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spk05: Good morning and good evening, everyone, and welcome to Cango, Inc.' 's fourth quarter and full year 2021 earnings conference call. At this time, all participants are in a listen-only mode. This call is also being broadcast live on the company's investor relations website. Joining us today are Mr. Jiayun Lin, Chief Executive Officer, and Mr. Michael Zhang, Chief Financial Officer of the company. Following management's prepared remarks, we will conduct a Q&A session. Before we begin, I'll refer you to the safe harbor statement in the company's earnings release, which also implies to the conference today. As management will make forward-looking statements, with that being said, I am now turning the call over to Mr. Jaoyuan Lin, CEO of CanGo. Please go ahead, sir. 大家好,欢迎参加倡股2021年第四季度及全年财报电话会。
spk04: Hi, everyone. Welcome to Cango's Q4 and 4-Year 2021 Earnings Call. In the past year 2021, the epidemic has not subsided.
spk08: The global political and economic situation has been constantly changing, and it has brought challenges to society, companies, and individuals. The automotive industry we operate in is complex and complex. After the epidemic, there have been multiple tests, and the shortage of electricity has spread throughout the year. The supply chain safety has been very important. During 2021, the lingering COVID-19 pandemic and volatile global political and economic environment posed many challenges to individuals, businesses, and society at large. The automotive industry was put through multiple tests with chip power shortages,
spk04: and ongoing supply chain disruptions as COVID-19 has become part of the new normal. Despite all the pressure, we proactively coped with the changes and implemented changes within our organization. We took the initiative to transform our business by deepening the platform strategy and we're delighted to see encouraging progress over the past year.
spk08: 2021 is the most important year in the development of our car transaction business. We rely on our wide-ranging lower market to cover nearly 50,000 retailers' channels and networks, as well as the deep market understanding of the industry and transportation accumulation. Canggu is a cut-off point for high-quality car users. The service of car supply chain to retailers is integrated. Promote our business to the full transformation of the car transaction service platform. At the same time, under the big background of economic adjustment and supervision, 我们自去年二季度末起主动调整传统的车金融业务结构, 严控规模并聚焦效能提升,努力提高该业务板块的盈利能力。 与此同时,通过为经销商提供更品质化的服务增加其粘性。 We achieved great growth and significant progress in our car trading transactions business during the past year, building on our deeply penetrated dealership network covering nearly 50,000 car dealers.
spk04: which predominantly serve the lower tier cities and extensive industry know-how accumulated over the last decade, we leveraged high-quality vehicle sources as the entry point, supplemented with integrated automotive supply chain services to further empower our dealers. In the process, we promoted a comprehensive transformation of our business into a one-stop automotive transaction services platform. At the same time, in the context of economic changes, and tightening regulation, we have proactively adjusted our traditional automotive financing facilitation business since the end of Q2 2021 by strictly managing the business scale and focusing on productivity improvement. All these efforts allow us to improve the profitability of this traditional business. At the same time, we are looking to provide better quality services for dealers and to increase their stickiness.
spk08: A range of proactive business initiatives have helped us to hedge effectively against the challenging economic and market conditions.
spk04: Despite these difficulties, we achieved total revenues of RMB 1.05 billion in the fourth quarter, beating our guidance. Revenues from our car trading transactions business were 704 million RMB, accounting for nearly 67% of total revenues. Revenues from our automotive financing facilitation and aftermarket services facilitation businesses were 252 million and 36.73 million, respectively. Q4 net income was 124 million. Looking at the full year, actually our total revenues were 3.92 billion RMB, up over 91% year-on-year.
spk08: only to establish a rich matching market, especially for low-end markets, attracting more car dealers to join the stock market and increasing its annuality. In the fourth quarter of 2021, the revenue of car transaction service businesses increased by 28.7%. The annual total revenue is nearly three-thirds of the same. Within a short period of one year, the car transaction business has grown to boost revenue growth,
spk04: During this period of transition, car trading transactions business is a crucial part in the formation of an ecosystem pivoting around Kengo's car trading platform, and this has also been an important business focus in 2021. During the past year, we continued to invest in developing self-owned and third-party sources of vehicles, while also strengthening our transaction matching services. We aim to build diverse vehicle sources to meet the dealer demand, particularly those in the lower-tier markets, while attracting more dealers to join our platform and increase their loyalty. In Q4 of 2021, revenues from car trading transactions grew 28.7% year-on-year, and total revenues for full-year 2021 nearly quadrupled compared with the prior year. In just one year, our car trading transactions business has grown into an important driver for revenue growth and our business transformation, accounting for 67% of total revenue. 去年5月底推出的B端车商服务小程序灿股好车是灿股平台主要的流量路口。 通过线上智能平台和线下服务网络的有机结合,构建车辆在线匹配与线下交易闭环。
spk08: For car dealers, we provide all-terrain services such as trade, logistics, financial, insurance, etc. Since the end of the fourth quarter, the number of car dealers in Canggu Good Car has reached 6,394, covering 31 provinces and 305 cities. Since the launch in May 2021, the total traffic has exceeded 2 million. The fourth quarter's active car dealership ratio has reached 31%. There are 53 self-driving cars in the small program. Last May, we launched our B2B WeChat mini program called Tango Hao Che as the main traffic attracting entrance to our platform.
spk04: It combines organically the digital intelligence platform and ground service network to build a closed loop of online matching and offline transactions for dealers, providing them with full process services covering transactions, logistics, finance, insurance, etc. At the end of Q4, Kangal Hotel had engaged with 6,394 dealers in 31 provinces and 305 cities. Since its launch, the cumulative number of views for Kangal How-To has exceeded 2 million, and the proportion of dealers actively using the service reached 31% in Q4. There are 53 self-owned vehicle models on Kangal How-To, including 13 car brands and 24 ranges of car models. Among those 13 brands, nine of them are NEV brands, New Energy Vehicle, in other words. We also further enhanced our supporting warehousing and logistics capabilities. As of the end of Q4, a total of 93 warehouses have been established, covering 91 cities across the country. Through Kangoo Hao Che, dealers are able to locate their desired car models in as fast as 30 minutes, followed with automatic matching of dealership warehouse. Same-day delivery is available in many instances. Moreover, the low-cost vehicle display service with free shipping helps dealers enrich the variety of showroom models and improve their ability to attract and retain customers. More than 400 dealers have applied for this display service, and currently nearly 100 dealers are exhibiting Kangoo's display vehicles.
spk08: In addition to the existing vehicle channels, we have also used the economic model to attract customers, creating the best traffic and operation capabilities for Canggu. Since the end of the 4th century, Canggu's economic network has covered 12 provinces across the country, with more than 21,000 registered agents, and with 905 branch stores. We organized nine offline new energy car experience activities in Yunnan, Guizhou, and Chongqing, including six provinces, covering Jihu, Xiaopeng, Tianji, Pengke, and Hechong, and matched dozens of ideal orders. By combining the online public traffic and offline community experience scenarios, we achieved the O2O mode of landing and traffic avoidance.
spk04: In addition to our existing dealership network, we also acquire customers through our independent sales rep initiative, building our own private traffic acquisition and operating capabilities. By the end of Q4, our sales reps network has been operating in 12 provinces across the country with more than 21,000 sales reps and 905 sub-dealers. During Q4, we organized nine in-person experience activities, featuring NEV brands in six provinces and cities, including Yunnan, Guizhou, and Chongqing. The events showcased NEV brands, including ArcFox, Xiaopeng, Anophage, Poco, and Haiqian, and matched dozens of orders. By integrating online private traffic with offline community experience, our online-to-offline, or O2O, model has been working very well, and we have also formed a closed traffic group.
spk08: As of the end of the fourth quarter, the total amount of RMB 467.02 billion has been accumulated. In terms of channels, as of the end of the fourth quarter, there are 45,930 car dealers in the Canggu network, of which 9844 are CS dealers and 846 are luxury brand dealers.
spk04: In terms of a traditional automotive financing facilitation business, in anticipation of the market and regulatory conditions, we proactively made strategic adjustments since the end of second quarter 2021. We switched our focus from scale to quality and looking to improve our resilience and operational efficiency through technological tools and process restructuring. In Q4, we facilitated financing transactions totaling 5.733 billion RMB down 7.7% quarter over quarter. The total outstanding balance of CanGo-facilitated financing transactions was 46.702 billion RMB as of December 31, 2021. In terms of dealer network, by the end of last year, we have worked with 45,930 car dealers throughout China, of which 9,844 were forest dealers, including 846 luxury brand dealers. 资产质量方面受产品结构调整和大市场经济 环境走低等综合因素影响, 截至四季度末,公司所有已完成并在存续期的汽车贷款的 M1加以及 M3加
spk08: In terms of asset quality, as of December 31, 2021, our M1-plus and M3-plus overdue ratios that increased slightly quarter over quarter to 1.62% and 0.86% respectively.
spk04: This was mainly affected by the product mix adjustment as well as the weak macroeconomic conditions, but we expect the overdue ratios to remain flat in the coming quarters.
spk08: 在车后市场领域第四季度,以保险促成为切入点,我们继续开拓新能源厂商落地服务机会。 目前,灿骨保险服务快捷路口已成功接入理想车主APP, 与高核汽车的系统对接预计在月内完成。 and the discussion of other new energy main airport is also in progress. At the same time, the rear-end market service is another important supply chain service as a shareholder car trading platform. We are also further deepening the service capability of car dealers. Our insurance small program also includes car dealership platform shareholder good cars and car dealership tool shareholder buyers. In this quarter, we have carried out a car insurance binding for trading, group purchase, and sales vehicles.
spk04: Turn into our aftermarket services segment. Through our insurance facilitation services, we continue to explore additional cooperation opportunities with NEV manufacturers in the fourth quarter. We've embedded the Kengo insurance service portal in the Autos app, and we'll complete the integration with HiFi system in March. Ports with other NEV manufacturers are also underway. At the same time, as one of the main supply chain services our auto transaction services platform provides, we've been working to further explore our dealer service capabilities in the aftermarket segment. Our insurance portal has been integrated into our dealer platform, CanGo Houcher, as well as dealer tool, CanGo Go Plus. During this past quarter, we bundled our auto insurance products with vehicle group sales and successfully launched the first batch of customized insurance products for forest dealers. As a next step, we will continue to expand the auto service network, increase its stickiness and activity.
spk08: In 2021, the market fluctuation caused by the pandemic and chip supply has brought great impact to the automotive traffic area, especially the lower market.
spk04: In 2021, market volatility is caused by COVID-19 and ship supply disruptions dealt a serious blow to the car market, particularly in a lower tier cities. In 2021, we also saw the first year of our full long effort to transform into a car trading platform. Confronted with unprecedented market changes, we've responded by looking inward for internal impactors and define the uncertainties to set our goal. At the China Automotive Industry Summit 2021, we received the 2021 Outstanding Car Transaction Innovative Service Provider Award, demonstrating the industry's recognition of our transformation into a platform business and the achievements we have made in this direction. 在下一阶段的平台建设中,我们将继续聚焦平台核心能力的打造,一方面依托探股升值下层市场的渠道网络和服务能力,
spk08: and smart new energy vehicles, to build the sales capacity of new energy vehicles in the downstream market, provide difference and meet the local market needs of the drivers, and help new energy manufacturers achieve their last mile in the downstream market. On the other hand, build a negative energy system that helps to improve the connection between the drivers, provide the drivers with the system tools, online service response, and offline landing service,
spk04: In the next stage of developing our platform, we will continue to focus on building the platform's core competencies. Firstly, leveraging Kangoo's deep-rooted channel networks and service capabilities in the lower-tier markets and our synergies with NEVs, we will cultivate our NEV sales capabilities in the lower-tier markets. To do so, we will provide dealers with differentiated vehicle sources matching local demand and will help NEV manufacturers with large-scale services in the lower-tier markets. Secondly, we are going to establish an empowerment mechanism to boost dealer loyalty by providing systems, tools, online responses, and offline implementation services that directly address their challenges. We will extend our current three major business segments to provide competitive supply chain services to truly empower our dealers with the platform resources and services needed for their development.
spk08: Looking ahead,
spk04: We will continue to optimize the ecosystem of our car transaction services platform. With our advantage in the supply chain and car sourcing, complemented by our consistently improving systems, tools, and service operating capabilities, we will further empower our dealer partners and continue to provide high-quality branded auto-related services to consumers. 接下来,有请我们的首席财务官张永毅。
spk08: to review the company's financial performance in this quarter.
spk04: Next, I will turn the call over to our chief financial officer, Michael Zhang, for a review of the company's financial performance.
spk07: Thanks, Jiayuan. Hello, everyone, and welcome to our fourth quarter and four-year 2021 earnings call. Before I started to review our financials, please note that unless otherwise stated, all numbers are in IMB terms and all percentage comparisons on year-over-year basis. During the quarter, microeconomic headwinds continued and global chip shortage have directly impacted China's automotive industry. Facing external pressure, we continued to make steady progress in the fourth quarter with top line beating our previous guidance. Fourth quarter total revenue were $1,050.5 million. Looking at the quarterly performance of our three co-businesses, Revenues from car trading transactions were $703.9 million, continued to serve as an important growth driver and playing a key part in our business transformation to a platform model. Revenues from automotive financing facilitation and off-market services facilitation were $252 million and $36.7 million, respectively. Now let's move on to our costs and expenses during the quarter. Total operating costs and expenses in the fourth quarter of 2021 were $1,207.6 million compared to $899 million in the same period, 2020. This was mainly due to the related costs incurred by card trading transactions business. Cost of revenue in the fourth quarter of 2021 increased to $880.7 million from $723.8 million in the same period, 2020. As a percentage of total revenue, cost of revenue in the fourth quarter of 2021 was 83.8% compared to 66% in the same period, 2020. The change was primarily due to an increase in the amount of car trading transactions. For automotive financing facilitation and off-market services facilitation, cost of revenue as a percentage of relevant revenues was around 54.1% in the fourth quarter of 2021. Sales and marketing expenses in the fourth quarter of 2021 were $73.8 million compared to $65.8 million in the same period, 2020. As a percentage of total revenue, sales and marketing expenses in the fourth quarter of 2021 were 7% compared to 6% in the same period, 2020. General and administrative expenses in the fourth quarter of 2021 were $86.1 million compared to $90.1 million in the same period of 2020. As a percentage of total revenue, general and administrative expenses in the fourth quarter of 2021 remained flat at 8.2% compared with the same period of 2020. Research and development expenses in the fourth quarter of 2021 were $23.6 million compared to $23 million in the same period, 2020. As a percentage of total revenue, research and development expenses in the fourth quarter of 2021 was 2.2% compared to 2.1% in the same period, 2020. Net loss on risk assurance liability in the fourth quarter of 2021 was $84.6 million compared to a net gain of $18.8 million in the same period, 2020. The loss was mainly due to a sequential increase in default rate over the last quarters. We recorded loss from operations of $157 million in the fourth quarter of 2021 compared to an income of $198.4 million in the same period, 2020. This decrease was mainly due to loss on risk assurance liabilities and provision for credit loss, as well as the decrease in cross-profit margin of our automotive financing facilitation and off-market service facilitation business. Due to the fair value change of the company's investment in the autumn, net income in the fourth quarter of 2021 was $124.1 million. Non-GAAP adjusted net income in the fourth quarter of 2021 was 147.3 million. On a per share basis, diluted net income per ADS in the first quarter of 2021 was 0.87, and diluted non-GAAP adjusted net income per ADS in the same period was 1.04. For the full year of 2021, our total net revenue increased by 91.1% year-over-year to $3.9 billion. Total operating cost expenses were $3.9 billion. Net loss was $8.5 million, and non-GAAP adjusted net income was $79.1 million. Diluted net loss per ADS was $0.06, and diluted non-GAAP adjusted net income per ADS was $0.54. Moving on to our balance sheet, as of December 31st, 2021, we had cash and cash equivalents of $1.4 billion compared to $906.4 million as of September 30, 2021. As of December 31, 2021, the company had a short-term investment of $2.6 billion compared with $3.6 billion as of September 30, 2021. Looking ahead to the first quarter of 2022, We expect our total revenue to be between $700 million and $750 million. Please note that this forecast reflects our current and preliminary view on the market and operational conditions, which are subject to change. This concludes our prepared remarks. Operator, we are now ready to take questions. Thank you.
spk05: 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're using a speakerphone, please pick up your handset before pressing the keys. And to withdraw your question, please press star then two. And at this time, we'll pause momentarily to assemble our roster. And the first question will come from Shelly Wang with Morgan Stanley. Please go ahead.
spk02: Hello, everyone. I'm Shelly from Morgan Stanley. 我这边有三个问题想请教一下 第一个就是想问一下就是我们对车交易业务 这个2022年大概全年展望是怎么样 就主要是我们对销量 然后以及对它毛利率这个趋势的预期 然后第二个的话是 第二个是想请教一下 就是因为我看到我们在第四季度的时候 一些provision做的比较多 In addition, the revenue guidance for the first quarter of this year seems to be more conservative. I would like to ask, what is the main reason why we have become more cautious now? Is it because of the whole... More of it is because of the economic situation, for example, the economy may be poor, and it affects everyone's demand for buying a car. Or is it more to reflect on ourselves, because in the process of the entire business transition, we may be a little more cautious. Which side do you want to understand more? And then the third question I would like to ask is, do we have any new business expansion in the newsroom? These are the three questions. Thank you. Thank you, Shirley.
spk08: I will answer your first and third questions. The second question is answered by our CFO, Zhang Yongyi.
spk04: Thank you. I'm Shirley from Wang. I have three questions. So the first question is, what is your outlook for contributing transactions business in 2022? Mainly, your outlook for sales and cross-margin. And my second question is that in Q4, I noticed that the company made quite high provisions. And also in Q1 this year, I noticed that the guidance from the company on revenue is quite conservative. So on what basis do you produce such a cautious forecast or guidance? Is it because of your more negative outlook of the macroeconomic conditions? Do you think that macroeconomic conditions will have a negative impact on the demand? Or is it more because of your concerns over the consequences from the business transition of the company? So which factor plays a more important role in your production of these numbers? And my third question is about your cooperation with NEVs. Could you give us some update on your collaboration with NEV manufacturers, any new business partnerships? Thank you. So Mr. Ming will take the first and third question, and Michael will take the second question.
spk08: Uh, uh, uh, uh, uh.
spk04: Okay, so for the first question, in 2021, we sold a total of about 23,000 vehicles, including 5,742 NEVs. So actually, for the full year, the sales volume was 23,166. Right now, the gross margin level was about 1%. Though the gross margin of car trading transactions is low now, there is sufficient potential for CanGo in a lower tier market, which is worth tapping into because we have a lot of strengths or advantages in terms of market size as well as the bargaining power.
spk08: In 2022, we expect that cars will still be affected by shortcomings, but the impact of new cars will be less. 我们会着重提升新能源汽车在下层市场的销售能力,搭建有助于提升车商粘性的赋能体系,同时对车商进行规范化培训,打造我们平台自身的品牌形象,提高其粘性。 Looking forward to 2022, we expect the auto market to remain under pressure because of global chip shortage. However, the impact on NEVs will be smaller.
spk04: we will focus on strengthening our NEV sales capabilities in the lower tier markets, and we will try to create an empowerment system conducive to increasing this dealer's stickiness. Meanwhile, we will also carry out our training programs for dealers so that we will be able to build up our brand image and enhance dealer loyalty.
spk08: 好,这是第一个问题的回答,然后我们第三个问题。 So that's my take on the first question, now I will take your third question. including Xiaopeng, Biadi, Nezha, Aici, Jixin, Beiqi New Energy, Dongfeng New Energy, DS New Energy, Jili New Energy, etc., including Dongben New Energy. This year, we will continue to expand the financial and insurance... Sorry, Mr. Lin, you continue.
spk03: It's okay, Mr. Lin, you continue.
spk08: Okay, this year, we will continue to expand the financial and insurance and channel land capacity... actually in terms of our collaboration of our uh
spk04: NEVs, actually, we've been working closely with the NEVs over the years, and we've been trying to embed our portals into their systems. With the integration of the system, we will better empower our NEV manufacturers, and then we will also be able to extend our collaboration. In terms of our car trading transactions with the NEVs, Over the years, we have been taking advantage of our deep-rooted network, especially in the lower tier cities. We've been connecting the car dealers as well as the car buyers to our platform. And we've been working with a series of NFE brands like R-Fox and Xiaopeng, et cetera. So what we are doing What we are trying to do is that we will integrate our dealer and consumer resources in order to lower tier markets to create a service loop with our platform-based cost-sourcing financial services and insurance services will better empower our car dealers. And this is the underlying logic of our business.
spk08: Next, please answer the second question.
spk04: Now I will hand over to Michael.
spk07: Hello, Sherry. Regarding the second question you asked, I think it may be divided into two small questions. The first is about the bad state of the supply of 4G. Such a relatively large supply is mainly due to, first of all, we observed the trend cycle of the whole downstream market. there is actually a change that is not very strong. The overall customer base decline and the demand rate are still in a state of deterioration quarter by quarter. So I think this is one of the first factors. The second is that in the end of the year, there are some new After it happened, some of our local demand was actually affected by it. So it also led to an increase in the volume of demand. So based on such a state, we are based on a cautious financial process. So we conducted a relatively large-scale disaster relief in the fourth quarter. To fully reflect Okay, I will take the second question. I will answer your question divided into two parts.
spk04: The first part is actually about our provision for bad debt in Q4. Yes, you are right. We have increased our provision for bad debt in Q4 mainly because of two reasons. The first reason is that we noticed that in the lower tier markets, the credit cycle is showing some negative signs. For example, like the customer base is moving downwards. and also if you look at quarter by quarter number the overdue ratio is deteriorating and the second reason it has something to do with collection and because of the outbreaks of pandemic in china different parts of china and our collection levels have been negatively impacted different parts in different regions and this has part this has been a reason why the overdue ratio has been rising as well so based on the principle of Based on the principle of potentiality, we have decided to increase our provision for Q4 to reflect the changes in asset quality as well as changes in the external environment.
spk07: In fact, there is still a relatively large pressure, relatively remote. So in such an external environment, in fact, our overall demand for this quarter, for 2022, is not particularly optimistic at the moment. This is the first aspect. The second aspect is actually more based on our own strategic adjustment. In fact, from the second half of last year, we have established a strategic transformation from the original financial or loan collection and after-sales collection and transaction mode. We have made further changes to the transaction and service platform. From this point of view, we have taken the initiative to search for financial businesses that need to bear the risk of credit. As I mentioned before, we are also concerned about the entire mentality cycle. So we have also made changes to the corresponding business model. That is to say, we will do more in the future. Businesses that are not affected by financial or financial risks, such as transactions and services. So in this process, in this transformation process, Then the decline of the original financial business will definitely have a certain pressure on our recent income. So I think this is also the result of our strategic transformation of such a demand. Then I think these two points of the book, I think in general, it constitutes our overall income guidance for the first quarter. Thank you.
spk04: Okay, so the second part is about our conservative guidance for Q1 revenue. Well, there are two main reasons for this. The first one has something to do with the external demand. We expect that the demand from the lower tier markets will actually be quite soft, especially demand for our trading services as well as demand for our facilitation business. while it's mostly because of the different types of pressure available in the market. So, overall speaking, we are indeed not so optimistic about the market demand in 2022. And the second reason has something to do with our own strategic transformation. Well, in the second half of last year, the company decided to transform its strategy from the facilitation business focus, the model, to a model that emphasizes more on our car trading capabilities, service capabilities, and aftermarket capabilities as well. In other words, since the second half of last year, we have started to focus reduce the size of our facilitation business, which actually holds higher credit risks. And so, as I said earlier, we have also noticed the changes in the credit cycle in the market. So that's why, you know, since the second half of last year, we started to change our business model. So in the future, yes, there will be, you know, less focus on those business clients that have higher credit risks and financial risk Instead, we will focus more on normal trading and service businesses. So in the process, of course, in the near term, the reduction or contraction of the facilitation business will have some negative impact on our expected revenue. So this is indeed something that has been a result of our strategic plan. So combining the two reasons, our expectation of the market demand and also because of the strategic transformation, we have given this revenue guidance for Q1.
spk05: Again, if you have a question, please press star, then 1. And we'll pause momentarily to assemble our roster again. The next question will come from David Pan with Goldman Sachs. Please go ahead.
spk06: David Pan, Goldman Sachs I have three questions. The first one is about our loan promotion business, and we also saw some changes in the fourth quarter, including the same rate and the same rate, and we also spent some time just now to introduce some trends and pressures in terms of asset quality. I would like to ask about the future prospects of this business. Because indeed, the transformation of the company has progressed very smoothly. So the overall proportion of this piece is declining. Of course, this is from the income end. And then from the perspective of this growth, it may also show a trend that is very different from the previous one. So I want to know, what is our idea of this piece in the future? Will it continue to go down or will it slowly shrink down? Thank you. I have three questions. The first question is about your outlook for the loan facilitation business.
spk04: Well, in Q4, indeed, we noticed that there were some changes in terms of this business, both year-on-year as well as quarter-by-quarter. And also, you have talked about the changes in asset quality and of pressure that you are facing. So what is your future plan for the loan facilitation business? Well, right now, the company is doing pretty well with your strategic transformation and And I noticed that indeed the contribution from the loan facilitation business down to your total revenue has reduced. And also, of course, the growth trend has changed as well. So what is your plan for loan facilitation business over the next few years? Will you continue with this business or will you exit from this business? And the second question is about the cash and cash equivalents. I noticed that by the end of 2021, the company still holds about 1.43 billion RMB of cash and cash equivalents. So what is your plan for the use of the cash? And the third question is about holding foreign company accountable act. So there are some rules in terms of this thing of these rules. holding foreign companies. So could you talk about the impact of this new act on your business?
spk08: Thank you, David. I will answer the first question, and CFO Yongyi will answer the second and third questions.
spk04: Thank you, David, for your questions. I will take the first question, and I leave the second and third to Michael.
spk08: We will focus on low risk and high efficiency to operate this business.
spk04: Because of changes in the macroeconomic conditions, we've decided to reduce the size of our loan facilitation business. However, we will not give up this business altogether because loan facilitation businesses were part of the fundamentals of the group. So instead, in the future, we will focus more on low risk business for loan facilitation and as well as business that can help that will be more efficient. Also, while we are transforming into a trading platform, we still have to rely on loan facilitation business to provide impactors for our growth. And actually, when you are providing trading services, you have to provide the loan facilitation business as well. And as I said, we are going to rely or still rely on the loan facilitation as a catalyst. for our future growth.
spk08: Okay. 我的问题回答完了。 接下来两位请容易回答。 Okay, now I'll hand over to Michael. 谢谢David的问题。 关于第一个问题, 因为刚才林总已经解释得比较充分, 但是我想再补充一点吧, 就是因为刚才提到, 对于住宅业务的定位, 我们当然不会放弃这样的一个业务, 但是他从他的整个在我们公司业务
spk07: such a structure in which the positioning will make some changes. That is to say, our future will be surrounded by this transaction and service, right? So in this case, it will definitely extend our such a service opportunity in this generation of finance, that is to say, first trade service and then finance such a closed ring business model. So from the perspective of financial positioning, it will be more positioned in terms of an extension value of my transaction and service, or a channel like this. So there will be some changes in this. Of course, on the basis of this, we will also strengthen the operating efficiency within the business line of financial assistance, especially its cost and efficiency control and improvement. This is actually a positioning for financial assistance business in the future or the entire business structure of the future.
spk04: Thank you, David, for your questions. I will add a few words to the first question. Well, yes, as Jiayuan Salad's non-facilitation business, we will not give it up. However, we are changing the positioning of this business line in our total business structure. Well, as we explained earlier, we are now turning more toward trading as well as service platform. So, in other words, In our new business model, in our business closed loop, it's trading first and then, you know, as part of trading, we provide loan facilitation business to our customers. So, in other words, you can, you know, understand it this way. The loan facilitation business will become an extension of our trading and service platform. It also could provide an opportunity for us to cash in. At the same time, we will try our best to improve the productivity and improve the efficiency of the operation of this loan facilitation business, including, or in particular, cost control. So this is our positioning of this loan facilitation business for the future.
spk07: The second question is about our account cash arrangement. Because from from the perspective of our overall strategy. For the use of this part of funds, we will also combine business development and the re-creation of our own business model in the process of capitalization, as well as potential opportunities for external cooperation to consider future arrangements such as cash.
spk04: About your second question, the use of our cash balances, well, of course, firstly, we will have to use the cash to meet our strategic development needs. Well, we will look at where we need the cash to support our business growth, and also we are transforming our business model, so we may need the cash to meet our capital expenditure needs. In addition, we also use the cash to better realize our potential external cooperation opportunities.
spk07: So, on the one hand, we will also pay attention to some of the latest monitoring progress. At the same time, we will indeed think about some of these different markets, some of these subsequent changes in monitoring policy, and some of these possible arrangements, and make some corresponding predictions. But as of now, we will pay more attention to the whole
spk04: About your third question, HFCAA, well, we did notice that there have been some news coverage on this act. However, so far, for the company, we have not yet received any form of inquiry from either NYSE, New York Stock Exchange, or any regulators. So for us, we will keep following up the regulatory developments. At the same time, we will also make a plan in line with the regulatory changes in different markets and future possible regulatory arrangements. However, for us so far, our focus will be actively communicating with the regulators and work with the regulators.
spk05: The next question comes from Tim Moore with Zach. Please go ahead.
spk00: Thank you. I have four questions, which I'll ask individually. My first question is similar to what Shelly was asking about. Your revenue growth guidance for the first quarter seems a little bit light. You know, we're aware of the macro slowdown and the Olympics and Chinese New Year impact. So what I was really kind of wondering is, are you skipping or turning away possibly half the business opportunities in the loan facilitation business as part of your transformation and in order to avoid maybe some write-downs from credit cycle tightening in some cities? I just want to get a better sense of how active and intentional you're really skipping business on the loan side rather than macro pressure.
spk04: I have a total of four questions, so I will ask them one by one. The first question is actually a bit similar to the question asked by Sherry from Da Mo. I also noticed that the company is more conservative in terms of the management of revenue in the first system. As you have just explained, it is indeed because you have considered the changes in the macroeconomic factors, and there may be a series of negative factors affecting the Spring Festival. In addition, you also talked about the changes in the current cycle, and the company's strategic transformation towards this uh,
spk08: Okay. So CEO Jiayuan will take the question first and then Michael will, you know, add what he feels. OK, 关于住贷业务我们的收缩,一方面是刚才所提到的基于大环境,基于经济周期,信贷周期的变化所带来的,但我们是不会放弃这个住贷市场的。 Well, as we explained earlier, we decided to contract or reduce the size of this loan facilitation business.
spk04: partly because of the macroeconomic condition changes as well as the changes in the credit cycle. However, we will not give up this business. Because we still have a lot of core competencies in the loan facilitation business, we will not simply give them up. So our plan is that when the market is down, in a downturn, we will contract our business correspondingly. However, when the market recovers, we will expand our business again. In addition, as I explained earlier, while we are transforming our business model and in transforming ourselves into a trading platform, the financial services or non-facilitation business is actually an inseparable part of these trading services.
spk08: Okay, let me finish my answer and see if CFO has anything to add.
spk04: So from me, I will now hand over to Michael.
spk07: Hi, Tim. This reduction is also an initiative adjustment. In fact, the larger background that Mr. Lin just mentioned, but in fact, from another perspective, we are in order to reach a initial stage in such a big modern cycle. In fact, it is to be able to quickly shrink the threshold of our credit risk. Because you may also pay attention to the total amount of our current loan amount. Currently, there is a outstanding balance of almost 4.5 billion yuan. Among these, the part where we take credit risk, that is, the part where we take certain risks and certain obligations, Then this is actually Thank you, Tim. So I will add a few points on this. First of all, yes, as you notice that we have made major adjustments to our loan facilitation business. Actually, we took the initiative
spk04: to reduce the size of this loan facilitation business? Well, for the reasons our CEO has already explained quite clearly. And another reason is that we believe we are still at the beginning of a new credit cycle. So what we want to do is to quickly reduce our credit risk exposure in a relatively short period of time. If you look at our outstanding balance for loan facilitation business, it's still about 45 billion RMB, and among which 25 to 30 billion are what we need to undertake risk assurance liabilities. In other words, we have to take on the credit risks for about 25 to 30 billion of this outstanding balance. So that's why we need to take very quick measures to make major adjustments to the new low facilitation business in a relatively short period of time so as to reduce our risk exposure. So that's why you saw these major changes in our Q1 guidance.
spk07: Sorry. 我想再补充最后一句,其实我们也是希望在短期内能够把我们的业务模式能够调整到尽可能不承担信用风险的这样的一个业务模式。 Sorry, just one last word on this point. Our goal is to minimize our credit risk in the shortest period of time possible in our business model.
spk00: Okay, thank you. That was very helpful for that point. My next question relates to your closed loop one-stop shop, which is very differentiated, including your logistics, warehousing, and last mile service for dealers. I'm hoping that you could share some examples or actions that you're taking or you plan to take to accelerate the penetration of auto trading into your dealer network. I believe you have auto trading in about 6,000 or so of your dealerships. And it seems like it could go to 15,000 or 20,000 over time, you know, at least half the dealership base maybe a couple years out. So I'm just wondering maybe what you're doing to really move that needle faster maybe on the auto trading penetration. 非常感谢两位老总的回答,对我的理解非常有帮助啊。
spk04: China China China China China China China China China China China China China Okay, let me answer this question. Because stock trading is a natural extension of our business,
spk08: The origin of Canggu is financial services, financial and insurance services. In the 10-year financial insurance service professional service process, we have accumulated the professional ability of financial insurance services. Then, it is based on the net worth of 50,000 in the low-end market, and the ability of our energy site service in low-end cities. And these abilities are indispensable in car transactions. Thank you, Tim, for your question. I will take the first part of your question. So in terms of our car trading business,
spk04: Well, actually, it's a natural extension of our loan facilitation business that we have built up over the past 10 years. Well, thanks to our more than a decade of efforts, we have built up strong capabilities in the auto loan facilitation segment as well as the insurance service sector. So, I mean, segment. And we have also, over the years, built up relationships with more than 50,000 dealers in the lower tier markets, as well as our in-person service capabilities. All these capabilities are essential to our card trading business. So this is also where we are different from a lot of the peers in the markets.
spk08: And then when it comes to this specific action, it's like our current main focus of the online sales team is now starting to gradually transform into the development of trading business.
spk04: And in terms of the specific actions that we have taken, well, actually, we have been reorganizing training programs for our service personnel in line with our car trading business development needs. And, for example, we train them how to better work with the car dealers.
spk08: So over time, with our investment in capacity building and in our investment in resources,
spk04: Well, actually, we will quickly fully leverage our capabilities in the traditional loan facilitation business to support the growth of our car trading or car transaction business.
spk08: To give you another example, which is also part of your question, that is the last mile service we deliver to car dealers. Well, an example is the display service that we organize for car dealers.
spk04: And this is a service that we have launched based on our deep knowledge of needs of our car dealer partners.
spk08: And about our warehousing services, we have a fully developed system and equipment
spk04: a strong database that will, that helps us, you know, smartly and, uh, rationally, uh, organize our warehousing facilities.
spk08: And for some, uh, uh,
spk04: Dealers who don't have a long-term business with us and also for some purchasing orders that are not so big in volume or in value, we provide the self-service possibility for the dealers. That is, the dealers can come to our warehouse and pick up the cars by themselves. Thank you. So that's me, and I will hand over to Michael. No more from Michael.
spk00: Great. Thank you for elaborating on that important topic. My other two questions were already answered, so I don't have any further questions. Thanks.
spk04: Okay. The next question will come from Brent Lee with Bamboo Works. Please go ahead. Hello, I would like to ask about
spk01: I have just one question. My question is about a company. I noticed that a company has reduced your holding in Li Auto. So what is your view on Li Auto's future developments?
spk08: OK.
spk04: Okay, on this question, actually, we reduced our holding in the auto as part of our investment decisions. And though we have reduced our holding, we will maintain our close strategic partnership with the auto. And as usual, we are still very positive about the development of NEV and its market, including the auto.
spk01: Okay, thank you.
spk04: Thank you.
spk08: 好,那我们今天的这个会议就到此结束,谢谢大家。 That closes today's conference call. Thank you all for your attention. Okay,谢谢。
spk05: The conference call has concluded. Thank you for your participation. You may now disconnect.
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