Uxin Restricted (UXIN) Q1 2021 Earnings Name Transcript

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Uxin Restricted  (NASDAQ: UXIN) Q1 2021 earnings name dated Sep. 08, 2020

Company Members:

Nancy Tune — Investor Relations

Kun Dai — Chairman of the Board & Chief Government Officer

Zhen Zeng — Chief Monetary Officer

Analysts:

Unidentified Participant — — Analyst

Presentation:

Operator

Women and gents, thanks for standing by and welcome to Uxin’s Earnings Convention Name for the Quarter-Ended June 30 of 2020. [Operator Instructions] Immediately’s convention name is being recorded. In case you have any objections you might disconnect presently.

I might now like to show the decision the decision over to Nancy Tune, Investor Relations Director of Uxin. Please go forward.

Nancy Tune — Investor Relations

Thanks, operator. Good day everybody, welcome to Uxin’s earnings convention name for the quarter ended June 30, 2020. On the decision as we speak are D.Ok., our Founder and CEO; and Zhen Zeng, our CFO. D.Ok. will assessment enterprise operations and the Firm highlights adopted by Zhen who will talk about financials and the steerage. They each can be obtainable to reply your questions through the Q&A session that follows.

Earlier than we begin, I want to remind you that this name might comprise forward-looking statements made below the Secure Harbor provisions of the US Non-public Securities Litigation Reform Act of 1995. These statements are made — are based mostly on administration’s present data and assumptions about future occasions that contain identified or unknown dangers and uncertainties which might trigger precise outcomes to vary materially from these within the forward-looking statements. Uxin doesn’t undertake any obligations to replace any forward-looking statements besides as required below relevant legislation. For extra details about the potential dangers and uncertainties, please check with our filings with the SEC.

With that I’ll now flip the decision over to our CEO, D.Ok. Please go forward.

Kun Dai — Chairman of the Board & Chief Government Officer

Thanks, Nancy. Good day, everybody. Thanks for becoming a member of our earnings convention name as we speak. In the newest two quarters, the impression of coronavirus pandemic continued to create challenges for total financial. Given the present macro setting, we’re glad that we efficiently accomplished the divestiture of our mortgage facilitation enterprise and relieved ourself of the historic assure liabilities.With this enterprise modifications in place, the monetary impression of the divesting the mortgage facilitation enterprise, taking place as monetary ensures and divesting the B2B enterprise was there and can proceed to be mirrored in our monetary statements for the quarter ended June and the September 30, 2020. Together with this enterprise divestitures, we’ve got shifted our enterprise technique from multi-businesses groups to our core focus and shifted our progress technique from being finance — financing-driven to at least one that in used automotive high quality and repair oriented.

Below the earlier financing-driven strategy, we skilled a speedy transaction quantity progress. We had been additionally weighed down by a big underlying credit score threat and constrains on stream as a result of we needed to take all of the assure liabilities and buyback the default mortgage when this delinquency belongings meet a sure standards.Now with this drive behind we entered into a brand new part of growth as a transaction-orientated on-line used-car vendor the place our focus is lastly on all in top quality worth for cash used automobiles and the premium buying providers. We consider that repeatedly enhanced used automotive high quality and buying providers is the easiest way to maximise buyer worth and acquire extra buyer belief and word-of-mouth referrals.Though it takes time to construct a popularity and develop at a scale with this used automotive and repair oriented strategy, we consider that that is the important thing to sustaining our long-term aggressive benefits and reaching sustainable progress. With the intention to create the most effective worth and expertise throughout the whole worth chain for our prospects, we upgraded our used automotive transaction processed and migrated each gross sales step on-line.

In remodeling our enterprise, we’ve got upgraded the important thing factors all through our service course of. We considered a gaggle of stock collectors to curate the worth for cash used automotive from throughout the nation to make sure that the best tenders of automotive high quality are meet by cautious inspection, simplifying our pricing construction to facilitate the purchasers’ buying selections, supply skilled consulting charges and buying providers in a well timed trend from our on-line gross sales consultants, working with extra financing companions to supply diversified used automotive finance product and enhance total mortgage strategy — approval price for our buyer, supplier will run program and after-sales providers and make the whole buying course of extra handy and environment friendly for our prospects. All of those efforts have translated into higher buyer satisfaction and larger belief in our Uxin model evidenced there by our elevated internet promoter rating amongst our prospects.

To additional improve the client expertise, we’ve got strengthened our position as China’s main on-line used automotive vendor and starting to construct our personal stock of recent automotive this months. This can assist us to raised management our threat of excessive — for used automotive and ship increased transaction certainty to our prospects. As we transfer up the availability chain and assess used automotive at a extra favorable acquisition value, we can have larger facility in providing extra aggressive pricing to our prospects, additional constructing Uxin as a trusted and go-to-online resolution for purchasing used automotive.In distinction to the native offline sellers conventional method of buying stock based mostly solely on particular person expertise and consumer case, our stock benefit vitality comes from our sturdy knowledge and analytics functionality. We are going to take a extra scientific and a scientific strategy to obtain used automotive by analyzing the in depth used automotive consumer habits, used automotive and transactional knowledge aggregated on our platform through the years. We are going to selectively construct our stock based mostly on our proprietary evaluation of buyer desire, a automotive’s value-for-money efficiency in addition to real-time market dynamics and developments. As well as, we are going to supply refurbished — refurbishments as a brand new service by reconditioning our automotive to a like new situation earlier than dealing with it over to our prospects. This can be one other key step in making certain the most effective total buying experiences as reconditioning can additional improve our automobiles value-for-money efficiency.

We consider that our data-driven and high quality focus stock technique will additional improve buyer satisfaction had been enabling our to attain quick — a quicker stock flip over. This can be one other vital milestone for us in solidifying our place as China’s main nationwide large on-line vendor and providing top quality value-for-money used automotive and the premium providers.

With that, I want to flip the decision over to our CFO, to stroll you thru the monetary outcomes. Zhen please.

Zhen Zeng — Chief Monetary Officer

Okay, thanks DK. Good day, everybody. Thanks for becoming a member of us as we speak. As DK talked about in finishing the web transformation of our transaction course of we’ve got additionally restructured our prices and bills to adapt to new enterprise and the service mannequin. We now have a streamlined stock sourcing and a automotive inspection, on-line gross sales consultants staff and a back-office help staff. As well as, increased buyer satisfaction and a extra word-of-mouth referrals additionally interprets into extra natural site visitors and decrease the necessity for exterior site visitors acquisition. All these components will improve our long-term operational effectivity as we obtain larger scale over time.

Because of the tax minimize that was carried out in China since Might this 12 months. Used automotive sellers now solely have to pay 0.5% of the used automotive gross sales. This implies we now have a extra accommodative fiscal setting, new methods to function as a precise vendor. We are going to work with our monetary establishments within the type of stock financing to proactively constructing our personal stock so that it’s going to enable us to adequately our money stream. Accessing used automobiles have extra engaging acquisition value by transferring up the availability chain is not going to solely reinforce our management over stock, but additionally have us to probably drive margin growth over the long term. We consider this revamped stock technique will higher place us to generate long-term worth for our shareholders whereas maximizing buyer worth and expertise.

Now let me stroll you thru our monetary particulars for the quarter ending in June. Please observe that the outcomes I’ll talk about relative to persevering with operations solely. All numbers are in RMB except in any other case said. Additionally, please observe that some numbers I check with are non-GAAP numbers.Yow will discover a reconciliation of those numbers on the backside of our earnings launch.

Within the three months ended June 30, 2020, complete income had been RMB62 million in contrast with RMB389 million in the identical interval final 12 months. The lower was primarily as a result of lower within the 2C transaction quantity and GMV on account of financial downturn attributable to the COVID-19 pandemic in addition to the lead time that we have to absolutely ramp up its upgraded transaction course of.

Our complete 2C income was RMB52 million in contrast with RMB341 million in the identical interval final 12 months. On-line used automotive transaction quantity is 3,887 unit for the three months ended June 30, 2020 and its corresponding GMV with RMB426 million.

two income stream of our 2C enterprise. Fee income was RMB29 million in contrast with the RMB179 million in the identical interval final 12 months, primarily as a result of decreases within the transaction quantity and GMV. Our fee charges expanded barely to six.7% from 6.2% in the identical interval final 12 months on account of our steady effort to supply a nationwide choice of greatest value-for-money used automobiles in addition to high quality transaction providers to the client. Worth-added service income was RMB23 million in contrast with RMB162 million in the identical interval final 12 months, primarily as a result of decreases within the transaction quantity and GMV. VAS take price decreased barely to five.4% from 5.7% in the identical interval final 12 months on account of pricing adjustment through the COVID-19 interval.

different enterprise. Different income was RMB11 million for the three months ended June 30, 2020 in contrast with RMB48 million in the identical interval final 12 months. The lower was primarily as a result of divestiture of the Firm’s salvage automotive associated enterprise in January 2020.Price of revenues decreased by 53% year-over-year to RMB80 million. The lower was primarily as a result of lower in salaries and advantages for workers participating in automotive inspection, high quality management, customer support and after-sales servicesas nicely because the lower in achievement value resulting from a lower within the transaction quantity.

Gross margin was adverse 28.4% for the three months ended June 30, 2020 in contrast with the gross margin of 55.9% in the identical interval final 12 months. Complete working bills was RMB151 million. Non-GAAP working bills, which excluded the impression of share-based compensation, was RMB156 million. Gross sales and advertising and marketing bills decreased by 61% year-over-year to RMB116 million. The lower was primarily resulting from a lower within the salaries and advantages bills on account of the adoption of the versatile workload-based staffing program and a few mixture of the worker contracts ensuing from our enterprise mannequin improve in addition to the lower within the site visitors acquisition value.

Gross sales and advertising and marketing bills, excluding the impression of our share-based compensation, had been RMB111 million. G&A bills decreased by 29% to RMB87 million, the lower was primarily resulting from a lower within the salaries and advantages on account of adoption of a versatile workload-based staffing program and a few mixture of worker contracts outcomes from our enterprise mannequin improve in addition to the lower within the share-based compensation bills and partially offset by the surveillance value on account of some termination of worker contracts and a goodwill impairment of RMB9.5 million recorded within the reported quarter.

G&A bills, excluding the impression of the share-based compensation, was RMB98 million. RMB bills decreased by 29% to RMB23 million, the lower was primarily resulting from a lower within the salaries and advantages bills on account of the adoption of the versatile workload-based staffing program and a few mixture of worker contracts ensuing from our enterprise mannequin improve. R&D bills, excluding the impression of our share-based compensation, was RMB24 million. Acquire from the assure liabilities was nil for the three months ended June 30, 2020. We incurred the assure liabilities related to the remaining assure obligations from its historic facilitated loans that had been transferred to Golden Pacer.

We adopted Accounting Requirements Replace of 2016-13 Monetary Instrument, Credit score Losses, measurements of the credit score loss on monetary devices on January 1, 2020 below a modified retrospective methodology earlier than the adoption of ASC 326, acquire or loss associated to ensure liabilities accounted for the below the larger of the quantity decided on ASC 460 and the quantity decided below ASC 450 was recorded because the acquire or loss from assure liabilities. After the adoption of ASC 326, anticipated credit score losses from a contingent assure legal responsibility shall be accounted for, along with and individually from the stand prepared assure liabilities accounted for below ASC 460 and the supply for the contingent assure liabilities is at present recorded inside provision for credit score losses and the aid from the stand prepared assure liabilities accounted for below ASC 460 is at present recorded inside different working earnings.

Provision of credit score losses, internet was RMB74 million for the three months ended June 30, 2020. The reversal of the supply for credit score losses had been primarily as a result of launch of assure liabilities of RMB86 million on account of a supplemental settlement reached between us and certainly one of our main financing companions in April 2020 almost about our historically-facilitated loans. Pursuant to this supplemental settlement, this financing associate agreed to set a cap on the amount of money we would wish to meet its assure legal responsibility with this financing associate from 2020 to 2022. Loss from persevering with operations was RMB128 million in contrast with RMB223 million in the identical interval final 12 months.

Non-GAAP adjusted loss from persevering with operations, which exclude the impression of share-based compensation, was RMB133 million in contrast with RMB196 million in the identical interval final 12 months. Internet loss from persevering with operations had been RMB152 million in contrast with RMB241 million in the identical interval final 12 months. Non-GAAP adjusted internet loss from persevering with operations, which excludes the impression of the share-based compensation had been RMB157 million within the quarter in contrast with RMB214 million in the identical interval final 12 months. Turning to our money place, as of June 30, 2020, we’ve got money and money equivalents of RMB241 million. That sums our outcomes for the three months ended June 30, 2020.

Transferring on to our steerage, beginning this month, September 2020, we are going to construct our personal used automotive stock. We’ve got began to pick value-for-money used automobiles out there, procure these automobiles and prepare for the reconditioning and refurbishment to function them to a like-new situation earlier than promoting them to our prospects. We’re at present assessing related income recognition in accordance with ASC 606 for promoting its personal stock. For the three months ended September 30, 2020, bearing in mind the continual impression of the COVID-19 pandemic, improve progress of our enterprise mannequin and the finished enterprise divestitures, excluding the revenues to be acknowledged below promoting our personal stock ranging from September 2020. We anticipate our complete revenues from persevering with operations to be within the vary of RMB33 million to RMB35 million, which embrace fee income, value-added service income and different income.

If taking into account a part of the revenues to be acknowledged below promoting our personal stock, for which a portion of the revenues generated in September 2020 perhaps acknowledged on a gross foundation, we anticipate our complete revenues from persevering with operations for the three months ended September 30, 2020 to rise to a spread of RMB65 million to RMB70 million. This forecast displays our present and preliminary view available on the market and operational circumstances and relies upon the present scenario and uncertainties related to the COVID-19 pandemic, that are topic to alter. This forecast can also be based mostly on our preliminary accounting evaluation of such inventory-owning enterprise mannequin, which perhaps topic to refinement and revision. That concludes our ready remarks.

Nancy Tune — Investor Relations

Thanks, Mr. Zhen. Operator, we want to open the decision for questions now.

Questions and Solutions:

Operator

Thanks. [Operator Instructions] We’ve got our first query from the road of Eddy Wang of Morgan Stanley. Please go forward.

Unidentified Participant — — Analyst

Hello. That is Michael, Nancy. Thanks for taking my query. [Foreign Speech]

Let me translate myself. So my query is about, the long-term outlook of the used automotive business in China, particularly for the subsequent few years. So — and below that background, I feel what’s the benefit of the stock taking enterprise mannequin we are going to undertake, sure, simply wish to hear your ideas on that? Thanks.

Kun Dai — Chairman of the Board & Chief Government Officer

[Foreign Speech] Prior to now one or two years upgrading product high quality and providers is a keynote in each consumer-facing business and sector and high-quality manufacturing and satisfaction providers are the inspiration of promoting extra prospects and constructing popularity. Below this setting, the place people are extremely linked with one another and the knowledge change is very efficient constructing popularity and gaining phrase of mouth referrals is essential to our Firm’s long-term sustainable progress and that is additionally very true within the used automotive business, after over a decade of growth, we’re their final business senders and truthfully, the business — the used automotive business sadly had a lower than passable popularity. We consider being trustworthy and honest when servicing prospects providing them high-quality used automobiles and premium providers is the easiest way to remodel the whole business and obtain a wholesome and long-term progress for the general sector.

Yeah. So prior to now one or two years, an increasing number of customers are turning away from new automobiles and selected to purchase used automobiles. This isn’t just because they can’t afford shopping for a brand new automotive, however extra about they’ve now have a extra common consumption philosophy. They wish to spend much less on a used automotive, however get a like-new situation, which is sort of nearly as good as a brand new automotive. With this pattern an increasing number of used automotive sellers will come up prepared to supply high-quality used automobiles and premium providers. And in flip with this profit, an increasing number of customers may also selected to purchase used automobiles as nicely and affected by the mushy macro economic system, total, used automotive business will see a really sluggish progress price right here, however taking a look at subsequent one 12 months or two, we expect it can steadily get well to a double-digit progress. We determined to construct our personal stock of used automobiles now is definitely inspired and pushed by our high quality focus and a buyer referral technique. We consider providing high-quality worth for cash in used automobiles and premium buying providers will witness increased buyer satisfaction and popularity as nicely, extra buyer belief and word-of-mouth referrals is not going to solely improve our automotive gross sales, but additionally enhance our skill to drive long-term market growth on account of the standard premium our prospects are prepared to pay us.

We began to construct our stock now, as a result of we expect we’ve got three, 4 benefits. The primary one is concerning the digitalization and clever knowledge analytics each our historic transactions and the present transactions really exist in all in digital kind, so do our buyer behaviors and their preferences aggregated on our capital. So, this allows us to nicely handle the availability and demand in addition to the promoting costs with completely completely different decision-making capabilities from the normal used automotive sellers. And our present digital capabilities enable us precisely predict the month-to-month gross sales of sure automotive makes and mannequin even to foretell the turnover of the particular mannequin and this completely guides us to deciding on automobiles and construct our personal stock.

And the second is about {our capability} to comprehend purely on-line used automotive transaction and providers at present in China’s used automotive market, we are literally the one one who is ready to promote automobiles fully from on-line. Our prospects can simply make the acquisition resolution after studying our used automotive digital profile on-line. As well as, our prospects are in a position to make these selections with out the should be assisted by offline gross sales workers all through the whole course of and likewise our achievement functionality covers over 300 cities and counties mixed throughout China. Our prospects can obtain their automobiles that meet and even past their expectations inside days after they make the acquisition on-line. Our pure on-line method of promoting used automobiles considerably strengthen our skill of matching automobiles with customers on a nationwide stage, which additionally ensures increased probability of quicker turnover.

The third one is about our benefits in the fee construction. And our value construction is definitely essentially completely different from that of conventional offline sellers. So not like them, we don’t have to have the in depth offline bodily showrooms and we don’t want a big offline gross sales staff both. Such benefits really allow us to develop right into a nationwide on-line used automotive vendor with sturdy operational effectivity and the potential to develop at scale.

So, wanting on the macro setting now it’s really an excellent timing for us to take this strategy given the present used automotive taxation creates a extra variable setting for us to construct the stock. And since Might of this 12 months, the used automotive tax minimize in China permits vendor solely have to pay 0.5% of used automotive gross sales as tax in contrast with 2% beforehand and with tax price, our total tax bills will improve a lot as in contrast with earlier than. And as well as, for the automobiles that will procure upfront, the automotive cycles are literally with us. So, we’re in a position to work with monetary establishments on stock financing. So, when every part ramps up, the macro setting really additionally helps our selections. Thanks, Eddy.

Unidentified Participant — — Analyst

Thanks.

Operator

Thanks. I might now like handy the convention again to Ms. Nancy Tune for closing remarks. Please go forward.

Nancy Tune — Investor Relations

Thanks once more for becoming a member of our name as we speak and to your continued help in Uxin. We’re wanting ahead to talking with you once more sooner or later. Thanks.

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