Ladies and gentlemen, thank you for standing by and welcome to Uxin's Earnings Conference Call for the Fourth Quarter and Full Fiscal Year ended March 31, 2023. At this time, all participants are in a listen-only mode. After management's prepared remarks, there will be a question-and-answer session. Today's conference call is being recorded. If you have any objections you may disconnect at this time. I'd now like to turn the call over to your host for today's conference call, Mr. Jack Wang. Please go ahead, Jack.

Hi. Thank you, operator. Hello, everyone. Welcome to Uxin's earnings conference call for the fourth quarter and full fiscal year ended March 31, 2023. On the call with me today, we have D.K. our Founder and CEO; and John Lin, our CFO. D.K. will review business operations and company highlights, followed by John, who will discuss financials and guidance. They will also be available to answer your questions during the Q&A session that follows. Before we proceed, I would like to remind you that this call may contain forward-looking statements which are inherently subject to risks and uncertainties that may cause actual results to differ from our current expectations. For detailed discussions of the risks and uncertainties, please refer to our filings with the SEC. Now with that, I will turn the call over to our CEO, D.K. Please go ahead, sir.

Good day to everyone and thank you for your continued interest and support. It's a pleasure to welcome you on our earnings call today. To better communicate with our domestic and international investors, I will be discussing our performance over the last fiscal year as well as providing insights into our prospects in both Chinese and English. The 2023 fiscal year, which spanned from April 2022 to March 2023, presented numerous challenges. Along with various other Chinese enterprises, we navigated the societal and economic headwinds caused by the COVID-19 pandemic. Despite these obstacles, our online-offline used car retail operations experienced growth phases, moments of stagnation, and subsequent resurgence. Nevertheless, we managed to overcome these hurdles and delivered a commendable performance. Our retail transactions increased to 10,703 units, recording an impressive year-over-year growth of 105%. Notably, our net promoter score or NPS remained consistently high at about 60 points over six consecutive quarters, solidifying our position as the industry leader. The excellent quality of our used car offerings, combined with our exceptional customer service, received growing recognition from our expanding customer base. Furthermore, Uxin’s offline superstores have become the benchmark for industry upgrades within China's used car sector. China's vibrant used car market is significant, already reaching a staggering trillion RMB level. With 320 million vehicles, China has the world's largest car ownership. Each year, a substantial number of vehicles enter circulation, driving the rapid growth of the used car industry. In the first half of 2023, the nation saw a remarkable surge in used car transactions, reaching around 9 million units, marking a 15% increase compared to the previous year. Drawing from mature market experiences in the automotive industry, China is progressively pivoting towards a trajectory centered around smart car transactions. We anticipate our used car transactions in China will soon surpass 20 million units annually, with still remarkable growth potential of three to four times. While the upgrade and consolidation of China's used car industry are still in their early stages, the unique characteristics of each vehicle, the extremely fragmented market structure, and the lengthy intricate transaction chains have all hindered the industry's transition towards brand-oriented, large-scale, and standardized development. Our pioneering model of offline superstore combined with online nationwide purchase has successfully transitioned from concept to reality. This model, focused on advanced production, modern retail experiences, and data-driven operations, has established a strong foundation for the next stage of scalable profitability. First, state-of-the-art reconditioning factories with advanced equipment and technology ensure the supply of high-quality used car products. The supply of ultra-large scale high-quality used cars is reliant on modernized reconditioning factories with appropriate production capacity. Following the launch of our new Uxin Superstore, which is the largest in Northwest China, capable of handling up to 3,000 units. The transparent factory management system that Uxin has explored and developed over one and a half years has also been put into action. The system integrates inspection, evaluation, and repair processes seamlessly while utilizing a broad spectrum of digital monitoring tools to streamline operational management and enhance efficiency. The system's intelligent workshop planning, real-time tracking of vehicle and material status, and accurate data on work hours and costs have established the most advanced reconditioning factory management system in China's used car industry. Furthermore, we continue to advance our reconditioning techniques, introducing cutting-edge technologies such as 3D printing and smart repair, and developing an integrated parts supply system. As a result, the reconditioning time and cost per vehicle have been further reduced. The timeframe for each car to move from factory intake to shelf has decreased by 70%, averaging just four days. Our second superstore emphasizes customers, products, and venues while changing the way consumers buy and sell used cars, creating a better consumer experience that surpasses traditional marketplaces. For most consumers in China, purchasing a used car can be a challenging and uncertain process. Traditionally, it involves visiting numerous dealerships spread across a used car marketplace, searching for specific models, inspecting several vehicles, and negotiating prices with various dealers. This lengthy process does not guarantee the purchase of a reliable used car at a fair price nor adequate after-sales support. In the past year, Uxin has transformed the used car buying experience by adopting contemporary retail standards. Our superstores provide consumers with a relaxed and enjoyable car buying experience akin to modern shopping malls. Upon entering our superstores, customers are welcomed into a bright and spacious environment featuring thousands of carefully selected exhibition vehicles. Our cars are conveniently arranged using the modern retail shelf model, making it easy to compare different models. A scoring system based on the national standard guarantees clarity and understanding for customers. They can be assured that our pricing is transparent, with no hidden fees. Besides the conventional dealership experience, we offer a one-stop solution for all needs, including financing, insurance, extended warranty, accessory upgrade, and other value-added services. To enhance customer convenience, we have an on-site Vehicle Administration Office enabling customers to complete old transaction transfer procedures on the same day, ensuring a smooth and efficient process. We are excited to report that our superstores have quickly become the preferred destinations for used car purchases in their respective cities. After just one year of opening, we have established ourselves as the leading brand in local used car recognition. The positive word of mouth among consumers has generated a network effect, attracting a constant flow of local traffic to our superstores. Uxin’s agile digital decision-making creates a highly competitive mode in larger-scale used car operations. The business process is managed on a per vehicle basis, with the system capacity built around this singular vehicle dimension. Our proprietary trip irrigation system runs through every step of the used car transaction chain, from acquisition and reconditioning to sales, delivery, and after-sales service. We make data-driven business decisions at the vehicle level, which constitutes our core competitive advantage compared to traditional car dealerships. For example, with vehicle pricing, Uxin has developed an intelligent pricing model based on over a decade of accumulated Chinese used car transaction data. This model determines the individual price of each vehicle factoring in age, condition, mileage, color, and other parameters, while also considering aspects like customer demand, current inventory structure, offline test drive feedback, and real-time market dynamics for timely adjustments. By consistently refining relevant parameters and iterating the pricing system with extensive transaction data, Uxin’s initial pricing becomes increasingly accurate, and the adjustment process is faster. This leads to ongoing improvement in sales efficiency, with the average time from listing to sale being under 45 days. Our sales volume increases as the available parameters for input to the system grow. We are establishing our pricing decision anchors and expanding the limits of our pricing capabilities. The digital system's flywheel effect is still enhancing, which is crucial for reinforcing competitive advantages in our large-scale used car operation system and represents one of our vital modes. Over the last year, alongside advancements in our business, our financial position has also improved toward long-term stability. Early in the year, we completed the restructuring and repayment of the 2019 convertible loans, effectively resolving the bulk of our historical debt and significantly optimizing our balance sheet structure. This move allows us to allocate resources more effectively for future business growth. In addition, we have proactively fostered partnerships with banks in credit supply chain financing, securing credit lines of about 400 million RMB from several reputable banks. These arrangements have enhanced the efficiency of our capital usage and will support our plans for fiscal year 2024. Looking ahead to the 2024 fiscal year, we will primarily focus on three key areas based on our current strategic planning. First, the launch of our new flagship superstore in Hefei. We would like to inform everyone that the construction of the flagship superstore, jointly financed by us and the Hefei government, has entered the final stage of equipment and system collaboration after a year and a half of construction. We plan to start trial operations in August with a grand opening by the end of this calendar year. The new superstore covers an area of 450,000 square meters and houses the world's most advanced used car reconditioning factory alongside the largest used car sales area, capable of accommodating up to 10,000 vehicles for display and sale at full capacity. The Hefei flagship superstore will act as Uxin's central hub for our expansion efforts in the used car industry, with ambitions that extend across Anhui province and nationwide sales. It represents a significant collaboration for both Uxin and the Hefei local government to promote the growth of the automotive aftermarket industry in Anhui province and build a leading brand in China's used car sector. Secondly, our goal is to achieve profitability at our superstores. After more than a year of steady development, Uxin's superstores have continuously improved sales efficiency, enhanced gross profit margins, and significantly refined the overall cost structure. Consequently, we expect our gross profit margin to exceed 6% for the first quarter of fiscal year 2024. Our midterm target for gross profit margin will be 10% or more. Due to disturbances in the new car market in recent months, Uxin has maintained a cautious purchasing strategy and has not substantially increased inventory. Starting in August, we will accelerate our vehicle inventory buildup to drive additional sales conversions. We are optimistic about achieving positive EBITDA for both the Xi'an and Hefei stores by year-end. Finally, we aim to complete the expansion planning for two to three new superstores. Based on the successful implementation of Uxin's offline superstore model, we are actively planning to expand into new regions. We are working on finalizing location selections and operational preparations for two to three new superstores to broaden our regional presence and branding, while enhancing synergies between cohesive online and offline sales networks. These efforts will provide a strong foundation for our business growth in the coming years. The Chinese used car market is extensive with significant potential, and we are determined to ensure that our growth is exponential. By remaining committed to value creation, we believe there are tremendous opportunities ahead to serve consumers in the used car sector we are passionate about, while also generating greater returns for our shareholders, employees, and society at large. Once again, I extend my deepest gratitude for your unwavering trust and support. I sincerely welcome you to visit our superstores to experience it firsthand and explore our products and services on our mobile platform. We also look forward to achieving new milestones in the upcoming fiscal year at Uxin. Now, I would like to hand the call over to our CFO to take you through our financial results. John, please?

Thank you, D.K., and hello, everyone. Since we have both domestic and international investors on the call, we will present our remarks in both Chinese and English for everyone's convenience. I will now provide an overview of our financial results for the first quarter and fiscal year of 2023. Looking back at the fourth quarter of fiscal year 2023, which ran from January to March 2023, the quarterly retail transaction volume reached 2,259 units, reflecting a 22% increase year-over-year. However, we saw a 23% decline compared to the previous quarter, primarily due to the traditional slow season during the Spring Festival holiday, which caused most used car transactions to be paused for nearly a month. Additionally, the aggressive pricing promotions in China's new car sector impacted the used car market, leading customers to adopt a more cautious approach. The total retail sales revenue for the fourth quarter was RMB 264 million, down 17% year-over-year. This drop was mainly driven by the average selling price of retail vehicles falling from RMB 173,000 last year to RMB 117,000 this quarter. The decrease in average selling price reflects our ongoing efforts to optimize our inventory structure over the past year. In terms of wholesale, the transaction volume this quarter was 1,348 units, a 32% decrease from the previous quarter. Based on our experiences during peak and off-peak seasons, we proactively reduced overall inventory acquisition before the Spring Festival, resulting in fewer wholesale transactions. The average selling price of wholesale vehicles also declined from RMB 67,000 in the previous quarter to RMB 65,000 this quarter. As a result, total wholesale sales revenue for the fourth quarter was RMB 73.6 million, a 44% decrease from the previous quarter. Overall, total revenues for the fourth quarter came to RMB 344 million, a 27% decline compared to the previous quarter and a 32% decrease year-over-year, primarily due to the effects of the Spring Festival offseason break and fluctuations in the domestic new car market. Despite the increase in retail transaction volume, this was offset by declines in wholesale transaction volume and average vehicle selling prices. As we move past COVID, our operations are realigning onto a healthier growth path. The inventory structure is gradually returning to a stable level, and both sales turnover and profitability are continuously improving. In the fourth quarter of fiscal year 2023, despite facing residual impacts from the epidemic, our gross profit margin increased to 2.3%, up from 0.6% in the previous quarter and 0.2% in the same period last year. We believe there is significant potential for further growth in our gross profit margin. We expect our gross profit margin to exceed 6% in the first quarter of fiscal year 2024, reaching a new high in the past three years. The total operating expenses for this quarter were RMB 113 million, reflecting a 9% rise compared to the prior quarter. This increase was mainly due to a non-cash expense of RMB 17 million related to the impairment loss on historical financial assets. We have largely completed the accounting treatment for these assets, and it will not significantly affect our financial statements going forward. Excluding this one-time impact, operating expenses were around RMB 100 million, a 3% increase from the previous quarter. The non-GAAP operating loss for this quarter was RMB 46.7 million, down RMB 38.9 million from the previous quarter. This includes a one-time gain of RMB 48 million from historical debt restructuring. If we disregard the impairment loss and the gain from debt restructuring, the non-GAAP operating loss for this quarter decreased by roughly RMB 4 million compared to the third quarter. Regarding the performance for the full fiscal year of 2023, despite the pandemic's effect on our business pace in the first three quarters, we still experienced substantial growth in retail transaction volume and revenue. Our retail transaction volume for the full year was 10,703 units, representing a 105% year-over-year increase, and our retail sales revenue was RMB 1.31 billion, a 68% year-over-year growth. Total revenues for the year were RMB 2.06 billion, up 26% year-over-year. The non-GAAP loss from operations for the full year was RMB 110 million, an increase of RMB 57 million compared to the previous fiscal year, largely due to a decline in gross profit margin. Detailed information on our full year results can be found in the earnings release we just published and our upcoming Annual Report, so I won't elaborate further here. Turning to the current landscape, we have recently seen a strong momentum in business development. With the price war in the new car market coming to an end, the overall situation in the used car market has stabilized, our inventory structure has improved, and sales turnover has accelerated. The adoption rate of our higher-margin value-added services, such as finance, insurance, maintenance, and accessory upgrades, has continued to improve, enhancing our business profitability and setting the stage for achieving our target of breaking even at our superstores this year. Recently, Uxin has been following a cautious acquisition strategy, keeping inventory levels low. As we begin to scale up our inventory quickly, the profitability from sales conversion is just a matter of time, and we are committed to achieving positive EBITDA at both our Xi'an and Hefei superstores by the end of 2023. We have also taken measures to improve our financial planning and strengthen our cash positions. Earlier this year, we completed the restructuring and repayment of all 2019 convertible notes, eliminating a significant historical burden. We have greatly optimized our asset and liability structure, allowing for better business growth conditions. Additionally, in July, we amended the stock warrant agreement with two investors, and prospective financing is on track. Moreover, as D.K. highlighted earlier, we have partnered with several prominent banks, securing RMB 200 million in inventory financing and credit. These collaborations will significantly enhance the efficiency of our fund utilization and provide strong financial backing for inventory growth and business expansion. Overall, our financial situation is improving toward long-term stability. Regarding our outlook for the first quarter of fiscal year 2024, ending in June 2023, we expect overall sales to return to sustainable growth due to market stabilization and an increase in inventory vehicles. We anticipate retail transaction volume to be 1,600 units, with a retail average selling price of RMB 110,000. We project wholesale transaction volume to reach 1,600 units with a wholesale average selling price of RMB 61,000. Our total revenues, inclusive of retail sales, wholesale sales, and value-added services, are expected to be between RMB 270 million and RMB 290 million. Furthermore, we expect a significant increase in our gross margin, forecasting it to exceed 6% in the next quarter. That concludes our prepared remarks for today. Operator, we are now ready to take the first question.

Our first question will come from Tom Kerr of Zacks Investment Research. Please go ahead.

Hello, good morning. Can you discuss any recent market trends or any significant changes in consumer purchasing behavior lately?

Indeed, as we highlighted during our previous earnings call, the onset of aggressive pricing strategies in the new car market since January had a significant impact on the used car sector. Consumers' increasing uncertainty over additional reductions in new car prices led to a noticeable hesitation, particularly when considering premium used car prices over RMB 100,000. However, since June, we've seen the market start to stabilize, and our sales efficiency has been on an upward trajectory. Our inventory turnover rate of vehicles on sale in the last month, standing at approximately 40 days, has surpassed the previous monthly record. As our brand presence amplifies in the regions where our superstores are located, we will further strengthen the network effect among our consumer base. Looking ahead, we remain confident in our capacity to continue expanding our market share within those territories. And that's our answer to your first question, Tom.

Okay, thank you. One more question. Can you provide further commentary on future IRCs, are you looking at many regions or any specific areas for expansion?

So as we've mentioned earlier, in our ongoing commitment to growth, we're marking out the establishment of two to three additional superstores in the fiscal year of 2023. In determining the locations, we will be evaluating a range of criteria, including population density, the used car market size, regional economic vitality, geographical positioning, and local government incentives. Each new establishment aims to fortify Uxin’s position as a leader in the local used car market, improving our penetration into offline markets while bolstering our brand synergy with our online operations. For more detailed information and updates on our ongoing and future developments, I would encourage you and our investors to stay connected to our IR website or official social media accounts.

Thank you. That is all the questions I had.

Operator, let’s move on to the next.

Our next question comes from Fei Dai of TF Securities. Please go ahead.

You mentioned in your earnings release that there will be a significant improvement in gross margin next quarter. Where is that momentum for the gross margin expansion coming from, and what are your long-term gross margin targets? Thank you.

So this is the translation from our CFO, John. As you pointed out, our recent operational performance has been promising, especially the marked improvement in our gross margin. For the quarter, spanning April to June, as we've mentioned earlier, our gross margin had already reached 6%. So looking forward, we forecast further growth throughout the fiscal year of 2024 aiming for a midterm target of 10% with aspirations for even higher margins in the long-term. Our gross profit for retail vehicles primarily stems from two sources; the gross profit from vehicle sales and the gross profit from value-added services. We have seen marked improvements in both areas. The uptake in our vehicle sales gross profit is due to the combination of our sales margins steady recovery and the significant decrease in our reconditioning costs. The past two years presented challenges with the pandemic causing disruptions and dampening market activity. This led to an extended inventory sales cycle, significant inventory depreciation, and a contraction in our sales margins. However, post-pandemic, our inventory structure has improved with older vehicles making up a smaller fraction and the average sales cycle reducing to within 45 days. Consequently, our sales margins are trending back to standard levels. Moreover, the inauguration of our Xi’an reconditioning facility and the integration of state-of-the-art reconditioning techniques, coupled with our transparent digital management system, has significantly elevated our overall efficiency. Under the scaled production, our reconditioning cost per retail vehicle has dropped by an average of 70% compared to last year. Collectively, these elements have fueled our gross margin resurgence in vehicle sales. Our high-margin value-added services, including finance, insurance, repair, and other value-added services, have seen continuously increasing penetration rates. Revenue generated from these services per retail vehicle has surged by above 30% compared to six months ago, making another key driver for our gross growth. Our cutting-edge large-scale reconditioning facilities empower us to offer a comprehensive suite of value-added services to our used car buyers, similar to what new car flash shops offer, but with a distinct cost advantage. This Uxin superstore model, a large showroom model apart from traditional used car marketplaces and small used car dealerships. We are heartened by the market enhancements in our gross margin, which bolster our confidence in obtaining EBITDA profitability for our superstores this year. As we start scaling up our inventory, achieving profitability from our large-scale sales is only a matter of time. We're committed to achieving EBITDA profit from our two major superstores in Hefei and Xi'an within 2023. And that's our answer to your question.

Operator, can we move on.

The next question comes from Kai Kang of Citi. Please go ahead.

Do you believe that expanding into the used car business will increase competition and create challenges for Uxin? How does Uxin compare to the leading sellers in the used car market? Thank you.

So thank you for the question. The transformation and industry upgrade in China's used car market is well underway. We generally welcome all responsible participants committed to fostering trust with consumers and elevating industry standards. Going forward, in China's used car landscape, those retailers who emphasize product quality, customer experience, integrity, and compliance will undoubtedly be at the forefront. Collectively, we have the potential to steer the industry towards stronger growth and broader expansions. It's my belief that the used car sector is not a winner-takes-all market. Each retail model can find its niche and flourish. To draw from a mature market analogy, consider the U.S. where CarMax is the leading used car retailer and captures less than 3% of the market share, whereas branded dealerships represent around 40%. It's not about competition. Each player taps into their strength, catering to a specific brand or pricing segment, thereby nurturing their customer base and establishing mutual respect within the market. Compared to our U.S. peers, both we and new car dealerships in China still have significant growth potential in capturing market share. In comparison to new car dealerships building into the used car arena, our unique selling proposition contrasts our extensive superstores and more niche specialty stores. Operating under a warehouse-style superstore model, we emphasize volume and turnover. We pride ourselves on the vast array of choices available to customers with thousands of vehicles under a single window. Moreover, we possess the industry's most advanced larger-scale used car reconditioning factories. With a streamlined reconditioning process and cutting-edge digital management, we offer a cost-effective solution without compromising on vehicle quality. When comparing vehicle types and pricing with new car dealerships, we believe our portfolio is both compelling and competitively priced. That essentially sums it up. Thank you for the question.

Thank you.

That concludes our call today. I will now hand the call back to management for any closing remarks.

Alright. Thank you. Thank you again for this call and for your continued support for Uxin. We look forward to speaking to you again very soon in the future. Thank you. Bye-bye.

Bye-bye. Thank you.