Uxin Limited
Q3 2021 Earnings Call Transcript

Published: 28 Apr 2021

[Operator:]

Ladies and gentlemen, thank you for standing by and welcome to Uxin’s Earnings Conference Call for the Quarter Ended December 31, 2020. At this time, all participants are in a listen-only mode. And after management’s prepared remarks, there will be a Q&A session. Today’s conference call is being recorded. If you have any objections, you may disconnect at this time. I would now like to turn the call over to your host for today's conference call to Eric Yuan. Please go ahead sir.

[Eric Yuan:]

Thank you, operator. Hello, everyone. Welcome to Uxin’s earnings conference call for the quarter ended December 2020. On the call today are D.K., Founder and CEO; and Zhen Zeng, our CFO. D.K. will review business operations and the company highlights, followed by Zhen, who will discuss financials and guidance. They will both be available to answer your questions during the Q&A session.

[Kun Dai:]

Thank you, Eric. Hello everyone. Thank you for joining our earnings conference call today. We are pleased to report that we have completed our strategic transformation into an inventory only model in the quarter ended December 31, 2020. The majority of online new car transactions in December were sold from your own inventory. This successful transaction reflects our commitment and ongoing efforts to better serve our customers with our online products and services. Operating as a national-wide online used car dealer we have our own inventory. We now have much strong control and the management over the entire services and supply chain. From the selection and quality of our used cars inventory to online car consulting for buyers and customer services and our own delivery and after sales services national-wide. To strengthen our ability to provide a youth car of the high quality and value for money, we are building our own inspection and reconditioning center or IRC, where we can refer selected in inventory to like new condition. Our first IRC in Xi’an has been operating since March 2021. Through our news network of IRC we can reflect the facilitator in house refurbishing for better control of quality and consistency so that the used car will sell meet our own quality excellent standards. We are also able to better serve the market within the services, reviews of each IRC location. Moreover with this ongoing improvement to our products and services offerings we have been closely monitoring our net promoter score or NPS. We have seen our NPS increase to 42 during the reporting quarter up from 30 in the quarter ended September 30, 2020 and only 10 in the quarter ended June 30, 2020. The significant improvement in NPS is the re-combination by our customers of our value proposition that we are providing even higher quality, value for money used car and best in class online car services. It also gives us greater confidence that we have the right development strategy in place and are heading in the right direction with our online business.

[Zhen Zeng:]

Thanks D.K. Hello everyone. Thanks for joining us today. I will walk you through the financial results for the quarter ended December 31, 2020. Our online used car transaction volume was 2,307 units this quarter. The majority was sold from our own inventory. Since we have shifted to an inventory only model, our revenue recommendation and the structure of costs and expenses are more in line with our industry peers. We believe this will facilitate the understanding of our business and our financials. Also since we have settled the majority of our remaining liability in July 2020, from this quarter the impact of the discontinue to loan facilitation business on operating expenses has been minimized. As a result our financial performance will better reflect our core business. Moreover during this quarter, we improved overall potential operational efficiencies through strict cost management. We target to grow the business at the most efficient cost level. We believe our ongoing cost saving efforts will be productive and abundance our financials in the coming quarters. Now let me walk through the financial details for the quarter ended December 31, 2020, which is the third quarter of our fiscal year 2021. All numbers are in RMB unless otherwise stated. Total revenue were RMB323 million. This is recognized on a gross basis as a result of the transformation into the inventory only model. Our total 2Q revenue was RMB303 million. The majority of the revenue coming from our vehicle sales. Gross margin was 2.9% compared with negative 22.4% last quarter and 59.2% in the same period last year. Due to the adoption of the inventory only model, revenue recognition and the components of cost were significantly different from the corresponding period in 2019 and also the last quarter. However, we believe this is more comparable with our industry peers. With the transformation completed, we expect that gross margin will rise gradually in the coming quarters. Total operating expenses was RMB188 million compared with RMB318 million last quarter and RMB862 million in the same period last year. Total operating expenses decreased mainly due to our continuing actions in cost and expenses cutting and also the decrease in the last related to liabilities for historically facilitated loans. To talk more about the cost and expenses, we also improved overall operational efficiencies through various cost management. As part of our strategy, we aim to grow our business at a most efficient level. The marketing expenses decreased by around 50% year-over-year, van expenses and the professional fees decreased by 72% compared with the corresponding period in 2019. Due to the adoption of the inventory only model, the most salaries and benefits for employees engaged in car sourcing, inspections, after sales services have been reclassified as sales and the marketing expenses whereas before such items were classified as cost of revenues.

[Operator:]

Thank you. Our first question comes from the line of Capital. You line is open. Please go ahead.

[Unidentified Analyst:]

Hi, everyone. Thanks for taking my question. We're happy to see the work you've been doing and your strategic transformation. Would you give us more color on what's happening with your IRC in Xi’an, your inspection reconditioning center? Thank you.

[Kun Dai:]

Thanks for your question. For Xi’an IRC, we started to select the location and construct from December 2020 and put it into operation in the past March. The IRC covers the area of approximately 24,000 square meters including an official warehouse zone and refurbish zone. Once completed the IRC can hold over 1,000 making it the largest flagship store of used car in Northwestern China under a single brand. So currently we have already stored hundreds of vehicles in the exhibition hall. The IRC is scheduled to officially open for business this May. This year IRC represents a major breakthrough in our business development as a nationwide online used car dealer allowing us to have much stronger control over the entire service and supply chain providing our customers with used cars of high quality and value for money as well as our full range of solutions. In terms of re-consulting, our team is doing that job in about 40 cities across China with only about 20% finally admitted to our in-house inventory. So every single week in our inventory has to pass more than 300 tests during the inspection process. So leveraging our professional testing equipment and extensive inspection know how, we effectively help customers choose cars of good quality. Meanwhile we also apply our in-house to develop the technologies to refurbish the vehicles to further enhance their quality before they go to market. At same time our Xi’an IRC serves multiple functions such as warehousing, inspection, refurbishment and a vehicle demonstration. It also provides vehicle registration services offering customers one stop car purchasing experience. Local customers can come to our IRC and check out the car in person. They can also pick up the car off site rather than wait for delivery. Overall the development of Xi’an IRC is in line with our prior expectations and we believe it will positively contribute to the development of the used car market in Northwestern China once it is officially launched. Thank you.

[Operator:]

Thank you. Ladies and gentlemen that does conclude the conference for today and thank you for participating. You may now all disconnect.