Cogobuy Announces 2017 Second Quarter and Interim Results

HONG KONG, Aug. 31, 2017 /PRNewswire/ --

Highlights of the Interim results for the year ended June 30, 2017:

• The Group's Gross Merchandise Value ("GMV") was approximately RMB12.9 billion, an increase of 39% year-on-year ("YoY")
• Transaction customers as at June 30, 2017 reached 25,240, up 68.8% YoY
• Non-GAAP profit attributable to equity shareholders¹ of the Company was approximately RMB299.7 million, up 28.6% YoY.
• The Board has resolved to declare an interim dividend of HK$0.05 per share (2016 interim dividend: nil)

Highlights of the second quarter of 2017 ended June 30, 2017:

• The Group's GMV was RMB6,720.8 million, an increase of 25.4% YoY
• Non-GAAP profit attributable to equity shareholders¹ of the Company was approximately RMB165.8 million, up 24.8% YoY
• Gross margin recorded 9.5%, improved from 8.2% YoY

Cogobuy Group ("Cogobuy" or the "Company", stock code: 400.HK; with its subsidiaries (the ''Group''), the largest e-commerce platform serving the electronics manufacturing industry in China, is pleased to announce its unaudited operation summary for the second quarter and audited consolidated results for the six months ended June 30, 2017 (the "Reporting Period").

Financial Highlights of the First Half of 2017

During the Reporting Period, the total GMV of the Company's three major businesses was approximately RMB12.9 billion, representing an increase of 39% YoY; with 47% derived from direct sales value, 33% from transaction value in online marketplace and 20% from IngFin Financing Services("IngFin"). In total, 51% of the GMV was derived from blue chip customers while 49% was derived from small and medium enterprise ("SME") customers.

During the Reporting Period, increasing numbers of new customers, incremental sales generated by the monetization of INGDAN.com and business growth from IngFin contributed to the strong results. As at June 30, 2017, the number of transaction customers reached 25,240, of which approximately 0.8% are blue chip customers and 99.2% are SME customers. This was an increase of 68.8% from 14,952 as at June 30, 2016. The number of registered customers reached 128,002, an increase of 85.1% from 69,137 as at June 30, 2016.

During the Reporting Period, the Company recorded total revenue of RMB6121.6 million, representing a YoY increase of 8.3%. Profit attributable to equity shareholders of the Company was approximately RMB270.5 million, a YoY increase of 33.0%. Non-GAAP profit attributable to equity shareholders1 of the Company was approximately RMB299.7 million, a YoY increase of 28.6 %. The Board has resolved to declare an interim dividend of HK$0.05 per share (2016 interim dividend: nil).

Cash and bank balances amounted to RMB3,295.2 million as at June 30, 2017. Inventory turnover days and trade receivables turnover days were 43.8 days and 46.3days, respectively. As at June 30, 2017, the basic common shares outstanding was 1,462,043,000, and the diluted common shares outstanding was 1,472,940,000.

Financial Highlights of the Second Quarter of 2017

For the three months ended June 30, 2017, the Company's total GMV was RMB 6,720.8 million, representing an increase of 25.4% YoY; with 41.3% derived from direct sales, 39.2% from its online marketplace platform, and 19.5% from IngFin. In total, 52.4% of the GMV was derived from blue chip customers while 47.6% was derived from SME customers.

INGDAN.com, the largest Internet of Things (''IoT'') and Artificial Intelligence ("AI") innovation business platform for intelligent hardware in China, attracted new customers and generated good results with its developing ecosystem for smart hardware. During the Reporting Period, GMV contributed by the INGDAN.com platform was RMB 957.4 million, 14.2% of the total GMV in the second quarter of 2017. In May, INGDAN.com launched an open AI platform, the Kepler System ("K-System"). With "open platform" as a key feature and its "enabling" function, the K-System, powered by Microsoft and other top-tier chip manufacturers, helps traditional electronic enterprises to implement AI technologies faster.

Early this year, the Company positioned IngFin as a key business to drive future growth. During the second quarter, IngFin's business expansion and revenue surpassed the Company's expectations. As at 30 June, 2017, IngFin's outstanding loan receivables amounted to RMB2,403.8 million.

For the three months ended June 30, 2017 the Company recorded a total revenue of RMB2,854.1 million, a YoY decrease of 11.5%. Owing to malicious short selling reports, some Hong Kong Banks reactively tightened the Company's credit line. To cope with the short-term financial stress, the Company adapted strategic business modifications, reducing our direct sales business of IC components due to its working capital requirement, hence recorded a drop in revenue. Nonetheless, Gross margin improved materially to 9.5% YoY. Growth of IngFin and other services surpassed our expectation and offset the decline of the direct sales business of IC components, net profit attributable to equity shareholders of the Company grew significantly to approximately RMB150.0 million, a YoY increase of 26.8%. Non-GAAP profit attributable to equity shareholders¹ of the Company was approximately RMB165.8 million, a YoY increase of 24.8%. Non-GAAP operating expenses² were RMB 86.0 million. Non-GAAP operating margin³ was 6.5%. The Group's effective tax rate was 15.6% and its non-GAAP effective tax rate⁴ was 14.6%.

For the three months ended June 30, 2017, the Group generated positive non-GAAP operating cash flow⁵ of approximately RMB334.0 million. Inventory turnover days⁶ and trade receivables turnover days⁷ of the Company were 43.8 days and 46.3 days, respectively.

Business Highlights

• Levering its vast network with leading technology companies from around the world, INGDAN.com launched an open Artificial Intelligence ("AI") platform called the K-System The K-System provides open, turn-key AI solutions for hardware and software, and cloud and data services. It facilitates easy customization for AI products and services in design and manufacturing, and accelerates the application development for enterprises adapting AI technologies, helping to unleash AI's industry market potential.
• Cogobuy was selected by Forbes as one of the ''Forbes Asia's Fabulous 50" this year among a stellar lineup of high-performing blue chip companies in the region. According to Forbes, Cogobuy, together with three other Fabulous 50 companies – Baidu, Alibaba and Tencent—joined China's first industry alliance to tap into the booming artificial intelligence market in July this year.
• Cogobuy achieved a progressive breakthrough on its collaboration with a leading global semiconductor manufacturer on building a "Robotics Innovation Ecosystem." Through its supply chain ecosystem, INGDAN.com has consolidated core module supplier resources for the robotics industry. Providing one-stop support to robotics companies, especially in intelligent modeling and core components, the Company has created a complete robotics ecosystem. The ecosystem has so far assisted 136 AI and Robotics startups connect with the resource supply chain ecosystem, facilitated their product development from concept-to-manufacturing while identified a number of promising ventures among them in the process. This is expected to further enhance INGDAN.com's monetization potential.
• During the first half of 2017, INGDAN.com expanded its presence to the voice-controlled home appliance industry, leveraging its vast network with the leading technology companies around the world. The Company is providing a full portfolio of components, modules, and end-product brands to meet high market demand for the industry. Leading home appliance brands, including Haier, have been incorporating voice recognition into many of their products, and the technology is rapidly becoming more and more mainstream, signaling enormous business opportunities.

Outlook

Mr. Jeffrey Kang, CEO of Cogobuy Group, said "We experienced strong growth in 2017 until an unexpected challenge occurred in the second half of May 2017. The malicious short selling reports about us caused banks in Hong Kong to tighten the credit facilities granted to us, resulting in a sudden disruption of liquidity. In the process of reducing our procurement and repaying our bank debts, our IC components direct sales business has suffered greater impact during the Period, including the short-term impact on some of our suppliers and customers. During the Period, we preserved our core businesses primarily by using our internal fund. At the end of July 2017, we have resumed some of the normal credit arrangements with certain banks in Hong Kong. We expect the impact on IC components direct sales business will continue to the second half of 2017.

We have made certain strategic adjustments in our businesses since the beginning of the third quarter. We have shifted our focus to businesses with high margins that generate positive cash flow, such as our marketplace business and services, and reducing certain direct sales businesses that take up more working capital. We also slowed the activity of our IngFin Financing Services business, which has a relatively large need for operating capital. These served to raise our internal cash ratio and accelerated the collection of outstanding loans from IngFin Financing Services to support the recovery of our direct sales business. As at August 30, 2017, our IngFin Financing Services customers repaid more than RMB 2,064.0 million outstanding loans and corresponding interests, with the outstanding loan balance of our IngFin Financing Services decreased to approximately RMB339.7 million from RMB 2,403.8 million as at June 30, 2017.  

Looking ahead into the second half of the year, we aim to further exploit the potential of our existing business through accelerating the development of our corporate services, technology transfers, and brand management, including upgrading INGDAN.com and the AI technology results conversion platform. With AI now elevated to the national strategic level, there is huge room for development. In May, INGDAN.com launched its fully open K-system AI platform, which helps enterprises implement AI technologies faster.

As far as our traditional businesses are concerned, we are seeing a gradual recovery of some of our banking credit lines, though in the near term, our IC components direct sales business will still experience decline through the second half of 2017, which will impact our revenue. We anticipate corporate services revenue from INGDAN.com to further enhance and the Company to resume high growth in 2018.

In summary, we continue to focus on the establishment of communities for corporate key decision-makers, as well as developing our 'Community+O2O' corporate service business model, based on data while using IC components as an entry point to expand other corporate services. As a rapid-growth enterprise, we will place more importance on consolidating our liquidity, and enhancing our short-term debt structure to be better positioned to respond to risks that might arise. "

About Cogobuy Group

Cogobuy Group is the largest e-commerce service platform serving the electronics manufacturing industry in China. Through the e-commerce platform, which includes a direct sales platform, an online marketplace, and a dedicated team of technical consultants and professional sales representatives, the Company provides customers with comprehensive online and offline services across pre-sale, sale, and post-sale stages. The Company serves mainly SME electronics manufacturers.

For further information, please refer to the Company's website at http://www.cogobuy.com

About INGDAN.com

INGDAN.com is a platform dedicated to connecting global intelligent hardware entrepreneurs and China-based supply chain resources. The platform provides information on hardware innovation, supply chain data, and supply chain demand docking for global IoT innovators and entrepreneurs. It is a one-stop hardware innovation business platform with its core being the "supply chain."

For further information, please refer to the Company's website at http://www.ingdan.com