Earnings Call: Q4 2018

Mar 14, 2019

Earnings release

Ladies and gentlemen, thank you for standing by, and welcome to Uxin's 4th Quarter and Full Year 2018 Earnings Conference Call. At this time, all participants are in a listen only mode. After management's prepared remarks, there will be a Q and A 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. Please go ahead. Thank you, operator. Hello, everyone. Welcome to Uxin's 4th quarter and full year 2018 conference call. Today, D. K, our Founder and CEO and Zhen Zeng, our CFO, will discuss our financial results. Following their prepared remarks, D. K. And Zhen will address any questions you have. Before we start, I would 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 made 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 law. 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, T. K. Please. Thank you, Nancy. Hello, everyone. Thank you for joining our Q4 full year 2018 earnings conference call. We are pleased to report that we ended the year with another set of strong results. Total revenue in the 4th quarter increased by 62% to RMB1.1 billion, exceeding the high end of our guidance. Thanks to our large business scale and present control of cost and operating expenses, we continue to gain operating leverage during the Q4. As a result, non GAAP net loss narrowed to RMB242 1,000,000, declined by over 50% both year over year and quarter over quarter. It's also very encouraging to see that our gross profit now covers all of our sales and marketing expenses, taking us one step closer to profitability. In the Q4, our 2C business continued to drive overall growth. We facilitated over 160,000 used car transactions on our 2C platform, almost doubling the number in the same period last year. Total 2C revenue, including revenues from both transaction facilitation and loan facilitation, increased by 118% year over year to RMB937 1,000,000, which contribute 82% of our total revenue. We are particularly excited to share that our cross region transactions experienced a remarkable growth during the quarter. The transaction volume in the category exceeded 10,000 used cars in December alone and over 22,000 for the quarter, compared to only a few 100 in Q4 2017. This reflects the game changing impact that our business model has had on China used car supply chain, as well as growing consumer recognition of Uxin brand and services. Uxin's leadership in facilitating cross region transaction in China is unmatched. It's a play a key role in bridging used car demand and supply between different tiers of cities across the country. By leveraging Uxin's unique offering of standardized inspection, offline fulfillment, title transfer as well as allroad after sales warranty services, we can efficiently provide a consumer in lower tier city with an unmatched purchasing experience and enable them to purchase large ticket items online without the need for the in person check-in. Due to the significant value we provided to our users, we have also made a significant progress on monetization. Our 2C transaction facilitation take rate increased to 2.4% in 4th quarter, compared to only 1.2% in Q4 last year. The significant increase was mainly driven by the high volume of cross region transactions, which had a take rate of 5.3 during the quarter, as well as a great pricing power generated from our optimized services. This translated into a 263 percent year over year increase in our 2C transaction facilitation revenues in 4th quarter, representing 33% of our 2C revenue, up from 23% in Q4 and 20% in same quarter last year. With a strong momentum in cross region transaction growth, we believe that the revenue contribution from 2C transaction facilitation will continue to increase. Turning to our 2C loan facilitation business. Revenue increased by 81% year over year to RMB620 1,000,000 during the quarter. Along with growth in 2C transaction volume, we achieved solid growth in the number of loan facilitated, with attach rate increasing to 47% and an average service fee rate of 7%. More importantly, our enhanced risk management capability throughout the entire finance life cycle enable us to further lower our M3 plus delinquency rate to 1.41 percent as of Q4 2018 from 1.43% as of Q3 2018. Through 2019, we will continue to increase our focus on the 2C business, especially the cross region transactions, where we see great growth potential To further strengthen our leadership on this front, we will continue to focus our effort in 4 key areas. First, we will penetrate the lower tier city, where we see rapidly growth demand for used cars. To better address customer needs, we will expand our current network by adopting a franchising model to complement our self operating services center. With this initiated, we aim to cover 1500 country level cities across China in 2019, enabling customer in these cities to buy their first dream car through our platform. 2nd, we will enhance our ability to display our used car inventory online in a standardized manner by leveraging our advanced inspection system. This will enrich our inventory base with more marketable used cars, which will in turn help our dealer customers increase inventory turnover and operating efficiency. We believe this will strengthen our relationships with dealers and build a solid foundation for them to also work with us on 2C side. 3rd, we will further develop our big data capability and AI technology. We will continue optimizing our AI driving price engine, which evaluated a car condition and provides buyer and a seller with price insights. This cutting edge technology help us helps customer quickly spend their car of choice from our massive online inventory. It also forecasts the reset value of used car, which enable dealers to efficiently management their operating risk. 4th, we will optimize overall services process to ensure a seamless one stop purchasing experience that cover every step of transaction from online selection to offline end to end fulfillment as well as after sales services. Moving on to our 2B business. Transaction volume decreased by 37% to 72,000 used cars and a corresponding revenue decreased by 16% to RMB145 1,000,000 in the 4th quarter. The decline reflect our ongoing strategy shifted to our 2C business. From a commercial perspective, we see much great growth potential in the 2C business. That side, the 2B business will continue to serve as an important aim of our group, as it enable us to maintaining strong relationship with our dealer customer and enhance the stickiness of our platform, thus facilitate our 2C growth. This is particularly the case on the B2B side, where our highly efficiency auction platform enable dealers to source used car and optimize inventory turnover, thereby minimizing inventory risk by delivering the type of value to dealer. We will encourage our dealer customer to expand collaboration on our 2C platform, especially in terms of cross region retail transactions. On the C2B side, with our change of approach to connecting dealer with individual, who are selling their used car, we now provide a dealer with inventory leads on more favorable terms. As we implement this strategy and continue to enhance our value proposition, We are confident that we will build on our position as China's largest used car e commerce platform and continue to redefine the used car industry. With that, I would like to turn the call over to our CFO, Zeng Zeng, to talk through our financial. Zeng, please. Okay. Thanks, D. K. Hello, everyone. Thanks for joining us today. Now let me walk you through our financial details of the Q4 and the full year of 2018. Note that 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 Q4, total revenue increased by 62% to RMB1137 million from RMB703 1,000,000 in the Q4 2017. The increase was primarily due to the increase in 2C transaction volume, transaction facilitation take rate and amount of loans facilitated. Drilling down to our 2C and 2B business, 2C transaction facilitation revenue was RMB317 1,000,000, an increase of 2 63% year over year from RMB87 1,000,000 in the Q4 2017, primarily due to a 94% increase in the 2C transaction volume. The year over year growth rate of our 2C transaction facilitation revenue has been accelerating throughout the year. Our 2C transaction facilitation take rate increased to 2.4% in the Q4 2018 from 1.2% in the Q4 2017. 2C loan facilitation revenue increased by 81% year over year RMB620 1,000,000, primarily driven by the increase in the transaction volume and the amount of loan facilitated. Our service fee rate was 7% during the quarter. The attach rate of loan facilitation service slightly increased to 47% in the quarter, mainly driven by the higher volume contribution from cross regional transactions. In terms of our 2B business, our 2B transaction facilitation revenue reached RMB146 1,000,000, representing a decrease of 16% year over year, primarily due to the decline in the transaction volume, which reflects our ongoing strategy shift to the 2C business. The decrease of 2B transaction volume was mainly because of our change of approach in serving customer with car selling needs, as well as the dealers growing appetite for retail transactions through our 2C platform. Our take rate for 2B transaction facilitation was 4.3% in the Q4 2018, up from 3.1% in the Q4 2017. Cost of revenues increased by 43% year over year to RMB353 1,000,000 in the Q4 2018, compared to RMB247 1,000,000 in the same period last year. This increase was primarily due to the increase in the cost of fulfillment, title transfer and the registration, which were correspondingly driven by the increase in the transaction volume, as well as the increase in the salaries and benefits of employees engaged in the car inspection, quality control, customer service and after sales service. Gross profit was RMB783 1,000,000 and gross margin was 69% in the Q4 of 2018, compared to 65% in the same period last year. Total operating expenses was RMB1049 1,000,000. Non GAAP operating expenses, excluding the share based compensation, were RMB977 1,000,000. Sales and marketing expenses decreased by 1% year over year to RMB689 1,000,000, compared to RMB694 1,000,000 in the same period last year. The well managed sales and marketing expenses reflects our continuous efforts on increasing operating efficiency and focusing on conversion. Sales and marketing expenses, excluding share based compensation expenses as a percentage of total revenue, decreased to 61% during the quarter from 99% in the Q4 2017. G and A expenses increased by 79% year over year to RMB272 1,000,000 in the Q4 2018 from RMB152 1,000,000 in the same period last year. The increase was primarily attributable to the increase in the salaries and benefits expenses, share based compensation expenses and professional service fees. G and A expenses, excluding the impact of the share based compensation expenses was RMB201 1,000,000, representing 18% of total revenue in the quarter, compared to 18% in the Q4 2017. R and D expenses increased by 23% year over year to RMB97 1,000,000 in the Q4 2018 from RMB78 1,000,000 in the corresponding period last year. The increase was primarily due to the increase in salaries and benefits expenses. R and D expenses, excluding the impact of share based compensation expenses was RMB96 1,000,000, representing 8% of total revenue in the quarter, decreasing from 11% in the Q4 2017. We are confident that we are increasing operating leverage and the prudent approach to expenses management will continue to improve our profitability over time. Gain from the guarantee liability was RMB8 1,000,000 compared to a loss RMB15 1,000,000 in the prior year period. The gain was a result of a slight decrease in the delinquency rate compared to that of the Q3 of 2018. Loss from operations in the Q4 2018 was RMB266 1,000,000 compared to a loss of RMB483 1,000,000 in the prior year period. Non GAAP loss from operations, which exclude share based compensation expenses, was RMB194 1,000,000, compared to RMB455 1,000,000 in the same period last year. Non GAAP loss from operations as a percentage of total revenue was 17% in the Q4 2018, decreased from 65% in the Q4 2017. The change in fair value of the derivative liabilities was nil in the Q4 2018, compared to a loss of RMB385 1,000,000 in the same period last year. We no longer see any impact of derivative liabilities as the preferred shares were converted into the ordinary shares at the time of IPO. Net loss in the Q4 2018 was RMB315 1,000,000 compared to a net loss of RMB902 1,000,000 in the prior year period. The narrowed net loss was primarily due to the greater operating leverage and the decrease in the loss from fair value change of derivative liabilities. Non GAAP net loss, which excludes share based compensation expenses, was RMB242 1,000,000 in the quarter, compared to a loss of RMB489 1,000,000 in the prior year period. Non GAAP adjusted net loss as a percentage of total revenue was 21% in the Q4 2018, decreased from 69% in the Q4 2017. Now turning to our cash position. As of 31st December 2018, Uxin had cash and cash equivalents of RMB801 1,000,000 compared to RMB677 1,000,000 as in of Q3 2018 and RMB292 1,000,000 at the end of Q4 2017. The company had a short term time deposit and other investment products of RMB596 1,000,000 compared to RMB581 1,000,000 at the end of Q3 2018 and RMB1 1,000,000 as of the end of Q4 2017. The company has a restricted cash of RMB2013 1,000,000 compared to RMB1838 1,000,000 at the end of Q3 2018 and RMB1617 1,000,000 at the end of Q4 2017. So that was the 4th quarter results. Now let me briefly walk you through some highlights of the full year results. In the full year 2018, total revenue increased by 70% year over year to RMB3315 1,000,000 compared to RMB1951 1,000,000 in the 2017. Drilling down to our 2C and the 2B business units, 2C transaction facilitation revenue increased by 180% year over year to RMB6 45 1,000,000. Notably, our take rate for 2C transaction facilitation increased to 1.6% from 0.9% in the prior year. 2C loan facilitation revenue increased by 88% year over year to RMB1774 1,000,000. Our average service fee rate increased to 7% from 60.2% in the prior year. In terms of our 2B business, 2B transaction facilitation revenue increased by 17% year over year to RMB607 1,000,000. The take rate for 2B transaction facilitation increased to 4% from 3% in the prior year. Gross profit was RMB276 1,000,000 in the year 2018 and gross margin increased to 66% compared to 62% in the prior year. Loss from operations in 2018 was RMB2566 1,000,000 compared to RMB1823 1,000,000 in the prior year. Non GAAP loss from operations, which exclude share based compensation expenses, was RMB1514 1,000,000, representing 46% of total revenues, decreasing from 85% in the prior year. Net loss in the full year 2018 was RMB1538 1,000,000, compared to the net loss of RMB2748 1,000,000 in the prior year. Non GAAP net loss, which excludes the share based compensation expenses and again from the fair value change of derivative liabilities was RMB1671 1,000,000 in the 2018, compared to RMB1696 1,000,000 in the prior year. Non GAAP net loss as a percentage of total revenue was 50% in the 2018, which decreased from 87% in the prior year. 2018 was the year of investment for Uxin, as we focused on building the resources and infrastructure that will enable the rapid expansion of our 2C business, particularly cross regional transactions. With these investments, we have also started the benefit from many opportunities to improve operational efficiency across our business. This was particularly the case in the Q4 of 2018, where we realized a significant reduction in the sales and marketing expenses as a percentage of revenues. Building on the solid foundation, we are confident that we will maintain strong growth momentum in 2019 and continue to improve our operating leverage. Now turning to the guidance. For the Q1 of 2019, we expect the total revenue to be in the range of RMB900 1,000,000 to RMB950 1,000,000. This forecast reflects the company's current and the primary views on the market and operational conditions, including seasonal factors, which are subject to change. That concludes our prepared remarks. Thank you, Mr. Zeng. Operator, we now would like to open the call for questions. Certainly. Our first question comes from the line of Eddie Huang from Morgan Stanley. Please go ahead. Hi, D. K, Michael, Nancy. Yes, thank you for taking my question and congratulations on the strong results. So I have one question regarding the cross regional transaction. You mentioned that you will focus on the cross regional transaction given the greater growth potential. So can you give us more details regarding the economics of the such transaction versus non cross regional transactions such as the take rate you have mentioned that in 4th quarters already reached like 5.3% and the loan attach rate as well as the GP margin difference. Also, what's your target for the cross regional transaction in 2019 in terms of the volume and the proportion of the overall B2C transactions? Okay. Thank you, Eddie. All right. I would like to answer this question. So first of all, I would like to we review again of our cross region in our last year and the Q4 results. So first of all, we are very excited to say we have already achieved 10,000 transaction volume for cross region transaction in the last December and 40,000 for full year 2018. And compared just very few, only 100 in 2017. And we are very confident that in 2019, we expect cross region transactions will grow by 3x equal to around 160,000 used cars. And secondly, talking about take rate. Yes, currently, from Q4, our cross region transaction, the transaction take rate was 5.3%. And I think we will and because of this number, so in last quarter, we increased our total 2C transaction take rate from the 1.2, 2017 Q4, increased to 2.4 1.2 in 2017 Q4, increased to 2.4 in Q4 last year. And I think, driven by volume and both of the numbers, I think, because there are 3 main reasons. So first of all, we say the biggest the pinpoint in China used car market is that's an imbalance between the demand and supply. So there is a lot of the used car supply in Tier 1 city, such like Beijing, Shanghai. That's a big city people, they doing the trading business. They sell used car and buying a new car. And on the other hand, in lower tier cities, there are a lot of people, these 2 do not have a car, but they want to buy the first one. But with the low income, the problem, I think a used car is the best choice for people who buying the first the traffic vehicle. So how to solving that cross region problem? So I think the only way is using online transaction to benefit the low tier city, the customers. We can enable them. They can have the massive choice of the used car. Compared today, in the country level city, they may only have 50, 100 used cars select. We increase it into 100,000 selective. And secondly, the very important why we can increase our take rate, because there are very big price difference for the same car between in the big city and the country level city. In the traditional supply chain, there need a lot of middlemen to transfer the used car from the Tier one city and go to the low tier cities. So every the middlemen, they will ask 8% to 10% the arbitrage. So that's make people who live in the small city, the used car price, the average 20% higher than the big cities. So today, when we launch the cross region, the transaction services, we will just cut off all the middlemen. We can enable people who live in the countryside, the city, they can get the same price. That's like the people who live in the big cities. So that's very big, the value gain from our operation enable we can have a very good monetization on our take rate. I want to I'd like to tell you the why we think we should like to do that the cross country, the transaction for the retail. When we founded the Uxin, everyone you know, because I only buy used car, I never buy the new one. But at the beginning, when I buy the used car, when I founded the Uxin, I'm searching the car, cross country. And in past 5 years, I changed 3 cars. And every of these cars, even I live in Beijing, I search it across country and I buy from other cities. So I believe cross country selection provide a very significant value to the customer, because the used car is a very unique product. Not only you can provide the massive selection that you can just optimize the customer value to them. So that is, I think, the fundamental reason why the cross region business can have a very strong result both in our business and also in our financial. I think in the further year in 2019, we will all in this business, focus doing the foremost important things. First of all, we're expanding our the sales network. Today, we cover 900 the region. And our aim at the end of this year, we want to coverage 1500, the country level cities, and we enable 800,000,000 the peoples who live in the lower tier city, they are able to buy the higher price, the used car. And secondly, we want to enhance our inspection and the digital display technology, such like the VR, such like the video. And we want to provide experience. People view the used car online have almost the same experience that's like people view the real car. And the third one is we enhanced our logistics system. And compare the two numbers, In the January 2018, we only have 10,000 roads as a transportation roads. But at the end of 2018, we have already increased that number to 60,000 roads. Yes. And at the end of this year, we want to increase the roads going to 90,000. So that will coverage every corner in China, the cities, we can deliver a car, go to there. And also, we decreased the delivery time from January 2018, that's average of 5.7 days until now, 4.1 days. So we wanted people who buying the car from our platform and they can get the car ASAP. And the last one is we will enhance our extension warranty and services network. Because the used car is a very complex product, People not only buy it, people need to use it for a long time. We want to make a used car as simple as possible to the customer. So we will expanding our after sales network to provide the best user experience to the customer and set up the word on most for the Youxin brand and the Youxin product. So that's some summaries of our strategy and goals for the cross region transactions. So Eddie, it's Michael here. So I'll give you some more color on the numbers. So in last year, we finished around 40,000 transactions for cross region services. And in this year, we aim to have a 4x increase. And for the full year, the cross region will have 20% for the total 2C transaction volume, more than 20%. So for your question on the loan, and I think today, our cross region transaction have the higher conversion rates for the loan facilitated. And today, we maintain 80% of the conversion rate. Okay. Thank you, D. K. Thank you, Michael. Very clear. Thank you very much. Thank you, Annie. Thank you for the questions. Our next question comes from the line of Ronald Keung from Goldman Sachs. Your line is now open. Thank you. Thank you, D. K, Michael and Nancy. I have two questions. And firstly, can you give us an update on your Taobao partnership? As we see the volumes are very strong in the 4th quarter, actually revenues reaccelerated. It seems like the new partnership with traffic is really helping. So are there any updates on any further new initiatives between the two parties? Any promotion days? Or should we expect, for example, June 18, Liuba to be sort of another big festival that we should focus on? And this brings me to the second question, which is about your first quarter revenue guidance, because this implies around 39% to 46% revenue growth, which is quite some slowdown versus the strong 62% revenue growth in the Q4. So could you explain it? Are there any seasonal factors? And with the partnership, should we expect the rest of the year, particularly during promotion, the Alibaba promotion quarters, which are generally the second and fourth quarter, should we expect a different growth rate for the remaining part of the year? Would you like me to translate the question? Yes, please, Renaud. Okay. Okay. Thank you, Ronald. I think I'm going to answer the question, the corporate with Taobao. And then you answered the question about the Q1 guidance. Right. And we have seen growing traction from Taobao users from our used car offering since December, when we start our partnership. For December alone, we completed over 3,000 transactions through Taobao. Thanks to our partnership and promotion of Double 12, the shopping festival. Today, I think we are still at an earlier stage of our cooperation. Driving search traffic is our primary focus for this moment. Our tech team is working with Taobao to optimize the keywords and the search result as well as a standardized layout of used car on Taobao to be in line with what's shown on Uxin own platform. By adding the video inspection report and the VR, the function and among other the measures. And I think the going forward, we intend to expand our collaboration into recommendation traffic by leveraging our used car transaction related data and capability of user profile. We will be able to help Taobao proactively accommodate a used car of choice to its users. In long term, when our cooperation prove to work well for the meaningful transaction volume greater, we will further expand our partnership by tapping into the data corporation, such as risk profiling. And we believe this partnership will strengthen our leadership in China's used car market and help Taobao expand their its product and service offering. So we are now has a very good the corporate with Taobao and almost every 2 weeks, and we will launch the new product in the Taobao platform and it cover a lot of the area, including the payment and include the online, the exhibition of the used car and also optimize the customer experience when the car being shipped and we will share all the transparency information to the customer. And also we are facilitating with Taobao together to enhance the guarantee and the service the after sales service to the customer. Okay. Turning to your second question for your Q1 for the Q1 guidance. And yes, as you said, we expect our Q1 2019 total revenue in the range of RMB900 1,000,000 to RMB950 1,000,000 up to 39% to 46%. While for the full year, we expect the total revenue to outpace this growth rate. Our current Q1 2019 guidance factors in the seasonality. The 3 factors in this year coming early February. So compared to the mid February last year, which makes the peak season period in the Q1 shorter and then the last year and the low season period longer, much longer. And we have factored in such impact and provide a relatively conversion guidance for the 2019 Q1. But for the whole year of 2019, we are confident that we can achieve a much faster year over year growth. Next question comes from the line of Nick Lai from JPMorgan. Your line is now open. Yes. Thank you, D. K. And Mike. Again, it's Nick from JPMorgan. Indeed, great results. Thank you. So one similar question on SG and A. I think that was again a great achievement in the 4th quarter. I noticed that SG and A expense actually dropped 6% Q on Q in 4Q. But at the same time, our revenue in the 4th actually grew substantially by over 30% from 3Q last year. So maybe, first of all, can you share with us what kind of strategy did we implemented in the 4th quarter? And then into 2019, can we extrapolate that? And how should we think about SG and A in 2019? Thank you. Okay. For here, it's Michael here. So for your question, I think mainly we're talking about because our R and D and G and A is quite stable in this year. So as long as our revenue increase and have the operating leverage on the G and A and R and D. And for the sales and marketing, we made a strong progress optimizing sales and marketing expenses and our selling increased leverage in the related expenses. In the Q4, sales and marketing expenses as a percentage of revenue declined to 61% compared to 87% in Q3 and 99% in the same period last year, as you mentioned. And in the full year of 2018, sales and marketing expenses as a percentage of revenue declined to 81% compared to 113% in the prior year. This is a clear demonstration of our growing brand awareness and increasing conversion efficiency, which reflects more accurate consumer targeting and improvement in the productive of our sales consultants. So going forward, we expect through dollar amount of our branding expenses to remain stable, while we continue to improve the efficiency of our user acquisition and our sales consultants. We will maintain our prudent approach to expense management and continue to improve our margin profile. So additionally, in 2019, we will adopt a franchise model to complement our self operated service center, as CK just mentioned. So we believe this will reduce our own investment in the sales as well as improve our operating efficiency. Thank you. Thank you for the questions. Thank you. I'll take the next question from the line of Monica Chen from Credit Suisse. Your line is now open. Good evening, management. Thank you for taking my question and congratulations to D. K, Michael and Nancy for a very strong Q4 results. I have two questions here. Number 1, can management provide more color about the franchise model, as you just mentioned? And we just launched in recent months in order to cover more lower tier cities to expand our network. So can you provide more details like how many agents we are already working with? And what's the pipeline for the new sign up? What kind of service we are providing to them, helping them to get more transactions and what's the revenue sharing with them like? So that's my first question. My second question is on the 2B business side. So we noticed we have some changes in the 2B business, and we tend to shift our focus on the Tuesday business. But can management maybe give us more color on how should we think about the 2B business in terms of the value we are providing to the dealers? Have we observed the total B2B markets maybe slowing down given the 2C market is growing faster? And also, we noticed that actually the take rate for the 2B business actually improved to 4.3% versus 3.1% on same quarter last year. What's likely the trend going forward? Okay. Thank you, Monica. This is D. K. Let me take the two questions. So first, talking about our franchise model. We launched franchise model Q4 last year. At the end of Q4, and we have 200 franchisors joined to our sales network. And at the end of the February, and we have already got 600 franchisors going to our network. And it's almost speed every month, 200 franchisors will open. And now from our the business side, And now we have over 1,000 independent franchisors are still waiting on our waiting list to which we open the new store for them. And we have a goal that at the end of the year, we want to cover the 1500 country level cities use especially use our the franchising model to cover all this. And that's almost mean this year, we will open 2,500 more than 2,500 franchised store that's using that new model. And let me say, for the revenue spread, and we basically on the franchise, there are KPI, and we will separate a 3% to 4% to them. And we're doing very detailed calculation. Let's say, because the franchisor, they invest everything, including the rental, the store and the renovation of the store and they pay all the salary of their staff. So we calculated the cost that we're using the franchisor. It's almost equal in the executive level that such as we use our own stuff. But by the way, the franchising model has done very good performance presented today. I think, 1st of all, they are very self innovative, because when we're going to cover all the country level cities, so that's mean in this level, the shop will be very small and the staff will not a lot of people, normally 2 or 3 person. I think if we want to management 2,000 store across the country, that will definitely a very big challenge for management and also the incentive to these people. So the franchising model provide a very good self motivation that we want to see. And also self the cost and give us the very asset level approach to just expanding our network to all of these customers. So that's a franchising model, the answers. And the second question is talking about the B2B strategy. Yes. First of all, the year over year, the B2B revenue the 2B revenue and the transaction is declined. But I want to mention that it's on our plan. It's our strategy because we found that the 2C business is very, very big and very potential, the golden miner. So we just move all our resource and into the 2C business. That's also we're showing the results. We have very significant achievement on our 2C. And for the 2B business, I wanted to explain for the short term, medium term and the long term. For the short term decline, especially in the Q4 and the last Q3, they're mainly due to we changed our C2B business model. Last year not the 2017, we account all our C2B business as a transaction. But since from we mentioned and we stayed in last Q2, yes, we changed the approach. So Q3 and Q4, we didn't account every C2B transaction into our 2B transaction. So that's a cost that mainly decline. So that's the short term, the driver reason. And for the medium term, and we say our cross region 2C business model is more attractive to our dealer. Because traditional, if they selling the car goes to our B2B, actually dealer cannot get a very significant profit. Now using the cross country retail model, they can achieve the better profit because we're helping them to find an end user, not just a wholesaler. So we see the trend is more and more dealers, they move their the transaction decision from the B2B go to our the cross regional model. And secondly is, as we all know, we have 7 the city opened the B2B auction in China. But the reason to the news is more and more cities such like Xi'an, such like Wuhan, such like Jinan, these cities is growing their local supply. So more and more people, they will not go very far such like from Shandong go to Beijing to take the inventory. They have another choice, take inventory from Jinan. But in last year, we didn't expanding our B2B business. So that's, I think, in the medium term, it's a reason why we our 2B business, we all have a little bit decline because we didn't invest into this business more. But for the volume, I think, we will gradually to stabilize certain level and the current certain level. And we are happy to say the current take rate is also good. And for the long term, I think, 2B business is very important. If we say the Mayhem in United States, we say the some other the auction company in Europe and Japan. They are mainly source of their car is coming from the very big supplier, such like a fleet company, such like the rental company. But today in China, the used car supply are very fragmented. It all come from dealers. So I think we will keep our 2B business as very important part of our business our the group business, one part of our group business. And I think we are watching the opportunities. Once the market has done the big the supply happened, yes, I think we will, at that time, to keep our competitive advantage of the B2B business, and we will enhance our investment of 2B business. Yes. Thank you. Thank you for the question. I would now like to hand the call back to Nancy for closing remarks. Thank you, everyone, for joining today's call and for your continued support for Uxin. We look forward to speaking to you again in the future. Thank you. Thank you, everyone. Thank you, ladies and gentlemen. That does conclude the conference for today. You may now disconnect your lines.