Good morning, and good evening, everyone. Welcome to Cango Inc.'s Second 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 make forward-looking statements. With that said, I'm now turning the call over to Mr. Jiayuan Lin, CEO of Cango. Please go ahead, sir.

Hello everyone and welcome to Cango's second quarter 2024 earnings call. In the second quarter of 2024, the automotive market remains sluggish, presenting significant challenges for the industry. According to the China Association of Automobile Manufacturers, vehicle production and sales in June reached 2.5 million and 2.552 million units, respectively, reflecting a year-on-year decline of 2.1% and 2.7%, respectively. Passenger vehicle sales in June fell by 2.3% year-on-year. Although sales of new energy vehicles continue to outpace the market, their growth has not been sufficient to alter the industry's overall downward trajectory. In response to these challenges, we continue to implement strict cost control and risk management strategies, reinforcing our financial stability through disciplined expense management and cost efficiency measures. Meanwhile, we maintain meticulous oversight for current assets and liabilities, closely monitoring our risk exposure. As of June 30, our total outstanding loan balance stood at approximately RMB6.2 billion with M1+ at 2.93% and M3+ at 1.57%. Our credit risk exposure has been decreased to a low level with only RMB2.7 billion of outstanding balance of loans where the company bears credit risks have not been provided with full bad debt allowance or full risk assurance liabilities. As the new car market grows, we are increasingly recognizing the used car market's immense potential opportunities. As such, we have further streamlined our business processes, enhanced service quality, and strengthened the customer experience. Over the past quarter, we focused on enhancing the competitiveness of Cango U-car by ensuring a consistent supply of high-quality vehicles, optimizing dealer service experiences and supply chain management, and improving the convenience and security of cross-regional deliveries, which drove steady business growth. By the end of the second quarter, our Cango U-car app has accumulated over 130,000 page views. During the quarter, we facilitated the transaction of 266 vehicles and successfully auctioned 124 vehicles across our platform. Meanwhile, we identified and on boarded new partners with a strong reputation and ample vehicle inventories to ensure a diverse range of listings on Cango U-car. To enhance operational efficiency, we implemented rigorous management practices and refined key processes such as vehicle listing, transaction facilitation, and customer service. These efforts have increased resource utilization efficiency and improved overall operational effectiveness. We also established strategic partnerships with numerous major used car markets nationwide in the second quarter, enabling real-time synchronization of their vehicle listings with Cango U-car to better meet users' specific demands. Currently, Cango U-car holds over 260,000 vehicle listings. By integrating extensive offline vehicle inventory, we have effectively enhanced user engagement on the Cango U-car app. We have further enriched our user experience by establishing exclusive member communities through private management, regularly providing members with benefits and event updates to boost user engagement and loyalty. We have also established a set of refined operational processes and management guidelines focused on safeguarding seller dealers' rights. This includes implementing streamlined transaction rules and risk prevention mechanisms as well as providing comprehensive training and support, all of which are designed to help seller dealers improve their operational efficiency. Next, I would like to highlight some key advancements that Cango has made in the area of cross border used car transactions. Since China began allowing the export of used vehicles in 2019, export volumes have surged over tenfold, with a significant increase in the average value of exported vehicles. Supportive guidelines and favorable policies from government departments and authorities have fostered the growth of the used car export sector. We are optimistic about the promising prospects in the export market for used vehicles, particularly those in the NEV segment. Since its launch in March 2024, our international used car platform, AutoCango.com, has quickly gained traction among global audiences. To date, it has attracted over 180,000 visits with more than 20,000 registered users across 207 countries and regions worldwide. Autocango.com hosts over 85,000 high-quality used car SKUs offering more than 60,000 different models. In the second quarter, we significantly expanded Autocango.com's market coverage as well as its range of products and services offerings. Under our traffic-first strategy, Cango has been focusing on establishing a primary traffic gateway connecting China's used car dealers with overseas buyers. We believe that this streamlined, asset-light and traffic-focused operational approach will enable us to control operating costs while creating sustained value across our core business lines. Our website allows overseas buyers to more conveniently and directly access China's high-quality used car inventories and we aim to position this website as the premier gateway for exporting Chinese used cars. Moving forward, Cango will continue to deepen our partnership with overseas markets, further refining Autocango's functionality and services to better serve car users both at home and abroad. Next, I will turn the call over to our Chief Financial Officer, Michael Zhang, for a review of the company's financial performance.

Thanks, Jiayuan, and hello, everyone, and welcome to our second quarter 2024 earnings call. Before I start to review 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 second quarter of 2024 was RMB45.1 million compared with RMB675.4 million in the same period in 2023. Guarantee income, which represented the fee income earned on a non-contingent aspect of a guarantee, was RMB20.9 million in the second quarter of 2024. This was presented separately from the contingent aspect of a guarantee in pursuit of the adoption of ASC 326 since January 1, 2023. Now let's move on to our cost and expenses during the quarter. Cost of revenue in the second quarter decreased to RMB26.5 million from RMB615.8 million in the same period in 2023. As a percentage of total revenues, cost of revenue in the second quarter of 2024 was 58.8% compared with 91.2% in the same period of 2023. Sales and marketing expenses in the second quarter decreased to RMB4 million from RMB12.2 million in the same period of 2023. General and administrative expenses in the second quarter were RMB39.2 million compared with RMB36.8 million in the same period of 2023. Research and development expenses in the second quarter of 2024 decreased to RMB1.7 million from RMB7.7 million in the same period of 2023. Net gain on contingent risk assurance liability in the second quarter was RMB10.3 million compared with a net loss of RMB1.6 million in the same period of 2023. Net recovery on provision for credit losses in the second quarter of 2024 was RMB33 million compared with a net loss of RMB10.2 million in the same period of 2023. We recorded a net income from operations of RMB47 million in the second quarter of 2024 compared with a loss of RMB8.9 million in the same period of 2023. Net income in the second quarter of 2024 was RMB86 million. Non-GAAP adjusted net income in the second quarter of 2024 was RMB90.7 million. On a per share basis, basic and diluted net income per ADS in the second quarter of 2024 were RMB0.83 and RMB0.76, respectively. And non-GAAP adjusted basic and diluted net income per ADS in the same period were RMB0.87 and RMB0.8, respectively. Moving on to our balance sheet, as of June 30, 2024, the company had cash and cash equivalents of RMB949.5 million compared with RMB1.2 billion as of March 31, 2024. As of June 30, 2024, the company had short-term investment of RMB2.7 billion compared with RMB2.3 billion as of March 31, 2024. Looking ahead to the third quarter of 2024, we are now predicting our total revenue to be between RMB20 million and RMB25 million. Please note that this forecast reflects our current preliminary views on the market and operational conditions, which are subject to change. This concludes our prepared remarks. Operators, we are now ready to take questions.

Thank you very much. I'm from CITIC Securities. I have two questions on used car market development. So my first question is how's your strategic partnership with major used car markets help improve your market position? And what about the contribution by these partnerships to your financial performance?

Thank you for your questions. By collaborating with major used car markets, we have expanded our supply channels and diversified our vehicle offerings. In addition, these partnerships allow us to leverage their geographic coverage and market penetration, providing our customers with a broader range of choices. Our extensive offerings comprehensively address our clients' evolving needs, increasing their stickiness on our platform. As our vehicle inventory grows and market coverage expands, our transaction volume has naturally increased. This higher volume not only creates economies of scale, reducing unit costs, but also strengthens our bargaining power. This enhanced position has enabled us to negotiate more favorable terms with suppliers and customers alike, further improving our profit margins. Thank you very much. That's for your first question.

Thank you. And my second question is that the Chinese government has actually published a lot of favorable policies to support the development of the used car market. So what about the challenges that your company faces in promoting the used car cross-border transactions?

Thank you for your question. For the challenges, first of all, cross-border transactions usually come with relatively high logistics costs, including expenses for transportation, insurance, and also for warehousing. To better control these costs, we have partnered with third-party companies who have established and well-established cross-border logistics capabilities. Additionally, we will continue to monitor policy changes and develop flexible strategies to adapt to these changes. Also, regulations and standards for used vehicles vary across countries, including safety, emissions, and quality requirements. To address this, we will ensure that all vehicles traded meet the standards of the target market. In addition, used car transactions very often involve a relatively long transaction cycle due to their unique market characteristics, including but not limited to vehicle condition assessment, selection by buyers, multiple rounds of price negotiations, and necessary legal and financial reviews. Buyers typically need more time to look into the vehicle's maintenance history, performance, and pricing before making a purchasing decision. So naturally, this extended transaction cycle also poses a challenge for cross-border used vehicle transactions. Thank you. That's for your second question.

Thank you very much. No more questions from me.

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

Thank you. I have two questions. The first question is on finance. So I noticed that the company has decreased your revenue guidance. So will you continue to do that in the future? And the second question is how will the management balance your long-term strategy against your short-term performance pressure?

Okay. On your first question about guidance, we are strategically reallocating our resources, optimizing operations, and implementing effective measures to reduce operational costs in response to market changes and internal demand. Moving forward, we will continue to evaluate business development from a strategic perspective while leveraging our unique business model to drive ongoing cost reduction and efficiency improvements. We are confident that these adjustments and refinements will enable us to respond more agilely to market changes and deliver greater value to our shareholders. On your second question, firstly we have adopted an integrated approach to strategic planning. We have established a comprehensive strategic planning process to ensure alignment between short-term performance goals and our long-term vision. This involves maintaining continual communication to ensure all stakeholders have a clear understanding of the company's strategy and direction. In the short term, we will focus on enhancing execution, efficiency, controlling costs and driving revenue growth to ensure robust financial performance. Secondly, we have broken down our goals into different phases and also made flexible adjustments. We have established very clear objectives and targets for different phases that support both short-term performance and long-term strategic implementation. At the same time, we maintain strategic flexibility, allowing us to adapt our plans in response to market and technological changes and swiftly respond to external environmental shifts. Thank you.

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

Thank you all for your participation. Thank you.