Uxin Limited (UXIN) Q4 2018 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by, and welcome to Uxin's Fourth Quarter and Full Year 2018 Earnings Conference Call. [Operator Instructions]. 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 Fourth 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 the prepared remarks, D.K. and Zhen will address any questions you have. Before we start, I will 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 SEC. With that, I will now turn the call over to our CEO, D.K. Please?

Thank you, Nancy. Hello, everyone. Thank you for joining our fourth quarter and the full year 2018 earnings conference call. We are pleased to report that we ended the year with another set of the strong results. Total revenue in the fourth quarter increased by 62% to RMB1.1 billion, exceeding the high end of our guidance. Thanks to our large business scale and prudent control of cost and operating expenses, we continued to gain operating leverage during the fourth quarter. As a result, non-GAAP net loss narrowed to RMB242 million, 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 the marketing expenses, taking us one step closer to profitability. In the fourth quarter, 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 million, which contributed 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 hundreds in Q4 2017. This reflects the game-changing impact that our business model has had on China used cars supply chain as well as a growing consumer recognition of Uxin brand and its services. Uxin's leadership in facilitating cross-region transaction in China is unmatched. It plays a key role in bridging used car demand and the supply between different tiers of cities across the country. By leveraging Uxin's unit offering of standardized inspection, offline fulfillment, title transfer as well on-road aftersales warranty and services, we can efficiently provide a consumer in lower-tier cities with an unmatched purchasing experience and enable them to purchase large-ticket items online without the need for the in-person checking. Due to the significant volume - Due to the significant value we provide to our users, we have also made a significant progress on monetization. Our 2C transaction facilitation take rate increased to 2.4% in fourth 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 263% year-over-year increase in our 2C transaction facilitation revenues in fourth quarter, representing 33% of our 2C revenue, up from 23% in Q4 and 20% in same quarter last year. With 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 million during the quarter. Along with growth in 2C transaction volume, we achieved solid growth in the number of loan facilitated, with the tax rate increasing to 47% and 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+ delinquency rate to 1.41% 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 a great growth potential. To further strengthen our leadership on this front, we will continue to focus our effort in four key area. First, we will penetrate the lower-tier cities, 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 initiative, we aim to cover 1,500 country-level cities across China in 2019, enabling customer in these cities to buy their first dream car through our platform. Second, 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 the 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. Third, we will further develop our Big Data capability and AI technology. We will continue optimizing our AI-driven price engine, which evaluate car condition and provide buyer and seller with price insights. This cutting-edge technology help us - helps customers quickly find their car of choice from our massive online inventory. It also forecasts the reselling value of used car, which enable dealers to efficiently management their operating risk. Fourth, 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 aftersales services. Moving on to our 2B business, transaction volume decreased by 37% to 72,000 used cars, and correspondingly, revenue decreased by 16% to RMB145 million in the fourth 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 said, 2B business will continue to serve as an important arm in - 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 B2B side, where our highly efficient auction platform enable dealers to source used car and optimize inventory turnover, thereby, minimizing inventory risk by delivering the top of value to dealer. We will encourage over dealer customer to expand the 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 lease 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 cars e-commerce platform and continue to redefine the used car industry. With that, I would like to turn the call over to our CFO, Zhen Zeng, to talk through our financial. Zhen, please.

Okay. Thanks, D.K. Hello, everyone. Thank you for joining us today. Now let me walk you through our financial details of the fourth quarter 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 fourth quarter, total revenue increased by 62% to RMB1,137 million from RMB703 million 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 million, an increase of 263% year-over-year from RMB87 million 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 to RMB620 million, primarily driven by the increase in the transaction volume and amount of loan facilitated. Our service fee rate was 7% during the quarter. The attach rate of loan facilitation service widely 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 million, 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 dealer's growing appetite for retail transaction 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 million in the Q4 2018 compared to RMB247 million 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 car inspection, quality control, customer service and aftersales service. Gross profit was RMB783 million, and gross margin was 69% in the fourth quarter of 2018, compared to 65% in the same period last year. Total operating expenses was RMB1,049 million. Non-GAAP operating expenses, excluding the share-based compensation, were RMB977 million. Sales and marketing expenses decreased by 1% year-over-year to RMB689 million, compared to RMB694 million 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 revenues, decreased to 61% during the quarter from 99% in the Q4 2017. G&A expenses increased by 79% year-over-year to RMB272 million in the Q4 2018 from RMB152 million in the same period last year. The increase was primarily attributable to the increase in the salaries and benefit expenses, share-based compensation expenses and professional service fees. G&A expenses, excluding the impact of the share-based compensation expenses, was RMB201 million, representing 18% of the total revenue in the quarter, compared to 18% in the Q4 2017. R&D expenses increased by 23% year-over-year to RMB97 million in the Q4 2018 from RMB78 million in the corresponding period last year. The increase was primarily due to the increase in salaries and benefits expenses. R&D expenses excluding the impact of share-based compensation expenses was RMB96 million, 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 expense management will continue to improve our profitability over time. Gain from the guarantee liability was RMB8 million compared to a loss RMB15 million in the prior year period. The gain was a result of a slight decrease in the delinquency rate compared to that of the third quarter of 2018. Loss from operations in the Q4 2018 was RMB266 million, compared to a loss of RMB483 million in the prior year period. Non-GAAP loss from operations, which exclude share-based compensation expenses, was RMB194 million, compared to RMB455 million in the same period last year. Non-GAAP loss from operations as a percentage of total revenue was 17% in the Q4 2018, decrease from 65% in the Q4 2017. The change in fair value of derivative liabilities was zero in the Q4 2018, compared to a loss of RMB385 million in the same period last year. We no longer see any impact of derivative liberties, as the preferred shares were converted into the ordinary shares at the time of IPO. Net loss in the Q4 2018 was RMB315 million compared to a net loss of RMB902 million in the prior year period. The narrowed net loss was primarily due to the great 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 million in the quarter, compared to a loss of RMB489 million in the prior year period. Non-GAAP adjusted net loss as a percentage of total revenue was 21% in the Q4 2018, decreased from the 69% in the Q4 2017. Now turning to our cash position. As of 31st December, 2018, Uxin had a cash and cash equivalents of RMB801 million, compared to RMB677 million at the end of Q3 2018 and RMB292 million at the end of Q4 2017. The company had a short-term time deposit and other investment products of RMB596 million, compared to RMB581 million at end of Q3 2018 and RMB1 million as of the end of Q4 2017. The company had restricted cash of RMB2,013 million compared to RMB1,838 million at the end of Q3 2018 and RMB1,617 million at the end of Q4 2017. So that was the fourth 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 RMB3,315 million compared to RMB1,951 million in the 2017. Turning down to our 2C and 2B business units. 2C transaction facilitation revenue increased by 180% year-over-year to RMB645 million. 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 RMB1,774 million. Our average service fee rate increased to 7% from 6.2% in the prior year. In terms of our 2B business, 2B transaction facilitation revenue, increased by 17% year-over-year to RMB607 million. The take rate for 2B transaction facilitation increased to 4% from 3% in the prior year. Gross profit was RMB2,176 million in the year 2018, and gross margin increased to 66% compared to 62% in the prior year. Loss from operations in the 2018 was RMB2,566 million, compared to RMB1,823 million in the prior year. Non-GAAP loss from operations, which exclude share-based compensation expenses, was RMB1,514 million, representing 46% of total revenues, decreasing from 85% in the prior year. Net loss in the full year 2018 was RMB1,538 million compared to the net loss of RMB2,748 million in the prior year. Non-GAAP net loss, which excludes the share-based compensation expenses and gain from the fair value change of the derivative liabilities, was RMB1,671 million in the 2018 compared to RMB1,696 million of 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 at the Uxin, as we focused on building the resources and the infrastructure that will enable the rapid expansion of our 2C business, particularly, cross-regional transactions. With these investment, we have also started the benefit from many opportunities to improve operational efficiency across our business. This was particularly the case in the fourth quarter of 2018, where we realized a significant reduction in the sales and marketing expenses as a percentage of revenues. Building on a solid foundation, we are confident that we will maintain strong gross momentum in the 2019 and continue to improve our operating leverage. Now turning to the guidance for the first quarter of 2019, we expect the total revenue to be in the range of RMB900 million to RMB950 million. This forecast reflects the company's current and the preliminary views on the market and operational conditions, including seasonal factors, which are subject to change. That concludes our prepared remarks.

Thank you, Mr. Zhen. Operator, we'll now like to open the call for questions.

[Operator Instructions]. Our first question comes from the line of Eddy Wang from Morgan Stanley.

D.K., Michael and Nancy, 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 noncross-regional transactions, such as the take rate, you have mentioned that in fourth quarter, it already reached like 5.3%. And the loan attached rate as well as the GP margin difference. Also what's your target for the cross-regional transactions in 2019 in terms of the volume and the proportion of the overall B2C transactions?

Okay. Thank you, Eddy. I would like to answer this question. So first of all, I would like to - we'll review again of our cross-region in our last year and the Q4 results. So first of all, we're very excited to say, we have already achieved 10,000 transaction volume of our cross-region transaction in last December and 40,000 for full year 2018, and compared just a very few, only hundreds in 2017. And we are very confident that in 2019, we expect the 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 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 three main reasons. So first of all, with the biggest, the pinpoint in China used car market is - that's an imbalance between demand and supply. So there is a lot of the used cars supply in Tier 1 city, suchlike in Beijing, Shanghai. That's a big city, people, they're 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, they still don't have car, but they want to buy the first one. But with the low income, the problem - and I think the used car is bad choice for people who're buying the first - the traffic vehicle. So how to solving that cross-region problem? So I think that the only way is using online transaction, yes, to cater to the low-tier cities, the customers. We can enable them. They can have a - the massive choice of the used car compared today in the country-level cities, they may only have 50, 100 used cars select. We increased it into hundred thousands select. And secondly, the very important, that why we can't increase our take rate, because there are very big price difference for the same car between the - in the big city and the country-level city. In the traditional supply chain, they'll need a lot of middlemen to transfer the used car from the Tier 1 city go to the low-tier cities. So every - the middlemen, they will ask 8% to 10%, the arbitrage. For that to make people who live in the small city, the used car price, the average 20% higher than the big cities. So today, we will launch the cross-region, the transaction services. We will just cut off all the middlemen. We can enable people who live in the countryside city, they can get at 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 a new one. But at the beginning, will I buy the used car, when I founded the Uxin. I'm searching the car cross-country. And in past five years, I changed three cars and every of these car, 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 very unique product. Not only you can provide the massive selection that you can just optimize the customer value to the - so that is, I think, the fundamental reason, why the cross-region business can have a very strong result in both in our business and also in our financial. I think the - in the further year, in 2019, we will all in this business. We're focused doing the foremost and 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 the year, we want to coverage 1,500, the country level cities, and we enable 800 million, the peoples, who live in the lower-tier cities. They're able to buy the fair price, the used car. And secondly, we want to enhance our - the inspection and the digital display technology, suchlike VR, suchlike the video. And we want, provide an 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 compared the two numbers. In the January 2018, we only had 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, we will coverage every corner in China, the cities, we can deliver a car, go to there. And also we decrease the delivery time from January 2018, that's average of 5.7 days until now, 4.1 days. Yes, so we want people who buying a car from our platform, and if they can get it our - get the car ASAP Yes, and the last one is we will enhance our exchange, warranty and the 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 used car as simple as possible to the customer. So we will expanding our aftersales network to provide the best, the user experience to the customer, and set out the word of mouth for the Uxin brand and the Uxin product. So that's some summary of our strategy and goals for the cross-region transactions.

So Eddy, Michael here. So I give you some more color on the numbers. So last year, we finished around 40,000 transactions for cross-region services. And in this year, we aim to have a 4x increase, and the - 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.

Our next question comes from the line of Ronald Keung from Goldman Sachs.

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 fourth quarter. Actually revenues reaccelerated, seems like the new partnership, with traffic is really helping. So are there any updates on any further new initiative between the two parties? Any promotion base, or should we expect, for example June '18 to be - about to be so another big festive for that, 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 fourth quarter. So could you explain - is there - are there any seasonal factors and with the partnerships, should we expect the rest of the year, the [indiscernible] promotion, the Alibaba promotion, quarters which are generally 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 questions?

Yes, please. Yes, Please translate that question.

[Foreign Language].

Okay, thank you, Ronald. I think I'm going to answer the first question, the corporate with Taobao. And Zeng, you can answer the question about the Q1 guidance.

Okay. I will.

Right, and we have been growing traction from Taobao users from our used car often since December. We will start our partnership. For December alone, we completed over 3,000 transactions with - form Taobao. Thanks to our partnership and promotion of Double 12, the shopping festival. Today, I think that we are still at an earlier stage of our corporation. 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 cars on Taobao to be in line with what show on Uxin's own platform. By adding the video inspection report and VR, the function and among other, the measures. And I think that 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 recommend a used car of choice to its users. In long term, when our corporation prove to work well for the meaningful transaction volume created, we will further expand our partnership by tapping into the data corporation, such as risk profiling. And we believe, this partnership with strength our leadership in China's used car market and help Taobao expand their - its product and service offerings. So we are now - have a very good, the corporate with Taobao and almost every two weeks, and we will launch the new - the product in the Taobao platform, and they cover a lot of the area include the payment and include the online, the exhibition of the used car and also optimizing 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 aftersales service to the customer.

Okay. Starting to your second question for your Q1 - for the Q1 guidance. And yes, as you said, we set our Q1 '19 total revenue in a range of RMB900 million to RMB950 million, up to 39% to 46%. Well, for the full year, we expect the total revenue to outpace this growth rate. Our current first quarter 2019 guidance factors in the seasonality. The 3 factor was, in this year coming early February compared to the mid-February of last year, which makes the peak season period in the Q1 shorter, and - than 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 this '19, 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.

D.K., and I am - again, it's Nick from JP Morgan. So one similar question on SG&A. I think that was, again, a great achievement in the fourth quarter. We noticed that SG&A expenses actually jumped 6% Q-on-Q in 4Q. At the same time, our run rate in the fourth quarter actually grew substantially by over 30% from - to last year. So maybe, first of all, can you share with us what kind of strategy did we implemented in the fourth quarter? And then into 2019, can we extrapolate that? And how should think about SG&A in 2019? [Foreign Language].

Okay. Sure. Yes, it's Michael here. So for your question, I think mainly what we're talking about is marketing because our R&D and G&A is quite stable in this year. So as long as our revenue increase and capital operating leverage on the G&A, R&D. And for the sales and marketing, and we made a strong progress optimizing sales and marketing expenses in our selling increase elaborating relative expenses in the Q4, so it's marketing expenses as a percentage of revenue decline to 61% compared to 87% in the Q3 and the 99% in the same period last year, as we mentioned. And in the full year of 2018, sales and marketing expenses as a percentage of revenue decline to 81% compared to 113% in the prior year. This is a clear demonstration of our growing brand awareness and an increase in conversion efficiency, which reflects a more accurate consumer targeting and improvement in the productive of our sales consultants. So going forward, we expect the true dollar amount of our branding expenses to remain stable, while we continue to improve the efficiency of our user acquisition and our sales consultant. We will maintain our prudent approach to expense management and continue to improve our margin profile. So additionally, in the 2019, we will adopt a franchise model to complement our self-operated service center, as D.K. just mentioned. So we believe, this we'll reduce our own investments in the sales as well as improve our operating efficiency.

I'll take the next question from the line of Monica Chen from Credit Suisse.

I have two questions here. Number one, can management provide more color about the franchise model, as you just mentioned? And we just launched - raised amount in order to cover more lower-tier cities to extend our network? So can you provide more details, like how many agents we're already are working with? What's the pipeline for the new sign-up? What kind of service we're providing to them, helping them to get more transactions? And what's the, like, 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 2C business. But can management, maybe, give us more color on how should we think about the 2B business? And can you tell us the value we are providing to the dealers? Have we observed the other total B2B markets, maybe, slowing down given the 2C market's growing faster? And also we noticed that actually the take rate for the 2B business actually improved to 4.3% versus the 3.1%, same quarter, last year? What's likely the trend going forward? [Foreign Language]

Okay. Monica, this is D.K. Let me take the two questions. So first, talking about our franchise model. We launched franchise model, the Q4 last year. At the end of Q4, and we have 200 franchisors joined to our - the sales network. And at the end of the February, and we have already got a 600 franchisors joining to our network. And it's almost speed every month, 200 franchisors we'll open. And now from our - the business side, and now we have over 1,000, the independent franchisor are still waiting on our waiting list to wait we open the new store for them. And we have a goal that at the end of the year, we want to cover the 1,500 in the country-level cities use - specially use our - the franchise model to cover all this. And that almost mean, this year, we will open 2,500 - more than 2,500, the franchise store that's using our - that new model. And let me say, for the revenue spread, and we basically on the franchisors, there the KPI. And we will separate the 3% to 4% to them. And we're doing very detailed calculation. That is because the franchisor, they invest in everything, included the rental, the store, and the [Foreign Language]?

The renovation.

The renovation of the store, and they pay all the salary of their - the staff. So we calculated the cost. That so we're using the franchisor, it's almost equal in the executive level that suchlike we use our, the own staff. That, by the way, the franchising model has done a very good performance, yes, present today. I think, first of all, they are very self - [Foreign Language] self-innovative, because when we are 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 management 2,000 stores across the country, that will definitely a very big - the challenge for management and also the incentive to these people. So the franchising model provide a very good self-motivation, that we want to say. And also saves the cost and give us a very - at a level approach to just expanding our network to all these customer. So that's a franchising model, the answers. And the second question you were is B2B strategy. Yes, first of all, the year-over-year, the B2B revenue - the 2B revenue and the transaction has declined. But I won't mentioned 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 mine. So we - just to move all our resource and - into the 2C business. And that's also we're showing the result. We have very significant achievement in 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 are mainly due to rechange our C2B business model. And last year, not - the 2017, we account all our, the C2B business as a transaction, but since from we mentioned, and we were stating in the last Q2, yes, we changed the approach. So Q3 and Q4, we didn't account every C2B transaction into our 2B transaction. Because that's a cost that mainly declined. 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 the selling the car goes through our B2B, actually dealer cannot get a very significant profit. They are now using the cross-country retail model, where they can achieve the better profit because we're helping them to find an ended user, not just the wholesaler. So we say the trend is more and more dealers, they move their, the transaction decision from the B2B go to our, the cross-region model. And secondly is, as we all know, we have seven - the city open B2B auction in China. But the recent to the news is more and more cities suchlike Xi An, suchlike Wuhan, suchlike Jinan, these cities is growing their local supply. So more and more people, they will not go very far suchlike from Shandong go to Beijing to take their inventory. They have another choice, taking inventory from Jinan. But in last year, we didn't expanding our B2B business. So that's, I think, the medium-term, it's a reason why we - our 2B business that we all have a little bit decline because we didn't invest into this business more. But as for the volume, I think, we will gradually do to stabilize certain level, at the current certain level And we're happy to stay the current take rate is also good, yes. And for the long-term, I think, the 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. The mainly source of their car is coming from the very big supplier. Yes, that's like a fleet companies, that's like the rental company, yes. And but today, in China, the used car supplier are very fragmented. It all comes from dealers. So I think we will keep our 2B business as very important part of our - the group business, one part of our group business. But I think we are watching the opportunities. Once, the market have done the big - the supply happened. yes, I think we will - at that time, to keep our, the competitive advantage of the B2B business, and we will enhance our - the investment of 2B business. Yes. Thank you.

Thank you for the questions. I'll like to hand the call back to Nancy for closing remarks.

Thank you all for joining to this 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.