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Bitauto Holdings Limited (BITA) Q2 2019 Earnings Call Transcript

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Bitauto Holdings Limited (NYSE: BITA)
Q2 2019 Earnings Call
Sep 5, 2019, 8:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Hello, and thank you for standing by for Bitauto's Second Quarter 2019 Earnings Conference Call. [Operator Instructions]

Now, I'll like to turn the meeting over to your host for today's conference.

Unidentified Speaker

Thank you. Welcome to Bitauto's second quarter 2019 earnings conference call. Speakers from the Company today are Mr. Andy Zhang, CEO, Mr. Xiaoke Liu, COO, and Mr. Ming Xu, CFO. After management's prepared remarks, Andy, Xiaoke and Ming will be available to answer your questions. In addition, Catherine Liu, CFO of Yixin, will be available to answer your questions related to Yixin.

Before we proceed, please note that discussions today will contain forward looking statements made under the safe harbor provisions of the US Private Securities and Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties, which may cause actual results to differ materially from our current expectations. Potential risks and uncertainties include but are not limited to those outlined in our public filings with the SEC, including registration statement on Form F-1. Bitauto does not undertake any obligation to update any forward-looking statement except as required under applicable law.

This call will include discussions of certain unaudited non-GAAP financial measures. Please refer to our earnings release, which was issued earlier today for reconciliations of these unaudited non-cash measures to the most directly comparable unaudited GAAP measures. As a reminder, this conference is being recorded. In addition, a live and archived webcast of the conference will be available on our website.

I'll now turn the call over to Andy Zhang, CEO of Bitauto.

Andy Xuan Zhang -- Chief Executive Officer and Director

Hello, everyone, and thank you for joining us for our second quarter 2019 earnings conference call. Q2 remained a challenging quarter for the auto industry as a whole. According to the Chinese Association of Automobile Manufacturers, China's total sales of new passenger vehicles decreased by approximately 14.3% year over year in the second quarter of 2019. In spite of the sustained weakness in passenger vehicle sales in China, Bitauto continued to achieve steady top-line growth in the second quarter, with total revenue reaching RMB2.79 billion, up 8.9% year-over-year, in particular, our transaction services business expanded market share amid the industry downturn, with revenue increase by 17.2% year over year in the second quarter to RMB1.49 billion and the transaction volume up 34% year-over-year 138,000 units.

Revenue from our advertising and the subscription business was RNB1.01 billion for the second quarter compared to RNB1.07 billion in the corresponding period in 2018, reflecting reduced marketing spending by our automaker and dealer customers. We are, however, pleased to see further improvement in mobile traffic as well as in quantity and the quality of our sales leads. Our continuous efforts to enhance content and the user experience starting with the rollout of our upgraded Bitauto media app in October last year continued to pay off.

Looking at our traffic, according to Questmobile, in July 2019, DAU for Bitauto auto media app increased by over 200% compared with that of the October 2018. In addition, the combined DAU of both the auto media app and the auto pricing app increased by over 60% during the same period. Our total number of sales leads increased in the second quarter by 37% year-over-year. More importantly, our organic sales leads, which typically feature better quality and higher conversion rates, accounted for over 50% of our total sales leads in the second quarter and continued to rise in July and August.

During the quarter, we further enhanced user generated content areas, including user review, Q&A and retail pricing, particularly for new car models. These efforts helped us strengthen our competitive advantage in the market and attracted more users. We also made substantial progress in enhancing our product offerings. Our AI-based marketing solution, which we launched in the first quarter of this year, has already achieved very positive feedback from automaker customers. We are working on enhancing this product offering and expect to roll it out to all of the automaker customers and see more meaningful revenue growth in the coming quarters.

Our network of independent dealers continued to grow to over 30,000 during the second quarter, with more than 33,600 paying customers at the end of August. We will look to further tap into this market segment and explore tailored offerings to increase monetizing going forward.

Now, moving to our transaction services business. Yixin continued to strengthen its industry leadership and grew faster than the overall industry, facilitating approximately 138,000 financed automobile transactions during the quarter, representing a year-over-year increase of 34%. Yixin's loan facilitation services grew over 250% year-over-year and contributed 49% of its total financed automobile transactions, up from 19% in the same period last year.

It's new core service revenues, which include revenues from loan facilitating transactions and new self-operated financing lease transactions facilitated during the period reached RMB589.9 million, representing a 46.9% year-over-year increase.

Looking ahead, we will continue to focus on executing our core business strategies. First, we will continue to enhance Bitauto's value proposition through improving content and the user experience. We're also looking at ways to better promote the Bitauto brand through improved brand awareness and enlarge our user base, which we believe still strengthen our ability to bring higher quality sales leads to our automaker and the dealer customers, and enable them to raise the effectiveness of their marketing spending on Bitauto media platforms.

Second, we will further rollout our AI-based marketing solution to automaker customers to achieve incremental growth in our advertising business. Third, we will drive revenue growth in our subscription business through enhancing ARPU as we migrate more dealer customers to premium and deluxe premium packages and through expanding our dealer coverage network and increasing monetization among independent dealers. Fourth, Yixin will continue to increase its loan facilitation services and further improve its technology capabilities to provide better product and services to consumers, financial institution partners and auto dealers.

As we continue to enhance Bitauto's value proposition through improving content and user experience, increasing traffic and developing products which enable automakers and dealers to raise the effectiveness of their marketing spending, we're confident in our strategy to build Bitauto into China's top online automobile media and transaction services platform.

With that, I'll turn the call over to Ming to go over the financials.

Ming Xu -- Chief Financial Officer

Thank you, Andy. Good evening, everyone. We delivered positive top-line growth in the second quarter despite a challenging industry environment. More importantly, our effort to improve traffic and content are bearing fruits and are increasingly recognized by our automaker and dealer customers as they focus more on effectiveness and ROI of their marketing spend.

Looking ahead, in addition to continuous improvement in traffic and content, we will also focus more on Bitauto's brand building initiative to accelerate the growth of our user base. Although our efforts to enhance our traffic, content and brand awareness will involve higher operating expenses, we believe these inputs will bring long term value to our businesses and we view them as investments rather than merely expenses.

As we continue to strengthen the competitiveness of Bitauto's products and services, expand our user base and enhance user experience, we are confident that we will continue to grow revenue and reduce customer acquisition costs in long run.

Now, let's look at our Q2 2019 financial highlights before moving to Q&A. Please note that I will reference mainly to financial figures in RMB in following discussion.

Bitauto reported revenue of RMB2.79 billion for the second quarter of 2019, representing a 8.9% increase from the corresponding period in 2018. The increase in revenue was attributable to the growth of the Company's transaction service business.

Revenue from the advertising and subscription business for the second quarter of 2019 was RMB1.01 billion compared to RMB1.07 billion in the corresponding period in 2018, mainly due to decreased marketing spend by our automakers and dealer customers reflecting the sustained decline in new car sales.

Revenue from the transaction service business for the second quarter 2019 was RMB1.49 billion, representing a 17.2% increase from RMB1.27 billion in the corresponding period in 2018, mainly attributable to the growth of the Company's loan facilitation services. Revenue from the digital marketing solutions business for the second quarter, of 2019 was RMB294.7 million, representing a 31.2% increase from the RMB224.7 million in the corresponding period in 2018.

Cost of revenue for the second quarter of 2019 was RMB1.21 billion, representing a 18.7% increase from the corresponding period in 2018. The increase was primarily due to the increase in commissions associated with loan facilitation services. Cost of revenue as a percentage of revenue in the second quarter of 2019 was 40% compared to 76.7% in the corresponding period in 2018.

Gross profit for the second quarter 2019 was RMB1.67 billion, representing a 3.1% increase for the corresponding period in 2018. Selling and administrative expenses were RMB1.64 billion for the second quarter of 2019, representing a 17.1% increase from the corresponding period in 2018. This increase was primarily due to the increase in marketing expenses associated with the Company's mobile apps and the increase in allowance for doubtful accounts receivable from the services Yixin no longer provides due to the general economic slowdown in recent periods.

Product development expenses were RMB142.1 million for the second quarter of 2019, representing a 12.7% decrease from the corresponding period in 2018. Share-based compensation, which was allocated to the related line items of operating expenses, was RMB99.9 million in the second quarter of 2019 compared to RMB151.6 million in the corresponding period in 2018.

Non-GAAP income from operations in the second quarter of 2019 was RMB215.4 million compared to non-GAAP income from operations of RMB429.1 million in the corresponding period in 2018. Net loss in the second quarter of 2019 was RMB136.2 million compared to net income of RMB27.4 million in the corresponding period in 2018. Net loss attributable to Bitauto in the second quarter of 2019 was RMB145.5 million compared to net income attributable to Bitauto of RMB2.7 million in the corresponding period in 2018.

Non-GAAP net income in the second quarter of 2019 was RMB216 million compared to non-GAAP net income of RMB353.7 million in the corresponding period in 2018. Non-GAAP net income attributable to Bitauto in the second quarter 2019 was RMB155.3 million compared to non-GAAP net income attributable to Bitauto of RMB257.3 million in the corresponding period in 2018.

Basic and diluted net loss per ADS, each representing one ordinary share, in the second quarter of 2019 amounted to RMB2.06 and RMB2.06, respectively. Non-GAAP basic and diluted net income per ADS in the second quarter of 2019 amounted to RMB2.17, US dollar $0.32, and RMB2.12, US dollar $0.31, respectively.

As of June 30th, 2019, the Company has cash and cash equivalents and restricted cash of RMB7.45 billion. Cash provided by operating activities, cash used in investing activities and cash used in financing activities in the second quarter of 2019 were RMB110.3 million, RMB196.2 million, and RMB1.88 billion, respectively.

Numbers of employees totaled 8,396 as of June 30th, 2019, including employees of entities in which Bitauto has acquired and holds controlling interest as of first date. This represents a 6.4% year-over-year increase. In addition, given Yixin's scale and significance to Bitauto, I will also like to share with you some of Yixin's operating and financial highlights for Q2 2019.

As of June 30th, 2019, Yixin's accumulated total financed automobile transactions reached approximately 1.4 million and its accumulated aggregate auto financing amount exceeded RMB100 billion. As a leading player in this industry, Yixin has enjoyed leadership advantages during business development. Despite the sustained weakness in passenger vehicle sales in China, in the second quarter of 2019, Yixin facilitated approximately 138,000 financed automobile transactions and the aggregate automobile financing amount facilitated through its loan facilitation services and self-operated financing business was approximately RMB11.01 billion.

In the quarter, Yixin achieved faster growth than the industry. Its financed automobile transactions, both new and used, achieved an increase of a approximately 34% from the corresponding period, while China's total sales of new and used passenger vehicles decreased by approximately 7% compared to the same period last year according to the data from China Association of Automobile Manufacturers and the China Automobile Dealers Association.

In the quarter, through it's not facilitation services for financing partners, Yixin facilitated approximately 67,000 financed automobile transactions, representing an increase of over 250% from the corresponding period in 2018, and approximately 49% of Yixin's total financed automobile transactions.

In the second quarter of 2019 on the US GAAP, Yixin's total revenue reached RMB1.5 billion. New core services revenue, which include revenue from loan facilitation services and new self-operated financing lease transactions Yixin facilitated during the period reached RMB589.9 million, gross profit reached RMB689 million, net income was RMB4.4 million and non-GAAP net income was RMB94.4 million.

In the second quarter of 2019, Yixin's non-GAAP net income is calculated as net income excluding share-based compensation of RMB55.8 million, amortization of intangible assets resulting from asset and business acquisition of RMB34.2 million and offset by tax effect of RMB0.04 million. In the second quarter of 2019, Yixin entered into certain transactions with other subsidiaries of Bitauto, which have been eliminated upon Bitauto's consolidation of Yixin.

The cost of revenue and expenses that Yixin recorded for the services purchased from those subsidiaries of Bitauto amounted to RMB4.2 million. As of June 30th, 2019, Yixin had cash and cash equivalents and restricted cash of RMB4.38 billion, total finance receivable of RMB34.44 billion and total borrowings, including bank borrowings and asset-backed securitization debt of RMB27.03 billion.

As of June 30th, 2019, 90-day plus including 180-day plus past due ratio and 180-day plus due ratio for all financed transactions, including the third party loan facilitation, were 1.06% and 0.58%, respectively. 90-day plus, including 180-day plus past due ratio and 180-day plus past due ratio for Yixin's self-operated financing business were 1.29% and 0.77%, respectively.

To give you some background on the increase in our past due ratios, since 2019, various local governments started to implement much stricter rules and the guidance on delinquent consumer account payment collection, and in order to better comply with this new rules and guidance, we use litigation as our primary priority collection method. Litigation usually take a longer time for collection and our delinquent ratios increase accordingly in the near term. However, we believe, in the long term, this will help regularize the overall industry practice and further improve consumer user experience.

Under US GAAP, Yixin's provision for credit losses of finance receivable for the second quarter of 2019 was RMB195.8 million. The balance of provision for credit losses of financial receivable was RMB437.3 million as of June 30th, 2019. For the second quarter of 2019, there was an increase in allowance for doubtful accounts receivable from the services to auto dealers Yixin no longer provides. In consideration of the general economic slowdown in recent periods, Yixin made such allowance for doubtful accounts receivable.

Allowance for doubtful accounts receivable was RMB137 million in the second quarter of 2019 compared to RMB1.9 million in the corresponding period in 2018. Yixin expects allowance for doubtful accounts receivable to decreases significantly in the future.

With that, I'll turn to guidance for the third quarter of 2019. Bitauto currently expects to generate revenue in the range of RMB2.65 billion to RMB2.75 billion in the third quarter of 2019, representing a 2.8% decrease to 0.9% increase from the corresponding period in 2018. This forecast takes into consideration of seasonality factors in Bitauto's business and excludes any impact of foreign currency fluctuations. It reflects management's current and preliminary view, which is subject to change.

Let's now start the Q&A session. Andy, Xiaoke and myself and Yixin's CFO, Catherine Liu, are available to take your questions. Operator, please go ahead.

Questions and Answers:

Operator

Thank you. [Operator Instruction] Your first question comes from the line of Binbin Ding of JPMorgan. Please go ahead.

Binbin Ding -- JP Morgan -- Analyst

Thanks management for taking my question. My first question is a high level one about the auto market. So can management give us some color in terms of the trend of passenger vehicle sales for the rest of 2019 and maybe potentially 2020 as well? It seems that in July and August, the sales were still very weak, and we noted that the government has announced some stimulus policies on auto consumption at the end of August. So shall we expect these policies to help auto sales stabilize in the next few months?

My follow up question is on the transaction services. So in the second quarter, I noticed that your loan facilitation service contributed to roughly 50% of the total financed automobile transactions, and that percent seems to have declined from over 60% in 1Q. So how shall we look at the future share of the contribution from loan facilitation services? And from operational and technology perspective, how do you balance consumers' exposure to your own self-operated financing products or third party loan, what is algo behind it? Thank you.

Ming Xu -- Chief Financial Officer

Thank you Binbin. So our CEO, Xiaoke, will answer the first question and Catherine will answer the second question.

Xiaoke Liu -- Chief Operating Officer

[Foreign Speech]

Okay. So let me translate briefly. So as you can see, the auto sales in June recovered briefly, but I would believe that was mainly caused by the temporary demand caused by the migration from China 5 to China 6 emission standards. After that, we see the auto sales growth dropping again in July. It actually dropped by 5% year-over-year and 16% month-over-month. Year-to-date, from January to July, we still have minus 8.8% decrease. And in August, according to the data from the CPCA, actually in the first week, we saw the wholesale data decreasing by 31% year-over-year, it recovers slightly in Q2 and Q3, but still quite weak. In Q4, internally from our website, we saw a slight increase in consumers' purchasing intentions reflected by the willingness of them to self lease, but that was only a very mild increase. We still need to monitor that data very closely.

And in terms of inventory, we saw that even though like in June, the clearance sales of many dealers helped them to clear some inventory, but overall inventory level in July and August remains quite high. So in July and the latest development in July, so far, we still see the auto demand quite weak. And for example, this week, the Chengdu Auto Show starts today actually and we saw from the attendance number and also from the activities of car makers that, actually, it's still a very lukewarm attendance number.

Now, toward the end of August, we saw the government actually release some -- central government release some policies to support the auto industry. We believe that was quite encouraging, but still it takes time for the local governments to implement those policies. And so far, we believe that the process is still quite slow. We haven't see a very explicit, or very clear timetable from the local governments. And also, like today, for example, the Ministry of Commerce also announced certain intention to help the automakers and auto industry. We believe this is encouraging because seems that the government has now realized the significance and importance of auto industry and started to offer or willing to offer help, but still it takes time for detailed policies to come out and to be implemented. So simply speaking, we believe that the auto industry remains challenging from what we see. That's for the first question and Catherine will answer your second question.

Catherine Liu -- Chief Financial Officer

Hi. For your second question, in the first quarter, Yixin's loan facilitation contributed over 60% of the total transaction volume and in the second quarter it contributes 49%, which reflects some short term adjustments. But in the third quarter from the current loan facilitation business and we expect our loan facilitation will still increase and we think we expect that in the second half of the year, our loan facilitation will -- the percentage of the loan facilitation will be back to over 60%. Okay.

Binbin Ding -- JP Morgan -- Analyst

Thank you. And the follow up is on the, how do you balance your consumer's exposure to your self-operated financing products versus the third party loans? I think there should be some algo to decide what kind of products will be recommended to the consumer?

Catherine Liu -- Chief Financial Officer

Currently, we actually have work -- we are working with about 10 financial institutions for our loan facilitation services. And then, also, we have self operated financing businesses. So, for our self-operated financing business, we view it as one of the capital channels for us. So among this, let's say, 11 or above channels, we will balance it based on a lot of factors such as the cost of the capital, the convenience of the approval process, et cetera. So, that's our goal to have a more smart matching system for various funding channels. And then we view our self-operated financing business just as one of the funding channels.

Binbin Ding -- JP Morgan -- Analyst

Okay. That's helpful. Thank you very much.

Operator

Thank you. Next question is from the line of Hillman Chan of Citigroup. Please go ahead.

Hillman Chan -- Citigroup -- Analyst

Good evening, Andy, Xiaoke, Ming, and Catherine. Thank you for taking my question. Also, just a follow up on the Binbin's question previously. Could management share more on the auto advertising outlook for second half specifically by different channels, online and offline, and also the ad formats? And is it also possible to share more feedback from your OEMs and dealers customer for their future planning for the rest of the year, please? Thank you very much.

Andy Xuan Zhang -- Chief Executive Officer and Director

[Foreign Speech] Thank you for your question. Xiaoke will answer the question.

Xiaoke Liu -- Chief Operating Officer

[Foreign Speech] So, Hillman, as you know, we actually see in the first quarter and second quarter a lot of the other online media platforms actually reported declining growth in their -- actually, year-over-year decline in their online advertising revenues.

[Foreign Speech]

So, the main reason we believe is that because of the weak auto sales and outlook the automakers are cutting their branding spending.

[Foreign Speech]

So, on the other hand, these OEM, starting from Q2, they become increasingly focused, focusing their advertising spend on the performance ads.

[Foreign Speech]

So that's a brief overview of what is happening in the advertising market.

Hillman Chan -- Citigroup -- Analyst

Thank you very much. Just one follow up question. As the whole industry, including us and also auto [Technical Issues] more and more online self leads, [Technical Issues], industry meanwhile the [Indecipherable] is trending down. So how should we think about that going forward, the discrepancy going forward? Thank you.

Ming Xu -- Chief Financial Officer

Thank you, Hillman. Yes, you're right. So we believe this -- so as you know, this basically implies the effectiveness or the quality of the self lease is declining. And I think this actually means that the dealers and increasingly the OEMs, so previously mainly the dealers cared about leads and quality, but now increasingly the OEMs are also caring about self leads, and tying the self lead with their spending on our platforms. So going forward, everyone, every advertiser, big and small, will pay more attention to the effectiveness of their spending and to quality of self leads.

So actually, we believe this is both a challenge and opportunity for us. By opportunity, we think that this requirement will actually be more beneficial to the big leading performs like us and like our main competitor because we are able to deliver self leads and large quantity of self leads to the advertisers, but the smaller platform actually are weaker in their ability to provide self leads and even weaker in their ability to -- capability to provide high quality self leads to the customers.

And so we are actually working internally, both on our product and also on our commercial solutions to the customers so that we come up with new ways to encourage more users to use their self leads and to ensure that these people will actually go to the stores. We will actually interact with the dealers and we will try our best to make sure that they will eventually buy car hopefully. So this actually also opens a window for us to try out different ways of pricing our product particularly with our dealer customer. We're trying out different forms of commercial products to reach that goal.

Hillman Chan -- Citigroup -- Analyst

Got it. Thank you very much, Ming and Xiaoke. Thank you.

Operator

Thank you. Our next question is from the line of Frank Chen of Macquarie. Please go ahead.

Frank Chen -- Macquarie -- Analyst

Good evening, Andy, Xiaoke, Ming and Catherine. Thanks for taking my question. I noted that Bitauto achieved very encouraging user traffic growth on self leads growth. And could management share with us user acquisition strategy going forward? And what should we think of the budget on the users and our branding? We see good growth in both user and self leads. How should we better monetize this in the future?

Andy Xuan Zhang -- Chief Executive Officer and Director

[Foreign Speech] So, thank you for a question. Xiaoke will answer your two questions.

Unidentified Speaker

[Foreign Speech] So as you know, we rolled out the upgraded e-trade app starting from October of last year. And so far, we are still achieving a very healthy growth in both traffic and self leads that the app generates.

[Foreign Speech]

So as we are speaking now, the self leads generated by our two apps actually are now contributing to the majority of our total self leads generated every day, and through very close tracking and multi-channel tracking we're doing, we find -- we are convinced that the quality of these adds, these organic adds are much better than the self leads we used to get from other channels.

[Foreign Speech]

So through our operation in the past 10 months, we have also further focused on our strategy on positioning our app as a marketplace going forward. And we believe this positioning is based on the -- It's also in line with the users' perception of our app, of our services.

[Foreign Speech]

So in the recent months, we are also adding more contents and also particularly tech-driven content, for example, AI driven, big data driven content and also user generated content into our app. The purpose for that is to further increase the conversion of users leaving a self lead, and also to improve the quality of those self leads.

[Foreign Speech]

So going forward, we will further diversify the self lead generation user cases, and to extend the user case from a purely price discovery to cover the whole purchasing and ownership cycle of a car, so that we can generate more self leads out of our users.

[Foreign Speech]

So through our efforts, we also realize that the consumers' brand perception of different auto information platforms or different verticals actually plays a role in the willingness to leave a contact and also contacts -- a contact to leave a self lead and also play an important role in the quality of -- eventual quality of those self leads. So as a result, we plan to roll out a campaign to further promote our brand and help to raise the awareness and brand perception of the Yiche brand among the potential car buyers and the car owners.

[Foreign Speech]

Yes. So with this continuous focus and optimization on the user acquisition channels and also on this branding campaign, we believe that in the third and fourth quarter -- in the coming quarters, we will maintain this strong momentum in user acquisition and in user and self lead growth.

[Foreign Speech]

So, now turning to the question about the monetization, so with this growth in our user base, we're also looking at ways to monetize these users. And we notice, as we mentioned before, that the OEMs are increasingly focused on the effectiveness of their marketing spend, on the performance of their marketing spending.

[Foreign Speech]

So, in Q2, we formerly roll out our AI-based marketing solutions to the OEMs.

[Foreign Speech]

So, this product based on our technology capabilities in big data and in the use of profiling to provide a more effective way for the OEMs to get self leads and particularly high quality self leads with their marketing spending. And since we roll our that product, it has been increasingly recognized and accepted by our OEM customers.

[Foreign Speech]

So, in the past few months, since May, actually, we are seeing increasing number of customers that use our AI marketing solution month-over-month.

[Foreign Speech]

So, as I mentioned before, going forward, we will provide this -- base this AI marketing solution on a more diversified self lead generation user cases and provide these commercial products to our customers.

[Foreign Speech]

We believe that the trend is very clear that the OEMs are becoming more and more focused on the quality of their -- effectiveness of their marketing spend. So, we believe that this a trend that -- not only us or our competitor, but actually across the marketing industry that platforms are using technologies to raise the effectiveness of their marketing solutions. And we believe this trend will also benefit us and this going forward, will becoming a increasingly important contributor to our advertising revenue.

[Foreign Speech]

Thank you.

Frank Chen -- Macquarie -- Analyst

Thank you. Thank you, Xiaoke and Ming.

Operator

Thank you. Our next question is from the line of Gary Chen of CICC. Please go ahead.

Gary Chen -- CICC -- Analyst

Good evening, management. Thanks for taking my questions. This is Gary from CICC on behalf of Charlie Qian [Phonetic]. I have two questions. First one is about Yixin. As you mentioned, loan facilitation services contributed roughly 49% of total transactions in this quarter and it might reach over 60% in the second half year. And what is your expectations for this ratio from more long term vision and how do we reach this target?

And the second question is about our cash flows. Could management give more color about the outflows of our cash and what's the reasons behind that? Thank you.

Ming Xu -- Chief Financial Officer

Thank you. Gary. Catherine, will answer your first question about loan facilitation and I'll address the second question regarding cash flow.

Catherine Liu -- Chief Financial Officer

Our loan facilitation services is our business focus, so we will keep increase our loan facilitation partners and our businesses. We think in the next two or three years, our loan facilitation services will still keep increasing. I think, eventually it will be a majority of our business. I hope this answers your question.

Gary Chen -- CICC -- Analyst

Thank you. Very helpful.

Ming Xu -- Chief Financial Officer

Thank you, Gary. Regarding your second question about cash flow, the cash outflow in investing activities is mainly caused by the new self-operated auto finance businesses of Yixin. And yes, that's the main reason for the investing cash outflow. For the financing outflow, it's mainly caused by two reasons. First one is the repayment of borrowing and asset backed securities by Yixin. And secondly, it's, as we have announced before, in the second quarter, we actually pay back a convertible bond that we borrowed from -- issued to PAG in 2016. And so we repaid the remaining outstanding amount of that convertible bond in Q2, which was slightly over $100 million. And so that caused -- that's the main reason for -- the two reasons for cash outflow in the financing activities. However, as you can see, the cash flow of ourselves and also including the whole Group remains very healthy and robust.

Gary Chen -- CICC -- Analyst

Thank you.

Operator

Thank you. Our next question is from the line of Miranda Zhuang of Bank of America. Please go ahead.

Miranda Zhuang -- Bank of America-Merrill Lynch -- Analyst

Thank you, management for taking my questions. So I have a quick question. So we have seen the Company's digital marketing business, which is essentially the auto ad agency business, deliver a very strong growth of over 30% year-over-year, given that the whole auto advertising budgets declining. So, I'm curious to learn the reason behind the growth of the business and how should we think about the business for second half of the year?

And my second question is related to the auto finance. So, yes, again, very inspiring to see the very strong growth of the auto finance volume, which is clear outperformed the industry so, suggesting that Yixin is taking market share. So, I'm curious to know that, in your mind, who are we getting the market share from? Like, is it more from the banks or AFEs or other auto finance lease companies? And for the mid-to-long term, do we have any target for Yixin's market share? Thank you.

Ming Xu -- Chief Financial Officer

Thank you, Miranda. I will answer your question regarding CIG and Catherine will answer the question on Yixin. So regarding CIG, as you know, they actually -- the revenue includes mainly two parts. Number one is the traditional revenue stream of agencies, which is the rebate from media. And for that part, actually, in Q2, the performance is in line with the overall online advertising market of China. And at the same time, they also have a second part of revenue, which is more a project-based -- basically, projects they do with their customers. So, actually, in Q2, we see a very strong growth in this project-based revenue.

And going to second -- however, these projects actually are more ad hoc and it's very difficult. We have a very limited visibility on the project-based revenue. And for the rebates actually -- going into second half, I think, it's more --it's very closely in line with what will happen in the auto industry. If auto industry remains weak and the advertisers will remain very careful in their marketing spend and that will also influence CIG's business.

Catherine, you want to answer the question on market share.

Catherine Liu -- Chief Financial Officer

Sure. I think to your second question, Yixin is taking market share, I think, generally because the industry is consolidating. I think since the beginning of last year, the whole finance industry experienced, I think, the macro -- from micro situation wise there is general credit tightening policies. And also, I think from the primary market and the secondary market, I think, the auto finance companies valuation is undervalued, which I think resulted a lot of the -- I think the capital is not -- does not flow into this market as much as in, let's say, 2016, 2017. So as a result, I think our competition, we think it's less.

And also for the auto finance industry, this is actually an industry with pretty high entry barrier. So I think from the competition wise, we think that as the leader in the industry, we're enjoying the consolidating benefit. So that's why we enjoy the natural growth and industry growth.

As to your point, are we competing? I think we are competing, but we are also cooperating with banks and auto finance companies. For example, our loan facilitation services, we have partners that are banks and possibly large auto finance companies as well. So for those institutions we are actually partners with them. But of course, in terms of the product wise, we are competing with other banks or other auto finance companies products in the market. But I think, from Yixin's past experience, since we started the business in 2015, we have demonstrated, we have pretty strong execution team and attractive products for consumers. So that's the reason why we are gaining market share and become the leader. And we believe that with this leadership and our execution team, we will continue to be the leader in the industry and enjoy the leadership advantages. And we will also try to enlarge our competitive advantages by improving our technologies and increasing our loan facilitation partners and increase our operating efficiency. Hope this answers your questions.

Miranda Zhuang -- Bank of America-Merrill Lynch -- Analyst

Okay. Sure. Thank you.

Operator

Thank you. We are now approaching the end of the conference call. I'll turn the call over to Bitauto's CFO, Ming Xu, for closing remarks.

Ming Xu -- Chief Financial Officer

Once again, thank you for joining us today. Please don't hesitate to contact us if you have any other further questions. Thank you for your continued support and we look forward to talking with you in the coming months.

Operator

[Operator Closing Remarks]

Duration: 59 minutes

Call participants:

Unidentified Speaker

Andy Xuan Zhang -- Chief Executive Officer and Director

Ming Xu -- Chief Financial Officer

Xiaoke Liu -- Chief Operating Officer

Catherine Liu -- Chief Financial Officer

Binbin Ding -- JP Morgan -- Analyst

Hillman Chan -- Citigroup -- Analyst

Frank Chen -- Macquarie -- Analyst

Gary Chen -- CICC -- Analyst

Miranda Zhuang -- Bank of America-Merrill Lynch -- Analyst

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