Good morning and good evening, ladies and gentlemen. Thank you for standing by and welcome to TuanChe Limited Second 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 call over to your host today, Ms. Cynthia Tan, IR Director of the company. Please go ahead, ma'am.

Hello, everyone, and welcome to TuanChe second 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 second quarter 2020 earnings call. In the second quarter, we are pleased to report 63.3% year-over-year reduction of net losses attributable to the company's shareholders, primarily driven by the acceleration of our rigorous cost measures and online strategy, despite a year-over-year decrease of 73.1% in net revenues and a year-over-year decrease of 70.1% in gross profit due to material COVID-19 related impact. Net loss attributable to the company's shareholders in the second quarter of 2020 was RMB40 million compared with RMB108.9 million in the second quarter of 2019. Let's take a thorough look at the second quarter performance of our business segments while also providing additional detail on our strategic and operational priorities. First, our offline marketing services. As we have discussed in our first quarter earnings call and in the press releases prior to today, out of concern for public health and in accordance with all national and local regulatory guidelines on COVID-19 prevention and control, we held a very few offline events in April 2020. These events gradually resumed in late May. Given that the suspension of events lasted for the significant part of the second quarter, our operating and financial performance for offline marketing services continued to be materially affected by the pandemic. We organized 61 total shows across 56 cities compared with 344 auto shows in 186 cities in the second quarter of 2019. That being said, our offline auto shows and special promotion events are now mostly back to normal in some cities we operate. China's auto market has also begun to show strength. In July, China's auto retail sales increased 7.7% year-over-year, the highest level since May 2018. In this context, we are optimistic we can deliver a significant quarter-over-quarter improvement in the…

Thank you, Mr. Wen. Hello, everyone. Thank you for joining us. As our CEO, Mr. Wen, just mentioned, while COVID-19 pandemic was effectively contained in China, the China -- the company continued to hold fewer auto shows and special promotion events during the second quarter of 2020 than usual, in accordance with government guidelines and for the best interest of public health. This has resulted in a 73.1% year-over-year decline in net revenues to RMB54.7 million in the second quarter. Nevertheless, as our offline events gradually resumed operations since late May and our virtual dealership and online marketing services registered strong growth, our net revenues and gross profit both rebounded strongly from first quarter, achieving 464.9% and 658.3% quarter-over-quarter growth, respectively. Amidst the COVID-19 and macroeconomic challenges, we remained focused on optimizing our cost structure, which resulted in a 66.8% year-over-year reduction in operating expenses and significantly reduced our net losses, both year-over-year and sequentially. We are closely monitoring the circumstances and will adjust our operation strategy accordingly, while keeping a disciplined cost structure in order to deliver positive returns for our shareholders in the long run. Now I would like to walk through our second quarter 2020 financial results. Before I start, please note that all numbers stated in my following remarks are in RMB terms, unless otherwise noted. Our total revenues in the second quarter were RMB54.7 million, decreasing 73.1% from RMB 203.5 million in the same period last year. This was a result of the adverse impact of the COVID-19 pandemic and the sluggish Chinese economy. The decrease was partially offset by the steady growth of virtual dealerships and online marketing services and others. Compared with the first quarter this year, total revenues increased by 464.9%, as our offline services recovered and our online services made strong…

[Operator Instructions] The first question today comes from Jack Vander Aarde of Maxim Group.

So I guess I'll just start with the China auto environment as a whole. If you could just kind of summarize what you're seeing in terms of new vehicle sales and the opportunities. Or if basically the market is getting more healthy and steady and consistent, if there's any green sky or blue skies ahead. Or do you expect it to remain choppy relative to where you were a few months ago when we last spoke?

Okay. Great. Nice to talk to you again, Jack, and let me translate the first question. [Foreign Language]

[Foreign Language]

In the second quarter, the new car sales in China started to rebound. It increased by 1.8% and 2.9% year-over-year, respectively, in May and June. And in July, the auto retail sales increased by 7.7% year-over-year. This is the highest level we've seen since May 2018. And this is also helped by the government's measure to contain COVID-19 pandemic domestically as well as different local governments have taken policies to promote auto sales and domestic consumptions. So the market environment is much -- have been much improved since second quarter, and we are having quite optimistic forecast for now on the market side.

[Foreign Language]

Does that answer your question, Jack?

Yes. Yes, that was fantastic. And then another question I have is as it relates to the second quarter and your results. Gross margin -- while revenue continues to be pressured, and obviously so, gross margin was pretty significantly high. It was in the high 70s, which was a pretty exceptional performance for gross margin. And you guys mentioned in the prepared remarks that this is due to mix primarily. But is there anything else that was helping the gross margin profile this quarter besides just mix?

Do you need my translation? Let me take your question.

So yes, the gross margin for our company has improved significantly from -- well, at higher 70s. This is mainly due to the change in the revenue mix. Because in the second quarter, our online marketing services has grown strongly. So -- and the gross profit for that revenue side has been over 80%. So that's the main reason our gross margin has improved. Does that answer your question?

Okay. Understood. That's helpful. Yes. Yes, it does. And then I guess, just in terms of how about automobile transaction sales? Are you guys noticing any -- of the automobiles you did facilitate to sell during the quarter, are there any noticeable trends? Or, I don't know, I guess, in terms of the markets you serve within China, did you see a noticeable trend shift in how many vehicles you're able to sell through the virtual dealer platform? Or at least how you're enticing maybe new leads? Is that driving the virtual platform? I'm just wondering if there's anything longer term or midterm in the strategy for the offline business that you have. And how that relates to the online business you have? How is the omnichannel strategy working as a whole basically?

Yes. Sure, Jack. Let me translate your question, and maybe we'll take -- answer that on another respect. Okay. [Foreign Language]

[Foreign Language]

We are still seeing an upside trend on the China new -- China auto market new car sales in August. And we are expecting the traditional high consumption season in the fourth quarter, starting from September. And so if there is no another hit from the COVID-19 pandemic, we are seeing very positive market sales trends in the overall market.

[Foreign Language]

But as we mentioned in our prepared remarks, the user behavior is shifting online now. So this year, we have made significant progress in our online auto shows and online special promotion events. Although we have been cooperating with Alibaba since -- for several years by now, the depth of the cooperation has improved significantly since the end of last year. We have launched a lot -- a number of online live streaming, special promotion event on Tmall Live, and our online program provides a solution that is win-win for both OEMs, dealers and consumers.

[Foreign Language]

And from our perspective, the online business has generated higher gross margins. As Chenxi just mentioned, it should be around 80% or even higher. And on the other side, besides Tmall Auto, we have been also cooperating with Baidu Youjia, and that is the auto segment of the Baidu portal, which is the largest search engine in China. So we have been their sales representatives in all of China and generated a related data product. So this also contribute to our online marketing revenues since first quarter of this year, and will continue to be a bigger part of our online marketing revenue throughout the year. Does that answer your question, Jack?

Yes. Absolutely. That more than answers my question. I appreciate the added color. The last thing is just as you look -- a forward-looking question again. You guys have done a nice job, especially with Q2 again, of controlling your operating expenses during this climate that we're in today. Just in terms of the directional pattern for the rest of the year, how would you expect the operating expenses to trend as you look forward? Or -- and how much of it is kind of variable and it just depends as we go along here? Or is there anything concrete you can say about operating expenses and the trend?

Okay. Ronnie will take your question.

Well, in terms of operating expenses, we will expect that the operating expenses will grow because some of it are related to our operations, to our offline and online services. So as our revenues recover, the expenses will grow. But in terms of the overhead side of the operating expenses, we'll try our best to control that, to take more cost cutting measures. So while the overall operating expense will grow, but for the overheads, it will remain the same or similar.

Great. Thanks for the question. We're looking forward to see you next time. And operator?

This concludes the earnings conference call today. You may now disconnect your lines.

Thank you.

Thank you.

Thank you.