Good morning, and good evening, everyone. Welcome to Cango Inc.'s First Quarter 2024 Earnings Conference Call. This call is also being broadcast live on the company's IR website. Joining us today are Mr. Jiayuan Lin, Chief Executive Officer; and Mr. Yongyi Zhang, Chief Financial Officer of the company. Following management's prepared remarks, we will conduct the Q&A session. Before we begin, I refer you to the safe harbor statement in the company's earnings release, which also applies to the conference call today as management will be making forward-looking statements. With that said, I'm now turning the call over to Mr. Jiayuan Lin, CEO of Cango. Please go ahead, sir.

Good morning, everyone, and welcome to Cango's first quarter 2024 earnings call. China's GDP maintained moderate growth in Q1 2024, increasing by 5.3% year-on-year despite a complex global economic environment. According to the China Association of Automobile Manufacturers, the auto industry also saw strong growth with production and sales reaching 6.61 million and 6.7 million vehicles, respectively. This represents a year-on-year increase of 6.4% for production and 10.6% for sales. New energy vehicles, or NEVs, were a particular bright spot. Production and sales surged by 28.2% and 31.8% year-on-year to 2.12 million and 2.09 million units, respectively. This strong performance pushed NEV's market share to over 30%. Despite positive growth in vehicle production and sales, the auto market faces challenges on both the supply side and demand side. Traditional automakers must transform to compete in a new energy vehicle era, and emerging NEV manufacturers face intense competition and struggle for profitability. On the demand side, slow income growth and job market instability restrict consumer purchasing propensity. Rapid technological advancements and price competition lead consumers to delay purchases, further tightening the market. In response to the oversupply in the new car market, we took proactive steps to manage inventory and reduce costs. We strategically reduced the scale of our self-operated new car business and streamlined purchasing processes to improve efficiency and enhance inventory management to mitigate the risk of decline in new car prices. While this strategy resulted in lower revenue compared to last year, amounting to RMB 64.4 million in Q1 this year, it ensured profitability for the company. Our operating profit was RMB 74.15 million, and net profit was RMB 90.03 million. We maintained financial stability in a challenging macroeconomic environment through strict cost controls and risk management. We closely monitor liquidity and liabilities, reducing our total outstanding facilitated financing balance to RMB 7.586 billion by the end of Q1, and our delinquency ratios remain low at 2.87% for M1+ and 1.51% for M3+ as of March 31, indicating strong asset quality. Q1 also saw the successful integration of Cango U-Car, strengthening our platform competitiveness in several ways. We secured a consistent supply of high-quality vehicles, and dealer service experiences and supply chain management were optimized. Cross-region deliveries became more convenient and secure. Cango U-Car achieved impressive growth in Q1 2024. The platform expanded its reach to 8,459 registered car dealers across 31 provinces and 251 cities in China. It generated significant user engagement with over 130 million accumulated page views. The platform also facilitated 124 auctions and 204 facilitated deals. We ramped up our vehicle offerings and transactions in Q1 2024, strengthening partnerships with existing stores and bringing high-quality third-party vendors onto our platform nationwide, creating a more diverse and stable vehicle pipeline. We also boosted transaction volume by hosting 42 auction events and special sales throughout the quarter. We differentiated Cango U-Car in Q1 through an enhanced membership ecosystem and premium services. We developed a more attractive membership program with exclusive benefits to boost dealer engagement and loyalty. We launched a new pilot program in Q1, helping dealers transition to an online plus offline marketing strategy. In addition, we introduced the hassle-free purchase service in April, offering comprehensive transaction support for payments, logistics, and insurance. This streamlines transactions for both buyers and sellers and improves transparency for a better member experience. In Q2, we will continue to focus on deepening user engagement, enriching platform content, and expanding both our membership base and high-quality vehicle inventory. Additionally, we are making waves in the cross-border used car market. In March, we launched the first of its kind information platform to connect overseas buyers from different countries and regions directly with China's high-quality used car inventory. This platform fills the gap in cross-border used car information services, providing valuable insights to global users, and our goal is to become the go-to gateway for Chinese used cars entering the international market. Moving forward, we are committed to unlocking new growth opportunities through innovative business models. Partnering with our dealer network, we will leverage continuous innovation and meticulous management to create additional value in China's rapidly evolving auto sector. This focus will ensure the company's long-term sustainable success. With that said, I will turn the call over to our CFO, Yongyi Zhang, for a review of the company's financial performance.

Thanks, Jiayuan, and hello, everyone, and welcome to our first quarter 2024 earnings call. Before I start reviewing our financials, please note that unless otherwise stated, all numbers are in RMB terms and all percentage comparisons are on a year-over-year basis. Total revenue in the first quarter of 2024 was RMB 64.4 million compared with RMB 552.6 million in the same period of 2023. The guarantee income, which represented a fee income earned on the non-contingent aspects of a guarantee, was RMB 30.3 million in the first quarter of 2024. Now let's move on to our costs and expenses during the quarter. Cost of revenue in the first quarter decreased to RMB 29.1 million from RMB 480.5 million in the same period of 2023. As a percentage of total revenue, cost of revenue in the first quarter of 2024 was 45.1% compared with 88.6% in the same period of 2023. Sales and marketing expenses in the first quarter decreased to RMB 3.5 million from RMB 12.5 million in the same period of 2023. General and administrative expenses in the first quarter decreased to RMB 37.9 million from RMB 39.8 million in the same period of 2023. Research and development expenses in the first quarter decreased to RMB 1.1 million from RMB 8.1 million in the same period of 2023. Net gain on contingent risk assurance liability in the first quarter was income was RMB 15 million compared with RMB 1.6 million in the same period in 2023. The gain was recognized due to the release of obligations from the contingent aspect of the risk assurance liabilities. Net recovery on provision for credit losses in the first quarter was RMB 66.3 million. The recovery was primarily due to the positive impact from the collections of financing receivables. We recorded RMB 74.2 million in income from operations in the first quarter of 2024 compared with RMB 51.8 million in the same period of 2023. Net income in the first quarter was RMB 90 million. Non-GAAP adjusted net income in the first quarter was RMB 95.7 million. On a per share basis, basic and diluted net income per ADS in the first quarter of 2024 were RMB 0.85 and RMB 0.8, respectively, and non-GAAP adjusted basic and diluted net income per ADS in the same period was RMB 0.91 and RMB 0.85, respectively. Moving on to our balance sheet. As of March 31, 2024, the company had cash and cash equivalents of RMB 1.2 billion compared with RMB 1 billion as of December 31, 2023. As of March 31, 2024, the company had short-term investments of RMB 2.3 billion compared with RMB 635.1 million as of December 31, 2023. The increase was mainly due to the conversion from restricted cash and bank deposits held for short-term investments of RMB 1,670 million on December 31, 2023, after the company completed its subscription process. Looking ahead to the second quarter of 2024, we are now predicting our total revenues to be between RMB 35 million and RMB 45 million. Please note that this forecast reflects our current and preliminary view on the market and operational conditions, which are subject to change. This concludes our prepared remarks. Operator, we are now ready to take questions.

Our first question comes from Pingyue Wu from Citic Securities. Please go ahead.

My name is Pingyue, I'm from Citic. I have a question. The first question is that recently the government launched a subsidy program for trading in order to encourage consumption. So does the company believe that this will help drive the recovery and growth of the automobile market? And if possible, could you give us a specific number you're measuring the degree of impact of this policy on the demand for vehicles or automobiles?

Thank you very much for your question. In our view, the government's trading subsidy program creates a positive tailwind for the auto market recovery. These subsidies act as an incentive for consumers, especially those already considering an upgrade or trading in their older vehicles. This could indeed lead to a significant boost in demand for new cars, which benefits our company. While the trading subsidy is a positive step, we shouldn't underestimate the broader challenges facing the auto market. Consumer confidence and overall economic conditions will likely take time to improve, potentially limiting the program's immediate impact on new car demand. We commend the State Council and the Ministry of Commerce's efforts, but a comprehensive approach that addresses those other factors will be crucial for a sustained market recovery.

Thank you. And my second question is, we noticed that our company's Cango U-Car app was upgraded in April. So are there any new features after the upgrade?

Yes, the latest version of Cango U-Car features our newly added hassle-free purchase service, which provides car dealers with more comprehensive and reliable solutions. We've also enhanced the Cango U-Car experience for our members with two exciting features. The first is the exclusive membership section. Members now have access to a curated selection of premium vehicles nationwide, and these vehicles are all under three years old and have fewer than 50,000 kilometers, ensuring top quality. Plus, they are offered at competitive prices compared to industry standards. The second feature is the improved in-app communication; with just one click, members can now connect with sellers directly within the app. This streamlines communication and boosts transaction efficiency.

The next question comes from Emerson Zhao from Goldman Sachs. Please go ahead.

Thank you. I have two questions. The first question is we noticed that the company has decreased your new car procurement. So what will the revenue sources look like moving forward? And my second question is the company return to profitability this quarter holds a significant amount of cash. So will there be any plans for dividend payout?

Thank you for your questions. On your first question, we strategically adapted to a changing market by streamlining our self-operated new car business. While this segment previously generated significant revenue, it offered lower profit margins. This proactive shift has led to a decrease in total revenue, but our core business has transitioned to facilitation services with much higher gross profit margins due to a leaner cost structure. Our evolving business model and optimized revenue structure have boosted profitability, laying a solid foundation for our long-term sustainable growth. Regarding your second question about dividend payout, since going public, the company has been consistently rewarding shareholders with dividends, reflecting our commitment to shared success. Looking ahead, we will strategically plan future dividend allocations considering our evolving business and cash flow requirements.

Thank you. That concludes the question-and-answer session. Thank you once again for joining Cango's first quarter 2024 earnings conference call today. Have a great day.