Cango Inc. Reports Second Quarter 2020 Unaudited Financial Results

Rhea-AI Summary

Cango, Inc. (NYSE: CANG) reported second quarter 2020 revenues of RMB274.1 million (US$38.8 million), down from RMB336.3 million in Q2 2019, primarily due to COVID-19 impacts. After-market services revenue grew 46.3% to RMB52.5 million (US$7.4 million). Financing transactions facilitated were RMB4,946 million (US$700.1 million). The company achieved net income of RMB70.2 million (US$9.9 million), reversing a previous loss and maintaining solid gross margins. Guidance for Q3 2020 anticipates revenues between RMB300 million and RMB330 million, while their investment in Li Auto is expected to enhance liquidity.

Positive

• After-market services revenue surged 46.3% to RMB52.5 million.
• Net income rose to RMB70.2 million, reversing previous losses.
• Q3 2020 revenue guidance between RMB300 million and RMB330 million.

Negative

• Total revenues declined by 18.5% year-over-year due to COVID-19.
• Decrease in dealer network from 45,688 to 44,521 dealers.
• Cash and cash equivalents decreased to RMB2,010.3 million from RMB2,741.0 million.

SHANGHAI, Aug. 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.

Conference Call Information

The Company's management will hold a conference call on Monday, August 24, 2020, at 9:00 P.M. Eastern Time or Tuesday, August 25, 2020, at 9:00 A.M. Beijing Time to discuss the financial results. Listeners may access the call by dialing the following numbers:

International:	+1-412-902-4272
United States Toll Free:	+1-888-346-8982
Mainland China Toll Free:	4001-201-203
Hong Kong, China Toll Free:	800-905-945
Conference ID:	Cango Inc.

The replay will be accessible through August 31, 2020, by dialing the following numbers:

International:	+1-412-317-0088
United States Toll Free:	+1-877-344-7529
Access Code:	10147234

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

The Company defines "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.

The Company defines "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 are 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 RMB7.0651 to US$1.00, the noon buying rate in effect on June 30, 2020, in the H.10 statistical release of the Federal Reserve Board. The Company makes no representation that the RMB or US$ 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

Caesar Cao
Cango Inc.
Tel: +86 21 3183 5088 ext.5521
Email: ir@cangoonline.com 

Emilie Wu
The Piacente Group, Inc.
Tel: +86 21 6039 8363
Email: ir@cangoonline.com

 

 

CANGO INC. UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEET (Amounts in Renminbi ("RMB") and US dollar ("US$"), except for number of shares and per share data）
				As of December 31, 2019		As of June 30, 2020
				RMB		RMB	US$
ASSETS:
Current assets:
Cash and cash equivalents				2,002,314,688		2,010,317,864	284,542,025
Restricted cash - current				970,993,759		484,332,950	68,552,880
Short-term investments				597,265,740		835,048,818	118,193,489
Accounts receivable, net				148,562,946		64,779,967	9,169,009
Finance lease receivables - current, net				1,661,082,122		1,617,485,890	228,940,268
Short-term consumer financing receivables, net				13,298,562		84,466	11,955
Financing receivables, net				9,103,522		18,957,245	2,683,224
Short-term contract asset				20,688,424		51,042,617	7,224,614
Prepaid expenses and other current assets				117,445,282		80,897,222	11,450,259
Total current assets				5,540,755,045		5,162,947,039	730,767,723
Non-current assets:
Restricted cash - non-current				873,674,276		926,414,353	131,125,441
Long-term investments				547,888,818		551,511,101	78,061,330
Goodwill				145,063,857		145,063,857	20,532,456
Property and equipment, net				14,736,767		12,993,643	1,839,131
Intangible assets				44,758,242		44,568,406	6,308,248
Long-term contract asset				11,655,356		31,940,001	4,520,814
Deferred tax assets				100,667,946		135,796,122	19,220,694
Finance lease receivables - non-current, net				1,448,958,373		985,507,019	139,489,465
Other non-current assets				8,415,694		5,423,466	767,642
Total non-current assets				3,195,819,329		2,839,217,968	401,865,221
TOTAL ASSETS				8,736,574,374		8,002,165,007	1,132,632,944
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debts				1,439,749,760		807,645,729	114,314,833
Long-term debts—current				863,418,789		1,076,453,717	152,362,135
Accrued expenses and other current liabilities				278,690,234		164,458,100	23,277,535
Risk assurance liabilities				259,952,473		323,552,720	45,795,915
Income tax payable				67,308,814		34,701,923	4,911,738
Total current liabilities				2,909,120,070		2,406,812,189	340,662,156
Non-current liabilities:
Long-term debts				301,667,717		301,706,773	42,703,822
Deferred tax liability				12,329,929		21,120,936	2,989,474
Other non-current liabilities				21,796,367		10,818,782	1,531,299
Total non-current liabilities				335,794,013		333,646,491	47,224,595
Total liabilities				3,244,914,083		2,740,458,680	387,886,751
Shareholders' equity
Ordinary shares				204,260		204,260	28,911
Treasury shares				(20,638,881)		(63,535,448)	(8,992,859)
Additional paid-in capital				4,526,344,454		4,564,430,104	646,053,149
Accumulated other comprehensive income				119,430,738		142,660,288	20,192,253
Retained earnings				852,508,968		617,735,708	87,434,815
Total Cango Inc.'s  equity				5,477,849,539		5,261,494,912	744,716,269
Non-controlling interests				13,810,752		211,415	29,924
Total shareholders' equity				5,491,660,291		5,261,706,327	744,746,193
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY				8,736,574,374		8,002,165,007	1,132,632,944

 

 

CANGO INC. UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Amounts in Renminbi ("RMB") and US dollar ("US$"), except for number of shares and per share data)
				Three months ended June 30,					Six months ended June 30,
				2019		2020			2019		2020
				RMB		RMB	US$		RMB		RMB	US$
Revenues				336,303,754		274,054,751	38,789,932		687,962,259		520,052,725	73,608,686
Loan facilitation income and other related income				222,630,419		143,604,125	20,325,845		458,941,883		263,624,306	37,313,599
Leasing income				71,250,688		69,275,783	9,805,351		143,640,951		143,557,538	20,319,251
After-market services income				35,866,122		52,472,658	7,427,023		75,662,229		101,528,861	14,370,478
Others				6,556,525		8,702,185	1,231,713		9,717,196		11,342,020	1,605,358
Operating cost and expenses:
Cost of revenue				125,824,004		102,817,046	14,552,808		256,630,454		193,414,759	27,376,082
Sales and marketing				44,503,534		42,437,952	6,006,702		90,050,914		88,212,181	12,485,624
General and administrative				53,418,413		66,040,192	9,347,382		118,182,033		123,451,858	17,473,476
Research and development				12,246,050		12,901,613	1,826,105		25,593,854		25,458,298	3,603,388
Net loss on risk assurance liabilities				2,379,706		(42,928,191)	(6,076,091)		20,230,839		33,957,484	4,806,370
Provision for credit losses				13,672,656		26,119,771	3,697,014		23,695,938		70,214,542	9,938,223
Total operation cost and expense				252,044,363		207,388,383	29,353,920		534,384,032		534,709,122	75,683,163
Income (Loss) from operations				84,259,391		66,666,368	9,436,012		153,578,227		(14,656,397)	(2,074,477)
Interest and investment income, net				22,704,386		21,675,128	3,067,915		41,588,934		50,808,295	7,191,447
Income from equity method investments				(942,312)		-	-		(926,205)		-	-
Interest expense				(4,712,329)		(369,637)	(52,319)		(10,006,574)		(1,736,923)	(245,845)
Foreign exchange loss, net				1,409,293		621,774	88,006		122,801		(3,439,945)	(486,893)
Other income, net				856,340		7,317,072	1,035,664		21,593,278		25,790,703	3,650,437
Other expenses				(168,717)		(527,390)	(74,647)		(1,184,660)		(581,495)	(82,305)
Net income before income taxes				103,406,052		95,383,315	13,500,631		204,765,801		56,184,238	7,952,364
Income tax expenses				(8,819,437)		(25,152,250)	(3,560,070)		(35,808,056)		(20,639,459)	(2,921,326)
Net income				94,586,615		70,231,065	9,940,561		168,957,745		35,544,779	5,031,038
Less: Net income attributable to non-controlling interests				3,047,624		-	-		1,200,254		3,646,196	516,086
Net income attributable to Cango Inc.'s shareholders				91,538,991		70,231,065	9,940,561		167,757,491		31,898,583	4,514,952
Earnings per ADS attributable to ordinary shareholders:
Basic				0.60		0.47	0.07		1.11		0.21	0.03
Diluted				0.60		0.47	0.07		1.11		0.21	0.03
Weighted average ADS used to compute earnings per ADS attributable to ordinary shareholders:
Basic				151,404,946		150,605,540	150,605,540		151,404,946		150,789,465	150,789,465
Diluted				151,404,946		150,819,440	150,819,440		151,404,946		151,899,153	151,899,153
Other comprehensive (loss) income, net of tax
Unrealized losses on available-for-sale securities				(108,594)		-	-		(146,801)		-	-
Reclassification of losses to net income				(276,843)		-	-		(276,843)		-	-
Foreign currency translation adjustment				31,329,909		(5,444,800)	(770,661)		(10,639,143)		23,229,550	3,287,929
Total comprehensive income (loss)				125,531,087		64,786,265	9,169,900		157,894,958		58,774,329	8,318,967
Total comprehensive income (loss) attributable to Cango Inc.'s shareholders				122,483,463		64,786,265	9,169,900		156,694,704		55,128,133	7,802,881

 

 

CANGO INC. RECONCILIATIONS OF GAAP AND NON-GAAP RESULTS (Amounts in Renminbi ("RMB") and US dollar ("US$"), except for number of shares and per share data
		Three months ended June 30,					Six months ended June 30,
		2019		2020			2019		2020
		(Unaudited)		(Unaudited)	(Unaudited)		(Unaudited)		(Unaudited)	(Unaudited)
		RMB		RMB	US$		RMB		RMB	US$
Net income		94,586,615		70,231,065	9,940,561		168,957,745		35,544,779	5,031,038
Add: Share-based compensation expenses		22,273,101		22,096,880	3,127,610		37,550,563		45,415,178	6,428,101
Cost of revenue		913,198		905,973	128,232		1,539,574		1,862,024	263,552
Sales and marketing		4,744,170		4,706,635	666,181		7,998,269		9,673,432	1,369,185
General and administrative		15,457,530		15,335,232	2,170,561		26,060,087		31,518,128	4,461,101
Research and development		1,158,203		1,149,040	162,636		1,952,633		2,361,594	334,262
Non-GAAP adjusted net income		116,859,716		92,327,945	13,068,171		206,508,308		80,959,957	11,459,139
Less: Net income attributable to non-controlling interests		3,047,624		-	-		1,200,254		3,646,196	516,086
Net income attributable to Cango Inc.'s shareholders		113,812,092		92,327,945	13,068,171		205,308,054		77,313,761	10,943,053
Non-GAAP adjusted net income per ADS-basic		0.75		0.61	0.09		1.36		0.51	0.07
Non-GAAP adjusted net income per ADS-diluted		0.75		0.61	0.09		1.36		0.51	0.07
Weighted average ADS outstanding—basic		151,404,946		150,605,540	150,605,540		151,404,946		150,789,465	150,789,465
Weighted average ADS outstanding—diluted		151,404,946		150,819,440	150,819,440		151,404,946		151,899,153	151,899,153

 

 

 

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SOURCE Cango Inc.

FAQ

What were Cango's financial results for Q2 2020?

Cango reported revenues of RMB274.1 million, net income of RMB70.2 million, and after-market services revenue increased to RMB52.5 million.

How did Cango perform in terms of financing transactions in Q2 2020?

Cango facilitated RMB4,946 million in financing transactions during the second quarter.

What is Cango's revenue guidance for Q3 2020?

Cango expects total revenues to be between RMB300 million and RMB330 million for Q3 2020.

How did Cango's net income change from the previous quarter?

Cango's net income in Q2 2020 was RMB70.2 million, compared to a net loss of RMB34.7 million in the previous quarter.

What impact does Cango's investment in Li Auto have?

Cango holds shares in Li Auto, which may enhance liquidity and significantly impact financial results in Q3 2020.