NEW YORK, April 15, 2020 /PRNewswire/ -- TuanChe Limited (Nasdaq: TC) For the full year 2019, the Company's net revenues decreased slightly by 1% YoY to ~RMB645 million (US$92.6 million,) with annual number of auto sales transactions facilitated increased by 2% YoY, outperforming the annual decline of ~8% for the overall auto industry in China, where December marked the 18th consecutive month of a year-over-year decline in industry-wide passenger car sales in China. TuanChe's average gross margin remained flat YoY at 71.1%.
However alongside the continued challenging auto market condition, including slowing economy, the consequent weakening consumption power and increasingly stringent regulation on emission, TuanChe reported a YoY decline of ~19% in net revenues of ~RMB183 million (US$26.3 million) in the 4th quarter of 2019, in-line with the management's guidance of a YoY decline of 16% - 20.5%.
The decline was mainly attributed to the year-over-year decline of ~20%% from the offline marketing services, while partially offset by the slight increase in virtual dealership, online marketing services and other revenues. 4Q19 gross margin increased slightly to 72.3%, up from 72% in 4Q18 and 72.1% in 3Q19. Operating expenses increased by 11.4% YoY in 4Q19, trailed by higher R&D and S&M expenses, conversely offset by a YoY decline of ~7% in G&A, leading to a non-GAAP adjusted net loss of ~RMB58 million (US$8.3 million), or an adjusted net loss per share of RMB0.20 (US$3c), compared to a net income of RMB8.2 million, or RMB0.04 per share a year ago.
Nevertheless, balance sheet remained healthy, with cash and cash equivalents of RMB193.9 million (US$27.9million) as of December 31, 2019, following a net cash used in operating activities of RMB27.1 million (US$3.9 million) in the quarter compared with net cash used in operating activities of RMB6.3 million in the prior year period.
Additionally in combating the weak auto market in China, the management has put in a company-wide collaborative effort targeting to mitigate the downward pressure in its core offline business, and has seen promising results from new initiatives cultivated for incremental growth and revenues drivers.
1Q-2020 Business Outlook
TuanChe's offline sales events in 1Q-2020 were inevitably impacted by the COVID-19 outbreak, with most offline events suspended in support of containment effort for the best interest of public health. Nevertheless, the management remains confident in the company's ability to navigate through the challenging time and achieve long-term growth, supported by its sustainable business model, solid e-commerce foundation and brand equity, as well as further improved cost structure, according to the management.
Overall, both financial and operating results are expected to be adversely impacted by COVID-19 in 1Q2020. Taking into the consideration of the ongoing macroeconomic and regulatory headwinds facing the auto industry, further exacerbated by the COVID-19 virus outbreak, the management expects the company's net revenues to range from approximately RMB9 million to RMB10 million, representing an approximate YoY decrease of 92.7% to 91.9% in 1Q2020, resulting from the suspension of all auto shows and special promotion events previously scheduled for February and March, with the possibility of further reduction in offline sales events currently scheduled in 2Q2020, subject to further development of the pandemic and the associated government guidance.
2019 Fourth Quarter and Full Year Financial & Operating Performance Reviews
Net revenues decreased by 19.3% to RMB182.8 million from RMB226.4 million a year ago, in line with the management's guidance, mainly dragged by the decrease in offline marketing services, down 19.9% YoY in the quarter, while partially offset by the accelerated growth of the Company's new business initiatives, such as virtual dealership and online marketing services.
Gross profit decreased by 19.1% to RMB132.1 million from RMB163.3 million a year ago, with gross margin increased to 72.3% from 72.1%. Adjusted 4Q19 EBITDA was a loss of RMB58.0 million, or US$8.3 million, compared to a gain of US$8.2 million in the prior year period.
Quarterly organized auto shows numbers decreased by 3% to 321 in 149 cities from 331 auto shows in 167 cities across China a year ago. A total of 269 special promotion events were organized during the quarter. Whereas the annual number of auto shows organized increased by 24% to 1055 in 233 cities in 2019, up from 851 auto shows in 196 cities in 2018.
Quarterly number of automobile sales transactions facilitated decreased by 13% to 102,472 from 117,744, and the quarterly Gross Merchandise Volume ("GMV") of new automobiles sold decreased by 16.1% to RMB 13.5billion (US$1.9 billion) from RMB16.1 billion. Whereas the annual auto sales transactions facilitated by the company increased by 2.0% YoY to 354,355 in 2019 from 347,398, and the annual GMV of new automobiles sold decreased only slight by 1.2% YoY to RMB47.5 billion (US$6.8 billion) in 2019 from RMB48.1 billion.
Sales operations covered 148 cities as of December 31, 2019, compared with 149 cities as of September 30, 2019 and 138 cities as of December 31, 2018.
Despite the economic uncertainties in the quarter, the company's Chairman and Chief Executive Officer remained committed to strategic execution for the long-term growth, such as optimization of core auto show business with a focus on generating high ROIs, accelerated development of customized special promotion events, and continued focus on growth initiatives in virtual dealership and online marketing services.
Going forward, the management plans to focus on new online initiative to digitalize and monetize the company's offline customer traffic and consumer insights to strategically collaborate with more stakeholders in the automotive value chain, allowing OEMs and dealers to effectively reach customers, meanwhile provide more transparency to improve consumer's shopping experience.
A Perfect Storm Where Existing Industry Challenges Met with COVID-19 Outbreak
China's auto sales have been experiencing an extended downward trend as illustrated below. Despite the rate of decline further eased in the fourth quarter of 2019, only to be countered by the COVID-19 outbreak, evidenced by the spike in YoY decline of ~19% in January 2020, with the remaining 1Q2020 expected to get hit even harder. Overall, the total auto unit sales in China retracted by 8.1% in 2019 from 2018, and Jan 2020 marked the consecutive 19th month of downturn in unit sales.
COVID-19 Pandemic Business Impact and Contingent Plans
On the back of COVID-19 epidemic in China, the Company announced on January 30 and February 26 the suspension of all auto shows and special promotion events, previously scheduled for February and March. In light of continuous containment efforts set forth by the government, management believes it is in the best interest of the public health to continue suspending the majority of the Company's offline sales events in April, with a gradual recovery expected in May and June contingent on the evolving development of the pandemic. Consequently, both financial and operating results for 1Q-2020, as well as for the most part of 2Q-2020 are expected to be materially impacted. The Company will continue to closely monitor both the pandemic and subsequent mandatory regulations.
Share Repurchase Program
On the Company's share repurchase program, wherein up to US$20 million worth of the Company's ADS shares are authorized to be executed over a maximum 12-month period starting on June 17, 2019, TuanChe had repurchased 427,738 ADSs at a valuation of approximately US$2 million under this program up to December 31, 2019.
TuanChe initially announced its plan to acquire Longye International Limited on June 3, 2019. The acquisition was completed in January 2020, and the company had partially consolidated Longye's financial results starting on January 13, 2020.
DISCLOSURES AND DISCLAIMERS
Stone Street received a flat fee from or on behalf of the Company for the creation and dissemination of the report. Stone Street has not received investment banking income from the Company in the past 12 months, and does not expect to receive investment banking income from the Company in the next 12 months.
SOURCE TuanChe Limited