Good morning and good evening. Welcome to Cango Inc.’s Third Quarter 2019 Earnings Conference Call. At this time all participants are in a listen-only mode. This call is also being broadcast live on the company’s IR website. Joining us today are Mr. Jiayuan Lin, Chief Executive Officer; and Mr. Yongyi Zhang, Chief Financial Officer of the company. Following management’s prepared remarks, we will conduct the question-and-answer session. Before we begin, I refer you to the safe harbor statement in the company’s earnings release, which also applies to the conference call today, as management will make forward-looking statements. With that said, I’m now turning the call over to Mr. Jiayuan Lin, CEO of Cango. Please go ahead.

[Foreign Language] Hello, everyone. Thank you for joining us today on Cango’s Third Quarter 2019 Earnings Call. During the quarter, the symptoms of a global economic slowdown continue to emerge. Moreover, as macro headwinds continue to rise including global trade on escalating geopolitical tension have directly impacted China’s automotive industry. To date, the underwhelming performance of China’s automotive market in 2019 can face the increasingly difficult industry conditions worldwide. Since the second quarter of 2018, new car sales in China have continuously plunged, with no apparent signs of recovery. Despite new car sales showing sequential improvements during September of this year, more time is required to determine whether car sales will continue on this upward trajectory going forward. Following the government’s introduction of policies to stimulate new car sales, we have observed a certain level of confidence in the market. With these new policies implemented in the marketplace, we expect the Chinese auto market to start turning the corner in the second half of 2020. [Foreign Language] For the auto financing market, in particular, the low penetration rate of auto financing services still represents a promising opportunity for our future expansion, especially in lower tier markets. Meanwhile, we are also exploring growth opportunities in other emerging verticals such as the market for electric vehicles. We believe that by seizing these opportunities, we will offset the current challenges in auto financing industry caused by the decline of new car sales in China. [Foreign Language] It is important to remember that while the Chinese auto industry is entering to a period of transformation, we’ve noticed a reshaping of the auto financing market dynamics. Going forward, we expect these evolving market dynamics to lead to increasing industry consolidation. As challenging market conditions put weaker companies to the test, market leaders like Cango, with…

Thanks, Jiayuan. Hello, everyone, and welcome to our third quarter 2019 earnings call. Before I start to review our financials for the quarter, please note that unless otherwise stated, all numbers are in RMB terms, and all percentage comparisons are on a year-over-year basis. In the face of macroeconomic headwinds and ongoing contraction of China’s automotive industry, we maintained our growth momentum in the third quarter of 2019, posting strong financial and operating performances. Our total revenues in the third quarter of 2019 were CNY 351.3 million, representing a year-over-year increase of 23.2%, outperforming the high end of our guidance by 8.1%. Our aftermarket services facilitation business also continued to ramp up as revenues grew to CNY 40.7 million or 11.6% of our total revenue in the third quarter. Cost of revenue in the third quarter was CNY 125.4 million or 35.7% of our total revenues compared to CNY 113.5 million or 39.8% of our total revenue in the prior-year period. As a result, we expanded our gross margin to 64.3% in the third quarter from 60.2% in the prior-year period, mainly attributable to the successful implementation of series of cost-control initiatives and the increased leverage resulting from improved economies of scale. Sales and marketing expenses in the third quarter decreased by 1.9% to CNY 47.6 million from CNY 48.5 million in the prior-year period. As a percentage of total revenues, sales and marketing expenses in the third quarter decreased to 13.5% from 17% in the prior-year period. These decreases further illustrate our commitment to improve our sales and marketing efficiency while maintaining the strong growth trajectory of our total revenues. General and administrative expenses were CNY 52.3 million or 14.9% of total revenues in the third quarter compared with CNY 14.7 million or 14.3% of total revenue in the…

Thank you. We’ll now begin the question-and-answer session. [Operator Instructions] The first question comes from John Cai with Morgan Stanley. Please go ahead.

[Foreign Language] Thank you, management for taking my questions. I have two questions. The first question is on risk. I see that the overdue ratios have been increased sequentially. Just wonder, was that impacted by the regulatory tightening on collections or there’s other factors? How do you see the trend of this overdue ratio? The second question is about the regulations over the loan facilitation model. The PBOC Shanghai branch has recently issued a document trying to tighten the commercial banks from then to [indiscernible] platforms. Just wonder how would that impact our cooperation with funding partner? Thank you.

[Foreign Language] Thank you for the question. Let me take your first question, that is the changes in the overdue rates. Well, actually, we’ve already talked about this issue during the quarterly analyst meetings. As we all know, that’s the – yes, the regulatory – the environment over collection is changing. And so as early as – I mean, in the earlier part of this year, we have already taken measures to control M0 and also M1 overdue ratios. And we are stepping up our collection methodology, especially telemarketing-based collection methodology to control these M0 and M1 overdue ratios. And if you look at the end of Q3 numbers, yes, indeed, the overdue ratios have only increased. I think the main reason is due to the long holidays during September and October. For example, during September and October, we have the autumn festival – Mid-Autumn Festival and also the National Day Festival. So because of these holidays, the collection efforts have, to some extent, been impacted. So that’s why at the end of September, we are seeing the rising M1 overdue ratio. But we have been following the trends very closely in October and also in November, and we can see that our measures, especially our control measures, are taking effect. If you look at the changes in M1 after the holidays, you can see that thanks to our efforts, the M1 has been – ratio has been going down, and this testifies to the effect of our controls. And M3, we all know that it’s partly impacted by the changes in M1 and is rolling effect. So as we – so we expect that in the next quarter, the M1 ratio as well as M3 ratio will remain stable. And also, we will – we believe there will be…

[Operator Instructions] Your next question comes from Lucy Li with Goldman Sachs. Please go ahead.

[Foreign Language] The first question is on ICBC and the contribution from ICBC-related loans. I would like to know in the past quarter also how much loan volume is contributed by this channel and what about the fee rates. Going forward in the next year or two, what do we expect the ICBC channel would bring that in terms of both loan volume and the margin? As the business didn’t go as expected, what would be the main challenges? The second question is on the financial statement. There are two items. One is the interest income, the other one is the other income. I would like to know the major reasons for the quarterly fluctuations. Thank you.

[Foreign Language] All right, I will take your questions. About the first question, actually, our business with ICBC started to grow considerably since June. In the past few months, actually, we’ve been focusing in our partnership with ICBC on non-OEM-subsidized products, targeting lower tier markets in China. So you can see that the take rate has not changed very much over the past few months, and the main reason is, like I said earlier, this is mostly non-OEM-subsidized product category. And for our partnership with ICBC, you can also see that the cost of funding for us is relatively low, and that’s resulting lower APR and also very stable margin for us. So, you can see that the take rate compared with other type – I mean, the take rate of this product compared with other types of products, we don’t see any significant decrease. It has been very stable, and this trend has also been reflected in our financial data. And in the future, in terms of OEM-subsidized product category, we expect the margin to go lower, because the take rate is indeed lower for OEM-subsidized products. And as we talked before, OEM-subsidized products, their unit price is relatively high, and the vehicle gross margin is, of course, impacted by this kind of a characteristic of this product category. And so that also, in turn, has an impact on our take rate. So, you can see that because of the higher unit price than the – in our financial statements, both the gross margin and the net profit margin will stand at the very good level and because in our corporate structure, we have a higher level of fixed cost. So, we don’t really see any negative impact in terms of the gross – in terms of on gross margin and also net margin in the ICBC OEM-subsidized product category. No negative impact. [Foreign Language] In terms of contribution of our – from ICBC partnership, well, if you look at new business metrics of every month, then it’s about 20% to 25% contribution from new business every month. [Foreign Language] Again, this is non-OEM-subsidized product category. [Foreign Language] On your second question, changes in two items in our financial statements. First of all, other income, other income mainly improved the cash incentive from the government. So it’s a kind of a government grant item. That’s why we have quite big changes quarter-over-quarter. And the second item, interest income. Well, for this quarter, it actually consists of two parts. The first is the bank deposit, about CNY 14 million. And so you can see that it’s relatively stable quarter-over-quarter. And the second part is CNY 27 million from the payment of structural product of numerous trucks. So you can see that’s why we have some changes because of the second part. Thank you.

Thank you. You have a follow-up question from John Cai from Morgan Stanley. Please go ahead.

Hello, John.

[Foreign Language] My question is about the cost of revenue. As a percentage of total revenue, this number declined to around 36% in 3Q. So just wonder, in particular, the commissions we paid to car dealerships, what’s the ratio at the moment? And more broadly, can management comment on the competition landscapes on the sector? Obviously, the other sales is under pressure. So in terms of these loan facilitation competitions, do we see the competitions getting more intense or otherwise? And how should we look at these cost efficiencies going forward? And there’s also a mention of our cost-control initiative. Is there any more details or colors on that? Thank you.

[Foreign Language] Okay, thank you very much. I will take your questions. The first question is about the changes in our cost of sales, and we are still seeing – I want to explain to you why the cost of sales has reduced overall, and also, I will talk about the structure of our cost of sales. Actually, the cost of revenue as a percentage has dropped significantly, as you pointed out. We can break it down into two parts in terms of the cost of revenue. The first one is variable cost and that includes, of course the commission that they paid to the dealers. Now let’s look at the auto financing services for new cars, this market segment. In fact, in this market segment, we are seeing much less fierce competition compared with last year. There are several reasons for this, of course, including changing dynamics in the auto market, regulatory changes as well as the market liquidity. So if you look carefully, you won’t see that in the new car market segment. Some international platforms and also small and medium-sized players, they actually are exiting from these market segments. They are turning towards the secondhand markets or a car for loan service market. So that’s why in the new car segment, we are seeing less competition than the previous year. And that, of course, has helped to maintain the stable level of commissions for dealers. And in fact, we are seeing lower commission rates for dealers because of the fact I just mentioned. And last year, for example, we often saw some market – some marketing actions like quarterly or monthly promotional programs or campaigns. And this year, however, we have seen very few or even no structural marketing initiatives. And these trends have very good or…

[Operator Instructions] There are no further questions at this time. This does conclude our question-and-answer session. I would like to turn the call back over to management for any closing remarks.

[Foreign Language] Thank you for joining us today, I look forward to more discussions with you as we will definitely bring you more good news in terms of our business performance.

Thank you. [Foreign Language]

Thank you. The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.