CAR Inc. 2017 Annual Results Feb 27 th, 2018
Operational & Financial Highlights
Q4 17 Highlights (RMB in millions) Car rental 1,211 684 Continue to demonstrate strong growth momentum with YOY price reduction impact Achieve significant margin expansion with strong fleet growth and techdriven cost structure improvement +60% Rental days +39% +9pp Revenue EBITDA margin YoY Rental revenue Adj. EBITDA +3% +1% Fleet rental UCAR ending fleet ~46% YOY reduction due to UCAR s change to balance btw self-op & 3rd parties to achieve better operating efficiency Fleet rental demand stabilized supported by UCAR s solid consumer demand & firmed operating model 4Q 16 +2pp ~13,000 4Q 17 UCAR avg. rental fleet 2
2017 Executive summary Car rental: Continued to exceed expectations Demonstrated stronger than ever growth momentum 64% YoY rental days growth (guidance 40% YoY) Achieved record high utilization rate of 67% and quicker realization of significant upside 9pp YoY improvement (guidance 5-7pp YOY) Realized margin expansion despite significant price reduction EBITDA margin +5pp YoY and net margin +2pp YoY due to significant operating leverage/efficiency Fleet rental: Headwind due to significant UCAR fleet decline UCAR fleet decline driven by its operating efficiency improvement and refined operating model to best balance between self-operation and third party services More diversified channels and products under development Used car: Expedited fleet replacement to drive growth and mitigate future residual risks headwinds on margins due to disposal loss of legacy models 3
2017 Highlights Growth 64% YoY Car rental (2) volume Profitability 59% Adj. EBITDA margin (1) 33% YoY Car rental revenue 12% Adj. net margin (1) Car rental 67% Fleet utilization Financial positions RMB 770 MM Free cash flow 42% YoY Average daily fleet 2.1x Net debt/adj. EBITDA (1) Notes: (1) Adjusted EBITDA, adjusted net profit, and margins exclude the costs relating to the used car B2C pilot program. Adjusted EBITDA is defined as profit or loss before income taxes, net finance income/costs, depreciation, amortization and impairment, excluding share-based compensation, foreign exchange gain/loss, fair value gain from investment in equity shares and redeemable preference shares, fair value gain on derivative instrument-transaction not qualifying as hedges, share of profit/(loss) of an associate; adjusted net profit is defined as profit or loss excluding share-based compensation, foreign exchange gain/loss, fair value gain from investment in equity shares and redeemable preference shares, fair value gain on derivative instrument-transaction not qualifying as hedges, share of profit/(loss) of an associate. Margins are calculated as percentage of rental revenue. (2) Rental revenue and operating fleet have been reclassified to align with its new development in business natures 4
Financial highlights (RMB in millions) Q4 17 Q4 16 YoY 2017 2016 YoY Total rental revenue 1,211 1,179 3% 5,048 5,016 1% - Car rental (1) 954 688 39% 3,792 2,847 33% - Fleet rental (1) 252 482 (48)% 1,235 2,126 (42)% Total revenue 1,959 1,593 23% 7,717 6,454 20% Net profit 219 72 205% 881 1,460 (40)% Adj. EBITDA (2) 684 677 1% 2,993 3,057 (2)% Margin (4) 56.5% 57.4% (0.9)pp 59.3% 60.9% (1.6)pp Adj. net profit (3) 74 118 (37)% 613 821 (25)% Margin (4) 6.1% 10.0% (3.9)pp 12.1% 16.4% (4.3)pp Free cash flow (201) 620 U 770 1,795 (57)% Basic EPS (RMB) 0.10 0.03 233% 0.39 0.62 (36)% Dec-17 Dec-16 change Total assets 20,640 21,189 (3)% Total debt 11,122 11,682 (5)% Cash 4,876 5,725 (15)% Total debt/ Adj. EBITDA 3.7x 3.8x (0.1)x Net debt/ Adj. EBITDA 2.1x 1.9x 0.2x Note: (1) The Company has reclassified the rental revenue and operating fleet to better align with its new development in business natures. (2) Adjusted EBITDA is defined as profit before income taxes, net finance income/costs, depreciation, amortization and impairment, excluding share-based compensation, unrealized foreign exchange gain/loss related to USD denominated liabilities, costs related to B2C pilot program and fair value gain on investment in redeemable preference shares (3) Adjusted net profit is defined as profit excluding share-based compensation, unrealized foreign exchange gain/loss related to USD denominated liabilities, costs related to B2C pilot program and fair value gain on investment in redeemable preference shares (4) As a percentage of rental revenue 5
2017 Adj. net profit walk (RMB in millions) 33% car rental growth with margin expansion UCAR fleet rental decline 821 Residual pressure of legacy models & the adjusted residual values of certain vehicle models Finance cost increase due to excess liquidity 613 Non-recurring 2016 Car rental contribution Fleet rental contribution Vehicle residual impact Finance cost & others 2017 6
Car rental: delivered far beyond guidance High demand growth with margin expansion Car rental key metrics YoY 64% ADRR 33% Delivered far beyond guidance (2017 guidance on volume growth & utilization) Volume growth: 2017FY 64% vs 40% guidance Utilization: 2017FY 9pp+ vs 5-7pp guidance Effective pricing strategy, 19% ADRR decrease Rental days -19% Revenue 7% slight RevPAC decrease, offset by unit cost decrease due to higher operating leverage 58% 9pp+ YOY 67% Realized margin expansion due to significant operating leverage / efficiency 2016 Utilization Rate 2017 +5pp Car rental EBITDA margin +2pp Car rental Net margin 7
Car rental: reboot and achieve record high growth momentum well rewarded by growth initiatives 40%+ volume growth for 6 consecutive quarters Growth levers ADRR Price lever 313 More attractive pricing to stimulate demand & suppress competition 245 216 Rental days Rental days YOY ADRR YOY 1Q 16 2Q 16 3Q 16 4Q 16 1Q 17 2Q 17 3Q 17 4Q 17 8% 18% 40% 45% 63% 79% 57% 60% (1)% (6)% (9)% (12)% (22)% (26)% (16)% (14)% 1Q 16 2Q 16 3Q 16 4Q 16 1Q 17 2Q 17 3Q 17 4Q 17 1Q'16 2Q'16 3Q'16 4Q'16 1Q'17 2Q'17 3Q'17 4Q'17 Fleet optimizer 21 Avg. fleet age 1Q'16 2Q'16 3Q'16 4Q'16 1Q'17 2Q'17 3Q'17 4Q'17 15 Rental experience revolution Better fleet condition + more attractive models Smart fleet management Counter/staff bypass Smart pick up & return Car sharing to be introduced 12 8
Car rental: margin expansion despite price reduction (RMB in millions) 2017 2016 YoY RevPAC (3) Car rental revenue (1) 3,792 2,847 = Days x Avg. daily fleet (2) x 68,103 48,032 RevPAC (2) 153 164 = ADRR (3) 230 284 x Utilization (4) 66.7% 57.6% 33% 42% -7% -19% +9.1pp 174 163 170 149 165 155 157 138 1Q 16 2Q'16 3Q'16 4Q'16 1Q'17 2Q'17 3Q'17 4Q'17 ADRR (4) 313 300 282 251 245 223 237 216 1Q'16 2Q'16 3Q'16 4Q'16 1Q'17 2Q'17 3Q'17 4Q'17 Utilization (5) 67.6% 69.4% 66.5% 60.3% 59.3% 55.4% 54.4% 63.9% 1Q'16 2Q'16 3Q'16 4Q'16 1Q'17 2Q'17 3Q'17 4Q'17 Adj. EBITDA margin increased 5pps despite significant ADRR reduction: RevPAC slightly decreased 7%, strong utilization gain offsetting ADRR reduction RevPAC break-even point decreased due to strong operating leverage from scale Notes: (1) The Company has reclassified the rental revenue and operating fleet to better align with its new development in business natures. (2) Average daily fleet is calculated by dividing the aggregate days of car rental vehicles in operation in a given period by the aggregate days of that period (3) RevPAC refers toaverage daily rental revenue per car rental vehicle, which is calculated by multiplying the average daily rental rate in a given period by the fleet utilization rate in that same period (4) Average daily rental rate is calculated by dividing car rental revenue in a given period by the fleet rental days in that period. Fleet rental days are the total rental days for all vehicles in car rental fleet in a given period (5) Fleet utilization rate is calculated by dividing the aggregate days that vehicles are rented out for car rentals by the aggregate days that car rental vehicles are in operation 9
Used car disposal Improved capabilities in used car disposal # of used vehicles disposed 36,912 Proven residual risk management Cost of sales of used vehicles As % of sales of used vehicles 15,483 9,284 23,092 100% 95.1% 101.1% 103.0% 101.1% 2014 2015 2016 2017 2014 2015 2016 2017 Avg. selling price (RMB 000) 64 65 62 72 Depreciation % (of rental revenue) 23.4% 21.4% 25.1% 27.2% Used car disposal channels 5% 2017 9% 63% 29% 40% 55% 2016 B2B - Franchisees B2B - Dealers B2C Expedited vehicle replacement to drive growth and mitigate residual risks loss due to legacy GM model More rigorous estimations of residual values for certain vehicle models, resulting in depreciation % +2.1pp YoY Cost to sales ratio constant at 95%-105% Q4 99.0% Continued the effort for deeper penetration into B2C retail channel through Maimaiche partnership 55% in 2017 10
Strong financial positions Strong cash generation (RMB in millions) Free Cash Flow (FCF) Optimizing funding capability and credit profiles (RMB in millions) Debt (Gross/Net) 1,795 770 2013 2014 2015 2016 2017 (649) (1,129) 11,682 11,122 8,385 6,344 5,958 6,246 3,811 2,967 3,611 1,135 Cash (1) (3,303) 2013 2014 2015 2016 2017 Net debt Total debt 844 2,476 2,041 5,725 4,876 Net debt/ 3.2x 0.7x 2.3x 1.9x 2.1x adj. EBITDA Continue deliver strong positive Free Cash Flow despite 4.5B vehicle capex spent Cash position remains strong at 4.9B providing adequate liquidity for both onshore and offshore Executed share buy-back of HKD1.4B in 2017 Net leverage remained low due to strong FCF generation Maintained strong relationship and credit facilities with 30+ banks, funding channels further diversified FX risk mitigated: USD630mm hedged Note: (1) includes restricted cash, available-for-sale investments and cash and cash equivalents 11
Strategic Highlights
新战略 : 打造新一代汽车生活平台 New strategy: Build a new generation of auto lifestyle platform 流量入口 Traffic entrance 线上 Online + 线下 Offline 线下服务综合体 Offline service complex 汽车生活 = 无车车生活 + 有车车生活 Auto lifestyle = Lifestyle without car + Lifestyle with car 13
神州租车 : 无车车生活平台 CAR: Auto lifestyle platform for drivers without car 无车车生活 神州租车的全面升级 Comprehensive upgrade of CAR 打造中国最大的新一代汽车共享平台 Build the largest new generation of vehicle mega-sharing platform in China 14
构建新一代人车生态圈 Build a new generation of auto and consumer ecosystem 15 15
最大最高质量的人车生态大数据 Largest and most high-quality Big-data from the ecosystem 新消费 New consumption 用户数据 驾驶行为数据 人工智能 AI 无人驾驶 新金融 车辆数据 Autonomous drive New financial 出行数据 交通数据 智慧交通 Intelligent transportation Big data: consumers, vehicles, driver behaviors, mobility and transportation infrastructure. 16
建设智慧城市, 拥抱无人驾驶 : 构建未来无人驾驶运营平台 To build the future operating platform for autonomous drive 集中停车场 分散服务点 汽车生活 数据网络 + 人工智能 + 云决策 + 实时控制 无人驾驶车辆 我们已经成为中国智慧城市产业技术创新战略联盟 在出行领域的唯一会员单位 17
商业模式的变革 : 智能取还 Business model change: Autonomous Rental Intelligent vehicle management Full-self-service rental process Densely-spread service locations 体验升级 : 随时随地随取随还 Experience upgrade 运营创新 : 全面无人化和智能化 Operation innovations 18
商业模式的变革 : 分时共享 Business model change: Car Sharing 闲散资源 + 规模优势 = 超低定价 Idle resource + Scale advantage = LOW Price 0 元起步 + 0.19 元 / 分钟 + 0.99 元 / 公里 众多车型 50+ 车型任选 Vehicle selections 网络密布 遍布全国 50+ 城市超高密度覆盖城市内主要区域 大规模获取 本本族 新客户, 高频带动低频 利用闲散资源和碎片时间, 提升车队利用率, 增强盈利能力 Acquisition of new generation customers; Increase utilization by using idle resource 19
Appendix Supplementary Financials
Sustainable profitability profile Profit margins Cost structure Adj. EBITDA margin (1)(2)(5) Major cost items as % of rental revenue (1)(4)(5) 65% 61% 60% 57% 60% 58% 62% 57% 1Q'16 2Q 16 3Q 16 4Q 16 1Q 17 2Q'17 3Q'17 4Q'17 Gross margin (1) 49% 41% 42% 43% 35% 38% 42% 31% Interest SG&A Depreciation 73% 11% 10% 23% 81% 77% 12% 11% 10% 10% 26% 24% 88% 14% 11% 27% 79% 12% 11% 26% 84% 14% 10% 27% 80% 12% 9% 26% 92% 14% 9% 31% 1Q'16 2Q'16 3Q'16 4Q'16 1Q'17 2Q'17 3Q'17 4Q'17 Adj. net profit margin (1)(3)(5) 22% 17% 17% 10% 14% 11% 16% 6% DOE 29% 32% 32% 36% 30% 34% 33% 38% 1Q'16 2Q 16 3Q 16 4Q 16 1Q 17 2Q'17 3Q'17 4Q'17 1Q'16 2Q'16 3Q'16 4Q'16 1Q'17 2Q'17 3Q'17 4Q'17 Notes: (1) As percentage of rental revenue (2) Adjusted EBITDA is defined as profit before income taxes, net finance income/costs, depreciation, amortization and impairment, excluding share-based compensation, foreign exchange gain/loss, IPO-related expenses, fair value gain and costs relating to the used car B2C pilot program (3) Adjusted net profit is defined as profit excluding share-based compensation, foreign exchange loss related tocorporate reorganization, IPO-related expenses, and unrealized foreign exchange loss related tousd denominated liabilities (4) Expenses figures have been adjusted for share-based compensation, reorganization related expenses as well as costs related to suspended fleet. Interest expenses are net of interest income (5) The metrics exclude costs related to B2C pilot program in 4Q 16 and 1Q 17 21
Net investment in fleet Fleet expansion (1) 22,171 21,857 15,483 9,986 (2) 38,353 9,284 29,982 23,092 45,392 36,912 Vehicles purchased Vehicles disposed 2013 2014 2015 2016 2017 Net investment in fleet (RMB in millions) 5,220 4,495 1,889 2,729 495 654 603 2,633 1,438 2,669 Vehicle purchase capex Used vehicle sales revenue 2013 2014 2015 2016 2017 Notes: (1) Fleet expansion does not reflect change in finance leasing fleet (2) Among 15,483used vehicles disposed in 2014, 10,185vehicles were sold while 5,298vehicles were disposed to franchisees through finance leasing 22