SunCar Technology (SDA) - 2023 Q2 - Quarterly Report

Financial Statements Condensed Consolidated Balance Sheets Total assets increased to $224.0 million by June 30, 2023, with liabilities rising to $170.1 million and equity turning positive Condensed Consolidated Balance Sheet (in thousands USD) | Account | Dec 31, 2022 | June 30, 2023 (Unaudited) | | :--- | :--- | :--- | | Total Current Assets | $145,350 | $177,292 | | Total Non-current Assets | $46,618 | $46,727 | | TOTAL ASSETS | $191,968 | $224,019 | | Total Current Liabilities | $155,192 | $125,973 | | Total Non-current Liabilities | $0 | $44,158 | | TOTAL LIABILITIES | $155,192 | $170,131 | | Total Equity | $36,776 | $53,888 | - Total assets grew from $192.0 million to $224.0 million, while total liabilities increased from $155.2 million to $170.1 million between December 31, 2022, and June 30, 2023[7] - A significant change in liabilities was the reclassification of $45.6 million in 'Amount due to related parties' from current to non-current, with the non-current portion being $43.3 million as of June 30, 2023[7] Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) Total revenues increased 27.8% to $159.4 million in H1 2023, but operating profit plummeted 81.1% to $1.1 million due to rising expenses, resulting in a net loss Statement of Operations Highlights (in thousands USD, except per share data) | Metric | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | | Total Revenues | $124,728 | $159,378 | | Automotive after-sales service | $89,851 | $98,813 | | Insurance intermediation service | $29,346 | $47,710 | | Technology service | $5,531 | $12,855 | | Operating Profit | $5,981 | $1,128 | | Net Income (Loss) Attributable to Shareholders | $2,125 | ($3,379) | | Basic and Diluted EPS | $0.03 | ($0.04) | - Total revenues grew 27.8% YoY, driven by strong performance in Insurance Intermediation (+62.6%) and Technology services (+132.4%)[11] - Operating costs and expenses increased significantly to $158.3 million from $118.7 million, primarily due to a 74.7% rise in promotional service costs and an 88.1% increase in selling expenses, leading to a sharp decline in operating profit[11] Unaudited Condensed Consolidated Statements of Changes in Equity Total equity increased to $53.9 million by June 30, 2023, primarily due to a $21.7 million private placement and reverse recapitalization, despite a net loss - The company completed a reverse recapitalization on May 17, 2023, which is accounted for as an issuance of shares by SunCar for the net monetary assets of Goldenbridge Acquisition Limited[25][26] - A private placement in H1 2023 raised $21.7 million through the issuance of 2,173,657 Class A ordinary shares[16][96] - Total equity attributable to the company's shareholders shifted from a deficit of $5.3 million at year-end 2022 to a positive equity of $9.3 million by June 30, 2023[16] Unaudited Condensed Consolidated Statements of Cash Flows Operating activities used $20.5 million in H1 2023, while financing activities provided $35.5 million, leading to a $14.2 million increase in cash and restricted cash Condensed Consolidated Statements of Cash Flows (in thousands USD) | Cash Flow Activity | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | ($20,537) | ($20,525) | | Net cash (used in) provided by investing activities | ($1,724) | $897 | | Net cash provided by financing activities | $26,126 | $35,485 | | Effect of exchange rate changes | ($1,463) | ($1,661) | | Net change in cash and restricted cash | $2,402 | $14,196 | | Cash and restricted cash, end of period | $39,749 | $38,113 | - Cash used in operations remained high at $20.5 million, primarily due to a $38.8 million increase in prepaid expenses and other current assets, which was partially offset by increased accounts payable and decreased accounts receivable[19][197] - Financing activities were the primary source of cash, driven by $68.3 million in proceeds from short-term loans and $21.7 million from a private placement, net of loan repayments[19][200] Notes to Unaudited Condensed Consolidated Financial Statements Key notes include the May 2023 reverse recapitalization, disposal of Shengda Group, segment operations, significant customer concentration, and extended related-party payables - On May 17, 2023, the company consummated a reverse recapitalization with Goldenbridge Acquisition Limited, with SunCar determined as the accounting acquirer[25][26] - The company disposed of its subsidiary, Shengda Group, on March 1, 2022. The results of this business are presented as discontinued operations[31][62][63] - For H1 2023, Customer A and Customer B accounted for 19% and 17% of total revenue, respectively. As of June 30, 2023, Customers E, C, and F represented 16%, 16%, and 13% of total accounts receivable, respectively[126][127] - As of June 30, 2023, the company had significant payables to Shengda Group (a related party) totaling $43.3 million, with the repayment date extended to December 31, 2025, at a 1% annual interest rate[119][120] Management's Discussion and Analysis of Financial Condition and Results of Operations Business Overview SunCar provides digitalized automotive after-sales services and online auto insurance intermediation in China, operating three main business segments - The company operates three primary business segments: automotive after-sales service, insurance intermediation, and technology services[139] - In the after-sales business, SunCar provides customized service solutions to enterprise clients (banks, insurance companies) whose end customers require automotive services[139] - The insurance intermediation business facilitates the sale of auto insurance products from major Chinese insurers through a proprietary online digital platform[140] - Technology services involve providing software solutions like CRM, order management, and financial systems to partners on a proprietary hybrid cloud platform[141] Results of Operations Total revenue grew 28% to $159.4 million in H1 2023, but operating profit fell 81% to $1.1 million due to a 33% increase in operating expenses Comparison of Results of Operations (in thousands USD) | Line Item | H1 2022 | H1 2023 | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenues | $124,728 | $159,378 | 28% | | Automotive after-sales service | $89,851 | $98,813 | 10% | | Insurance intermediation service | $29,346 | $47,710 | 63% | | Technology service | $5,531 | $12,855 | 132% | | Total operating costs and expenses | ($118,747) | ($158,250) | 33% | | Promotional service expenses | ($28,363) | ($49,563) | 75% | | Selling expenses | ($6,802) | ($12,793) | 88% | | Operating profit | $5,981 | $1,128 | -81% | | Net profit (loss) | $5,692 | $1,136 | -80% | - Insurance intermediation revenue grew 63% to $47.7 million, driven by a 118% increase in the number of policies sold, which offset a 20% decrease in average commission rates[182] - Technology service revenue increased by 132% to $12.9 million due to business expansion and improved IT infrastructure via a Private Cloud Platform[183] - General and administrative expenses decreased by 19% to $4.0 million, mainly due to a $3.7 million bad debt reversal following the adoption of ASC326, which was partially offset by increased professional service fees for the public listing[185] Liquidity and Capital Resources As of June 30, 2023, the company held $35.5 million in cash, with liquidity primarily from financing activities and significant contractual obligations Cash Flow Summary (in thousands USD) | Activity | Six Months Ended June 30, 2023 | | :--- | :--- | | Net cash used in operating activities | ($20,525) | | Net cash provided by investing activities | $897 | | Net cash provided by financing activities | $35,485 | | Net increase in cash and restricted cash | $14,196 | - Principal sources of liquidity are cash from bank borrowings, equity financing from private placement, and revenue from business operations[194] Contractual Obligations as of June 30, 2023 (in thousands USD) | Obligation | Total | | :--- | :--- | | Operating lease payment | $1,517 | | Capital payment | $8,018 | | Short-term borrowings | $85,199 |