Good morning, and welcome to the Cheche Group's Fourth Quarter and 2024 Results Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Cracker Coulson, Investor Relations for Cheche Group. Mr. Coulson, the floor is yours.

Thank you so much, operator. Good morning, everyone, here in the U.S. Good evening to those of you joining us from Asia, and thanks to all of you for joining us to review Cheche's 2024, 4th quarter and full year results. This morning, Cheche posted both the earnings release and a related investor presentation to our website, which you can find at ir.chechegroup.com. I'm pleased to say that with me on the call today are Lei Zhang, Cheche Founder and Chief Executive Officer; and Sandra Ji, Cheche Chief Financial Officer. After their prepared remarks are concluded, we're going to open up this call to your questions.

But before we begin, some statements in this teleconference are forward-looking within the meaning of federal securities laws.

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 that we discuss today.

So we encourage you to review the most recent filings with the SEC for the risk factors that could materially impact our results.

As I mentioned, the earnings release is available on ir.chechegroup.com and we encourage you to review the reconciliations of certain non-GAAP measures contained within. With those formalities now out of the way, it's my pleasure to turn the call over to Lei Zhang, Chief Executive Officer. Lei, take it away.

Thank you, Gro. Greetings, everyone. Thank you for joining us today to review Cheche Group Fourth Quarter and Full year 2024 results. I am pleased to report the Cheche Group continues to perform positively in the rapid evolving insurance last gap, driven by the increasing relevance of new energy vehicles, our expanding partnerships and technological advancements within our platform.

Overall, China's EV sector is seeing continued momentum with penetration rates hollering around 50% of total passenger vehicle sales.

For the full year of 2024, the number of embedded Cheche policies were up 159% year-over-year to RMB 1.1 million, with corresponding EV writing premiums growing 128% from prior year to USD 452 million over the same period.

As a leading player in the space, Cheche is well positioned to capitalize on the industry positive trends as we expand our insurance offering for EV vehicles to capture renewal and policies for used vehicles.

This is a critical step in growing our customer base and increasing our revenue streams from existing policyholders. The platform grew as the largest auto insurance technology platform by digital auto insurance transaction premiums continued to lead the industry, providing customized systems and embedded insurance products.

As we continue to broad strategic partnerships and leverage our innovative solutions, our reach among NEV manufacturers has close to 15 as of the fourth quarter. The need for advanced technology that driven system and cost [indiscernible] insurance products in the AV space drives improved margins.

As AV industry continues to match and underwriting becomes more pure, the higher margins of our NAV policies will continue to positively shift the overall revenue mix.

We continue to depend our partnership with both traditional and AUV automakers, positioning Cheche as a key player in this space. These partnerships provide us with valuable data insights and access to customers that will allow us to further expand our presence and enhance our offerings.

We are particularly excited about our ongoing innovation in the realm of autonomous driving.

In collaboration with automakers and insurers, we are working to launch new suitable products on our independent third-party platform. Their products are designed to help provide [indiscernible] reports that connect all parties involved in an accident and sliding scale of responsibility. We plan to launch selected products on a test basis in certain cities late this year.

We are also incorporating AI and Machine Learning into our business by partnering with a leading computer model to enhance efficiency fact and reduce costs. Currently in development are products that focus on fraud detection and claims management and on rapidly assessing we code which we believe will significantly improve customer experience and operation effeciency.

Last month, Cheche announced that its innovative Tianmu Insurance antifraud and risk control model has been recognized in the reteachers top 100 AI products of 2024 list highlighting Cheche's commitment to leverage cutting-edge technology in the resource industry. The awarding winning Tianmu model it creates advanced technologies such as big data, AI and biometrics to construct intelligent anti-fraud and risk control system.

As a company, we are actively broadening our revenue streams by diversity across different product types with a focus on increasing our market share through more tailored and flexible policies.

Additionally, we have launched new SaaS and data analytics to enhance the value of our technology and further improve our margins.

Looking ahead, our unique insights and broad capabilities help drive our growth of the digital insurance industry, delivering great value to our partners and customers, Future alongside our network of insurance companies and intermediaries, we will continue to innovate the issue tax base of users more personalized and cost active coverage options.

We are proud of that what we have achieved and excited these new opportunities that lie ahead.

I will now turn the call over to our CFO, Sandra. Thank you.

Thank you, Lei.

Firstly, I'd like to begin by touching on our first quarter operational and financial highlights before taking questions.

Our total written premiums placed for this quarter increased 15.6% to RMB 7.4 billion or USD 1 billion, while total written premiums placed for the full year of 2024 increased by 7.5% over the prior year to RMB 24.3 billion or USD 3.3 billion. The total number of policies issued increased from RMB 4.8 million year quarter to RMB 5.1 million in the fourth quarter this year, while the total number of policies issued over the full year of 2024 increased from RMB 15.8 million of the prior year to RMB 17.3 million.

As Lei already mentioned, for 141,000 policies and sorry, RMB 1.4 billion of corresponding premiums were embedded in EV deliveries, growing 184% and 171%, respectively, year-over-year. embedded policies and corresponding rate on premiums for the full year of 2024 reached RMB 1.1 million and RMB 3.3 billion, which is USD 452.4 million, respectively, representing growth of 159% for policies embedded and 128% for written premiums compared to the prior year.

In terms of our net revenues, we generated RMB 80 -- sorry, RMB 983.6 million or USD 134.8 million in the fourth quarter, an increase of 13.4% year-over-year, while net revenues for the full year of 2024 increased by 5.2% over the prior year to RMB 3.5 billion or USD 475.8 million. The growth was driven by increase in insurance transactions conducted through our [indiscernible] referral partners and third-party platform partners. The cost of revenues in the quarter was RMB 932 million or USD 127.7 million, up 13% from the prior year quarter.

Cost of revenues increased by 4.8% to RMB 3.3 billion or USD 454.1 million from the prior year. which was consistent with the growth of business volume and net revenues.

We also reported a drop of 20.1% in selling and marketing expenses in the quarter to RMB 19.7 million or USD 2.7 million, primarily due to a decrease in staff costs and lower marketing expenses.

For the full year, selling and marketing expenses decreased 28.7% to RMB 79.5 million or USD 10.9 million from RMB 111.5 million in the prior year.

General and administrative expenses were also lower this quarter, declining 53.2% to RMB 25.7 million or USD 3.5 million from RMB 54.9 million in the prior year quarter, largely due to decreased share-based compensation expenses and partially offset by increase in postal lifting professional service fees and staff costs.

As for the fourth year of 2024, general and administrative expenses decreased by 22.6% to RMB 107.9 million or USD 14.8 million. Research and development expenses decreased to 25.3% in this quarter to RMB 9.3 million or USD 1.2 million. And decreased RMB 33.6 million to RMB 38 million or USD 5.2 million from RMB 57.2 million in the prior year.

The operating loss in this quarter decreased by 93.7% year-over-year to RMB 3 million or USD 0.4 million. If we excluded non-GAAP expenses, the adjusted operating income for this quarter was RMB 1.3 million, which was USD 0.2 million compared to an adjusted operating loss of RMB 12 million in the prior year quarter, which resulted in the growth of our net revenues and the improvement of our operational efficiency. Operating loss for the full year of 2024 decreased by 60.3% year-over-year to RMB 66.5 million or USD 9.1 million.

Excluding non-GAAP expenses, the adjusted operating loss decreased by 40.2% year-over-year to RMB 28.2 million or USD 3.9 million.

Net loss in the quarter also improved 67.4% to RMB 10.4 billion or million, sorry, or USD 1.4 million over the fourth quarter of 2023, while improving 61.6% for the full year to RMB 61.2 million or USD 8.4 million from RMB 159.6 million over the prior year. Adjusted net loss for the quarter improved to RMB 3 million or USD 0.4 million, which is down 38.6% from the adjusted net loss in the prior year quarter. mainly due to foreign exchange losses of RMB 5.3 million. Adjusted net loss was only RMB 24.8 million or USD 3.4 million in 2024, which decreased by 25.3% from RMB 33.2 million for the prior year.

Turning to our balance sheet. We reported RMB 152.9 million or USD 21 million in cash, cash equivalents and short-term investments in the fourth quarter.

Next, looking ahead to our full year, our 2025 guidance.

We expect net revenues to range from RMB 3.6 billion to RMB 3.8 billion, representing an increase of 8.7% to 9.4% compared to the full year of 2024 with total written premiums placed to range from RMB 25.5 billion to RMB 27.0 billion, representing a year-over-year increase of 4.9% to 11.1%. The written premiums placed are expected to range from RMB 7 billion to RMB 8 billion, representing a year-over-year increase of 112% and 142% growth.

We also anticipate our adjusted operating results shifting from a loss to a profit for full year 2025.

I think that concludes our remarks.

Next, we will be happy to take your questions. Thank you.

[Operator Instructions] The first question comes from Allen Klee with Maxim Group.

Congratulations on the quarter where you revenues and bottom line results were better than my projections and also your outlook is better than my projection.

So great job. If I could start off on some of the -- one of the first things I heard you say on this call was you're looking -- you expect to increase revenue streams from existing partners. Could you talk a little bit about how you think that's going to happen?

[Foreign Language]

I'll help translate.

Firstly, our revenue growth will in the EV market will come from the below aspect.

Firstly, in terms of the partners, we already have 15 partners currently, and we will try to bring more partners into our business. And that's the first pathway to increase our revenue stream.

Secondly, during the current partnerships, in the past few years, the main growth driver was for the new car deliveries. And we already started to do business with our automakers to to provide service for their use of vehicles for their existing car owners to help them to do the insurance renewal business.

So that's the second pathway. And thirdly, apart from the traditional insurance -- car insurance -- auto insurance business we are already starting to provide nonauto insurance service, along with the auto insurance to constitute service product package to the car owners. That's the third pathway. And Beyond that, we also -- we're also trying to provide service to cover more car types within the same partners because only in the currently -- even in the current partnership, automaker can produce different -- a lot of types of cars. And currently, we only cover the part of their car types.

We are trying to cover more and more in the future. Thank you.

Thank you. Could you give -- you talked about different ways you're using artificial intelligence. Could you maybe just drive some of the examples of how you're using that today and how you might expand it?

[Foreign Language]

So basically, in China right now, the is driving in smart connected NAV is very high.

For instance, among Huawei, how many in intelligent driving users. The intelligent driving accounts for about 35% to the total mileage, reducing collision incidents by about 1.6 million times, so when accident occurs, the car owners will typically think it is caused by the stability and safety of the autonomous system rather than themselves.

So under this scenario, has urged the insurance industry to introduce a new type of interest product, which is product liability insurance. This insurance product is designed based on factors such as stability, safety and the maturity of the intelligent driving system.

So many automakers are now actively going out this product liability insurance, which may be purchased either by the vehicle owner or the automaker.

So Cheche Group comes into play the traffic accident occurs. We as a third party, we can determine where the vehicle owner or the intelligent driving system was in control and the time of the incident.

So we provide an independent third-party core platform and SaaS solution with blockchain technology for provisions and AI-powered analysis and revenue.

So this is our AI-based technical solution in the intelligent driving area.

That's very interesting. And then just maybe 2 more questions. One on revenues. We're all combine and 1 big question.

On the revenues, you -- I'm curious for your guidance for 2025. How should we think about your projection for revenue growth? How much is because you think the market is going to be growing like at a certain rate versus how much is relative to you're thinking that it's going to be an expansion of what you're offering of your partners and your new products and upselling and all that.

And then sorry to make this so long.

The other one is just you've been able to increase your gross margins around 50% -- 50 basis points a year. Does that seem like with more NAVs, that's probably that should continue. And you've also been doing a great job on operating expense control and how to think about that in '25.

Sorry for [indiscernible]

Okay. Yes.

In terms of the logic for the revenue growth, if we see the whole market for the traditional car insurance market, for the past couple of years, the year-over-year growth rates are remaining at life only 4% to 5% a year.

So I think for the ICE market, i.e., traditional car market, we we will keep growing along with the total industry, yes.

So we won't expect a big surprise from that. And for the AV market, the industry growth rate for the past 2 years is around 40% to 50% Definitely, we are going way faster than the whole industry. And we already keep the momentum of growth of over 100% growth rate for 2 or more consecutive years.

We expect the trend will continue and we -- we showed in the guidance yes, we are quite confident that we can enjoy way faster growth rates in EV industry than the market than the whole industry growth. That's the logic.

And as for the the margin.

I think I talked before, for the traditional car insurance, the gross margin is relatively low, which was only around 3% to 5%. And but for the insurance because we provide the subsystem service to those -- to our business partners i.e., those automakers. And we also provide operational and other service -- renewal service like we mentioned before. To them, we can enjoy, we hire gross margin in the market, which was around 20% compared to 3% to 5% for the traditional car market.

So that's why we are confident we can improve our profitability going forward and achieve breakeven or even make profit soon

The next question comes from Steve Silver with Argus Research.

The company is exiting 2024 in a very strong capital position in terms of cash.

With the expectation of the company turning profitable in 2025, I'm curious if there are any areas that you've identified for capital investments to continue this growth trajectory.

Actually, we don't think we will -- sorry, we will invest too much in this year. Besides in the AI R&D sector because as Lei mentioned, we are developing certain new types of products like AI, AI claim management and damage assessment tool and also for the third-party platform for the autonomous driving insurance. Since we are still developing those new products, we will invest some funds into this area. I like to increase the service or increased staff investment. Other than that, we don't expect we will invest others -- invest in other sectors.

Great.

And so the press release mentions that you're now aligned with the majority of significant NAV manufacturers in China. I'm curious as to whether there are any other groups that will now make up the majority of new partnerships that the company may form, just other areas you might have identified there.

[Foreign Language]

so as we just mentioned, currently, we have been cooperating with 15 makers.

So we expect that in this year, this number will still grow -- but as we all know in China, we are around 20 to 30 -- makers basically in total, and we just take 17% of the total OEM of market so basically, in the future, we think the growth will mainly come from the auto insurance renewable services from our existing partners because in China, you need to renew your auto insurance each year.

So with NAV keeps growing each year, and this is a big growth.

The next question comes from Mark Long with Prime Impact Capital.

Congratulations on a strong quarter and strong 2024 momentum and the outlook for profitability in 2025, very impressive results. And my question, Lei is around how you plan to leverage the new low-cost open source AI models that are available in China for your new products? And what you see in terms of the ability to deploy cost-effective solutions across your portfolio?

[Foreign Language]

As we can see in the first quarter of this year, they show a lot of big models on the market. and a lot of industries are using AI to reshape the industry workflow to reduce the cost and improve efficiency.

So about application of AI in the insurance industry, we believe it will play a big goal in both underwriting and claims settlement.

So on the right side, which is about pricing, we will use AI to help automakers achieve real-time actual area calculations and dynamic pricing. By utilizing a big month of driving data, including user behavior data, our approach is far more precise than traditional auto insurance pricing measures, which can better reflect the difference among drivers.

While on the claim business side, we are researching solutions that can utilize data from smart connected NAVs.

So in the event of accident, relevant driving data such as radar ratings, camera footage and collision data can be expected and analyzed using AI large models for U.S. stations and assessments.

Service Intelligent claims solution will revolutionize the traditional claims process by integrating 5K steps, which are investigation, damage assessment, claims, loss calculation and payment. These 5 steps into 1 stock seemly system.

So this is our exploration in intelligent claims processing and we believe it will receive the entire industry workflow to achieve cost effectiveness and risk mitigation.

Was there a follow-up, Mr. Long?

No, that's excellent. And it sounds like you're well positioned to leverage the open source models, which will give you a huge advantage, given your relationships with the large NEV OEMs.

So that's great.

Sounds like you're going to leverage your leadership position and become one of the leaders in how AI reshapes the auto insurance industry in China.

[Operator Instructions] the next question comes from Fan Gao with CITIC Securities.

[Foreign Language]

So let me translate it.

You know that we have some partners that has shown me [indiscernible] so on.

So my question is that led us this OEM profile to cooperate with us. Could you give some information about this question? And what is our AI products and the future plan?

[Foreign Language]

[Interpreted] So as for the first question, why as you can see, we have been incorporating with the main EV partners on the market.

So basically, there are 2 main reasons we think why they chose us.

So the first one is, we are a leading digital platform in China.

So after -- last 10 years of experience, we have been connected our consistently multiple insurance companies.

So we can help them to realize an online co-options and policy issuance, so we provide a full-service service full stock service for our partners. And that's the first one.

The second one, because we have reached among auto insurance operational experiences.

During the past years, we have been provided for more than 20 million car owners.

So whether it comes to operational technology, we are always the best choice for them.

[Foreign Language]

[Interpreted] as for the second question about.

So apart from what I just mentioned about the AI application in the claims and underwriting. We think because right now in China, most of NAVs are smart connected NAVs.

So the internet driving scale in China are leading globally.

So basically, on the base behind this, there we produce a large amount of data, no matter they are driver users data or collision data.

So all of this data can be utilized in the AI.

So that's why right now, we are investing -- we are investing in AI techniques.

So basically, in auto insurance, especially in the smart connected in the smart NAV insurance, AI will be fully utilized in this industry.

So this is our future. And this is the direction of our future of our future strategic investment.

Was there a follow-up?

The next question is a follow-up from Allen Klee with Maxim Group.

I hit the button by accident. I'm sorry.

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

Thank you. We appreciate you taking the time to join us on the call today.

If you have any follow-up questions, please reach out to Investor Relations. Have a good day. Thank you.

The conference has now concluded. Thank you for attending today's presentation.

You may now disconnect.