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spk01: Good morning and good evening, everyone. Welcome to Kengo Inc.' 's first quarter 2024 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. Jiayuan Ling, Chief Executive Officer, and Mr. Yongli Zheng, 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'm now turning the call over to Mr. Jaiwan Lin, CEO of Tango. Please go ahead, sir.
spk02: Welcome to CanGo's first quarter 2021 earnings call.
spk03: In the first quarter of 2024, China's GDP increased by 5.3% and maintained a warm growth in a complex global economic environment. The data of the Chinese Motor Industry Association shows that in the first quarter, the car sales each completed 660.6 million and 672 million, respectively increasing by 6.4% and 10.6%. China's GDP maintains moderate growth in Q1 2024, increasing by 5.3% year-on-year despite a complex global economic environment. According to the China Association of Automobile Manufacturers,
spk02: The auto industry also saw strong growth with production and sales reaching 6.61 million and 6.72 million vehicles respectively. This represents a year-on-year increase of 6.4% for production and 10.6% for sales. New energy vehicles, or EVs in short, were a particular bright spot. Production and sales surged by 28.2% and 31.8% year-on-year to 2.12 million and 2.09 million units respectively. This strong performance pushed NEV's market share to over 30%.
spk03: Despite the overall growth of test and sales data, the market environment is still facing many challenges. Traditional cars are transforming into deep-sea areas, while new cars are rapidly rising. Despite positive growth in vehicle production and sales, the auto market faces challenges on both the supply side and the demand side.
spk02: Traditional automakers must transform to compete in a new energy vehicle era, and emerging NEV manufacturers face intense competition and struggle for profitability. On the demand side, slow income growth and job market instability restrain consumer purchasing propensity. Rapid technological advancements and price competition lead consumers to delay purchases, further tightening the market.
spk03: In the face of the situation where the new car market is more than expected, we actively reduced the size of the new car self-sufficiency purchase, reduced the purchase and optimized the inventory. Although this caused the company's income to drop in the short term, it effectively avoided the risk of the new car price down. In the first quarter, the total revenue of Canggu Road was RMB6,442,000, the operating profit was RMB7,415, and the net profit was RMB9,030,000.
spk02: In response to the oversupply in the new car market, we took proactive steps to manage inventory and reduce costs. We strategically reduced the scale of our self-operated new car business and streamlined purchasing processes to improve efficiency and improved inventory management to mitigate the risk of declining new car prices. While this strategy resulted in a lower revenue compared to last year, that is $64.42 million in Q1 this year, It ensured profitability for the company. Our operating profit was 74.15 RMB, I mean 74.15 million RMB, and net profit was 90.03 million RMB.
spk03: We maintained financial stability in a challenging macroeconomic environment through strict cost controls and risk management.
spk02: We closely monitored liquidity and liabilities, reducing our total outstanding facilitated financing balance to 7.586 billion RMB by the end of Q1, and our delinquency ratios remain low at 2.87% for M1+, and 1.51% for M3+, as of March 31st, indicating strong asset quality. This quarter, we have completed the integration of Canggu's Yotech platform
spk03: Q1 also saw the successful integration of Kangoo Ucar strengthening our platform's competitiveness in several ways. We secured a consistent supply of high-quality vehicles, and dealer service adherences and supply chain management were optimized.
spk02: Cross-region deliveries became more convenient and secure.
spk03: 截至季度末,唱古优车APP累计注册车商用户8,459家, 累计PV超过13万,注册车商覆盖31省251个城市。 一季度中,拍卖成交124单,撮合成交204单。 Kengo Yuka achieved impressive growth in Q1 2024.
spk02: The platform expanded its reach to 8,459 registered car retailers across 31 provinces and 251 cities in China. It generated significant user engagement with over 130 million accumulated page views. The platform also facilitated 124 auctions and 204 facilitated dues. 为确保平台车员的丰富性和多样性,
spk03: We continue to strengthen the cooperation relationship with existing stores and attract new high-quality third-party stores to join. In the first quarter of 2020, we reached a cooperation with the domestic multi-local second-hand car trading market to introduce stable staff supply for the platform. At the same time, by implementing auction activities and exclusive activities on the platform, we achieved an increase in sales volume. In the first quarter, the platform implemented 42 auction activities.
spk02: We ramped up our vehicle offerings and transactions in Q1 2024. We strengthened partnerships with existing stores and brought on our platform high-quality third-party vendors nationwide, creating a more diverse and stable vehicle pipeline. Also, we boosted transaction volume by hosting 42 auction events and special sales throughout the quarter. 为打造产股优车线上平台参与化竞争优势
spk03: We focus on building a more attractive membership system, increasing membership-specific services and rights, thereby increasing the activity and ageing of platform car users. In the first quarter, we launched the MCN 4-point project to assist membership car dealers to realize the transfer upgrade from offline marketing to online and offline marketing. In April, we launched the Procurement and Purchase Service, from capital payment, logistics tracking, transportation insurance to land payment, We differentiated Kendo Yoka in Q1 through an enhanced membership ecosystem and premium services.
spk02: We developed a more attractive membership program with exclusive benefits to boost dealer engagement and loyalty. And we launched an NCM pilot program in Q1, helping dealers transition to an online plus offline marketing strategy. In addition, we introduced the hassle-free purchase service in April, offering comprehensive transaction support for payments, logistics, and insurance. This streamlines transactions for both buyers and sellers and improves transparency for a better member experience. In Q2, we will continue to focus on deepening user engagement, enriching platform content, and expanding both our membership base and high-quality vehicle inventory.
spk03: The cross-border information exchange platform has built a bridge for global multi-language users to understand and understand China's second-hand car market, filling the void of domestic cross-border second-hand car transaction information service. Through this platform, overseas buyers can more conveniently and more directly access China's high-quality second-hand car resources. In the future, we hope to build the platform into China's second-hand car out of the sea.
spk02: In addition, we are making waves in cross-border used car market. In March, we launched the first of its kind information platform to connect overseas buyers from different countries and regions directly with China's high-quality used car inventory. This platform fills the gap in cross-border used car information services, providing valuable insights to global users. And our goal is to become the go-to gateway for Chinese used cars entering the international market.
spk03: We are committed to unlocking new growth opportunities through innovative business models, partnering with our dealer network,
spk02: We will leverage continuous innovation and meticulous management to create additional value in China's rapidly evolving auto sector. This focus will ensure the company's long-term sustainable success. Next, I will turn the call over to our CFO, Michael Zhang, for a review of the company's financial performance.
spk04: Thanks, Jia Yuan. Hello, everyone, and welcome to our first quarter 2024 learning score. 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 first quarter of 2024 was $64.4 million compared with $552.6 million in the same period, 2023. The guaranteed income, which represented a fee income earned on the non-contingent aspect of guarantee, was $30.3 million in the first quarter of 2024. Now let's move on to our cost and expenses during the quarter. Cost of revenue in the first quarter decreased to $29.1 million from $480.5 million in the same period, 2023. As a percentage of total revenue, cost of revenue in the first quarter of 2024 was 45.1% compared with 88.6% in the same period 2023. Sales and marketing expenses in the first quarter decreased to $3.5 million from $12.5 million in the same period 2023. General and administrative expenses in the first quarter decreased to $37.9 million from $39.8 million in the same period 2023. Research and development expenses in the first quarter decreased to $1.1 million from $8.1 million in the same period, 2023. Net gain on contingent risk assurance liability in the first quarter was $15 million compared with $1.6 million in the same period, 2023. The gain was recognized due to the release of obligations from the contingent aspect of the risk assurance liabilities. Net recovery on provision for credit losses in the first quarter was 66.3 million. The recovery was primarily due to the positive impact from the collections of financing receivables. We recorded 74.2 million in income from operations in the first quarter of 2024, compared with 51.8 million in the same period, 2023. Net income in the first quarter was 90 million, Non-GAAP adjusted net income in the first quarter was $95.7 million. On a per share basis, basic and diluted net income per ADS in the first quarter of 2024 were $0.85 and $0.8, respectively. And non-GAAP adjusted basic and diluted net income per ADS in the same period was $0.91 and $0.85, respectively. Moving on to our balance sheet. As of March 31, 2024, the company had cash and cash equivalents of $1.2 billion compared with $1 billion as of December 31, 2023. As of March 31, 2024, the company had a short-term investment of $2.3 billion compared with $635.1 million as of December 31, 2023. The increase was mainly due to the conversion from restricted cash bank deposit held for short-term investments of RMB $1,670 million on December 31, 2023, after the company completed its subscription process. Looking ahead to the second quarter of 2024, we are now predicting our total revenues to be between $35 million and $45 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. We will now pause a moment to assemble our roster. Thank you. Our first question comes from Ting Wei Wu from Civic Security.
spk00: Please go ahead. Thank you.
spk02: My name is Wu Pingyuan from CITIC. I have a question. The first question is that recently the government launched a subsidy program for the trading programs in order to encourage the consumption. So does the company believe that this will help drive the recovery and growth of the automobile market? And if possible, could you give us A specific number you're measuring the degree of impact of this policy on the demand for vehicles or for automobiles. thank you very much for your question so in our view the government's trading subsidy program creates a positive tailwind for the auto market recovery and these subsidies act as an incentive for consumers especially those already considering an upgrade or to trading their older vehicles this could indeed lead to a significant boost in demand for new cars which benefits our company
spk03: Even so, we need to consider other factors that may affect the test, such as the macroeconomic environment, consumer confidence, model update cycle, etc. For the current consumer confidence, we judge that there is still a longer recovery period. Therefore, for the notification issued twice by the State Department and the Ministry of Commerce this year, we believe that its drive to increase consumer demand is still relatively limited.
spk02: While the trading subsidy is a positive step, we shouldn't underestimate the broader challenges facing the auto market. Consumer confidence and overall economic conditions will likely take time to improve, potentially limiting the program's immediate impact on new car demand. We commend the State Council and the Ministry of Commerce's efforts, but a comprehensive approach that addresses those other factors will be crucial for a sustained market recovery.
spk00: Thank you. My second question is, we noticed that the company's CanGo U-Car app was upgraded in April. So are there any new features after the upgrade?
spk02: Yes, the latest version of Kangaroo Car features our newly added hassle-free purchase service, which provides car dealers with more comprehensive and reliable solutions.
spk03: We've also enhanced the Kangaroo Car experience for our members with two exciting features.
spk02: The first is the exclusive membership section. Members now have access to a curated selection of premium vehicles nationwide, and these vehicles are all under three years old and have fewer than 50,000 kilometers, ensuring top quality. Plus, they are offered at competitive prices compared to industry standards. And second feature is improved in-app communication. With just one click, members now can connect with sellers directly within the app. This streamlines communication and boosts transaction efficiency. Thank you.
spk01: Thank you. The next question comes from Emerson Zhao from Goldman Sachs. Please go ahead.
spk05: Thank you.
spk02: Thank you. I'm Emerson Zhou from Goldman Sachs. I have two questions. The first question is we noticed that the company has decreased your new car procurement. So what will the revenue sources look like moving forward? And my second question is the company returned to profitability this quarter and holds a significant amount of cash. So will there be any plans for dividend payout?
spk03: Thank you, Emerson. Regarding the first question, due to the change in the market environment, we made strategic adjustments. Thank you for your questions. So on your first question, we strategically adapted to a changing market by streamlining
spk02: our self-operated new car business. While this segment previously generated significant revenue, it offered lower profit margins. And this proactive shift has led to a decrease in total revenue, but our core business has transitioned to facilitation services with much higher gross profit margin due to a leaner cost structure.
spk03: On the other hand, for the company, this transformation means to optimize the income structure, strengthen the operating capacity, and establish a solid foundation for future stable development.
spk02: Our evolving business model and optimized revenue structure have boosted profitability, laying a solid foundation for long-term sustainable growth.
spk03: Regarding financing, the company has been financing many times in the past few years. We hope to share the stages of company development with shareholders to strengthen the market's confidence in the company's future development. In the future, we will continue to have fund-raising arrangements. We will still start from the overall strategic layout of the company, and plan to combine business development and cash financing.
spk02: On your second question about dividend payout, well, since going public, the company has been consistently rewarding shareholders with dividends, reflecting our commitment to shared success. Looking ahead, we will strategically plan future dividend allocations, considering our evolving business and cash flow requirements. Thank you.
spk01: Thank you. That concludes the question and answer session. Thank you once again for joining Kengo's first quarter 2024 earnings conference call today. Have a great day.
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