Renren Announces Unaudited Second Quarter 2018 Financial Results

2018-09-11 18:00:00

 BEIJING, China, September 11, 2018 — Renren Inc. (NYSE: RENN) ("Renren" or the "Company"), which operates a social networking service (SNS) business, used auto business and SaaS business, today announced its unaudited financial results for the second quarter ended June 30, 2018. 

Second Quarter 2018 Highlights

       Total net revenues were US$135.0 million, a 582% increase from the corresponding period in 2017.

     Used auto sales revenue was US$122.7 million. We initiated used auto sales business through one of our subsidiaries in the second quarter of 2017.

     Internet Value-Added Services (IVAS) and others net revenues were US$12.1 million, an 18.6% increase from the corresponding period in 2017.

     Financing income was US$0.2 million, a 97.4% decrease from the corresponding period in 2017.

       Gross profit was US$5.4 million, a 16.0% increase from the corresponding period in 2017.

       Operating loss was US$32.6 million, compared to an operating loss of US$15.1 million in the corresponding period in 2017.

       Net income (1) attributable to the Company was US$166.1 million, compared to a net loss of US$17.2 million in the corresponding period in 2017.

       Adjusted loss from continuing operations (2) (non-GAAP) was US$19.0 million, compared with an adjusted loss from continuing operations of US$9.9 million in the corresponding period in 2017.

       Adjusted net income (2) (non-GAAP) was US$177.5 million, compared to an adjusted net loss of US$12.0 million in the corresponding period in 2017.

(1)     On April 30, 2018, the Company announced a series of transactions that included a cash dividend by the Company and a private placement by its subsidiary Oak Pacific Investment (the “Transaction”). The Transaction was completed in June 2018. The operational results of Oak Pacific Investment for the three months ended June 30, 2017, March 31, 2018, and June 30, 2018, have been excluded from the Company’s financial results from continuing operations and have been separately presented under discontinued operations. There was a one-time gain amounting to US$180.8 million that resulted from the Transaction and was not related to Renren’s continued operations post Transaction.

(2)     Adjusted loss from operations and net income (loss) are non-GAAP measures, which are defined as loss from operations excluding share-based compensation expenses and amortization of intangible assets and net income (loss) excluding share-based compensation expenses, fair value change of contingent consideration and amortization of intangible assets, respectively. See “About Non-GAAP Financial Measures” below.

We are pleased that our revenues grew 582% year-over-year, supported by the addition of our used auto retail business one year ago.  We have been able to leverage Renren’s past experience in integrating more technology into our auto business, including a mobile app for consumers to browse for autos and purchase value-added services, big data analytics to optimize procurement and an auto dealership SaaS platform that improve efficiencies in our dealership operations.  Q2 also saw the disposition of almost all of our investments in private companies.  We believe this will sharpen our management focus on our auto and SaaS operating businesses as we strive to create sustainable shareholder value for the long term,” commented Joseph Chen, Chairman and Chief Executive Officer.

Second Quarter 2018 Results

Total net revenues for the second quarter of 2018 were US$135.0 million, representing a 582% increase from the corresponding period in 2017, due to the launch of the used auto retail business in the second quarter of 2017.

Used auto sales revenue of US$122.7 million was generated through one of our subsidiaries conducting our used auto sales business, which is a new business that we initiated in the second quarter of 2017.

IVAS and others net revenues were US$12.1 million, representing an 18.6% increase from the corresponding period of 2017. The increase was mainly due to the revenue from our Renren mobile live streaming service and SaaS business.

Financing income was US$0.2 million for the second quarter of 2018, compared to US$8.6 million in the corresponding period of 2017. The decrease was in line with the decrease of financing receivable due to the reformation of used auto dealership financing services from US$238.6 million as of June 30, 2017 to US$13.2 million as of June 30 2018.

Cost of revenues was US$129.6 million, compared to US$15.1 million from the corresponding period of 2017. The increase was primarily due to the cost of used auto sales.

Operating expenses were US$38.0 million, a 92.6% increase from the corresponding period of 2017.

Selling and marketing expenses were US$9.9 million, an 81.4% increase from the corresponding period of 2017. The increase was primarily due to the increase in headcount and personnel related expenses for the used auto sales business. 

Research and development expenses were US$6.8 million, a 48.3% increase from the corresponding period in 2017. The increase was primarily due to an increase in headcount and personnel related expenses for the SaaS business.

General and administrative expenses were US$21.3 million, a 120% increase from the corresponding period in 2017. The increase was primarily due to an increase in share-based compensation expenses.

Share-based compensation expenses, which were all included in operating expenses, were US$13.5 million, compared to US$5.2 million in the corresponding period in 2017. The increase was mainly due to a modification which repriced the exercise price with respect to options.

Loss from operations was US$32.6 million, compared to a loss from operations of US$15.1 million in the corresponding period in 2017.

Loss in equity method investments was US$0.6 million, compared to earnings of US$57.7 million in the corresponding period in 2017.

Net income attributable to the Company was US$166.1 million, compared to a net loss of US$17.2 million in the corresponding period in 2017. The improvement was primarily due to a US$180.8 million one off gain recognized resulting from the transaction the Company announced on April 30, 2018.

Adjusted loss from continuing operations (non-GAAP) was US$19.0 million, compared with an adjusted loss from operations of US$9.9 million in the corresponding period in 2017. Adjusted loss from operations is defined as loss from operations excluding share-based compensation expenses and amortization of intangible assets.

Adjusted net income (non-GAAP) was US$177.5 million, compared to an adjusted net loss of US$12.0 million in the corresponding period in 2017. The adjusted net income for the second quarter of 2018 was mainly attributable to a one-time gain amounting to US$180.8 million that resulted from the foresaid Transaction. Adjusted net income (loss) is defined as net income (loss) excluding share-based compensation expenses, fair value change of contingent consideration and amortization of intangible assets. 

Business Outlook

The Company expects to generate revenues in an amount ranging from US$123 million to US$128 million in the third quarter of 2018, representing a 104.3% to 112.6% year-over-year increase. This forecast reflects the Company’s current and preliminary view, which is subject to change.

Conference Call Information

The Company will not host a conference call. Please contact our Investor Relations Department if you have any questions.

About Renren Inc.

Renren Inc. (NYSE: RENN) operates a social networking service (SNS) business, used auto business and SaaS business. Renren's American depositary shares, each of which represents fifteen Class A ordinary shares, trade on NYSE under the symbol "RENN".

Safe Harbor Statement

This announcement contains forward-looking statements. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" and similar statements. Among other things, the business outlook for the third quarter of 2018 and quotations from management in this announcement, as well as Renren's strategic and operational plans, contain forward-looking statements. Renren may also make written or oral forward-looking statements in its filings with the U.S. Securities and Exchange Commission ("SEC"), in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about Renren's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: our goals and strategies; our future business development, financial condition and results of operations; the expected growth of the social networking site market in China; our expectations regarding demand for and market acceptance of our services; our expectations regarding the retention and strengthening of our relationships with used auto dealerships; our plans to enhance user experience, infrastructure and service offerings; competition in our industry in China; and relevant government policies and regulations relating to our industry. Further information regarding these and other risks is included in our annual report on Form 20-F and other documents filed with the SEC. All information provided in this press release and in the attachments is as of the date of this press release, and Renren does not undertake any obligation to update any forward-looking statement, except as required under applicable law.

About Non-GAAP Financial Measures

To supplement Renren's consolidated financial results presented in accordance with United States Generally Accepted Accounting Principles ("GAAP"), Renren uses "adjusted income (loss) from operations and net income (loss)" which are defined as "non-GAAP financial measures" by the SEC, in evaluating its business. We define adjusted income (loss) from operations as income (loss) from operations excluding share-based compensation expenses and amortization of intangible assets and adjusted net income (loss) as net income (loss) excluding share-based compensation expenses, fair value change of contingent consideration and amortization of intangible assets, respectively. Renren continuously and periodically reviews the operating results and business performance from operational perspectives. Starting from the first quarter of 2018, there was a significant impact on net income (loss) due to the material and significant noncash amount of fair value change of contingent consideration relating to the used auto dealerships of the emerging used auto business. Due to the nature of the business, Renren believes that including adjusted income (loss) from operations and excluding the impact of such fair value changes more appropriately reflects Renren’s results of operations, and provides investors with a better understanding of Renren’s business performance. To facilitate investors and analysts, we present the foresaid impact in "Reconciliation of non-GAAP results of operations measures to the comparable GAAP financial measures" retrospectively. We present adjusted income (loss) from operations and net income (loss) because they are used by our management to evaluate our operating performance. We also believe that these non-GAAP financial measures provide useful information to investors and others in understanding and evaluating our consolidated results of operations in the same manner as our management and in comparing financial results across accounting periods and to those of our peer companies.

These non-GAAP financial measures are not intended to be considered in isolation from, or as a substitute for, the financial information prepared and presented in accordance with GAAP. For more information on these non-GAAP financial measures, please see the table captioned "Reconciliation of non-GAAP results of operations measures to the comparable GAAP financial measures" at the end of this release.