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Cango Inc. Reports Fourth Quarter and Full Year 2020 Unaudited Financial Results

Date: 2021-03-12
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SHANGHAI, March 11, 2021 /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 fourth quarter and full year of 2020.

Fourth Quarter 2020 Financial and Operational Highlights

·         Total revenues were RMB1,097.4 million (US$168.2 million), a 150.2% increase from RMB438.5 million in the same period of 2019, outperforming the high end of the Company's guidance by 46.3%. The increase was mainly driven by the increased amounts of both financing transactions the Company facilitated and car trading transactions.

·         Car trading transactions revenues were RMB546.8 million (US$83.8 million), or 49.8% of total revenues in the fourth quarter of 2020.

·         Automotive financing facilitation revenues were RMB398.1 million (US$61.0 million), a 51.8% increase from RMB262.3 million in the same period of 2019.

·         The amount of financing transactions the Company facilitated in the fourth quarter of 2020 was RMB10,822.2 million (US$1,658.6 million). The total outstanding balance of financing transactions the Company facilitated was RMB43,504.8 million (US$6,667.4 million) as of December 31, 2020.

·         M1+ and M3+ overdue ratios for all financing transactions that remained outstanding and were facilitated by the Company were 0.98% and 0.42%, respectively, as of December 31, 2020, compared to 1.11% and 0.53%, respectively, as of September 30, 2020.

·         The number of dealers covered by the Company was 48,487 as of December 31, 2020, compared to 46,248 as of September 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.

 

Full Year 2020 Financial and Operational Highlights

·         Total revenues were RMB2,052.4 million (US$314.5 million), a 42.5% increase from RMB1,440.1 million in the full year of 2019.

·         Car trading transactions revenues were RMB624.8 million (US$95.8 million), or 30.4% of total revenues in the full year of 2020.

·         Automotive financing facilitation revenues were RMB891.8 million (US$136.7 million), compared to RMB913.8 million in the full year of 2019. This slight decrease was mainly due to the impact of the Covid-19 pandemic, which severely disrupted the domestic automotive industry in the first half of 2020.

·         After-market services facilitation revenues were RMB241.2 million (US$37.0 million), compared to RMB206.0 million in the full year of 2019.

·         The amount of financing transactions the Company facilitated in the full year of 2020 was RMB27,697.7 million (US$4,244.9 million).

·         M1+ and M3+ overdue ratios for all financing transactions that remained outstanding and were facilitated by the Company were 0.98% and 0.42%, respectively, as of December 31, 2020, compared to 0.85% and 0.40%, respectively, as of December 31, 2019.

·         The number of dealers covered by the Company was 48,487 as of December 31, 2020, compared to 49,238 as of December 31, 2019.

Mr. Jiayuan Lin, Chief Executive Officer of Cango, commented, “It was a remarkable year for Cango despite the challenging environment due to the Covid-19 outbreak. Fueled by our mission to make car purchases simple and enjoyable, our ongoing efforts to build a one-stop platform that empowers all parties involved in the car transaction value chain has enabled us to navigate challenges and deliver solid results. During the fourth quarter, we achieved outstanding performance across the board including our automotive financing facilitation, car trading transactions and after-market services facilitation businesses. Fourth quarter total revenues came in at RMB1,097.4 million, exceeding the high end of our previous guidance by 46.3%. Robust returns from our investment in Li Auto are already contributing to strong growth in our bottom line, and our deep insights into sector trends make us optimistic about the automotive industry’s gradual but pervasive evolution toward new energy vehicles.

“The success we achieved in 2020 stems from our industry know-how and the strong platform we have worked so hard to build over the past decade. Benefitting from our strong foothold in the lower-tier markets, we have seen great synergies across our businesses. In particular, revenues from our car trading transactions business contributed approximately 50% of total revenues in the fourth quarter, becoming an important growth driver for us. With our platform, we aim to connect all participants in the automotive transaction value chain through our closed-loop services with customer experience at the core. During the fourth quarter, we also made significant strides to enhance our service capabilities in terms of traffic generation and operation, supply chain management, as well as technological capabilities.

“Looking back over the last 10 years since Cango was founded, we have grown our business with a passion, always looking toward the future and staying true to our original aspirations even as we weathered obstacles. Moving into the next decade, we believe our vast dealership network, efficient service platform, competitive technological advantages and industry expertise give us a unique edge which will not only benefit our customers by giving them a premium experience and enhanced, comprehensive offerings, but also help accelerate growth of the auto market in China.

Mr. Yongyi Zhang, Chief Financial Officer of Cango, stated, “Our continuous and steady progress across businesses fueled our top line expansion in the fourth quarter. Total revenues grew to a record level of RMB1.1 billion, up 150.2% year-over-year. As we rolled out more initiatives to effectively optimize overall cost, our operating income maintained its robust growth momentum in the quarter, rising 68.6% year-over-year. With robust returns from our investment in Li Auto, we also expanded our profitability in the fourth quarter, growing net income by over 15 times to RMB1.6 billion. Looking ahead, we remain focused on executing our growth strategy and committed to investing selectively in growth opportunities across all our business lines.”

 

Fourth Quarter 2020 Financial Results

REVENUES

Total revenues in the fourth quarter of 2020 increased by 150.2% to RMB1,097.4 million (US$168.2 million) from RMB438.5 million in the same period of 2019. Revenues from car trading transactions in the fourth quarter of 2020 were RMB546.8 million (US$83.8 million), becoming an important revenue contributor. Revenues from automotive financing facilitation and after-market services facilitation in the fourth quarter of 2020 were RMB398.1 million (US$61.0 million) and RMB70.8 million (US$10.8 million), respectively.

OPERATING COST AND EXPENSES

Total operating cost and expenses in the fourth quarter of 2020 were RMB899.0 million (US$137.8 million) compared to RMB320.8 million in the same period of 2019. This was mainly due to the related costs incurred by car trading transactions business. Primarily as a result of the increase in revenues from car trading transactions, sales and marketing expenses, general and administrative expenses and research and development expenses each decreased as a percentage of total revenues in the fourth quarter of 2020, compared to the same period of 2019.

·         Cost of revenue in the fourth quarter of 2020 increased to RMB723.8 million (US$110.9 million) from RMB157.2 million in the same period of 2019. As a percentage of total revenues, cost of revenue in the fourth quarter of 2020 was 66.0% compared to 35.9% in the same period of 2019, and the change was primarily due to an increase in the amount of car trading transactions. For automotive financing facilitation and after-market services facilitation, cost of revenue as a percentage of relevant revenues was around 30% in the fourth quarter of 2020.

·         Sales and marketing expenses in the fourth quarter of 2020 were RMB65.8 million (US$10.1 million) compared to RMB55.2 million in the same period of 2019. As a percentage of total revenues, sales and marketing expenses in the fourth quarter of 2020 was 6.0% compared to 12.6% in the same period of 2019.

·         General and administrative expenses in the fourth quarter of 2020 were RMB90.1 million (US$13.8 million) compared to RMB66.1 million in the same period of 2019. As a percentage of total revenues, general and administrative expenses in the fourth quarter of 2020 was 8.2% compared to 15.1% in the same period of 2019.

·         Research and development expenses in the fourth quarter of 2020 were RMB23.0 million (US$3.5 million) compared to RMB18.6 million in the same period of 2019. As a percentage of total revenues, research and development expenses in the fourth quarter of 2020 was 2.1% compared to 4.2% in the same period of 2019.

·         Net gain on risk assurance liabilities in the fourth quarter of 2020 was RMB18.8 million (US$2.9 million) compared to a net loss of RMB6.5 million in the same period of 2019. Net gain on risk assurance liabilities was mainly due to a sequential decrease in default rate since the third quarter of 2020.

INCOME FROM OPERATIONS

Income from operations in the fourth quarter of 2020 was RMB198.4 million (US$30.4 million), compared to RMB117.7 million in the same period of 2019.

FAIR VALUE CHANGE OF EQUITY INVESTMENT

Fair value change of equity investment in the fourth quarter of 2020 was a gain of RMB1,487.8 million (US$228.0 million) compared to nil in the same period of 2019. The Company’s investee, Li Auto Inc. (“Li Auto”), has been listed on the Nasdaq Global Select Market since July 30, 2020. As of December 31, 2020, Cango held 39,194,413 Class A ordinary shares of Li Auto.

NET INCOME

Net income in the fourth quarter of 2020 was RMB1,568.5 million (US$240.4 million), an increase of 1,432.1% from RMB102.4 million in the same period of 2019. Non-GAAP adjusted net income in the fourth quarter of 2020 was RMB1,588.0 million (US$243.4 million), an increase of 1,189.2% from RMB123.2 million in the same period of 2019.  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 fourth quarter of 2020 were RMB10.48 (US$1.61) and RMB10.40 (US$1.59), respectively. Non-GAAP adjusted basic and diluted net income per ADS in the fourth quarter of 2020 were RMB10.61 (US$1.63) and RMB10.53 (US$1.61), respectively. Each ADS represents two Class A ordinary shares of the Company.

BALANCE SHEET

As of December 31, 2020, the Company had cash and cash equivalents of RMB1,426.9 million (US$218.7 million), compared to RMB1,423.3 million as of September 30, 2020.

As of December 31, 2020, the Company had short-term investments of RMB4,342.4 million (US$665.5 million), compared to RMB1,140.2 million as of September 30, 2020. The increase was mainly due to the change in fair value of the Company’s investment in Li Auto and the Company’s reclassification of such investment from long-term investments to short-term investments.

 

Full Year 2020 Financial Results

REVENUES

Total revenues in the full year of 2020 increased by 42.5% to RMB2,052.4 million (US$314.5 million) from RMB1,440.1 million in the full year of 2019. Revenues from car trading transactions in the full year of 2020 were RMB624.8 million (US$95.8 million). Revenues from automotive financing facilitation and after-market services facilitation in the full year of 2020 were RMB891.8 million (US$136.7 million) and RMB241.2 million (US$37.0 million), respectively.

OPERATING COST AND EXPENSES

Total operating cost and expenses in the full year of 2020 were RMB1,734.1 million (US$265.8 million) compared to RMB1,116.8 million in the full year of 2019. This was mainly due to the related costs incurred by car trading transactions business. Primarily as a result of the increase in revenues from car trading transactions, sales and marketing expenses, general and administrative expenses and research and development expenses each decreased as a percentage of total revenues in the full year of 2020, compared to the full year of 2019.

·         Cost of revenue in the full year of 2020 increased to RMB1,098.1 million (US$168.3 million) from RMB539.3 million in the full year of 2019. As a percentage of total revenues, cost of revenue in the full year of 2020 was 53.5% compared to 37.4% in the full year of 2019, and the change was primarily due to an increase in the amount of car trading transactions. For automotive financing facilitation and after-market services facilitation, cost of revenue as a percentage of relevant revenues was around 30% in the full year of 2020.

·         Sales and marketing expenses in the full year of 2020 were RMB195.9 million (US$30.0 million) compared to RMB192.8 million in the full year of 2019. As a percentage of total revenues, sales and marketing expenses in the full year of 2020 was 9.5% compared to 13.4% in the full year of 2019.

·         General and administrative expenses in the full year of 2020 were RMB265.7 million (US$40.7 million) compared to RMB236.6 million in the full year of 2019. As a percentage of total revenues, general and administrative expenses in the full year of 2020 was 12.9% compared to 16.4% in the full year of 2019.

·         Research and development expenses in the full year of 2020 were RMB62.6 million (US$9.6 million) compared to RMB57.4 million in the full year of 2019. As a percentage of total revenues, research and development expenses in the full year of 2020 was 3.0% compared to 4.0% in the full year of 2019.

·         Net loss on risk assurance liabilities in the full year of 2020 was RMB2.3 million (US$0.3 million) compared to a net loss of RMB34.3 million in the same period of 2019.

INCOME FROM OPERATIONS

Income from operations in the full year of 2020 was RMB318.3 million (US$48.8 million), compared to RMB323.3 million in the full year of 2019. This slight decrease was mainly due to the impact of the Covid-19 pandemic, which severely disrupted the domestic automotive industry in the first half of 2020.

FAIR VALUE CHANGE OF EQUITY INVESTMENT

Fair value change of equity investment in the full year of 2020 was a gain of RMB3,315.5 million (US$508.1 million) compared to a gain of RMB41.6 million in the full year of 2019. The Company’s investee, Li Auto Inc. (“Li Auto”), has been listed on the Nasdaq Global Select Market since July 30, 2020. As of December 31, 2020, Cango held 39,194,413 Class A ordinary shares of Li Auto.

NET INCOME

Net income in the full year of 2020 was RMB3,373.4 million (US$517.0 million), an increase of 733.2% from RMB404.9 million in the full year of 2019. Non-GAAP adjusted net income in the full year of 2020 was RMB3,452.2 million (US$529.1 million), an increase of 608.7% from RMB487.1 million in the full year of 2019. 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 ADS in the full year of 2020 were RMB22.43 (US$3.44) and RMB22.17 (US$3.40), respectively. Non-GAAP adjusted basic and diluted net income per ADS in the full year of 2020 were RMB22.95 (US$3.52) and RMB22.69 (US$3.48), respectively. Each ADS represents two Class A ordinary shares of the Company.

Business Outlook

For the first quarter of 2021, the Company expects total revenues to be between RMB1,000 million and RMB1,050 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 first quarter of 2021 financial results.