Renren Announces Unaudited Third Quarter 2018 Financial Results

2019-03-29 19:40:00

BEIJING, China, March 29, 2019 — Renren Inc. (NYSE: RENN) ("Renren" or the "Company"), which operates a used auto business and SaaS business, today announced its unaudited financial results for the third quarter ended September 30, 2018. 

Third Quarter 2018 Highlights
• Total net revenues were US$116.8 million, a 94.1% increase from the corresponding period in 2017.
— Used auto sales revenue was US$106.3 million, a 152% increase from the corresponding period in 2017.
— Internet Value-Added Services (IVAS) and others net revenues were US$10.5 million, a 7.4% decrease from the corresponding period in 2017.
• Operating loss was US$44.1 million, compared to an operating loss of US$27.2 million in the corresponding period in 2017.
• Net loss attributable to the Company was US$28.8 million, compared to a net loss of US$22.8 million in the corresponding period in 2017.
• Adjusted loss from continuing operations (1) (non-GAAP) was US$41.1 million, compared with an adjusted loss from continuing operations of US$14.9 million in the corresponding period in 2017.
• Adjusted net loss (1) (non-GAAP) was US$44.0 million, compared to an adjusted net loss of US$10.5 million in the corresponding period in 2017.
(1) Adjusted loss from continuing 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.

Third Quarter 2018 Results
Total net revenues for the third quarter of 2018 were US$116.8 million, representing a 94.1% increase from the corresponding period in 2017, due to the rapid growth of our used auto retail business since its launch in the second quarter of 2017.
Used auto sales revenues for the third quarter of 2018 were US$106.3 million, representing a 152% increase from the corresponding period in 2017. This is a new business that we initiated in the second quarter of 2017.
IVAS and others net revenues were US$10.5 million, representing a 7.4% decrease from the corresponding period of 2017. The decrease was mainly due to decreases in the revenue from both our Renren mobile live streaming service and our SaaS business.
Financing income was US$28 thousand for the third quarter of 2018, compared to US$6.6 million in the corresponding period of 2017. Our used auto dealership financing business ceased to extend financing to third parties from January 2018, and instead has focused on internal financing to our own used car dealerships since that time.
Cost of revenues was US$119.6 million, compared to US$54.6 million from the corresponding period of 2017. The increase was primarily due to the growth of our used auto sales business, as well as to US$5.7 million in write-offs of inventory we recorded in the third quarter of 2018. These write-offs were due to one of our dealerships having received a notice from a local police station regarding an investigation of the dealership premises in August 2018, which caused certain inventory not to be assessable pursuant to the investigation.
  
Operating expenses were US$41.4 million, a 26.4% increase from the corresponding period of 2017.
 
Selling and marketing expenses were US$9.5 million, a 23.5% 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$7.3 million, a 15.7% 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$24.6 million, a 31.2% increase from the corresponding period in 2017. The increase was primarily due to an increase in US$16.1 million write-offs of advance to suppliers. Our management decided to record impairment loss for advance to suppliers because certain suppliers could not fulfill their contractual obligations to us.
 
Share-based compensation expenses, which were all included in operating expenses, were US$2.9 million, compared to US$12.2 million in the corresponding period in 2017. The decrease was mainly due to a modification which repriced the exercise price with respect to outstanding share incentive options in the third quarter of 2017.

Loss from operations was US$44.1 million, compared to a loss from operations of US$27.2 million in the corresponding period in 2017.
 
Loss in equity method investments was US$0.7 million, compared to loss of US$1.3 million in the corresponding period in 2017. We disposed of the overwhelming majority of our equity method investments in June 2018.

Net loss attributable to the Company was US$28.8 million, compared to a net loss of US$22.8 million in the corresponding period in 2017.
 
Adjusted loss from continuing operations (non-GAAP) was US$41.1 million, compared with an adjusted income from continuing operations of US$14.9 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 loss (non-GAAP) was US$44.0 million, compared to an adjusted net loss of US$10.5 million in the corresponding period in 2017. 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.

Other Information
Legal proceedings
In August 2018, a notice from the Shandong Luokou police bureau was placed at the location of the Ji’nan Dealership, one of dealerships of the Company. This notice stated that there is an ongoing investigation concerning the Ji'nan dealership premise, and relevant persons were required to cooperate with the investigation. According to the Company's assessment, the investigation is concerning an individual who holds 30% of Ji’nan Dealership’s equity interest, not the Ji’nan Dealership. However, because the Ji’nan Dealership and its 30% minority shareholder, US$5.7 million inventory was written off and US$16.1 million write offs of advances to suppliers of the Ji’nan Dealership was recorded for the quarter ended September 30, 2018.

Business Outlook
The Company expects to generate revenues in an amount ranging from US$117 million to US$122 million in the fourth quarter of 2018, representing a 30.0% to 35.6% 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 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 fourth 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.