Cheche Group Inc. (CCG) Q2 2025 Earnings Report, Transcript and Summary

Good day, and welcome to the Cheche Group First Half 2025 Earnings Conference Call. [Operator Instructions]. Please note, today's event is being recorded. I would now like to turn the conference over to Crocker Coulson with Investor Relations for Cheche Group. Please go ahead.

Thanks so much, operator. Good morning, everybody. Good evening to those of you joining us from Asia, and thanks to everyone for joining us on Cheche’s First Half of 2025 Earnings Call. This morning, Cheche posted both the earnings release and related investor presentation to our website, which is at ir.chechergroup.com, and you can find all the materials there. With me on the call today are Lei Zhang, Cheche’s Founder and CEO; as well as Sandra Ji, Cheche’s Chief Financial Officer. After the prepared remarks are concluded, we'll be pleased to open up the call for your questions. But before we begin, I'd like to let you know that some statements in this teleconference will be forward-looking within the meanings of the federal securities law. Although we believe these statements are reasonable, we can provide 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, therefore, encourage you to review the most recent filings with the SEC for risk factors that could materially impact our results. As I mentioned, you can find our earnings release at ir.chechergroup.com, and we encourage you to review the reconciliations of certain non-GAAP measures that are contained in that release. With those formalities now out of the way, it's my great pleasure to turn the call over to Lei Zhang, Cheche’s CEO. Lei, over to you. [Technical Difficulties] I believe your line may be muted. Lei, Sandra? Are you on mute?

Yes, pardon me. It looks like we're having some issues here. I'm going to place music back on and we will get the situation resolved. Please stand by for just a moment. Thank you for holding, everybody. This is the conference operator. I joined the speaker location back to the call. Please proceed.

Okay. Thank you. Thank you, everyone. Thank you for joining us today to review Cheche’s first half 2025 results. The first half of 2025 was a period of relent, adaptation and forward-looking investment for Cheche Group. In the first half of 2025, the number of NEV insurance policies transacted on our platform exceeded 810,000 representing increase of 135% from the prior year, while total written premiums reached RMB 2.6 billion, up to 150% over the same period. Over the past 3 years, our NEV business maintained a compound annual growth rate of 140%. And as this is one of Cheche’s fastest-growing and most promising core business, we continue to diligently strengthen partnership with NEV makers and expand our insurance operations, expecting to serve 30% to 40% of China's NEV market over the next 3 to 5 years. NEV premiums as a percentage of the total written premiums increased to 22.5% from 9.3% in the prior year and gross margins increased a clear reflection of the effectiveness of our business structure and operational efficiency implemented over the past year. Our adjusted net loss for the first half of 2025 improved 47% to RMB 10 million or USD 1.5 million from RMB 24 million in the prior year, and we remain on track to achieve full year adjusted operating profitability in 2025. Throughout the period, we continued to advance our strategy prioritize. China's NEV market is scaling at an unprecedented path, fuelling demand for innovative insurance solutions. Against this backdrop, we are taking decisive steps to invest and commercialize our innovative AI-driven features. This initiative not only align us with growth trajectory of NEV, but also established the framework for our global expansion road map. In short, while the numbers reflect a period of transition, the strategic process we have made positions future for sustainable long-term growth and leadership in both China and international markets. Looking more broadly at China's automotive industry, the first half of 2025 demonstrated continued momentum for NEV. Global NEV sales reached 9.1 million units, with China contributing 6.9 million units, representing an impressive 75% global share. NEV accounted for 44% of new car sales in China in the first half of 2025 and insurance demand is scaling rapidly. Auto insurance premiums reached RMB 440 billion over the same period, up 4.5% year-over-year, while NEV insurance premiums growing 41% to RMB 66 billion, nearly 10x surpassed overall industry growth. This ongoing expansion of NEV ecosystem validates our strategy focus and provide a strong tailwind for future next phase of growth. Cheche position as the largest auto insurance technology platform by digital auto insurance transaction premiums remains strong, and our growth continues to set the path for the industry. We are building on this leadership position by deepening partnerships with both traditional and NEV automakers with customized system and embedded insurance products, which firmly established Cheche as a critical partner in the automotive ecosystem. These collaborations provide us with rich data, valuable insights and direct customer access, resources that enable us to broaden our reach and continually enhance the solutions we deliver. This morning, alongside our earnings release, we announced the launch of 2 forward-looking global initiative. The AI-driven intelligent insurance tool, a resource that will leverage real-world driving data to enhance liability determination, automated claims processing and improve efficiency for insurances and the fintech solution for automakers abroad. A toolbox of digital solutions that will support automakers as they expand internationally, providing financial and insurance infrastructure to enable success internationally. These initiatives are not only designed to strengthen our leadership in China, but also to position Cheche as a digital backbone connecting automakers, insurers and vehicle owners globally. We are also collaborating with insurance companies and OEMs to jointly develop an anti-fraud claims system tailored for intelligent driving scenarios. By analyzing vehicle driving data, the system will improve careers in the liability determination and streamline claims automation. Over the next 3 to 5 years, China's NEV fleet is expected to reach [8] million to 100 million units. Based on the industry average estimated claim rate of 30%, our claim services will cover around 30 million NEV. This West market opportunity is projected to contribute RMB 300 million to RMB 500 million in AI-driven solutions and services, significantly improving the company's financial and operational structure. Our vision is not limited to China. We are preparing to roll out this next-generation solutions in global markets beginning in the quarter 4, 2025 and expanding overseas business to serve as a key growth engine beginning in 2026. We have already formed the partnerships with several automotive brands with a strong overseas focus. And together, we have developed a comprehensive global road map spanning Asia Pacific, Europe. This expansion expected to validate China's match NEV digital pricing model in global markets, promote alignment in international insurance standards, and enable ecosystem-wide globalization of China's automotive industry. We believe these steps mark a key milestone in Cheche’s global expansion blueprint and reinforce our role as a trusted technology partners in the worldwide transition to intelligent and connected mobility. To summarize, the first half of 2025 reflects a period of transition and strategic position for Cheche Group. We achieved a higher gross margin as a result of business structure improvement, launched plans for 2 transformative initiatives that are expected to extend our leadership beyond China and are preparing for global expansion in partnership with automakers and insurers worldwide. We remain confident that our AI-driven solutions and fintech innovations will not only strengthen Cheche financial outlook, but also help shape the future of insurance in the intelligent mobility era. I will now turn the call over to our CFO, Sandra Ji. Thank you.

Thank you, Lei. I'd like to begin by touching on our first half operational and financial highlights before taking questions. Firstly, operational update. Our total written premiums placed for the first half 2025 increased 4% to RMB 11.5 billion or USD 1.6 billion. The total number of policies issued increased from 8 million in the prior year period to 8.3 million in the first half year of 2025. 810,000 embedded policies and RMB 2.6 billion of corresponding premiums were embedded in NEV deliveries, growing 135.5% and 150.6%, respectively, year-over-year. Next is our financial update. In terms of net revenues, we generated RMB 1,348.7 million or USD 188.3 million in the first half 2025, a decrease of 17.7% year-over-year. The shift was driven by the larger proportion of NEV premiums with lower service fee rates. NEV policies represented 22.5% of total written premiums placed compared to 9.3% in the year ago period. Our cost of revenues in the first half 2025 was RMB 1,282.9 million or USD 179.1 million, down 18.5% from the year ago period due to a decline of net revenues and a higher gross margin driven by the rapid growth of the NEV business. Gross profit increased 1.7% to RMB 65.8 million or USD 9.2 million compared to the prior year period despite lower net revenues as the improved business structure led to higher gross margin. We also reported a decrease of 10.6% in selling and marketing expenses in the period to RMB 37.3 million or USD 5.2 million, primarily due to a decrease in staff costs, amortization of right-of-use assets and share-based compensation expenses. General and administrative expenses were also lower in this period, declining 39.7% to RMB 37.3 million or USD 5.2 million from RMB 61.8 million in the year ago period, largely due to decreased share-based compensation, staff costs and the professional service fees. Research and development expenses decreased slightly to RMB 18.3 million or USD 2.6 million. The total operating expenses decreased by 23.9% to RMB 92.8 million or USD 13 million from RMB 121.9 million in the prior year period, mainly due to the decrease in staff costs and share-based compensation expenses. If we exclude share-based compensation expenses and dispute resolution expenses, the total operating expenses decreased 13.7% from the prior year period. Net loss for this period improved 53.4% to RMB 25.6 million or USD 3.6 million over the first half year of 2024. The adjusted net loss for the period improved to RMB 10.5 million or USD 1.5 million, down 56.9% from the adjusted net loss in the prior year period. While turning to our balance sheet, we reported RMB 167.2 million or USD 23.3 million in cash, cash equivalents and short- term investments in the prior year period. Looking ahead to the full year of 2025, Cheche is revising net revenue guidance to an approximate range of RMB 3 billion to RMB 3.3 billion from the previously announced range of RMB 3.6 billion to RMB 3.8 billion to reflect recent changes in the business structure. We still affirm expectations for the following: one, total second -- total written premiums placed ranging from RMB 25.5 billion to RMB 27 billion, NEV written premiums placed ranging from RMB 7 billion to RMB 8 billion and the adjusted operating results shifting from a loss to a profit. With that, we'll be happy to address your questions. Thank you.

[Operator Instructions]. Today's first question comes from [indiscernible] [Chen] with CICC.

I appreciate the chance to pose a question to the management. And my question is, could you add some color on the recent significant progress or strategic road map for the NEV business. Building on the company's years of technological expertise and industry accumulation, what future innovation opportunities do you foresee?

Thank you, CICC. So I answer this question in Chinese. [Foreign Language]. [Interpreted] The company is centered on its intelligent NEV insurance platform, delivers end-to-end AI-driven digital insurance solutions for OEMs, which address diverse needs such as pricing, risk control, underwriting, claims and others. Compared with prior periods, the NEV insurance policy transacting on our platform in the first half of 2025 exceeded 8 million with policy volume and premiums growing by 135% and 150%, respectively, maintaining a CAGR of around 140% for 3 consecutive years. These results underscore strong NEV market demand and validate the success of our strategy to empower NEV growth through digital insurance technology. In 2025, the company will focus on strategic opportunities in the intelligent and connected NEV, leveraging our partnerships with 15 major NEV manufacturers. We plan to gradually fully serve the NEV risk control management. This NEV segment will create a flywheel effect for the company's revenue and margin over the next 3 to 5 years. Also, the company has plans to expand into international markets in the fourth quarter of this year, and we have formed partnerships with several major auto brands. And together, we have developed a detailed road map covering the Asian Pacific region, Europe and Latin America. It is expected to validate and refine China's mature NEV digital pricing models in global markets, promote alignment in international insurance standards and empower the ecosystem-wide globalization of China's auto industry through multiple models. And the company also expects this overseas business to serve as a key growth engine beginning in the year of 2026. Thank you.

And our next question today comes from Derek Greenberg at Maxim Group.

You guys have mentioned that your goal is to get to a 30% to 40% market share in the NEVs in the 3 to 5 years. I was wondering where you're starting at now, what that market share is scaling from.

Okay. Thank you. I'm Zhang Lei. [Interpreted] So as we just mentioned, our target in the NEV market. Basically, currently, we are taking around 10% of the NEV market. So that -- the number is for the new car delivery. So plusing the current inventory cost in the NEV market, we are confident and also with our more than 100% growth each year to reach this target in 3 to 5 years, we are quite confident to achieve that.

This is Sandra. Let me add something. For the past few years, the CAGR for our NEV business are over 140%. And so we are quite confident that we will keep that high growth momentum for the next 3 to 5 years. The whole industry -- for the whole industry, the NEV insurance growth rate for last year is 40% but we enjoy over -- as I just mentioned, we enjoy a CAGR of 140%, far -- way faster than the industry growth rate, which means we are gaining more and more market share during the growing process. That's why we are quite confident after 3 to 5 years, we can achieve 30% to 40% of the total NEV insurance market.

And then I think earlier in the call, you may have mentioned, I wanted to reaffirm that I think NEVs are 22.5% of mix, which is up from 9.3% prior. First, I just wanted to verify that. And then second, given that scale and market share and the growth you're seeing, what do you see the mix shifting to as you achieve your market share goals?

Yes, we already saw the trend that NEV business accounted for more and more percentage proportion of the overall business picture. Yes, actually, the growing rate is becoming faster and faster. And for the 3 to 5 years, we estimated that the NEV business would account for over 50% or even higher, 50% to 70% of our total business.

And then just real quickly, I was wondering if you could help us understand there's strong performance on the bottom line and it looks like you're reaffirming written premiums. But I wanted to kind of parse out the net revenues and how that's impacted by this business. Is it just a lower policy rate or take rate on the NEV or what explains the variance there in terms of growth in all other segments, but a little bit lighter on revenue. If you can just help us understand.

Yes, yes. For the take rate, yes, that's the fact in China's industry. The take rate for NEV insurance is much lower than the traditional car insurance because since NEV insurance is still in the preliminary stage, most -- actually, nearly all of the insurers are still suffering from the loss in the NEV insurance market. So that's why they can't give a higher take rate for us. But along with the development of the total market with the NEV insurance, we believe that all the insurers will shift from loss to profit in NEV insurance. As a result, they are willing to give more and more take rate to us. That's one -- that's a trend we believe we will realize in the future. And yes, to explain the revenue variance in this period, although the take rate for the NEV insurance is lower, but we have, we enjoy much higher gross margin in the business than traditional car, yes. That's why despite the lower net revenues, we still have stronger, higher gross margin, you can see from the number and -- which means the profitability is improving and the business structure actually has improved compared to previous years. I think the quality of the revenue are higher than all those traditional cars because the margin is higher. Yes, that's the reason.

I'm going to ask one more, and then I'm going to hop back in the queue so others have an opportunity to ask questions. But I wanted to touch on the announcement this morning of the 2 new AI products and the international expansion. I was wondering, if you could just talk a little bit about what the rollout will look like in terms of those products and the go-to-market strategy, maybe what geographies you're targeting first and if there's going to be additional resources and investment in that area.

[Interpreted] Okay. For the 2 products we pronounced this morning. Currently, in China, we are cooperating with a major automaker by using the AI-driven solutions to help them reform their claims processing, which can increase around 50% in accuracy. As for our global strategy, currently, as I mentioned, in Asia Pacific region and also other countries like Thailand and [indiscernible] and Australia, we are cooperating with local partners, and we have signed several agreements. And right now, we are trying to deliver financial insurance tech services to these partners.

[Operator Instructions]. Our next question comes from Mark Long at Prime Impact Capital.

Congratulations on a strong first half of leadership in the NEV insurance sector and positioning the company to become profitable in the second half of 2025; that's very impressive performance. Could you briefly explain Lei, how you're leveraging AI and data analytics to deliver your new claims and fintech solutions?

Okay. Thanks, Mark. [Interpreted] So currently, right now, basically, most of the NEVs are smart and connected NEVs, so they possess huge amount of data. So actually -- so currently, we are using the AI tool to determine that when an accident happens, we're using AI tool to determine -- to help determine the in time -- in real-time accident situations to decide -- to determine who is the main responsibility when the accident happens. On the other hand, utilizing this type of data, we could have to achieve antifraud. So when the accident happens, we could have to increase -- after the accident happened, we could have to increase the accuracy, the efficiency of the claims processing. We will help them to integrate the loss determination and claims and other types of steps into one suite processing and to realize to finish this type of claim service in few minutes. In this way, we could help insurance companies to achieve their operational efficiency.

That sounds very innovative. Can you explain the expected revenue contribution from these new initiatives over the next 3 to 5 years?

Yes. According to the industry statistics, we -- according -- the accident rate is over -- is average at 30% of the total NEV cars. Yes. According to the number, we can cover over 3000 -- sorry, 30 million NEV unit cars, which means according to our estimation, that will bring us RMB 300 million to RMB 500 million revenues to our business since the product is AI-driven product, which has a very high gross margin, so the RMB 300 million to RMB 500 million revenue also means profit to our business.

That’s excellent. And do you expect to make significant investments in operational expenses? Or will you be driving your kind of operating leverage from your existing platform?

Actually, we already have -- we are in a very good position, and we are quite confident we can keep the operating expenses under control. So the total operating expenses and investments won't go up drastically. We will keep it under very good control, so the profitability and the net margin will going up significantly in the foreseeable future.

And our next question today comes from Derek Greenberg at the Maxim Group.

I was wondering with operating expenses and the decline we saw year-over-year, if you could just remind us the reductions across the 3 segments, how you're achieving that?

Yes. Since we for the past 2 or 3 years, we had very good control on our headcount, and we already developed a very good network -- technology network, and that will need us to -- need a significant investment in R&D and in other expenses. So that's why -- and we also have much lower share-based compensation, so that's why the total operating expenses are decreasing significantly compared to last year. And I think for the 3 to 5 years, the operating expenses may keep relatively stable and will not grow very fast.

And then could you just talk a little bit about some of the initiatives you have towards autonomous driving?

[Interpreted] Yes. As for autonomous driving, currently, we are cooperating with Huawei and XPeng to develop protection based on the intelligent autonomous driving scenarios. And in the fourth quarter of this year, actually, we are cooperating with the China Insurance Automotive Research Institute to develop a strategy to solve the standard problem for the NEV insurance.

And then my last question is just, I guess, looking at the macro, is there anything you can point to in terms of how the consumer is holding up or if there's any changes in government regulations and stimulus either recently or in the horizon?

[Interpreted] So in terms of policies, for the NEV insurance, we think not just China, but the other countries also in need of the right, a good and accurate NEV insurance policies because right now in China, the NEV inventory is quite huge, so we have advantages when it comes to the hands-on experiences and pricing models of NEV insurance and currently, we have talked about overseas expansion. We are trying to take these experiences and models globally and have other countries and partners globally. So we think NEV is going to be the key growth engine in the future, and we forecast that probably the total number of NEVs will exceed 15% in the future globally.

This concludes the question-and-answer session. I'd like to turn the conference back over to the company for any closing remarks.

Okay. Thank you. We appreciate you taking the time to join us on the call today. Please reach out to Investor Relations with any questions. Thank you very much.

Thank you. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]