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TuanChe Limited - Sustainable Healthy Growth Despite Continued Macro Downturn

TuanChe 1Q-2019 Earnings Highlights

NEW YORK, NY / ACCESSWIRE / May 20, 2019 / On the backdrop of a continued challenging macroeconomic condition and a seasonably slow quarter, TuanChe reported a year-over-year revenue growth of near 40.6% to RMB123 million, exceeding the high-end of the management's guidance of a year-over-year growth of 32.7%, and outperforming the overall auto industry sales which continued to decline by 13.7% YoY in the 1st quarter of 2019, with March marking the tenth straight month of YoY decline in industry-wide passenger car sales.

The sustained strong growth momentum in financial and operating results was attributed to the company's continuous efforts to improve its core auto show business as well as the new growth initiatives in special promotion events, virtual dealership and online marketing services.

Gross profit increased to RMB88.9 million, posting a year-over-year growth of 40.8%, with gross margin further expanding to 72.4% from 72.2% in 2018 Q1. The margin improvement was mainly driven by the increasing revenue contributions from the higher margined new service offerings, such as virtual dealership and online marketing services. However, due to rising operating expenses from continued geographic expansion that outpaced the revenue growth, the company returned an adjusted net loss of RMB15.5 million (US $2.3 million), which slightly increased from the prior year period. Adjusted basic and diluted loss per ADS were both RMB0.05 (US $0.01) in the 1st quarter of 2019.

Balance sheet remained strong with solid cash position and no outstanding debt. As of March 31, 2019, the Company had cash and cash equivalents of RMB505.6million (US $75.3 million), with a net cash used in operating activities of US $9.1 million in the quarter, due to higher operating costs from business expansion.

2Q-2019 Business Outlook - Confident in sustaining a healthy business growth momentum

With a business model geared for further streamlined operations and cost control initiative implementations, the management is confident in sustaining its healthy business growth momentum. The company's net revenue is expected to range from approximately RMB240 million to RMB250 million, representing an approximate year-over-year growth of 31.9% to 37.4% in the 2nd quarter of 2019, continuing to defy the gravity of an overall industry slowdown.

China Auto Industry Auto Unit Sales (China Association of Automobile Manufacture)


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Financial Reviews

Sustained revenue growth momentum driven by expanding offline marketing services

Revenue from offline marketing services increased by near 37% YoY to approximate RMB120 million, accounting for 97% of its total revenue. Among which, revenue generated from auto shows alone increased by 35.9% to RMB118.8million (US $17.7 million), primarily due to the company's expanded city coverage, as well as the increased number of auto shows organized for the broad auto industry customers, including franchised dealers, automakers, and automotive service providers, with the remaining offline revenue coming from the new special promotion event services.

The company's geographic coverage of sales operations sites further expanded to 146 cities as of March 31, 2019, up from 138 cities as of Dec. 31, 2018. TuanChe's continued geographic expansion into additional third-tier and below cities had resulted in healthy revenue growth, as the proven efficiency of its offline auto shows to deliver car sales results has been driving increasing demand from the auto industry customers in those under-served cities.

Quarterly number of auto shows organized increased by 85.4% YoY to 178 in 137 cities across China, up from 96 auto shows organized in 71 cities in the prior year period. Additionally, a total of 12 special promotion events were organized during the quarter. Meanwhile, quarterly number of auto sales facilitated has increased by 31.1% YoY to 63,641, and the gross merchandise volume (GMV) of new car sold increased by near 16.7% YoY to RMB8.4 billion, compared to 8.1% YoY growth in the prior quarter.

Healthy topline growth complemented with cost-centric business expansion model to drive future profitability

The rollout of offline special-promotion events as a new service, virtual dealership and online marketing services should together energize the company's healthy topline growth.

Additionally, the increasing economies of scale in organized auto-shows, together with a business expansion model centered on operation efficiency and cost-control should help the company further narrow its net loss and drive the company's profitability down the road.

Recent business developments - Easyhome strategic partnership

TuanChe established a strategic partnership in April with Beijing Easyhome Furnishing Chain Group Co., Ltd. ("Easyhome"). Easyhome is one of the nation's largest home improvement suppliers and furniture chains, and the partnership allows two companies to serve a broader consumer base through the jointly formed innovative one-stop retail shop that combines home decoration products and automotive services.

Under this partnership, Easyhome will offer shopping mall retail spaces for TuanChe to run auto shows free of charge, which is a huge cost saving to the company. TuanChe plans to bring its auto show events to Easyhome's retail locations in over 200 cities to further monetize the retailer's extensive customer base, while reciprocally Easyhome will benefit from higher foot traffic and enhanced brand image.



SOURCE: Stone Street Group LLC

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