Home > Overseas Investment News > Cango Inc. Reports Third Quarter 2018 Unaudited Financial Results
Cango Inc. Reports Third Quarter 2018 Unaudited Financial Results
2018-11-23

SHANGHAI, Nov. 23, 2018 /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 2018.

Financial and Operational Highlights

  • Total revenues in the third quarter of 2018 were RMB285.2 million (US$41.5 million).
  • Net income in the third quarter of 2018 was RMB106.3million (US$15.5 million). Net income per ADS in the third quarter of 2018 was RMB0.73 (US$0.11). Each ADS represents two of the Company's Class A ordinary shares.
  • The number of dealers covered by the Company increased to 44,279 as of September 30, 2018, representing a year-over-year increase of 45.1%.
  • M1+ and M3+ overdue ratios for all financing transactions which the Company facilitated and remained outstanding were 0.83% and 0.36%, respectively as of September 30, 2018, as compared to 0.92% and 0.46%, respectively as of June 30, 2018.

Recent Developments

The Company has made significant progress under the strategic cooperation with Industrial and Commercial Bank of China ("ICBC") and Didi Chuxing ("Didi"). The Company has completed the system integration with ICBC, and started to facilitate auto loans for ICBC. The Company has also established 39 subsidiaries in key ride-sharing cities across China for Didi, among which we have started operations in 7 cities, including the pilot city Changzhou.

Mr. Jiayuan Lin, Chief Executive Officer of Cango, stated, "During the third quarter of 2018, we adhered to our asset-light business model, focused on high-quality services for consumers, dealers and financial institutions, and pushed forward strategic growth initiatives. First, we continued to expand and optimize our dealer coverage. Leveraging our extensive dealer network, our proprietary SaaS management system helps dealers with loan facilitation, supply chain financing, and car sourcing. Our dealer relationship has become more deeply integrated in many operational fronts, which provided multiple sustainable monetizing opportunities for Cango. Second, our after-market service, has become a meaningful source of revenue despite being launched for less than a year. We observed a satisfying attach rate, along with the potential for providing after-market services as a standalone product." 

Mr. Lin continued, "Third, our strategic cooperation with ICBC and Didi has been progressing as planned. Our system integration with ICBC has achieved initial success. Auto loan products with OEM subsidies represent a tremendous market segment we currently have little presence in. As to the cooperation with Didi, we have established 39 subsidiaries in key ride-sharing cities. Looking ahead, we expect the growth rate of car transactions in China to remain soft. Our strategy is to grow our market share with competitive products and solid execution; and to enter into new market segments through cooperation with our strategic partners. We have confidence in the transparent growth path ahead. We believe we will continue delivering value to our shareholders ."

Mr. Yongyi Zhang, Chief Financial Officer of Cango, stated, "During the third quarter of 2018, our business remained highly profitable and our operation cash flow positive. Third quarter revenues increased by 2.4% year-over-year, and after-market services started to make a meaningful revenue contribution. Our after-market services incurred minimum incremental labor and system costs and expenses, resulting in high profit margins and generating great return on our investment. As we continue cultivating dealership and customer life-long monetization opportunities, and developing operations and systems for new market opportunities, we believe we are well positioned to implement our growth strategies."

Third Quarter 2018 Financial Results

REVENUES

Total revenues increased by 2.4% to RMB285.2 million (US$41.5 million) in the third quarter of 2018 from RMB278.4 million in the corresponding period of 2017. The increase was primarily due to the contribution of after-market services. Total revenues for the first nine months of 2018 were RMB770.3 million (US$112.2 million), an increase of 4.0% compared to the corresponding period of 2017.

Revenue from after-market services in the third quarter of 2018 was RMB39.0 million (US$5.7 million), which accounted for 14% of total revenues.

OPERATING COST AND EXPENSES

Total operating cost and expenses in the third quarter of 2018 were RMB209.0 million (US$30.4 million), compared to RMB103.1 million in the corresponding period of 2017. The increase in operating cost and expenses was primarily attributable to the increases in cost of revenue, general and administrative expenses as well as sales and marketing expenses.

  • Cost of revenue in the third quarter of 2018 increased by 50.9% to RMB113.5 million (US$16.5 million) from RMB75.2 million in the corresponding period of 2017. As a percentage of total revenues, cost of revenue in the third quarter of 2018 increased to 39.8% from 27.0% in the corresponding period of 2017. The increase was due to a higher average amount of commissions paid to dealers in each financing transaction.
  • Sales and marketing expenses in the third quarter of 2018 increased to RMB48.5 million (US$7.1 million) from RMB23.3 million in the corresponding period of 2017. As a percentage of total revenues, sales and marketing expenses in the third quarter of 2018 increased to 17.0% from 8.4% in the corresponding period of 2017. The increase was due to the expansion of the Company's sales personnel to 2,203 as of September 30, 2018 from 1,260 as of September 30, 2017, to further improve the Company's dealer coverage and dealers' stickiness. The Company expects its sales and marketing expenses as a percentage of total revenues to decrease in the future due to economies of scale.
  • General and administrative expenses were RMB40.7 million (US$5.9 million) or 14.3% of total revenues in the third quarter of 2018, compared with RMB16.5 million or 5.9% of revenues in the corresponding period of 2017. The increase was primarily due to increased administrative staff headcount and compensation, as well as the share-based compensation expenses.
  • Research and development expenses in the third quarter of 2018 increased to RMB10.8 million (US$1.6 million) from RMB3.8 million in the corresponding period of 2017. As a percentage of total revenues, research and development expenses in the third quarter of 2018 increased to 3.8% from 1.4% in the corresponding period of 2017, mostly due to the expansion of the Company's research and development team.

NET INCOME

Net income was RMB 106.3 million (US$15.5 million) in the third quarter of 2018, compared to RMB135.5 million in the corresponding period of 2017. Non-GAAP adjusted net income was RMB120.2 million (US$17.5 million), compared to RMB135.5 million in the same period last year. 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

Net income per ADS was RMB0.73 (US$0.11) in the third quarter of 2018, and RMB0.73 (US$0.11) on a diluted basis. Non-GAAP adjusted net income per ADS was RMB0.82 (US$0.12) in the third quarter of 2018, and RMB0.82 (US$0.12) on a diluted basis. Each ADS represents two of the Company's Class A ordinary shares.

BALANCE SHEET

As of September 30, 2018, the Company had cash and cash equivalents of RMB3,643 million (US$530.4 million), compared with RMB3,121 million as of June 30, 2018.

Business Outlook

For the fourth quarter of 2018, the Company expects total revenues to be between RMB280 million and RMB295 million. This forecast reflects the Company's current and preliminary views on the market and operational conditions, which are subject to change.

Conference Call Information

The Company will hold a conference call on Thursday, November 22, 2018 at 8:00 pm Eastern Time or Friday, November 23, 2018 at 9:00 am Beijing Time to discuss the financial results. Participants may access the call by dialing the following numbers:

International:

United States Toll Free:

China Toll Free:

4001-201-203

Hong Kong Toll Free:

Conference ID:

Cango Inc.

The replay will be accessible through November 30, 2018, by dialing the following numbers:

United States Toll Free:

International:

Access Code:

10123205

A live and archived webcast of the conference call will also be available at the Company's investor relations website at .

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: .

Definition of Overdue Ratios

We define "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.

We define "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 is 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 RMB6.8680 to US$1.00, the noon buying rate in effect on September 28, 2018 in the H.10 statistical release of the Federal Reserve Board. The Company makes no representation that the RMB or US$ 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

Caroline Li
Cango Inc.
+86 21 3183 5087

 

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,
2017


As of September 30,
2018





RMB


RMB

US$









ASSETS:








Current assets:








Cash and cash equivalents




803,270,815


3,642,758,351

530,395,800

Restricted Cash




10,060,360


10,129,155

1,474,833

Short-term investments




62,380,000


201,454,000

29,332,266

Accounts and financing receivable, net




86,427,259


100,671,704

14,658,082

Short-term finance leasing receivable, net




-


751,934,198

109,483,721

Short-term amounts due from related parties




1,253,833


-

-

Prepaid expenses and other current assets 




144,858,222


63,304,040

9,217,245

Total current assets




1,108,250,489


4,770,251,448

694,561,947









Non-current assets:








Restricted Cash




319,352,347


580,965,889

84,590,258

Long-term investments




191,002,602


291,225,956

42,403,313

Equity method investments




165,659,951


1,451,427

211,332

Goodwill




-


145,063,857

21,121,703

Property and equipment, net




9,751,738


19,570,541

2,849,525

Intangible assets




1,701,770


1,774,670

258,397

Deferred tax assets




67,774,187


76,286,734

11,107,562

Long-term amounts due from related parties




122,383,094


-

-

Long-term finance leasing receivable, net




-


748,241,928

108,946,116

Other non-current assets




10,991,399


22,078,402

3,214,677

Total non-current assets




888,617,088


1,886,659,404

274,702,883

TOTAL ASSETS




1,996,867,577


6,656,910,852

969,264,830









LIABILITIES, MEZZANINE EQUITY AND
SHAREHOLDERS' EQUITY








Current liabilities:








Short-term borrowings




-


171,400,000

24,956,319

Long-term debts—current




-


303,521,920

44,193,640

Accrued expenses and other current liabilities




328,522,735


156,482,317

22,784,263

Short-term amounts due to related parties




5,525,000


-

-

Risk assurance liabilities 




129,935,457


161,743,140

23,550,253

Income tax payable




62,320,855


55,515,820

8,083,259

Total current liabilities




526,304,047


848,663,197

123,567,734









Non-current liabilities:








Long-term borrowings




175,000,000


581,876,978

84,722,915

Other non-current liabilities




35,555,908


32,870,283

4,786,005

Total non-current liabilities




210,555,908


614,747,261

89,508,920

Total liabilities




736,859,955


1,463,410,458

213,076,654









Mezzanine equity








Convertible Preferred Shares 








Series A-1




1,501,153,698


-

-

Series A-3




307,816,408


-

-

Series B




2,132,875,970


-

-

Series C




-


-

-

Total mezzanine equity




3,941,846,076


-

-

Shareholders' equity








Ordinary shares




83,145


204,260

29,741

Series A-2 Convertible Preferred Shares 




1,450


-

-

Additional paid-in capital




4,100,000


19,439,077

2,830,384

Accumulated other comprehensive
income/(loss)




(398,698)


107,045,840

15,586,174

Accumulated (deficit) retained earnings




(2,711,414,472)


5,058,446,424

736,523,940

Total Cango Inc.'s (deficit) equity




(2,707,628,575)


5,185,135,601

754,970,239

Non-controlling interests




25,790,121


8,364,793

1,217,937

Total shareholders' (deficit) equity




(2,681,838,454)


5,193,500,394

756,188,176

TOTAL LIABILITIES, MEZZANINE EQUITY
AND SHAREHOLDERS' EQUITY




1,996,867,577


6,656,910,852

969,264,830

 

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 September 30,


Nine months ended September 30,





2017


2018


2017

2018





RMB


RMB

US$


RMB

RMB

US$













Revenues




278,442,720


285,171,140

41,521,715


740,876,311

770,278,151

112,154,652

Operating cost and expenses:












Cost of revenue




75,237,589


113,539,426

16,531,658


237,831,135

275,576,495

40,124,708

Sales and marketing




23,285,963


48,494,188

7,060,889


57,058,501

120,292,212

17,514,882

General and administrative




16,521,980


40,703,732

5,926,577


43,449,576

98,798,322

14,385,312

Research and development




3,788,950


10,833,449

1,577,380


9,182,263

26,766,990

3,897,349

Net (gain) on risk assurance liabilities




(15,725,161)


(14,055,654)

(2,046,543)


(37,640,739)

(15,239,157)

(2,218,864)

Provision for financing receivables




-


9,464,769

1,378,097


-

22,928,882

3,338,509

Total operation cost and expense




103,109,321


208,979,910

30,428,058


309,880,736

529,123,744

77,041,896













Income from operations




175,333,399


76,191,230

11,093,657


430,995,575

241,154,407

35,112,756

Interest income




3,562,379


15,045,281

2,190,635


9,777,092

41,368,719

6,023,401

income from equity method investments




3,883,027


43,795,483

6,376,745


4,155,139

42,399,341

6,173,463

Interest expense




(5,119,996)


(4,757,534)

(692,710)


(10,013,277)

(14,259,589)

(2,076,236)

Foreign exchange loss, net




(15,655,457)


(6,739,620)

(981,308)


(24,345,001)

682,896

99,432

Other income




13,428,261


11,925,506

1,736,387


15,981,449

32,971,660

4,800,765

Other expenses




(174,390)


6,669,254

971,062


(282,578)

(528,669)

(76,976)













Net income before income taxes




175,257,223


142,129,600

20,694,468


426,268,399

343,788,765

50,056,605

Income tax expenses 




(39,749,961)


(35,866,227)

(5,222,223)


(107,030,659)

(88,882,439)

(12,941,532)













Net income




135,507,262


106,263,373

15,472,245


319,237,740

254,906,326

37,115,073

Less: Net income attributable to the noncontrolling interest shareholders

10,818,050


3,447,788

502,008


13,105,836

7,546,938

1,098,854













Net income attributable to Cango Inc.'s shareholders

124,689,212


102,815,585

14,970,237


306,131,904

247,359,388

36,016,219

Less: Accretion of Series C Preferred Shares




-


(6,991,289)

(1,017,951)


-

-

-

Net income attributable to Cango Inc.'s ordinary shareholders

124,689,212


109,806,874

15,988,188


306,131,904

247,359,388

36,016,219

Net income per ADS(Note 1):












Basic




1.00


0.73

0.11


2.42

1.82

0.27

Diluted




1.00


0.73

0.11


2.42

1.80

0.26

ADSs used in net income per ADS computation (Note 1):












Basic




63,574,601


150,049,511

150,049,511


63,574,601

135,592,860

135,592,860

Diluted




126,415,858


150,049,511

150,049,511


126,415,858

137,062,696

137,062,696













Other comprehensive income, net of tax











Unrealized losses on available-for-sale securities




(3,647,669)


11,384

1,658


(2,065,258)

167,515

24,391

Reclassification of losses to net income




2,065,258


-

-


2,065,258

-

-

Foreign currency translation adjustment




-


63,386,168

9,229,203


-

107,277,023

15,619,834













Total comprehensive income




133,924,851


169,660,925

24,703,106


319,237,740

362,350,864

52,759,298

Total comprehensive income attributable to Cango Inc.'s shareholders

123,106,801


166,213,137

24,201,098


306,131,904

354,803,926

51,660,444













Note1: Each ADS represents two ordinary
shares.












 

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 September 30,


Nine months ended September 30,





2017


2018


2017

2018





(Unaudited)


(Unaudited)

(Unaudited)


(Unaudited)

(Unaudited)

(Unaudited)





RMB


RMB

US$


RMB

RMB

US$













Net income




135,507,262


106,263,373

15,472,244


319,237,740

254,906,326

37,115,074

Add: Share-based compensation expenses

-


13,971,837

2,034,338


-

19,439,077

2,830,384

       Cost of revenue



-


572,846

83,408


-

797,003

116,046

       Sales and marketing



-


2,976,001

433,314


-

4,140,523

602,872

       General and administrative


-


9,696,453

1,411,831


-

13,490,717

1,964,286

       Research and development



-


726,537

105,786


-

1,010,834

147,180

Non-GAAP adjusted net income                                           

135,507,262


120,235,210

17,506,582


319,237,740

274,345,403

39,945,458

Less: Net income attributable to the
noncontrolling interest shareholders

10,818,050


3,447,788

502,008


13,105,836

7,546,938

1,098,855

Non-GAAP adjusted net income attributable to
Cango Inc.'s shareholders

124,689,212


116,787,422

17,004,575


306,131,904

266,798,465

38,846,603

Accretion of Series C Preferred Shares

-


(6,991,289)

(1,017,951)


-

-

-

Non-GAAP adjusted net income attributable to
Cango Inc.'s ordinary shareholders

124,689,212


123,778,711

18,022,526


306,131,904

266,798,465

38,846,603

Non-GAAP adjusted net income per ADS-basic (Note 1)

1.00


0.82

0.12


2.42

1.97

0.29

Non-GAAP adjusted net income per ADS-diluted (Note 1)

1.00


0.82

0.12


2.42

1.97

0.29

Weighted average ADS outstandingbasic

63,574,601


150,049,511

150,049,511


63,574,601

135,592,860

135,592,860

Weighted average ADS outstandingdiluted

126,415,858


150,049,511

150,049,511


126,415,858

137,062,696

137,062,696













Note1: Each ADS represents two ordinary shares.









 

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