Cango Inc. Reports First Quarter 2023 Unaudited Financial Results
SHANGHAI, June 8, 2023 /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 first quarter of 2023.
First Quarter 2023 Financial and Operational Highlights
Mr. Jiayuan Lin, Chief Executive Officer of Cango, commented, "China's automotive industry remained sluggish in the beginning of 2023 as it continued to be severely impacted by the challenging macro environment and depressing industry landscape. In the first quarter of 2023, our total revenues were recorded at RMB542.6 million, down 31% year-over-year, but up 11% quarter-over-quarter. During the quarter, our traditionally low season, we sold a total of 3,867 new cars through 'Cango Haoche,' marking a solid performance compared with the fourth quarter of 2022. Moreover, our car trading transactions business contributed 79% of the total revenues in the first quarter, further solidifying its position as our largest revenue contributor. In April 2023, we launched our AI customer service on 'Cango Haoche,' further reaffirming our ability to stay at the forefront of industry innovation as we refined our service process with the power of digitalization and technology.
"We continued to expand and upgrade our services for used car trading transactions with comprehensive offerings available through our 'Cango U-Car' mini program and APP. Additionally, during the quarter, we upgraded our auction services and launched the market's first offering to enable dealers to list their used cars for B2B auction. Supported by our dedicated in-house technician teams, we are actively deepening our service capabilities and core competencies along the used car value chain.
"Empowered by big data and technological innovation, throughout 2023, Cango will continue to strengthen its position in the digital and technology-led evolution within China's auto industry and explore additional long-term growth opportunities with our dealer partners," concluded Mr. Lin.
Mr. Yongyi Zhang, Chief Financial Officer of Cango, stated, "We had another steady quarter despite the volatile external environment. We continued to refine our operations and deepen our penetration along the value chain, while further solidifying our competitive strengths. Meanwhile, backed by improvement of asset quality and our solid balance sheet, we are confident in our ability to weather a complex industry environment, while driving sustainable growth over the long term."
Accounting Policy Changes
The Company has adopted the Financial Instruments – Credit Losses (ASC 326): Measurement of Credit Losses on Financial Instruments on January 1, 2023, using the modified retrospective transition method. This standard requires the measurement of all expected credit losses for financial assets measured at amortized cost and off-balance sheet credit exposures not accounted for as insurance at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts.
Upon adoption of the standard on January 1, 2023, the Company recorded RMB302.4 million (US$44.0 million) increase in risk assurance liabilities, RMB14.5 million (US$2.1 million) increase in the allowance for finance lease receivables, RMB13.8 million (US$2.0 million) increase in the allowance for financing receivables and RMB3.2 million (US$0.5 million) increase in the allowance of other current and non-current assets. After adjusting for deferred taxes, RMB306.9 million (US$44.7 million) decrease was recorded in beginning retained earnings on January 1, 2023 through a cumulative-effect adjustment.
First Quarter 2023 Financial Results
Total revenues in the first quarter of 2023 were RMB542.6 million (US$79.0 million) compared with RMB787.7 million in the same period of 2022. Revenues from car trading transactions in the first quarter of 2023 were RMB429.8 million (US$62.6 million), or 79.2% of total revenues in the first quarter of 2023, compared with RMB599.3 million in the same period of 2022. The guarantee income, which represented the fee income earned on the non-contingent aspect of a guarantee, in the first quarter of 2023 was RMB64.1 million (US$9.3 million) which was presented separately from contingent aspect of a guarantee pursuant to the adoption of ASC 326 since January 1, 2023.
OPERATING COST AND EXPENSES
Total operating cost and expenses in the first quarter of 2023 were RMB490.8 million (US$71.5 million) compared with RMB976.8 million in the same period of 2022.
INCOME FROM OPERATIONS
Income from operations in the first quarter of 2023 was RMB51.8 million (US$7.5 million), compared with a loss of RMB189.1 million in the same period of 2022.
Net income in the first quarter of 2023 was RMB78.8 million (US$11.5 million). Non-GAAP adjusted net income in the first quarter of 2023 was RMB92.8 million (US$13.5 million). 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 (the "ADS") in the first quarter of 2023 were RMB0.58 (US$0.09) and RMB0.56 (US$0.08), respectively. Non-GAAP adjusted basic and diluted net income per ADS in the first quarter of 2023 were RMB0.69 (US$0.10) and RMB0.66 (US$0.10), respectively. Each ADS represents two Class A ordinary shares of the Company.
As of March 31, 2023, the Company had cash and cash equivalents of RMB696.6 million (US$101.4 million), compared with RMB378.9 million as of December 31, 2022.
As of March 31, 2023, the Company had short-term investments of RMB2,017.7 million (US$293.8 million), compared with RMB1,941.4 million as of December 31, 2022.
For the second quarter of 2023, the Company expects total revenues to be between RMB600 million and RMB650 million. This forecast reflects the Company's current and preliminary views on the market and operational conditions, which are subject to change.
Share Repurchase Program
The above share repurchases were conducted pursuant to resolutions of the Company's board of directors, which authorized that the Company's proposed repurchases may be made from time to time on the open market at prevailing market prices, in privately negotiated transactions, in block trades and/or through other legally permissible means, in accordance with applicable rules and regulations. The repurchases will be funded from the Company's existing cash balance.
Conference Call Information
The Company's management will hold a conference call on Thursday, June 8, 2023, at 9:00 P.M. Eastern Time or Friday, June 9, 2023, at 9:00 A.M. Beijing Time to discuss the financial results. Listeners may access the call by dialing the following numbers:
The replay will be accessible through June 15, 2023 by dialing the following numbers:
A live and archived webcast of the conference call will also be available at the Company's investor relations website at http://ir.cangoonline.com/.
About Cango Inc.
Cango Inc. (NYSE: CANG) is a leading automotive transaction service platform in China, connecting car buyers, dealers, financial institutions, 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 has a nationwide network. Leveraging its competitive advantages in technological innovation and big data, Cango has established an automotive supply chain ecosystem, and developed a matrix of products centering on customer needs for auto transactions, auto financing and after-market services. By working with platform participants, Cango endeavors to make car purchases simple and enjoyable, and make itself customers' car purchase service platform of choice. For more information, please visit: www.cangoonline.com.
Definition of Overdue Ratios
The Company defines "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.
The Company defines "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 (loss), 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 (loss) as net income (loss) 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 (loss) 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 (loss) 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 (loss) 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 are not reflected in the presentation of Non-GAAP adjusted net income (loss). 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 RMB6.8676 to US$1.00, the noon buying rate in effect on March 31, 2023, in the H.10 statistical release of the Federal Reserve Board. The Company makes no representation that the RMB or US$ 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.
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