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TuanChe Limited. (NASDAQ: TC) - Continued Growth Momentum Defying Macroeconomic Headwinds

4Q18 & 2018 Full Year Earnings Highlights

NEW YORK, NY / ACCESSWIRE / March 26, 2019 / Despite small, TuanChe remained profitable on adjusted basis in 4Q-2018, continuing to defy the industry headwinds. The solid performance was mainly attributed to nearly doubled revenues and further improved gross margin from enhanced operating efficiency and its unique business model.

In 4Q-2018, TuanChe reported net revenue of RMB 226.4 million (USD $32.9 million), a YoY increase of 98.6%, following a 106% YoY growth in 3Q-2018. Gross margin expanded to 72.1%, compared to 71.2% a year ago. On GAAP basis, the company reported a net loss of RMB29.9 million (US$4.3 million), down from US$7.3 million in the prior quarter. However, non-GAAP net income, adjusted by share-based compensation and net fair value of warrant, was RMB 8.2 million (US$1.2 million), or an adjusted EPADS of US$0.01, compared to a net loss of RMB6.9 million in the prior year period.

For the full year of 2018, TuanChe's net revenue increased by 131.9% to RMB 651.0 million (USD $94.7 million). Gross margin expanded to 71.8% from 69.4% in 2017. On GAAP basis, the company reported a net loss of RMB113.8 million (US$16.6 million), down from RMB111.6 million in the prior quarter. On non-GAAP basis, the company reported a net income of RMB 3.3 million (US$0.5 million), or an adjusted earnings per ordinary shares of RMB0.03 (USD 0.4c), significantly improved from a net loss of RMB87.4 million, or RMB0.92 per share in 2017.

1Q-2019 Business Outlook Defying Industry-Wide Challenges

Riding on 4Q-2018 momentum, management expects the company's net revenues to range from approximately RMB113 million to RMB114 million in 1Q-2019, a low-season historically for the auto industry. The guidance represents a year-over-year growth of ~29.3% to 30.4%, versus a YoY monthly decline since September, 2018 for the total industry auto unit sales.

Exhibit 1: China Auto Industry Auto Unit Sales

Source: China Association of Automobile Manufacturers

Looking into 2019, the management is confident in sustaining the company's growth momentum, given its industry-leading scale, nationwide sales network, in-depth industry expertise, and enhanced operating leverage.

Financial Reviews

Strong revenue growth drivenby continued Auto-Show momentum

Defying automobile industry headwinds, TuanChe maintained its strong growth trajectory in 4Q-2018. The company's revenues benefited from the shift in sales & marketing budget of major auto-OEMs to definitive, high ROI marketing channels such as TuanChe's.

Also aiding the nearly doubled net revenue growth in 4Q-2018 was the company's continued geographic coverage expansion into additional third-tier cities and below, where the demand for offline-organized auto shows are increasing, which had effectively facilitated increasing number of auto sales in those under-served lower-tiered cities.

The number of auto shows organized by the company in 4Q-2018 grew ~140% to 331 in 167 cities from a year ago. Meanwhile, quarterly automobile sales transactions facilitated increased by 26.4% to 117,744 and the quarterly Gross Merchandise Volume (''GMV'') of new automobiles sold increased by 8.1% to US$2.3 billion from a year ago. Geographic coverage of sales operations had also further expanded to 138 cities as of Dec. 31, 2018, up ~77% YoY. The increased economies of scale in organizing auto-shows should help sustain the company's revenues growth.

Incremental revenue streams from diversified productline

On top of the company's transaction-driven, online-to-offline business model, TuanChe leveraged its big-data analytics capability to embark on its Demand-Side-Platform (DSP), as well as launched a Virtual Dealership Platform in May and June 2018, respectively. These two initiatives are positioned to leverage its proprietary customer intelligence to provide precision marketing service for more than 10,000 of automaker, dealers and other automotive-related industry customers by leveraging its proprietary customer intelligence, and are expected to form a closed-loop ecosystem and bring incremental revenue stream by adding other automotive value-added service, including automotive financing service, aftermarket service, and automotive insurance and warranty service.

Revenues from Virtual dealership, demand-side platform and other revenues were RMB4.9 million (US$0.7 million) and RMB6.7 million (US$1.0 million) in Q4-2018 and the full year of 2018, respectively.

Reachedprofitability benefiting from improving operating leverage

Along with the YoY growth of ~99% and ~101% in revenues and gross profit respectively, selling & marketing expenses in 4Q-2018 increased ~93% YoY to US$21.1 million, including ''non-cash'', share-based compensation of US$2.4 million, or ~11% of total S&M expenses. Additionally general & administrative and R&D expenses also increased in the quarter mainly resulting from higher headcount necessitated by the company's business expansion.

Nevertheless, TuanChe reached profitability in 4Q-2018 as the company continued to improve its core competency in organizing auto shows, streamline its back-office operations, and optimized its cost structure.

Strong cash position enabling further businessexpansion

As of December 31, 2018, the Company had cash and cash equivalents of RMB578.6 million (US$84.1 million), compared to merely RMB66.7 million as of Dec. 31, 2017. TuanChe registered a positive adjusted EBITDA of RMB8.5 million, or US$1.2 million in 4Q-2018, compared to a loss of RMB5.7 million in the prior year period.

The company can tap into its sizable cash reserves to support its continued efforts in business expansion, which in turn should help sustain the company' growth momentum, despite the industry headwinds.

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SOURCE: Stone Street Group



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