Cango Inc.

Good morning and good evening, everyone. Welcome to CanGo, Inc.' 's third 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 Lin, Chief Executive Officer, and Ms. Rian Sun, Financial Director of CanGo. Following management's prepared remarks, we will conduct a Q&A session. Before I 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 make forward-looking statements. With that said, I am now turning the call to Mr. Jia Yun Lin, CEO of Tango. Please go ahead. 大家好,欢迎参加唱国2024年第三季度财报电话会议。

Hello everyone, and welcome to CanGo's 3rd Quarter 2024 Earnings Call.

In the 3rd quarter of 2024, CanGo's overall business performance was stable. It achieved a total income of RMB 2695 million, a profit of RMB 3524 million, and a net profit of RMB 6788 million. This was mainly due to the fact that we implemented a more rigorous cost control and risk management strategy, and improved operating efficiency through economic cost management.

In the third quarter of 2024, Kenco's overall business performance remained stable, highlighted by total revenue of 26.95 million RMB and operating profit of 35.24 million RMB and a net profit of 67.88 million RMB. These solid results were primarily driven by our implementation of stricter cost control and risk management strategies, which significantly improved operational efficiency. For post-loan management, we reinforced monitoring mechanisms and risk assessments, effectively maintaining a low non-performing loan ratio and ensuring asset quality and stability. As of September 30th, Our total outstanding loan balance was approximately 4.8 billion RMB with M1 Plus at 3.17% and M3 Plus at 1.76%. We also reduced our credit risk exposure not fully covered by bad debt allowance for risk assurance liabilities to 1.7 billion RMB. The company's total cash equivalents and short-term investments amounted to approximately 3.8 billion RMB, an increase of 89.27 million RMB compared to the end of the previous quarter.

在业务发展方面,我们进一步聚焦产股优车APP和二手车出海业务的发展。 截至三季度末,产股优车APP累计PV达到28万,环比增长21%。 本季度,我们与多个二手车交易市场建立了战略合作,实现车员信息的实时更新。

In terms of business development, we prioritize driving growth across the CanGo U-Car app and our overseas used car operations. By the end of the third quarter, the CanGo U-Car app had accumulated a total of 280,000 page views, an increase of 21% from last quarter. We strengthened CanGo's competitive advantages in vehicle inventory during the quarter, by establishing strategic partnerships with numerous used car marketplaces, enabling real-time updates of vehicle listings, and ensuring a diverse and abundant supply of vehicles through CanGo U-Car app. Meanwhile, we introduced a rapid vehicle inspection and listing service. In close collaboration with professional third-party inspection teams, we conduct thorough background checks and comprehensive vehicle condition assessments for each vehicle and provide buyers with detailed vehicle history reports and inspection data. enhancing transparency in transactions. Additionally, our nationwide logistics network offers buyers a variety of delivery and transport options to better meet diverse customer needs. Our community operations team fosters user engagement through a range of online and offline activities, including exclusive online auctions, on-site visits, and members-only discounts. We also continuously collect and analyze user feedback to refine our service processes, ensuring we consistently improve customer satisfaction.

On our used car export service, where we continue to make significant progress this quarter,

Our international used car platform, autocango.com, has accumulated over 370,000 page views and nearly 60,000 registered users since its launch in March 2024. The platform now offers more than 100,000 used car SKUs covering over 65,000 different models.

To better serve our customers and enhance our brand image, we are continuously optimizing autocango.com's content and improving the overall user experience. autocango.com's sitemap now boasts over 500,000 pages

thanks to consistent content updates and technological improvements. This growth reflects our commitment to content development and drives increased user engagement with information we provide.

在搜索引擎优化方面,我们也看到了积极的变化。 AutoCangle在垂直搜索结果的曝光量突破241万次,预计到今年年底将突破400万次。 這意味著越來越多的人能夠通過搜索引擎找到並訪問我們的網站,從而增加我們的品牌曝光率。 隨著海外市場的不斷開拓,目前已收到來自超過130個國家和地區的購車線索。 Our content development efforts have also driven positive changes in search engine optimization. autocango.com's visibility in search engine results pages, or SERP in short,

has exceeded 2.41 million impressions and is expected to surpass 4 million by the end of this year. This means that an increasing number of people can find and access our website through search engines, boosting our brand exposure. As we continue to expand into overseas markets, we have already received inquiries from over 130 countries and regions regarding vehicle purchases.

In the future, we will continue to focus on improving the quality and function of AutoCandle. Looking ahead, we will continue to focus on enhancing AutoCanGo.com's quality and functionality to meet the diverse needs of users in different regions.

At the same time, we will strengthen our data analysis capabilities to gain a more accurate understanding of the characteristics of our target market and user demographics. Building on this foundation, we will develop data-based scientific marketing strategies in that achieving more balanced global growth.

We are actively pursuing forward-looking strategic investment opportunities on a global scale. We will focus on high-quality projects that complement our core competencies

or brain technological innovation. By establishing an international cooperation network, strengthening communication with leading global companies, and actively participating in the collaborative development of overseas markets or overseas projects, we aim to showcase our company's strengths and vision on a broader stage. Now I would like to hand the call over to our financial director, Ruiyan Chen, who will share our financial performance for this quarter.

Thanks, Ms. Ling. Hello, everyone. I am Ruiyan Chen, financial director of Kangal, and welcome to our third quarter 2024 earnings call. Before I review our financials, please note that unless otherwise stated, all numbers are in RMB terms and all percentage comparisons are on a year-over-year basis. Total revenues in the third quarter of 2024 were $27.0 million, compared with $353.6 million in the same period of 2023. Guarantee income, which represented the fee income earned on the non-contingent aspect of a guarantee, was $14.4 million in the third quarter of 2024. represented separately from the contingent effect of a guarantee pursuant to the adoption of ASC 326 since January 1, 2023. Now let's move on to our costs and expenses during the quarter. Cost of revenue in the third quarter decreased to $23.3 million from $304.6 million in the same period of 2023. As a percentage of total revenues, cost of revenue in the third quarter of 2024 was 86.3% compared with 86.1% in the same period of 2023. Sales and marketing expenses in the third quarter decreased to $3.4 million from $9.9 million in the same period of 2023. General and administrative expenses in the third quarter were 45.2 million compared with 34.7 million in the same period of 2023. Research and development expenses in the third quarter decreased to 1.4 million from 7.0 million in the same period of 2023. Net gain on contingent risk assurance liabilities in the third quarter was $7.1 million compared with a net loss of $3.5 million in the same period of 2023. Net recovery on provision for credit losses in the third quarter of 2024 was $74.4 million compared with $66.9 million in the same period of 2023. We recorded $35.2 million in income from operations in the third quarter of 2024, compared with a loss of $87.8 million in the same period of 2023. Net income in the third quarter of 2024 was $67.9 million. Non-GAAP adjusted net income in the third quarter of 2024 was $71.3 million. On a per share basis, Basic and diluted net income per ADS in the third quarter of 2024 were 0.66 and 0.60, respectively. And a non-GAAP-adjusted basic and diluted net income per ADS in the same period were 0.69 and 0.53, respectively. Moving on to our balance sheet, as of September 30, 2024, the company had cash and cash equivalent of 691.8%. compared with $949.5 million as of June 30, 2024. As of September 30, 2024, the company had short-term investments of $3.1 billion compared with $2.7 billion as of June 30, 2024. Looking ahead to the fourth quarter of 2024, we are now predicting our total revenues to be between $15 million and $17.5 million. Please note that this forecast reflects our current and preliminary views on market and operational conditions, which are subject to change. This concludes our prepared remarks. Operator, we are now ready to take questions.

Thank you very much. We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, you may press star then two. At this time, we will pause momentarily to assemble our roster. Today's first question comes from Emerson Joe with Goldman Sachs. Please go ahead.

Hi, I'm Amazon from Kaohsiung. I have two main questions. The first question is about China's economic recovery. How does the company see the future of the economy? The second question is to ensure the safety and reliability of the second-hand car trade. What specific measures has the company taken to ensure the quality of the car? Thank you.

Thank you, management, for taking my questions. I have two questions. The first question is that considering the model recovery of the Chinese economy, how does the company view the potential impact of the future macroeconomic environment on your business? And the second question is, what specific vehicle quality assurance measures has the company taken to ensure the safety and reliability of used cars?

好,謝謝Emerson. 關於第一個問題, Thank you, Emerson, for your questions. On your first question,

China's moderate economic recovery will, we believe, positively impact our business. The improvements in the macroeconomic environment help boost consumer confidence and purchasing power, which in turn stimulates demand growth in the automotive market. Specifically for the used car market, as economic conditions improve, more people may be inclined to upgrade their vehicles or purchase a car for the first time. This will drive an increase in used car transactions. We will continue to monitor macroeconomic indicators and market dynamics to respond quickly to potential economic changes. We believe that by consistently enhancing operational efficiency and strengthening customer experience and leveraging our digital capabilities, the company can mitigate the potential impact of macroeconomic fluctuations on our business. In addition, we are actively exploring new growth opportunities and value-adding services to adapt to and meet the market's evolving needs. On your second question, how we are ensuring the safety and reliability of used cars, well, we collaborate with reputable dealers and regularly assess our partners to ensure they provide high-quality vehicles that meet our standards. Each vehicle undergoes over 100 professional technical inspections before being listed, covering areas such as exterior, interior, and mechanical performance.

A detailed inspection report is also provided for each vehicle, including but not limited to key information such as mileage and condition descriptions for buyer's reference.

We have also established a dedicated team to gather feedback, respond promptly to any complaints, and continuously improve processes to enhance overall service quality.

Thank you.

That's all from my side.

Thank you. The next question comes from Ping Yu Wu with CIPIC Securities. Please go ahead.

I have two questions. I would like to ask how the company plans to deepen the overseas market integration and optimize the function and service of the auto triangle. My second question is about capital control. What measures have we taken in terms of capital control and risk management strategies to improve operating efficiency and strengthen the financial structure?

Thank you. I have two questions for the management. And the first question is, how does the company plan to further integrate with your overseas markets? And what are the plans for optimizing Auto Kangoo's features and services? My second question is on risk control and management. What measures have CanGo taken in terms of cost control and risk management strategies to improve operational efficiency and improve your financial structure? And how will these measures continue to impact the company's future performance?

在这一过程中,对于非洲地区各国的清关政策进行了详尽研究,并已经在四个非洲国家建立了进口清关代理合作关系。 下一步计划是逐步构建非洲地区的业务代理商机制,旨在为潜在客户提供服务,涵盖包括但不限于清关物流等关键环节的支持。 Thank you for your questions.

On your first question, we are currently conducting comprehensive research on overseas markets and actively engaging with local partners to secure more localized support and resources. For example, we have thoroughly examined the customs clearance policies of various African countries and established import customs clearance agency partnerships in four nations to date. Our next step is to gradually develop a business agency framework in Africa in-depth providing services to potential clients in key areas such as customs clearance and logistics, among others.

此外,我們計劃通過社交媒體等平台 積極展示品牌形象 以提升國際知名度 為了確保全球用戶能夠無大礙地使用我們的服務 我們將提供多語言版本支持 Autocangle網站的語言版本 將在2025年初增加到15種 進一步增強

Additionally, we plan to actively showcase our brand image through social media and other platforms to enhance our international visibility. We will also offer multilingual support to ensure that users worldwide can seamlessly access our services. By early 2025, AutoCanGo.com will be available in 15 languages, further improving user experience and expanding our market reach.

在功能优化方面,AutoCangle将开启中国二手车市场直发测源的网站功能,并为海外用户提供在线快速查询二手车车况和价格的服务,进一步提升用户体验。 In terms of functionality improvement, we are introducing a direct sourcing feature for the Chinese used car market on AutoCangle.com.

We are also enabling online queries but to allow overseas users to quickly access information on the condition and prices of used vehicles, further enhancing user experience.

Last but not least, we are dedicated to developing talent with an international perspective and cross-cultural communication skills to enhance our operational capabilities in overseas markets.

We plan to recruit international students in Shanghai for internship programs, providing them with valuable practical experience while infusing our team with fresh blood, including global insights. Our goal is to create a diverse and globally competitive team that can better serve clients from various cultural backgrounds and advance the company's globalization efforts.

Regarding your second question, cost control and risk management strategy, in terms of cost control, we use optimized business processes to adopt automated tools to simplify the review process and implement a strict budget management system to ensure the rationality of investment. At the same time, we use cloud computing services to replace traditional IP infrastructure construction, reduce hardware investment and maintain cost. In addition, we establish long-term cooperation with high-quality suppliers to achieve better price conditions. On your second question on cost control and risk management strategies, well, firstly, on cost control, we have streamlined our business processes, automated approval workflows, and enforced strict budget management systems to ensure disciplined spending.

We also leverage cloud computing services to replace legacy IT infrastructure, significantly reducing hardware investments and maintenance costs. In addition, by fostering long-term partnerships with top-tier suppliers, we have secured more favorable pricing trends. We conduct regular performance evaluations and phase out underperforming suppliers to minimize procurement costs. Moreover, we have strategically optimized workforce allocation and upgraded our training and development programs to elevate the team's expertise and service quality. In terms of risk management, we have established a robust internal control system that clearly defines risk management ownerships at various levels and strengthen internal audits to promptly identify and rectify potential issues. Additionally, we closely monitor changes in the macroeconomic conditions and their impact on our business, ensuring that all operations comply with relevant laws and regulations. And we follow closely to the developments in policies and regulations and adjusting our corporate strategy as necessary. The sustained positive impact of these measures is reflected in the company's financial statements. Improvements in the balance sheet, improved cash flow, and enhanced profit performance have all laid a solid foundation for the company's next phase of strategic development.

That is all from my side.

Thank you. That concludes the question and answer session. Thank you once again for joining Kengo's third quarter 2024 earnings conference call today. Have a great day.

That closes today's earnings call. Thank you all for joining us.