Stock Update (NYSE:BITA): Bitauto Hldg Ltd (ADR) Announces 2Q:15 Unaudited Financial Results


Bitauto Hldg Ltd (ADR) (NYSE:BITA), a leading provider of internet content and marketing services for China’s fast-growing automotive industry, today announced its unaudited financial results for the second quarter 2015 ended June 30, 2015[1].

Second Quarter 2015 Highlights

  • Revenue in the second quarter of 2015 was RMB1.01 billion (US$162.2 million), a 92.5% increase from the corresponding period in 2014.
  • Gross profit in the second quarter of 2015 was RMB682.1 million (US$110.0 million), a 62.7% increase from the corresponding period in 2014.
  • Non-GAAP profit in the second quarter of 2015 was RMB122.6 million (US$19.8 million), compared to a non-GAAP profit of RMB124.2 million (US$20.0 million) in the corresponding period in 2014.
  • Non-GAAP basic and diluted profit per ADS in the second quarter of 2015 was RMB1.91 (US$0.31) and RMB1.66(US$0.27), respectively.

Mr. William Li, chief executive officer and chairman of Bitauto commented, “We are pleased to have concluded the second quarter of 2015 with solid results including top-line growth of 92.5% year-over-year. Our EP platform business maintained a strong performance with 191.2% year-over-year growth in the second quarter.”

“In our core business segment, the company generated over 25 million sales leads for our automobile customers during the second quarter, with the share of leads generated from mobile continuing to rise. Our transaction platforms provided China’s leading automobile buying experience to a growing number of consumers, and we received positive market feedback for our expanding suite of transaction services. We were also pleased with the steady growth of JD.com’s automobile channel operated by Bitauto, on which both sides have been collaborating closely since its launch on April 15, 2015.”

“In the quarters ahead, Bitauto will continue to execute on our three core business strategies. First, we plan to strengthen our transaction services, including our automobile transaction, CRM and automotive financing services, and promote the development of our EP platform. Second, we expect to increase investment in our offline service infrastructure to create an even better customer experience, and to strengthen Bitauto’s brand in the automobile transaction market. Third, we plan to continue to increase our investment in optimizingBitauto’s mobile products and services. We are confident that these strategies will further solidify our industry leadership.”

Mr. Andy Zhang, chief financial officer of Bitauto, commented, “During the second quarter we continued to see healthy top line growth driven by strength in our core businesses along with the expansion of our transaction services and mobile offerings. In particular, transaction services grew substantially to over 15% of total revenue for the second quarter. Looking ahead, we will remain committed to our core business strategies while continuing to invest in our transaction services business and in growing brand awareness to further strengthen Bitauto’s position in China’s automobile market.”

Second Quarter 2015 Results

Bitauto reported revenue of RMB1.01 billion (US$162.2 million) for the second quarter of 2015, including advertising and subscription revenue of RMB902.6 million (US$145.6 million) and agent service revenue[2] of RMB102.9 million (US$16.6 million), representing a 92.5% increase from the corresponding period in 2014. The increase in revenue was primarily attributable to the growth of the EP platform business, the advertising business and the digital marketing solutions business.

Cost of revenue for the second quarter of 2015 was RMB323.5 million (US$52.2 million), representing a year-over-year increase of 214.0% from RMB103.0 million (US$16.6 million). Cost of revenue as a percentage of revenue in the second quarter of 2015 was 32.2%, compared to 19.7% in the corresponding period in 2014. The increase in cost of revenue was mainly due to an increase in direct costs in transaction services on the EP platform and other higher-direct-cost services.

Gross profit for the second quarter of 2015 was RMB682.1 million (US$110.0 million), representing a 62.7% increase from the corresponding period in 2014.

Selling and administrative expenses were RMB667.7 million (US$107.7 million) for the second quarter of 2015, representing an increase of 160.9% from the corresponding period in 2014. This increase was primarily attributable to an increase in expenses relating to the Company’s mobile marketing efforts and an increase in amortization of intangible assets related to our strategic cooperation withJD.com.

Product development expenses were RMB76.6 million (US$12.4 million) for the second quarter of 2015, a 142.6% increase from the corresponding period in 2014. The increase was primarily due to an increase in product development headcount and related expenses.

Share-based payment expenses, which were allocated to related operating expense line items, were RMB27.1 million (US$4.4 million) in the second quarter of 2015, compared to RMB8.3 million (US$1.3 million) in the corresponding period in 2014. The increase was mainly due to the granting of restricted share units in 2015.

IFRS operating loss in the second quarter of 2015 was RMB48.4 million (US$7.8 million), compared to an operating profit of RMB132.0 million (US$21.3 million) in the corresponding period in 2014. This was primarily attributable to the increase in expenses relating to the increase in headcount and employee salaries and benefits, marketing efforts, amortization of intangible assets related to our strategic cooperation with JD.com, as well as direct costs in transaction services on the EP platform and other higher-direct-cost services.

Non-GAAP operating profit in the second quarter of 2015 was RMB128.3 million (US$20.7 million), compared to a non-GAAP operating profit of RMB140.3 million (US$22.6 million) in the corresponding period in 2014.

Income tax expense in the second quarter of 2015 was RMB16.7 million (US$2.7 million), compared to an income tax expense ofRMB20.9 million (US$3.4 million) in the corresponding period in 2014.

IFRS loss in the second quarter of 2015 was RMB59.2 million (US$9.6 million), compared to an IFRS profit of RMB115.9 million(US$18.7 million) in the corresponding period in 2014. Basic and diluted loss per ADS, each representing one ordinary share, in the second quarter of 2015 amounted to RMB1.02 (US$0.16) and RMB1.02 (US$0.16), respectively.

Non-GAAP profit in the second quarter of 2015 was RMB122.6 million (US$19.8 million), compared to a non-GAAP profit of RMB124.2 million (US$20.0 million) in the corresponding period in 2014. Non-GAAP basic and diluted profit per ADS in the second quarter of 2015 amounted to RMB1.91 (US$0.31) and RMB1.66 (US$0.27), respectively.

Second Quarter 2015 Business Segment Results

Revenue from the advertising business for the second quarter of 2015 was RMB413.3 million (US$66.7 million), representing a 37.5% increase from the corresponding period in 2014. The increase was attributable to better brand recognition of the bitauto.com website due to its leading position as one of the most effective auto vertical destinations in China as well as an increase in advertising spending by automaker customers.

Cost of revenue for the advertising business for the second quarter of 2015 was RMB75.0 million (US$12.1 million), representing a year-over-year increase of 76.5% from RMB42.5 million (US$6.9 million) for the corresponding period in 2014. This was mainly due to an increase in higher-direct-cost services. Cost of revenue as a percentage of revenue in the second quarter of 2015 was 18.1%, compared to 14.1% in the corresponding period in 2014.

Gross profit from the advertising business for the second quarter of 2015 was RMB338.3 million (US$54.6 million), representing a 31.1% increase from the corresponding period in 2014.

Operating profit from the advertising business for the second quarter of 2015 was RMB97.6 million (US$15.7 million), representing a 6.4% increase from the corresponding period in 2014.

Revenue from the EP platform business for the second quarter of 2015 was RMB489.4 million (US$78.9 million), representing a 191.2% increase from the corresponding period in 2014. The increase was attributable to an increase in transaction services including automobile transactions, customer relationship management and automotive financing services, as well as an increase in the number of paid customers.

Cost of revenue for the EP platform business for the second quarter of 2015 was RMB188.4 million (US$30.4 million), representing a year-over-year increase of 535.0% from RMB29.7 million (US$4.8 million) for the corresponding period in 2014. This was mainly due to an increase in direct costs in transaction services on the EP platform. Cost of revenue as a percentage of revenue in the second quarter of 2015 was 38.5%, compared to 17.7% in the corresponding period in 2014.

Gross profit from the EP platform business for the second quarter of 2015 was RMB301.0 million (US$48.5 million), representing a 117.5% increase from the corresponding period in 2014.

Operating loss from the EP platform business for the second quarter of 2015 was RMB159.2 million (US$25.7 million), compared to an operating profit of RMB45.4 million (US$7.3 million) in the corresponding period in 2014. This was primarily attributable to the increased investment in transaction services on the EP platform and an increase in amortization of intangible assets related to our strategic cooperation with JD.com.

Revenue from the digital marketing solutions business for the second quarter of 2015 was RMB102.9 million (US$16.6 million), representing a 91.7% increase from the corresponding period in 2014, which reflects an increase in the number of advertising customers.

Cost of revenue for the digital marketing solutions business for the second quarter of 2015 was RMB60.1 million (US$9.7 million), representing a year-over-year increase of 94.7% from RMB30.9 million (US$5.0 million) for the corresponding period in 2014. The increase was mainly due to an increase in direct costs for the customer support services such as marketing activities and website design and maintenance for our customers.

Gross profit from the digital marketing solutions business for the second quarter of 2015 was RMB42.8 million (US$6.9 million), representing an 87.6% increase from the corresponding period in 2014.

Operating profit from the digital marketing solutions business for the second quarter of 2015 was RMB13.2 million (US$2.1 million), compared to an operating loss of RMB5.2 million (US$0.8 million) in the corresponding period in 2014.

As of June 30, 2015, the Company had cash and cash equivalents, time deposits and restricted cash of RMB5.13 billion (US$827.3 million). Cash used in operating activities, cash used in investing activities such as capital expenditures, and cash from financing activities in the second quarter of 2015 were RMB394.9 million (US$63.7 million), RMB587.5 million (US$94.8 million), and RMB97.6 million (US$15.7 million), respectively.

Gross billings[3] in the second quarter of 2015 was RMB1.34 billion (US$215.7 million), compared to RMB798.7 million (US$128.8 million) in the corresponding period in 2014.

Bills receivables, representing short-term notes receivable issued by financial institutions that entitle the Company to receive the full face amount from the financial institutions at maturity, which generally range from three to six months from the date of issuance, was RMB88.1 million (US$14.2 million) as of June 30, 2015, compared to RMB104.7 million (US$16.9 million) as of December 31, 2014.

Trade receivables was RMB1.82 billion (US$293.2 million) as of June 30, 2015, compared to RMB1.34 billion (US$216.7 million) as ofDecember 31, 2014. This increase was in line with gross billings growth.

The number of employees totaled 3,965 as of June 30, 2015, representing a 59.5% increase from the same period in 2014. This was primarily due to higher headcount in Bitauto’s customer support service teams as the Company expands its offline service infrastructure to enhance the automobile buying experience, as well as increased headcount in Bitauto’s mobile product development team.

Recent Updates

As of June 30, 2015, the Company had a total of 63,311,294 ordinary shares, with 34,388,244 ADSs issued and outstanding. Each ADS represents one ordinary share of the Company. Non-GAAP basic and diluted per ADS figures for the second quarter of 2015 were calculated using a weighted average of 60,116,280 and 62,500,994 ADSs, respectively.

Third Quarter 2015 Outlook

Bitauto currently expects to generate revenue in the range of RMB1.00 billion (US$161.3 million) to RMB1.05 billion (US$169.4 million) in the third quarter of 2015, representing a 64.5% to 72.7% year-over-year increase. Bitauto currently expects non-GAAP profit attributable to ordinary shareholders of the parent in the range of RMB95.0 million (US$15.3 million) to RMB105.0 million (US$16.9 million) in the third quarter of 2015, representing a 24.9% to 32.1% year-over-year decrease.

This forecast takes into consideration seasonality factors in Bitauto’s business, and excludes any impact of foreign currency fluctuation. It reflects management’s current and preliminary view, which is subject to change.

Additional Updates on the Preliminary Results for the First Quarter of 2015

The Company announced its preliminary results for the quarter ended March 31, 2015 on May 8, 2015 with a loss of RMB2.8 millionattributable to ordinary shareholders of the parent. After further review of relevant supporting documents, as well as valuation reports, the Company has recently determined that in accordance with IFRS, an additional gain from deemed disposal of a joint venture of RMB64.7 million and a loss of RMB12.3 million resulted from the fair value changes of the financial instruments shall be recorded for the first quarter of 2015. As a result, profit attributable to ordinary shareholders of the parent for the first quarter of 2015 was adjusted to a profit ofRMB49.7 million. The adjustment has no impact to the Company’s revenue, gross profit, operating loss, cash flow and the non-GAAP basic and diluted profit per ADS for the first quarter of 2015. (Original Source)

Following the earnings release, shares of Bitauto are down 2.23% to $35 in after-hours trading. BITA has a 1-year high of $98.28 and a 1-year low of $35.70. The stock’s 50-day moving average is $47.49 and its 200-day moving average is $55.99.

On the ratings front, Bitauto has been the subject of a number of recent research reports. In a report issued on August 4, Brean Murray Carret analyst Anne Shih reiterated a Hold rating on BITA. Separately, on May 11, Oppenheimer’s Ella Ji maintained a Buy rating on the stock and has a price target of $72.

According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Anne Shih and Ella Ji have a total average return of -0.9% and -4.0% respectively. Shih has a success rate of 47.1% and is ranked #2784 out of 3727 analysts, while Ji has a success rate of 34.1% and is ranked #3409.

Bitauto Holdings Ltd is engaged in the provision of Internet content and marketing services in the automobile industry, including advertising services, subscription services, listing services and one-stop digital marketing services in the PRC.