Good morning and good evening, everyone. Welcome to Cango Inc.'s Third Quarter 2020 Earnings Conference Call. [Operator Instructions]. Joining us today are Mr. Jiayuan Lin, Chief Executive Officer; and Mr. Michael Zhang, Chief Financial Officer of the company. Following management's prepared remarks, we will conduct a Q&A session. Before we begin, I refer to 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, I am now turning the call over to Mr. Jiayuan Lin, CEO of Cango. Please go ahead, sir.

Hello, everyone, and welcome to Cango's Third Quarter 2020 Earnings Call. In the second half of this year, China's auto market has regained momentum with gradual recovery in the lower-tier cities, with steady progress across our business. We are pleased to see a significant rebound in both our financial and operational performance. Total revenue in the third quarter was approximately RMB435 million, outperforming the high end of our guidance range by approximately 32%. In particular, our aftermarket services facilitation revenue grew to RMB68.9 million, accounting for nearly 15.8% of total. Our car trading transaction business also contributed considerable revenue in this quarter reaching RMB70.4 million. Operating income sustained its growth momentum from the previous quarter and came in at approximately RMB135 million, mainly attributable to our effective cost control initiatives. Finally, our net income of this quarter was close to RMB1.8 billion, mainly attributable to the significant investment gains from Li Auto. Our deep and wide coverage of dealership network, continuous upgrades and innovations of products and services are the main drivers for our sustained growth. We are committed to building an integrated platform that serves all parties in the automotive value chain while offering safe, professional and efficient auto transaction-related products and services to our customers. By implementing our key growth strategy and successfully expanding our core and new businesses, we are witnessing increasing demand for our products and services, which is leading to improved operating efficiency and gains in market share. Let's start with our core auto loan facilitation business. In the third quarter, we facilitated RMB7.5 billion financing transactions up 30% from the same period of last year, marking the first period of year-on-year growth since the pandemic outbreak. As of September 30, 2020, the total outstanding balance of financing transactions the company facilitated reached RMB38.9 billion.…

Thanks, Jiayuan. Hello, everyone, and welcome to our third quarter 2020 earnings call. Before I start to review our financials for the quarter, please note that unless otherwise stated, all numbers are in RMBterms and all percentage comparisons are on a year-over-year basis. Total revenues came in at CNY434.9 million in the third quarter of 2020, once again outperforming our previous guidance range. In addition, our aftermarket services facilitation business continued to serve as an important growth driver, generating CNY68.9 million in revenues for the third quarter and accounting for approximately 16% of total revenue. Car trading transactions business also become a meaningful growth driver this quarter, contributing CNY70.4 million in revenues. Now let's move to our cost and expenses during the quarter. Total operating cost and expenses in the third quarter of 2020 was CNY300.4 million compared to CNY261.6 million in the same period 2019. This was in line with the increase in the company sales volume and related costs incurred by car trading transactions. Cost of revenue in the third quarter of 2020 increased by 44.2% to CNY180.9 million from CNY125.4 million in the same period 2019. As a percentage of total revenues, cost of revenue in the third quarter of 2020 was 41.6% compared to 35.7% in the same period 2019. Excluding this financial impact from the car trading transactions, cost of revenue as a percentage of total revenue was 30.3% in the third quarter of 2019. Sales and marketing expenses in the third quarter of 2020 were CNY41.9 million compared to CNY47.6 million in the same period 2019. As a percentage of total revenue, sales and marketing expenses in the third quarter of 2020 decreased to 9.6% from 13.5% in the same period last year. The increase -- the decrease was a result of the company's…

[Operator Instructions]. The first question today comes from Shelly Wang with Morgan Stanley.

First of all, congratulations to the management for your outstanding performance in the third quarter. And I have actually -- I actually have 3 questions. Well, the first question is about your outlook for your fourth quarter performance and your performance for next year. Well, if you look at the monthly sales of the brands -- car brands in China, we are witnessing strong rebound in China's auto market, in particular, the China domestic OEMs, such as Changan and Great Wall. And based on your presentation, your guidance for next quarter for your revenue is about CNY700 million to CNY750 million. So could you share with us your outlook on your performance in fourth quarter and for next year in more detail? And also which business lines do you expect to contribute more to this growth in the fourth quarter? Is it car -- your core car loan business or new business?

Thank you very much, Shelley, for your questions. Well, indeed, from third quarter to fourth quarter, we expect the car market to continue its strong rebound, especially in the lower-tier cities. Well in our previous quarter presentation, we mentioned that actually in the first half of this year, the lower-tier market segments have been relatively slow in terms of their recovery. However, in the third quarter, these lower-tier markets definitely picked up its recovery speed, especially the 2 brands that you mentioned, Changan and the Great Wall. So it's the -- so your observations are the same as ours. Well, in terms of our guidance for the fourth quarter. So definitely, we expect to see stable growth and steady growth in the fourth quarter in terms of our performance metrics. And on our guidance for the fourth quarter -- well, actually, in the third quarter, we already see equivalent revenue contribution from our new business line. So in the fourth quarter, we expect significant contribution to our top line from our car trading transaction business. So actually, in terms of the guidance for the fourth quarter, we expect the car trading transaction business contributing 40% to our business growth.

My second question is about the 4S dealership network. Well, in your presentation, you mentioned that Cango plans on exploring and developing your footprint in the higher-end market segments. However, in the 4S market, we already see car financing services also by the premium car brands such as BMW. So how are you going to differentiate yourself in this competition? And my third question is about the impact of the insurance reform -- auto insurance reform launched in September. So how is -- how are those policies going to impact on your business?

Shelley, I will take your questions. The first question about how are we going to gain market share in the 4S dealership market. Indeed, in China, the 4S dealership market is huge. And we are also seeing strong efforts by banks and the AFCs, auto financing companies, to develop their footprint in this market. However -- well, for all our target market share, we are not very ambitious. We only aim for 10% to 15% of the market share. And how are we going to gain this market share? Well, it's going to be on our differentiated services. Well, first of all, we offer important services for our customers. And on the other hand, we also -- different from offline service providers by offering strong service capabilities online and, for example, like our partnership with Ant. So -- and actually, we have received very good feedback from our customers from -- for our online services. So this is how we are going to be different from the AFCs. So again, we are not going to compete directly with -- against the ASCs because we are not so ambitious in terms of our market share. Just one thing about our product offerings in the 4S market. Well, we are also selling the bank's products to our customers in this market. So actually compared with the local banks, where 4S stores are located, our partner banks, they have a stronger financial position and they are offering lower cost of capital.

Well, about your third question, the impact of the insurance reform policies launched in September. Well, indeed, these new policies have put some pressure on our insurance facilitation business. However, we have already taken some countermeasures to mediate -- to mitigate the pressure amount. First of all, we are working with larger insurers to offer better products and services to our customers, thereby gaining market share in this industry transformation. And secondly, we are combining our insurance products and services with our car financing business. In other words, we are utilizing cross-selling strategies to -- over more diversified mix of products and services to our customers, improving their experience. In addition, we are stepping up efforts to build up our KA model, key account sales model, and so that we are able to integrate our resources in this regard and to prepare ourselves for market developments in the next year.

The next question comes from David Tang with Goldman Sachs.

First of all, congratulations to the management on your outstanding performance in the third quarter. And we are also very excited by your outlook for the fourth quarter. My questions are mostly on industry competition. Could you give us more colors on the trends -- the market trends in both the 4S market and in the lower-tier markets since the third quarter, or in other words, the post-pandemic markets? So -- and my question is mostly on auto financing. And the second question is, could you share with us your observations on the market -- your market share and development? And how it's going to be in the future?

David, I will try to answer your questions. Well, actually, the pandemic and the market downturn has given us more time to rethink our business models and to initiate new measures to improve our business models. And while over year -- thanks to the over 10 years of development, we are now well-recognized by our partner banks for our high-quality service and a very well-designed business process, which deliver very good experience to our customers and consumers. And that's why banks working with us are happy to provide with us low-cost of capital products. And thanks to these efforts, we are able to further improve and enhance our core business. And that's for the core business. And then for our new business lines, over the past few months, we have developed and implemented a series of initiatives to develop new business lines. And the initial results have given us more confidence in our future and our strategic directions. And these new business lines or initiatives include our efforts to expand into the higher-end 4S stores and NEV market as well as establish -- as well as setting up the sales rep initiative for our insurance products. And also, in addition, we are -- we have successfully launched our car trading transaction business.

Thank you. I would like to add a few observations from my side. Well, first of all, on the demand side, well, in fact, during the pandemic and after the pandemic, in the lower-tier markets, we are seeing the market conditions for the small dealers changing significantly. Well, what I mean is that the smaller dealers in the lower-tier markets, they are in a very disadvantaged position now. Although we are seeing rebound in market demand in the recent months, the conditions for the dealers have improved slightly. Still, the smaller dealers, they need strong partners to help them get access to more resources and to help improve their service capabilities. And this is where Cango can offer value to our partners in the lower-tier markets. And this is also where we see the value of the market -- lower-tier markets is. And this trend is very obvious in the pandemic. And so for us, the key is to establish -- to help establish ecology based on our platform by -- and offer diverse range of services and products. And this definitely will give us more room to grow and will also will help these dealers in the lower-tier markets to grow together with us. And on the demand side, the second point I would like to make is about the higher-tier or the first-tier in second-tier cities and also the higher-end market segments, that is the 4S markets touched upon by Mr. Lin. Well, again, in these markets -- market segments, we are seeing some unmet needs here by our partners, for example, in terms of service efficiency and process efficiency. So we do see a lot of opportunities for us to facilitate -- drive our growth. And actually, since July, when we established our teams, in the past 3 to 4 months, we are -- already achieved new business growth for our partnership with 4S stores, in luxury and premium brands. In the future, we believe that with our strong service capabilities and also our high-quality financing resources, we will be able to further drive the growth of our 4S market segments. And on the supply side, well, Cango is China's leading auto financing platform. And during the pandemic, we are seeing profound changes in competition -- industry competition. Actually, since last year, we already saw the trend of market consolidation. And this year, this consolidation has picked up pace, in fact. So in the future, we believe only platforms that have a unique -- that have their unique core competencies and that are able to deploy well-designed business strategies and that can offer strong products and services to customers will be able to survive and grow.

Thank you very much for your answers. And congratulations again on your strong performance.

[Operator Instructions]. We have no further questions at this time. I would now like to hand the call back to management for any closing remarks.

That closes today's earnings call. Thank you all for your participation.

Thank you.

This conference has now concluded. Thank you for attending today's presentation. You may now disconnect.