Good morning and good evening ladies and gentlemen. Thank you for standing by and welcome to TuanChe Limited First Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After prepared remarks by the management team there will be a question-and-answer session. Today’s conference call is being recorded. I would now like to turn the conference call over to your host today, Ms. Cynthia Tan, IR Director of the company. Please go ahead, ma'am.

Thank you and hello everyone. Welcome to TuanChe's first quarter 2020 earnings conference call. We have released our earnings results earlier today and it is now available on our IR website, as well as on newswire services. Before we continue, please note that the discussion today will contain forward-looking statements made under the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, our future results may be materially different from the views expressed today. Further information regarding these and other risks and uncertainties is included in our earnings release and our registration statement filed with the SEC. TuanChe does not assume any obligation to update any forward-looking statements, except as required by law. Today, you'll hear from Mr. Wei Wen, the company's Chief Executive Officer, who will provide an overview of our growth strategies and business developments. He will be followed by Mr. Chenxi Yu, Ronnie, the company’s Deputy Chief Financial Officer, who will provide additional details on the company’s financial results and discuss the financial outlook. Following management's prepared remarks, we’ll open up the call to questions. With that said, I would now like to turn the call over to our CEO, Mr. Wei Wen. Please go ahead, sir.

Hello and thank you everyone for joining us today on our first quarter 2020 earnings call. In the first quarter of 2020, we experienced significant challenges stemming from the COVID-19 outbreak, which resulted in substantial year-over-year net revenue decline and a widening net loss. In response, we swiftly adjusted our operations to meet the evolving demands of the challenging environment. During this quarter, we focused our efforts on several key priorities, including; first, ensuring the health and safety of our employees and the customers; second, accelerating our online strategy through forming a relationship with Baidu Youjia, Baidu’s information service app in the automobile vertical, and deepening our collaboration with TMall Auto and completing the acquisition of Longye International; and third, managing our cost structure to maintain sufficient cash balance and liquidity. Let's take a look now at the first quarter results of our business segments, while also providing additional detail on our strategic and operational priorities. First, our offline marketing services, as we have explained in press release prior to today, out of concern for public health and in accordance with our national and local regulatory guidelines on COVID-19 prevention and control, both our auto shows and special promotion events were suspended for both February and March due to the COVID-19 outbreak, resulting in 95% year-over-year revenue decline for offline marketing services. In April, we held few offline events for the best interest of public health in order to fully support the government's guidance on the pandemic prevention and control. That being said, we are pleased to report that since May as COVID-19 outbreak gradually subsided and the Chinese government started to relax preventative and control measures, our offline business began to steadily recover. From a strategic perspective, we have adjusted the pace of our business expansion, while staying committed…

Thank you for the introduction Mr. Wen and hello everyone. Thanks for joining us. I’m very excited and privileged to begin my new role with the company. I'm confident in our ability to navigate through this challenging period, while at the same time continue laying the foundation for omni-channel approach to achieving long-term growth. Please note that all numbers stated in my following remarks are in RMB terms, unless otherwise noted. Now, I'd like to work through our first quarter 2020 financial results. Our total revenues in the first quarter were RMB9.7 million, decreasing 92.1% from RMB122.9 million in the same period last year. This was a result of the adverse impacts of the COVID-19 pandemic and the sluggish Chinese economy. The decrease was partially offset by the steady growth of virtual dealership and online marketing services, materially and negatively impacted by the suspension of all auto shows and special promotion events scheduled in February and March of 2020. Our offline marketing services revenues generated from auto shows in the first quarter of 2020 decreased by 95.2% to RMB5.7 million from RMB118.8 million in prior year period. Revenues generated from special promotional events in the first quarter of 2020 were RMB0.3 million compared with RMB0.8 million in prior period. Revenues from our virtual dealership, online marketing services, and others reached RMB3.7 million during the first quarter of 2020, compared with RMB3.3 million in the prior year period, primarily due to our continuous online marketing services expansion and revenue contribution from the company's completion of acquisitions of Longye International Limited on January 13, 2020. Our gross profits in the first quarter was RMB5.7 million, decreasing 93.6% year-over-year from RMB88.9 million in conjunction with revenue declines. Our gross margin decreased to 58.6% from 72.4% in the same period last year. In the…

[Operator Instructions] Our first question comes from Laura Liu from Stone Street Group. Please go ahead.

Good morning guys. So, I have a question like, can you just share with us more updates on the current situation of the auto market and also the impact of this coronavirus?

No problem. Please let me translate. [Foreign Language]

[Foreign Language] In the first quarter, China automobile sales declined by 42.5% year-over-year with passenger car sales further declining by 45.4%, mainly due to the extensive quarantine measures in responding to the COVID-19 pandemic. This has resulted in consumer postponing their vehicle purchase activities. [Foreign Language] As there is no new pandemic cases reported in most domestic regions, and the government is gradually easing the containment measures coupled with a lot of newly launched auto market stimulus policies in various regions. Domestic auto sales are gradually recovering in China market. The total car transaction number in China has seen a year-over-year 4.4% growth and 14.5% growth increase respectively in April and May while the passenger car sales still slightly declined by 2.6% in April, but it also rebounded by 7% in May. [Foreign Language] Starting in May, our offline business is also gradually recovering in some regions. However, we still face significant uncertainties in terms of the pace of the recovery. Due to recent new COVID-19 cases reported in June in Beijing area, we – this will continue to give rise to uncertainties affecting the company's operational and financial performance. [Foreign Language] Our progress in returning to normal operations will continue to depend on the specific situation regarding the pandemic in different regions. We will continue to monitor the degree and duration of the macro-economic impacts of the pandemic going forward. [Foreign Language] On our cost control side, our offline activities are reduced. The variable costs associated with our value, our sales and customer acquisition are also reduced accordingly. The rest of our quarter expense is mostly related to staff salaries. [Foreign Language] As we face the challenges brought by the pandemic, we implemented measures to adjust the pace of operation expansion and direction. We’ll conserve our results, including for loan arrangements, scaling back our recruitment budget, and employee size, and may result in other cost cutting measures if the outbreak of COVID-19 and its impact persists or escalates.

Does that answer your question, Laura?

Yes, that's great. Thanks. Just have another question. Can you also provide some more details regarding the online strategy, especially in response to the COVID-19?

Okay, please wait. Let me translate. [Foreign Language]

[Foreign Language] Our strategy in response to the pandemic is mainly to proactively expand our online business. In the first quarter, we formed a strategic partnership with Baidu Youjia, which is Baidu’s information service app in the automobile vertical. [Foreign Language] We also further deepened our cooperation with TMall with Palbo. We have launched a number of new online products such as online live streaming special promotion events on TMall Live and leveraging our years of solid track record in offline sales and marketing to build a new and contextual model for marketing service online. [Foreign Language] In addition to that, we completed the mergers and acquisitions with Longye in the first quarter of 2020. Longye’s 4-store social CRM system can help our dealers better track their sales leads, obtain online like through our live streaming auto shows and increase conversion rates when customers are unable to visit the dealer stores during the pandemic period.

Does that answer your question, Laura?

Yes, that's very helpful. I think that’s all the questions. Thank you.

Thank you, Laura. Operator, we can have next question, please.

The next question comes from Jack Vander Aarde from Maxim Group. Please go ahead.

Yes, hello. Hope you're all healthy and well. Just wanted to say welcome and congrats to Ronnie on your new role as CFO as well.

Thank you.

A couple questions from me. Yes, no problem. A couple questions from me. I'll start with you guys provided a lot of detail and helpful color of the macro environment, so I'm going to start with Q1 revenues just because Longye was explicitly mentioned as a contributor, are you able to provide an explicit contribution of revenue or a rough estimate of what Longye actually contributed to the quarter?

Please let me translate first. [Foreign Language]

Hello, Jack and thank you. And we are not ready to disclose in detail Longye's calculated revenues GAAP figure, but we can tell you that it contributed to our first quarter’s revenue amount and it will continue to be a steady growth to the company's total revenue stream.

Okay.

Jack, does that answer your question?

Yes, that's fair enough. And then as a follow up – I have a couple more questions. If I look at your 2Q revenue guidance, you know, it implies another – a large decline year-over-year, which is no surprise, but, you know, I'm positively surprised by that the decline is far less severe than I was expecting, so it’s a positive surprise. And since the second quarter technically just finished, is there any preliminary data points you could share maybe in terms of how sales have trended on a weekly basis throughout the quarter, maybe from like early April through May through the end of June? Is there anything you could share on just kind of the trend of sales what you've seen? And were there any auto events offline, auto shows hosted in June?

Please let me translate first. [Foreign Language] [Technical Difficulty]

Hello, Jack. For your question, our April revenue was relatively slow affected by the pandemic, but for May and June we are steadily recovering and we hosted a number of auto shows and promotions – special promotion events in both May and June. That's the – well, as for weekly change, we’re – well, all I can tell you is that we are seeing steady growth each week and that's also in conjunction with the macro automobile industry, as earlier mentioned by Mr. Wen, as we are seeing rebounding figures for the macro automobile industry.

Yes, for your further reference, that will be – in April, that will be a 4.5% rebound and for May, that will be a 14.5% market transaction rebound. The June data is yet to come out and our recurring trend is like – you can use that as a reference data. Does that answer your question?

Sure. Just to clarify, those data points for April and May you just provided, are – is that in terms of the industry or is that in terms of TuanChe specifically?

That would be the total China automobile transaction data. That would be for the industry.

Okay. Got it, that's helpful. And then – okay, as a follow up here, you know, perhaps I'm getting ahead of myself, but if we were to assume China's overall economic in auto environment returns to a healthier, normalized, consistent level, are you able to speak to maybe how many auto show events – you know kind of what level of potential revenues you think could be achieved realistically in 2021? What I'm trying to get at is, do you expect revenue to kind of grow up the 2018 base for 2021? Or would you expect it – the overall trajectory of revenues to kind of be lower given the 2020, you know, difficult environment?

Let me translate first. [Technical Difficulty] Hi, Jack. Our CEO, Wei will take the question.

[Foreign Language] We still cannot provide any forward looking statement regarding the 2021 revenue. We don't even provide an annual forecast right now. [Foreign Language] As you can also understand like just like in the United States, the China pandemic is actually much more eased right now, but still – we still didn't expect any vaccine coming out, right, like right away. [Foreign Language] Yes. Because there are huge uncertainties regarding the pandemics developments, like just we thought the pandemic is under control in all around China, but we have spotted new cases recently in June in Beijing, and that will have some really material impact on our business. [Foreign Language] If the pandemic is under control for the year of 2021, then we'll expect our business, especially our offline promotion events and offline auto shows will actually recover from the 2020 current situation, but we still don't have any – like we don't have – we cannot provide any comparison to the year of 2018 or 2019 because that's – that would be a total different market situation back then.

Does that answer your question, Jack?

Yes. That's very helpful. And I appreciate you taking a shot with my question as helpful as it could be. I understand we're very early on. And then, just one more question kind of bigger picture, in terms of the strategic value proposition, historically, you know, TuanChe has, on average, I believe, helped consumers save, you know, somewhere a little over 7% or so on average on the purchase price when consumers purchase a vehicle at TuanChe event versus say, a third-party dealer or non-affiliated dealer. You know, given the recent pandemic and its impact on the industry, is there any reason to expect that 7% or so savings that you've historically achieved to change in the future? And if so, what would be driving that?

Let me translate first, thank you. [Technical Difficulty] Mr. Wei will take the question.

[Foreign Language] Yes, this is a very good, but not very easy question. [Foreign Language] Under current market situations, a lot of different OEMs have divided into two parties. One of them are still very stable and still – even can achieve some kind of growth, but the other group may have suffering from common market situation. [Foreign Language] For those really strong brands that under very healthy situation, that discount may even, like, become smaller than previous years. [Foreign Language] Just like Mercedes Benz, the parts and even the whole car is important as a whole, so under the current situation of the pandemic, the actual inventory of imported cars is getting – the inventory is lower so that the price are even stronger and more stable than ever. [Foreign Language] And for some of the brands who is totally built domestically and for those brands who are very weak right now in the market, the discount is actually getting bigger. [Foreign Language] From this point of view, overall, from our observations, the number of the OEMs that are under like difficulty or trouble is a little bit more than those who are more stable. So overall, from our perspective, that discount is getting larger. [Foreign Language] With the recovery of the auto market and – where most of the OEMs actually survive this impact the discount may shrink back to the normal situation or even smaller than we previously expected.

Does that answer your question Jack?

Yes, yes, it does. It was very helpful. I appreciate the color. That's all my questions for now, guys. Thank you again.

Thank you for calling, Jack. Operator, do we have any more questions?

No, there are no more questions in the queue. As there are no further questions now, I'd like to turn the call back over to management for closing remarks.

Thank you once again for joining us today. If you have any further questions, please feel free to contact TuanChe investor relations through the contact information provided on our website or the TPG Relations. Thank you.

This concludes the earnings conference call. You may now disconnect your line. Thank you.