Ladies and gentlemen, thank you for standing by, and welcome to Uxin's First and Second Quarter of Fiscal Year 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. After management's prepared remarks, there will be a Q&A session. Today's conference call is being recorded. If you have any objections, you may disconnect at this time. I would now like to introduce your host for today's conference call, Mr. Jack Wang. Please go ahead, Jack.

All right. Thank you, operator. And hello, everyone. Welcome to Uxin's earnings conference call for the first and second quarters of fiscal year 2024 ended June 30, 2023, and September 30, 2023, respectively. On the call with me today we have DK, our founder and CEO, as well as Feng Lin, our CFO. DK will review business operations and company highlights, followed by John, who will discuss our financials and guidance. They will both be available to answer your questions during the Q&A session that follows. Before we proceed, I would like to remind you that this call may contain forward-looking statements which are inherently subject to risks and uncertainties that may cause actual results that differs from our current expectations. For detailed discussions of the risks and uncertainties, please refer to our filings with the SEC. Now, I will turn the call over to our CEO, DK. Please go ahead, sir.

[Foreign Language] [interrupted] Hello, everyone. Thank you for joining our earnings call. I am pleased to reconnect with you all today on the call and to facilitate communicate with domestic and international investors. I will share our company’s latest progress in both Chinese and English. Due to the financing transactions with the government of Hefei City in the past month, we postponed the release of our first quarter financial results. Today we're presenting the performance of the first and second quarters of fiscal year 2024 covering April to September 2023. I will first review the key highlights of the past two quarters and then share some of our achievements and future goals. In the first quarter of fiscal year 2024, from April to June 2023, we witnessed that the end of a car buying surge initially fueled by pent-up demand during the pandemic. Subsequently, the aggressive pricing strategies of new cars beginning in March continued to reverberate through China's used car market. This shift led to a cautious approach by consumers who adopted a wait and see stance on purchasing used cars. Aligned with these market dynamics, we opted for a prudent car acquisition strategy, maintaining lower inventory levels. Consequently, our retail transaction volume in the first quarter saw a 25% decrease from the previous quarter, totaling 1,687 units. However, in the second quarter between July and September, we strategically increased our inventory levels, resulting in a significant rebound in retail transaction volume to 2,287 units, a notable 36% sequential growth and far surpassing the industry's average growth rate of 5% in transaction volume. Throughout this period, we effectively maintained the turnover base of our vehicles on sale before 45, while simultaneously enhancing our profitability as our gross margin has expanded to 6.2% from 1.3% in the same period last…

[Foreign Language] [interrupted] Thank you, DK. And hello, everyone. I will provide a closer look at our financial results from the first and the second quarter of fiscal year 2024. DK has already provided an overview of our retail transaction volumes for these periods. In the face of the fluctuating market conditions for the first quarter of 2024, we adopted a prudent vehicle acquisition strategy and opted to maintain relatively low inventory levels. As such, our retail transaction volume in the first quarter decreased by 25% sequentially to 1,687 units. During the second quarter, we increased our inventory levels enabling us to grow our retail transaction volume by 36% to 2,287 units in the second quarter. Our retail sales revenue in the second quarter reached RMB249 million, representing a sequential increase of 33% from RMB187 million in the first quarter. In response to the evolving economic landscape, we diligently refined our inventory structure to align with current market demands. This strategic adjustment is reflected in the average selling price or ASP of our retail vehicles, which decreased from RMB120,000 in the same period last year to approximately RMB110,000 over the last two quarters. Our wholesale business segment remained relatively stable with a transaction volume of 1,567 units and a sales revenue of RMB95 million in the first quarter compared to 1,597 units with a sales revenue of RMB99 million in the second quarter. Overall, our total revenues for the second quarter were RMB356 million, a sequential increase of 23% from RMB298 million -- sorry, RMB289 million in the first quarter. Furthermore, we further accelerated our inventory turnover, increased the penetration rate of our value-added services and reduced the per-vehicle costs, thanks to the efficiencies gained from our modernized factory operations. As a result, we saw a substantial improvement in our…

Thank you. [Operator Instructions] Today's first question comes from [Kai Qian] (ph) with CITIC Securities. Please go ahead.

[Foreign Language] So I have another question which is about changing the gross profit margin. So in the second quarter of 2023, which means from the April to September, we have achieved a big progress on the rebound of our growth profit. And we maintain at this time, we are at the third quarter of 2023. So we know there are a lot of factors that contribute to that rebound. So could you give us more detailed information about the weight of different factors, especially the contribution from Xi'an IRC operation?

[Foreign Language] [interrupted] Hi, this is John and I'll address that question. Our gross profit margin has seen a notable improvement, rising from 1.3% in the same period last year to 6.2% this quarter. The growth in gross profit for a retail vehicle primarily stems from two aspects: vehicle sales and value added services. In the last quarter, the year-over-year improvement in gross profit was approximately 70% driven by vehicle sales and 30% by value added services. The uptake in gross profit from vehicle sales can be attributed to the success of our large superstore model. This success translates to more accurate risk pricing, increased sales efficiency, and a faster inventory turnover. Additionally, as the market stabilizes, the price spread in our used car sales has significantly improved compared to the previous year. At Uxin, we leverage our superstores and factories to provide a comprehensive array of value added services, including finance, insurance, extended warranties, accessories, maintenance, and repairs. This business model represents a natural advantage over traditional used car dealers. We can offer customers more suitable finance and insurance products, cost-effective accessories, and achieve sales conversions through an offline superstore experience that surpasses traditional used car marketplaces. We are consistently improving the penetration rate of our value added services and we believe that there is still a significant potential for further growth. And with our Xi'an IRC up and running, the reduction in reconditioning costs has indeed made a noticeable impact on gross margin improvement. As DK mentioned earlier, our transparent factory system featuring the world's most advanced used car reconditioning factory facilitates integrated end-to-end process management for inspection, diagnosis, and repair. This has significantly improved vehicle turnover efficiency and reduced the [time] (ph) cost. At the same time, we continue to roll out advanced reconditioning equipment and processes, such as 3D printing and smart repairs, while integrating the spare parts supply system. As a result, the reconditioning time and cost per vehicle has further decreased. As of now, the reconditioning cost per vehicle is more than 50% lower than a year ago. The optimization of the reconditioning process along contributed about 1.5 percentage points to the improvement in our gross profit margin. And that us my answer to your question.

[Foreign Language] [indiscernible] retail transaction volume quarter [indiscernible] from July of September. But do you think currently in the last fourth quarter, maybe in the next few months this stable trend can be continued and there may be not strong shopping tax on the new car market. And so in 2024, our retail transaction volume will bounce and can be continued in the next year. Thank you.

[Foreign Language] [interrupted] Hi. This is DK. And I’ll address the sales perspective of your question first. So from July to September 2023 after new car prices stabilized, the used car market gradually returned to normal. Our sales volume began to recover in July, showing a 35% growth in the September quarter compared to the June quarter. In the same period, the domestic used car market only saw an average sequential transaction volume growth rate of 5%. So our performance significantly exceeded the market. Regarding the ASP of retail vehicles, both in the September and June quarters our ASP remained stable at around RMB110,000. At the beginning of the year, it was about RMB120,000, and in the same period last year, it was about RMB140,000. The ASP of retail vehicles experienced a slight decline, mainly due to our proactive optimization of the inventory structure to align with the current economic conditions and market demands. So after completing the adjustment of our vehicle structure, our inventory now mainly consists of used cars aged three to eight years. Overall, the impact of the new car market on us has lessened. Starting in October, new cars underwent a new round of price reductions. But our ASP has remained relatively stable. And that's my answer to your question.

Thank you. And our next question today comes from Fei Dai with TF Securities. Please go ahead.

[Foreign Language] Given that current economic conditions are quite challenging, so on the company’s perspective is there any changes in market trend and consumer behavior? How is the company addressing the impact of economy change? That is my first question. Thank you.

Hi, this is DK, and I will answer that question. So for us, attaining profitability really centers around three key aspects. Firstly, it entails consistently evaluating inventory levels through reasonable pricing. Secondly, it necessitates maintaining the current efficiency of sales turnover. And thirdly, it involves an ongoing commitment to drive cost reduction and enhance efficiency. So the most notable potential impact that we observe is the market volatility stemming from the continues reduction in new car prices. On the vehicle acquisition side, the increasingly competitive pricing strategies in the new car market this year had repercussions in the used car market, lowering the acquisition prices for used cars. Leveraging our AI-driven digital pricing system, we can determine the most reasonable acquisition prices. Customers selling their cars may require some time to adjust their price expectations, potentially influencing the pace of inventory increase. And on the sales front, as evident from the market response during the new car price reduction wave in March, customers may adopt a wait-and-see approach to purchasing used cars. However, we are confident in continuously expanding inventory and maintaining a healthy sales turnover within 45 days by leveraging our retail competitiveness model for vehicle selection, dynamically adjusting inventory structure, utilizing AI systems for digital pricing with timely market feedback, and benefiting from the high sales conversion efficiency driven by our leading brand influence and reputation in regions that we operate. And furthermore, we anticipate the new car market to return to a new stable level. The price reductions are definitely not sustainable. And we also expect the supply and demand in the used car market to normalize. We're confident in achieving our profitability goals. That will be the answer to your question.

[Foreign Language]

All right. Thank you.

Thank you. This concludes our question and answer session. I'd like to hand the call back to management for any closing remarks.

Thank you all again for joining today's call and for your continued support in Uxin. We look forward to speaking with you again in the future.

Thank you. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.