Cango Inc (NYSE:CANG) Q1 2021 Earnings Conference Call May 31, 2021 9:00 PM ET Company Participants Jiayuan Lin - CEO Caroline Li - Head of IR Yongyi Zhang - CFO Conference Call Participants Shelley Wang - Morgan Stanley Derek Su - Goldman Sachs Operator Good morning and good evening, everyone. Welcome to Cango Incorporated First Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. This call is also being broadcast live on the company's IR website. Joining us toda ...

PART I [ITEM 3. KEY INFORMATION](index=8&type=section&id=Item%203.%20Key%20Information) This section presents Cango Inc.'s selected financial data and outlines key business, operational, and ADS-related risk factors [Selected Financial Data](index=8&type=section&id=A.%20Selected%20Financial%20Data) This section presents Cango Inc.'s selected consolidated financial data, highlighting revenue growth, significant net income increase from investment gains, and asset expansion Selected Consolidated Statements of Comprehensive Income Data (2018-2020) | Indicator | 2018 (RMB, in thousands) | 2019 (RMB, in thousands) | 2020 (RMB, in thousands) | | :--- | :--- | :--- | :--- | | **Total revenues** | 1,091,414 | 1,440,069 | 2,052,432 | | **Income from operations** | 276,720 | 323,296 | 318,297 | | **Fair value change of equity investment** | — | 41,582 | 3,315,476 | | **Net income** | 306,924 | 404,859 | 3,373,420 | | **Net income attributable to Cango Inc.'s shareholders** | 302,692 | 390,914 | 3,369,518 | | **Diluted Earnings per ADS** | 2.16 | 2.58 | 22.18 | Selected Consolidated Balance Sheet Data (as of Dec 31) | Indicator | 2018 (RMB, in thousands) | 2019 (RMB, in thousands) | 2020 (RMB, in thousands) | | :--- | :--- | :--- | :--- | | **Total assets** | 7,301,140 | 8,736,574 | 12,145,933 | | **Total liabilities** | 2,045,773 | 3,244,914 | 3,770,723 | | **Total shareholders' equity** | 5,255,367 | 5,491,660 | 8,375,209 | Reconciliation of Net Income to Adjusted Net Income (Non-GAAP) | Indicator | 2018 (RMB, in thousands) | 2019 (RMB, in thousands) | 2020 (RMB, in thousands) | | :--- | :--- | :--- | :--- | | **Net income** | 306,924 | 404,859 | 3,373,420 | | Add: ESOP Expenses | 33,411 | 82,266 | 78,755 | | **Adjusted net income** | 340,335 | 487,125 | 3,452,175 | [Risk Factors](index=11&type=section&id=D.%20Risk%20Factors) The company faces various risks related to its business operations, corporate structure, evolving regulatory landscape in China, and potential adverse consequences for ADS holders - The company operates in an emerging and fast-growing market with a limited operating history, making future performance difficult to predict, with key challenges including maintaining relationships with dealers and financial institutions, managing credit risk, and adapting to regulatory changes[29](index=29&type=chunk)[31](index=31&type=chunk) - The COVID-19 pandemic adversely affected operations in the first half of 2020, causing a decrease in revenue and an increase in delinquency rates, though business recovered in the second half, future impacts remain uncertain[33](index=33&type=chunk) - The company relies on a limited number of financial institutions, with WeBank, MYbank, and Bank of Shanghai being key partners, and in 2020, collaborations with these three institutions accounted for **32.6%**, **51.5%**, and **4.0%** of automotive financing facilitation revenues, respectively, where any disruption could materially impact the business[46](index=46&type=chunk) - There is a significant risk that the company may be classified as a Passive Foreign Investment Company (PFIC) for U.S. federal income tax purposes, which could result in adverse tax consequences for U.S. investors[286](index=286&type=chunk)[287](index=287&type=chunk) - The company's auditor is not inspected by the Public Company Accounting Oversight Board (PCAOB), and the Holding Foreign Companies Accountable Act (HFCA Act) could lead to the delisting of the company's securities from U.S. exchanges if the PCAOB is unable to inspect the auditor for three consecutive years[238](index=238&type=chunk)[241](index=241&type=chunk) [ITEM 4. INFORMATION ON THE COMPANY](index=80&type=section&id=Item%204.%20Information%20On%20The%20Company) This section details the company's history, technology-enabled automotive transaction service platform business model, and its organizational structure, including the VIE arrangement [History and Development of the Company](index=80&type=section&id=A.%20History%20and%20Development%20of%20the%20Company) This section outlines Cango Inc.'s development from its 2010 founding, including its IPO, strategic acquisitions, and key equity investments - The company was founded in August 2010 through Shanghai Cango, initially focusing on automotive financing solutions[293](index=293&type=chunk) - Completed its initial public offering on the New York Stock Exchange on **July 26, 2018**, under the symbol "CANG"[298](index=298&type=chunk) - Acquired Shanghai Chejia at the end of September 2018, making it a wholly-owned consolidated subsidiary, and in 2019, acquired Fushun Insurance Brokerage Co., Ltd. to enhance its after-market services[296](index=296&type=chunk) - Made a series of equity investments in Li Auto (formerly Chehejia) in 2018 and 2019, holding **39,194,413 Class A ordinary shares** of Li Auto as of December 31, 2020[297](index=297&type=chunk) [Business Overview](index=81&type=section&id=B.%20Business%20Overview) Cango operates a technology-enabled automotive transaction service platform offering trading, financing facilitation, and after-market services, leveraging a vast dealer network and financial institution partnerships - The company's platform offers three core services: pre-sale automobile trading solutions, during-sale automotive financing facilitation, and post-sale after-market services facilitation[299](index=299&type=chunk)[304](index=304&type=chunk) Key Operational Metrics (2020) | Metric | Value | | :--- | :--- | | Registered Dealers | 48,487 | | Active Dealers (Q4 2020) | 19,667 | | Financing Transactions Facilitated | 329,293 | | Total Amount of Financing | RMB 27.7 billion | | Automobile Trading Transactions | 4,999 cars | | Automobile Trading Value | RMB 624.8 million | - The company collaborates with **12 third-party financial institutions**, and in 2020, **98.1%** of financing was funded by these institutions, with the remaining **1.9%** funded by the company's subsidiary, Shanghai Chejia[309](index=309&type=chunk)[327](index=327&type=chunk) - A strategic partnership with Didi Chuxing provides access to its large driver base for services like vehicle sourcing, financing, and insurance, with Cango serving **509 licensed Didi Chuxing drivers** in 2020[373](index=373&type=chunk) [Organizational Structure](index=128&type=section&id=C.%20Organizational%20Structure) Cango Inc. operates in the PRC primarily through a Variable Interest Entity (VIE) structure to comply with foreign investment restrictions, maintaining control via contractual arrangements - The company uses a VIE structure to conduct its operations in China, mainly through Shanghai Cango, to comply with PRC restrictions on foreign ownership in certain business areas like VATS[486](index=486&type=chunk) - Control over the VIE is established through a series of contractual arrangements, including Equity Interest Pledge Agreements, Powers of Attorney, an Exclusive Business Cooperation Agreement, and an Exclusive Option Agreement[486](index=486&type=chunk)[489](index=489&type=chunk) - As a result of these arrangements, Cango Inc. is the primary beneficiary of Shanghai Cango, allowing it to consolidate the VIE's financial results into its own financial statements under U.S. GAAP[487](index=487&type=chunk) [ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS](index=129&type=section&id=Item%205.%20Operating%20and%20Financial%20Review%20and%20Prospects) This section provides management's discussion and analysis of the company's financial condition and operating results, including revenue, costs, liquidity, and capital resources [Operating Results](index=129&type=section&id=A.%20Operating%20Results) This section details the company's operating performance, highlighting significant revenue growth, a surge in net income driven by investment gains, and changes in credit performance metrics Comparison of Results of Operations (2019 vs. 2020) | Indicator (RMB, in millions) | 2019 | 2020 | Change (%) | | :--- | :--- | :--- | :--- | | **Total Revenues** | 1,440.1 | 2,052.4 | +42.5% | | Automobile trading income | 11.4 | 624.8 | +5375.9% | | After-market services income | 206.0 | 241.2 | +17.1% | | **Total operating cost and expenses** | 1,116.8 | 1,734.1 | +55.3% | | **Fair value change of equity investment** | 41.6 | 3,315.5 | +7870.0% | | **Net income** | 404.9 | 3,373.4 | +733.1% | - The significant increase in 2020 net income was primarily driven by a **RMB 3,315.5 million** gain from the fair value change of the company's equity investment in Li Auto, which went public in July 2020[608](index=608&type=chunk) Credit Performance Metrics (as of Dec 31) | Ratio | 2019 | 2020 | | :--- | :--- | :--- | | M1+ overdue ratio | 0.85% | 0.98% | | M3+ overdue ratio | 0.40% | 0.42% | [Liquidity and Capital Resources](index=157&type=section&id=B.%20Liquidity%20and%20Capital%20Resources) This section discusses the company's liquidity sources, including cash balances, operating cash flows, and various debt financing activities like credit facilities and asset-backed securities Summary of Cash Flows (RMB, in millions) | Cash Flow Activity | 2018 | 2019 | 2020 | | :--- | :--- | :--- | :--- | | Net cash from/(used in) operating activities | 184.8 | 422.9 | (621.6) | | Net cash used in investing activities | (1,638.6) | (1,198.4) | (493.6) | | Net cash from/(used in) financing activities | 4,091.1 | 730.5 | (380.8) | - As of December 31, 2020, the company had cash and cash equivalents of **RMB 1,426.9 million** and restricted cash of **RMB 888.0 million**[618](index=618&type=chunk)[619](index=619&type=chunk) - The company utilizes debt financing, including credit agreements with banks like Bank of Shanghai and CITIC Bank, and has issued Asset-Backed Notes (ABNs) and Asset-Backed Securities (ABSs) to raise capital[620](index=620&type=chunk)[621](index=621&type=chunk)[623](index=623&type=chunk)[624](index=624&type=chunk) [ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES](index=159&type=section&id=Item%206.%20Directors%2C%20Senior%20Management%20and%20Employees) This section details the company's leadership, compensation practices, board structure, and employee breakdown, including share ownership of key personnel [Compensation](index=162&type=section&id=B.%20Compensation) This section outlines the aggregate cash compensation for directors and executive officers, details the Share Incentive Plan, and mentions employment agreement clauses - In 2020, aggregate cash compensation for directors and executive officers was approximately **RMB 26.5 million (US$4.1 million)**[667](index=667&type=chunk) - The company adopted the Share Incentive Plan 2018, initially reserving **27,845,526 ordinary shares** for grants, and as of December 31, 2020, **18,510,727 options** remained outstanding after grants in May 2018, February 2019, and October 2020[674](index=674&type=chunk)[680](index=680&type=chunk) - Share-based compensation expenses recognized in 2020 amounted to **RMB 78.8 million (US$12.1 million)**[680](index=680&type=chunk) [Employees](index=169&type=section&id=D.%20Employees) This section provides a breakdown of the company's total employees by functional area as of year-end 2020, highlighting the sales and marketing concentration Employee Breakdown by Function (as of Dec 31, 2020) | Function | Number of Employees | % of Total | | :--- | :--- | :--- | | Sales and marketing | 2,053 | 68.2% | | Operations | 364 | 12.1% | | Risk management | 233 | 7.7% | | General administration | 215 | 7.2% | | Research and development | 144 | 4.8% | | **Total** | **3,009** | **100.0%** | [Share Ownership](index=170&type=section&id=E.%20Share%20Ownership) This section details the company's concentrated voting power, primarily held by co-founders through super-voting shares, and lists other principal shareholders - Co-founders Mr. Xiaojun Zhang and Mr. Jiayuan Lin collectively exercise **87.6%** of the aggregate voting power as of March 31, 2021, due to their ownership of super-voting Class B shares[709](index=709&type=chunk) - Each Class A ordinary share is entitled to **one vote**, while each Class B ordinary share is entitled to **20 votes**[704](index=704&type=chunk) - Other principal shareholders (owning over **5%**) include WP Fintech (**18.3%**), Tencent Mobility Limited (**10.8%**), Didi Chuxing (**9.7%**), and Taikang Offshore Entities (**5.6%**)[704](index=704&type=chunk) [ITEM 8. FINANCIAL INFORMATION](index=174&type=section&id=Item%208.%20Financial%20Information) This section presents the company's consolidated financial statements and outlines its dividend policy, including past special cash dividends and future payment considerations - The company's board approved special cash dividends in three consecutive years Special Cash Dividend History | Approval Date | Dividend per Share (Ordinary) | Dividend per ADS | Aggregate Amount | | :--- | :--- | :--- | :--- | | April 22, 2019 | US$0.125 | US$0.25 | Approx. US$37.9M | | April 22, 2020 | US$0.125 | US$0.25 | Approx. US$37.9M | | March 11, 2021 | US$0.50 | US$1.00 | Approx. US$151.4M | - Future dividend payments are not guaranteed and will depend on the company's earnings, financial condition, and other factors, with distributions also constrained by PRC laws requiring statutory reserves to be set aside by its PRC subsidiaries[723](index=723&type=chunk)[724](index=724&type=chunk) [ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=185&type=section&id=Item%2011.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section discusses the company's exposure to market risks, primarily foreign exchange and interest rate fluctuations, and assesses the impact of inflation on operations - **Foreign Exchange Risk:** All revenues are denominated in RMB, and fluctuations in the RMB against the U.S. dollar can affect translated financial results, with the company recording a foreign exchange loss of **RMB 8.8 million** in 2020[766](index=766&type=chunk) - **Interest Rate Risk:** The company has not been materially exposed to interest rate risk and has not used derivative instruments to manage this exposure, however, future changes in market interest rates could pose a risk[771](index=771&type=chunk) - **Inflation Risk:** Inflation in China has not materially affected results of operations, with the consumer price index increasing by **2.5%** in 2020[772](index=772&type=chunk)[645](index=645&type=chunk) PART III [ITEM 18. FINANCIAL STATEMENTS](index=192&type=section&id=Item%2018.%20Financial%20Statements) This section presents the full audited consolidated financial statements of Cango Inc. for 2018-2020, prepared under U.S. GAAP, including the auditor's report and detailed notes [Notes to the Consolidated Financial Statements](index=211&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) These notes provide detailed explanations of the company's significant accounting policies, including VIE consolidation, revenue recognition, share-based compensation, and fair value measurements - **VIE Structure:** The company operates in the PRC through a VIE, Shanghai Cango, due to foreign ownership restrictions, and is considered the primary beneficiary, consolidating the VIE's financial results[843](index=843&type=chunk)[848](index=848&type=chunk) - **Revenue Recognition:** The company adopted ASC 606 on January 1, 2019, with revenue derived from loan facilitation, finance leases, after-market services, and automobile trading, and revenue from loan facilitation and post-origination services is allocated and recognized accordingly[875](index=875&type=chunk)[878](index=878&type=chunk) - **Risk Assurance Liabilities:** For certain financing arrangements, the company provides risk assurance to financial institutions, with this liability having two components: a non-contingent aspect accounted for under ASC 460 and a contingent loss aspect under ASC 450, totaling **RMB 460.8 million** as of December 31, 2020[915](index=915&type=chunk)[1007](index=1007&type=chunk) - **Share-Based Compensation:** The company uses the binomial tree option pricing model to value stock options granted under its 2018 ESOP, with total share-based compensation expense amounting to **RMB 78.8 million** in 2020[1054](index=1054&type=chunk)[1055](index=1055&type=chunk) - **Investment in Li Auto:** The investment in Li Auto was reclassified to short-term investments in 2020 following its IPO, and as of December 31, 2020, the fair value of this investment was **RMB 3.69 billion**, resulting in a significant unrealized gain[972](index=972&type=chunk)[973](index=973&type=chunk)

Financial Data and Key Metrics Changes - Total revenues in Q4 2020 reached a record RMB 1,097 million, exceeding previous guidance by approximately 46% [3] - Net income for Q4 2020 was RMB 1.6 billion, primarily due to an investment gain of about RMB 1.5 billion [3][20] - For the full year 2020, total net revenues increased by 42.5% to RMB 2.1 billion, with net income of RMB 3.4 billion [20][21] Business Line Data and Key Metrics Changes - Car trading transactions generated revenue of RMB 547 million in Q4 2020, accounting for about 50% of total revenue [5][16] - Automotive financing facilitation revenues were RMB 398.1 million, up 51.8% year-on-year [11][20] - Aftermarket services facilitation revenue in Q4 was RMB 70.76 million, contributing to total revenue growth [12][20] Market Data and Key Metrics Changes - The total outstanding balance of financing transactions facilitated by the company reached RMB 43.5 billion as of December 31, 2020 [12] - The M1+ overdue ratio decreased to 0.98% from 1.11% as of September 30, 2020, indicating improved asset quality [12] Company Strategy and Development Direction - Cango aims to expand its service capabilities in the auto transaction value chain, focusing on lower-tier markets [4][10] - The company is committed to technological innovation and big data as core drivers for growth [10] - Plans for 2021 include facilitating 45,000 to 50,000 car trading transactions and enhancing logistics and supply chain capabilities [25][29] Management's Comments on Operating Environment and Future Outlook - Management noted that the auto market in China is recovering steadily post-pandemic, with pent-up demand from lower-tier markets [3] - The tightening of credit supply has not directly impacted business, with macro policies favoring companies like Cango [29] - The company expects total revenues in Q1 2021 to be between RMB 1,000 million and RMB 1,050 million [21] Other Important Information - Cango has a network of nearly 50,000 registered dealers nationwide, enhancing its position in the market [4][13] - The company received multiple industry awards, including the innovative auto finance services enterprises award for seven consecutive years [14] Q&A Session Summary Question: Outlook for car trading transactions business in 2021 - Cango expects to facilitate 45,000 to 50,000 car trading transactions in 2021, targeting non-authorized dealers in lower-tier cities [25][26] Question: Risk management for independent sales rep model - The company has strict controls over the qualification and eligibility of independent sales reps, ensuring authenticity in transactions [27][28] Question: Impact of macro credit policies on demand for auto loans - Macro policies are favorable for Cango, and tightening credit supply has not significantly impacted business performance [29] Question: Outlook for take rate and cost of funding - Cango aims to maintain steady funding costs and take rates by expanding partnerships with high-quality funding sources [31]

Cango, Inc. (NYSE:CANG) Q3 2020 Earnings Conference Call November 23, 2020 8:00 PM ET Company Participants Jiayuan Lin - Co-Founder, CEO & Director Michael Zhang - CFO & Director Conference Call Participants Shelley Wang - Morgan Stanley David Tang - Goldman Sachs Operator Good morning and good evening, everyone. Welcome to Cango Inc.'s Third Quarter 2020 Earnings Conference Call. [Operator Instructions]. Joining us today are Mr. Jiayuan Lin, Chief Executive Officer; and Mr. Michael Zhang, Chief Financial ...

Cango Inc. (NYSE:CANG) Q2 2020 Earnings Conference Call August 24, 2020 9:00 PM ET Company Participants Jiayuan Lin - Chief Executive Officer Michael Zhang - Chief Financial Officer Conference Call Participants Shelley Wang - Morgan Stanley Operator Good morning, and good evening, everyone. Welcome to Cango, Inc.'s Second Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. This call is also being broadcast live on the company's IR website. Joining us today are Mr ...

Cango, Inc. (NYSE:CANG) Q1 2020 Earnings Conference Call May 27, 2020 9:00 PM ET Company Participants Jiayuan Lin - Co-Founder, CEO & Director Yongyi Zhang - CFO & Director Conference Call Participants Wen Li - Goldman Sachs Group John Cai - Morgan Stanley Operator Good evening, everyone. Welcome to the Cango, Inc. First Quarter 2020 Earnings Conference Call. [Operator Instructions]. This call is also being broadcast live on the company's IR website. Joining us today are Mr. Jiayuan Lin, Chief Executive Of ...

PART I [ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS](index=7&type=section&id=ITEM%201.%20IDENTITY%20OF%20DIRECTORS%2C%20SENIOR%20MANAGEMENT%20AND%20ADVISERS) This section is not applicable as per the report - This item is not applicable[16](index=16&type=chunk) [ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE](index=7&type=section&id=ITEM%202.%20OFFER%20STATISTICS%20AND%20EXPECTED%20TIMETABLE) This section is not applicable as per the report - This item is not applicable[16](index=16&type=chunk) [ITEM 3. KEY INFORMATION](index=7&type=section&id=ITEM%203.%20KEY%20INFORMATION) This section presents selected historical financial data, discusses key risk factors, and provides information on capitalization and use of proceeds [Selected Financial Data](index=7&type=section&id=A.%20Selected%20Financial%20Data) The company's total revenues grew to **RMB 1.44 billion** in 2019, with net income attributable to ordinary shareholders reaching **RMB 390.9 million** Selected Consolidated Statements of Comprehensive Income Data (2017-2019) | Indicator | 2017 (RMB) | 2018 (RMB) | 2019 (RMB) | 2019 (US$) | | :--- | :--- | :--- | :--- | :--- | | **Total revenues** | 1,052,204 | 1,091,414 | 1,440,069 | 206,853 | | **Income from operations** | 470,020 | 276,720 | 323,296 | 46,439 | | **Net income** | 349,057 | 306,924 | 404,859 | 58,154 | | **Net income attributable to Cango Inc.'s ordinary shareholders** | 341,010 | 302,692 | 390,914 | 56,151 | | **Basic Earnings per ADS** | N/A | 2.17 | 2.59 | 0.37 | Selected Consolidated Balance Sheet Data (As of Dec 31) | Indicator | 2018 (RMB) | 2019 (RMB) | 2019 (US$) | | :--- | :--- | :--- | :--- | | **Total assets** | 7,301,140 | 8,736,574 | 1,254,930 | | **Total liabilities** | 2,045,773 | 3,244,914 | 466,103 | | **Total shareholders' equity** | 5,255,367 | 5,491,660 | 788,828 | Reconciliation of Net Income to Adjusted Net Income (Non-GAAP) | Indicator | 2017 (RMB) | 2018 (RMB) | 2019 (RMB) | 2019 (US$) | | :--- | :--- | :--- | :--- | :--- | | **Net income** | 349,057 | 306,924 | 404,859 | 58,154 | | Add: ESOP Expenses | — | 33,411 | 82,266 | 11,817 | | **Adjusted net income** | 349,057 | 340,335 | 487,125 | 69,971 | [Risk Factors](index=10&type=section&id=D.%20Risk%20Factors) This section details significant risks including intense competition, reliance on financial institutions, regulatory changes, VIE structure uncertainties, and NYSE listing non-compliance - The company has a limited operating history in China's emerging automotive finance market, making historical performance not necessarily indicative of future results[30](index=30&type=chunk)[31](index=31&type=chunk)[32](index=32&type=chunk) - The COVID-19 outbreak is expected to have a material adverse impact on business and financial condition for 2020 due to decreased auto purchases and potential rises in delinquency rates[38](index=38&type=chunk)[40](index=40&type=chunk) - The company relies on a limited number of financial institutions, with Jincheng Bank and WeBank representing **22.6%** and **16.4%** of total revenues in 2019 respectively[52](index=52&type=chunk)[53](index=53&type=chunk) - Contractual arrangements with its VIE (Shanghai Cango) may not be as effective as direct ownership and could be subject to scrutiny by PRC authorities[214](index=214&type=chunk)[224](index=224&type=chunk) - The company received a NYSE non-compliance notification on October 24, 2019, related to stockholder count, with potential delisting if compliance is not regained[295](index=295&type=chunk)[296](index=296&type=chunk)[298](index=298&type=chunk) - There is a significant risk that the company was a **Passive Foreign Investment Company (PFIC)** for U.S. federal income tax purposes for 2019, potentially resulting in adverse tax consequences for U.S. investors[334](index=334&type=chunk)[335](index=335&type=chunk) [ITEM 4. INFORMATION ON THE COMPANY](index=79&type=section&id=ITEM%204.%20INFORMATION%20ON%20THE%20COMPANY) This section provides a comprehensive overview of Cango Inc., detailing its history, business model, organizational structure, and facilities [History and Development of the Company](index=79&type=section&id=A.%20History%20and%20Development%20of%20the%20Company) Cango, founded in 2010, has expanded its automotive financing and dealer network, serving over **1.38 million** car buyers and completing its NYSE IPO in 2018 - The company was founded in 2010 and has cumulatively served **1,383,833** car buyers through its platform as of December 31, 2019[342](index=342&type=chunk) - Cango Inc. was incorporated in the Cayman Islands in October 2017 and established a VIE structure with Shanghai Cango to conduct its business in China[343](index=343&type=chunk) - The company completed its initial public offering on the New York Stock Exchange under the symbol "CANG" on July 26, 2018[346](index=346&type=chunk) [Business Overview](index=80&type=section&id=B.%20Business%20Overview) Cango operates an automotive transaction service platform in China, connecting **49,238** dealers and **13** financial institutions, facilitating **RMB 28.1 billion** in financing in 2019 - The company's platform connects **49,238** registered dealers, **13** third-party financial institutions, and **59** other industry participants[347](index=347&type=chunk) - Core services include automotive financing facilitation, automotive transaction facilitation, and after-market service facilitation[348](index=348&type=chunk) Financing Transactions Facilitated in 2019 | Metric | Value | | :--- | :--- | | Number of car purchases financed | 390,140 | | Total amount of financing transactions | RMB 28.1 billion (US$4.0 billion) | - The company has strategic partnerships with ICBC for expanding into tier-one and tier-two cities and with Didi Chuxing to provide solutions for its driver fleet[371](index=371&type=chunk)[372](index=372&type=chunk) [Organizational Structure](index=121&type=section&id=C.%20Organizational%20Structure) Cango Inc. operates in the PRC through a Variable Interest Entity (VIE), Shanghai Cango, controlled via contractual arrangements to comply with foreign ownership restrictions - The company operates in the PRC through a VIE structure to comply with foreign ownership restrictions, with Shanghai Cango as the consolidated VIE[516](index=516&type=chunk) - Control over the VIE is maintained through a series of contractual arrangements, enabling the company to consolidate its financial statements and receive economic benefits[517](index=517&type=chunk)[518](index=518&type=chunk) - PRC legal counsel has opined that the ownership structure and contractual arrangements are valid, but substantial uncertainties remain regarding PRC law interpretation[519](index=519&type=chunk)[520](index=520&type=chunk) [Facilities](index=126&type=section&id=D.%20Facilities) The company's headquarters are in Shanghai, leasing approximately **7,328 square meters** of office space, along with regional offices and warehouses across China - The company's headquarters are in Shanghai, and it leases all its office and warehouse facilities across China[530](index=530&type=chunk) [ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS](index=126&type=section&id=ITEM%205.%20OPERATING%20AND%20FINANCIAL%20REVIEW%20AND%20PROSPECTS) This section analyzes the company's financial condition and results, highlighting revenue growth, net income increase, liquidity, and capital resources [Operating Results](index=126&type=section&id=A.%20Operating%20Results) In 2019, total revenues grew **31.9%** to **RMB 1.44 billion**, driven by leasing and after-market services, with net income rising to **RMB 404.9 million** Key Financial Results Comparison (2018 vs 2019) | Metric | 2018 (RMB Million) | 2019 (RMB Million) | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenues | 1,091.4 | 1,440.1 | +31.9% | | Net Income | 306.9 | 404.9 | +31.9% | - The revenue growth in 2019 was mainly driven by a **RMB 241.0 million** increase in leasing income and a **RMB 105.9 million** increase in after-market services income[630](index=630&type=chunk) Credit Performance Metrics (As of Dec 31) | Ratio | 2018 | 2019 | | :--- | :--- | :--- | | M1+ Overdue Ratio | 0.74% | 0.85% | | M3+ Overdue Ratio | 0.37% | 0.40% | [Liquidity and Capital Resources](index=149&type=section&id=B.%20Liquidity%20and%20Capital%20Resources) The company's liquidity is supported by **RMB 2.00 billion** in cash and equivalents, **RMB 1.84 billion** in restricted cash, and **RMB 422.9 million** in operating cash flow, alongside increased borrowings Cash and Debt Position (As of Dec 31, 2019) | Item | Amount (RMB Million) | Amount (US$ Million) | | :--- | :--- | :--- | | Cash and cash equivalents | 2,002.3 | 287.6 | | Restricted cash | 1,844.7 | 265.0 | | Short-term debts | 1,439.7 | 206.8 | | Long-term debts | 1,165.1 | 167.4 | Summary of Cash Flows (2019) | Cash Flow Item | Amount (RMB Million) | Amount (US$ Million) | | :--- | :--- | :--- | | Net cash provided by operating activities | 422.9 | 60.7 | | Net cash used in investing activities | (1,198.4) | (172.1) | | Net cash provided by financing activities | 730.5 | 104.9 | [ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES](index=155&type=section&id=ITEM%206.%20DIRECTORS%2C%20SENIOR%20MANAGEMENT%20AND%20EMPLOYEES) This section details the company's leadership, compensation, board structure, and employee base, noting co-founders' significant voting control - The company is led by co-founder and Chairman Xiaojun Zhang and co-founder, director, and CEO Jiayuan Lin[683](index=683&type=chunk)[684](index=684&type=chunk)[685](index=685&type=chunk) - In 2019, aggregate cash compensation paid to directors and executive officers was approximately **RMB 21.6 million (US$3.1 million)**[697](index=697&type=chunk) - As of December 31, 2019, the company had **3,189** employees, with **72.3%** in sales and marketing roles[728](index=728&type=chunk) - As of March 31, 2020, co-founders collectively exercised **87.2%** of the aggregate voting power, making the company a "controlled company" under NYSE rules[199](index=199&type=chunk)[739](index=739&type=chunk) [ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS](index=169&type=section&id=ITEM%207.%20MAJOR%20SHAREHOLDERS%20AND%20RELATED%20PARTY%20TRANSACTIONS) This section outlines major shareholders and describes transactions with related parties, including Jincheng Bank, Didi Chuxing, and the VIE structure - Jincheng Bank was considered a related party until September 2017 due to co-founder Mr. Xiaojun Zhang's directorship, with the company providing automotive financing facilitation services[742](index=742&type=chunk)[743](index=743&type=chunk) - The company has a strategic business cooperation agreement with shareholder Didi Chuxing to provide vehicle sourcing, financing, and insurance facilitation to Didi's drivers and users[754](index=754&type=chunk)[755](index=755&type=chunk) - The company operates through a VIE structure, which involves contractual arrangements with the VIE (Shanghai Cango) and its shareholders, who are also related parties[749](index=749&type=chunk) [ITEM 8. FINANCIAL INFORMATION](index=171&type=section&id=ITEM%208.%20FINANCIAL%20INFORMATION) This section confirms the consolidated financial statements are appended and details the company's dividend policy, including special cash dividends approved in 2019 and 2020 - The company's board approved special cash dividends of **US$0.125** per ordinary share (US$0.25 per ADS) on April 22, 2020, following a similar dividend in 2019[760](index=760&type=chunk) - The company's ability to pay dividends depends on distributions from its PRC subsidiaries, subject to PRC laws requiring allocation to statutory reserves[762](index=762&type=chunk) [ITEM 9. THE OFFER AND LISTING](index=172&type=section&id=ITEM%209.%20THE%20OFFER%20AND%20LISTING) This section details the listing of the company's American Depositary Shares (ADSs) on the New York Stock Exchange (NYSE) under the ticker symbol "CANG" since July 26, 2018 - The company's ADSs are listed on the New York Stock Exchange under the symbol "CANG" since July 26, 2018, with each ADS representing two Class A ordinary shares[763](index=763&type=chunk)[765](index=765&type=chunk) [ITEM 10. ADDITIONAL INFORMATION](index=173&type=section&id=ITEM%2010.%20ADDITIONAL%20INFORMATION) This section covers supplementary information including corporate documents, exchange controls, and taxation, highlighting the significant risk of being classified as a Passive Foreign Investment Company (PFIC) - The company is an exempted company in the Cayman Islands and is not subject to income, gains, or withholding taxes there[770](index=770&type=chunk) - There is a risk that PRC tax authorities could deem the company a PRC resident enterprise, subjecting it to a **25%** enterprise income tax on worldwide income and potential withholding taxes for non-PRC shareholders[771](index=771&type=chunk) - The company believes there is a significant risk it was a **Passive Foreign Investment Company (PFIC)** for U.S. federal income tax purposes for 2019, potentially resulting in adverse tax consequences for U.S. Holders[785](index=785&type=chunk)[790](index=790&type=chunk) [ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=182&type=section&id=ITEM%2011.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) This section discusses the company's exposure to market risks, primarily foreign exchange risk due to RMB-denominated revenues and USD functional currency, with limited interest rate risk - The company's primary market risk is foreign exchange risk, as all revenues are denominated in RMB, impacting reported financial results due to RMB/USD fluctuations[813](index=813&type=chunk)[816](index=816&type=chunk) - The company has not been materially exposed to interest rate risk but notes that future changes could impact its interest-earning assets and borrowings[818](index=818&type=chunk) [ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES](index=184&type=section&id=ITEM%2012.%20DESCRIPTION%20OF%20SECURITIES%20OTHER%20THAN%20EQUITY%20SECURITIES) This section describes the company's American Depositary Shares (ADSs), for which Citibank, N.A. serves as the depositary bank, detailing associated fees and listing information - Citibank, N.A. is the depositary bank for the company's ADSs[821](index=821&type=chunk) Selected Depositary Fees for ADS Holders | Service | Fee | | :--- | :--- | | Issuance of ADSs | Up to U.S. 5¢ per ADS | | Cancellation of ADSs | Up to U.S. 5¢ per ADS | | Distribution of cash dividends | Up to U.S. 5¢ per ADS held | PART II [ITEM 15. CONTROLS AND PROCEDURES](index=186&type=section&id=ITEM%2015.%20CONTROLS%20AND%20PROCEDURES) Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of December 31, 2019 - Management concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the annual report[830](index=830&type=chunk) - Based on the COSO framework, management concluded that the company's internal control over financial reporting was effective as of December 31, 2019[831](index=831&type=chunk) - The annual report does not include an attestation report from the registered public accounting firm regarding internal control over financial reporting due to the company's exemption as a non-accelerated filer[832](index=832&type=chunk) [ITEM 16. [RESERVED]](index=188&type=section&id=ITEM%2016.%20%5BRESERVED%5D) This section covers corporate governance and compliance, including principal accountant fees, share repurchases, and foreign private issuer exemptions from NYSE rules [Principal Accountant Fees and Services](index=188&type=section&id=ITEM%2016C.%20PRINCIPAL%20ACCOUNTANT%20FEES%20AND%20SERVICES) Ernst & Young Hua Ming LLP was paid **US$919 thousand** for audit services in fiscal year 2019 Accountant Fees (in thousands of US dollars) | Fee Category | 2018 | 2019 | | :--- | :--- | :--- | | Audit Fees | $2,624 | $919 | | Tax Fees | — | — | | All Other Fees | — | — | | **Total** | **$2,624** | **$919** | [Purchases of Equity Securities by the Issuer and Affiliated Purchasers](index=189&type=section&id=ITEM%2016E.%20PURCHASES%20OF%20EQUITY%20SECURITIES%20BY%20THE%20ISSUER%20AND%20AFFILIATED%20PURCHASERS) The company repurchased **431,556 ADSs** for approximately **US$3.0 million** under its **US$10 million** share repurchase program, with **US$7.0 million** remaining as of March 31, 2020 - The company announced a **US$10 million** share repurchase program on June 5, 2019[841](index=841&type=chunk) Share Repurchase Activity (June 5, 2019 to March 31, 2020) | Metric | Value | | :--- | :--- | | Total ADSs Purchased | 431,556 | | Average Price Paid per ADS | US$6.95 | | Total Cost | ~US$3.0 million | | Remaining Authorization | US$7.0 million | [Corporate Governance](index=189&type=section&id=ITEM%2016G.%20CORPORATE%20GOVERNANCE) As a foreign private issuer, the company follows home country (Cayman Islands) corporate governance practices, exempting it from certain NYSE listing standards - The company, as a foreign private issuer, follows home country (Cayman Islands) practices for certain corporate governance matters, exempting it from some NYSE listing standards[843](index=843&type=chunk) - Key differences from NYSE standards include not having compensation or nominating committees composed entirely of independent directors[844](index=844&type=chunk) PART III [ITEM 18. FINANCIAL STATEMENTS](index=190&type=section&id=ITEM%2018.%20FINANCIAL%20STATEMENTS) This section contains the company's audited consolidated financial statements for 2017-2019, prepared under U.S. GAAP, with an unqualified opinion from Ernst & Young Hua Ming LLP - The report includes audited consolidated financial statements for the years ended December 31, 2017, 2018, and 2019, prepared in accordance with U.S. GAAP[848](index=848&type=chunk)[858](index=858&type=chunk) - The independent auditor, Ernst & Young Hua Ming LLP, issued an unqualified opinion on the financial statements[858](index=858&type=chunk)[863](index=863&type=chunk) - The company adopted new accounting standards for revenue recognition (ASC 606) and certain equity securities in 2019[859](index=859&type=chunk) [ITEM 19. EXHIBITS](index=190&type=section&id=ITEM%2019.%20EXHIBITS) This section lists all exhibits filed as part of the annual report, including corporate documents, VIE agreements, and Sarbanes-Oxley Act certifications - Lists key corporate documents filed as exhibits, including the Memorandum and Articles of Association, Deposit Agreement, and various contractual arrangements governing the VIE structure[849](index=849&type=chunk)[850](index=850&type=chunk) - Includes certifications from the Chief Executive Officer and Chief Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[852](index=852&type=chunk)

Cango Inc. (NYSE:CANG) Q4 2019 Earnings Conference Call March 18, 2020 9:00 PM ET Company Participants Jiayuan Lin - Chief Executive Officer Yongyi Zhang - Chief Financial Officer Conference Call Participants John Cai - Morgan Stanley Operator Good morning and good evening, everyone. Welcome to Cango Inc.'s Fourth Quarter 2019 Earnings Conference Call. At this time all participants are in a listen-only mode. This call is also being broadcast live on the company's IR website. Joining us today are Mr. Jiayua ...

Cango Inc. (NYSE:CANG) Q3 2019 Earnings Conference Call November 14, 2019 8:00 PM ET Company Participants Jiayuan Lin – Chief Executive Officer; Yongyi Zhang – Chief Financial Officer Conference Call Participants John Cai – Morgan Stanley Lucy Li – Goldman Sachs Operator Good morning and good evening. Welcome to Cango Inc.’s Third Quarter 2019 Earnings Conference Call. At this time all participants are in a listen-only mode. This call is also being broadcast live on the company’s IR website. Joining us toda ...

Cango Inc. (NYSE:CANG) Q2 2019 Earnings Conference Call September 3, 2019 9:00 PM ET Company Participants Jiayuan Lin - Chief Executive Officer Yongyi Zhang - Chief Financial Officer Conference Call Participants Joey Xu - Morgan Stanley Michael Li - Bank of America Merrill Lynch Operator Good morning and good evening everyone. Welcome to the Cango Inc.'s Second Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. This call is also being broadcast live on the compa ...