TuanChe Restricted (TC) Q2 2020 Earnings Name Transcript

TuanChe Restricted (NASDAQ: TC) Q2 2020 earnings name dated Sep. 18, 2020

Company Members:

Cynthia Tan — Director of Investor Relations

Wei Wen — Chairman of the Board of Administrators and Chief Government Officer

Chenxi Yu — Deputy Chief Monetary Officer

Analysts:

Jack Vander Aarde — Maxim Group — Analyst

Presentation:

Operator

Good morning, and good night, girls and gents. Thanks for standing by, and welcome to TuanChe Restricted Second Quarter 2020 Earnings Convention Name.

[Operator Instructions] After ready remarks by the administration group, there can be a question-and-answer session. As we speak’s convention name is being recorded.

I’d now like to show the decision over to your host right this moment, Ms. Cynthia Tan, IR Director of the Firm. Please go forward, ma’am.

Cynthia Tan — Director of Investor Relations

Hiya, everybody, and welcome to TuanChe’s second quarter 2020 incomes convention name. We have now launched our incomes outcomes earlier right this moment and it’s now accessible on our IR web site, in addition to on Newswire providers.

Earlier than we proceed, please be aware that the dialogue right this moment will comprise forward-looking statements made below the Protected Harbor provision of the US Non-public Securities Litigation Reform Act of 1995. Ahead-looking statements contain inherent dangers and uncertainties. As such, our future outcome could also be materially completely different from the views expressed right this moment. Additional info concerning this and different dangers and uncertainties is included in our incomes 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 legislation.

As we speak, you’ll hear from Mr. Wei Wen, the Firm’s Chief Government Officer, who will present an summary of our development technique and enterprise developments. He can be adopted by Mr. Chenxi Yu, Ronnie, the Firm’s Deputy Chief Monetary Officer, who will present further particulars on the Firm’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’d now like to show the decision over to our CEO, Mr. Wei Wen. Please go forward, sir.

Wei Wen — Chairman of the Board of Administrators and Chief Government Officer

Hiya, and thanks, everybody, for becoming a member of us right this moment on our second quarter 2020 earnings name. Within the second quarter, we’re happy to report a 63.3% year-over-year discount of internet losses attributable to the Firm’s shareholders, primarily pushed by the acceleration of our rigorous value measures and on-line technique, regardless of a year-over-year lower of 73.1% in internet revenues and a year-over-year lower of 70.1% in gross revenue resulting from materials COVID-19 associated impression.

Web loss attributable to the Firm’s shareholders within the second quarter of 2020 was RMB40 million in contrast with RMB108.9 million within the second quarter of 2019. Let’s take an intensive have a look at the second quarter efficiency of our enterprise segments whereas additionally offering further element on our strategic and operational priorities.

First, our offline advertising and marketing providers. As we’ve got mentioned in our first quarter earnings name and within the press releases previous to right this moment, out of concern for public well being and in accordance with all nationwide and native regulatory tips on COVID-19 prevention and management, we held a only a few offline occasions in April 2020. These occasions steadily resumed in late Might. On condition that the suspension of occasions lasted for the numerous a part of the second quarter, our working and monetary efficiency for offline advertising and marketing providers continued to be materially affected by the pandemic.

We organized 61 complete reveals throughout 56 cities in contrast with 344 auto reveals in 186 cities within the second quarter of 2019. That being stated, our offline auto reveals and particular promotion occasions at the moment are principally again to regular in some cities we function. China’s auto market has additionally begun to indicate energy. In July, China’s auto retail gross sales elevated 7.7% year-over-year, the best degree since Might 2018. On this context, we’re optimistic we will ship a big quarter-over-quarter enchancment within the third quarter for our offline advertising and marketing providers, whereas ensuring the well being and security of our workers and clients stays our high precedence.

Strategically, we’ll proceed to evaluate and regulate the tempo of resumption of our offline enterprise and deal with producing larger ROIs. We may also additional leverage our deep insights in automotive transactions and develop personalized and focused particular promotion occasions for every auto seller and OEM.

Subsequent, let me transfer on to our development initiative in digital dealership and on-line advertising and marketing providers. Our revenues from digital dealerships, on-line advertising and marketing providers and others, reached RMB19.9 million, rising 180% year-over-year, primarily pushed by profitable on-line gross sales occasions that had been held in the course of the second quarter, and most notably, the stay streaming promotion occasions was performed in collaboration with Tmall Auto in the course of the week of June 18, 2020.

Such encouraging outcomes had been propelled by our distinctive integration of contact factors and channels for on-line buyer acquisition and advertising and marketing with offline promotion actions, which not solely creates a seamless and holistic procuring expertise for shoppers, but additionally helps auto OEMs and sellers successfully attain clients and obtain elevated gross sales conversion charges.

Now, I wish to add extra coloration on stay streaming and its position in automotive gross sales. To start with, e-commerce transactions facilitated by stay streaming has skilled a really quick development in recent times. In 2019, stay streaming accounted for about 4% of China’s e-commerce GMV. As shopper habits shifted quicker on-line this yr because of the impression of the pandemic, stay streaming penetration is anticipated to succeed in a charge of seven% to 9% in accordance with iMEDIA Analysis.

Alternatively, for the reason that buy determination surrounding a automotive is way more dynamic and guarded in comparison with basic shopper merchandise, finishing an auto transaction totally on-line has been confirmed troublesome. However given our successes in combining on-line stay streaming with offline infrastructure and capabilities, we anticipate stay streaming promotion occasions to turn out to be the central element for the acceleration of full digitalization of automotive advertising and marketing. And we see ourselves more and more well-positioned to empower each the shoppers and the producers and sellers ultimately, capturing the big alternative related to the modifications within the automotive retail trade.

Now, I’ll flip this name over to Chenxi, our Deputy CFO, for a better have a look at our monetary efficiency within the second quarter.

Chenxi Yu — Deputy Chief Monetary Officer

Thanks, Mr. Wen. Hiya, everybody. Thanks for becoming a member of us. As our CEO, Mr. Wen, simply talked about, whereas COVID-19 pandemic was successfully contained in China, the China — the Firm continued to carry fewer auto reveals and particular promotion occasions in the course of the second quarter of 2020 than typical, in accordance with authorities tips and for the perfect curiosity of public well being. This has resulted in a 73.1% year-over-year decline in internet revenues to RMB54.7 million within the second quarter.

However, as our offline occasions steadily resumed operations since late Might and our digital dealership and on-line advertising and marketing providers registered sturdy development, our internet revenues and gross revenue each rebounded strongly from first quarter, reaching 464.9% and 658.3% quarter-over-quarter development, respectively.

Amidst the COVID-19 and macroeconomic challenges, we remained centered on optimizing our value construction, which resulted in a 66.8% year-over-year discount in working bills and considerably diminished our internet losses, each year-over-year and sequentially. We’re carefully monitoring the circumstances and can regulate our operation technique accordingly, whereas protecting a disciplined value construction to be able to ship optimistic returns for our shareholders in the long term.

Now I wish to stroll by our second quarter 2020 monetary outcomes. Earlier than I begin, please be aware that every one numbers said in my following remarks are in RMB phrases, until in any other case famous.

Our complete revenues within the second quarter had been RMB54.7 million, lowering 73.1% from RMB 203.5 million in the identical interval final yr. This was a results of the opposed impression of the COVID-19 pandemic and the sluggish Chinese language financial system. The lower was partially offset by the regular development of digital dealerships and on-line advertising and marketing providers and others. In contrast with the primary quarter this yr, complete revenues elevated by 464.9%, as our offline providers recovered and our on-line providers made sturdy progress.

As a result of continued opposed impression of the COVID-19 pandemic, our offline advertising and marketing providers revenues generated from auto reveals decreased by 82.5% to RMB33.Four million from RMB190.6 million within the second quarter of 2019. The offline advertising and marketing providers income generated from auto reveals elevated 486.5% over the primary quarter of 2020 of RMB5.7 million.

Revenues generated from particular promotion occasions within the second quarter of 2020 had been RMB1.5 million in contrast with RMB5.Eight million within the second quarter of 2019 and RMB0.Three million within the first quarter of 2020. Revenues from our digital dealership, on-line advertising and marketing providers and others elevated by 180% to RMB19.9 million in the course of the quarter in contrast with RMB7.1 million within the second quarter of 2019 and achieved a quarter-over-quarter development of 438.3%, primarily resulting from our steady growth of on-line advertising and marketing providers, together with commencements of stay streaming promotion occasions.

The year-over-year development was additionally helped by revenues generated from our accomplished acquisition of Longye Worldwide Restricted in January 2020. Our gross revenue within the second quarter decreased by 70.1% to RMB43 million from RMB144 million within the second quarter of 2019, however elevated by 658.3% quarter-over-quarter. Our gross margin elevated to 78.6% from 70.8% in the identical interval final yr, primarily because of the change within the income combine.

Within the second quarter, promoting and advertising and marketing bills decreased by 77.7% to RMB48.6 million from RMB217.5 million within the second quarter of 2019 and elevated by 53.1% in contrast with the primary quarter of 2020. The year-over-year lower was primarily resulting from lower in promotion bills and inventory compensation because of value measure controls — value management measures taken by the corporate and diminished offline occasions.

Normal and administrative bills had been RMB28 million in contrast with RMB28.1 million within the second quarter of 2019 and RMB24.Three million G&A bills within the first quarter of 2020. Analysis and improvement bills decreased by RMB8.Three million from RMB9.9 million within the second quarter of 2019, primarily because of the firm value management measures. R&D bills had been flat in contrast with the primary quarter of 2020.

Our loss from persevering with operations was RMB41.Eight million within the second quarter, which is decrease in contrast with RMB111.Four million in the identical interval final yr and RMB59 million within the first quarter of 2020. Excluding the results of share-based compensation bills, adjusted internet loss attributable to the Firm’s shareholders was RMB32.Eight million within the second quarter in contrast with RMB29.Three million in the identical interval final yr, and improved considerably from a lack of RMB51.9 million within the first quarter of 2020.

Adjusted fundamental and diluted internet loss per bizarre share had been each RMB0.11 within the second quarter in contrast with RMB0.1 in the identical interval final yr. Adjusted EBITDA was a lack of RMB32.1 million within the second quarter in contrast with a lack of RMB30.Four million in the identical interval final yr, and improved considerably from a lack of RMB50.7 million within the first quarter this yr.

Now turning to our stability sheet. On the finish of second quarter of 2020, we had money and money equivalents, time deposits and short-term investments of RMB200.Four million. For the third quarter of 2020, we anticipate our internet revenues to be between roughly RMB90 million and RMB95 million, representing a year-over-year approximate lower of 33.6% and 29.9%. That is primarily because of the estimated declining variety of offline occasions that’s anticipated to be held within the third quarter of 2020 because of the COVID-19 pandemic.

This forecast displays the Firm’s present and preliminary views in the marketplace and operational circumstances in addition to the affect of the COVID-19 pandemic, that are topic to vary. This concludes our ready remarks for right this moment.

Operator, we at the moment are able to take questions. Thanks.

Questions and Solutions:

Operator

Thanks. We’ll now start the question-and-answer session. [Operator Instructions] The primary query right this moment comes from Jack Vander Aarde of Maxim Group. Please go forward.

Jack Vander Aarde — Maxim Group — Analyst

Hello, good morning guys. Thanks for taking my questions as effectively. So I assume I’ll simply begin with the China auto atmosphere as an entire. In case you might simply type of summarize what you’re seeing by way of new automobile gross sales and the alternatives. Or if mainly the market is getting extra wholesome and regular and constant, if there’s any inexperienced sky or blue skies forward? Or do you anticipate it to stay uneven relative to the place you had been just a few months in the past after we final spoke?

Cynthia Tan — Director of Investor Relations

Okay. Nice. Good to speak to you once more, Jack, and let me translate the primary query. [Foreign Speech]

Wei Wen — Chairman of the Board of Administrators and Chief Government Officer

[Foreign Speech]

Cynthia Tan — Director of Investor Relations

Within the second quarter, the brand new automotive gross sales in China began to rebound. It elevated by 1.8% and a pair of.9% year-over-year, respectively, in Might and June. And in July, the auto retail gross sales elevated by 7.7% year-over-year. That is the best degree we’ve seen since Might 2018. And that is additionally helped by the federal government’s measure to comprise COVID-19 pandemic domestically in addition to completely different native governments have taken insurance policies to advertise auto gross sales and home consumptions. So the market atmosphere is way — have been a lot improved since second quarter, and we’re having fairly optimistic forecast for now in the marketplace aspect.

Wei Wen — Chairman of the Board of Administrators and Chief Government Officer

[Foreign Speech]

Cynthia Tan — Director of Investor Relations

Does that reply your query, Jack?

Jack Vander Aarde — Maxim Group — Analyst

Yeah. Yeah, that was improbable. After which one other query I’ve is because it pertains to the second quarter and your outcomes. Gross margin — whereas income continues to be pressured, and clearly so, gross margin was fairly considerably excessive. It was within the excessive 70s, which was a fairly distinctive efficiency for gross margin. And also you guys talked about within the ready remarks that this is because of combine primarily. However is there anything that was serving to the gross margin profile this quarter moreover simply combine?

Cynthia Tan — Director of Investor Relations

Do you want my translation? Let me take your query.

Chenxi Yu — Deputy Chief Monetary Officer

Hiya, Jack. So sure, the gross margin for our firm has improved considerably from — effectively, at larger 70s. That is primarily because of the change within the income combine as a result of within the second quarter, our on-line advertising and marketing providers has grown strongly. So — and the gross revenue for that income aspect has been over 80%. In order that’s the principle purpose our gross margin has improved. Does that reply your query?

Jack Vander Aarde — Maxim Group — Analyst

Okay. Understood. That’s useful. Sure. Sure, it does. After which I assume, simply by way of how about vehicle transaction gross sales? Are you guys noticing any — of the cars you probably did facilitate to promote in the course of the quarter, are there any noticeable developments or, I don’t know, I assume, by way of the markets you serve inside China, did you see a noticeable pattern shift in what number of autos you’re in a position to promote by the digital seller platform or no less than the way you’re attractive possibly new leads?

Is that driving the digital platform? I’m simply questioning if there’s something long term or midterm within the technique for the offline enterprise that you’ve. After which how that pertains to the web enterprise you’ve? How is the omnichannel technique working as an entire mainly?

Cynthia Tan — Director of Investor Relations

Sure. Certain, Jack. Let me translate your query, and possibly we’ll take — reply that on one other respect. Okay. [Foreign Speech]

Wei Wen — Chairman of the Board of Administrators and Chief Government Officer

[Foreign Speech]

Cynthia Tan — Director of Investor Relations

We’re nonetheless seeing an upside pattern on the China new — China auto market new automotive gross sales in August. And we expect the normal excessive consumption season within the fourth quarter, ranging from September. And so if there isn’t a one other hit from the COVID-19 pandemic, we’re seeing very optimistic market gross sales developments within the total market.

Wei Wen — Chairman of the Board of Administrators and Chief Government Officer

[Foreign Speech]

Cynthia Tan — Director of Investor Relations

However as we talked about in our ready remarks, the person habits is shifting on-line now. So this yr, we’ve got made important progress in our on-line auto reveals and on-line particular promotion occasions. Though we’ve got been cooperating with Alibaba since — for a number of years by now, the depth of the cooperation has improved considerably for the reason that finish of final yr. We have now launched rather a lot — a variety of on-line stay streaming, particular promotion occasions on Tmall Dwell, and our on-line program supplies an answer that’s win-win for each OEMs, sellers and shoppers.

Wei Wen — Chairman of the Board of Administrators and Chief Government Officer

[Foreign Speech]

Cynthia Tan — Director of Investor Relations

And from our perspective, the web enterprise has generated larger gross margins. As Chenxi simply talked about, it needs to be round 80% and even larger. And on the opposite aspect, moreover Tmall Auto, we’ve got been additionally cooperating with Baidu Youjia, and that’s the auto section of the Baidu portal, which is the biggest search engine in China. So we’ve got been their gross sales representatives in all of China and generated a associated knowledge product. So this additionally contribute to our on-line advertising and marketing revenues since first quarter of this yr, and can proceed to be an even bigger a part of our on-line advertising and marketing income all year long. Does that reply your query, Jack?

Jack Vander Aarde — Maxim Group — Analyst

Sure. Completely. That greater than solutions my query. I recognize the added coloration. The very last thing is simply as you look — a forward-looking query once more. You guys have accomplished a pleasant job, particularly with Q2 once more, of controlling your working bills throughout this local weather that we’re in right this moment. Simply by way of the directional sample for the remainder of the yr, how would you anticipate the working bills to pattern as you look ahead? Or — and the way a lot of it’s type of variable and it simply relies upon as we go alongside right here? Or is there something concrete you possibly can say about working bills and the pattern?

Cynthia Tan — Director of Investor Relations

Okay. Ronnie will take your query.

Chenxi Yu — Deputy Chief Monetary Officer

Effectively, by way of working bills, we’ll anticipate that the working bills will develop as a result of a few of it are associated to our operations, to our offline and on-line providers. In order our revenues get well, the bills will develop. However by way of the overhead aspect of the working bills, we’ll strive our greatest to regulate that, to take extra value reducing measures. So whereas the general working expense will develop, however for the overheads, it’ll stay the identical or comparable.

Jack Vander Aarde — Maxim Group — Analyst

Sure, understood. Sure, Ronnie. Thanks. That’s it for me guys. Sustain the great work over there. And I stay up for talking once more quickly.

Cynthia Tan — Director of Investor Relations

Nice. Thanks for the query. We’re wanting ahead to see you subsequent time. And operator?

Operator

[Operator Closing Remarks]

Chenxi Yu — Deputy Chief Monetary Officer

Thanks.

Operator

Thanks.

Cynthia Tan — Director of Investor Relations

Thanks.

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This transcript is produced by AlphaStreet, Inc. Whereas we try to supply the perfect transcripts, it might comprise misspellings and different inaccuracies. This transcript is supplied as is with out specific or implied warranties of any type. As with all our articles, AlphaStreet, Inc. doesn’t assume any accountability on your use of this content material, and we strongly encourage you to do your personal analysis, together with listening to the decision your self and studying the corporate’s SEC filings. Neither the knowledge nor any opinion expressed on this transcript constitutes a solicitation of the acquisition or sale of securities or commodities. Any opinion expressed within the transcript doesn’t essentially mirror the views of AlphaStreet, Inc.

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