Good morning, and good evening, ladies and gentlemen. Thank you for standing by, and welcome to the TuanChe Limited Fourth Quarter and Full Year 2019 Earnings Conference Call. [Operator Instructions] Today's conference call is being recorded. I would now like to turn the call over to your host today, Ms. Cynthia Tan, IR Director of the company. Please go ahead, ma'am.

Hello, everyone, and welcome to TuanChe's Fourth Quarter and Full Year 2019 Earnings Conference Call. We have released our earning result earlier today, and it is now available on our IR website as well as on Newswire services. Before we continue, please note that the discussion today will contain forward-looking statements made under the safe harbor provision of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, our future results may be materially different from the views expressed today. Further information regarding this and other risks and uncertainties is included in our earnings release and our registration statements filed with the SEC. TuanChe does not assume any obligation to update any forward-looking statements, except as required by the law. Today, you'll hear from Mr. Wei Wen, the company's Chief Executive Officer, who will provide an overview of our growth strategies and business development, who will followed by Mr. Troy Mao, the company's Chief Financial Officer, to provide additional details on the company's financial results and discuss the financial outlook. Following management's prepared remarks, we will open up the call to questions. With that said, I would now like to turn the call over to our CEO, Mr. Wei Wen. Please go ahead, sir.

Hello, and thank you, everyone, for joining us on our fourth quarter and the full year earnings call today. During the fourth quarter, the downturn of the overall market and auto industry continued, and the full year 2019 finished with an 8.2% year-over-year decline in China vehicle sales. With that being said, for 2019, we still achieved a 2% increase in the number of automobile sales transactions we facilitated with an 1.2% decrease in GMV compared with the prior year, outpacing the overall auto market. We are handling this short-term setback in stride and remain fully committed to our strategic execution for long-term growth in 3 specific areas. These include further optimization of our core auto show business with a focus on generating high ROIs, accelerating the development of special promotion events, and finally, our growth initiatives in virtual dealerships and online marketing services. Now let me provide highlights on our business segments for the fourth quarter. First, for our offline marketing services, we continue to optimize our core auto show business with a focus on generating higher ROIs. We successfully organized 321 auto shows across 149 cities compared with 331 auto shows in 167 cities in the fourth quarter of 2018. We expanded our sales operation to 148 cities compared with 138 cities a year ago. Going forward, we plan to strategically focus on cities with higher potential ROIs in an effort to ensure satisfactory margins and sustainable growth for our business. Additionally, in the fourth quarter, we leveraged our deep insights in automotive transactions and are focused on the development of our special promotion events, which we customized for each auto dealer and OEM. This allowed them to further monetize their customer basis by improving the customer experience leading to improved sales conversion rates. In the fourth quarter,…

Thank you, Wei. Hello, everyone. Before I start, please note that all numbers stated in my following remarks are in RMB terms or unless otherwise noted. Now I would like to walk through our fourth quarter 2019 financial results. Our total revenues in the fourth quarter were RMB 182.8 million decreasing 19.3% from RMB 226.4 million in the same period last year and as a result of stagnation in the automotive industry in China. The decrease was partially offset by the steady growth of the company's new business initiatives, including virtual dealership and online marketing services. As new car sales in China continued to be soft, our offline marketing services revenues generated from auto shows in the fourth quarter 2019 decreased by 23.1% to RMB 170.4 million from RMB 221.5 million in the prior year period, primarily due to the slowing macro economy and industry-wide challenges. Revenues generated from special promotion events in the fourth quarter of 2019 were RMB 7.1 million compared with nil in the prior year period. In the fourth quarter, we continued to ramp up our new business operations. Revenues from our virtual dealership, online marketing services and others reached RMB 5.3 million during the quarter compared with the RMB 4.9 million in the fourth quarter 2018. Our gross profit in the fourth quarter was RMB 132.1 million, decreasing 19.1% year-over-year from RMB 163.3 million in conjunction with revenue declines. However, our gross margin expanded to 72.3% from 72.1% in the same period last year. The margin improvement was driven by the enhanced efficiency of our auto show organization process, our improved bargaining power with the third-party vendors as well as the lower cost of operations in lower-tier cities. In the fourth quarter, selling and marketing expenses increased to RMB 159.6 million from RMB 144.9 million…

[Operator Instructions] Our first question today comes from Laura Liu of Stone Street.

Can you just discuss like the current situation of the auto market in China? And also like the impact of this coronavirus to the company?

Thank you, Laura. Let me translate. [Foreign Language]

[Foreign Language]

[Interpreted] According to official statistics impacted by Chinese Spring Festivals and this COVID-19 pandemic, total auto transaction numbers in China dropped by 18.7% and 79.1%, respectively, in January and February.

[Foreign Language]

[Interpreted] As far as the market trends concerned, unfavorable factors such as decreased travel by consumers and reduced number of dealership visits, macroeconomic uncertainties extending the cycle of vehicle replacement and reduced household expenditures that will particularly affect big-ticket items such as autos, may continue to impact the automotive sales in the medium to long term.

[Foreign Language]

[Interpreted] But on the other hand, the good news is that the increased risk of public transportation during the pandemic may also partially increase the demand for entry-level cars for families without private vehicles. In addition, we have recently observed that various government entities have introduced stimulus policies to promote auto consumption as the -- as auto industry is one of the most important pillar industries in China.

[Foreign Language]

[Interpreted] According to the China Automotive Dealers Association, by the date of April 10, 76.5% of all its dealers have already resumed operations across the country with consumer traffic recovered to around 70.8%, indicating a gradual recovery of auto transaction market.

[Foreign Language]

[Interpreted] With that said, we'll continue to monitor the degree and duration of the macroeconomic impact by the pandemic going forward. Laura, does that answer your question?

Yes. Just have another adding-on question. So how does this affect the companies like business, especially like in -- for the company strategy?

Please wait a minute. [Foreign Language]

[Foreign Language]

[Interpreted] Due to the Spring Festival and pandemic, as mentioned in our previous press releases on this impact of coronavirus, most of our offline business lines were basically suspended in the first quarter.

[Foreign Language]

[Interpreted] With the domestic easing of the coronavirus outbreak and the continued relaxation of prevention and control measures throughout China, we expect our offline business to gradually recover starting in the second half of the second quarter, but we still face significant uncertainties in term of the pace of the recovery. At the moment, we believe it remains difficult to carry out most of our offline auto shows in April. And our progress in returning to normal operations will depend on the specific situation regarding the pandemic in different regions across China.

[Foreign Language]

[Interpreted] Our strategy in response to the challenges is mainly to expand our online business proactively, especially with the further deepening of cooperation with Taobao, we are launching a number of new online programs such as Taobao live streaming auto shows and online special promotion events, leveraging our years of solid track record and insight from offline auto shows and marketing to build a new and more efficient model of auto marketing service online.

[Foreign Language]

[Interpreted] In addition to that, we completed the merger and integration of Longye by the end of the fourth quarter of 2019. Its social CRM system for dealers can help us better track sale fleet of paying online and increased conversion rates, which customers are unable to visit dealer stops during this special period.

[Foreign Language]

[Interpreted] Last but not least, we will focus on reducing costs and improving operational efficiency. With our offline activity suspended, the variable costs associated with venue, construction, sales and customer acquisition are all significantly reduced. The rest of our cost is primarily related to staff salaries and some other fixed costs. To mitigate the challenge brought by pandemic, we have adopted a series cost-control measures and have already made some progress. Laura does that answer your question?

Yes, yes. It's great.

Thank you, Laura.

The next question today comes from Jack Vander Aarde of Maxim Group.

I'll start with -- did I hear this correctly in response to the prior analyst's question that as of April 10, 76.5% of all dealer locations have reopened. Was that all China auto dealerships or just those related to TuanChe?

No. That was the official statistics for all the dealerships across China.

Okay. All right. That's helpful. And then you also mentioned in that same response that consumer traffic levels have returned about 70% or so.

Yes. 70.8%. That's also from the same data source that's announced by the China Dealership Association.

Okay. And then if I look at your outlook for the first quarter, you guys provide a revenue outlook. As expected, it's certainly down year-over-year quite a bit. I'm wondering if you could talk about those -- your Q1 revenue guidance from a segment contribution perspective. Maybe kind of which -- what percentage of revenues do you expect each segment to contribute to that number?

Jack, this is Troy. I will take your question. Well, officially, we don't make breakdowns for our revenue guidance. We only had a very limited auto shows organized in January, very limited because it was just right before the Chinese New Year. Just rounding the Chinese New Year, we had coronavirus pandemic. So for the public health, foresay, we have canceled all February and March auto shows. Definitely, with any -- with another supplement for our online marketing services, virtual dealerships, we will see some contributions from that segment. Also, we mentioned earlier, we expect that we will also see some accretive effect from the acquisition with Longye International.

Got it. That's helpful. And then -- okay. So if you -- if all auto show events have been canceled through March, but it doesn't sound like any have been canceled as far as I know from a press release for April or beyond yet. When -- I know you guys don't provide this explicitly, but when can we maybe think about when you start to see sequential revenue growth throughout the year? I know it's a very tough question, but would you expect Q2 to be higher than Q1 in terms of revenue because no auto show events have been canceled? Or would you expect maybe that's too uncertain? Maybe Q3 would be higher than Q2? Any thoughts there?

Even though we haven't given any Q2 guidance yet. But for sure, with the gradual recovery expected in May and June, we will see the increase in revenue streams. Also, Wei -- as our CEO, Wei Wen, mentioned, we put a lot of efforts on our online marketing services initiatives, including online streaming of auto sales. From that part, we definitely expect the recovery and also supplemented to the revenue stream. So the answer is yes, we'll see the gradual recovery starting from Q2. But definitely expect more recoveries in Q3 and beyond.

Okay. That's helpful. And then given your partnership, if I just touch on this specifically with Easyhome. Is there anything you could say about how many locations of Easyhome locations are opened? Have all Easyhome locations been opened or is that a work in progress?

We believe most Easyhome locations are opened. But again, it's similar to our other venue locations for auto shows for the interest of public health, it's still not good to have any possible auto shows organized at the Easyhome venues across the country.

Sure. And that makes sense. And then my last question is that you guys -- you've talked about your -- how you're focused on making investments in your online infrastructure. Can you talk about what specific investments are you making that in -- what do you expect to -- like how do you expect to benefit? How does TuanChe expect to benefit from these investments from a revenue perspective throughout the rest of this year?

Please wait a second, and I'll translate. [Foreign Language]

[Foreign Language]

[Interpreted] Okay. For the first point, under this special period -- under this pandemic period, due to most of our offline auto shows are suspended due to various -- in support of public health, the online new initiatives and online products will be one of our main streams of revenues for TuanChe for now.

[Foreign Language]

[Interpreted] We are actually focused to expand our online product offerings and increase the monetization of our online products to build our strategic positions on online automotive sales marketing platform across China.

[Foreign Language]

[Interpreted] The revenue streams from our online products will actually be reflected in our following quarter report. Does that answer your question?

Yes. Yes, that's helpful. And then maybe I'll just add then, if you got to think about auto show revenue and then you think about virtual dealership revenue, which would you expect to be -- recover the most, the quickest, I guess, when you look at the rest of this year? I know auto show events are the majority of the revenue, but just relative to each bucket where they've been in the past.

Well, in the second quarter, we definitely expect the revenue coming from virtual dealership will get recovery faster than auto show business. But definitely, we expect -- definitely, we hope, starting from Q3, the revenue coming from auto shows will pick up even faster.

As there are no further questions now, I'd like to turn the call back over to Cynthia Tan for any closing remarks.

Thank you all for joining us today. And if you have any further questions, please feel free to contact us. Looking forward to seeing you all next quarter. Operator?

This concludes the earnings conference call. You may now disconnect your line. Thank you. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]