Cango Inc. Reports Third Quarter 2018 Unaudited Financial Results
SHANGHAI, Nov. 22, 2018 /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 third quarter of 2018.
Financial and Operational Highlights
-- Total revenues in the third quarter of 2018 were RMB285.2 million
(US$41.5 million).
-- Net income in the third quarter of 2018 was RMB106.3million (US$15.5
million). Net income per ADS in the third quarter of 2018 was RMB0.73
(US$0.11). Each ADS represents two of the Company's Class A ordinary
shares.
-- The number of dealers covered by the Company increased to 44,279 as of
September 30, 2018, representing a year-over-year increase of 45.1%.
-- M1+ and M3+ overdue ratios for all financing transactions which the
Company facilitated and remained outstanding were 0.83% and 0.36%,
respectively as of September 30, 2018, as compared to 0.92% and 0.46%,
respectively as of June 30, 2018.
Recent Developments
The Company has made significant progress under the strategic cooperation with Industrial and Commercial Bank of China ("ICBC") and Didi Chuxing ("Didi"). The Company has completed the system integration with ICBC, and started to facilitate auto loans for ICBC. The Company has also established 39 subsidiaries in key ride-sharing cities across China for Didi, among which we have started operations in 7 cities, including the pilot city Changzhou.
Mr. Jiayuan Lin, Chief Executive Officer of Cango, stated, "During the third quarter of 2018, we adhered to our asset-light business model, focused on high-quality services for consumers, dealers and financial institutions, and pushed forward strategic growth initiatives. First, we continued to expand and optimize our dealer coverage. Leveraging our extensive dealer network, our proprietary SaaS management system helps dealers with loan facilitation, supply chain financing, and car sourcing. Our dealer relationship has become more deeply integrated in many operational fronts, which provided multiple sustainable monetizing opportunities for Cango. Second, our after-market service, has become a meaningful source of revenue despite being launched for less than a year. We observed a satisfying attach rate, along with the potential for providing after-market services as a standalone product."
Mr. Lin continued, "Third, our strategic cooperation with ICBC and Didi has been progressing as planned. Our system integration with ICBC has achieved initial success. Auto loan products with OEM subsidies represent a tremendous market segment we currently have little presence in. As to the cooperation with Didi, we have established 39 subsidiaries in key ride-sharing cities. Looking ahead, we expect the growth rate of car transactions in China to remain soft. Our strategy is to grow our market share with competitive products and solid execution; and to enter into new market segments through cooperation with our strategic partners. We have confidence in the transparent growth path ahead. We believe we will continue delivering value to our shareholders ."
Mr. Yongyi Zhang, Chief Financial Officer of Cango, stated, "During the third quarter of 2018, our business remained highly profitable and our operation cash flow positive. Third quarter revenues increased by 2.4% year-over-year, and after-market services started to make a meaningful revenue contribution. Our after-market services incurred minimum incremental labor and system costs and expenses, resulting in high profit margins and generating great return on our investment. As we continue cultivating dealership and customer life-long monetization opportunities, and developing operations and systems for new market opportunities, we believe we are well positioned to implement our growth strategies."
Third Quarter 2018 Financial Results
REVENUES
Total revenues increased by 2.4% to RMB285.2 million (US$41.5 million) in the third quarter of 2018 from RMB278.4 million in the corresponding period of 2017. The increase was primarily due to the contribution of after-market services. Total revenues for the first nine months of 2018 were RMB770.3 million (US$112.2 million), an increase of 4.0% compared to the corresponding period of 2017.
Revenue from after-market services in the third quarter of 2018 was RMB39.0 million (US$5.7 million), which accounted for 14% of total revenues.
OPERATING COST AND EXPENSES
Total operating cost and expenses in the third quarter of 2018 were RMB209.0 million (US$30.4 million), compared to RMB103.1 million in the corresponding period of 2017. The increase in operating cost and expenses was primarily attributable to the increases in cost of revenue, general and administrative expenses as well as sales and marketing expenses.
-- Cost of revenue in the third quarter of 2018 increased by 50.9% to
RMB113.5 million (US$16.5 million) from RMB75.2 million in the
corresponding period of 2017. As a percentage of total revenues, cost of
revenue in the third quarter of 2018 increased to 39.8% from 27.0% in
the corresponding period of 2017. The increase was due to a higher
average amount of commissions paid to dealers in each financing
transaction.
-- Sales and marketing expenses in the third quarter of 2018 increased to
RMB48.5 million (US$7.1 million) from RMB23.3 million in the
corresponding period of 2017. As a percentage of total revenues, sales
and marketing expenses in the third quarter of 2018 increased to 17.0%
from 8.4% in the corresponding period of 2017. The increase was due to
the expansion of the Company's sales personnel to 2,203 as of September
30, 2018 from 1,260 as of September 30, 2017, to further improve the
Company's dealer coverage and dealers' stickiness. The Company expects
its sales and marketing expenses as a percentage of total revenues to
decrease in the future due to economies of scale.
-- General and administrative expenses were RMB40.7 million (US$5.9
million) or 14.3% of total revenues in the third quarter of 2018,
compared with RMB16.5 million or 5.9% of revenues in the corresponding
period of 2017. The increase was primarily due to increased
administrative staff headcount and compensation, as well as the
share-based compensation expenses.
-- Research and development expenses in the third quarter of 2018 increased
to RMB10.8 million (US$1.6 million) from RMB3.8 million in the
corresponding period of 2017. As a percentage of total revenues,
research and development expenses in the third quarter of 2018 increased
to 3.8% from 1.4% in the corresponding period of 2017, mostly due to the
expansion of the Company's research and development team.
NET INCOME
Net income was RMB 106.3 million (US$15.5 million) in the third quarter of 2018, compared to RMB135.5 million in the corresponding period of 2017. Non-GAAP adjusted net income was RMB120.2 million (US$17.5 million), compared to RMB135.5 million in the same period last year. 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
Net income per ADS was RMB0.73 (US$0.11) in the third quarter of 2018, and RMB0.73 (US$0.11) on a diluted basis. Non-GAAP adjusted net income per ADS was RMB0.82 (US$0.12) in the third quarter of 2018, and RMB0.82 (US$0.12) on a diluted basis. Each ADS represents two of the Company's Class A ordinary shares.
BALANCE SHEET
As of September 30, 2018, the Company had cash and cash equivalents of RMB3,643 million (US$530.4 million), compared with RMB3,121 million as of June 30, 2018.
Business Outlook
For the fourth quarter of 2018, the Company expects total revenues to be between RMB280 million and RMB295 million. This forecast reflects the Company's current and preliminary views on the market and operational conditions, which are subject to change.
Conference Call Information
The Company will hold a conference call on Thursday, November 22, 2018 at 8:00 pm Eastern Time or Friday, November 23, 2018 at 9:00 am Beijing Time to discuss the financial results. Participants may access the call by dialing the following numbers:
International: +1-412-902-4272
United States Toll Free: +1-888-346-8982
China Toll Free: 4001-201-203
Hong Kong Toll Free:
800-905-945
Conference ID:
Cango Inc.
The replay will be accessible through November 30, 2018, by dialing the following numbers:
United States Toll Free:
+1-877-344-7529
International:
+1-412-317-0088
Access Code: 10123205
A live and archived webcast of the conference call will also be available at the Company's investor relations website at http://ir.cangoonline.com/.
About Cango, Inc.
Cango Inc. (NYSE: CANG) is a leading automotive transaction service platform in China connecting dealers, financial institutions, car buyers, and other industry participants. Founded in 2010 by a group of pioneers in China's automotive finance industry, the Company is headquartered in Shanghai and engages car buyers through a nationwide dealer network. The Company's services primarily consist of automotive financing facilitation, automotive transaction facilitation, and after-market services facilitation. By utilizing its competitive advantages in technology, data insights, and cloud-based infrastructure, Cango is able to connect its platform participants while bringing them a premium user experience. Cango's platform model puts it in a unique position to add value for its platform participants and business partners as the automotive and mobility markets in China continue to grow and evolve. For more information, please visit: www.cangoonline.com.
Definition of Overdue Ratios
We define "M1+ overdue ratio" as (i) exposure at risk relating to financing transactions for which any installment payment is 30 to 179 calendar days past due as of a specified date, divided by (ii) exposure at risk relating to all financing transactions which remain outstanding as of such date, excluding amounts of outstanding principal that are 180 calendar days or more past due.
We define "M3+ overdue ratio" as (i) exposure at risk relating to financing transactions for which any installment payment is 90 to 179 calendar days past due as of a specified date, divided by (ii) exposure at risk relating to all financing transactions which remain outstanding as of such date, excluding amounts of outstanding principal that are 180 calendar days or more past due.
Use of Non-GAAP Financial Measure
In evaluating the business, the Company considers and uses Non-GAAP adjusted net income, a non-GAAP measure, as a supplemental measure to review and assess its operating performance. The presentation of the non-GAAP financial measure is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with U.S. GAAP. The Company defines Non-GAAP adjusted net income as net income excluding share-based compensation expenses. The Company presents the non-GAAP financial measure because it is used by the management to evaluate the operating performance and formulate business plans. Non-GAAP adjusted net income enables the management to assess the Company's operating results without considering the impact of share-based compensation expenses, which are non-cash charges. The Company also believes that the use of the non-GAAP measure facilitates investors' assessment of its operating performance.
Non-GAAP adjusted net income is not defined under U.S. GAAP and is not presented in accordance with U.S. GAAP. This non-GAAP financial measure has limitations as analytical tools. One of the key limitations of using Non-GAAP adjusted net income is that it does not reflect all items of expense that affect the Company's operations. Share-based compensation expenses have been and may continue to be incurred in the business and is not reflected in the presentation of Non-GAAP adjusted net income. Further, the non-GAAP measure may differ from the non-GAAP information used by other companies, including peer companies, and therefore their comparability may be limited.
The Company compensates for these limitations by reconciling the non-GAAP financial measure to the nearest U.S. GAAP performance measure, all of which should be considered when evaluating the Company's performance. The Company encourages you to review its financial information in its entirety and not rely on a single financial measure.
Reconciliations of Cango's non-GAAP financial measure to the most comparable U.S. GAAP measure are included at the end of this press release.
Exchange Rate Information
This announcement contains translations of certain RMB amounts into U.S. dollars ("US$") at specified rates solely for the convenience of the reader. Unless otherwise stated, all translations from RMB to US$ were made at the rate of RMB6.8680 to US$1.00, the noon buying rate in effect on September 28, 2018 in the H.10 statistical release of the Federal Reserve Board. The Company makes no representation that the RMB or US$ amounts referred could be converted into US$ or RMB, as the case may be, at any particular rate or at all.
Safe Harbor Statement
This announcement contains forward-looking statements. These statements are made under the "safe harbor" provisions of the United States Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" and similar statements. Among other things, the "Business Outlook" section and quotations from management in this announcement, contain forward-looking statements. Cango may also make written or oral forward-looking statements in its periodic reports to the SEC, in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about Cango's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: Cango's goal and strategies; Cango's expansion plans; Cango's future business development, financial condition and results of operations; Cango's expectations regarding demand for, and market acceptance of, its solutions and services; Cango's expectations regarding keeping and strengthening its relationships with dealers, financial institutions, car buyers and other platform participants; general economic and business conditions; and assumptions underlying or related to any of the foregoing. Further information regarding these and other risks is included in Cango's filings with the SEC. All information provided in this press release and in the attachments is as of the date of this press release, and Cango does not undertake any obligation to update any forward-looking statement, except as required under applicable law.
Investor Relations Contact
Caroline Li
Cango Inc.
+86 21 3183 5087
ir@cangoonline.com
CANGO INC.
UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEET
(Amounts in Renminbi ("RMB") and US dollar ("US$"), except for number of shares and per share data)
As of December 31, As of September 30,
2017 2018
RMB
RMB
US$
ASSETS:
Current assets:
Cash and cash equivalents 803,270,815 3,642,758,351 530,395,800
Restricted Cash 10,060,360 10,129,155 1,474,833
Short-term investments 62,380,000 201,454,000 29,332,266
Accounts and financing receivable, net 86,427,259 100,671,704 14,658,082
Short-term finance leasing receivable, net 751,934,198 109,483,721
Short-term amounts due from related parties 1,253,833
Prepaid expenses and other current assets 144,858,222 63,304,040 9,217,245
Total current assets 1,108,250,489 4,770,251,448 694,561,947
Non-current assets:
Restricted Cash 319,352,347 580,965,889 84,590,258
Long-term investments 191,002,602 291,225,956 42,403,313
Equity method investments 165,659,951 1,451,427 211,332
Goodwill 145,063,857 21,121,703
Property and equipment, net 9,751,738 19,570,541 2,849,525
Intangible assets 1,701,770 1,774,670 258,397
Deferred tax assets 67,774,187 76,286,734 11,107,562
Long-term amounts due from related parties 122,383,094
Long-term finance leasing receivable, net 748,241,928 108,946,116
Other non-current assets 10,991,399 22,078,402 3,214,677
Total non-current assets 888,617,088 1,886,659,404 274,702,883
TOTAL ASSETS 1,996,867,577 6,656,910,852 969,264,830
LIABILITIES, MEZZANINE EQUITY AND
SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings 171,400,000 24,956,319
Long-term debts-current 303,521,920 44,193,640
Accrued expenses and other current liabilities 328,522,735 156,482,317 22,784,263
Short-term amounts due to related parties 5,525,000
Risk assurance liabilities 129,935,457 161,743,140 23,550,253
Income tax payable 62,320,855 55,515,820 8,083,259
Total current liabilities 526,304,047 848,663,197 123,567,734
Non-current liabilities:
Long-term borrowings 175,000,000 581,876,978 84,722,915
Other non-current liabilities 35,555,908 32,870,283 4,786,005
Total non-current liabilities 210,555,908 614,747,261 89,508,920
Total liabilities 736,859,955 1,463,410,458 213,076,654
Mezzanine equity
Convertible Preferred Shares
Series A-1 1,501,153,698
Series A-3 307,816,408
Series B 2,132,875,970
Series C
Total mezzanine equity 3,941,846,076
Shareholders' equity
Ordinary shares 83,145 204,260 29,741
Series A-2 Convertible Preferred Shares 1,450
Additional paid-in capital 4,100,000 19,439,077 2,830,384
Accumulated other comprehensive (398,698) 107,045,840 15,586,174
income/(loss)
Accumulated (deficit) retained earnings (2,711,414,472) 5,058,446,424 736,523,940
Total Cango Inc.'s (deficit) equity (2,707,628,575) 5,185,135,601 754,970,239
Non-controlling interests 25,790,121 8,364,793 1,217,937
Total shareholders' (deficit) equity (2,681,838,454) 5,193,500,394 756,188,176
TOTAL LIABILITIES, MEZZANINE EQUITY 1,996,867,577 6,656,910,852 969,264,830
AND SHAREHOLDERS' EQUITY
CANGO INC.
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME
(Amounts in Renminbi ("RMB") and US dollar ("US$"), except for number of shares and per share data)
Three months ended September 30, Nine months ended September 30,
2017 2018 2017 2018
RMB
RMB
US$
RMB
RMB
US$
Revenues 278,442,720 285,171,140 41,521,715 740,876,311 770,278,151 112,154,652
Operating cost and expenses:
Cost of revenue 75,237,589 113,539,426 16,531,658 237,831,135 275,576,495 40,124,708
Sales and marketing 23,285,963 48,494,188 7,060,889 57,058,501 120,292,212 17,514,882
General and administrative 16,521,980 40,703,732 5,926,577 43,449,576 98,798,322 14,385,312
Research and development 3,788,950 10,833,449 1,577,380 9,182,263 26,766,990 3,897,349
Net (gain) on risk assurance liabilities (15,725,161) (14,055,654) (2,046,543) (37,640,739) (15,239,157) (2,218,864)
Provision for financing receivables 9,464,769 1,378,097 22,928,882 3,338,509
Total operation cost and expense 103,109,321 208,979,910 30,428,058 309,880,736 529,123,744 77,041,896
Income from operations 175,333,399 76,191,230 11,093,657 430,995,575 241,154,407 35,112,756
Interest income 3,562,379 15,045,281 2,190,635 9,777,092 41,368,719 6,023,401
income from equity method investments 3,883,027 43,795,483 6,376,745 4,155,139 42,399,341 6,173,463
Interest expense (5,119,996) (4,757,534) (692,710) (10,013,277) (14,259,589) (2,076,236)
Foreign exchange loss, net (15,655,457) (6,739,620) (981,308) (24,345,001) 682,896 99,432
Other income 13,428,261 11,925,506 1,736,387 15,981,449 32,971,660 4,800,765
Other expenses (174,390) 6,669,254 971,062 (282,578) (528,669) (76,976)
Net income before income taxes 175,257,223 142,129,600 20,694,468 426,268,399 343,788,765 50,056,605
Income tax expenses (39,749,961) (35,866,227) (5,222,223) (107,030,659) (88,882,439) (12,941,532)
Net income 135,507,262 106,263,373 15,472,245 319,237,740 254,906,326 37,115,073
Less: Net income attributable to the noncontrolling interest shareholders 10,818,050 3,447,788 502,008 13,105,836 7,546,938 1,098,854
Net income attributable to Cango Inc.'s shareholders 124,689,212 102,815,585 14,970,237 306,131,904 247,359,388 36,016,219
Less: Accretion of Series C Preferred Shares (6,991,289) (1,017,951)
Net income attributable to Cango Inc.'s ordinary shareholders 124,689,212 109,806,874 15,988,188 306,131,904 247,359,388 36,016,219
Net income per ADS(Note 1):
Basic 1.00 0.73 0.11 2.42 1.82 0.27
Diluted 1.00 0.73 0.11 2.42 1.80 0.26
ADSs used in net income per ADS computation (Note 1):
Basic 63,574,601 150,049,511 150,049,511 63,574,601 135,592,860 135,592,860
Diluted 126,415,858 150,049,511 150,049,511 126,415,858 137,062,696 137,062,696
Other comprehensive income, net of tax
Unrealized losses on available-for-sale securities (3,647,669) 11,384 1,658 (2,065,258) 167,515 24,391
Reclassification of losses to net income 2,065,258 2,065,258
Foreign currency translation adjustment 63,386,168 9,229,203 107,277,023 15,619,834
Total comprehensive income 133,924,851 169,660,925 24,703,106 319,237,740 362,350,864 52,759,298
Total comprehensive income attributable to Cango Inc.'s shareholders 123,106,801 166,213,137 24,201,098 306,131,904 354,803,926 51,660,444
Note1: Each ADS represents two ordinary
shares.
CANGO INC.
RECONCILIATIONS OF GAAP AND NON-GAAP RESULTS
(Amounts in Renminbi ("RMB") and US dollar ("US$"), except for number of shares and per share data)
Three months ended September 30, Nine months ended September 30,
2017 2018 2017 2018
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
RMB
RMB
US$
RMB
RMB
US$
Net income 135,507,262 106,263,373 15,472,244 319,237,740 254,906,326 37,115,074
Add: Share-based compensation expenses - 13,971,837 2,034,338 19,439,077 2,830,384
Cost of revenue 572,846 83,408 797,003 116,046
Sales and marketing 2,976,001 433,314 4,140,523 602,872
General and administrative 9,696,453 1,411,831 13,490,717 1,964,286
Research and development 726,537 105,786 1,010,834 147,180
Non-GAAP adjusted net income 135,507,262 120,235,210 17,506,582 319,237,740 274,345,403 39,945,458
Less: Net income attributable to the 10,818,050 3,447,788 502,008 13,105,836 7,546,938 1,098,855
noncontrolling interest shareholders
Non-GAAP adjusted net income attributable to 124,689,212 116,787,422 17,004,575 306,131,904 266,798,465 38,846,603
Cango Inc.'s shareholders
Accretion of Series C Preferred Shares - (6,991,289) (1,017,951)
Non-GAAP adjusted net income attributable to 124,689,212 123,778,711 18,022,526 306,131,904 266,798,465 38,846,603
Cango Inc.'s ordinary shareholders
Non-GAAP adjusted net income per ADS-basic (Note 1) 1.00 0.82 0.12 2.42 1.97 0.29
Non-GAAP adjusted net income per ADS-diluted (Note 1) 1.00 0.82 0.12 2.42 1.97 0.29
Weighted average ADS outstanding-basic 63,574,601 150,049,511 150,049,511 63,574,601 135,592,860 135,592,860
Weighted average ADS outstanding-diluted 126,415,858 150,049,511 150,049,511 126,415,858 137,062,696 137,062,696
Note1: Each ADS represents two ordinary shares.
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SOURCE Cango Inc.
