, vehicle data, and its various sensor data can effectively help our insurance risk assessment from the past traditional algorithmic model to the dynamic, real-time algorithmic assessment system. At the same time, when it happens, you can use the Internet of Things and this sensor to quickly fix all the data and images of the accident in a few minutes or within a minute to solve this kind of fraud on traditional carpets, reduce its kind of This is the first question. The second question is, in terms of shipping, we also briefly mentioned Currently, we have been following the Chinese car industry in four major global regions, including Latin America, Asia-Pacific, the Middle East, and some of the European regions. We are working with these mainstream car companies. In 2026, we will have three to five countries, local car manufacturers, Thanks for your answer. Very clear.

No more questions. Thank you.

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

Well, we'd like to thank everyone for joining us today. If you didn't have a chance to ask your questions or if you'd like to have a follow-up call with management, please feel free to reach out to me or the Chetra Investor Relations team. and we'll be more than happy to arrange a Zoom call at mutual convenience. Thanks, everyone, for joining us, and I look forward to coming back to you with future updates. Thank you, Operator.

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