Uxin Limited [UXIN] Conference call transcript for 2022 q1
2022-03-29 11:34:15
Fiscal: 2022 q3
Operator: Ladies and gentlemen, thank you for standing by and welcome to the Uxin Earnings Call for the Quarter Ended December 31st, 2021. 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 will now turn the call over to your host for today's conference call, Ms. Joyce Tang, IR Director of the company, please go ahead, ma'am.
Joyce Tang: Thank you, Operator. Hello, everyone. Welcome to Uxin's Earnings Conference Call for the quarter ended December 31st, 2021. On the call today are DK, Founder and CEO of Uxin, and John Lin, CFO of Uxin. DK will review business operations and company highlights, followed by John, who will discuss financial and guidance. They will both be available to answer your questions during the Q&A session that follows. Before we start, I would like to remind you that this call may contain forward-looking statements made under the Safe Harbor Provision of the U.S. Private Securities Litigation Reform Act of 1995. These statements are based on management's current knowledge and assumptions about future events that involve knowing or unknown risks and uncertainties, which could cause actual results to differ materially from those in the forward-looking statements. Uxin does undertake any obligations to update any forward-looking statements, except as required under applicable law. For more information about the potential riskand uncertainties, please refer to our filings with the SEC. With that, I will now turn the call over to our CEO, DK. Please go ahead.
Kun Dai: Joyce Tang: Hello everyone. Thank you for joining our earnings conference call today. To better communicate with both domestic and international investors. My prepared remarks today will still be in both English and Chinese. We are pleased that our business maintained its robust growth throughout the third quarter of year 2022, which stems from October to December 2021. Total transaction grow by 111% year-over-year to 4,879 units in the quarter, and grow by 33% compared with last quarter. Basically, retail transaction volume was 1,671 units. An increase of 61% compared with last quarter. Although the resurgence of COVID-19 in Xi'an, where our first IRC is located, resulted in the city-wide lockdown in last December. This growth movements of our second IRC in Hefei, generating since it's launched, as it actually helps us mitigate some of the negative impacts from the disruptions in Xi'an. Globally, officially opened for business in mid-November 2021, after six months of cooperation with the successful model of our CI IRC and sub foundation. We redecided thoughts operation process through a series of upgrades and improvements. As such, we have equipped our IRC with an omnichannel sales model, integrating online sales into its warehouse-style operation. We offer our customers a diverse collection of high quality and cost effective vehicles, premium transaction services, hassle-free after-tax guarantees, creating the superior use cash shopping experience that has been widely welcome back customers these opening. As evidence of our improved customer experience. Our NPS continue to rise for the fifth consecutive quarter, to reach a new record high of 59 in the third quarter from 56 in the prior quarter. This is a testament to our persistent efforts in optimizing all aspects of our operation to better pursue the customer needs from vehicle sourcing to transaction, delivery, and after sales services. Going forward, we will continue to refine and upgrade our products and services. Which will be the key for driving high-quality sales growth through customer reputation. In terms of vehicle sourcing, we are actively increasing the number of cars we purchased from consumers. For example, around 25% of used cars in the retail inventory was procured from customers in this quarter. Notably, we further strengthened our used car purchase services from local consumers, which enabled us to further reduce procurement costs while boosting sales conversion rates in the region. SBS metric has proven the effective needs of our efforts. We will continue to expand into sourcing channels to purchase vehicles from consumers. We also rolled out our use NEV business in this quarter. We have already developed a core NEV inspection capabilities, such as for battery and motor inspection. While we're expanding our use NEV ApoCell facilities. We currently have five of the best-selling NEV's wholesale, including Tesla, Leo, Lee Auto, , BYD. Moreover, the continuous optimization of our supply chain also yield very encouraging results. By improving the synergies between each process throughout the supply chain cycle, we reduced the time needed to make the car we procure ready for sale by 30% in the quarter. In the meantime, we leveraged our big data analysis of market dynamics and consumer preferences to ensure we keep an optimal selection of cars in our inventory. As such, I will improve the vehicle selection approach enabled us to further refine and localize the structure of our vehicles in inventory. To voucher the opening of the Hefei IRC this quarter, we also ramp up our new medium marketing strategy. By leveraging live-streaming and show from video content on popular platforms, our marketing material had expanded its customer coverage and garnered excellent response and feedback. We were able to successfully reach our target customers, basically improving our marketing efficiency and reducing its costs through this new mix, marketing strategy. Now, moving on to our expectations for the fourth quarter fiscal year 2022. During these three months ending March 31, 2022, we have experienced a lockdown in Xi'an, as well as the expected Chinese New Year holiday off-season. As you know, Xi'an was the second provincial capitals city in China to shut down since the outbreak in 2020, our actually began to recover after the Chinese New Year holiday. And business is now back to its standard level before COVID19. However, driven by robust performance of our group a IRC, we expand our retail sales to continue to grow in the fourth quarter. Although the impact of the epidemic in Xi’an has brought forth new challenges, I have no doubt that our team has the capabilities to overcome these obstacles. We have the team that has strength in experience, skills, and feel united. And we are grateful to everyone's hardware and dedicated contributions. We have the right strategy in place and we will continue to provide customers with high-quality products and services. Our commitment to driving high-quality growth through customer reputation and creating long-term value for our customers and shareholders will always serve as the foundation of our business vision. With that, I'd like to turn the call over to our CFO, John, to walk you through the financial results. John, please.
John Lin: Okay, thanks DK. Hello, everyone. Thank you all for joining us today. I will walk you through our financial performance in the quarter that ended December 31st, 2021. In this quarter, our retail sales volume increased by 61.3% quarter-over-quarter. And our overall sales volume increased to 33.4% quarter-over-quarter. As a result, despite the COVID-19 impacts starting from mid-December, our revenue grew 46.5% quarter-over-quarter, the revenue guidance we should have had time. Contribution from our Hefei IRC was the key driver of our sales and revenue growth in the third quarter. The new IRC significantly boosted the scale of our retail inventory. In the second quarter, we only had one IRC in Xi'an with a total inventory of about 600 cars. The newly added Hefei IRC can reach up to 2,500 cars inventory. The increased inventory enabled us to ramp up our sales, enhance our operation efficiency, and improve our one-stop car shopping experience to our customers. Thanks to the opening of Hefei IRC, we can keep our retail growth momentum, both in Q3 and that will be in Q4. With the opening of Hefei IRC in Q3, we incurred additional costs and expenses on construction, renovations, site rental, and new employees. We also invested in additional marketing for customer acquisition in Hefei City, as well as entire Anhui Province to maximize our branding the regional markets. Other than that, we continue to operate our business in the leanest way possible. We plan carefully and we only invest in key areas that will extend our vehicle acquisition, improve our technology leadership, and refine our supply chain system. Our business progress and operation optimization have been executed steadily following our long-term development plan, and we received a further capital injection from our strategic investors. With respect to the financing transaction with NIO Capital and Joy Capital, last Friday or March 25th, we received a $10 million from the segment close. We also expect to receive the remaining $12.5 million from the segment closing in the coming months. In addition, we are on track with the investors about the execution of the $165 million warrant. Now I will run through some key financials. Our numbers are in RMB terms, unless otherwise noted. For the revenue was $506.6 five million, representing a quarter-over-quarter growth of 46.5% and a year-over-year growth of 56.9%. Gross margin was 4.1%, stable compared to with 4.2% last quarter. Total operating expenses were $120 million compared to $285.9 million in the prior quarter, and a $188.3 million in the same period the last time. As I shared earlier, during this quarter we incurred expenses and preparation of the launch shop new Hefei IRC, and we also invested in additional marketing. Non-GAAP adjusted loss from continuing operations was $68.6 million compared with $43.2 million last quarter and a $162.5 million in the same period of last year. Similar to last quarter, there was a fair value impact related to our financing transaction. The shire price was $1.58 per ADS on December 31st, 2021, compared with $2.76 per ADS on September 30th, 2021. This resulted in a non-cash gain of RMB 1.36 billion from air value change of the warrant liabilities and forward the liabilities on our balance sheet. I would like to reiterate that this fair value impact was a non-cash thing and it was not a result of our operations. Consequently, net income from continuing operations was a net gain of RMB 1.28 billion in the first quarter compared with a net loss of RMB 1.71 billion in the last quarter, and a net loss of RMB 172.9 million in the same period last year. If removing the fair value adjustment impact the non-GAAP adjusted net loss from continuing operation was 80.2 RMB million compared with a net loss of RMB 56.9 million and a net loss of RMB 171 million in the same period last year. Then about our cash position as of December 31st, 2021, we had a cash and cash equivalent of RMB 161.3 million. Moving on to our Q4 guidance. In the fourth quarter, we are facing two major challenges. One has the citywide lockdown in Schieien from late December to late January. And the other one is the traditional spring festival off season in . We expect our total revenues to be in the range of RMB 440 million to 460 million for the three months ended March 31, 2022. Although our revenue growth slows down a little bit, we expect our retail sales volume to continue to increase. Please note that this forecast reflects our current and preliminary views on the market and operational conditions which are subject to changes. With that, it concludes our prepared remarks. Thanks.
Operator: And our first question comes from Marcol Rickenfell(ph) with American Trust.
Marcol Rickenfell: Okay. Yes. Given the recent increased COVID-related lockdown in China, what is the impact to your vehicle inventory center and retail sales growth for 2022 going forward calendar year? I'm sorry, I don't speak Chinese.
Kun Dai: No problem. I got your question. So, this is DK. I do try to you Chinese to answer the question and my colleague will translate to English.
Joyce Tang: Our business was definitely affected by the resurgence of COVID-19 and a Chinese New Year up season. In particular, operations of our CII, IRC were severely disrupted by COVID-19. However, as we successfully launched our Hefei IRC in November last year, its robust performance helping us to mitigate some of the impact. After the Chinese New Year holiday, our IRC has also renewed its growth gross category as it sales volume has surpassed its, pre -COVID level. During the fourth quarter, our Xi'an IRC continued to experience disruption caused by lingering COVID effect. However, we expanded strong momentum of our Hefei IRC to enable us to offset the impact and sustain our growth in terms of retail sales volumes. In fact, for the full year of 2022, we retail and total sales volumes to achieve solid sequential growth. Also, we are always able to conduct our business across the country when certain regions are impacted by COVID. Our online and offline sales model has integrated our offline stores with our -- using online super mall. This integration allows us to better diversify risks and minimize the impact of COVID-19. Thanks for the question.
Operator: Again, ladies and gentlemen, Our next question comes from Yin Ying (ph) with China Securities. Your line is open, you can ask your question, Yin Ying (ph). If your line is muted could you please unmute the line, The China Securities company you can go ahead and ask your question. Your line is open.
Yin Ying: Joyce Tang: Okay. Please, allow me to translate those questions to English. The first question is, can you share more details on the trend of inventory turnover and average the selling price during 2021? Also, what's your view on the current competition with as well as traditional car dealers?
Kun Dai: Joyce Tang: Okay. For your first question on turnover, our IRC s are at different stage of development of maturity. As we launched our Xi'an IRC in March 2021 and our Hefei IRC in November 2021. Overall, our turnover is around six days as a whole. As for the transition price, our current price of the retail via associates around RMB 140,000 for . Going forward, we will continue to diversify our selection of vehicles, and as such I think our average price will reduce to around RMB 100,000 to RMB 120,000, which is more suitable for the diverse needs for customers. Regarding computation, we and our peers are all focused on developing a business model that can facilitate our development. The used - vehicle market demands and highly fragmented. We all share the common goal of bringing innovation to this traditional industry and creating a better shopping experience for our customers. In terms of our advantage, the customers are our focus, as we have always prioritized customer perception to improve the quality of our growth. We have the largest self-operating to provide customers with a wide selection of vehicles to choose from. We also have our fashion and re-conditioners center with industry-leading technology and capabilities. All vehicles will undergo a number of itemized inspection and reconditioning to ensure our cars has the highest vendor of quality. We also have the most advanced online and offline integrated retail model. We were the first one in China to sell used cars online nationwide, removing the geographical barrier for customers. Now, our vehicles are delivered to the door steps of our customers in more than 200 cities across China, within four days. In addition, our largest scale and centralized warehouse-style retail model has cited cost efficiency. For the next question from Yin Ying is that, what are your plans to file your future expansion?
John Lin: Joyce Tang: As we mentioned before, please sign financing agreement with NIO Capital and Joy Capital in July 2021 for the total consideration of $300 million. As part of this agreement, we received the first tranche of $100 million in July 2021. The second change has a total consideration of $15 million. On March 25th this year, we received $10 million of the second tranche. As such, we have received totally $137.5 million for the financing and about $37.5 million from the second tranche. And we expect to receive the remaining $12.5 million soon. On top of this, will received up a total of $155 million warrants to the asset size by our investors. We are currently working on the warrant program with our investors based on the pace of our expansion and its needs for cash ingestion. With this money, we aim to continue and extending our IRC network to stand our business growth in the long term as we expect the for used car products and services. Thanks for your questions.
Operator: For next question comes from Fei Dai with TF Securities.
Fei Dai: Repeat my question in English. According to the financial report, Hefei IRC has had a positive impact on the company's performance. Wealth expansion of the company in the future will a more offline heavy asset. What do you think of the future development of the China used car market? How will the company cope with change that has been seen now? Thank you.
Kun Dai: Joyce Tang: Our offline investments are mainly channeled into our IRC or invasion and reconditioning centers. This investment enables us to scale our reconditioning capability. As we scale up, we are able to better manage the reconditioning process, and centralized the procurement of reconditioning consumables which inserts more negotiation power with our suppliers. At the same time, we are constantly refining our reconditioning technologies and process, leading to higher efficiency. These improvements will help us to reduce our costs. As such, our investment in IRC further fortify competitive remarks. We are committed to the omni -channel sales model that integrates online sales with warehouse style operations. Regardless of whether consumer buy online, or with our offline source directly, the quality and price of vehicles, they say, are the same. We have accumulated extensive experience in online sales from building and operating China's leading online used car shopping destination using online supermall. A lot of consumers know our name through our online reputation. Meanwhile, we are accelerating our penetration into regional markets while expanding our offline influence. So our online and offline operations and complement each other. In 2021, the used-car market in China continue to grow as its self volume exceeding 70 million units or 1 trillion RMB in transaction volume value. Any release has been on the rise in recent years, and they will get back in Italy an important component of the market in the future. For retail, no used-car dealership had market share of more than 1% in terms of sales volumes in China. Efforts were made to be massive and highly benefited. In recent years, consumers are increasingly comfortable with buying used cars. However, the major pinpoints of the traditional used car industry are yet to be address. This is why we are actively developing our staff operating used car sales model to strengthen our reconditioning and service capabilities. In addition, we are also developing services for NUVs. We may all update investments in order to provide customers with reliable and safe used car products to fulfill their needs for high-quality used car. While we maintain an efficient operating systems, we'll keep investing to strengthen our core competitiveness and further improve our operational efficiency. Thank you for your questions.
Operator: Thank you. We reached the end of the question and answer conference back to management for any closing remarks.
Joyce Tang: Thank you for joining our conference call today, we look forward to see you next time.
Kun Dai: Operator: Ladies and gentlemen, this does conclude today's presentation. You may now disconnect, and have a wonderful day.
