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,…

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…

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…

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,…

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.