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spk01: Good morning and good evening, everyone. Welcome to Kango Inc's fourth quarter and fiscal year 2023 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 IR website. Joining us today are Mr. Xiaoyuan Lin, Chief Executive Officer, and Mr. Yongyi Zhang, Chief Financial Officer of the company. Following management's prepared remarks, we will conduct the Q&A session. Before we begin, I refer you to the safe harbor statement in the company's earnings release, which also applies to the conference call today, as management will be making forward-looking statements. With that said, I am now turning the call over to Mr. Xiaoyuan Lin, CEO of Kango. Please go ahead, sir.
spk04: Hello everyone and welcome to CanGo's Fourth Quarter 2023 Earnings Call. 2023 proves to be a year of resilience in the face of headwinds.
spk03: While a long-term economic recovery remained on the horizon, the confluence of domestic and international factors caused a temporary slowdown. This resulted in slower than anticipated growth and dampened consumer confidence. In the automotive sector, the traditional fuel vehicle market contracted steadily, while new energy vehicles or EVs experienced a surge in market share, sparking fierce competition within the segment. Price boards became a norm in the auto sales landscape, triggering unnecessary restructuring within the industry. These shifts favored larger players and accelerated the survival of the fittest scenario. Dealerships, particularly smaller ones in lower-tier markets, faced significant operational challenges, especially in the latter half of the year.
spk04: In such a big environment, in the fourth quarter of 2023, the company achieved a total income of RMB1.31 billion, In 2023, the company will receive a total income of RMB1.7 billion. As of the end of the fourth quarter, the total debt balance will be reduced to RMB1.7 billion. M1 plus 2.66%, M3 plus 1.37%, the risk threshold will be further reduced. In addition, the company continues to promote a strict policy of down payment, effectively reducing operating costs.
spk03: Despite a challenging market environment in 2023, Kengo delivered total revenue of $130 million in Q4 and $1.7 billion for the full year. The company strategically reduced its total outstanding financing balance of facilitated financing transactions to approximately $10 billion R&D by year-end. Our credit rate metrics remain stable with M1+, M3+, delinquency rates at 2.66% and 1.37% respectively, reducing our risk exposure further. To mitigate this dynamic market, Kengo implemented strict cost reduction measures and efficiency enhancements, successfully lowering operating expenses.
spk04: Notably, Kengo maintains a solid financial position backed by robust liquidity and ample cash reserves. As of December 31, 2023, the company boasted 3.33 billion RMB in cash, cash equivalents,
spk03: and shortening investments as well as restricted cash that is bank deposits held for shortening investments. This strong financial foundation provides a springboard for the sustainable growth of our existing businesses and fuels our exploration of new ventures.
spk04: On the business side, we manage the market and industry trends. On the one hand, we clean up the stockpile of new cars. On the other hand, we set up a strategic strategy to combine the two platforms. In the fourth quarter, Canggu officially will focus on new car trading services of Canggu Good Car and focus on second-hand car trading services of Canggu Good Car operation to achieve resource integration and improve operation efficiency. After integration, Canggu Good Car App will build an online market, connect to the car supplier, the back market service provider, and connect to the lower market small currency car users to surround the online auction of second-hand car trading. B2B 撮合和经纪人帮买三大业务场景,提供贯通整个交易过程的产品及服务,涵盖历史车况查定,车辆评估及检测,交付物流,保险,供应链金融等等。 平台收益将主要来源于上游店铺租金,会员费和服务产品收费三个方面。 To adapt to evolving market conditions and capitalizing industry trends,
spk03: We took proactive steps to streamline our operations. This included clearing our new car inventory and consolidating our platforms into a single powerful solution. In Q4, we successfully merged our new car platform, Kangoo Hao Che, into Kangoo YouCar, our used car platform. This strategic move optimizes resource allocation and boosts operational efficiency. The upgraded Kangoo YouCar app now functions as a comprehensive online marketplace. It connects upstream vehicle suppliers, aftermarket service providers, and downstream small dealers in lower tier cities. This integrated platform offers users a full suite of services throughout the used car transaction process, catering to three main scenarios, that is online auctions, dealer-to-dealer transactions, and broker-assisted deals. Kangaroo Call goes beyond facilitating transactions. We provide a robust ecosystem of services. This includes access to historical vehicle reports, vehicle evaluation and inspection, logistics and delivery, insurance solutions, and supply chain financing. Our revenue streams will primarily come from upstream store rentals, membership subscriptions, and transaction-related services.
spk04: We streamlined operations within the integrated Kangoo UCAR platform in Q4. This included the introduction of a fixed-price end-to-end transaction service for cross-regional used car purchases.
spk03: This innovative service simplifies and secures long-distance transactions by offering price verification, vehicle inspection, guarantee, and delivery services.
spk04: 次季度,灿骨优车APP内上线的上游第三方卖家店达到38家, 涵盖新车、二手车和流量服务等综合类别。 与此同时,我们通过销售漏斗管理策略共挖掘商机9,887条,
spk03: By Q4, 38 upstream third-party sellers have set up stores on Kangoo Your Car, offering a comprehensive selection of vehicles, including new and used cars, along with traffic generation services. By leveraging our expertise in sales funnel management, we identified 9,887 potential business leads in Q4, We successfully converted a significant portion of receipts, providing services to 3,499 online small dealers and facilitating 530 used car transactions. At the same time, we have also expanded the platform's activity by operating self-serve stores.
spk04: Currently, our self-serve store services mainly include four categories. First of all, it is a self-driving car. It is mainly a car for storage and financial business. At the same time, it cooperates with other financial company's storage car as a platform car. Secondly, C2B turns the C-line line into a trading car. On the platform, it integrates C-line customers and B-line car dealers to complete the transaction. At the beginning, it mainly relies on storage and loan customers. In the fourth quarter, it also leads to the transfer of external lines. In addition, it serves the integration business between small and big car dealers. Besides attracting third-party sellers, we are also maximizing engagement and exploring new opportunities through our self-operated stores.
spk03: These stores offer a diverse range of services in four key areas. Firstly, repossessed car management. We handle repossessed vehicles primarily sourced from our auto financing business and collaborations with other lenders. Secondly, C2B lead conversion. We transform individual customer leads into tradable assets, facilitating transactions between them and dealers on our platform. We initially focused on existing financing customers, but now we have expanded lead sources in Q4 to boost conversion rates. Thirdly, B2B transaction facilitation. We provide transaction and logistics support for small dealer-to-dealer sales. And fourthly, we have expanded our insurance services. Our insurance team offers comprehensive coverage. including auto insurance and as a skill for non-auto options like work injury and road insurance for key regional clients.
spk04: As an online market, a good user experience is based on the technology base of the platform. In the fourth quarter, we will use digitized methods to create an AI platform to match the various resources of the car, passenger, and funds, and to provide a standardized, standardized, and intelligent transaction chain matching service. We hope to really promote the efficient circulation of second-hand cars across the country. At the same time, we must serve our small and medium-sized car users, help them reduce operating costs in the industry in a short period of time, increase income sources, and thus increase the turnover rate. The vision of Canggu building a car service platform has not changed. In the future, we will continue to polish and improve Canggu's core capabilities in the industry value chain through high-quality services and products.
spk03: At Kengo Yuko, we understand a superior user experience hinges on the strong technological foundation. In Q4, we deployed a central AI platform leveraging our digital expertise to optimize resource matching for vehicle inventory, customer leads, and auto financing. This powerful tool, combined with our standardized, streamlined, and intelligent transaction services, aims to create a nationwide network for efficient use-cash circulation. Furthermore, we remain dedicated to empowering small dealerships. We offer services that help them reduce operating costs and diversify revenue streams, especially during challenging market conditions. Ultimately, our goal is to enhance their survival rate and overall success. Kengo's vision remains steadfast, to become an industry leader by continuously refining and offering top-notch services and products across the entire automotive value chain.
spk04: In addition to the online market, we also always pay attention to the opportunity to explore new businesses. Unlike the domestic car market, China's second-hand car exports have a greater chance of growth. China, as the world's largest car manufacturer and market country, has a huge car stock, which provides rich resources for Chinese second-hand car exports. At the same time, the Chinese government has proposed a series of policies to support and regulate the development of the second-hand car market. This not only helps to improve the transparency and fairness of the second-hand car market, but also helps to improve the quality and reliability of second-hand cars, thereby strengthening their competitiveness in the international market. China has a strong ability in the manufacturing and supply of parts, which makes China's second-hand car prices have greater competitiveness in the global scope. At the same time, as the largest international trading country, China has extensive international logistics capabilities, can ensure safe and fast delivery of vehicles to global buyers.
spk03: Kangaroo Car's online marketplace is just one facet of our growth strategy. We see significant potential in China's burgeoning used car export market, unlike the fierce competition within the domestic market. China, as the world's largest auto manufacturer and consumer, possesses a vast pool of used cars, a gold mine for exporters. Additionally, government policies are fostering a more transparent, regulated system used car market. This translates into higher quality and more reliable vehicles that are competitive internationally. Furthermore, China's robust auto manufacturing and parts supply chain keep used car prices competitive globally. Leveraging its position as the top international trading nation, China builds a well-developed logistics network, ensuring efficient and secure delivery of used cars to international buyers.
spk04: In 2023, China's export volume will exceed 5 million units and will be the world's number one. This data is expected to continue to grow. We look forward to the development prospects of the second-hand car export business. We are actively promoting and landing export exploration business. We rely on China's rich experience and foundation in the domestic car market, as well as the capital support and broader market opportunities that American listed companies can bring. 我们打造线上线下一体化的二手车信息交互和出口服务平台,主要面向新兴发展国家的汽车经销商,帮助其轻松获取中国这个全球最大的汽车制造和消费市场中丰富的汽车资源。 China's position as the world's leading auto exporter with over 5 million vehicles shipped in 2023 and a projected upward trend presents a compelling opportunity for the used car export market.
spk03: Recognizing its potential, Kenco is actively pursuing this exciting new venture. Leveraging our extensive experience and network within China's domestic auto market, combined with the advantage of being a U.S.-listed company which brings us access to capital and broader market reach, we've launched a comprehensive use-car information exchange and export service platform. This innovative platform, integrating both online and offline resources, caters specifically to auto dealers in emerging and developing countries. By partnering with Kangoo, these international dealers gain easy access to China's vast pool of used vehicles, a significant advantage in today's global market.
spk04: 我们的跨境二手车信息交互网站 www.autokango.com 已于本月初上线 在线SKU总数超过7万5千个 and added about 500 to 1,000 new SKUs every week. Autocango will use innovative AI technology to improve vehicle visibility, search efficiency, and interaction flexibility to accurately meet the personalization needs of each customer and ensure transparency, efficiency, and security of transactions. Our goal is to become an excellent website for overseas buyers to buy Chinese second-hand cars. Autocango
spk03: Our cross-border used car information exchange platform, or www.autocango.com, was launched in early March 2024, with an impressive inventory exceeding 75,000 SKUs. This platform is constantly growing, with approximately 500 to 1,000 new vehicles added weekly. Leveraging cutting-edge AI technology, AutoCango empowers users with an intuitive search experience, making it easier than ever to find the perfect car. Furthermore, our platform prioritizes user interaction, ensuring it caters to each customer's evolving needs. Transparency, efficiency, and security are at the core of Forteo CanGo. We are committed to providing a seamless and secure experience for all users, with the ultimate goal of becoming the go-to platform for overseas buyers seeking high-quality use cards from China.
spk04: Although the external environment is still challenging, We are full of confidence in the development potential of the Chinese market and the business model of Zangu's all-terrain platform service. In 2024, we will continue to deepen the automotive trade field, insist on digital innovation and AI renewable energy, expand Zangu's product and service coverage on the entire value chain, and join hands with our car companies in the transformation process of the Chinese automotive industry into digitalization and technological transformation.
spk03: While acknowledging the current market complexities, we remain bullish on the long-term potential of China's auto industry and the strength of Kengo's end-to-end service model. In 2024, we are committed to solidifying our position within the auto transaction market, pioneering digital innovation, and leveraging AI to enhance our platform and user experience, as well as expanding our offerings by introducing new products and services across the entire value chain. By working along with our dealer partners, these initiatives will allow us to create significant value and become a key player in China's dynamic technology-driven automotive landscape.
spk04: Now I'll hand over to our Chief Financial Officer, Michael Dunn, for a review of the company's financial performance.
spk06: Thanks, Jiayuan. Hello, everyone, and welcome to our fourth quarter and four-year 2023 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 are on a year-over-year basis. Total revenue in the fourth quarter of 2023 was $130.2 million, compared with $487.1 million in the same period, 2022. Guarantee income, which represents the fee income earned on the non-contingent aspect of a guarantee, was $42.1 million in the fourth quarter. Now let's move on to our costs and expenses during the quarter. Total operating costs and expenses in the fourth quarter of 2023 were $159.1 million compared with $698.7 million in the same period, 2022. Cost and revenue in the fourth quarter decreased to $110.9 million from $481.7 million in the same period, 2022. As a percentage of total revenues, cost of revenue in the fourth quarter of 2023 was 85.1% compared with 98.9% in the same period, 2022. Sales and marketing expenses in the fourth quarter decreased to $4.4 million from $19.2 million in the same period 2022. As a percentage of total revenues, sales and marketing expenses in the fourth quarter 2023 were 3.4% compared with 4% in the same period 2022. General and administrative expenses in the fourth quarter decreased to $45.6 million from $66.2 million in the same period 2022. As a percentage of total revenues, general and administrative expenses in fourth quarter 2023 were 35%, compared with 13.6% in the same period, 2022. Research and development expenses in fourth quarter decreased to $7.3 million from $8.4 million in the same period, 2022. As a percentage of total revenues, research and development expenses in fourth quarter 2023 were 5.6% compared with 1.7% in the same period, 2022. Net loss on contingent risk assurance liability in the fourth quarter were 22.2 million. Net recovery on provisions for credit losses in the fourth quarter were 31.2 million. The recovery was primarily due to the positive impact of collections of financing receivables. We recorded 28% in loss from operation in the fourth quarter of 2023, compared with 211.6 million in the same period, 2022. Net loss in the fourth quarter was 103.8 million. Non-GAAP adjusted net loss in the fourth quarter was 99.2 million. On a per share basis, basic and diluted net loss per ADS in the fourth quarter of 2023 were both 0.95 respectively, and non-GAAP adjusted basic and diluted net loss per ADS in the same period were both 0.91, respectively. For the full year of 2023, our total net revenue were 1.7 billion. Total operating costs and expenses were 1.8 billion. Net loss was 37.9 million, and non-GAAP adjusted net income was 0.6 million. Basic and diluted net loss per EDS were both 0.31. Non-GAAP-adjusted basic net income per EDS was 0.01, and non-GAAP-adjusted diluted net income was 0, respectively. Moving on to our balance sheet, as of December 31, 2023, the company had cash and cash equivalents of $1 billion, compared with $665.6 million as of September 30, 2023. As of December 31, 2023, the company had a short-term investment of $635.1 million, while the company had restricted cash. Current bank deposit held for short-term investment of $1.7 billion. As of September 30, 2023, the company had a short-term investment of $2.4 billion. Looking ahead to the first quarter of 2024, we are now predicting our total revenues to be between RMB 50 million and RMB 100 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.
spk01: Thank you. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star 2. If you are on a speakerphone, please pick up the handset to ask your question. Your first question comes from Ping Yu Lu.
spk02: Your line is now live.
spk01: Thank you. Your next question comes from Emerson Xiao. Please go ahead.
spk05: Hello, Mr. Emerson. I have three questions. First, I saw that the company and Cao Cao made a strategic cooperation this year. What is the current progress? Second, I saw that the company has a lot of cash on its account. I would like to ask if there will be a red line after the trip. The third question is, after the two apps are merged, what will be the difference between the old and the new app? Thank you.
spk03: Thank you, Emerson from Goldman Sachs. I have three questions. First question, we noticed that the company has entered a strategic partnership with Taochong Mobility. Can the management share some details on this progress? And second question is that we noticed the company currency holds an essential cash position. A lot of companies, you know, issue dividends, distribute dividends. And my third question is, what are the differences in Kangoo Your Car before and after integration?
spk04: 谢谢Emerson. Thank you, Amazon, for your questions. The first question, well, Chaochao Mobility is a leading domestic shared mobility platform.
spk03: It provides users with smarter, greener, and healthier travel experiences, and can go with the powerhouse in automotive trading and aftermarket strategies. Our extensive network and fast vehicle inventory will enable us to jointly pursue business opportunities in China's high-growth, lower-tier markets.
spk04: 目前我们双 方的IT同事正在做后台系统程序开发的沟通中, 有最新进展我们会及时同步大家。
spk03: Currently, IT teams from both parties are working together on the backend system and program development. We will provide regular updates to keep everyone in front of the latest developments as they unfold. On your second question, since going public, we've established a track record of rewarding shareholders with consistent dividends to further solidify confidence in CanGo's long-term growth trajectory. For further dividend plans, we will maintain a prudent approach, carefully considering factors like overall strategic plans, business developments, and our cash flow position to ensure a sustainable dividend policy.
spk04: Regarding the third question, the two apps merged. The previously independently operated Canggu You Car mainly focuses on second-hand car transaction services, including service for drivers, patrol cars, and real-time tolls. After the integration, in addition to the existing second-hand car business, Canggu You Car also merged new car transaction functions, including new car transactions, insurance, traffic, and other comprehensive third-party seller stores.
spk03: On your third question, prior to integration, Tango U-Car functions as a standalone platform dedicated to used car transactions. This included sourcing vehicles, facilitating car searches, and hosting online auctions. Following the integration, Kangaroo Car has evolved beyond the used car platform and now builds a comprehensive marketplace featuring third-party sellers of renew car sales, insurance, and traffic generation services. We are committed to continuously expanding this ecosystem by integrating even more third-party vendors, fostering a more dynamic and enriching user experience. Thank you.
spk01: Thank you. Your next question comes from from CITIC Securities. Please go ahead.
spk03: I'm Wu Pingyue from CITIC Securities. I have two questions. The first question is, could management share your insights for 2023 automotive market and provide outlook for 2024? My second question is on the used car export business. What about the progress and has the company considered working with some KOLs? Okay, thank you.
spk04: In 2023, there will be a high and low attitude. At the end of the year, Thank you for your questions. On your first question, despite the sluggish start in 2023, the automotive market accelerated towards the latter part of the year and into early 2024.
spk03: This momentum was fueled by a series of promotional activities launched by car manufacturers. We anticipate these price reductions to persist for some time. However, the intense competition within the industry has resulted in margin pressure for various players throughout the supply chain.
spk04: 我们预计2020年燃油车市场和新能源车的竞争都将更加激烈。 燃油车盈利但萎缩较快,新能源车高增长但亏损较大,矛盾压力比较大。 2024 outlook, NEV penetration rate has been surging over the years. It rose from 28% in 2022 to 35% in 2023 and is expected to reach 40% by 2024.
spk03: This rapid shift is intensifying competition within the NEV segment as well as the conventional field vehicle segment. While traditional gasoline-powered vehicles remain profitable, their market share is contracting rapidly. NEVs are experiencing robust sales growth, but manufacturers are currently absorbing significant losses. So this contrasting dynamic presents substantial pressure on the overall market.
spk04: Regarding the second-hand car market, At the beginning of March, the company launched Auto Kangal, a service website for second-hand car cross-border information, providing domestic second-hand car dealers and foreign buyers with information on Chinese domestic second-hand car members, fill in the blanks of the current domestic cross-border second-hand car transaction information service website. We are currently mainly facing some foreign, some new developments in the country's left-hand car market of car dealers. We hope to create another one that can easily obtain China is the world's largest car manufacturing and consumer market with abundant car resources. Our platform uses innovative AI technology to improve vehicle visibility, search efficiency, and interaction compatibility to accurately meet the individual needs of each customer and ensure transparency, efficiency, and security of transactions.
spk03: On your second question, our used car F4 business, in March 2024, we launched AutoCango, the first of its kind cross-border information exchange platform for used car market. AutoCango bridges the gap in information services by connecting domestic Chinese used car dealers with foreign buyers, specifically targeting auto dealers in left-hand drive markets across emerging economies. Diverging China's position as the world's largest auto market, AutoKango empowers its international buyers with easy access to a vast pool of quality use costs. Powered by innovative AI technology, our platform streamlines the user experience in housing, vehicle discovery, search efficiency, and user interaction to precisely meet evolving customer needs. Auto Cango prioritizes transparency, efficiency, and security throughout the entire transaction process, ensuring a smooth and secure experience for all parties involved. On partnerships, we are open to partnership opportunities that align with the following criteria. Firstly, profitability. We prioritize ventures with clear business models and transparent cost structures. And secondly, long-term growth potential. However, to ensure efficient resource allocation, we conduct regular assessments within defined timeframes. Thank you.
spk01: Thank you. We have no further questions at this time. I'll now hand the call back to management for closing remarks.
spk04: Thank you all for your participation.
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