Q1 2024 Cheche Group Inc Earnings Call

Participants

Crocker Coulson; Investor Relations; Cheche Group Inc

Lei Zhang; Founder and Chief Executive Officer; Cheche Group Inc

Wenting Ji; Chief Financial Officer; Cheche Group Inc

Yuyu Zhang; Analyst; CICC Corp Ltd.

Edwin Liu; Analyst; CLSA Ltd.

Presentation

Operator

Hello, and welcome to the Cheche Group first-quarter 2024 results call. (Operator Instructions)
Please note this event is being recorded. I would now like to turn the conference over to Crocker Coulson, Investor Relations for Cheche Group. Please go ahead.

Crocker Coulson

Thanks so much, operator, and good morning to all of you joining us here in the US. Good evening to those of you joining us from Asia. And we'd like to welcome you all, and thank you for joining us to review Cheche's 2024 first quarter results. This morning Cheche posted both the earnings release and the related investor presentation to our website, and you can find that at ir.chechegroup.com.
Now with us on the call today are Lei Zhang, Cheche's Founder and Chief Executive Officer; Wenting Ji, Cheche's, Chief Financial Officer, and also Ting Lin, Cheche's Chief Strategy Officer. After prepared remarks are concluded, we will open the call for questions.
Before we begin some statements in this teleconference are forward-looking within the meaning of federal securities laws. Although we believe these statements are reasonable, we can give no assurance that they will prove to be accurate because they are prospective in nature. Actual results could differ materially from those we discuss today.
We encourage you to review the most recent Form F-4 and subsequent filings for risk factors that could materially impact our results. As I mentioned, the earnings release and investor deck are available at ir.chechegroup.com, and we encourage you to review the reconciliations of certain non-GAAP measures contained within.
With that, I'll turn it over to Lei Zhang, Chief Executive Officer. Lei, please go ahead.

Lei Zhang

Than you Crocker. Good morning everyone. we're glad you have joined us. China's largest auto insurance technology platform, buy digital auto insurance transaction premiums and add to driver in the digital transformation, we are continuing to gain market share through our cutting edge, embedded insurance capabilities, powerful ecosystem and the unique starts offerings.
Social remains well positioned to capture significant opportunities resulting from accelerating digitalization of auto insurance market in China. As of March 31, 2024, so to facilitate a wider range of auto insurance transactions, providing course for about 49 million workers, plenty over USD7 billion in writing premiums and collaborating with over 100 insurance carers between 2021 and the first quarter of 2024.
The EV market in China has the highest penetration rate in the world, which has attracted several international automakers to begin manufacturing electric wafers here. Driving further industry competition and the potential, we have capitalized on this new market segment, with our recently announced partnership with Volkswagen digital sales and service to amplify the presence of Volkswagen, i.e. the insurance business.
We also began collaborating with Beijing Hoji, the insurance brokerage firm in Xiaomi growth this quarter. Xiaomi, this delay and it is the NEV market with a big splash. We will leverage our technology platform and start solutions to have them provide auto insurance services and products to consumers in multiple cities across China.
We remeasuring industry's leading provider of embedded insurance solutions and our technology roadmap continues to prioritize winning additional high-profile EV manufacturers and growing our current market share of 11 partnerships.
As a result of its efforts, our number of EV embedded policies is up to 124.5% year on year to 119,000, with responding written premium growing 78.5% to USD51 million over the same period last year. Our self-reinforcing cloud-based model is highly scalable and the daily collects the well ever data insights that our organically leverage to driver, increasing infinities of our products.
In April of this year, NEVs crossed over to account for more than 50% of new vehicle sales in China. The range of offerings are now available on EV to Chinese consumers is more affordable, more intelligent and make driving more entertaining than comparable IC offerings.
Cheche continues to align its growth strategy with manual critical dynamics driving the automotive industry in China, as it sets the standard for affordable, functional and sustainable vehicles. The first phase of the strategy establish conductively has embedded insurance technology and operating service providers so that EV manufacturers can capture the sort of sales and renewal as a paddle their direct to consumer relationship.
We are later focused on securing relationships with the remaining large NEV players. It is true, we foresee that a reinsurance which will bolster the falling future. The first of these embedded and subscriber the insurance models will become mainstream embedded and subscriber insurance, where official integrated products, smart recommendations, one click reinsurer and a digital claims with NEV makers as the new shopping and service portal.
Second, it ensures that we will be data-driven and provide real-time pricing. The data-driven model will capitalize on data analytics and AI actuarial modeling capabilities such as data connection, real-time pricing and a smart risk management to reshape auto insurance.
Third, EV makers of lifetime of services to users. And I will be more involved in well added services such as financing use of cars and the new car services line insurance.
Fill three we'll leverage the enormous data stream and managing from NEVs to have a manufacturer understand driving behavior and risk risk profile at a granular level. This data streams will grow over richer as auto transition towards L3 and level 4 autonomy.
And the driver stepped back as an active participate when cars are in supervised automaker model. With the foundation of the Boji's federally insurance relevance, driver data surgery is positioned to embed AI deeper into the tactics and low out capabilities such as automated claims management, automated fraud prevention and individualized risk adjusted pricing that generate more value for our partners and higher margins for Cheche.
Our strategy is to develop and leverage the network effort effect of being the hub of the NEV industry to build, but tenable competitively advantaged yet have our partners survive and thrive in the years to come is a long-term.
We may consider global expansion of facilities in regions such as North America and South East Asia. We are pleased we are pleased with our progress in 2024 and look forward to capitalizing on the industry's evolving opportunities.
I will now turn the call over to our CFO, Wenting Ji. Thank you.

Wenting Ji

Thanks Lei. I I'd like to begin my touch on our first quarter operational and financial highlights before taking questions. For the operational update, Cheche continues to grow its business with its CapEx, light technology focus and strategy.
As a result, total written premiums placed for the quarter increased 9.2% to RMB5.4 billion or USD751.1 million the total number of policies placed grew 21.2% in the quarter to 4 million. As Lei mentioned, 119,000 policies and RMB370.2 million or USD51.3 million of the corresponding premiums were embedded in annual deliveries, growing 124.5% and 78.5%, respectively, year over year.
Word-of-mouth referrals and a local industry relationships remain central to Cheche's organic growth strategy for the installed base of auto insurance markets. The quarter's addition of over 49 and 600 new referral partners contributed to the company's approximately 1.2 million total referral partners at the quarter's end.
For the financial update in terms of net revenues, we generated RMB787.1 million or USD109 million in the first year, up 1% year over year or cost of revenues in the first quarter was RMB753.4 million or while USD104.2 million, also up 1% year over year in line with the revenue growth.
The total operating expenses decreased by 18.5% to RMB65.7 million or USD9.1 million from RMB80.7 million in the prior year quarter, mainly due to the decrease in share-based compensation expenses, marketing expenses and staff costs.
Excluding the impact of share-based compensation expenses, and the listing related professional services fees. The adjusted total operating expenses increased by 3.4% from the prior quarter, mainly due to the incurrence of RMB5.2 million in post listing professional service fees, net loss decreased [28% or 8%] to RMB31.2 million or USD4.3 million over the prior year quarter.
Excluding non-GAAP expenses, the adjusted net loss was RMB12.2 million or USD1.7 million, increasing by RMB4.4 million compared to the adjusted net loss of RMB7.8 million for the prior quarter, mainly due to the incurrence of RMB5.2 million in lifting professional service fees.
Turning to our balance sheet, we had RMB234 million or USD32.4 million in cash, cash equivalents and short-term investments, which provides us with a healthy financial flexibility. Looking ahead Cheche, reaffirming its previously stated guidance, which as we continue to expect that net revenues in 2024 will range from RMB3.5 billion to RMB3.7 billion, representing an increase of 6.1% to 12.1% compared to the four year of 2023.
Total written premiums placed are expected to range from RMB24.5 billion to RMB26.5 billion, representing an increase of 8.4% to 17.3% compared to a full year of 2023. With that, we are happy to address any of your questions. Thank you.

Question and Answer Session

Operator

We will now begin the question and answer session. (Operator Instructions)
Yi Zhong with CICC.

Yuyu Zhang

(spoken in foreign language) So I have one question, and this is about a potential upside after NGB Cubo. So what's the potential upside of NJBL cause or insurance market and what's the ROE Churchill place and will play in this market? Thanks.

Lei Zhang

(spoken in foreign language) Well, thanks for your questions. As we can see now that the premiums of the reinsurance of the has accounted for over 60% of the total ownership of NEVs. And the EV market has become the main service and the EV insurance has become the main service of the EV makers, and it is no longer served as a sort of affiliated and offerings of the EV makers. But it has served as the core business of their total offerings.
(spoken in foreign language) In the next year, we believe that the revenue will grow from the RMB200 billion to the RMB300 billion. And in terms of the revenue from the repair parts and from the aftermarket, such that we believe it will exceed RMB500 billion. So the total market size will range between RMB50 billion RMB800 billion.
(spoken in foreign language) Also as a service provider, there are two roles that we play in this ecosystem. First of all, we will help and assist the EV makers to become the main participant in the market. We are we are helping them to build SaaS system and empower them with and operating services.
(spoken in foreign language) On the other hand that after EV insurance become more intelligent and subscriber services, we were helped the insurance carriers with their smart risk management and real-time pricing. And also with the innovations in terms of the insurance product as the self-driving mode is becoming more and more mature.
(spoken in foreign language) We belief that we are one of the leaders in the NEV insurance market in China, and we will occupy the major market share over the next 3vto 5 years.
Thank you.

Operator

Did you have a follow-up, Ms. Zhang?

Yuyu Zhang

Thanks, it's very clear.

Operator

(Operator Instructions) This concludes our question and answer session.
ExEdwin Liu, CLSA.

Edwin Liu

(spoken in foreign language) So thanks for management for the opportunity to ask question. I have two quick questions. Firstly, in terms of the partnership with the NEV, OEM, for the insurance broker SaaS platform. Do we have a rough idea for the percentage of market share?
And the second question is based on the guidance for the adjusted net loss and we think that imply a sequential improvement in terms of the profitability from the first quarter this year. If our understanding correct, what would be the driver behind the improvement? Thank you.

Lei Zhang

(spoken in foreign language) we would like to answer your first question. As you have mentioned, we have worked with many major Chinese EV makers such as [Neil]and Xiaomi and yet the three on services that we're offering them now, the first one is at the new car and delivery date and about 80% to 90% new cars and purchase the auto insurance through our platform.
The second one is the at the renewal, a juncture that about 50% of the cars we are choosing to renew their auto insurance and on their app through our SaaS platform.
And the third one is the services that we provided in terms of the claims management, will we help the and EV makers to build their additional platform, and that will help the what car owners have to report about the car accident.
(spoken in foreign language) As we have mentioned, we have worked with the major EV makers, for example, the first one is at the Volkswagen NEV factory. And this year, they will launch their first electric vehicles in China, and we have established the exclusive partnership with them and to offer our services. We're covering the new car insurance and the insurance renewal and to the claims management.
And as to the other major EV makers and the larger the EV sales in China than the auto, we have served more than 60% to 70% of the auto insurance offerings in the including the new car insurance and renewals. And in particular, we have like 100% and service for their renewal services.
And the next one is a new EV maker, Xiaomi, and we have served 50% of the total of car owners. So and it is and I feel we have say that we are as a leader, we are a leader in the auto insurance sector, especially in the EV insurance.
(spoken in foreign language) And more and more EV makers have realized that our insurers have contributed a lot to their revenues in the aftermarket services and 50% of their revenues are coming from the repair parts and aftermarket services and among them and insurance have accounted and the biggest part.
So they are more and more EV makers have made insurance the major strategies of their future growth. So we believe that in the next 5 to 10 years. And we will see the vast growth opportunities and the resources in this.

Wenting Ji

This is [Sandra], I will answer the second question in terms of the adjusted net loss. Yes, there was a increase in adjusted net loss in the first quarter of 2024. Actually, the view on special reasons resulted in this result and perfectly. As we mentioned in the ER, we incurred RMB5.2 million in our post listing our professional service space, like a lawyer fees, our database is larger compared to the first quarter of last year.
The second reason is that there was a close there was a RMB1.4 million exchange gains due to the fluctuation of RMB and USD exchange rate, and that's a kind of non-operating related issue. And the third reason is that was close to RMB5 million of government grants, which was due to the preferential tax policies regarding the value added tax since the beginning of this year, the government to cancel this preferential policy. That's why that's why we didn't enjoy the benefit in this year.
Actually, to sum up those, those three reasons that they are of almost RMB10 million are different increased compared to the fourth quarter last year. Excluding this unknown operating one-off issues, actually we would have been deliver much better results compared to compared to last year that that would be over 50% improvement in terms of the adjusted net loss.
Thank you.

Lei Zhang

(spoken in foreign language) Thank you.

Operator

(Operator Instructions) This concludes our question and answer session. I would like to turn the conference back over to Lei Zhang for any closing remarks.

Lei Zhang

Thank you, everyone for joining the call. If you have any follow-up questions, please contact IR. Have a good day. Thank you.

Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.