Ladies and gentlemen, thank you for standing by and welcome to Uxin's Third Quarter 2019 Earnings Conference Call. [Operator Instructions] After management prepared remarks there will be a Q&A session. [Operator Instructions] 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 third quarter 2019 earnings conference call. Today D.K. our Founder and CEO and Zhen Zeng, our CFO will discuss our financial results for the third quarter. Following the prepared remarks, D.K. and Zhen will be available to answer your questions. Before we start, I would like to remind you that our statements today will contain forward-looking statements that we make under the Safe Harbor provisions of the US Private Securities Litigation Reform Act of 1995. These statements are based on the 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 obligations to update any forward-looking statement, except as required under applicable law. For more information about the potential risks and uncertainties, please refer to the Company's filings with the 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 third quarter 2019 earnings conference call. We are pleased to report a solid set of results for this quarter. Our total revenue increased by 33% year-over-year to RMB461 million, exceeding the high end of our previous year guidance. In particular 2Q revenue recorded another robust year-over-year growth of 247%. And even more encouragingly our adjusted net loss narrowed notable by 40% year-over-year and 19% quarter-over-quarter to RMB268 million, demonstrating the results from our strong commitment to control costs, enhance operating efficiency and improve margin profile. Looking at our 2C business in further detail, we completed over 23,500 online used car transactions during the quarter, reflecting strong year-over-year growth of 107%. As some cities and regions have adopted the new emission standards China Six starting from July and don't allow car with lower emission standards to register locally, we did experience certain impact from this policy change, which resulted in relatively flat quarter-over-quarter transaction volume. Despite the impact, we are very pleased that our unique value proposition and the strong monetization ability helped to further increase our 2C take rate to 11.6% from 11.2% in the second quarter and 7% a year ago. This translated into per unit revenue of around RMB14,000 for the third quarter, up from about RMB13,000 in the second quarter. Looking ahead, the used car market is typically quite resilient. As more used car inventory meeting the new emission standard becomes available on the market. The sector will gradually digest the impact from policy change. We are also confident that we will be able to deliver strong sequential and year-over-year growth for online transaction volume in the coming year-end peak season. Underpinned by our key customer value, we believe our monetization ability will also get strong along…

Okay. Thanks D.K. Hello, everyone. Thanks for joining us today. As D.K. highlighted, we are very pleased to report a solid third quarter during which our gross margins further improved and operating and net losses significantly narrowed. In addition to the cost control and the efficiency efforts D.K. mentioned, we have also streamlined our headquarter related operations, such as the administrative management and the R&D processes by optimizing internal online business management systems. Moving forward prudent cost control and operating efficiency will be an ongoing focus area for us. We are confident that coupled with our superior monetization ability will help to further narrow our losses towards the end of this year. At the same time, we are confident that our business is well supported by our current cash position. First divesting the loan facilitation related business will significantly lower our cash requirements. Second, we believe our losses will continue to narrow as a result of our ongoing efforts in cost control and enhancing operating efficiency. Third, pursuant to the definitive agreements we entered into with Golden Pacer, the working capital associated with the divested loan facilitation business that we advanced to certain financing partners on behalf of Golden Pacer during the third quarter will be returned back to us in due course when the transaction is closed. Fourth, we expect to receive an aggregate cash consideration of $100 million after the closing of the transaction. All of this will contribute to our cash position and coupled with our continuous effort to enhance our monetization ability and operating efficiency, we believe we can build a more sustainable and profitable business over the long run. Now, let me work you through our financial details for the third quarter. Please note that the financial impact of the proposed divestiture has already been…

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

[Operator Instructions] The first question comes from the line of Eddy Wang from Morgan Stanley. Please ask your question.

Hi, DK, Michael and Nancy. [Foreign Language] I have two questions. The first is about ASP. We have witnessed that the -- that ASP of the 2C business actually has been increased in the past three quarters. So in the third quarter I think the ASP has almost reach around RMB120,000 which is almost the same level as the average ASP of a new car in China. What do you think of the trend of this ASP in next few years, and how do you balance the ASP versus the transaction volume, and what do you think the implied revenue per -- revenue per unit level in the near term and in the long term? The second question is about the competition. Since we have achieved the narrow loss in this quarter and our guidance also implies that a further narrow loss in the next quarter. So I think the -- overall the cross-regional transaction business model have been proven. So that's why I think some of the major competitors have actually also launched this cross-region transaction business. Have you viewed any direct competition from these competitors the same -- the similar business or do you think it's just -- do you have a lot of room for us to gain share even if it's competition from the major competitors? Thank you.

Excuse me, Eddy. [Foreign Language]

Yes, so our platform will actually provide a very full price range for our cars from RMB30,000 up to RMB1 million. So our current ASP is, like you said, is around RMB120,000. So I think it mainly comes from two reasons. The first one is, regarding to the relatively higher car price range, it's more the -- with younger car age. So this -- used cars more cater to the clientele who care more about the services or the after-sales guarantees or wider selection of used cars.

[Foreign Language]

Yes. So if we look at the mature market in the US like CarMax or Carvana, well, CarMax their average selling price is about $22,000; for Carvana, it's about $21,000. But for -- if we look at the overall market in the US, the average selling price is about only $10,000. So this is quite similar to China's market conditions. So for us, we feel very encouraged is that -- we are very encouraged by our current ASP because we can sell like RMB5,000 [ph] used car or a RMB120,000 [ph] used car. But the cost incurred is quite similar regarding the inspection cost or delivery cost. But different car price equals to different per unit revenue whichever, if we look at -- if we target the same take rate.

[Foreign Language]

So in terms of volume and car price, I think it's not the volume of the average. So our current focus is more to maximize our revenue scale and a healthy and sustainable profitability that comes along with this high-processing revenue.

[Foreign Language]

Yes. So our revenue -- per unit revenue increase is actually our evidence of consumers' recognition of our values brought by our online car transactions for our operators. So we won't drive the volume side compromising per unit profitability. With that, we will drive the volume growth as we continue to enhance our online used car transaction services and the more consumers naturally will be attracted to buy cars online from us. So we believe this will help us to reach a sustainable profitability in the longer term.

[Foreign Language]

Yes. We do observe [indiscernible] in the market are copying our online used car transaction model at [indiscernible] level. So this is actually a strong proof, that we did the right thing two years ago to choose such a business model.

[Foreign Language]

So we believe all our used car transactions is definitely the future trend. So we believe OS -- this market is still a Blue Ocean market. So it's large enough to have a second player.

[Foreign Language]

Yes. The compensation in the online used car transaction area is actually multi -- that's dimensional. So it has set a very high bar for Company's ability to organize, operate and manage the business in a highly efficient manner. So -- and the ability to provide high-quality customer services as well to operate a highly efficient and stable supply chain. So as a first-mover in the market, we have accumulated massive know-how and expertise and built a strong competitive advantages here. So we are very confident to win this competition for sure. Thank you.

[Foreign Language]

Thank you. Your next question comes from the line of Ronald Keung from Goldman Sachs. Please ask your questions.

Thank you. Hi DK, Michael and Nancy. I have two questions and then I will translate it to Chinese. Firstly, it's on the industry. As you mentioned, the global [ph] portfolio that has impacted sort of industry growth this year, not only new cars, also used car. Do you see any signs of this bottoming, or do we -- will this impact kind of drag on for a few more quarters before we see any potential uptick? And within the growth in this quarter, can you share just how the lower-tier city growth has been versus high-tier city. So let's see how growth has been trending with these markets, particularly you mentioned about the strong volumes from the franchisees. My second question would be, given that the Golden Pacer restructuring is mostly behind us, can you share just how the current management team DK and rest of the team, how are you spending your latest focus in time into -- with the finance business now, not -- no longer with the Group. What are we focusing on in particularly, in the cost side and then user experience? Just want to hear how the management team is doing in the latest restructured entity? [Foreign Language]

[Foreign Language]

Yes. So we did see the new car market is declining and it's worsening now. So the used car market also took some hit. For the used car market, specifically it's slow -- the growth rate is slowing, mainly because of two reasons; one is like you said, is our new emission standard adopted in a few regions like Cerdon Province or Hebei or [indiscernible]. So for us it affected about 25% of our Q3 volume.

[Foreign Language]

We won't expect the policy will be further adopted by other cities, because back in 2016 the state governments have already issued the regulation to lift the restriction on the car transported into -- across regionally. So --

[Foreign Language]

Yes, we will see the market will be divesting the policy changes and in the next two or three quarters the market will be picking up. So mostly because there will be more used car inventories meeting the new emission standard will be available on the market.

[Foreign Language]

So, the other factor is actually from the new car price decline side. So, from mid -- this Q2, we did see the new automakers has been cutting their new car prices to boost sales. So this will put some short-term pressure on the used car market because it affects the price to performance of the used cars.

[Foreign Language]

So, I think the new car price cuts has already reached to bottom to some percent. So the impact from new car market will be minimizing overtime -- over into next year.

[Foreign Language]

So the transaction volume on our platform from the lower-tier cities in Q3 was basically similar to our Q2 level, about 40% of our total volume and the growth rate between high-tier cities and the lower-tier cities, our platform also pretty similar.

[Foreign Language]

Yes. So the first action we take is, we leverage big data analytics to improve our inventory mix available on our platform. So to target the most physical inventory, we can actually downsize the number of cars impacted. So you can see this year we actually impacted less cars than last year. But the transaction volume is actually quite higher than last year's level. So this will help us to reduce the per unit inspection cost and we can also help consumers to better identify the better price to slow performance cars on our platform as well.

[Foreign Language]

Yes. So the second action we take is, we enhanced the customer satisfaction in terms of the fulfillment, such as the time limit of delivery and the consistency of the car's condition between consumers see the video [Technical Difficulty] put online and the actual car they see when they receive the car. So, the increased satisfaction actually helped us lower our car rate -- current rate impacted with.

[Foreign Language]

So, buying cars online is pretty -- very new way. So our sales consultants needs to be fully prepared to convert the consumers to buy cars online. So we also upgraded our CRM system by leveraging the AI technology, so we can better recommend the cars to our consumers. And we also build out this very highly effective sales consultant, sales assistance system to enhance the professionalism of our sales reps. So, this will also enhance our customer satisfaction and the commission [ph] rates as well.

[Foreign Language]

Yes. So the fourth area is, on the logistics. So we optimize our logistics planning by upgrading the former two-part logistics to three-part logistics. We increased the portion of main route versus the ground route. So, currently, the main route account for about 60% of our total logistic consistence. So it will effectively lower the per unit delivery cost and also increase the -- full order rate as well and also make sure the car can be delivered to the consumer's door step as soon as possible in a timely manner.

[Foreign Language]

You guys did really great. Thanks.

[Operator Instructions] The next question comes from the line of Ashley Xu from Credit Suisse. Please ask a question.

[Foreign Language]

Thanks, management for taking my questions. I have two questions. One is about users of -- acceptance on online car purchase without seeing the cars offline. Is there are any user metrics that could be shared? And second question is on the cash position. How much receivables would we have from Golden Pacer in 4Q, given we have made some deposits on behalf of them. And also, what's our plan on the use of cash together with the $100 million proceeds from the transaction? Thank you.

[Foreign Language]

Yes. So it's true that still there are many consumers go offline to track the car and buy the car -- buying cars online is a totally new experience for consumers. So it will take some time for consumers to shift their shopping habit. But what we do see here is that there are increasing number of our consumers buying cars online from Uxin. So this year, we are looking at 100,000 used -- online car transactions from our platform. So we brought you the same number of consumers actually accepting this way of buying cars online.

[Foreign Language]

Yes. So buying cars online is definitely the future trend. So buying cars online only also have the non-comparable advantages over going offline. So we can provide a much wider selection of used cars from nationwide and also because we don't have our fixed cost of the offline stores, we can offer better prices to consumers. So we are able to also provide a one-stop solution online to consumers, which cannot be provided by the offline stores. So the convenience we can deliver to the consumer also help us.

Zhen?

Okay. Thanks Ashley. I will work to answer your second question. So I'm more likely to give you the overall cash position of our current status. So I think our business is well supported by our current cash position. First of all, divesting the loan facilitation business has significantly lowered our cash requirements. We no longer need to report cash deposits as with this cash would be our financing partner or buyback the default loans. So both will lift the pressure on our working capital. So, secondly, I think without the loan facilitation business enter the [indiscernible] our bottom-line will be a reasonable indicator of our cash flow performance. As we continue to take cost control measures and enhance efficiency, we believe we can keep narrowing the losses and minimizing the cash outflow in their sense. And to address your question, per the definitive agreements, we enter into with the Golden Pacer. This quarter we still advance some working capital associated with the divestiture. After the transaction is closed, the portion of the cash will be returned back to us in due course. Last, we also expect to receive a aggregated cash consideration of $100 million associated with the divestiture after the closing. So, collectively all of this will contribute to our cash position. Again, with our focus on enhancing monetization ability and operating efficiency, we believe all will contribute to our long-term sustainable growth. Thank you, Ashley.

Thank you. We have reached the end of question-and-answer session. I would now like to hand the conference back to Nancy for closing remarks.

Thank you everyone for joining today's call and for your continuous support for Uxin. We look forward to speaking to you again in the near future. Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.