Good morning and good evening everyone. Welcome to Cango Inc.'s First Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. This call is also being broadcast live on the company's IR website. Joining us today are Mr. Jiayuan Lin, Chief Executive Officer; and Mr. Yongyi Zhang, Chief Financial Officer of the company. Following management prepared remarks; we will conduct the Q&A session. Before we begin, I refer you to the Safe Harbor statement in the company's earnings release, which also applies to the conference call today, as management will make forward-looking statements. With that said, I'm not going to turn the call over to Mr. Jiayuan Lin, CEO of Cango. Please go ahead sir.

[Foreign Language] Hello everyone. Welcome to our first quarter 2019 earnings conference call. As you know, 2018 marks China's first decrease in annual car sales during the last two decades the first quarter of 2019 driven by the escalating Sino-U.S. trade war and a softening economy car sales in China continued to slow down. In fact, according to industry reports, on the Chinese market passenger car sales fell in March for the 10 straight [ph] months and being the first quarter with 13.7 year-on-year decline in sales. Despite such industry and macroeconomic headwinds, we maintained our healthy growth trajectory in the previous quarters demonstrating the effectiveness of our growth strategy to-date. During the quarter, we continue to focus on strengthening our core competencies in auto loan facilitation services accelerating the development of our aftermarket services, expanding our collaborations with strategic partners, and establishing new partnerships with financial institutions and OEMs. As a result, our total revenues increased by 41.3% year-on-year to RMB351.7 million in the first quarter and our aftermarket services facilitation business remained a major source of growth in the first quarter contributing RMB39.8 million or 11.3% to our total revenues. Now, I will provide an update on the progress we achieved in the first quarter as well as the growth prospects for our core auto loan facilitation business, aftermarket services and new business initiatives. First, as the primary driver of our growth, our auto loan facilitation business continued to deliver solid results. In the first quarter, the total amount of financing transactions facilitated reached RMB6.55 billion and a total outstanding balance of financing transactions facilitated was RMB35.75 billion. On the funding side, we signed a collaboration agreement with First Automobile Finance, or in short FAF, a subsidiary of FAW Group. Under this agreement, we have utilized our extensive…

Thanks Jiayuan. Good morning and thanks to all of you for joining us today. Before I begin, please note that unless otherwise stated our numbers are in RMB and all comparators are on a year-over-year basis. As mentioned earlier, despite that the macroeconomic and industry environment remained quite challenging. This has been a productive quarter for Cango. Our total revenues in the first quarter of 2019 were RMB351.7 million, representing a year-over-year increase of 41.3% outperforming the high end of the company's guidance by 6.6%. Our aftermarket services facilitation business continue to contribute stable revenues and its revenues were RMB39.8 million. Interest facilitation services remain a key driver of growth for our aftermarket services facilitation segment. Cost of revenue in the first quarter of 2019 were RMB130.8 million. As a percentage of total revenues, cost of revenues in the first quarter of 2019 increased to 37.2% from 32.5% in the same period of last year. This increase was due to a high average amount of commissions paid to the dealers in each financing transaction. Sales and marketing expenses in the first quarter of 2019 increased to RMB45.5 million from RMB34.8 million in the same period last year. The increase was due to increase in staff compensation. As a percentage of total revenues, sales and marketing expenses in the first quarter of 2019 decreased to 13% from 14% in the same period of last year, remaining stable. General and administrative expenses were RMB64.8 million or 18.4% of total revenue, in the first quarter of 2019 compared with RMB26.7 million or 10.7% of revenue in the same period of last year. The increase was mainly driven by increasing staff compensation, including share-based compensation expenses as the company expands its business. Research and development expenses in the first quarter of 2019 increased to RMB13.3 million from RMB6.5 million in the same period of last year, and we continue to expand our R&D team and investing in product innovation. Due to the increase in cost of revenues and operating expenses, our net income was RMB74.4 million compared to RMB84 million in the same period of last year. Our non-GAAP adjusted net income, which excludes the impact of share-based compensation expenses increased by 6.7% year-over-year to RMB89.6 million in the first quarter of 2019. Our diluted net income per ADS was RMB0.5 and our diluted non-GAAP adjusted net income per ADS was RMB0.6 in the first quarter of 2019. Moving on to our balance sheet, as of the end of March 2019, we had cash and cash equivalents of RMB2,178 million compared with RMB2,912.9 million at the end of 2018. Looking forward to the second quarter of 2019, we expect our total revenue to be between RMB290 million and RMB315 million. This forecast reflects our current and preliminary view on the market and operational conditions, which are subject to change. With that, we are now open for questions.

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Your first question today comes from John Cai with Morgan Stanley. Please go ahead.

[Foreign Language] Thanks management for taking my questions and congratulations on the results. I have four questions. The first one is on the strategic collaborations with Didi and ICBC. Can the management share more details on the loan volumes and the take rate? The second question is on the new car facilitations. What's the trends on the loan price and the funding cost? The third question is on the asset quality. In the first quarter, I have noticed that there is increase in the risk assurance liability and while the delinquency rates seems to be stable, is there any reason driving the increase of the risk assurance liability behind? And the final question is about new business. Do we see any new revenue growth drivers besides the new auto sales loan facilitations and also the insurance cost? Thank you very much.

[Foreign Language] Thank you for your questions. I will take your first and second questions. Okay. In terms of the first question that is our strategic partnerships with ICBC. Actually, we have been working with ICBC very closely, mostly on products with guaranteed deposits. And our products with ICBC include both subsidized products and also nonsubsidized products. Now, first let's look at the take rate. The take rate for subsidized product is about 2% to 3% with deposit cash and for non-subsidized products, the take rate is about 5.5%, again, with deposit cash. And most of our revenue so far actually come from the nonsubsidized products. As of the end of March, the loan origination amount backed by ICBC stood at RMB32 million and by the end of April that amount reached RMB83 million. And in Q1 2019, we have already integrated our system with both Dongfeng Honda Automobile and Changan Mazda Automobile. And these collaborations enabled us to offer OEM subsidized auto financing promotion services nationwide by leveraging our dealership network. Meanwhile, we are close to finalizing our negotiations with Changan Suzuki Automobile as well as Guangqi Honda Automobile. Now, we'll start working with these OEMs in the second quarter of 2018 -- 2019. Also I need to call your attention to this fact that is while in terms of the transaction volume of OEM subsidized products, right now, it is still relatively at a low level because it takes time for us to change the habit or behavior pattern of our dealership and ForEx stores and also it takes time and efforts for us to expand coverage of ForEx stores, train the sales staff and optimize service processes. Now, we can expect the transaction volumes to reach high levels over the reasonable period of time. And about our partnership with Didi, in the first quarter, we completed over 180 car purchase transactions for licensed Didi drivers across eight cities in China. And we have also established our presence in 41 Chinese cities where we will be to provide Didi drivers with a complete suite of auto solutions, including car sourcing, auto financing, insurance products, and operator licensing. Our collaboration with Didi covers the comprehensive package of professional services. And I believe these services will be very helpful in further our loan facilitation business as well as aftermarket insurance services. We are very confident in the prospect of the collaboration and partnership. In terms of transaction volume resulting from the Didi collaboration, we do not yet expect it to be significantly reflected in our overall performance across the year. Well, your second question about the cost of funding and also the product pricing, well, for both metrics, we are seeing a downward trend. Now, I hand over to Michael to answer your further questions.

[Foreign Language] Okay. I will then briefly answer your third question. While you may have noticed, actually, our overall delinquency rate has always been at a very stable level, but you have also -- you may also have noticed that actually since this year, there have been some changes in the regulatory framework, for example, in terms of the loan servicing. Well, for the car collection, there has been some changes in the regulatory requirements, so that's why we are seeing some changes in the car collection rate and so that's why, for Cango, we have increased our provisioning for this issue. So, that's why in the first quarter, you are seeing some increase in the guarantee liabilities. So, we have made up for the shortfall in our provisioning.

Thank you. Your next question comes from Lucy Li with Goldman Sachs. Please go ahead.

[Foreign Language] The first question is on slightly longer view on ICBC and OEM collaboration. I would want to know the amount of loan -- that the loan facilitation as well as the revenue contribution, for example, in 2020, in your view. And the second question is on auto sales and in particular, the domestic car brand auto sales for the rest of the year and from the year going forward. And correspondingly, how does that is going to impact the auto loan needs of our final customers? And thirdly, it's on the auto financial service fees and the related policies? Thank you.

[Foreign Language] Okay. I will take your first question that is the contribution by ICBC -- by ICBC to subsidize the products to our 2020 revenue growth. Well, I'm very sorry that I cannot give you an exact estimate. However, we are very confident in the prospect. While I cannot give you the exact estimate because there are many influencing factors. Firstly, it depends on the competencies of Cango, for example, how much market share we will be able to get in the future and also how we can persuade the dealers to work with us and to subscribe to our services. So, that's the first influencing factor. And the second factor, actually, it's more about the OEMs. Well, as we described, now we are facing a lot of challenges in the macroeconomic environment, for example, like the Sino-U.S. trade war and also the decrease of sales in -- car sales in China. So, how OEMs are going to respond to those challenges? This is another very important influencing factor. So, overall speaking, we are very confident in the collaboration and also the growth in the future. But I'm sorry that I cannot give you the exact numbers yet. And your second question is about our outlook on the sales of domestic brands or domestic OEMs costs. Well, if Sino-U.S. trade war continues and with this as a precondition, my personal feel is that -- and in fact it self-boost the sales of domestic brand. And about your third question that is the Mercedes incidents and its impact on Cango. Well, no impact on Cango. Cango has always been operating strict compliance with corporate ethical standards and laws and regulations. In fact, in terms of Mercedes incident, I think there are two key issues here. The first one is that half the company or half the stores being -- giving very clear information to the customers in terms of its financial services fees and its revenues -- services fees and -- well, in terms of risks, Cango has always been given very clear information and has always been very transparent in terms of our fees explanation and fees disclosure to our customers. And the second key issue here is whether the company or the stores have been paying the tax -- paying tax -- that's paying taxes as required by the law. Again, Cango has always been very -- being very -- has always been very strictly in compliance with the relevance laws and regulations. We've been paying the taxes as with laws required and we actually have been doing this since day one. So, overall speaking, there is no big impact on Cango.

[Foreign Language] So, the question is on the cost of revenue. I noticed that it's stated in the earnings statement that there is a increase in average amount of commissions paid to dealers per individual transaction -- financing transaction. So, my question is, what's the proportion of dealer commission within the cost of revenue? And related to that, what's the commission rate we are paying is still around 1%? Thank you.

[Foreign Language] Okay. I will take your question. Lucy, thank you for your questions. In terms of the contribution by dealer commission to the cost of sales, right now, is about 45% to 50%, so quite a large percentage indeed. And in terms of its contribution to sales or as a percentage of sales, sorry, I think it's -- the commission to dealers is about 18% of sales. And right now, the dealer commission rate still stands at about on an average 1.2%, a slight increase over the same period of last year.

Thank you. Your next question comes from Emma Xu with Bank of America Merrill Lynch. Please go ahead.

[Foreign Language] So, do we introduce --

[Foreign Language]

[Foreign Language] So, the first question is, do we bring in new funding source in the first quarter? And is there any change in the operation model? And the second question is we noticed that Cango just issued the first ABN, will we continue to issue more ABN? And well, it has any impact on the company's business model?

[Foreign Language] Thank you. I will first of all answer your first question. Well, in terms of funding size, we recently signed collaboration agreements with First Automobile Finance and China Minsheng Bank. And for First Automobile Finance, it's a non-guarantee product and also for Minsheng, it's with guarantee. So in terms of collaboration with financial institutions, we have not seen significant changes on this side. At the same time, we are negotiating with other potential funding partners, such as China Construction Bank, Citibank, Bank of China, and our Shanghai Pudong Development Bank.

Thank you. I'll take your second question, that is the issuance of ABS products or asset-backed securities. Well, as you have noticed that we have just issued ABN. And these products while we are -- is issued in the public market that is in the exchange market, and we are now in the process of issuing ABS process -- issuing ABS products in the exchange market, which will be the main focus market of our ABS products in the next stage. And also, I have to call your attention to the fact that is the issuer of ABS products is Shanghai Autohome Financial Leasing Company, which is our wholly-owned subsidiary and the assets are all on balance sheet assets. And also, I have to call your attention to another fact that is as in 2018 [Indiscernible] only contributed 80% to Cango's total revenue. What it means is that the issuance of ABS products won't have material impact on Cango's business model and the auto loan facilitation business will remain our core business.

Thank you. [Operator Instructions] There are no further questions at this time. This concludes our question-and-answer session. I would like to turn the conference back for any closing remarks.

Thank you everyone for participating in Cango's first quarter conference call. And thank you very much and see you in our next quarterly conference call. Thank you very much. Have a nice day.