Cheche Group Inc. ($CCG)

Good day, and welcome to the Cheche Group Second Half and Full Year 2025 Earnings Conference Call. [Operator Instructions]. Please note this event is being recorded. I would now like to turn the conference over to Cracker Colson, Investor Relations. Please go ahead.

Thank you, Betsy. Hello, everyone. Thank you for joining us to review Cheche's second half and full year 2025 results. This morning, Cheche posted both the earnings release and a related updated investor presentation to our website which you can find at ir.chechegroup.com. I'm very pleased to say that with us on the call today, we have Lei Zhang, Cheche's Founder and CEO; and also Sandra Ji, Cheche's CFO. After the prepared remarks are concluded, we're going to open up the call for your questions, and I'll be happy to address them. But before we begin, I'd like to remind you that some statements in this teleconference will be forward-looking within the meaning of the federal securities laws. Although we believe these statements are reasonable, we can provide no assurance that they will prove to be accurate because they're prospective in nature. Actual results could differ materially from what we discussed today. So we encourage you to review the most recent filings with the SEC for risk factors that could materially impact our future results. As I mentioned, the earnings release is available for you at ir.chechegroup.com. And again, we also encourage you to review the reconciliations of certain non-GAAP financial measures contained within that we're going to discuss on the call today. With that, it's my great pleasure to turn the call over to Lei Zhang, Cheche's Chief Executive Officer. Lei, over to you.

Thank you, Crocker. Greetings, everyone. Thank you for joining us today to review Cheche's second half and full year 2025 results. 2025 was a defining year for Cheche Group, one that validated both resilience of our business model and the power of the strategy transformation, we have been executing despite ongoing fee rate compression driven by rapid growth of AEV premiums within our revenue mix. We delivered gross profit growth dramatically reduced the operating losses and for the first time, achieved adjusted net profitability on a full year basis. They are not incremental results. They marked inflection point on our evolution from a transactional insurance platform to an AI-powered intelligent insurance ecosystem. Let me begin with that, I believe it's the most meaningful headline from this period. The Cheche Group achieved adjusted operating profitability for the full year 2025 and delivered a positive net income in the second half of 2025. Our adjusted net income reached RMB 11.6 million of the USD 1.7 million. For the full year compared to an adjusted net loss of RMB 24.8 million in the prior year. That is a swing of more than RMB 35 million achieved while we focus on new capabilities and adopt the meaningful structural change on our revenue mix. This reflects cost management across every line of operating expenses, which we reduced in total by more than 19% year-over-year, even as we grew total written premiums placed by 11% and the total policies issued by 3 million. We demonstrated that scale can do advance together at cut and we intend to continue building the foundation in 2026. The profitability story also has a structural dimension. NAV premiums which carry a lower service fee with than the traditional auto insurance. Now we present 23% of our total written premiums for the full year. up from the 13% in the prior year. This shift initially creates a revenue headwind as we are mentioning, but it also drives higher gross margins, as our AI-powered tools allow us to capture higher take rates in the AEV insurance market and deploy capabilities that command premium pricing we expected the margin profile to continue improving. I also want to highlight the significant progress we have made in translating our AI strategy into operational capability. We are actively deploying AI pricing model in the collaboration with several of China's leading insurance companies as well as through the data partnerships with intelligent connected wealth manufacturers. Our insurance antifraud and risk control model which was recognized in the prestigious top 100 AI product over the 2024 last year. It's one example that integrates big data, artificial intelligence and the biometrics, enabling insurers to identify fraud earlier, price risk more preciously and process claims with great efficiency. This partnership positions us to expand our footprint in the renewal insurance market. Beyond our insure facing tools, we are developing and testing AR agents to the fundamental change out we engage with the car owners and the point of renewal. With AI agent, we can standard scale and improve the dialogue with the car owners, deploying consistent intelligent real-time outreach that is more effective than traditional method and significant move cost efficacy. On the R&D side, our team leveraged AI tools and LLM to accelerate product development and development circles. There too are expanding our capability road map without proportional increase in the spending. Looking further ahead, we intend to extend the operational and analytical capability across the full auto insurance value chain. From pre policy risk assessment and pricing through in the policy risk monitoring and intervention to claim service and loose assessment. Combined with our growing advantage in the driving behave data from EV ecosystem, we believe the position us to move the industry from the strategic pricing towards dynamic risk management and to build a data-driven competitive mode and strength over time. The quality of our OEM partners continue to depend. We currently have a partnership with 16 AEV manufacturers. And as our business and relationships merger, our strategy focus on shifting from adding new relations to the deepening existing wins. That means expanding the work and the models we serve within the partnership and in the dealer channel progress and maximizing renewal premiums captured across installed based vehicles we already service. Our work with Volkswagen reflects our ability to partner with both domestic champions and the global automakers operating in China's intelligent [indiscernible] market. We are building the full life cycle relationships with these partners, not transactional arrangements and the depth of those relationships is what creates the durable and carrying value for the CCG and our shareholders. Looking ahead, we expect to share additional partnership news in the incoming months that we believe will further demonstrated the strength of our position within China's most intelligent connected Wix system. We are also preparing to announce the significant advance in our AI driving auto pricing capabilities, a development that reflects our capabilities with science and risk molding and that we believe significantly expand our addressable market in the renewal insurance segment. We look forward to sharing more details in the near term. Let's turn to the progress we are making internationally, which represents one of our most important long-term growth vectors. Chinese automakers now export over 8 million Wix annually. And as expand globally, the demand for intelligent bet trialing insurance and financial services infrastructure follows. Cheche Group is uniquely positioned to meet on demand, bringing the digital insurance capabilities under the financial technology capabilities we have built in China's most demanding market to automotive ecosystem around the world. We are also advancing our international road map across the border, ACR Pacific and Latin American markets, leveraging our fintech solution for automakers aboard, our digital insurance and finance services is infrastructure designed to support Chinese automakers and their global plans as they build out new market operations. To summarize, 2025 demonstrated what Cheche Group is capable of. We achieved adjusted profitability depend on our AI capabilities from the landmark partnership with a global automotive leader and took our first meaningful step into the international markets. We entered the 2026 with clear priorities, continue growing renewal insurance penetration through the AI powered tools, expand our platform relationships with Huawei, Volkswagen and other NEV partners and invest selectively in international expansion where we see the clearest path to probability. We are confident in the trajectory of the business and grateful for the support of our investors and partners. 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 second half and full year 2025 operational and financial highlights before taking any questions. First, as our operational updates. Our total written premium plays for the second half 2025 increased 16.9% year-over-year to RMB 15.5 billion or USD 2.2 billion. For the full year, 2025, the total written premium increased 11% to RMB 27 billion or USD 3.9 billion. The total number of policies issued increased from 9.3 million in the prior year period to 12 million in the second half 2025. For the full year, total policies issued grew from 17.3 million to 20.3 million. On the NEV side, our 16 partnerships generated 1.2 million embedded policies and RMB 3.7 billion in corresponding written premiums in the second half 2025, representing year-over-year growth of 61.8% and 63.9%, respectively. For the full year 2025, NEV embedded policies reached 2.0 million and the corresponding premium reached RMB 6.3 million, growing 85.3% and 91.7%, respectively. Our NEV premiums represented 2.1% of total written premium placed in the second half of 2025, up from 17.2% in the prior year period. And 23.4% for the full year 2025, up from 13.6% in the prior year. Next is our financial results. The total net revenues for the second half of 2025 were RMB 1.7 billion or USD 237.5 million, representing a 9.4% year-over-year decrease. As Lei just mentioned, this decline reflects the higher proportion of EV premiums within our mix. which carry lower service fee rates. We are actively managing this structural transition through AI-enhanced pricing capabilities and renewal market penetration. For the full year 2025 net revenues were RMB 3.0 billion or USD 430.4 million, a decrease of 13.3% year-over-year, driven by the same EV mix dynamics. For the second half 2025, cost of revenues decreased 10% year-over-year to RMB 1.6 billion or USD 224 driven by lower net revenues and a continued improvement in our gross margin profile. For the full year 2025, cost of revenues decreased 14% year-over-year to RMB 2.8 billion or USD 407.5 million from the prior year. The gross profit in the second half increased 0.5% to RMB 94.6 million or USD 13.5 million despite lower net revenues, which is a direct result of our improved business structure. This is an important signal. Like even as revenue compresses through the fee rate transition, our gross profit is still growing. Gross margin expanded as the higher-margin NEV business represents an increased share of the mix. For the full year, the gross profit increased 1% to RMB 160.4 million or USD 22.9 million, with gross margin expanding as NEV business grew as a proportion of the mix. For second half 2025, the selling and marketing expenses decreased 18.1% to RMB 31.0 million or USD 4.4 million. General and administrative expenses decreased RMB 16.5 million to RMB 38.5 million or USD 5.5 million. Research and development expenses decreased RMB 2.5 million to RMB 18.9 million or USD 2.7 million. The total operating expenses decreased 14.4% to RMB 88.4 million or USD 12.6 million, while the adjusted total operating expenses decreased by 22.2% to RMB 77.1 million, which is USD 11.0 million. The total operating expenses for the full year decreased 19.6% to RMB 181.2 million or USD 25.9 million, while adjusted total operating expenses decreased 17.0% to RMB 156.9 million or USD 22.4 million. Operating income for second half 2025 was RMB 6.1 million or USD 0.9 million compared to an operating loss of RMB 9.3 million in the prior year period. Adjusted operating income was RMB 18.5 million or USD 2.6 million compared to an adjusted operating loss of RMB 1.5 million in the prior year period. Operating loss for the full year 2025 narrowed dramatically by 68.6% to RMB 20.9 million or USD 3.0 million. The full year adjusted operating income was RMB 5.6 million or USD 0.8 million compared to adjusted operating loss of RMB 28.2 million in the prior year. Net income for the second half 2025 was RMB 7.8 million or USD 1.1 million compared to a net loss of RMB 6.4 million in the prior year period. Adjusted net income was RMB 22.2 million or USD 3.2 million compared to adjusted net loss of RMB 0.3 million in the prior year period. Net loss for the full year 2025 was RMB 17.8 million, representing an improvement of 71.0% from RMB 61.2 million in the prior year. Adjusted net income was RMB 11.6 million or USD 1.7 million, compared to an adjusted net loss of RMB 24.8 million in the prior year. This marks the first full year adjusted profitability in history as a public company. Let's turning to our balance sheet. We reported RMB 160.8 million or USD 24.4 million in cash, cash equivalents, restricted cash and short-term investments as of December 31, 2025. Looking ahead to the full year of 2026, we are anticipating an approximate range of RMB 3.0 billion or [ RMB 3.2 billion ] for net revenues, a range of RMB 28.0 million to RMB 3.0 billion for total written premium, a range of RMB 10.5 billion to RMB 12.0 billion for NAV written premiums. And we also expect adjusted net income to multiply several fold compared to the full year of 2025. I think way that concludes our remarks Next, we'll be happy to take any of your questions. Thank you.

[Operator Instructions] The first question comes from [indiscernible] with Citic. It appears we've lost that questioner. The next question comes from Allen Klee with Maxim Group.

Congratulations on your progress and advances with NAVs and moving to profitability. In your guidance, you said that you're projecting in 2026, NAV premiums increase 66.7% to 90.5% year-over-year. Can you just highlight what in your offerings is going to result in such strong adoption, maybe highlighting how you're helping with pricing, risk and fraud?

Thank you, Alan. This question. First, we think AI as a K2 for the upgrade -- upgrading the company's innovation and operational capabilities. The first at the R&D level, AI has been integrated across the entire workflow from requirements, analysis and development testing and delivery significantly improving our overall efficiency and stability of outcomes. The second, as the business application level, our company will continue to promote the coordinated use multiple AI tools and further leverage our advantage in the driving heavy data within the EV ecosystem. This will gradually and AI capabilities across the full insurance value chain from the pre-underwriting risk assessment and pricing to in policy risk monitoring and intervention and intelligent claims inspection and loose assessment. Through its initial we aim to drive transformation of auto insurance from at pricing to the dynamic risk management while continuously strengthening our long-term competitive advantage.

You also said on the call that internationally, there's a large demand and you said you're going to advance across Asia and America with fintech solutions. Could you explain what you mean -- what your FinTech solutions are?

Okay. In terms of global expansion, company has formed a strategic partnership with several multi brands that focused on international growth. We have already established a solid presence in markets such as Australia, New Zealand, Latin America and the Middle East. We have successfully launched the business operations in the collaboration with partners, including Guangzhou auto company and [indiscernible] and BYD and [indiscernible]. By supporting Chinese automakers in the overseas expansion, we leveraged our Metro digital insurance capabilities and the financial technology capabilities to bring our technology to international markets as a China solution, helping build a global financial and the insurance ecosystem in such country.

I just can comment. I was talking to somebody from Australia yesterday, and they said the demand for Chinese electric vehicle cars is dramatic. So the waiting list, especially what's going on with oil prices.

Lei, do you want to tell [indiscernible], where you're joining us from. Yes. Because the price is increased. So Lei is actually in Australia today. Yes.

Yes. I traveled to Australia for the [indiscernible] and Sherry Auto in Australia.

That's great I'll catch them along to let other people ask questions. Congratulations.

The next question comes from [indiscernible]. I'm curious about your ability to leverage AI internally to reduce operating costs I'd also appreciate our update on how AI solutions are porting in international operations and any government plans for international expansion?

[Foreign Language].

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

Well, we'd like to thank everyone for joining us today. If you didn't have a chance to ask your questions or if you'd like to have a follow-up call with management, please feel free to reach out to me or the Cheche Investor Relations team. and we'll be more than happy to arrange a Zoom call at mutual convenience. Thanks, everyone, for joining us, and I look forward to coming back to you with future updates. Thank you, operator.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]