Business context and reporting period
The filing is an annual Form 20-F for TuanChe Limited, not “Token Cat Ltd” as stated in the request metadata. It covers the fiscal year ended December 31, 2021, with audited comparative information for 2019 and 2020; it is not a quarterly filing.
TuanChe is a Cayman Islands holding company operating primarily in China through subsidiaries and consolidated variable interest entities. Its businesses include auto shows and special-promotion events, commercial-bank auto-loan referral services, online marketing services and social CRM cloud services. The ADSs trade on Nasdaq under “TC,” with each ADS representing 16 Class A ordinary shares.
Key financial metrics
| Metric | 2021 | 2020 | Change |
|---|---|---|---|
| Net revenue | RMB357.6 million | RMB330.2 million | 8.3% increase |
| Gross profit | RMB272.3 million | RMB241.4 million | 12.8% increase |
| Gross margin | 76.1% | 73.1% | Up 3.0 percentage points |
| Operating loss | RMB110.8 million | RMB171.3 million | 35.3% improvement |
| Net loss attributable to shareholders | RMB101.9 million | RMB163.0 million | 37.4% improvement |
| Adjusted EBITDA | RMB82.9 million loss | RMB141.1 million loss | Loss narrowed |
| Adjusted net loss | RMB89.9 million | RMB145.8 million | Loss narrowed |
| Net cash used in operating activities | RMB92.3 million | RMB88.9 million | Cash use increased |
| Cash and cash equivalents | RMB63.5 million | RMB109.9 million | 41.9% decrease |
| Restricted cash | RMB33.8 million | RMB29.8 million | Increase |
| Short-term borrowings | RMB7.0 million | Nil | New borrowings |
Revenue mix shifted toward commercial-bank referral services. Auto-show revenue was RMB242.9 million, or 67.9% of total revenue, while referral-service revenue rose to RMB67.0 million, or 18.8%. Online marketing and other revenue was RMB43.7 million, or 12.2%.
The company reported total assets of RMB353.1 million, total liabilities of RMB159.8 million and shareholders’ equity of RMB193.3 million at December 31, 2021. Accounts and notes receivable, net, declined to RMB48.0 million from RMB66.1 million, but the allowance for doubtful accounts increased to RMB35.0 million from RMB23.3 million. The company had RMB5.4 million of long-term investments and RMB115.4 million of goodwill, primarily related to the Longye acquisition.
Material changes versus the prior comparable period
- Revenue increased modestly despite continued pandemic disruption, primarily because commercial-bank referral revenue increased from RMB18.7 million to RMB67.0 million. Loan matching volume increased from RMB1.3 billion to RMB5.4 billion.
- Auto-show revenue decreased 3.0%, and special-promotion revenue decreased 17.7%. The company held 450 auto shows in 142 cities in 2021 versus 449 in 172 cities in 2020, with booth offerings declining from 14,341 to 12,372.
- The company cancelled 157 auto shows because of regional COVID-19 outbreaks. Automobile sales transactions facilitated declined from 140,264 to 104,689, and GMV declined from approximately RMB19.8 billion to RMB14.6 billion.
- Cost of revenue declined 4.0%, while gross margin improved to 76.1%, reflecting lower event-related costs and the increased contribution from referral services.
- Selling and marketing expense declined 1.8%, general and administrative expense declined 26.3%, and research and development expense increased 4.0%.
- Cash used in operating activities remained negative at RMB92.3 million. Cash and cash equivalents declined by RMB46.5 million during the year, while investing activities generated RMB47.9 million, principally from the maturity of time deposits.
- Virtual dealership operations ceased in 2021 and generated no revenue. The company also reduced headcount from 769 to 621 employees and continued furlough and cost-control measures.
Guidance, outlook, risks and unusual items
Management did not provide quantitative revenue or earnings guidance. Its stated plans include reducing fixed labor costs, pursuing electric-vehicle industry cooperation, seeking potential financing and managing the continuing effects of COVID-19. On January 21, 2022, the company announced a preliminary plan to enter the electric-vehicle manufacturing business.
- Going concern: The financial statements and independent auditor’s report include an explanatory paragraph stating that recurring losses, negative operating cash flow and pandemic effects raise substantial doubt about the company’s ability to continue as a going concern. Management believes funding will cover at least the next 12 months if its plans are successfully executed, but there is no assurance of success.
- Liquidity: The company had RMB63.5 million of cash and cash equivalents, RMB33.8 million of restricted cash and RMB7.0 million of short-term borrowings at year-end. The year-end borrowings were subsequently repaid as of the report date. Additional financing may be required.
- COVID-19 and industry conditions: Regional outbreaks can cancel events, delay receivable collections and reduce automobile marketing demand. The global semiconductor shortage also reduced vehicle supply and affected online marketing activity.
- Commercial-bank referral exposure: The referral arrangement includes periodic guarantee obligations for certain auto-loan defaults. The company recognized guarantee liabilities of RMB4.1 million at year-end and acknowledges that regulators could view the arrangement as unauthorized financing-guarantee activity.
- Internal controls: Management concluded that internal control over financial reporting was ineffective at December 31, 2021 because of a material weakness involving insufficient financial-reporting and accounting personnel with U.S. GAAP expertise. Remediation was not complete.
- VIE structure and China regulation: A substantial portion of operations is conducted through contractual arrangements with VIEs rather than direct equity ownership. Changes in PRC laws, regulatory interpretations, cybersecurity rules, data-privacy requirements or overseas-listing requirements could impair control, consolidation or operations.
- Audit and listing risk: Marcum Bernstein & Pinchuk LLP replaced PwC in September 2021 and audited 2021 and re-audited 2019 and 2020. The auditor was not identified as a PCAOB “identified firm” as of the filing date, but audit-paper access and future HFCA Act compliance remain risks.
- Unusual items: Share-based compensation declined to RMB9.8 million from RMB17.4 million, allowance for doubtful accounts was RMB17.8 million, and the company recorded RMB0.7 million of impairment on a long-term investment.
- Ownership and governance: The dual-class structure gives Class B shares 15 votes per share. Chairman and CEO Wei Wen controlled approximately 76.1% of voting power as of March 31, 2022. No dividends are expected in the foreseeable future.
Important facts for investors to verify
- Confirm the issuer identity: the filing is for TuanChe Limited, Commission file number 001-38737, ticker TC, rather than Token Cat Ltd.
- Reconcile cash available for general corporate use with restricted cash pledged for commercial-bank referral activities and verify current borrowing balances after the reported repayments.
- Assess the company’s ability to reduce operating cash burn and obtain financing before existing liquidity is exhausted.
- Review the auditor’s going-concern language and the status, timing and cost of remediation of the internal-control material weakness.
- Evaluate credit losses, receivable aging and the concentration of customers, particularly because one customer exceeded 10% of receivables at year-end.
- Review the commercial-bank guarantee exposure, related regulatory uncertainty and adequacy of recorded guarantee liabilities.
- Assess the sustainability of the 2021 revenue increase, given its reliance on referral services while core auto-show activity and automobile transactions declined.
- Review the legal enforceability and regulatory status of the VIE contractual arrangements, including potential PRC restrictions on foreign investment and overseas listings.
- Monitor COVID-19 outbreaks, vehicle supply constraints, event cancellations and the proposed electric-vehicle expansion, which could require substantial additional capital.