Token Cat Limited Q2 FY2020 earnings call

• Offline events gradually resumed in late May 2020, though suspension in Q2 materially affected performance; optimistic for Q3 quarter-over-quarter improvement in offline marketing services while prioritizing health and safety.
• Strategically, will assess and adjust offline business resumption pace and focus on higher ROIs, and develop customized special promotion events for auto dealers/OEMs.
• Virtual dealerships and online marketing services saw strong growth, with revenues up 180% y-o-y driven by online sales events, especially live streaming collaborations. Live streaming is seen as central to automotive marketing digitalization.
• Leveraging integration of online and offline touch points to create seamless shopping experiences for consumers and help OEMs/dealers reach customers and boost sales conversion rates.
• Partnerships like with Tmall Auto and Baidu Youjia have deepened, contributing to online marketing revenue growth.

Offline Marketing Services

• In Q2 2020, organized 61 total shows across 56 cities compared with 344 auto shows in 186 cities in Q2 2019. Revenues from auto shows decreased 82.5% to RMB33.4 million from RMB190.6 million in Q2 2019. Special promotion events revenue was RMB1.5 million in Q2 2020 vs RMB5.8 million in Q2 2019.

Virtual Dealership and Online Marketing Services

• Revenues from virtual dealerships, online marketing services and others reached RMB19.9 million, increasing 180% year-over-year, driven by successful online sales events including live streaming promotion with Tmall Auto in June 2020. Revenue contribution from this segment was significant due to strong growth.

• For Q3 2020, net revenues expected between approximately RMB90 million and RMB95 million, representing a year-over-year approximate decrease of 33.6% and 29.9%, primarily due to estimated fewer offline events in Q3 due to COVID-19.

• Impact of COVID-19 on the number of offline events and overall market conditions, which could affect revenue and operational performance.

Q: Summarize the China auto environment, new vehicle sales trends and opportunities.

A: In Q2, China new car sales started to rebound, with May and June seeing year-over-year increases of 1.8% and 2.9% respectively, and July auto retail sales up 7.7% y-o-y, the highest since May 2018. Optimistic about market trends in Q4 if no new COVID-19 hits.

Q: About gross margin improvement despite revenue pressure; any factors besides revenue mix?

A: Gross margin improved to 78.6% from 70.8% y-o-y mainly due to change in revenue mix, with online marketing services having gross profit over 80%.

Q: Omnichannel strategy, offline vs online business relation, and operating expenses trend?

A: User behavior shifting online; significant progress in online auto shows and promotions, cooperating deeply with Alibaba and Baidu. Operating expenses expected to grow as revenues recover, but overheads will be controlled with cost-cutting measures.