Ladies and gentlemen, thank you for standing by and welcome to Uxin's Earnings Conference Call for the quarter ended March 31, 2020. At this time, all participants are in a listen-only mode. After managements 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'd now like to turn the call over to Nancy Song, Investor Relations Director of Uxin. Please go ahead.

Thank you, operator. Hello, everyone. Welcome to Uxin's Earnings Conference Call for the quarter ended March 31, 2020. On the call today are D.K., Founder and CEO; and Zhen Zeng, CFO. D.K. will review business operations and the company highlights, followed by Zhen, who will discuss financials and guidance. They will both be available to answer your questions during the Q&A session. Before we start, I would like to remind you that this call may contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These statements are made – 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 undertake any obligations to update any forward-looking statements, except as required under applicable law. For more information about the potential risks and uncertainties, please refer to the company's filings with the SEC. With that, I will now turn the call over to our CEO, D.K. Please go ahead.

Thank you, Nancy. Hello, everyone. Thank you for joining our earnings conference call today. So far this year 2020 has presented just as many challenges for our business, as it has created exciting achievements, making another significant milestone for Uxin. In addition to the divestiture of the loan facilitation business, we also successfully removed all historical guarantee obligations, as we transferred XinWang Bank-related loans to Golden Pacer, and settled the remaining guarantee liabilities associated with the historically facilitated loans for the other major financing partners of ours. These achievements have enabled us to fully resolve our auto financing-related issues, so we can focus squarely on our streamlined 2C online used car transaction business, we are driving sustainable growth for our shareholders. As a first mover in China's used car market, we believe that auto financing is a natural and convenient option to facilitate the desire to buy a used car. Built on the foundation of this behalf and our expertise in the used car industry, we initiated partnership with our financing partners under the business model of loan facilitation, but we needed to provide guarantees, for all facilitated loans. As much as the market opportunity is for used car financing, and as much as our financing-related volume grew rapidly in recent years, these guarantee liabilities have in fact put significant pressure on our cash flow. We also experienced a tightening regulatory environment for the overall financing industry, and all over economics downturn, which only intensified the pressure we faced. As we continue to operate in this environment, we believe that well-funded banks and licensed financial institutions are better positioned to play their role as a loan provider we are also taking on the credit risk given their strong skills in risk management and capacity for higher risk tolerance. With the…

Okay. Thanks, D.K. Hello, everyone. Thanks for joining us today. We are glad that we have removed the remaining guarantee obligations for the remaining outstanding loan balance of RMB 12 billion. The cash outflow associated with this portion of loans will be limited in the next few years under a scheduled payment plan. In addition, we have settled a maturing US$50 million of a convertible note with PacificBridge, which will leave us of a near-term data obligation. Both settlements create a more favorable business environment for our long-term growth. As D.K. highlighted, we are more confident now than ever in the prospect of further growth as a result of the transformation of our business and the service model. Under our fundamentally optimized cost structure, we will be able to achieve monthly operating breakeven at a much lower volume level as compared with last year. Therefore we will be in even better position to create long-term value for our shareholders. Now let me walk you through the – our financial details for the quarter ending in March. Please note that the results I will discuss related to continuing operations only. All numbers are in RMB unless otherwise stated. Also please note that some numbers I refer to are non-GAAP numbers. You can find a reconciliation of these numbers at the bottom of our earnings release. In the three months ended March 31, 2020 total revenues were RMB 104 million compared with RMB 336 million in the same period last year. The decrease was primarily due to the decreases in the 2C transaction volume and GMV, as a result of disruption caused by the COVID-19 pandemic on our business operations. Our 2C revenue was RMB 88 million compared with RMB 284 million in the same period last year. Online used car transaction…

Thank you, Mr. Zhen. Operator, we'd like to open the call for questions now. Thank you.

[Operator Instructions] Your first question comes from the line of Eddy Wang of Morgan Stanley. Please ask your question. Q – Eddy Wang : [Foreign Language] Hi, management. Thank you for taking my question. My question is about actually big picture question. So, we have noted that the business model of the company had been more initiatives, especially for move some of the off-line to the online, especially in the first half of this year. So, I just want to -- if you can give more color about, especially on the backdrop of the used car industry. We know that because of COVID-19 the first quarter, so in the second quarter the markets are not that good. And we expect that in the second half of this year maybe the market will not recover that strong. And in the longer term, I think it will still take time for the used car industry to have very strong significant growth in the longer term. So, your business model change actually I think you have -- you have thought through a lot of this. And just want your thoughts, especially under the used car industry regarding your business model improvement. Thank you.

[Foreign Language]

Yeah. So, I think -- second -- last year, we've witnessed or experienced an economic downturn and also starting -- entering into this year, we see the COVID-19 brought the overall macroeconomy going into a downturn as well. So, in the first half of the year -- first half of this year, the main responsibility or job for us is to get rid of all that guarantee -- historical guarantee liabilities. So, we no longer subject to our historical loan book of about RMB 37 billion. So, all of the guarantee liabilities, now no longer with us. So this is the parts we are moving -- keep away from the credit risk. And this is our way to address or face the economic downturn. So also, -- but considering the overall delinquency of the -- in the financing industry this has also helped us to improve our overall cash flow.

[Foreign Language]

Yeah. So in the first half of this year, the used car market also take a big hit from the macroeconomy also considering the economic downturn we are in now. And also the other factor is that we see the new car market, the new car price has been reduced significantly which has also -- have a significant impact in all the residual value of used cars.

[Foreign Language]

So, the transaction volume of used cars is relatively low in the first half of this year. But when we look at -- when the macro economy is stabilizing and as the new car price is stabilizing, we are expecting the new car market will be gradually picking up in the second half of this year.

[Foreign Language]

Yes. So under these circumstances even though the macro economy will be picking up, but not as good as previous years. So for us our -- the key thing for us is to focus. You can see we divested the noncore business in the previous quarters.

[Foreign Language]

So in terms of the customer base, previously we wanted to cover or service all of the car buyers in the market but now we only focus on the consumers who care more about the quality and services.

[Foreign Language]

So in terms of the business model, previously we cared more about the scale but now it's more about the quality of it.

[Foreign Language]

Yes. So our results actually comes from the quality we can deliver, the services we can deliver and also the standardization we can deliver, as well as the transparency of the whole buying process we can give or provide to the customers. All-in-all, we now need more of the word of mouth or the higher NPS scores from the customers. So the customer loyalty will be the key driver for our sustainable growth, especially under economic downturn or less favorable macro environment.

[Foreign Language]

Yes. So in terms of our sales team, we now replaced all of the offline sales by the online sales. So we will have higher operating efficiency from them.

[Foreign Language]

Yeah. So Chinese consumers have the highest acceptance of purchasing the -- go online to buy things. So we believe the online purchase for used car is basically there. And the buying used cars online can also bring lots of benefits for consumers such as the wide collection of used cars and a more convenient buying process without unnecessary cost incurred when they go offline to buy the car.

[Foreign Language]

Yeah. So we launched our pure online purchasing product this June. So we have seen pretty good acceptance from our customers. The challenges now actually come from the financing approval rates. Given we don't take guarantee anymore and started a new cooperation model with our financing partners, it actually takes time before we make the whole process more smooth. And if you look at the non-financing attached transactions, it has already recovered to about 60% of last year's level. So now the key issue is about -- all about the financing process. So the financing partners need time -- need to take credit risk by themselves now. So they need to develop new financing products to adapt to the current situations. And they also need more time to find a balanced approval rate. So -- but overall, the customers' acceptance of buying cars online, we don't see any problem here.

[Foreign Language]

Yes. That's all the answers. Thank you, Eddy.

Your next question comes from the line of Ronald Keung of Goldman Sachs. Please ask your question.

Thank you. Hey, D.K., Michael, Nancy. So I have two questions. So the first one is about your second quarter revenue guidance. Can you share some of -- what are the volume drivers behind that? How have we seen volumes trending and our expectations into the second half, particularly given now the kind of streamlined cost structure what kind of volume do we need to reach to reach a breakeven point? Second is on our lower finance approval rates that we've seen so far, what are we doing or what could we do to address or help drive on this challenge? Taking macro aside what can we do on outside to increase that approval rate? Thank you.

[Foreign Language]

Yes. Our pure online business model hasn't been fully available until this June. So under the new online service model, the starting point for us is the monthly transaction volume of 1,000 units. And our current breakeven point comes at a monthly volume of around 5,500 units. And we are expecting it will take like six to eight quarters before we reach this point.

[Foreign Language]

[Foreign Language] Yes. So, like Ronald mentioned, the key bottleneck now is the financing approval rate. And if we look at our non-financing tax volume is already returned to about 60% of last year's level. So, this relatively low approval rate is mainly because banks they changed their risk, control model because they have to take credit risk now all by themselves. For us, without taking the guarantees, actually, we are profiting with the banks and towards a direction more compliant with the current regulatory environment. And because the -- considering the macroeconomic environments and the higher delinquency rate over the past year, banks actually tend to be more conservative when they approve the loan. So the current approval which is -- the approval rate is relatively low now. And our approach to address this issue is to cooperate with more financing partners who have different risk appetite. So, it will take more time -- take time before we get the whole process more smooth and everything is ready and for banks themselves because our customer base has changed to higher-end or higher quality consumers, so their loan performance will be much better than before. And when the banks have seen this risk profile or customer profile, they will give us better approval rate. Thank you, Ronald.

And thank you again for joining our call today and for your continued support in Uxin and we look forward to speaking to you again during the future.

Bye-bye.

Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may now all disconnect.