Plus Therapeutics Q4 2023 Earnings Call Transcript

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Provided by Quartr
March 11, 2024

There are 3 speakers on the call.

Operator

Good morning and good evening, everyone. Welcome to Cango Inc. 4th 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.

Operator

Joining us today are Mr. Jiayuan Lin, Chief Executive Officer and Mr. Yongyi Zhang, Chief Financial Officer of the company. Following management's prepared remarks, we will conduct the Q and 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.

Operator

With that said, I am now turning the call over to Mr. Xiaoyuan Lin, CEO of Cango. Please go ahead, sir.

Speaker 1

Hello, everyone, and welcome to Cango's 4th quarter 2023 earnings call. 2023 proved to be a year of resilience in the face of headwinds. While the 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.

Speaker 1

Prize sports became a norm in the auto sales landscape, triggering unnecessary restructuring within the industry. This shift 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. Despite the challenging market environment in 2023, Cango delivered total revenue of $130,000,000 in Q4 and RMB1.7 billion for the full year. The company strategically reduced its total outstanding financing balance of facilitated financing transactions to approximately RMB 10,000,000,000 by year end.

Speaker 1

Our quarterly rate metrics remain stable with N1 plus and N3 plus delinquency rates at 2.66% and 1.37%, respectively, reducing our risk exposure further. To mitigate this dynamic market, Cango implemented strict cost reduction measures and efficiency enhancements, successfully lowering operating expenses. Notably, Cango maintains strong financial position backed by robust liquidity and ample cash reserves. As of December 31, 2023, the company boasted RMB 3,330,000,000 in cash, cash equivalents 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.

Speaker 1

To adapt to evolving market conditions and capitalize on industry trends, 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, Kangou Hao Zhi into Kangou Yucar, our used car platform. This strategic move optimizes resource allocation and boosts in operational efficiency. The upgraded Kangoyukar app now functions as a comprehensive online marketplace.

Speaker 1

It connects upstream vehicle suppliers, aftermarket service providers and downstream small dealers in lower tier cities. This integrated platform offers users the full suite of services throughout the used car transaction process catering to 3 main scenarios that is online auctions, dealer to dealer transactions and broker assisted deals. Kangou Yucao 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.

Speaker 1

Our revenue streams will primarily come from upstream store rentals, membership subscriptions and transaction related service fees. We streamlined operations within the integrated Cango UCaa platform in Q4. This included the introduction of a fixed price end to end transaction service for cross regional used car purchases. This innovative service simplifies and secures long distance transactions by offering price verification, vehicle inspection, guarantees and delivery services. By Q4, 38 upstream third party sellers have set up stores on Cango U Car, offering a comprehensive selection of vehicles, including new and used cars, along with traffic generation services.

Speaker 1

By leveraging our expertise in sales funnel management, we identified 9,887 potential business leads in Q4. We successfully converted a significant portion of these leads, providing services to 3,499 online small dealers and facilitating 530 used car transactions. Besides attracting third party sellers, we are also maximizing engagement and exploring new opportunities through our self operated stores. These stores offer a diverse range of services in 4 key areas. Firstly, repossessed car management.

Speaker 1

We handle repossessed vehicles primarily sourced from our auto financing business and collaborations with other lenders Secondly, C2B lead conversion, which transforms 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.

Speaker 1

Our insurance teams offers comprehensive coverage, including auto insurance. And as of Q4, non auto options like we'll enjoy are your insurance or key regional clients. At Pindu YouCall, we understand our superior user experience hinges only 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 used car circulation.

Speaker 1

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 rates and offer our success. Kango's vision remains the first to become an industry leader by continuously refining and offering top notch services and products across entire automotive value chain. Kangdu Yuchar's online marketplace is just one facet of our growth strategy.

Speaker 1

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 the vast pool of used cars, a gold mine for exporters. Additionally, government policies are fostering a more transparent regulated 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.

Speaker 1

Li Fioreng is positioned as the top international trading nation. China boasts a well developed logistics network ensuring efficient and secure delivery of used cars to international buyers. China's position as the world's leading auto effort with over 5,000,000 vehicles shipped in 2023 and a projected upward trend presents a compelling opportunity for the used car export market. Recognizing this potential, Cango 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.

Speaker 1

S.-listed company, which brings the fastest 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 Cango, these international dealers gain easy access to China's fast pool of used vehicles, a significant advantage in today's global market. AutoCango, our cross border used car information exchange platform, or www.autocango.com, was launched in early March 500 to 1000 new vehicles added weekly. The infringing cutting edge AI technology, AutoCango empowers users with an intuitive search experience, making it easier than never to find the perfect car.

Speaker 1

Furthermore, our platform prioritizes user interaction, ensuring it caters to each customer's evolving needs. Transparency, efficiency and security are at the core of 42 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 used cars from China. While acknowledging the current market complexities, we remain bullish on the long term potential of China's auto industry and the strength of Cango'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.

Speaker 1

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

Speaker 2

landscape.

Speaker 1

I'll hand over to our Chief Financial Officer, Michael Zhang, for a review of the company's financial performance.

Speaker 2

Thanks, Jiayuan. Hello, everyone, and welcome to our Q4 and full year 2023 earnings call. Before I started to review our financials, please note that unless otherwise stated, all numbers are in RMB terms and or percentage comparisons on a year over year basis. Total revenue in the Q4 of 2023 were $130,200,000 compared with $487,100,000 in the same period 2022. Guarantee income, which represents the fee income earned on the non contingent aspect of our guarantee, was RMB42.1 million in the 4th quarter.

Speaker 2

Now let's move on to our costs and expenses during the quarter. Total operating costs and expenses in the Q4 of 2023 were RMB 100 and $59,100,000 compared with $698,700,000 in the same period 2022. Cost and revenue in the 4th quarter decreased to $110,900,000 from $481,700,000 in the same period 2022. As a percentage of total revenues, cost of revenue in the Q4 of 2023 was 85.1% compared with 98.9% in the same period of 2022. Sales and marketing expenses in the 4th quarter decreased to RMB 4,400,000 from RMB 19,200,000 in the same period of 2022.

Speaker 2

As a percentage of total revenues, sales and marketing expenses in the Q4 of 2023 were 3.4% compared with 4% in the same period of 2022. General and administrative expenses in the 4th quarter decreased to $45,600,000 from 66 point 2 million in the same period of 2022. As a percentage of total revenues, general and administrative expenses in Q4 of 2023 were 35% compared with 13.6% in the same period 2022. Research and development expenses in Q4 decreased to $7,300,000 from $8,400,000 in the same period in 2022. As a percentage of total revenues, research and development expenses in Q4 of 2023 were 5.6% compared with 1.7% in the same period of 2022.

Speaker 2

Net loss on contingent risk assurance liability in the 4th quarter were RMB22,200,000. Net recovery on provisions for credit losses in the 4th quarter were RMB 31,200,000. The recovery was primarily due to the positive collections of financing receivables. We recorded RMB28.9 million in loss from operations in the Q4 of 2023 compared with $211,600,000 in the same period of 2022. Net loss in the 4th quarter was RMB103,800,000.

Speaker 2

Non GAAP adjusted net loss in the 4th quarter was RMB99,200,000. On a per share basis, basic and diluted net loss per ADS in the Q4 of 2023 were both RMB0.95, 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 was RMB1.7 billion. Total operating costs and expenses were RMB 1,800,000,000. Net loss was RMB 37,900,000 and non GAAP adjusted net income was RMB 600,000.

Speaker 2

Basic and diluted net loss per ADS were both 0.31. Non GAAP adjusted basic net income per ADS 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 RMB 1,000,000,000 compared with RMB665,600,000 as of September 30, 2023. As of December 31, 2023, the company had short term investment of CNY635,100,000 while the company had restricted cash, current bank deposit held for short term investments of RMB 1,700,000,000.

Speaker 2

As of September 30, 2023, the company had short term investment of RMB 2,400,000,000. Looking ahead to the Q1 of 2024, we are now predicting our total revenues to be between RMB50 RMB50 1,000,000 and RMB100 1,000,000. 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.

Operator

Thank Thank you. Your next question comes from the line of Henderson Xiaohan from Goldman Sachs.

Speaker 1

I'm Emerson from Goldman Sachs. I have 3 questions. First question, we noticed that the company has entered a strategic partnership with Taotong Mobility. Can management share some details on these progress? And second question is we noticed the company's currency holds a substantial cash position, Lot of company issue dividends distribute dividends.

Speaker 1

And my third question is, what are the differences in Cango Your Card before and after integration? Thank you, Emerson, for your questions. The first question while Tata Mobility is a leading domestic shared mobility platform, it provides users with smarter, cleaner and healthier travel experiences. And Cango is a powerhouse in automotive trading and aftermarket Currently, IT teams from both parties are working together on the back end system and program development. We will provide regular updates to keep everyone informed of the latest developments as they answered.

Speaker 1

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 development and our cash flow position to ensure a sustainable dividend policy. On your third question, prior to integration, Cango U Car functioned as a standalone platform dedicated to used car transactions. This included sourcing vehicles, facilitating car searches and hosting online auctions. Following the integration, Kangoo UCaa has evolved beyond the used car platform and now boasts a comprehensive marketplace featuring third party sellers offering new car sales, insurance and traffic generation services.

Speaker 1

We are committed to continuously expanding this ecosystem by integrating even more third party vendors, a more dynamic and enriching user experience.

Speaker 2

Thank

Speaker 1

you.

Operator

Your next question comes from Ping Yu Lu from Citix Securities.

Speaker 1

Export business. What about the progress? And has the company considered working with some KOLs? 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.

Speaker 1

This momentum was fueled by a series of promotional activities launched by car manufacturers. We anticipate these price reductions will persist for some time. However, the intense competition within the industry has resulted in margin pressure for various players throughout the year's supply chain. 20 24 outlook. NEB penetration rate has been surging over the years.

Speaker 1

It rose from 28% in 2022 to 35% in 2023 and is expected to reach 40% by 20 24. This rapid shift is intensifying competition within the NEV segment as well as the conventional fuel vehicle segment. While traditional gasoline powered vehicles remain profitable, their market share is contracting rapidly. NEVs are experiencing a robust sales growth, but manufacturers are currently absorbing significant losses. So this contrasting dynamic presents substantial pressure on the overall market.

Speaker 1

On your second question, our used car export 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. ZVerging China's position as the world's largest auto market, autocango empowers these international buyers with easy access to a vast pool of quality use costs. Powered by Innovative AI technology, our platform streamlines the user experience, enhancing vehicle discovery, search efficiency and user interaction to precisely meet evolving customer needs. AutoCango prioritizes transparency, efficiency and security throughout the entire transaction process, ensuring a smooth and secure experience for all parties involved.

Speaker 1

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 time frames. Thank you.

Operator

Thank you. We have no further questions at this time. I will now hand the call back to management for closing remarks.

Speaker 1

Thank you all for your participation. That closes today's earnings call.

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Earnings Conference Call
Plus Therapeutics Q4 2023
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