Cango Inc. Reports Third Quarter 2020 Unaudited Financial Results
SHANGHAI, Nov. 23, 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 third quarter of 2020.
Third Quarter 2020 Financial and Operational Highlights
Total revenues were RMB434.9 million (US$64.1 million), a 23.8% increase from RMB351.3 million in the same period of 2019, outperforming the high end of the Company's guidance by 31.8%. This was mainly driven by an increase in the amount of financing transactions the Company facilitated and car trading transactions.
After-market services facilitation revenues increased to RMB68.9 million (US$10.1 million), or 15.8% of total revenues in the third 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 third quarter of 2020 was RMB7,496.4 million (US$1,104.1 million). The total outstanding balance of financing transactions the Company facilitated was RMB38,946.1 million (US$5,736.1 million) as of September 30, 2020.
M1+ and M3+ overdue ratios for all financing transactions that remained outstanding and were facilitated by the Company were 1.11% and 0.53%, respectively, as of September 30, 2020, compared to 1.59% and 0.84%, respectively, as of June 30, 2020.
The number of dealers covered by the Company was 46,248 as of September 30, 2020, compared to 44,521 as of June 30, 2020. The increase was mainly due to the expansion of 4S dealers and quality dealers in the lower-tier cities following the introduction of the Company's competitive products and the formation of 4S team, as well as the progression of the dealership network optimization during the first three quarters of 2020.
Mr. Jiayuan Lin, Chief Executive Officer of Cango, commented, "Our outstanding third quarter results demonstrate that our business recovery is clearly on track and that our growth strategies are already working. Fueled by company-wide achievements in the core auto loan facilitation business, the after-market services business and new business initiatives, we are pleased to report total revenues of approximately RMB435 million, once again surpassing our previous guidance range. The auto loan facilitation business delivered very strong performance in the third quarter, marking the first return to year-over-year growth since the start of the pandemic. We also saw remarkable growth in our insurance facilitation business with increasing revenue contribution delivered by our newly formed Key Account ("KA") sales team and call center. Moreover, our efforts to improve asset quality continued to bear fruit, as the overall quality of our assets was close to pre-pandemic levels, evidenced by the M1+ overdue ratio improving from 1.59% as of June 30, 2020 to 1.11% as of September 30, 2020, and the M3+ overdue ratio from 0.84% to 0.53% during the same period.
"Our new business initiatives, including our deep partnership with new energy vehicle manufacturers, our car trading transactions business and our independent sales reps initiative, are also driving rapid revenue growth. The steps we have been taking over the past three quarters to enhance our fundamentals have strengthened Cango's position in this evolving market. In particular, as China's leading technological automotive transaction service platform, we are always closely monitoring the latest market trends. With firm confidence in the growth prospects of the new energy vehicle market, we have invested in this field, and our investment in Li Auto is expected to bring not only significant investment returns but also strategic cooperation opportunities. Looking ahead, we are committed to further exploration and learning as we work towards creating positive change for the future. By providing a user-centered product matrix around automotive financing and transaction, we will further deepen our dealership network and extend our service footprint," Mr. Lin concluded.
Mr. Yongyi Zhang, Chief Financial Officer of Cango, stated, "We continued advancing key elements of our growth strategy in the third quarter, positioning Cango to emerge from the pandemic. While lower-tier markets recovered slowly in the first half, we have seen encouraging signs of demand picking up as growth began to accelerate throughout the third quarter. Coupled with the outstanding performance in our core auto loan facilitation business and car trading transactions business, we achieved a strong rebound in our top-line growth. At the same time, our third quarter operating income increased by over 100% quarter-over-quarter and approximately 50% year-over-year. Excluding the significant gain from our investment in Li Auto, our third quarter net income still grew by approximately 72% sequentially. As we look ahead, there is clear visibility for significant upside and opportunity as we roll out new strategic initiatives, remain disciplined in cost management and make focused investments in the future of our business."
Third Quarter 2020 Financial Results
Total revenues in the third quarter of 2020 increased by 23.8% to RMB434.9 million (US$64.1 million) from RMB351.3 million in the same period of 2019. Revenues from after-market services facilitation in the third quarter of 2020 increased by 69.4% to RMB68.9 million (US$10.1 million) from RMB40.7 million in the same period of 2019. The increase was primarily due to the Company's efforts to cross-sell insurance facilitation services. Revenues from car trading transactions in the third quarter of 2020 were RMB70.4 million (US$10.4 million), becoming an important revenue contributor starting in this quarter.
OPERATING COST AND EXPENSES
Total operating cost and expenses in the third quarter of 2020 were RMB300.4 million (US$44.2 million) compared to RMB261.6 million in the same period of 2019. This was in line with the increase in the Company's sales volume and related costs incurred by car trading transactions business.
Cost of revenue in the third quarter of 2020 increased by 44.2% to RMB180.9 million (US$26.6 million) from RMB125.4 million in the same period of 2019, which was primarily due to an increase in the amount of financing transactions the Company facilitated and car trading transactions. As a percentage of total revenues, cost of revenue in the third quarter of 2020 was 41.6% compared to 35.7% in the same period of 2019. Excluding the financial impact from the car trading transactions, cost of revenue as a percentage of totals revenues was 30.3% in the third quarter of 2020.
Sales and marketing expenses in the third quarter of 2020 were RMB41.9 million (US$6.2 million) compared to RMB47.6 million in the same period of 2019. As a percentage of total revenues, sales and marketing expenses in the third quarter of 2020 decreased to 9.6% from 13.5% in the same period of 2019. The decrease was a result of the Company's efforts to improve the efficiency of its sales and marketing spending while growing its revenues concurrently.
General and administrative expenses in the third quarter of 2020 were RMB52.2 million (US$7.7 million) compared to RMB52.3 million in the same period of 2019. As a percentage of total revenues, general and administrative expenses in the third quarter of 2020 decreased to 12.0% from 14.9% in the same period of 2019.
Research and development expenses in the third quarter of 2020 were RMB14.2 million (US$2.1 million) compared to RMB13.2 million in the same period of 2019. As a percentage of total revenues, research and development expenses in the third quarter of 2020 decreased to 3.3% from 3.8% in the same period of 2019.
Net gain on risk assurance liabilities in the third quarter of 2020 was RMB12.9 million (US$1.9 million) compared with a net loss of RMB7.5 million in the same period of 2019. 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 third quarter of 2020 was RMB134.5 million (US$19.8 million), compared with RMB89.7 million in the same period of 2019.
FAIR VALUE CHANGE OF EQUITY INVESTMENT
Fair value change of equity investment in the third quarter of 2020 was a gain of RMB1,827.7 million (US$269.2 million) compared to nil in the same period of 2019. 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.
Net income in the third quarter of 2020 was RMB1,769.4 million (US$260.6 million), an increase of 1,348.7% from RMB122.1 million in the same period of 2019. Non-GAAP adjusted net income in the third quarter of 2020 was RMB1,783.2 million (US$262.6 million), an increase of 1,121.0% from RMB146.0 million in the same period of 2019. The significant increases were primarily due to the fair value gain of the Company's investment in Li Auto. 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 third quarter of 2020 were RMB11.82 (US$1.74) and RMB11.78 (US$1.73), respectively. Non-GAAP adjusted basic and diluted net income per ADS in the third quarter of 2020 were RMB11.91 (US$1.75) and RMB11.87 (US$1.75), respectively. Each ADS represents two Class A ordinary shares of the Company.
As of September 30, 2020, the Company had cash and cash equivalents of RMB1,423.3 million (US$209.6 million), compared to RMB2,010.3 million as of June 30, 2020. The decrease was mainly due to the fact that the Company invested certain amount of cash in term deposit and repaid debts.
As of September 30, 2020, the Company had long-term investments of RMB2,313.9 million (US$340.8 million), compared to RMB551.5 million as of June 30, 2020. The increase was mainly due to the change in fair value of the Company's investment in Li Auto.
For the fourth quarter of 2020, the Company expects total revenues to be between RMB700 million and RMB750 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 investment in Li Auto and the change in fair value of investment due to the price volatility of the stock may have a significant impact on the Company's fourth quarter financial results.
Notice of Annual General Meeting
The Company will hold its annual general meeting of shareholders (the "AGM") at 18F, Building 2, Youyou Century Plaza, 428 Yang Gao Nan Lu, Shanghai, China, on December 25, 2020 at 10:00 A.M. Beijing Time. No proposal will be submitted to shareholders for approval at the AGM. Instead, the AGM will serve as an open forum for shareholders and holders of the Company's ADSs to discuss the Company's affairs with management. The chairman of the AGM will conduct and lead the AGM and may accept questions from shareholders at his sole and absolute discretion.
The board of directors of the Company has fixed the close of business on December 4, 2020 (Eastern Standard Time) as the record date (the "Record Date") for determining the shareholders entitled to receive notice of and attend the AGM or any adjournment or postponement thereof.
Holders of record of the ordinary shares, par value US$0.0001 per share, of the Company (the "Ordinary Shares"), at the close of business on the Record Date are entitled to attend the AGM and any adjournment or postponement thereof in person.
The notice of the annual general meeting is available on the Company's website at ir.cangoonline.com. The Company filed its annual report on Form 20-F for the fiscal year ended December 31, 2019, with the U.S. Securities and Exchange Commission (the "SEC") on April 27, 2020, U.S. Eastern Time. The annual report can be accessed on the Company's investor relations website at ir.cangoonline.com or the SEC's website at www.sec.gov. The Company will also provide a hard copy of its annual report containing its audited consolidated financial statements, free of charge, to its shareholders and American Depositary Share holders upon request.