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spk03: Good morning and good evening, ladies and gentlemen. Thank you for standing by for Tuan Che Limited's fourth quarter earnings conference call. At this time, all participants are in a listen-only mode. After management's prepared remarks, there will be a question and answer session. Today's conference call is being recorded. Now, I will turn the call over to your speaker host today, Ms. Yang Song, IR representative of the company. Please go ahead, ma'am.
spk00: Hello, everyone, and welcome to Tuancho's fourth quarter and four-year 2020 earnings conference call. We have released our earnings results earlier today, and it's now available on our IR website, as well as on Newswire services. Before we continue, Please note that the discussion today will contain forward-looking statements made under the safe harbor provision of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, our future results may be materially different from the views expressed today. Further information regarding this and other risks and uncertainties is included in our earnings release and our registration statement filed with the SEC. Clencher does not assume any obligation to update any forward-looking statements except as required by law. Today, you will hear from Mr. Wei Wen, the company's chief executive officer. who will provide an overview of our growth strategies and business development, who will be followed by Mr. Chen Xiyu, the company's Deputy Chief Financial Officer, who will provide additional details on the company's financial results and discuss the financial outlook. Following management's prepared remarks, we'll open up the call to questions. With that said, I would now like to turn the call over to our CEO, Mr. Wei Wen. Please go ahead, sir.
spk01: Hello, and thank you, everyone, for joining us today on our fourth quarter and the four-year 2020 earnings score. We saw continued momentum in the fourth quarter as our net revenues of IMB 165.8 million beat the top end of our guidance ranged by 7 points and grew 65.7% versus the prior quarter. The better-than-expected fourth quarter results were primarily drawn by our offline marketing services that benefited from solid year-over-year passenger vehicle retail sales, growth of 7.5% in China. as well as our measured steps to resume our offline auto shows and the accelerating growth of our online marketing services. Additionally, we implemented rigorous cost measures such as scaling back our recruitment budget and employee size, combining our top-line recovery and strong focus on cost reduction Our net loss attributable to the company's shareholders was 25.4 million RMB in the fourth quarter, which narrowed 38.4% versus the third quarter 2020 and 62.5% year-over-year. Let's take a closer look at the fourth quarter performance of our business segments while also providing additional detail on our strategic and operational priorities. First, our offline marketing services. As we have discussed on previous earnings calls, our offline marketing events were heavily impacted by the COVID-19 pandemic, especially in the first half of 2020. However, As the pandemic became increasingly under control in China, we were able to progressively resume offline operations in late May of 2020, while keeping in accordance with all local and national regulatory guidelines on COVID-19 prevention and control. Currently, our offline order shows and special promotion events are mostly back to normal in most cities we operate. It should be noted, however, that with new reported cases in northern China in the first quarter of 2021, there's still lingering uncertainty on what is to come and how it may impact our business recovery. With our auto shows, we turn individual and isolated automobile purchase transactions into large-scale collective purchase activities. By attracting a large number of consumers, these events serve as integrated marketing solutions to our industry customers, which include OEMs, dealers and other automotive service providers. We enable interactions between large numbers of participants on both sides of a potential automobile purchaser transaction, creating a many-to-many environment with a short period of time. That's us creating value for both sides. For 2020, We organized 449 auto shows in 172 cities, compared with 1,055 in 233 cities in 2019. In the fourth quarter, we organized 230 auto shows in 135 cities, compared with 321 auto shows in 149 cities in the same period of 2019, but improving from 152 auto shows across 107 cities in the third quarter. As a result, we delivered 128.8 million RMB in net revenues generated from auto shows down 24.4% year-over-year, but increasing 55.9% quarter-over-quarter. In addition, we have developed our spatial promotion event services to better support our industrial customers through a series of integrated services, including event planning and execution. marketing training, and on-site coaching. Leveraging our deep insights in automotive transactions, we have also developed customized and targeted special promotional events for each auto dealer and OEM. In 2020, we held 207 special promotion events compared to six 127 in 2019 and in fourth quarter our events decreased 81% to 51 from 269 in the fourth quarter in 2019 with revenue decline 84.9% year over year. For our offline marketing services we continue to focus on cities where there is demand for more frequent auto shows and can therefore generate higher IRIs. For more remote cities with lower IRIs, we are focusing on online auto shows and special promotion events, a more cost-effective approach than offline events. Next. Let me move on to our goals initiative in virtual dealership and online marketing services. The extraordinary challenges that unfolded this year did stop us from capitalizing on online automotive retail opportunities that developed from the overall boost in internet usage during 2020. We focused on a number of initiatives, such as deepening our collaboration with Timor, Baidu Youjia, and WeBank, as we positioned ourselves for the continuous shift to online commerce and establish our brand as a leader in this space. Our efforts produced meaningful results. In the fourth quarter of 2020, our revenues from virtual dealerships, online marketing services, and others reached 35.9 million IMB, increasing 579.2% year-over-year. This was primarily driven by successful online promotion events that we held during the quarter. our strategic collaboration with Baidu Youjia and WeBank, and the revenues generated from our acquisition of Longyear International Limited in January 2020. Let me provide a recap on our main initiatives in online marketing services in 2020. First of all, we made headway in live streaming promotion events by leveraging our offline infrastructure, extensive relationships with OEMs and dealers, deep insights into consumer behavior, and our collaborative partnership with online e-commerce platforms. Our significant highlight in 2020 was the live streaming promotion event we conducted together with Timor-Odo. We not only organized these events for dealers, but also directly for OEMs. This event provided us with additional insights into consumers' online shopping needs, as well as the needs of OEMs and dealers. And we deliver, and we believe, can serve as good templates for our future endeavors. Our collaboration with Baidu Youjia, the auto segment of the Giant Baidu Portal, is another example of our creative online-merge-offline solutions. We helped Baidu Youjia expand its sales network to over 80 cities across China, where we serviced its operations aiming to improve sales essentially and the conversion rates for OEMs and the dealers. Looking ahead in 2021, We believe shifting consumer habits towards online commerce will continue to be a tailwind for the acceleration of the full digitalization of automotive sales to online retail platforms. We therefore see a defined path for us to continue serving the evolving consumer needs by leveraging our strengths as a leading omni-channel automotive marketplace. Now I will turn this call to Chen Xi, our Deputy CFO, for a closer look at our financial performance in the fourth quarter.
spk02: Thank you, Mr. Wen. Hello, everyone. Thank you for joining us. We concluded a challenging 2020 with a fourth quarter that demonstrated solid improvement. Our net revenues Although 9.3% lower than the same period in 2019, grew 65.7% compared with the third quarter of 2020. The significant top-line recovery was achieved while we simultaneously took a comprehensive approach to managing our costs. This resulted in slower operating expense growth of 29.5% quarter over quarter, leading to a narrow net loss of 25.7 million RMB. which was 37.6% and 62% lower versus the third quarter 2020 and the same period last year, respectively. Meanwhile, we maintained a healthy combined balance of cash and cash equivalents, restricted cash and time deposits of 185.4 million RMB which will provide us with the runway we need to create a platform for the future growth. Next, I would like to work through our fourth quarter 2020 financial results. Before I start, please note that all numbers that stated in my following remarks are in RMB terms, unless otherwise noted. Our total revenues in the fourth quarter were 165.8 million RMB decreasing 9.3% from $182.8 billion in the same period last year. This was a result of continued adverse impact of the COVID-19 pandemic. The decrease was partially offset by the year-over-year growth of virtual dealerships, online marketing services, and others compared with third quarter this year. Total revenues increased by 65.7% as our offline services recovered and our online services maintain solid performance. As we progressively resumed our offline auto shows, our offline marketing services revenues generated from these auto shows decreased by 24.4% to 128.8 million RMB from 170.4 million RMB in the fourth quarter of 2019. The offline marketing services revenue generated from auto shows increased 55.9% over the third quarter of 2020 of 82.6 million RMB. Remedies generated from special promotion events in the fourth quarter of 2020 were 1.1 million RMB compared with 7.1 million RMB in the fourth quarter of 2019 and 2 million RMB in the third quarter of 2020. Revenues from our virtual dealership, online marketing services, and others increased by 579.2% to 35.9 million RMB during the quarter, compared with 5.3 million RMB in the fourth quarter of 2019. Primarily due to our continuous expansion of online marketing services, including live streaming promotion events and collaboration with Baidu Youjia and WeBank, The year-over-year growth was also helped by the revenue generated from our completed acquisition of Longyear International Limited in January 2020. Our gross profit in the fourth quarter decreased by 8.7% to 120.6 million RMB from 132.1 million RMB in the fourth quarter of 2019 but increased by 67.3% quarter-over-quarter Our gross margin increased to 72.8% from 72.3% in the same period last year, primarily due to the change in revenue mix. In the fourth quarter, selling and marketing expenses decreased by 32.5% to 107.7 million RMB from 159.6 million RMB in the fourth quarter of 2019. an increase by 17.6% compared with the third quarter of 2020 as our operations continue to recover. The year-over-year decrease was also primarily due to the decrease in promotional expenses and staff compensation expenses as a result of cost control measures taken by the company and reduced offline events. General and administrative expenses were 30.6 million RMB compared with 27.8 million RMB in the fourth quarter of 2019 and 50.9 million RMB G&A expenses in the third quarter of 2020. Research and development expenses decreased to 10.2 million RMB from 13.8 million RMB in the fourth quarter of 2019 and 7.1 million RMB in the third quarter, primarily due to the decrease in staff compensation expenses. Our loss from continuing operations was 27.9 million RMB in the fourth quarter, lower compared with 69.1 million RMB in the same period last year, and 42.6 million RMB in the third quarter of 2020, respectively. Excluding the effect of share-based compensations, adjusted net loss attributable to the company's shareholders was RMB in the fourth quarter compared with 58 million RMB in the same period last year. Adjusted basic and diluted net loss per ordinary share were both 0.07 RMB in the fourth quarter compared with 0.2 RMB in the same period last year. Adjusted EBITDA was a loss of 21.3 million RMB in the fourth quarter compared with a loss of 57.8 million RMB in the same period last year. Now turning to our balance sheet, at the end of December 2020, we had cash and cash equivalents and time deposits of 155.6 million RMB. For more of our 2020 four-year financial results, please refer to our earnings press release for further details. For the first quarter of 2021, we expect our net revenues to be between approximately 76 million RMB and 80 million RMB, representing a year-over-year approximate increase of 684% to 725.5%. This forecast reflects the company's current and preliminary views on the market and operational conditions, as well as the influence of the COVID-19 pandemic, which are all subject to change. This concludes our prepared remarks for today. Operator, we are now ready to take questions. Thank you.
spk03: Thank you. We will now begin the question and answer session. To ask a question, You may press star then 1 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 2. For the benefit of all participants on today's call, If you wish to ask your question to management in Chinese, please immediately repeat your question in English. At this time, we will pause momentarily to assemble our roster. The first question comes from Jack of Benderhead with Maxim Group. Please go ahead.
spk04: Hi. Great. Thank you. Good evening, guys. Thanks for taking my questions. I'll start for a few questions for Mr. Nguyen and then a couple for Ronnie on the financial side. For Mr. Nguyen, it's great to see the business turning around in a positive direction. But, of course, I'm sure there's a lot of investors out there that are interested in receiving maybe a status update following the proposal letter from January sent to the board of directors on the potential of taking the company private. So for, you know, as you have positive updates on the business side, what would you tell investors that are maybe interested in buying the stock, but given this proposal, that's still outstanding? Thank you.
spk02: Give us a moment. Hello, Jack. Hello. I received the proposal in January from the Buyers Group, and the company is evaluating the proposal in depth. But due to the Chinese New Year, the company is still in the process of forming a special committee to further evaluating the proposal. That's all we can say for now. There's little we can express until further information is available.
spk04: Okay. Understood. I appreciate the added color, and that's understandable. And then another question from Mr. Wen, more on an update on the business. So just kind of bigger picture, I believe I've asked this kind of question before, but Just maybe can you provide some perspective on what you're seeing in terms of consumer purchases and their appetite for big-ticket purchases such as new cars? And then just kind of talk about the overall financial health of your various auto partners and just the general state of the economy for new cars in China.
spk02: Okay, so set.
spk01: The macroeconomy for the Chinese market overall has been improving significantly over the past few quarters, especially for GDP figures as well as imports and exports.
spk02: So we think that the overall macro economy is improving.
spk01: And then the car industry is also growing very significantly. According to the data of the Car Association, in the first two months of 2021, the sales of used cars increased by nearly 70%. On the one hand, it is due to the relatively low base last year, but at the same time, it is also due to the widespread economic recovery, which greatly improved the confidence of consumers.
spk02: For the auto sector, for the first two months of 2021, auto passenger retail sales in China grew close to 70% year-over-year, according to China Passenger Car Association, all from the low base last year, but also boosted by the broad economic recovery that significantly bolstered consumer confidence. Is that enough? Is that good enough?
spk04: Sure. That's good. And then I guess just sticking to that trend of new passenger auto sales, up significantly, obviously, off a down year last year. I'm talking about the overall market, obviously. In just any preliminary thoughts on what you're expecting for March and kind of throughout the balance of 2021, do you expect this sort of high positive levels to continue in terms of growth for the overall market?
spk02: new passenger car market.
spk01: From the perspective of HongKong economy, this year, regardless of the expected speed of China's economic growth from the World Bank, it may be the highest among all major economies in the world. Everyone is optimistic. At the same time, in the car industry, there are some policies supported by the country, so everyone is optimistic about the growth of the car industry.
spk02: We think that the macroeconomies were being quite optimistic about the improving trends for the rest of the year. And that's also being aided by the statement from the World Bank stating that the Chinese GDP growth for 2021 will be one of the best in the world. And for the auto sector, we also believe that the upward trend is more likely in 2021.
spk04: Excellent. That's helpful. Then let me switch gears. Now, just from Twanchay specifically, from a segment perspective, the virtual dealership and other segment was very strong, clearly. It was ahead of my expectations. Longer term, I guess... Do you see, and just given the dynamic, you guys are shifting your kind of strategy as you go along here, do you expect the virtual dealership segment and other segments to be kind of, I don't know, where do you see that mix evolving over time? Is it going to be the core offline auto show business as the core of the business, or is it going to become the virtual dealer business? Is that going to be more of a focus? Just how do you see this playing out over time?
spk02: Okay, what does that say?
spk01: In 2020, our online product services was improving very fast, and we also believe that this segment will be
spk02: important part of our future growth, but our auto show businesses will remain a core product for our product mix. For 2021 or maybe the next few years, the auto show business will still be the largest business in our revenue mix and our core business in our product mix.
spk04: Does that help? Understood. That's helpful. That's helpful. I appreciate the color there. And then just as far as auto show events go, they continue to, I think it was 230 auto show events in the fourth quarter. That's, again, you know, another sequential improvement, which is good to see. Do you expect the number of auto show events you host to eventually recover? Like, when do you expect that to maybe return to the same levels you saw earlier in 2019 and 2018? Or is it too hard to say? Just any color there.
spk02: All right. Give us a sec.
spk01: We are trying to compare the 2019 and 2018 business scale to reach the same level as the city, the coverage of the city, and the scale of the auto show. However, the first factor that we prioritized is whether the efficiency of our RRI is suitable in these cities. This is a key condition that we can restore.
spk02: We're trying to recover the number of auto shows and the city coverage to the level of 2018 and 2019, but still our priority, our first priority is the ROIs these auto shows produce and the operation efficiencies in the cities we operate. So that's the base we're trying to recover from. So that's that.
spk04: Okay, that's helpful. That makes sense to me as well. And then maybe just one last question, maybe for you, Ronnie. Just given the revenue momentum and just the overall macro environment continues to kind of turn around in a positive direction. Just wondering, you know, for your perspective on what that means for your plans and how you think about operating expense investments and whether you expect to ramp those up as you go along as the top line begins to recover. Do you expect OPEX to pick up again or any color there?
spk02: Right. The OPEX will certainly pick up in terms of absolute figures, but we're doing everything we can to take cost control measures to minimize the OPEX and the costs. So I would expect for 2021, the The absolute figure will go up, but the percentage that OPEX is of the revenue will be lower than that of 2019 and 2020. Of 2019 as well.
spk04: Okay. Excellent. Okay. That's it for me, guys. It's great to see the positive turnaround story playing out. I wish you best of luck. Thank you. All right. Thank you.
spk03: As there are no further questions now, I'd like to turn the call back over to management for closing remarks.
spk00: Thank you once again for joining us today. If you have further questions, please feel free to contact 20 Investor Relations through the contact information provided on our website or the Piacente Group Investor Relations. This concludes conference call.
spk03: You may now disconnect your line. Thank you.
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