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News Room / Fincera Reports Third Quarter 2016 Financial Results Highlighted by Continued Growth in B2B Payment Solutions and Lending Platforms

Fincera Reports Third Quarter 2016 Financial Results Highlighted by Continued Growth in B2B Payment Solutions and Lending Platforms

SHIJIAZHUANG, CHINA / ACCESSWIRE / December 1, 2016 / Fincera Inc. ("Fincera" or the "Company") (OTCQB: AUTCF) (fka AutoChina International), a leading provider of web-based financing and ecommerce services for small and medium-sized businesses and individuals in China, today reported financial results for the third quarter ended September 30, 2016.

Operational Highlights

(RMB in millions)
For the Three Months Ended
September 30, 2016
June 30,
2016
September 30, 2015
Amount
Amount
% Change
Amount
% Change
CeraPay Transaction Volume
6,444.7 6,024.1 7.0 % 2,850.9 126.1 %
CeraVest Loans Issued
1,273.0 1,264.2 0.7 % 931.3 36.7 %

CeraPay (https://www.dianfubao.com/)

CeraPay is the Company's credit advance and online payment processing platform. Launched in November 2014, CeraPay allows customers to pay for their everyday needs at participating merchants through the online CeraPay transaction network. With functionality similar to a credit card, the Company issues revolving credit lines to customers, which they can use to make purchase transactions via the CeraPay application. Fincera earns transaction fees through its CeraPay platform.

During the third quarter, CeraPay customers made payment transactions totaling RMB6.4 billion, (approximately $981 million) a 126.1% increase compared to the prior-year period and a 7.0% increase compared to the second quarter of 2016. The Company has achieved quarterly growth throughout 2016.

CeraVest (https://www.qingyidai.com/)

CeraVest is the Company's small business lending platform. From its inception in November 2014 through September 30, 2016, CeraVest originated over RMB6.1 billion (approximately $952 million) in loans. Fincera created CeraVest as an online lending marketplace that provides short-term operating capital for small and medium-sized businesses. CeraVest originates loans and sell these loans to the public. Currently, individuals may invest on the CeraVest platform and earn an annual interest rate of up to approximately 8.0% on a flexible term investment, or 8.6% for a 6-month investment if held to maturity. Fincera earns origination fees on CeraVest loans.

CeraVest originated RMB1.3 billion (approximately $194 million) in loans during the third quarter of 2016, a 36.7% increase compared to the prior-year period and a 0.7% increase compared to the second quarter of 2016. The CeraVest loan portfolio had a total unpaid principal balance of approximately RMB 2.6 billion (approximately $395 million) at September 30, 2016.

Discontinued Operations

The Company now classifies its legacy truck leasing business as a discontinued operation for all periods presented below. During the quarter, the Company continued to wind down this legacy truck leasing business and expects to continue servicing and collecting payments on existing commercial vehicle leases until all obligations related to the individual leases are met, which the Company estimates should occur by the end of 2017.

Subsequent Events - Completion of Purchase of Kai Yuan Finance Center Building Space

On October 19, 2016, the Company completed its previously announced purchase from a related party of the remaining portions of the Kai Yuan Finance Center, a 245-meter tall building in central Shijiazhuang City, Hebei Province (the "Building Assets") that it did not already own in a transaction valued at approximately $361.9 million, including assumption of debt of $250.4 million. The Company previously acquired 23 floors, or 60,000 square meters, of the building in a purchase transaction completed in late 2012. The Building Assets consist of 31 floors and an underground parking garage, totaling over 119,000 square meters, which house the Hilton Shijiazhuang, a premiere 594-room hotel. The transaction includes the purchase of the entity that contracts with Hilton Worldwide to operate the hotel. See the Report of Foreign Private Issuer on Form 6-K filed by the Company on October 28, 2016 for further details.

Management Commentary

Mr. Yong Hui Li, Chairman and CEO of Fincera, stated, "Throughout 2016 Fincera has continued to take advantage of a disconnect between the financing needs of small-to-medium sized businesses in China and the financing vehicles available to them in the marketplace. We are pleased with the continued acceptance of our suite of products and services during this period, as we believe that the Company combines the high-tech network capabilities of larger institutions with the high-touch focus on the customer that is lacking in small-business lending."

Mr. Li continued, "We achieved sequential-quarter and year-over-year growth in both CeraPay transaction volume and CeraVest loans issued, which drove a 92.2 % increase in total income (revenues) for the quarter ended September 30, 2016 as compared to the prior year period. These flagship platforms leverage technology from our experience as an operator of a nationwide commercial vehicle financing network to provide effective financing solutions for our customers. We are also continuing to leverage the network to develop complementary products targeted for use in different industries. Fincera has a nationwide network of over 2,200 employees operating in 31 provinces, municipalities, and autonomous regions throughout China. We believe we are one of the largest financial support networks in China, with a widely recognized brand that continues to gain greater prominence. We believe that as we continue to leverage this network, the Company has the potential to achieve economies of scale that can generate returns for investors above that of traditional financing and payment processing institutions."

Third Quarter 2016 Financial Results

Income (Revenues)
The table below sets forth certain line items from the Company's Consolidated Statement of Income as a percentage of income:

(USD in thousands)
Three months ended
September 30, 2016
Three months ended
September 30, 2015
Amount
% of Revenue
Amount
% of Revenue
% Change
Service charges
$ 20,435 60.7 % $ 9,664 55.2 % 111.5 %
Interest income
10,989 32.7 % 5,265 30.1 % 108.7 %
Other income
- - % - - % - %
Property lease and management
2,216 6.6 % 2,575 14.7 % (13.9 )%
Total income
$ 33,640 100.0 % $ 17,504 100.0 % 92.2 %
  • Income for the three months ended September 30, 2016, increased 92.2% to $33.6 million, from $17.5 million in the prior-year period, primarily due to the Company's ramp-up of its Internet-based business segment, particularly its CeraPay and CeraVest products.
  • Service charges, which represent CeraPay transaction fees, late payment fees and penalties for CeraPay, increased by 111.5% to $20.4 million in the three months ended September 30, 2016, from $9.7 million in the prior-year period, due to an increased volume of CeraPay transactions. During the third quarter of 2016, RMB6.4 billion (approximately $981 million) of transactions were processed through CeraPay, an increase of 126.1% from the RMB2.9 billion (approximately $462 million) processed in the third quarter of 2015.

  • Interest income, which represents interest earned on CeraVest loans, penalty fees and origination fees, increased by 108.7% to $11.0 million in the three months ended September 30, 2016, from $5.3 million in the prior-year period. This change was due to a significant increase in the aggregate amount of CeraVest loans facilitated by the Company. At September 30, 2016, CeraVest's portfolio had a total unpaid principal balance of RMB2.6 billion (approximately $395 million), an increase of 78.8% from the RMB1.4 billion (approximately $227 million) in CeraVest total unpaid principal outstanding at September 30, 2015.
  • Property lease and management revenues totaled $2.2 million in the three months ended September 30, 2016 and represent the revenues of the property lease and management business. This activity represents a decrease of 13.9% compared to the prior year period due to a decrease in the occupancy rates between the two periods. During the three months ended September 30, 2016, the occupancy rate of the Kai Yuan Finance Center was 68%, as compared to 94% at September 30, 2015.

Operating Costs and Expenses

  • The Company's operating costs and expenses increased by 96.4% to $32.3 million during the third quarter of 2016 from $16.4 million in the prior-year period, primarily due to increased interest expense, provision for credit losses, product development expense, selling and marketing expense, and general and administrative expenses to support the growth of the Company's Internet-based business.

Income (loss) from continuing operations before income taxes

  • Income (loss) from continuing operations before income taxes totaled $1.4 million during the third quarter of 2016, compared to $1.1 million in the prior-year period, primarily due to the ramp up of the Company's Internet-based business.

(Loss) income from discontinued operations, net of taxes

  • Loss from discontinued operations, net of taxes, totaled $1.1 million during the third quarter of 2016, compared to a loss of $1.5 million in the prior-year period, primarily due to the winding down of the legacy truck leasing business. This decrease in loss resulted from the winding down of the businesses classified as discontinued operations.

Net Loss

  • Net loss totaled $81,000 during the third quarter of 2016, compared to $0.7 million in the prior-year period.

Balance Sheet Highlights

At September 30, 2016, Fincera's cash and cash equivalents (not including restricted cash) were $77.9 million and working capital was $158.2 million, compared to $62.0 million and $162.6 million, respectively, at December 31, 2015. Total liabilities were $701.3 million, and stockholders' equity was $250.2 million, compared to $494.2 million and $256.1 million, respectively, at December 31, 2015.

About Fincera Inc.

Founded in 2005, Fincera Inc. (OTCQB: AUTCF) provides innovative web-based financing and ecommerce services for small and medium-sized businesses and individuals in China. The Company also operates a network of branch offices in 31 provinces, municipalities, and autonomous regions across China. Fincera's primary service offerings include a credit advance/online payment-processing network and a web-based small business lending platform. The Company's website is http://www.fincera.net. Fincera trades on the OTCQB venture stage marketplace for early stage and developing U.S. and international companies. OTCQB companies are current in their reporting and undergo an annual verification and management certification process.

Safe Harbor Statement

This press release contains forward-looking statements made pursuant to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements represent the Company's current expectations or beliefs concerning future events, plans, strategies, or objectives that are subject to change, and actual results may differ materially from the forward-looking statements. Without limiting the foregoing, the words "expect," "plan", "believe," "seek," "estimate," "aim," "intend," "anticipate," "believe," and similar expressions are intended to identify forward-looking statements. Forward-looking statements may involve known and unknown risks factors over which the Company has no control. In addition to the events and factors disclosed previously and from time to time in the Company's filings with the SEC, including the Company's Annual Report on Form 20-F for the period ended December 31, 2015, the following factors, among others, could cause actual results to meaningfully differ from those set forth in the forward-looking statements:

  • changing principles of generally accepted accounting principles;
  • continued compliance with government regulations;
  • legislation or regulatory environments, requirements or changes adversely affecting the financial services industry in China;
  • fluctuations in customer demand;
  • management of rapid growth;
  • general economic conditions;
  • changes in government policy;
  • China's overall economic conditions and local market economic conditions;
  • the Company's ability to expand through strategic acquisitions;
  • the Company's business strategy and plans, including whether its new financial services products are accepted by consumers;
  • the Company's ability to leverage its financing platform to achieve operating efficiencies while maintaining investor confidence;
  • the likelihood of investors to continue to invest in the Company's platform;
  • expected rates of returns for investors;
  • credit risk affecting the Company's revenue and profitability - such as being able to manage the default risk of customers;
  • the results of future financing efforts; and
  • geopolitical events.

In this press release, forward-looking statements include those related to the recently completed acquisition of hotel property operations. Such acquisition includes various risks, including that:

  • the hotel operations may not be profitable after a subsidy provision expires, or at all;
  • the acquisition is outside the scope of the Company's core operations; and
  • the entry into a new business activity may not be viewed favorably by investors and could adversely affect the Company's share price.

The information set forth herein should be read in light of such risks. Forward-looking statements speak only as of the date of this communication or the date of any document incorporated by reference in this document. Except as required by applicable law, the Company does not undertake to update these forward-looking statements to reflect future events or circumstances.

CONTACT

At the Company

Jason Wang
Chief Financial Officer
(858) 997-0680 / [email protected]

Investor Relations

The Equity Group Inc.
Carolyne Y. Sohn
Senior Associate
(415) 568-2255 / [email protected]

Adam Prior
Senior Vice President
(212) 836-9606 / [email protected]

FINCERA INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE (LOSS) (Unaudited)
(USD in thousands except share and per share data)

Three months ended
September 30,
Nine months ended
September 30,
2016
2015
2016
2015
Income
Service charges
$
20,435
$
9,664
$
52,687
$
19,416
Interest income
10,989
5,265
22,183
7,905
Other income
-
-
767
-
Property lease and management
2,216
2,575
7,212
7,204
Total income
33,640
17,504
82,849
34,525
Operating Costs and Expenses
Interest expense
9,381
3,983
24,008
11,821
Interest expense, related parties
1,510
2,495
4,131
4,374
Provision for credit losses
9,177
4,138
18,427
5,881
Product development expense
2,371
1,601
6,578
4,358
Property and management cost
567
673
1,566
1,799
Selling and marketing
3,650
509
8,791
1,033
General and administrative
5,611
3,033
15,395
8,200
Total operating costs and expenses
32,267
16,432
78,896
37,466
Income (loss) from continuing operations before income taxes
1,373
1,072
3,953
(2,941
)
Income tax provision (benefit)
383
237
1,267
(739)
Income (loss) from continuing operations
990
835
2,686
(2,202
)
(Loss) income from discontinued operations, net of taxes
(1,071
)
(1,511
)
(2,278
)
7,204
Net (loss) income
(81
)
(676
)
408
5,002
Foreign currency translation adjustment
(2,424
)
(10,531
)
(7,151
)
(10,271
)
Comprehensive (loss)
(2,505
)
(11,207
)
(6,743
)
(5,269
)
Earnings (loss) per share
Basic
Continuing operations
$
0.04
$
0.04
$
0.11
$
(0.09
)
Discontinued operations
(0.05
)
(0.06
)
(0.10
)
0.31
$
(0.01
)
$
(0.02
)
$
0.01
$
0.22
Diluted
Continuing operations
$
0.04
$
0.03
$
0.11
$
(0.09
)
Discontinued operations
(0.05
)
(0.06
)
(0.10
)
0.30
$
(0.01
)
$
(0.03
)
$
0.01
$
0.21
Weighted average shares outstanding
Basic
23,554,485
23,549,644
23,554,639
23,549,644
Diluted
24,186,885
24,012,958
24,150,931
24,046,939

FINCERA INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(USD in thousands except share and per share data)

September 30,
December 31,
2016
2015
(unaudited)
ASSETS
Current assets
Cash and cash equivalents
$
77,876
$
61,957
Restricted cash
7,993
157
Other financing receivables, net
316,862
235,349
Loans, net
383,923
250,659
Deposits for inventory, related party
46,424
-
Prepaid expenses and other current assets
3,828
1,520
Current assets of discontinued operations
22,597
104,595
Total current assets
859,503
654,237
Noncurrent assets
Property, equipment and leasehold improvements, net
69,589
73,817
Deferred income tax assets
12,596
7,011
Non-current assets of discontinued operations
9,811
15,250
Total assets
$
951,499
$
750,315
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short-term bank borrowings (including short-term bank borrowings of the consolidated VIEs without recourse to Fincera of $76,283 and $56,363 as of September 30, 2016 and December 31, 2015, respectively)
85,268
75,921
Long-term bank borrowings, current portion (including long-term bank borrowings, current portion of the consolidated VIEs without recourse to Fincera of nil and nil as of September 30, 2016 and December 31, 2015, respectively)
-
13,860
Borrowed funds from CeraVest investors, related party (including borrowed funds from CeraVest investors, related party of the consolidated VIEs without recourse to Fincera of $22 and $2,716 as of September 30, 2016 and December 31, 2015, respectively)
3,556
2,716
Borrowed funds from CeraVest investors (including borrowed funds from CeraVest investors of the consolidated VIEs without recourse to Fincera of $251,277 and $202,725 as of September 30, 2016 and December 31, 2015, respectively)
404,671
202,725
Financing payables, related parties (including financing payables, related parties of the consolidated VIEs without recourse to Fincera of $94,652 and $58,620 as of September 30, 2016 and December 31, 2015, respectively)
130,122
106,869
Other payables and accrued liabilities (including other payables and accrued liabilities of the consolidated VIEs without recourse to Fincera of $31,599 and $14,334 as of September 30, 2016 and December 31, 2015, respectively)
60,143
35,806
Income tax payable (including income tax payable of the consolidated VIEs without recourse to Fincera of $3,809 and $2,562 as of September 30, 2016 and December 31, 2015, respectively)
5,289
3,317
Current liabilities of discontinued operations (including current liabilities of discontinued operations of the consolidated VIEs without recourse to Fincera of $7,630 and $9,868 as of September 30, 2016 and December 31, 2015, respectively)
12,214
50,445
Total current liabilities
701,263
491,659

FINCERA INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS - Continued
(USD in thousands except share and per share data)

September 30,
December 31,
2016
2015
(unaudited)
Noncurrent liabilities
Non-current liabilities of discontinued operations (including non-current liabilities of discontinued operations of the consolidated VIEs without recourse to Fincera of nil and nil as of September 30, 2016 and December 31, 2015, respectively)
-
2,587
Total liabilities
701,263
494,246
Commitments and Contingencies
-
-
Stockholders' equity
Preferred shares, $0.001 par value authorized - 1,000,000 shares; issued – none
-
-
Ordinary shares - $0.001 par value authorized – 1,000,000,000 shares; issued and outstanding – 23,559,221 shares at September 30, 2016; and $0.001 par value authorized – 100,000,000 shares; issued and outstanding – 23,550,993 shares at December 31, 2015
24
24
Additional paid-in capital
330,186
329,276
Statutory reserves
24,478
27,014
Accumulated deficit
(112,285
)
(115,229
)
Accumulated other comprehensive income
7,833
14,984
Total stockholders' equity
250,236
256,069
Total liabilities and stockholders' equity
$
951,499
$
750,315

SOURCE: Fincera Inc.

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