TuanChe Limited – Sustained Outperformance Against Continued Macro Headwinds

2Q2019 Earnings Highlights

NEW YORK, NY / ACCESSWIRE / August 20, 2019 / Against the continued challenging market headwinds where June marked the 12th consecutive month of a YoY decline in industry-wide passenger car sales in China, TuanChe reported a YoY growth of 12% in total revenues of RMB203.5 million in the 2nd quarter of 2019, outperforming the YoY decline of 14% in the overall industry gross auto-sales volume.

The sustained sales outperformance was mainly attributed to the company’s continuous growth in its core auto-show business, further aided by its new special- promotion events business launched earlier this year, whose marketing services revenues reached RMB5.8 million in Q2, compared to RMB0.8 million in Q1. Additionally, revenues from the online virtual dealership also increased to RMB7.1 million during the quarter.

Gross profit increased to ~RMB144 million, posting a year-over-year growth of 9%, with gross margin falling slightly to 70.8% from 72.6% a year ago. However, due to the outpaced increase in operating expenses, the company reported an adjusted net loss of RMB29 million in 2Q-19, or an adjusted net loss per share of RMB10 cents, compared to a net income of RMB16 million, or a profit of RMB17 cents from a year ago.

Balance sheet remained strong with cash and cash equivalents amounting to RMB364 million with no outstanding debt as of June 30, 2019, following a net cash used in operating activities of RMB7.7 million in the quarter, or US$1.1 million, due to higher operating costs to sustain its enlarged business scale.

3Q-2019 Business Outlook

With the demonstrated strong performance in special promotion events expected to continue contributing to the company’s long-term growth, coupled with the implementation of a further streamlined operation model and cost control. Mindful of ongoing macroeconomic headwinds and tightening regulation on emission standards, the management expects the company’s net revenues to range from approximately RMB160 million to RMB170 million, representing an approximate YoY growth of 3.0% to 9.5% in 3Q-2019.

2Q-19 Financial Reviews

Sustained revenue outperformance mainly driven by growing offline marketing services

Revenues from offline marketing services increased by 8% year-over-year to approximate RMB196 million, accounting for ~96.5% of its total revenues. Among which, revenues generated from auto-shows alone increased by ~5% to ~RMB191 million, primarily driven by the number of cities in which the company operated, as well as the increased number of auto shows organized and booths offered to the broad industry customers, with the remaining offline revenues coming from special promotion events.

The company’s geographic coverage further expanded to 155 cities as of June 30, 2019, up from 146 cities as of March 31, 2019. A total of 154 special promotion events were also organized during 2Q-19, up from merely 12 in the prior quarter. TuanChe’s continued geographic expansion into additional third- and/or below-tier cities had continued to contribute to its topline growth.

Quarterly number of auto shows organized increased by 57% YoY to 344 in 2Q-19, up from 178 organized in the prior quarter. Meanwhile quarterly number of auto sales transactions facilitated increased by 12% YoY to 110,444, and the gross merchandise volume (GMV) of new car sold increased by near ~8% YoY to RMB15.2 billion.

Operating expenses outweighed revenues growth

Total operating expenses increased by 87% YoY to RMB255 million to support the company’s enlarged business scale, especially driven by ~98% YoY increase in selling & marketing expenses to RMB217 million in the quarter, including both share-based staff compensation and higher advertising & promotion expenses.
Consequently, adjusted EBITDA was a loss of RMB30 million, compared to an adjusted EBTIDA of RMB17 million in the prior year period.

Recent business developments

New Chief Operating Officer coming on-board – On May 28, 2019, TuanChe announced the appointment of Mr. Hui Yuan as the company’s new COO. Mr. Yuan will oversee the development of its omni-channel marketplace and the ongoing user experience optimization, as well as lead the company’s efforts in product R&D, online marketing, big data operations, and new sales & marketing initiatives.

LONGYE acquisition – On May 31, 2019, TuanChe entered into a share purchase agreement with Longye Intl’ Ltd to acquire the entire equity interest in Longye for RMB200 million, in the form of cash and the company’s securities in aggregate.

With Longye’s leading social customer relationship management (Social CRM) cloud systems for China’s auto industry, this acquisition is expected to further improve TuanChe’s core competencies in innovative product offerings, enhance sales capabilities, optimize marketing channels, streamline its daily operations, and leveraging big data technology.

Share Repurchase Program – On June 17, 2019, TuanChe’s board of directors authorized a share repurchase program of up to US$20.0 million worth of the Company’s shares for a maximum period of 12 months.

Contact:

(212) 600-2283
info@stonestreetus.com

SOURCE: Stone Street Group LLC

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