Earnings call: Cango Inc. reported a total revenue of RMB 26.95 million

Cango Inc . (NYSE: NYSE:CANG) delivered a robust financial performance in its third quarter 2024 earnings call on September 30, 2024. The company reported total revenue of RMB 26.95 million, operating profit of RMB 35.24 million, and net profit of RMB 67.88 million.

These results were primarily due to effective cost control and risk management strategies. Cango also maintained a low nonperforming loan ratio, with an outstanding loan balance of approximately RMB 4.8 billion. The company’s cash and cash equivalents saw an increase, reaching RMB 3.8 billion, which is up RMB 89.27 million from the previous quarter.

Key Takeaways

Total (EPA:TTEF) revenue reached RMB 26.95 million, with operating profit at RMB 35.24 million.
Net profit stood at RMB 67.88 million, attributed to strong cost control and risk management.
The nonperforming loan ratio remained low, with an outstanding loan balance of around RMB 4.8 billion.
Cash and cash equivalents increased to RMB 3.8 billion.
Cango’s U-Car app and AutoCango.com showed significant growth in user engagement.
Q4 2024 revenue is forecasted to be between RMB 15 million and RMB 17.5 million.

Company Outlook

Cango anticipates Q4 2024 revenues to range between RMB 15 million and RMB 17.5 million.
The company is focusing on expanding AutoCango.com into international markets and enhancing its features.
Management plans to continue stringent cost control and implement risk management strategies to improve operational efficiency and financial structure.

Bearish Highlights

The company did not present any specific bearish indicators during the call.

Bullish Highlights

Cango’s U-Car app increased its page views by 21%, reaching 280,000.
AutoCango.com achieved over 370,000 page views and nearly 60,000 registered users since its launch.
The international platform is expected to exceed 4 million search engine impressions by year-end.

Misses

There were no specific misses reported during the earnings call.

Q&A Highlights

Management discussed strategies for integrating into overseas markets, particularly in Africa, and enhancing AutoCango’s features.
Plans to support 15 languages on AutoCango.com by early 2025 were highlighted.
The company’s approach to improving the financial structure through cost control measures and risk management was emphasized.

Cango Inc. is paving the way for international expansion with its focus on improving the user experience of its platforms. The U-Car app’s increased page views and the rapid growth of AutoCango.com underscore the company’s potential in the used car market. By enhancing AutoCango’s features and expanding its language support, Cango is poised to increase its global footprint, especially in Africa.

On the operational side, Cango’s adoption of cloud computing, automation of workflows, and streamlining of business processes are indicative of a company seeking to optimize its cost structure and operational efficiency. The company’s proactive approach to risk management, including a robust internal control system and close monitoring of macroeconomic factors, is expected to contribute positively to its financial health and resilience.

As Cango Inc. continues to execute its strategic initiatives, its focus on international market integration, operational efficiency, and a diverse, globally competitive team positions it favorably for future growth and success in the global marketplace.

InvestingPro Insights

Cango Inc.’s (NYSE: CANG) recent financial performance aligns with several key metrics and insights from InvestingPro. The company’s strong Q3 2024 results, particularly its net profit of RMB 67.88 million, reflect its profitability over the last twelve months, as highlighted by InvestingPro data.

InvestingPro Tips reveal that Cango holds more cash than debt on its balance sheet, which is consistent with the company’s reported increase in cash and cash equivalents to RMB 3.8 billion. This strong liquidity position supports the InvestingPro observation that Cango’s liquid assets exceed short-term obligations, providing a solid foundation for its international expansion plans and ongoing operations.

The company’s effective cost control and risk management strategies mentioned in the earnings call are reflected in InvestingPro’s data, showing an impressive EBITDA growth of 429.88% over the last twelve months as of Q3 2024. This substantial growth underscores Cango’s ability to improve operational efficiency and financial structure, as discussed in the company outlook.

Moreover, Cango’s focus on expanding AutoCango.com into international markets aligns with the InvestingPro Tip indicating that analysts anticipate sales growth in the current year. The platform’s rapid user growth and the company’s plans to support 15 languages by early 2025 could contribute to this expected revenue increase.

It’s worth noting that Cango is trading at a low P/E ratio relative to near-term earnings growth, with a PEG ratio of 0.85 for the last twelve months as of Q3 2024. This suggests that the stock may be undervalued considering its growth prospects, which could be of interest to value-oriented investors.

For readers interested in a more comprehensive analysis, InvestingPro offers 14 additional tips for Cango Inc., providing a deeper understanding of the company’s financial health and market position.

Full transcript – Cango Inc (CANG) Q3 2024:

Operator: Good morning, and good evening, everyone. Welcome to Cango Inc.’s Third Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. This call is also being broadcast live on the company’s IR website. Joining us today are Mr. Jiayuan Lin, Chief Executive Officer; and Ms. Ruiyan, Financial Director of Cango. Following management’s prepared remarks, we will conduct a Q&A session. Before I begin, I refer you to the safe harbor statement in the company’s earnings release, which also applies to the conference call today as management will make forward-looking statements. With that said, I am now turning the call to Mr. Jiayuan Lin, CEO of Cango. Please go ahead.

Jiayuan Lin: [Foreign Language]. Hello, everyone, and welcome to Cango’s third quarter 2024 earnings call. [Foreign Language]. In the third quarter of 2024, Cango’s overall business performance remained stable, highlighted by total revenue of RMB26.95 million, and operating profit of RMB35.24 million and a net profit of RMB67.88 million. These solid results were primarily driven by our implementation of stricter cost control and risk management strategies, which significantly improved operational efficiency. [Foreign Language]. For postal management, we reinforced monitory mechanisms and risk assessments effectively maintaining a low nonperforming loan ratio and ensuring asset quality and stability. As of September 30, our total outstanding loan balance was approximately RMB4.8 billion with M1+ at 3.17% and M3+ at 1.76%. We also reduced our credit risk exposure not fully covered by bad debt allowance for risk assurance liabilities to RMB1.7 billion, the company’s total cash, cash equivalents and short-term investments amounted to approximately RMB3.8 billion, an increase of RMB89.27 million compared to the end of the previous quarter. [Foreign Language]. In terms of business development, we prioritize driving growth as the Cango U-Car app and our overseas used car operations. By the end of the third quarter, the Cango U-car app had accumulated a total of 280,000 page views, an increase of 21% from last quarter. We strengthened Cango’s competitive advantages in vehicle inventory during the quarter by establishing strategic partnerships with numerous used car marketplaces enabling real-time updates of vehicle listings and ensuring a diverse and abundant supply of vehicles for Cango U-Car app. [Foreign Language]. Meanwhile, we introduced a rapid vehicle inspection and listing service in close collaboration with professional third-party inspection teams we conduct thorough background checks and comprehensive vehicle condition assessments for each vehicle and provide buyers with detailed vehicle history reports and inspection data, enhancing transparency in transactions. Additionally, our nationwide logistics network offers buyers a variety of delivery and transport options to better meet diverse customer needs. [Foreign Language]. Our community operations team fosters user engagement through a range of online and offline activities, including exclusive online auctions, on-site visits and members only discounts. We also continuously collect and analyze user feedback to refine our service processes, ensuring we consistently improve customer satisfaction. [Foreign Language]. On our used car service, where we continue to make significant progress this quarter. Our international used car platform, AutoCango.com, has accumulated over 370,000 page views and nearly 60,000 registered users since its launch in March 2024. The platform now offers more than 100,000 used car SKUs covering over 65,000 different models. [Foreign Language]. To better serve our customers and enhance our brand image, we’re continuously optimizing AutoCango.com’s content and improving the overall user experience. AutoCango.com sitemap now posts over 500,000 pages thanks to consistent content updates and technological improvements. This growth reflects our commitment to content development and drive increased user engagement with information we provide. [Foreign Language]. Our content development efforts have also driven positive changes in search engine optimization, AutoCango.com’s visibility in search engine results pages or SERP in short, has exceeded 2.41 million impressions and is expected to surpass 4 million by the end of this year. This means that an increasing number of people can find and access our website through search engines boosting our brand exposure. As we continue to expand into overseas markets, we have already received inquiries from over 130 countries and regions regarding vehicle purchases. [Foreign Language]. Looking ahead, we will continue to focus on enhancing AutoCango.com’s quality and functionality to meet the diverse needs of users in different regions. At the same time, we will strengthen our data analysis capabilities to gain a more accurate understanding of the characteristics of our target market and user demographics. Building on this foundation, we will develop databased scientific marketing strategies in that achieving a more balanced global growth. [Foreign Language]. I will start advancing our existing business, we are also actively pursuing forward-looking strategic investment opportunities on a global scale. We will focus on high-quality projects that complement our core competencies of brain technological innovation by establishing an international cooperation network, strengthening communication with leading global companies and actively participating in the collaborative development of overseas markets or overseas projects, we aim to showcase our company’s strength and vision on a broader stage. [Foreign Language]. Now I would like to hand the call over to our Financial Director, Ruiyan, who will share our financial performance for this quarter.

Ruiyan: Thanks, Mr. Lin. Hello, everyone. I am Ruiyan, Financial Director of Cango. And welcome to our third quarter 2024 earnings call. Before I review our financials, please note that unless otherwise stated, all numbers are in RMB terms and all percentage comparisons are on a year-over-year basis. Total revenues in the third quarter of 2024 were RMB27.0 million compared with RMB353.6 million in the same period of 2023. Guarantee income which represented the fee income earned on the noncontingent aspect of a guarantee was RMB14.4 million in the third quarter of 2024. That was represented separately from the contingent effect of a guarantee pursuant to the adoption of ASC 326 since January 1, 2023. Now let’s move on to our cost and expenses during the quarter. Cost of revenue in the third quarter decreased to RMB23.3 million from RMB304.6 million in the same period of 2023. As a percentage of total revenues, cost of revenue in the third quarter of 2024 was 86.3% compared with 86.1% in the same period of 2023. Sales and marketing expenses in the third quarter decreased to RMB3.4 million from RMB9.9 million in the same period of 2023. General and administrative expenses in the third quarter were RMB45.2 million compared with RMB34.7 million in the same period of 2023. Research and development expenses in the third quarter decreased to RMB1.4 million from RMB7.0 million in the same period of 2023. The net gain on contingent risk assurance liabilities in the third quarter was RMB7.1 million compared with a net loss of RMB3.5 million in the same period of 2023. Net recovery on provision for credit losses in the third quarter of 2024 was RMB74.4 million compared with RMB66.9 million in the same period of 2023. We recorded RMB35.2 million in income from operations in the third quarter of 2024 compared with a loss of RMB87.8 million in the same period of 2023. Net income in the third quarter of 2024 was RMB67.9 million. Non-GAAP adjusted net income in the third quarter of 2024 was RMB71.3 million. On a per share basis, basic and diluted net income per ADS in the third quarter of 2024 were 0.66% and 0.60%, respectively. And a non-GAAP adjusted basic and diluted net income per ADS in the same period were RMB0.69 and 0.53 respectively. Moving on to our balance sheet. As of September 30, 2024, the company had cash and cash equivalent of RMB691.8 million compared with RMB949.5 million as of June 30, 2024. As of September 30, 2024, the company had short-term investments of RMB3.1 billion compared with RMB2.7 billion as of June 30, 2024. Looking ahead to the fourth quarter of 2024, we are now predicting our total revenues to be between RMB15 million and RMB17.5 million. Please note that this forecast reflects our current and preliminary views on market and operational conditions, which are subject to change. This concludes our prepared remarks. Operator, we are now ready to take questions.

Operator: Thank you very much. We’ll now begin the question-and-answer session. [Operator Instructions]. Today’s first question comes from Emerson (NYSE:EMR) Zhao with Goldman Sachs. Please go ahead.

Emerson Zhao: [Foreign Language]. Thank you management for taking my questions. I have two questions. The first question is considering the moderate recovery of the Chinese economy, how does the company view the potential impact of the future macroeconomic environment on your business? And the second question is, what specific vehicle quality assurance measures has the company taken to ensure the safety and reliability of used costs?

Jiayuan Lin: [Foreign Language]. Thank you, Emerson, for your questions. On your first question, China’s moderate economic recovery. Well, we believe positively impact our business. The improvements in the macroeconomic environment helps boost consumer confidence and purchasing power, which in turn stimulates demand growth in the automotive market. Specifically for the used car market as economic conditions improve, more people may be inclined to upgrade their vehicles or purchase a car for the first time, this will drive an increase in used car transactions. [Foreign Language]. And we will continue to monitor macroeconomic indicators and market dynamics to respond quickly to potential economic changes. We believe that by consistency enhancing operational efficiency and strengthening customer experience and leveraging our digital capabilities, the company can mitigate the potential impact of macroeconomic fluctuations on our business. In addition, we are actively exploring new growth opportunities and value-adding services to adapt to and meet the market’s evolving needs. [Foreign Language]. On your second question, how we are ensuring the safety and reliability of use cost. Well, we collaborate with reputable dealers and regularly set our partners to ensure they provide high-quality vehicles that meet our standards. Each vehicle undergoes over 100 professional technical inspections before being listed covering areas such as exterior, interior, and mechanical performance. [Foreign Language]. Detailed inspection report is also provided for each vehicle, including but not limited to key information such as mileage and condition descriptions for buyers’ preference. We have also established a dedicated team to get a feedback respond promptly to any complaints and continuously improve processes to enhance overall service quality. [Foreign Language]. Thank you that’s all from my side.

Operator: Thank you. The next question comes from Pingyue Wu with CITIC Securities. Please go ahead.

Pingyue Wu: [Foreign Language]. Thank you. I have two questions for the management. And the first question is, how does the company plan to further integrate with your overseas markets, and what are the plans for optimizing auto Cango’s features and services? My second question is on risk control and management. What measures have Cango taken in terms of cost control and risk management strategies to improve operational efficiency and improve your financial structure, and how will these measures continue to impact the company’s future performance.

Jiayuan Lin: [Foreign Language]. Thank you for your questions. On your first question, we are currently conducting comprehensive research on overseas markets and actively engaging with local partners to secure more localized support and resources. For example, we have thoroughly examined the customs clearance policies of various African countries and established import custom clearance agency partnerships in four nations to date. Our net debt is to gradually develop a business agency framework in Africa in that providing services to potential clients in key areas such as customs clearance and logistics among others. [Foreign Language]. Additionally, we plan to actively showcase our brand image through social media and other platforms to enhance our international feasibility. We will also offer multilingual support to ensure that users worldwide can seamlessly access our services. By early 2025, AutoCango.com will be available in 15 languages, further improving user experience and expanding our market reach. In terms of functionality improvement, we are introducing a direct sourcing feature for the Chinese used car market on AutoCango.com. We are also enabling online queries, but to allow overseas users to quickly access information on the condition and prices of used vehicles further enhancing user experience. [Foreign Language]. Last but not least, we are dedicated to developing talent with an international perspective and cross-cultural communication skills to enhance our operational capabilities in overseas markets. We plan to recruit international students in Shanghai for internship programs providing them with valuable practical experience, while infusing over — I mean, well, infusing our team with fresh blood including global insights. Our goal is to create a diverse and globally competitive team that can better serve clients from various cultural backgrounds and advance the company’s globalization efforts. [Foreign Language]. On your second question on cost control and risk management strategies. Well, firstly, on cost control, we have streamlined our business processes, automated approval workflows and enforce the strict budget management systems to ensure disciplined spending. We also leveraged cloud computing services to replace legacy IT infrastructure, significantly reducing hardware investments and maintenance costs. In addition, by fostering long-term partnerships with top tier suppliers we have secured more favorable pricing terms. We conduct regular performance evaluations and phase out underperforming suppliers to minimize procurement costs. Moreover, we have strategically optimized workforce allocation and upgraded our training and development programs to elevate the team’s expertise and service quality. [Foreign Language]. In terms of risk management, we have established a robust internal control system that clearly defines risk management ownerships at various levels and strengthen internal audits to promptly identify and rectify potential issues. Additionally, we closely monitor changes in the macroeconomic conditions and their impact on our business, ensuring that all operations comply with relevant laws and regulations, and we follow closely to the developments in policies and regulations and adjusting our corporate strategy as necessary. [Foreign Language]. The sustained positive impact of these measures is reflected in the company’s financial statements, improvements in the balance sheet improved cash flow and enhanced profit performance have all laid a solid foundations for the company’s net base of strategic development. [Foreign Language]. That is all from my side.

Operator: Thank you. That concludes the question-and-answer session. Thank you once again for joining Cango’s third quarter 2024 earnings conference call today. Have a great day.

Jiayuan Lin: [Foreign Language]. And that closes today’s earnings call. Thank you all for joining us.

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