SHANGHAI, August 24, 2020 /PRNewswire/ -- Cango, Inc. (NYSE: CANG) ("Cango" or the "Company"), a leading automotive transaction service platform in China, today announced its unaudited financial results for the second quarter of 2020.
Second Quarter 2020 Financial and Operational Highlights
Total revenues were RMB274.1 million (US$38.8 million) compared with RMB336.3 million in the same period of 2019, mainly due to the impact of the COVID-19 pandemic, which has severely disrupted the domestic automotive industry.
After-market services facilitation revenues increased to RMB52.5 million (US$7.4 million), or 19.1% of total revenues in the second quarter of 2020, continuing to serve as an important driver for the Company's revenue growth.
The amount of financing transactions the Company facilitated in the second quarter of 2020 was RMB4,946.0 million (US$700.1 million). The total outstanding balance of financing transactions the Company facilitated was RMB37,497.3 million (US$5,307.4 million) as of June 30, 2020.
M1+ and M3+ overdue ratios for all financing transactions that remained outstanding and were facilitated by the Company were 1.59% and 0.84%, respectively, as of June 30, 2020, as compared to 2.00% and 0.56%, respectively, as of March 31, 2020.
The number of dealers covered by the Company was 44,521 as of June 30, 2020, compared to 45,688 as of March 31, 2020. The decrease was a result of Cango’s efforts to optimize the efficiency of its dealership network by removing certain dealers that failed to meet the Company’s standards for operating risks and/or transaction referral capabilities.
Mr. Jiayuan Lin, Chief Executive Officer of Cango, commented, "While the overall auto industry has shown signs of gradual recovery, the difficult conditions triggered by the COVID-19 pandemic persisted through the end of the second quarter, and therefore the speed of that recovery, especially in lower-tier cities where the majority of our business operates, was slower than our previous expectations. In addition, low- and mid-range car models, as well as cars produced by domestic car manufacturers, were impacted more than high-end car models and those cars manufactured through joint ventures with foreign firms. Despite these headwinds, our after-market services facilitation business achieved an outstanding performance, mainly attributable to the prompt development of our insurance facilitation services. In particular, the car insurance contracts we facilitated in the second quarter grew significantly compared with the previous quarter. Also of note, the quality of our assets has improved considerably in the second quarter, as reflected by the improvement in our M1+ overdue ratio of 1.59% as of June 30, 2020 compared with 2.00% as of March 31, 2020. On the other hand, some of last quarter’s M1+ delinquencies have become M3+ delinquencies, but within a very reasonable range. We remain committed to applying a rigorous and comprehensive risk management policy and are confident in our ability to maintain the quality of our assets going forward.
“Looking ahead, we are well-positioned to keep momentum going by further expanding the auto loan facilitation business into the higher-end segment of the market. We have established a dedicated team to target this large market segment which has untapped potential. Additionally, we will continue to grow our insurance facilitation services by exploring more prime insurance transaction channels and expanding our insurance product offerings. We believe that 2020 is a very unique and pivotal year for the auto industry due to COVID-19, and a great time to push our strategic initiatives and find new directions for long-term growth. With more support from government and improved consumers’ confidence, we feel optimistic about the auto finance industry in the second half of this year. Fortified by our competitive advantages and unique market position, we may continue to create more value for our clients, partners and shareholders, while contributing to the development of the entire industry,” Mr. Lin concluded.
Mr. Yongyi Zhang, Chief Financial Officer of Cango, stated, "Amidst the COVID-19 pandemic, we generated RMB274.1 million in total revenues in the second quarter of 2020, outperforming the high end of our previous guidance by approximately 10%. In addition, we continue to see our cost optimization measures working, with gross margin maintained at a healthy level in the second quarter. We also regained positive operating income, mainly attributable to our effective cost control initiatives and improved asset quality as a result of effective post-loan management. As a result, our bottom line increased to RMB70.2 million compared with a net loss of RMB34.7 million in the previous quarter. While uncertainty remains given the challenging operating environment, we are pleased with the strength of our business fundamentals and remain encouraged by the long-term prospects for our business.
Second Quarter 2020 Financial Results
REVENUES
Total revenues in the second quarter of 2020 were RMB274.1 million (US$38.8 million) compared to RMB336.3 million in the same period of 2019. Revenues from after-market services facilitation in the second quarter of 2020 increased by 46.3% to RMB52.5 million (US$7.4 million) from RMB35.9 million in the same period of 2019, and the increase was primarily due to the Company’s efforts to cross-sell insurance facilitation services.
OPERATING COST AND EXPENSES
Total operating cost and expenses in the second quarter of 2020 were RMB207.4 million (US$29.4 million) compared to RMB252.0 million in the same period of 2019. This was in line with the decrease in the Company’s sales volume.
Cost of revenue in the second quarter of 2020 decreased by 18.3% to RMB102.8 million (US$14.6 million) from RMB125.8 million in the same period of 2019, which was primarily due to a decrease in the amount of financing transactions the Company facilitated. As a percentage of total revenues, cost of revenue in the second quarter of 2020 was 37.5% compared to 37.4% in the same period of 2019.
Sales and marketing expenses in the second quarter of 2020 were RMB42.4 million (US$6.0 million) compared to RMB44.5 million in the same period of 2019. As a percentage of total revenues, sales and marketing expenses in the second quarter of 2020 increased to 15.5% from 13.2% in the same period of 2019.
General and administrative expenses in the second quarter of 2020 were RMB66.0 million (US$9.3 million) compared to RMB53.4 million in the same period of 2019. As a percentage of total revenues, general and administrative expenses in the second quarter of 2020 increased to 24.1% from 15.9% in the same period of 2019.
Research and development expenses in the second quarter of 2020 were RMB12.9 million (US$1.8 million) compared to RMB12.2 million in the same period of 2019. As a percentage of total revenues, research and development expenses in the second quarter of 2020 increased to 4.7% from 3.6% in the same period of 2019. The increase was a result of the Company’s efforts to maintain a stable level of investment in research and development projects.
Net gain on risk assurance liabilities in the second quarter of 2020 was RMB42.9 million (US$6.1 million) compared with a net loss of RMB76.9 million in the first quarter of 2020. Net gain on risk assurance liabilities was mainly due to a decrease in the delinquent loan balance and default rate.
INCOME FROM OPERATIONS
Income from operations in the second quarter of 2020 was RMB66.7 million (US$9.4 million), compared with RMB84.3 million in the same period of 2019.
NET INCOME
Net income in the second quarter of 2020 was RMB70.2 million (US$9.9 million). Non-GAAP adjusted net income in the second quarter of 2020 was RMB92.3 million (US$13.1 million). Non-GAAP adjusted net income excludes the impact of share-based compensation expenses. For further information, see "Use of Non-GAAP Financial Measure."
NET INCOME PER ADS
Basic and diluted net income per American Depositary Share (ADS) in the second quarter of 2020 were both RMB0.47 (US$0.07). Non-GAAP adjusted basic and diluted net income per ADS in the second quarter of 2020 were both RMB0.61 (US$0.09). Each ADS represents two of the Company's Class A ordinary shares.
BALANCE SHEET
As of June 30, 2020, the Company had cash and cash equivalents of RMB2,010.3 million (US$284.5 million), compared to RMB2,741.0 million as of March 31, 2020. The decrease was mainly due to the dividend paid in May and the repayment of debts.
Business Outlook
For the third quarter of 2020, the Company expects total revenues to be between RMB300 million and RMB330 million. This forecast reflects the Company's current and preliminary views on the market and operational conditions, which are subject to change.
The Company’s investee, Li Auto Inc. (“Li Auto”), was listed on the Nasdaq Global Select Market on July 30, 2020. Cango currently holds 39,194,413 Class A ordinary shares of Li Auto. The listing is expected to enhance the liquidity of the Company’s investment in Li Auto, and the change in fair value of investment may have a significant impact on the Company’s third quarter financial results.
