Ladies and gentlemen, thank you for standing by, and welcome to Uxin's Earnings Conference Call for the First Quarter of Fiscal Year 2023. At this time, all participants are in a listen-only mode. After management's prepared remarks, there will be a Q&A session. [Operator Instructions] Today's conference call is being recorded. If you have any objections, you may disconnect at this time. I'd now like to turn the call over to your host for today's conference call, Ms. Joyce Tang, IR Director of the Company. Please go ahead, ma'am.

Thank you, operator. Hello, everyone. Welcome to Uxin's earnings conference call for the quarter ending June 30, 2022. On the call today are D.K., Founder and CEO; and John Lin, CFO. D.K. will review business operations and company highlights, followed by John, who will discuss financials and guidance. They will both be available to answer your questions during the Q&A session that follows. Before we start, I would like to remind you that this call may contain forward-looking statements made under the Safe Harbor Provision of the U.S. Private Securities Litigation Reform Act of 1995. These statements are based on management's current knowledge and assumptions about future events that involve known or unknown risks and uncertainties, which could cause actual results to differ materially from those in the forward-looking statements. Uxin does not take 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 our filings with the SEC. With that, I will now turn the call over to our CEO, D.K. Please go ahead.

Thank you, Joyce. Hello, everyone. Thank you for joining our earnings conference call today. To better communicate with both domestic and international investors, my prepared remarks today will still be in both English and Chinese. In the first quarter of fiscal year 2023, which was from April to June 2022, we maintained our growth momentum despite peak COVID resurgence across the nation. Our retail transaction volume increased by 30% quarter-over-quarter and more than 250% year-over-year to 2,407 units. We continue to gain trust among consumers with our high core vehicles, efficient processes, transparent pricing and reliable services. We also continue to expand our market share leadership in both in Xi’an CD and Hefei CD, where our two IRCs are located. The two IRCs are the largest 100% self-owned used car superstores in East China and Northwest China, respectively. Our regional branding and customer application has been growing rapidly. In this quarter, our Net Promoter Score was 60, remaining stable at an industry top level, consumer reputation through word of more recommendations started to fuel our business growth. About 25% of our retail sales in the quarter were generated from customer referrals. We refined our over 700 expansion chatpot and launched our National Standard Vehicle Dashboard program based of national used car appraisal and evaluation of mechanical clarification standards. The program further improved our customers' shopping experience. It has the presentation to retail vehicle information in the more accurate and intuitive way and help our customers make their decisions more easily and conveniently. Each retail vehicle is provided with a percentage score based on digital easy-to-understand information on vehicle conditions. Consumers can see our categorial rating for each retail vehicle, including ways for the interior appearance, engine components, cockpit, emission tests, road tax, checks and et cetera, in them of a…

Okay. Thanks, D.K., hello, everyone. Welcome to our earnings call for the first quarter of fiscal year 2023, which is the three months ended June 30, 2022. Uxin have international and domestic audiences on the call, we will walk you through our key financial results in both English and Chinese. Driven by a 29% quarter-over-quarter growth in our overall transaction volumes, our total revenues were RMB626 million, increasing 23.8% quarter-over-quarter and 125% year-over-year. Specifically, retail sales revenues were RMB348.4 million, increasing 9.1% quarter-over-quarter and 279% year-over-year. The retail revenue growth was mainly traded volume by 30% quarter-over-quarter sales volume growth. At the same time, we have been optimizing our inventory structure to better meet mainstream demand called mid-range priced cars as we are targeting broader and middle-class customers. The average selling price of retail car swapped to RMB145,000 in Q1 from RMB180,000 in the prior quarter. The ASP will further decrease to RMB118,000 in the next quarter and remained relatively stable in the future. Although the decrease in ASP partially offset the increase in revenue growth from retail sales volume, an optimized inventory structure with more widely expected price range will lay a healthier foundation for our long-term sales growth. Gross margin was 1.1% for the three months ended June 30, 2022, compared with 0.2% in the last quarter. As I just mentioned, we have been shifting towards mainstream mid-range priced vehicles. So we accelerated the sales of the higher-priced vehicle through price adjustments. This led to some write-off of unsold inventories to improve turnover. These actions led to a currently move gross margin, if we excluded the impact of inventory adjustments, our gross margin would be at the 4% level. While the inventory structure becomes more and more reasonable as planned, we expect our gross margin to improve quarter-over-quarter…

[Operator Instructions] Our first question comes from Yang from Yang. Please go ahead.

Okay. I will repeat the question in English again. We noticed that you expanding your outlook disclosure. Your retail transactions are expected to grow, while wholesale transactions are expected to decline. How should we expect two businesses to perform going forward?

D.K., please go ahead.

Okay. Retail sales will be the most important indicators of our performance to provide more clarity on our business growth trends and operating results. We have expanded our guidance to include our expectations of transaction volumes and average selling prices in addition to revenue outlook starting this quarter. We expect retail sales to maintain its growth momentum in the fiscal year of 2023. As more consumers recognize our products and services, our retail channels will continue to grow. Additionally, as we expand our inventory size and enhance our vehicle acquisition and expansion and reconditioning capabilities, we will have more retail standard vehicles, which will also contribute to the growth of our retail sales. Wholesale business is an effective supplement to our retail sales. As our retail sales force become more potent, we will retain more vehicles and naturally decrease the percentage of wholesale business. In the long term, we expect 75% of our total sales to come from retail and the remaining 25% from wholesale. That's my answer to the question.

The next question comes from Tom Kerr from Zacks Investment Research.

My question is about vehicle acquisition. Do direct purchases from consumers still represent about 1/3 of vehicle acquisitions? And is that share growing? And then just generally, how should we think about car sourcing costs given the series of favorable policies that's been implemented?

Hello, Tom. This is D.K. I will answer your question. Our device purchases from consumers accounted for nearly 40% of our total acquisitions this quarter, and we expect this percentage to increase further. Currently, we collect cars from consumers, mainly from the two IRC locations in Xi'an city and Hefei city as well as the surrounding cities. These are our primary sources of direct purchases from consumers. However, as we expand our inventory set, we will also increase the percentage of vehicle repurchase from consumers in other locations, especially after the removal of cross regional transfers which facilitates the national calculation of high-quality costs. Sorry. I didn't finish. In terms of our vehicle acquisition cost, they mainly consist of the vehicle purchasing price and the related transaction causes such as title transfers and delivery logistics. In the long term, we will continue to reduce our acquisition costs. Other restrictions are lifted. We can assess a broader selection of vehicle sources. We can effectively fill our inventory by analyzing the market data of vehicle pricing in different regions. This will enable us to further reduce our vehicle acquisition costs. The implementation of the new policies, such as regulations on the client and service registrations will benefit companies like us. In addition, this implementation of electronic filing, temporary license plates, a new test treatments, we can reduce our transaction costs in vehicle by doses of dollars. We were the first in the industry to start selling used cars nationwide. We have also established the industry's smooth advanced delivery routing system with dynamic optimization. We have kept our logistics part relative goal in the industry. With the increase in volume and improving economics of scale, our logistic cost will also continue to decrease. That's my answer to your question. Thank you.

I have one more quick question. Yes. On these favorable policies, do they all start October 1? Or have some already been implemented that you're seeing?

In 2022 to today, we saw a number of high-profile industry policies. These policies signify the government's commitment to developing the used car industry by solidifying well-branded dealerships as the mainstream transaction model in the market. Consequently, the state regulators limited the total number of used cars and individual is able to trade every year, whereas dealerships are now able to complete vehicle transfer directly. These measures have effectively in future used cars as commercial products. In fact on the same regulatory perspective, we still need more companies that can provide high-quality vehicles and reliable services as the driving force to crystallize the used car industry and win customers love for used cars as a product. The direction of these new national policies is highly consistent with our perception of the market and the characteristics of our business. The used car industry is currently experiencing its most crucial changes in decades, and we hope to take full advantage of such tailwinds to fuel our growth. Sorry. Yes. Yes, I want to just emphasize about any updates since the October 1. Yes.

The next question comes from Fai Dai from TF Securities. Please go ahead.

Repeat my question in English. I've got two questions. The first one is how is the Company's current financing situation, how are the funds being used? What's the Company plan to do with these funds in the future?

New capital has made payments based on further three-point payment schedule as part of its total $100 million strategic investment. The payment is proceeding in an orderly manner. We will utilize the funds mainly to expand our inventory size, enhance our reconditioning process and support the expansion of the Xi'an IRC and the development of the Hefei superstore that's currently in the construction.

Okay. Please go ahead.

Yes. Sorry, please go ahead.

Repeat my question in English. Do you now, what is transaction scenario and the process of the Company's consumer? What is the proportion of online and offline transaction?

Currently, 25% of our transactions are generated purely from online. For the remaining 75% customers will prefer to visit our stores in person and see the vehicles offline before purchasing a car. However, all the customers generally look at the vehicle license, the difference is whether they are located close to our IRCs or not. For customers near our stores, they are more willing to rely us offline after checking out the vehicle offer. During the visit, they can understand the real conditions of the vehicles before kicking them up on site. For customers who located further from our IRC, they will order and purchase online.

Thank you for your questions.

We have reached the end of the question-and-answer session. I would like to hand the call back to Joyce Tang for any closing remarks.

Thank you, everyone, for joining our call today. We look forward to seeing you next time. Bye-bye.

The conference has now concluded.

Bye-bye.

Thank you. The conference is now concluded. You may now disconnect.