Uxin Limited (UXIN)

Earnings Call: Q2 2019

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Sep 23, 2019

Ladies and gentlemen, thank you for standing by. Welcome to Uxin Second Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen only mode. After management 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 would now like to turn the call over to Nancy Song, Investor Relations Director of Uxin. Thank you. Please go ahead. Thank you, operator. Hello, everyone. Welcome to Uxin's Q2 2019 conference call. Today, D. K, our Founder and CEO and Zhen Zeng, our CFO, will discuss our financial results for the Q2. Following the prepared remarks, D. K. And Zhen will be available to answer your questions. Before we start, I'd like to remind you that our statements today will contain forward looking statements that we make under the Safe Harbor provisions 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 risks and uncertainties, which could cause actual results to differ materially from our expectations. Uxin does not undertake any obligation to update any forward looking statements, except as required under applicable laws. For more information about the potential risks and uncertainties, please refer to the company's filings with the SEC. With that, I will now turn the call over to our CEO, D. K. Please. K. Wei:] Thank you, Nancy. Hello, everyone. Thank you for joining our Q2 2019 earnings conference call. As you may already know, we announced a proposed transaction with Golden Passer to divest our loan facilitation related business this July. As a result, going forward, we will completely divest our 2C intra regional business, no longer provide a guaranteed services for the 2C cross region business, divest the corresponding assets and liability and therefore significantly relieve ourselves of guaranteeing obligation for the existing loan balance of the loan previously facilitated by us. Our 2C business now solely consists of online used car transactions, which previously were recorded as 2C cross region transactions. The corresponding revenue streams are now commission revenue and value added service revenue. Before we dive into more details of the proposed transaction, let me first give a quick recap of our Q2 performance. It is important to note that the financial impact of the proposed transaction has already been reflected in our Q2 results as required by the accounting policy. With relevant revenue, costs and operating expenses of discontinued operations excluded from our financial results. We are pleased to report another strong quarter with a 58% year over year increase in total revenue to RMB439 1,000,000. In particular, our 2C business continued a strong growth path. In the Q2, our 2C revenue substantially increased 11 times year over year to RMB322 1,000,000, contributing 73 percent of total revenues. Looking at our 2C business in more detail, we continued to see robust momentum in our online used car transaction volume during the quarter. We completed over 24,500 unit transactions in our online shopping mall, up 500% year over year. This not only reflects the growing traction of our one stop online used car buying products and services, but also demonstrated consumers' increased acceptance of buying used cars online from us without actually seeing a car when making the purchase decision. As we create the sales opportunity and control the entire shopping progress, coupled with our comprehensive product and service offerings, we have maintained our strong ability to monetize online used car transaction and record a total 2 city rate of 11.2% per unit in the quarter, equivalent to per unit revenue of over RMB13000. We have also made notable progress on penetrating low tier city. Our nearly 800 of franchisee contribute over 30% of total 2C transaction volume in the quarter, significantly up from a low teen percentage in Q1. More on to our 2C business, because of our change of approach in serving consumers with car selling needs as well as dealers growing preference to sell used car on our 2C platform. As expected, our 2B transaction volume declined by 57% year over year to 39,500 units, but with take rate slightly increased to 3.7% in the quarter from 3.5% in a year ago period. Even through 2B revenue decreased to RMB68 1,000,000, 2B Business continues to serve as a complementary pillar of our business as it strengthens our relationship with dealers by offering them a high efficient auction channel to improve inventory turnover. We may also continue to provide favorable terms to our dealer customers on the 2B platform, so as to maintain customer stickiness and encourage them to expand collaboration on our 2C platform at the same time. With that, let me now share more color on the proposed transaction with Golden Passer. As we divest our loan facilitation related business, we will only provide financing product referral services going forward for those customers who want to finance their car purchased from our online shopping mall. And we no longer need to provide any guaranteed services. Accordingly, we will be freed from putting down restricted cash as deposit at a bank escrow accounts. This will gradually lower our capital needs, improve cash flow and therefore create a more favorable operating environment for our long term development. In addition, the divestiture will allow us to fully focus on fulfilling online used car transactions, which is exactly our growth priority and strategy. We have always been a transaction center platform since day 1. Now with our involved model of a national online used car dealer, we are even better positioned to make the most of our strong suit in executing online transactions. More importantly, we firmly believe that to purchase used car online is a clear and accelerating trend in China UConn market, mirroring exactly what has happened in the mature market overseas. Our strategy to focus all our resource on the online transaction area will enable us to better capture the massive market opportunities brought by this trend. With our 2C business becoming a pure player, we will be better suited to utilize our innovative supply chain and infrastructure to provide consumer with a full core value through our one stop online used car product and service offerings. First, a nationwide selection of used cars. As offset to limited local selection, we are able to expand our inventory from local to national reach by operating a virtual national inventory system with over 18,000 offline dealers being our inventory suppliers. In the second quarter, we provide a real time selection a real time selection of over 110,000 used cars in our online shopping mall. More importantly, under our national online used car dealer model, we don't take actual inventory risk Only when we receive 100% certain purchase order from the consumer who pay a 10% deposit for the purchase in advance, do we start to procure the inventory from the supplier. 2nd, online standardization for unstandardized products. Our standardized video inspection reports and VR display for used car create a high transparency on car condition. In addition, our sales consultant will also visit a customer in person and help them interpret video inspection reports, introduce car specifics, assess to them in selecting the car they prefer and help them execute the purchase. All of this will give consumer great piece great peace of mind buying a big ticket item online. 3rd, a one stop online purchasing experience. In addition to selling a used car, we also provide financing and insurance product referrals and a comprehensive warranting program as value added service, plus comprehensive return policy to better meet consumers' various needs and offer overall solutions. 4th, national fulfillment services. We have built up a national logistic network to make sure every used car will sell online we sell online can be delivered to the consumer on time. We also provide offline title transfer assistant to ensure a seamless and hassle free ownership transfer between cities. Our well rounded fulfillment services make online shopping for a used car finally as convenient as buying any other standardized product online. Looking ahead, we are excited about our growth potential in the year to come. We believe our new more focused business structure will boost our core value and more importantly enable us to leverage the market trend and the growth opportunity in online used car transaction in China. That's at the headwinds that China overall auto market has been facing since last year. We believe the used car market is more resilient in a down cycle because of used car better price to performance. There is a great growth potential in the coming year in the size of the China market. It is of course important to note that with the earlier adoption of China 6, the new emission standard, several regions experienced a drag in used car sales to some extent, and we have felt a certain effect as well. However, we believe the youth comp market will gradually digest the effort effect and the macro environment will improve after short term adjustment. Amidst this environment, we have completed 38,000 online used car transaction on our platform in full year 2018 and aim to complete over 100,000 units this year. We are excited about the achievement to date and the target that we set for 2019. It's demonstrated we have been winning over trust from a faster growing group of consumers who have accepted the revolutionary way of purchasing used car online from us without seeing the actual car when they make the purchase decision. This is particularly encouraging that our online used car transaction model has not only proven, will accept it, but also has lead us into a whole new chapter in China used car sector. We are confident that as we continue to enhance our value proposition to consumers and consistently execute our growth strategy to expand online used car transaction business, we can maintain a strong momentum in the transaction volume share and build a more sustainable business over the long term. With that, I would like to turn the call over to our CFO, Dong Zhen to talk through our financials. Zeng, please go ahead. Okay. Thanks, D. K. Hello, everyone. We are pleased to deliver another set of strong results for the Q2. Before we go through the financial details, let me give you an overview on how the proposed transaction with Golden Pacer reshapes our financial profile. Please note that all the discussion and the comparison below are on an apple to apple basis. Given the divestiture and in accordance with the applicable accounting standards, we significantly relieve ourselves of guarantee obligations for existing loan balance of RMB33.2 billion as of June 30, 2019 for the used car loans previously facilitated by us. In addition, assets of RMB3.9 billion and liabilities of RMB0.9 billion were reclassified as the assets and liabilities had for sale on our consolidated balance sheet as of June 30, 2019. And a result of operations related to the divested business were reported as net loss or income from operations of discontinued operations. Revenue of discontinued operations and its corresponding cost of revenue and operating expenses for the Q2 of 2019 were RMB464 1,000,000, RMB89 1,000,000 and RMB378 1,000,000 respectively. The proposed divestiture will effectively lower our capital needs for and improve our cash flow, setting a solid foundation for our sustainable growth going forward. And P and L wise, our 2C revenue stream now include commission revenue and value added service revenue. As D. K. Mentioned earlier, our strong ability to monetize online used car transactions remains unchanged. We are confident that we can build up the scale in the top line for 2C online used car transaction on a more solid and sustainable basis as we fully focus on expanding this business deal. The proposed transaction is expected to temporarily impact the gross margin due to our cost structure. Our cost of revenues mainly includes the salary of inspection professionals and the cost related of offline logistics and the title transfer. These cost items are more associated with our continuing operations. So the majority remain within the lease call. We are confident that the gross margin will further improve over time as we continue to achieve better economy of scale, convert more used car sales with us aiding too many used cars inspected and further optimize the logistical routes and better utilize our delivery capacity with the transaction volume growing larger. Our ability on the front is evidenced by our gross margin improved to 53% in the quarter from 42% in the prior year period. In terms of operating expenses, the proposed divestiture will save us a significant portion of the operating expenses, mainly due to the relevant employees will be transferred to The Golden Pacer accordingly. We have also streamlined the business operations to improve employee productivity. As we continue to take prudent measures in cost and expenses management, we believe our faster growing online used car transaction volume will bring us greater economy of scale and higher operating leverage. With all the measures in place and being executed, combined with our more focused business model and the streamlined operations, we are confident that we will be able to achieve profitability as soon as possible in the coming years. Now, let me walk you through our financial details for the Q2. Please note that all discussions below relates to continued operations only. All numbers are in RMB unless otherwise stated. Also, please note that some numbers I refer to are non GAAP. You can find a reconciliation of these numbers in our earnings release. In the Q2, total revenues increased by 58% to RMB439 1,000,000 from RMB277 1,000,000 in the prior year period. The increase was primarily due to the increases in 2C transaction volume, GMV, commission rate and value added service take rate. Turning down to our business pillars. In terms of our 2C business, total 2C revenue were RMB322 1,000,000, representing a substantial increase of 11 times year over year from RMB RMB28 1,000,000 in the prior year period. Online used car transaction volume increased by 500% year over year to 24,585 units and its corresponding GMV increased by 4 82% year over year to RMB2864 1,000,000. Moving on to more details, Commission revenue was RMB179 1,000,000, representing a substantial increase of 893 percent from RMB18 1,000,000 in the same period last year, primarily due to the increases in the transaction volume, GMV and commission rate. Benefiting from our enhanced service, improve our user experience and higher pricing power, commission rate increased to 6.2% from 3.7% in the same period last year. Value added service revenue was RMB144 1,000,000, representing a substantial increase of 14 times from RMB10 1,000,000 in the same period last year, primarily due to the increases in the transaction volume, GMV and VAS take rate. The VAS take rate increased to 5% from 1.9% in the same period last year. Due to our optimized services, which will result in a higher pricing power and a higher percentage of 2C online use per transaction that are successfully referred with VES. In terms of our 2B business, 2B transaction facilitation revenue was RMB68 1,000,000, representing a decrease of 57% year over year. Our take rate for 2B transaction facilitation slightly increased to 3.7% from 3.5% in the prior year period. Cost of revenues increased by 27% year over year to RMB205 1,000,000. The increase was primarily due to the increases in fulfillment cost, which was corresponding driven by the increase in our transaction volume, as well as the increase in salaries and the benefits of employees engaged in car inspection, quality control, customer service and after sales service. Gross profit increased by 101 percent to RMB234 1,000,000 from RMB116 1,000,000 in the prior year period. Gross margin increased to 53% in the quarter compared to 42% in the prior year period, driven by the better economy of scale. Total operating expenses were RMB577 1,000,000. Non GAAP operating expenses, excluding share based compensation, was RMB550 1,000,000. Sales and marketing expenses decreased by 14% year over year to RMB347 1,000,000. The decrease the decline reflects our continuous efforts to enhance operating efficiency. Sales and marketing expenses, excluding share based compensation expenses of NIO as a percentage of total revenue decreased to 79% during the quarter from 144% in the prior year period. G and A expenses decreased by 81% to RMB174 1,000,000. The decrease was primarily attributable to the decrease in the share based compensation expenses. G and A expenses, excluding share based compensation expenses, was RMB147 1,000,000, representing 33% of total revenue in the quarter, compared to 31% in the prior year period. R and D expenses increased by 28% to RMB56 1,000,000. The increase was primarily due to the increase in the salaries and benefits expenses. R and D expenses, excluding share based compensation expenses, was RMB56 1,000,000, representing 13% of total revenue in the quarter, compared to 10% in the prior year period. Loss from continuing operations was RMB342 1,000,000, a decrease from RMB1258 1,000,000 in the prior year period. Non GAAP loss from continuing operations, which excluding share based compensation expenses was RMB315 1,000,000, a decrease from RMB398 1,000,000 in the prior year period. Non GAAP loss from continuing operations as a percentage of total revenue was 72%, a significant decrease from 143% in the prior year period. Fair value change of derivative liabilities was nil in the quarter, compared to a gain of RMB1544 1,000,000 in the prior year period. We no longer see any impact of derivative liabilities as the preferred shares were converted into ordinary share at the time of IPO. Net loss from continuing operations was RMB360 1,000,000, compared to a net income from continuing operations of RMB285 1,000,000 in the prior year period. The change was mainly due to that of the fair value change of the relative liabilities no longer exists in the quarter compared again in the same period last year. Non GAAP net loss from continuing operations, which exclude the share based compensation expenses, was RMB333 1,000,000 in the quarter, a decrease from RMB399 1,000,000 in the prior year period. Non GAAP net loss from continuing operations as a percentage of total revenue was 76%, decreasing significantly from 144% in the prior year period. Turning to our cash position. As of June 30, 2019, we have cash and cash equivalents of RMB783 1,000,000. Moving on to the guidance, factoring the divestiture of our loan facilitation related business to Golden Paper, we expect the total revenue for the Q3 of 2019 to be in the range of RMB440 1,000,000 to RMB460 1,000,000, excluding the loan facilitation related business. This forecast reflects the company's current and the primary view on the market and operational conditions, which are subject to change. That concludes our prepared remarks. Thank you, Ms. Zhu Zeng. Operator, we'd like to open the call for questions now. Certainly. First question comes from the line of Eddie Huang from Morgan Stanley. Please go ahead. I have two questions. The first is that given our current strategy is more concentrated on the online used car transaction business, May I have your view on the used car e commerce industry? Does that mean that for the industry wise, we have passed the stage of market share as the first priority and the leading used car platform will leverage on their own advantages and more focus on their own strategies? And what's the implication in terms of the competition? Will the competition among this leading platform be not as intense as before? This is the first question. And second question is about the our strategic investor, Wubba. Is there any incorporation or synergy we can share after they become our strategic investor in the Q2? Thank you. Okay. Yes. So look at the overall industry. So over the past few years, all the industry players are trying different models. We don't want to take more time to look back about that history, but now let me introduce how we look at the comparable mature market in the U. S. Yes. So if we look at the U. S. Market, 2 major players are CarMax and Carvana. So look at CarMax after their decades of operation, based on their current volume, their current market share is around 2%. If we look at Carvana, the U. S. Online used car e commerce platform, based on their volume projection this year, their market share would be like 0.5%. Yes. So purchasing a used car is a low frequency activity. So normally, it would take like 3 to 4 years before a consumer to buy a second car. So if we look at the transaction frequency, if we look at for our B2B business, if we see more higher volume or the scale, it will be the right strategy. But it is not necessarily true for our 2C business because for individual purchasers, there would be more take more years before they can buy their second car. So in this case, we care more or the consumers care more about the service. And for us, we care more about service and as well as the per unit margins and how we can write down the per unit cost. So that's our focus. Yes. So for online used car transactions, we believe the ceiling is quite high. So because the actually for the traditional way of purchasing used car, the selection in a local city is quite limited. But for us, our real time inventory supply on our platform was about 110,000 used cars in Q2. So we believe we are the best choice for the consumers. So we believe chasing for the high quality of services and to maintain a high level of per unit revenue as well as achieve better margin profile for per unit will be our target and the focus. Yes. So Uber and us are 2 leading used car platforms for China's consumers. So in terms of the traffic preparation, over the past few months, if investors look at Wubaz applications, our inventory has already been available on their platform and also our customized and standardized video inspection reports are also available on BaaS application as well as their customer profile, customer information are also there. So we also have the algorithms being optimized to pre assess what the consumers' preferences are as well. Yes. So our cooperation with Ooma has been benefiting us quite a lot. We get more users from Ooma. So over the past 3 months, if we look at the effective users, it's actually accounting for about 15% of our total effective users. Yes. Our high quality inventory have been available on Wubast platform will also benefit Wubast user and their customers to have a better purchasing experience. Yes. When we move to the next level of our cooperation, we will work more on the inventory data sharing as well as the user data sharing. So based on the data analytics and who build our models, we will enhance our ability to recommend relevant inventory to the consumers. So as we mentioned, the previous two benefits that we can mutually enjoy from each other, we believe we will further drive the synergies out of it. Thank you. Thank you for the questions. Next question comes from the line of Ronald Keung from Goldman Sachs. Please go ahead. Thank you. Thank you for taking my question. And I have two questions, Michael and Nancy. First is, I see we're now focusing on interregional. So can you share what is the profile of your buyers maybe in the past quarter by city tiers, so we could understand how lower tier city focused or what kind of focus we are on the user side? And how do we see cross regional volumes will track as a percentage of nationwide transactions and our market share in that segment? 2nd is, could you walk through some of the unit economics? We hear how unit revenue per car is now around RMB13000. So I want to hear what is the path to profitability based on our current model on the revenue side and maybe on the cost side? And are there any sort of volumes that we need to reach in order to cover the fixed cost and to a path of profitability? Thank you. Yes. So I'd like to address these questions from 2 aspects. So for the past 20 months, if we look at our online used car transactions in our inter regional business, our clientele are normally the group of consumers with relatively high purchasing budgets. They're normally the mid to high end customers. This is also evidenced by our ASP of around RMB110000 currently. So this group of consumers are caring more about the rich selection of used cars. So normally they have their preference of a certain car makes and models, interiors and colors, etcetera. Yes. So this type of consumers normally have higher requirements for the used cars and services. So they care more about the car condition, the after sales services as well as the convenience of the service. So all of the focus they care about are more in line with our value proposition to the consumers actually. Yes. So no matter in top tier for top tier cities or lower tier cities, our product and service offerings are equally attractive to them. So even for Beijing, the top tier cities in China, our inventory selection are also attractive to them. If we look at the price range of the car price, of our current ASP, RMB110000, if we look at this car price range, our selection can be like 20 to 30 fold larger than the local selection in Beijing. Yes. We started to penetrate into lower tier cities since last December. So if we look at our own transaction volume, about 40% comes from the lower tier cities and 6% from top tier cities. Yes. Going forward, we will penetrate into more lower tier cities because our value properties are more stronger in those cities. Yes. If we look at market share in certain cities, if we look at top tier cities, our market share there was close to 1%. If we look at lower tier cities, our value proposition is stronger in those cities. Our market share would be almost close to 2%. If we look at the transaction volume, whether it's intra regional or inter regional, our platform, actually the consumers don't know where the inventory is located. So but if we look at the breakdown, 92% are the profitable transactions and only 8% happened locally. Okay. Thanks, Ronald. It's Michael here. So I will address your second question on unit economics and the path to profitability. And for our top line, I think our current total 2C take rate was about 11.2% or to say our per unit revenue of one car is over RMB13000. So we are confident that we can continuously to increase our 2C take rate and we still have the room or space to increase that because we are continuing to enhance our value proposition to our consumer. And for our cost, and I think there are mainly 2 items, one is the inspection and one is logistic and the type of transfer. And for the over the inspection, and that's mainly the salary then benefits on inspection professionals. And our strategy is we don't expect to aid too many professionals to inspect more used car in the future. Instead, we focus more on the conversion from cars inspected to the cars sold. So we also will filter the car for the inspection by the sustainable price range and the no material damage, car conditions. So we will select the car, which will be inspect in order to save the inspection productivity only for those qualified cars. With optimized inventory structure, we believe we can sell much more cars without expecting equally that many. This will greatly drive down the per unit inspection cost. And for the logistic and delivery, as we grow our transaction volume, we are able to further optimize the delivery route planning and better utilize our delivery capacity. This will also significantly lower our per unit delivery cost. And our ability to on the front, it's actually evidenced by our gross margin improved to 53% in the quarter from 42% in the prior year period. And looking ahead, we are confident that we can further improve gross margin as we continue to grow our scale, increase the take rate and optimize each the cost item. And for the OpEx, we now more focus on the conversion of our traffic. So we will continue to optimize the traffic acquisition channel to generate more cost effective sales leads and enhance the conversion rate. And with the traffic spending stabilized at a current level, we are confident to lower the per unit traffic acquisition cost as well. And for your for the number, I think that with all the optimization measures in place, we believe we can reach the breakeven point when we carry out about 50,000 cars per quarter. Thanks, Ronald. Thank you, D. A. Thank you, Michael. Thank you for the questions. Next question comes from the line of Ashley Xu from Credit Suisse. Please go ahead. Thanks, management, for taking my questions. Two questions from me representing Tina. The first one is about target volume growth for this year in 2C Business and what would be the key drivers? And the second question is about the cross regional business. What do you see as the major challenges ahead and how to solve them? Thank you. Yes. So with our first half transaction volume was over 44,000 units. We are looking at over 100,000 transactions for the whole year. Yes. So look at the look at longer term, as we just mentioned, based on our value propositions, we believe we can further drive our transaction volume. So the first one is the wide selection of used cars. And now based on our AI intelligence system, we have a better understanding of people's preference and know which type of inventory are more preferred by the consumers and enhance our inventory structure. The rest 3 of the values are the online standardization, one stop purchasing experience and our offline fulfillment network. So for the online television, we will enhance our ability to provide the most accurate conditions for car conditions for the consumers. And for the 1 stop solution, we will enrich our value added services and for the fulfillment, we will make it make the delivery more convenient to the consumer. So all of the three values will build up our brand and increase the word-of-mouth among the consumers. Yes. So the 3rd driver is our sales productivity and sales productivity. So because online used car transaction is a whole new model for the consumers as well as for our sales force. So how to convince consumers to buy the car without seeing the car in the 1st place is important. So the seniority of our sales staff are important for us to drive up the volume. So if we look at our sales people, if they've been with us for more than 12 months, their sales per barrel rate is much higher than the new guys in terms of if they receive the same bunch of sales rate. So our focus will be increasing the sales productivity and the converge from our sales force. Yes. So for your second question, the challenges this year, we think comes more from the micro side. So the first one is the overall auto market is facing some headwinds, though the used car market is less affected than the new car market. Yes. Another factor is the early adoption of China's new emission standard. So the early adoption did drag the used car sales in some cities or about 40 cities in China. Given the China six standard is pretty newly introduced, they're actually like I mean, there are no enough used car inventory supplied in the used car market. Yes. For the overall auto market, we think the market condition will improve because we think the current car ownership in China is still low. So with the macro economy is picking up, the auto market will pick up as well. Regarding the China 6 new emission standard, the government policy actually rules out these 40 cities from the restrictions of the car cross regional connections. But besides that, we don't see more cities will adopt the new standard in the short term. Yes. So if we look at looking into next year, in the first half, we think there will be more used car with high I mean, the new emission standard used car will be supplied to the market. Thank you. Thank you for the questions. The last question comes from the line of Rebecca Wen from JPMorgan. Please go ahead. Hello. This is Rebecca from JPMorgan. I'm asking for Alex Yao. So my first question is, what's the reason for the massive uptick of the 2nd 2C transaction take rate from 6% to 11% in the second quarter. Could you provide us with some breakdown? And also any guidance for the take rate in the second half of the year or longer term? And second question is on the business model transition. What's the long term implication to business risk and scalability? Thank you. So, okay, I'll address your first question about the take rate. It's Martin here. So, in terms of the total 2C take rate, so as a result of that very best feature, our 2C revenue stream now is converted to the commission revenue and the value added service revenue. Accordingly, we changed the commission rate and value added service take rate from the consumer. So thanks to the sales opportunity we create, our control and the entire shopping process and our comprehensive product and service offering, our ability to monetize online used car transaction remain as strong as before. So this is evidenced by our total 2CK rate to 11.2% per unit in the quarter, up from 5.6% in the same period last year. I think our strong monetization ability is also well supported by our unmatched value proposition to the consumer. So like D. K. Mentioned, we have the 4 main value proposition. 1st, the nationwide selection of used car, which is much wider than the local market can provide. And the second, the online standardization for the unstandardized products, such as the standardized video inspection report and the VR display for the used car, which creates higher transparency on the car condition and thus gave the consumer greater peace of mind buying the used car online. And the third is a one stop online purchasing experience, which means we recommend the value added service to the best to meet the consumers' various needs. And the last but not least, the national service and the fulfillment network, which make online purchase of used car as convenient as buying another standardized product online. So we believe our the 4 core value propositions enable us to maintain our total 2 CTA rate at a similar level and to that before we divest the loan facilitation related business. Yes. As we previously mentioned, online used car transactions will be an accelerating trend globally because it brings greater value to consumers that we just mentioned, the wide selection of used cars as well as better prices provided to the consumers. So they have higher paying or revenue power during the process. And the third one is the transparency on the car condition. So with the online used car transaction products and the service offerings, consumers can finally enjoy standard services in the used car when they purchase used car, the same as they purchase a new car. Yes. So maybe against the trend, I think the largest risk for us is all about execution. That is to say how we can further enhance user experience. And because this is a whole new experience for consumers to purchase a car without seeing the car actually physically seeing the car. So how we can convince them to choose to do so is more important. Yes. So the transparency on card condition, how we can help consumers to better understand the card condition as well as if we can deliver the card in time, whether we can provide well rounded after services and the products, all of the three things are very important to enhance user experience. So I think our challenges are more on this front. That is why we will focus not only our capitals or our resources on this business, but also for our all of the management and our employees will work together to work towards this initiative. Thank you. Thank you for the questions. There are no more questions from the line. I would like to hand the call back to management for closing. Thank you everyone for joining our call today and for your continued support for Uxin. We look forward to speaking to you again in the near future. Thank you. Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation. You may now disconnect your lines.

• Earnings release