TuanChe Restricted (NASDAQ:TC) Q3 2020 Earnings Convention Name December 18, 2020 7:30 AM ET

Firm Contributors

Cynthia Tan – Investor Relations

Wei Wen – Chief Government Officer

Chenxi Yu – Deputy Chief Monetary Officer

Convention Name Contributors

Jack Vander Aarde – Maxim Group

Operator

Good morning and good night, women and gents. Thanks for standing by to welcome to TuanChe Restricted Third Quarter 2020 Earnings Convention Name. At the moment, all contributors are in a listen-only mode. After ready remarks by the administration group, there shall be a question-and-answer session. Right now’s convention name is being recorded.

I might now like to show the decision over to your host in the present day, Ms. Cynthia Tan, IR Director of the corporate. Please go forward, ma’am.

Cynthia Tan

Howdy, everybody, and welcome to TuanChe’s third quarter 2020 earnings convention name. We’ve launched our earnings outcomes earlier in the present day and it’s now accessible on our IR web site, in addition to on Newswire providers.

Earlier than we proceed, please word that the dialogue in the present day will comprise forward-looking statements made below the Protected Harbor provisions of the U.S. Non-public Securities Litigation Reform Act of 1995. Ahead-looking statements contain inherent dangers and uncertainties. As such, our future outcomes could also be materially completely different from the views expressed in the present day. Additional data relating to these and different dangers and uncertainties is included in our earnings launch and our Registration Assertion filed with the SEC. TuanChe doesn’t assume any obligation to replace any forward-looking statements, besides as required by regulation.

Right now, you may hear from Mr. Wei Wen, the corporate’s Chief Government Officer, who will present an summary of our progress methods and enterprise developments. He shall be adopted by Mr. Chenxi Yu, Ronnie, the corporate’s Deputy Chief Monetary Officer, who will present further particulars on the corporate’s monetary outcomes and focus on the monetary outlook. Following administration’s ready remarks, we’ll open up the decision to questions.

With that stated, I might now like to show the decision over to our CEO, Mr. Wei Wen. Please go forward, sir.

Wei Wen

Howdy and thanks everybody for becoming a member of us in the present day on our third quarter 2020 earnings name. We’re happy to report third quarter outcomes that show — demonstrated our momentum in rebuilding revenues and decreasing internet losses each within the wake of the extreme market circumstances caused by COVID-19 earlier within the 12 months. Whereas our internet revenues have been RMB100 million, or 26.2% decrease in contrast with the identical quarter final 12 months, we exceeded the highest finish of our steering vary by 5.3% and improved 82.7% over the second quarter.

This was primarily pushed by restoration in offline advertising providers as gradual resumption of our offline auto reveals that started in Could is making regular progress. Along with the sequential quarter-over-quarter restoration of income, we additional exited on our rigorous value containment measures, mitigating our internet loss attributable to the corporate’s shareholders to RMB41.2 million, in contrast with RMB46.8 million in the identical quarter final 12 months.

Let’s take a better take a look at the third quarter efficiency of our enterprise segments, whereas additionally offering further element on our strategic and operational priorities. First, our offline advertising providers. As we’ve talked on our second quarter earnings name, and COVID-19 pandemic more and more below management in China, we began to progressively resume our offline occasions in late Could, whereas maintaining in accordance with native and the nationwide regulatory tips on COVID-19 prevention and management.

We organized 152 auto reveals in 107 cities within the third quarter in contrast with 212 auto reveals in 150 cities in the identical interval of 2019, however enhancing from 61 auto reveals throughout 56 cities within the second quarter. In consequence, we delivered RMB82.6 million in internet revenues and able to kind auto reveals from 33.2% year-over-year, however growing 147.6% quarter-over-quarter.

Our quarterly variety of particular promotion occasions decreased by 66.7% to 64 from 192 within the third quarter final 12 months, whereas its income declined 67.1% year-over-year, and we resumed our operations, auto gross sales in China additionally rebounded. Within the third quarter, China’s auto retail gross sales elevated 7.9% year-over-year, which was the primary quarter of year-over-year gross sales progress in 2 years as a broad financial restoration bolstered shopper confidence.

The strong third quarter was adopted by steady energy in October and November with 8% auto retail gross sales progress in each months, giving us additional confidence in our restoration and momentum within the fourth quarter on and past.

Strategically for offline advertising providers, we are going to proceed to give attention to producing increased ROI, but in addition additional leveraging our deep insights in automotive transactions and have developed, optimized and focused a particular promotion — promotional occasion for every auto seller and OEM.

Subsequent, let me transfer on to our progress initiatives in digital dealership and on-line advertising providers. Our revenues from digital dealerships, on-line advertising providers and others reached RMB15.4 million, growing 168.9% year-over-year. This was primarily pushed by profitable on-line promotion occasions that have been held throughout third quarter. Our strategic collaboration with Baidu Youjia and Webank and the revenues generated from our acquisition of Longye Worldwide Restricted in January 2020.

If there’s a silver lining to the leverages — ravages brought on by the pandemic, it has been the outstanding progress within the digital economics of on-line providers, together with streaming occasions, are benefiting from this pattern, and we’ve been — we’ve seen sustained constructive income contribution from this phase. A key issue on this success has been the collaboratively – the collaborative partnerships we have established with TMall and Baidu Youjia, the auto phase of the large Baidu portal.

In our cooperation with Baidu Youjia, we’ve expanded a gross sales community to over 80 cities throughout China, the place we’ve served operations aiming to enhance gross sales effectivity and conversion charges for OEMs and the sellers. We’ve additionally made strong progress in stay streaming promotional occasions as we glance to speed up the complete digitalization of automotive advertising with on-line retail platform partnerships, such because the one we’ve with TMall.

Via these engagements, we not solely turn out to be an integral a part of the ecosystem that contributes worth by way of sturdy OEM and seller relationships, however we additionally acquire vital publicity for our personal occasions by way of their in depth attain, in addition to acquire invaluable person information and perception. In additional creating our digital choices inside the space of automotive advertising, we see a transparent and outlined pathway to growing alternatives that play to our strengths in multi-channeled automotive transaction facilitation.

Core to our price proposition is aiding to — is aiding automotive OEMs and sellers in optimizing their advertising efforts, person acquisition methods and conversion charges as a way to create a buying and shopping for expertise for purchasers that’s easy, pure and easy. With the multitude of dynamic forces that at the moment are quickly reshaping the trade, we’re assured that drawing our — drawing on our years of honed experience and executing on our multi-pronged methods will place us to ship sustained shareholder worth within the long-term.

Now I’ll flip this name over to Chenxi Yu, our Deputy CFO, for nearer take a look at our monetary efficiency within the third quarter.

Chenxi Yu

Thanks, Mr. Wen. Howdy, everybody. Thanks for becoming a member of us. As our CEO, Mr. Wen simply talked about, towards the backdrop of a recovering shopper market, we’re happy to — we’re happy with the restoration in our prime line revenues versus the second quarter and the moderation within the year-over-year lower, which was supported by rising offline market actions and the strong efficiency of our on-line segments.

Sustaining the energy within the prior quarter, internet revenues from digital dealership, on-line advertising providers and others grew 160.9% year-over-year. Moreover, we proceed to execute rigorous value and expense management measures. By doing so, we have been capable of register an elevated gross margin of 72.1% and a discount of complete working bills by 21.4% year-over-year, resulting in a bottom-line enchancment.

As we look forward to the tip of the 12 months, we’re constructing on this efficiency momentum and additional strengthening the service capabilities that function the inspiration of our distinctive omni-channel platform. We’ve a strong basis to seize long-term prospects within the altering trade and supply actual advantages to all in our price chain.

Now, I wish to stroll by way of our third quarter 2020 monetary outcomes. Earlier than I begin, please word that each one numbers acknowledged in my following remarks are in RMB phrases, until in any other case famous.

Our complete revenues within the third quarter have been RMB100 million, lowering 26.2% from RMB135.6 million in the identical interval final 12 months. This was a results of the continued adversarial affect of the COVID-19 pandemic. The lower was partially offset by the year-over-year income progress of digital dealerships, on-line advertising providers and others. In contrast with the second quarter of this 12 months, complete revenues elevated by 82.7% as our offline providers recovered and our on-line providers keep strong efficiency.

As we progressively resumed our offline auto reveals, our offline advertising providers revenues generated from these auto reveals decreased by 33.2% to RMB82.6 million from RMB123.6 million within the third quarter of 2019. The offline advertising providers revenues generated from auto reveals elevated by 147.6% over the second quarter of 2020 of RMB33.4 million.

Revenues generated from particular promotion occasions within the third quarter of 2020 have been RMB2.0 million in contrast with RMB6.0 million within the third quarter of 2019 and RMB1.5 million within the second quarter of 2020. Revenues from our digital dealership, on-line advertising providers and others elevated by 160.9% to RMB15.4 million throughout the quarter in contrast with RMB5.9 million within the third quarter 2019, primarily on account of our steady enlargement of our on-line advertising providers, together with stay streaming promotion occasions and collaboration with Baidu Youjia and Webank. The year-over-year progress was additionally helped by income generated from a accomplished acquisition of Longye Worldwide Restricted in January 2020.

Our gross revenue within the third quarter decreased by 22.6% to RMB72.1 million from RMB93.2 million within the third quarter of 2019, however elevated by 67.5% quarter-over-quarter. Our gross margin elevated to 72.1% from 68.7% in identical — in the identical interval final 12 months, primarily because of the change within the income combine.

Within the third quarter, promoting and advertising bills decreased by 15.8% to RMB91.6 million from RMB108.8 million within the third quarter of 2019 and elevated by 88.6% in contrast with the second quarter of 2020. As our operations proceed to recuperate, the year-over-year lower was primarily because of the lower in promotion bills and employees compensation bills on account of value management measures taken by the corporate and diminished variety of offline occasions.

Common and administrative bills have been RMB15.9 million, considerably decrease in contrast with RMB25.0 million within the third quarter of 2019 and RMB28 million G&A bills within the second quarter of 2020. primarily because of the lower in inventory compensation bills. Analysis and improvement bills decreased by RMB7.1 million from RMB12.2 million within the third quarter of 2019 and RMB8.3 million within the second quarter of 2020, primarily because of the lower in inventory compensation bills.

Our loss from persevering with operations was RMB42.6 million within the third quarter, decrease in contrast with RMB52.8 million in the identical interval final 12 months, and barely increased in contrast with RMB41.8 million within the second quarter of 2020, respectively.

Excluding the results of share-based compensation bills, adjusted internet loss attributable to the corporate’s shareholders was RMB38.3 million within the third quarter of 2020, in contrast with RMB36.9 million in the identical interval final 12 months. Adjusted fundamental and diluted internet loss per peculiar share have been each level RMB0.13 within the third quarter in contrast with RMB0.13 in the identical interval final 12 months. Adjusted EBITDA was a lack of RMB37 million within the third quarter in contrast with a lack of RMB37.9 million in the identical interval final 12 months.

Now turning to our steadiness sheet. On the finish of third quarter 2020, we had money and money equivalents, time deposits and short-term investments of RMB183.0 million. For the fourth quarter of 2020, we anticipate our internet revenues to be between roughly RMB145 million and RMB155 million, representing a year-over-year approximate lower of 20.7% to fifteen.2%. This primarily — that is primarily attributable to the estimated declining variety of offline occasions that’s anticipated to be held within the fourth quarter of 2020 because of the COVID-19 pandemic.

This forecast displays the corporate’s present and preliminary views in the marketplace and operational circumstances in addition to the affect of the COVID-19 pandemic, that are all topic to alter.

This concludes our ready remarks in the present day. Operator, we at the moment are able to take questions. Thanks.

Query-and-Reply Session

Operator

[Operator Instructions] The primary query in the present day comes from Jack Vander Aarde with Maxim Group. Please go forward

Jack Vander Aarde

Hello. Good night to you guys and good morning for me. Thanks for taking my questions. I will begin with simply hoping you’ll be able to present some views on what you are seeing when it comes to shopper buy urge for food for large ticket objects akin to new automobiles. After which simply an replace on the general monetary well being of your numerous auto companions and digital sellers and straightforward residence shops? Only a common replace there from the monetary well being and urge for food from shoppers. Thanks.

Cynthia Tan

Sure. Good to satisfy you once more, Jack, and let me translate the query first. We will establish a rebound — a powerful restoration of the shoppers’ confidence within the big-ticket objects consumptions like autos, and it may be mirrored by some market information we observe proper now. The auto market is recovering simply on the identical pace because the macro market and the buyer confidence is recovering on the identical time. And this restoration is a steady — is a steady pattern besides and quite not short-term momentum. Our main operation companions are the OEMs and sellers. And from our information, the acceleration is constant enhancing all through this few quarters all through 2020.

Jack Vander Aarde

Nice. Thanks, Cynthia, for translating that for me. I recognize that. That is good to listen to, and that definitely does appear to be the case. After which perhaps my subsequent query right here is simply sticking with type of the COVID restoration topic on the financial system. With not less than in the united statesand Europe, the 2 latest vaccines have been authorised for COVID. Simply questioning what the affect is from vaccines in China and the way — simply type of the place the financial system is as a complete with the COVID vaccines rolling out, and the way that is — are companies closed down anymore or is every little thing just about utterly opened up once more?

Cynthia Tan

Okay. Let me translate first. The vaccine is simply invented and it is nonetheless a long term for everyone to get a vaccine sooner or later simply as the identical in U.S and Europe. The China — the Chinese language persons are nonetheless very cautious in public areas and everyone — most of them nonetheless maintain their masks on. The offline consumption has been strongly recovered and as we will see in a lot of the malls in Beijing. However the pandemic is hitting just a few cities in China too as a result of because of the value from the outbreak in U.S and Europe. So, we’re nonetheless anticipating that will nonetheless, actually, affect our auto reveals in some — sure cities.

Jack Vander Aarde

Okay. Thanks. That is useful. I imply, clearly, as anticipated, the vaccine and every little thing, these are long-term — long term initiatives nonetheless, however not less than it is the ball has been beginning to roll right here. In order that’s a superb constructive signal that the pattern is constructive not less than, so completely satisfied to listen to that. Subsequent query, since there’s solely about two weeks remaining within the fourth quarter, so are there any preliminary information factors perhaps you’ll be able to share when it comes to how auto gross sales your — TuanChe facilitate auto gross sales have facilitate — or have trended on a weekly foundation over the fourth quarter? Like would you anticipate the auto reveals from offline occasions to extend in This autumn from this third quarter?

Cynthia Tan

Let me translate the query first. Within the third quarter, auto passenger automotive gross sales in China proceed to recuperate. Tendencies began in Could, elevated by 7.8% year-over-year and it’s pushed by efficient management of COVID-19 pandemic domestically and numerous authorities insurance policies to advertise auto gross sales in addition to broad financial system restoration that bolster shopper confidence. The strong third quarter was adopted by steady pattern in October and November with a 9.3% and 11.6% auto passenger automotive gross sales progress, respectively. So that offers us additional confidence within the gross sales outlook within the fourth quarter and 2021. Our offline enterprise has additionally steadily and slowly recovered beginning in the long run of Could, and now our offline auto reveals and particular promotion occasion at the moment are largely again to regular in most cities we function. However there’s nonetheless lingering uncertainties when it comes to the tempo of restoration, and the latest COVID-19 instances reported in Xinjiang, Dalian and Sichuan within the third quarter and fourth quarter, in addition to potential menace of a second wave of COVID-19 within the fourth quarter globally, proceed to offer us uncertainty affecting the corporate’s operation and monetary outcomes. So so far as we’re involved, we’re nonetheless unsure on the variety of auto present we will maintain proper now.

Jack Vander Aarde

Okay. Thanks. That’s useful. Sure, sure, it is nice. After which, I assume only one extra query for me. One other replace I type of discovered fascinating that you simply guys offered in your numbers from the press launch was the variety of cities that TuanChe has gross sales operations in, that quantity barely declined Q-over-Q relative to the Q2 degree. It was a slight decline, but it surely feels like this will likely have been considerably intentional, so I am questioning if that’s appropriate. After which are you exiting sure areas that perhaps as a result of they’ve much less potential constructive ROI?

Cynthia Tan

Let me translate the query first. That may be a nice query. Relating to to the cities we operated, we’ve — as you’ll be able to observe, we’ve maintained these cities with increased ROIs and extra — increased frequencies in auto present. After which for these extra distant cities with decrease ROIs and perhaps even result in a loss whereas holding long-term auto reveals, we might flip to our new on-line auto reveals and on-line particular promotion occasions to cowl these areas, and that may be a more cost effective method. Does that reply your query?

Jack Vander Aarde

That’s fascinating. That — sure, it does. That feels like a superb transfer. So, I am completely satisfied to listen to that as nicely. Feels like a strategic repositioning a bit. So, sure, I assume your income this quarter, congrats on that. You exceeded your steering, exceeded my estimates. So, it is good to listen to issues are turning round and I want you the most effective. Thanks.

Cynthia Tan

Thanks very a lot, Jack. Operator, is there any additional questions?

Operator

I am sorry, there aren’t any additional questions. I might like to show the decision again over to administration for closing remarks.

Cynthia Tan

Okay. Thanks as soon as once more for becoming a member of us in the present day. When you’ve got additional questions, please be happy to contact TuanChe Investor Relations by way of the contact data offered on our web site or the PR — Piacente Group Investor Relations. Thanks.

Operator

This concludes the earnings convention name. You could now disconnect your traces. Thanks for attending.