Cango Inc. (CANG) Misses Q1 EPS by 8c, Revenues Beat

Cango Inc. (NYSE: CANG) reported Q1 EPS of ($0.01), $0.08 worse than the analyst estimate of $0.07. Revenue for the quarter came in at $34.7 million versus the consensus estimate of $32.75 million.

First Quarter 2020 Financial and Operational Highlights

• Total revenues were RMB246.0 million (US$34.7 million) compared with RMB351.7 million in the same period of 2019, mainly due to the worldwide outbreak of the COVID-19 pandemic, which has severely disrupted the domestic automotive industry.
• After-market services facilitation revenues increased to RMB49.1 million (US$6.9 million), or 19.9% of total revenues in the first 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 first quarter of 2020 was RMB4,431.6 million (US$625.9 million). The total outstanding balance of financing transactions the Company facilitated was RMB38,635.7 million (US$5,456.4 million) as of March 31, 2020.
• M1+ and M3+ overdue ratios for all financing transactions that remained outstanding and were facilitated by the Company were 2.00% and 0.56%, respectively, as of March 31, 2020, as compared to 0.85% and 0.40%, respectively, as of December 31, 2019.
• The number of dealers covered by the Company was 45,688 as of March 31, 2020, compared to 49,238 as of December 31, 2019. The decrease was a result of Cango's efforts to optimize the efficiency of its dealership network by removing certain dealers that failed to meet the Company's standards for operating risks and/or transaction referral capabilities.

Mr. Jiayuan Lin, Chief Executive Officer of Cango, commented, "In line with our previous expectations, China's auto industry was severely disrupted by the COVID-19 pandemic in the first quarter of 2020. As a result of these headwinds during the period, our total revenues decreased and we experienced an uptick in delinquency rates, and dealers across the country encountered a series of business challenges while they slowly began to resume their operations. To overcome these challenges, we proactively implemented a number of countermeasures to keep our overall asset quality at a manageable level and provide dealers with the assistance they need to the greatest extent possible. Moreover, we also remain committed to bolstering our core auto loan facilitation and after-market services businesses, while enhancing our key strategic partnerships to secure our long-term growth prospects. Importantly, as we continue to accelerate the development of our after-market services, this segment is expected to become a key growth driver for our overall business.

"Looking ahead, we plan on regaining the growth momentum of our business by augmenting our existing business lines, executing online sales and marketing initiatives, and refining our operating efficiency. We believe that 2020 will be a year of change and consolidation for the auto industry, bringing opportunities as well as challenges. We have witnessed a slower recovery in lower tier cities and expect these markets to gradually restore the growth level seen before the pandemic in the second half of this year. Nonetheless, we believe the strengths of our business model, which covers the entire auto transaction chain, will enable us to weather the current challenging environment. By leveraging our competitive advantages, empowering other industry participants, and helping cultivate the development of the entire auto industry value chain, we will continue to strengthen the foundation for our lasting growth and the generation of long-term shareholder value."

Mr. Yongyi Zhang, Chief Financial Officer of Cango, stated, "Severely impacted by the COVID-19 outbreak, we generated RMB246.0 million in total revenue in the first quarter of 2020, decreasing 30.0% from same period of last year, though outperforming the high end of our previous guidance by 17.1%. In the meantime, we saw a significant increase in net loss on risk assurance liabilities mainly due to an uptick in delinquent loan balance and default rate, as well as increased loss given default ratio, which were in turn due to the impacts of the pandemic. Despite the disruptions, we remain focused on improving our operating efficiency with gross margin maintained at a healthy level in the first quarter. For the remainder of 2020, we will continue to focus on optimizing our operating efficiency by utilizing our platform's network effects to further augment our negotiating leverage and maintain our commitment to implementing effective cost control measures. Additionally, we will not slow down in our efforts to enhance our R&D capabilities, develop new business initiatives, and drive technical innovation forward. We are confident that the allocation of resources towards these areas will help to further bolster our long-term outlook, enabling us to navigate through the current market uncertainty."

Business Outlook

For the second quarter of 2020, the Company expects total revenues to be between RMB230 million and RMB250 million. This forecast reflects the Company's current and preliminary views on the market and operational conditions, which are subject to change.

For earnings history and earnings-related data on Cango Inc. (CANG) click here.

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