Ladies and gentlemen, thank you for standing by, and welcome to Uxin's Earnings Conference Call for the Quarter Ended December 31, 2022. 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 questions, you may disconnect at this time. I'd now like to turn the call over to your host for today's conference call, Mr. Jack Wang. Please go ahead, Jack.

Hi. Thank you, operator. Hello, everyone. Welcome to Uxin's earnings conference call for the quarter ended December 31, 2022. On the call with me today, we have D.K., (ph) our Founder and CEO; and John Lin, our CFO. D.K. will review business operations and company highlights, followed by John, who will discuss our financials and guidance. They will also 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 to differ from our current expectations. For detailed discussions of the risks and uncertainties, please refer to our filings with the SEC. Now with that, I will turn the call over to our CEO, D.K. Please go ahead, sir.

[Foreign Language] [Interpreted] Thanks, Jack. Hello, everyone. Thank you for joining our earnings conference call today. To accommodate both domestic and international investor, I will provide an overview of our business progress in both English and Chinese. I will start today's call by reviewing the key focal points of our efforts this quarter and then share an update on the direction we're pursuing as well as the recent market trends. During the third quarter of fiscal year 2023 from October to December 2022, the stringent COVID control measures created huge impact and fluctuations in the market. Despite such impacts, our retail sales volume for the quarter reached 2,928 units, representing an impressive 77% year-over-year growth. In the recent quarter, we have consistently directed our resources towards enhancing customer service, optimizing supply chain efficiency and managing costs to reinforce the competitive edge of Uxin’s used car business in the industry. As we persist in strengthening our customer service capabilities and improving the car-buying experience, our solid reputation and growing recognition among customers continued to advance. From October to December 2022, our NPS score of 60 remained at the top level in the industry for four consecutive quarters. This achievement is a testament to our success in building a product and service system that effectively meets our customers' needs over a long period of time driven by our commitment to elevated hospitality, improved car-buying experience and refined vehicle standards, quality and aftersales services. To further improve operational efficiency, we manage every step of vehicle circulation on an hourly basis and reduced the waiting time vehicles spend on the production line. By implementing a series of actions such as standardizing processing hours and upgrading our dynamic time tracking system, we were able to reduce the time from acquiring a used car to listing…

[Foreign Language] [Interpreted] Thank you, D.K., and hello, everyone. Since we have both domestic and foreign investors attending our call, our remarks will be delivered in both Chinese and English for everyone's convenience. Now I will provide a closer look at our financial results from the third quarter of fiscal year 2023, which is the three months ended December 31, 2022. As D.K. mentioned earlier, our retail sales from October through November were disrupted by strict COVID control measures. Although, these measures were lifted in the second week of December, the used car market across different regions continued to face challenges due to the varying infection rates. However, we are delighted to report that our sales has made a remarkable rebound and are outpacing the industry in business recovery. In fact, in December alone, we retailed 1,350 units, surpassing our pre-pandemic record levels. Our retail transaction volume was 2,928 units, only 6% lower than the second quarter, and up 77% year-on-year. In comparison, the total used car transaction volume in China declined 8% sequentially and 12% year-over-year in the three months between October and December. Our average selling price declined from RMB120,000 in the previous quarter to RMB112,000 in this quarter. Overall, retail revenue totaled RMB329 million, down 12% sequentially and up 41% year-over-year. Wholesale transaction volume was 1,969 this quarter, down 33% compared to the previous quarter. During the pandemic, we faced an unfavorable market environment and adopted a prudent vehicle sourcing strategy. We priced vehicles that did not need the retail standards more cautiously and reduced our vehicle acquisition volumes. As a result, the ASP of wholesale vehicles decreased from RMB81,000 in the previous quarter to RMB67,000 in this quarter. Our total wholesale sales revenue for the third quarter was RMB132 million, which represents a 45% sequential decline…

Thank you. [Operator Instructions]

Hi, operator. We're getting some feedback that there might be a technical issue on the call. So people are not able to join. So we'll take this opportunity to go over some questions we have received offline. And the first question, I will direct to our CEO, D.K. Are there any remaining COVID-19 issues, particularly in the region where the two IRCs are located?

[Foreign Language] [Interpreted] So from October to November in 2022, the COVID-19 pandemic significantly impacted our business, affecting everything from vehicle acquisition to sales and logistics. However, since the second week of December 2022, when the epidemic prevention policies were lifted, the market has rebounded rapidly. As of now, COVID no longer poses any impact on our operations.

I'll move on to the second question we received. Is there -- is the upgrade and build-out of the Xi'an IRC 100% complete at this point? And do you have any plans for future upgrades? I will also direct that question to our CEO, D.K.

[Foreign Language] [Interpreted] The expansion and upgrade of our IRC in Xi'an is 100% complete. As the largest used car superstore in Northwest China with 100% self-owned inventory, we have expanded our showroom capacity to 3,000 vehicles, which is 5 times larger than before. The increase in inventory will provide customers with a much wider selection, which will in turn drive our sales conversions. With the completion of our state-of-the-art used car reconditioning factory in Xi'an, we are now offering comprehensive after sales maintenance services and also providing an extensive selection of vehicle accessories, modifications and upgrades to meet the diversity of our customers. On top of that, we are now capable of exporting our cutting-edge used car reconditioning capabilities externally. The Xi'an IRC is our first fully formed IRC and superstore with full functions. All of its operations, from management processes and service standards to business systems are now capable of being replicated in other cities. As the auto market stabilizes in April, we will increase our inventory to drive sales growth. Simultaneously, we will continue the expansion of our IRC network in a steady pace in accordance with our cash position and strategic planning. Our expansion plans are already underway, and we look forward to updating everyone on our progress in due course.

And I will move on to the next question, which comes from TF Securities. The question is about we think that the company has really fully repaid the $61.6 million convertible notes. So can you please provide more details on these arrangements and its impact on your future business developments? I will direct that question to John to answer.

[Foreign Language] [Interpreted] That is correct. We have recently issued an announcement with two major updates. Firstly, we have received $80 million from the planned total of $100 million from the subscription agreement of the senior convertible preferred shares signed with NIO Capital in June 2022. Secondly, as you asked, we have announced our full repayment of the remaining $61.6 million convertible note balance. In 2019, we raised the $230 million through convertible note financing and underwent several restructurings. As a result, about 60% of the convertible notes were converted into using shares, with the remainder was to be paid in installments. As of March 31, 2023, the outstanding liability of $61.6 million represented Uxin's largest historical debt. After comprehensive evaluation , we have decided to fully repay and clear the outstanding applications from the convertible note, which will bring three significant benefits to our company. Firstly, with the full repayment of the remaining convertible note, our balance sheet structure is greatly improved. After the payment, our historical debt that we need to pay in the future has been significantly reduced, which will enhance our financial safety, making the long-term financial structure of Uxin much healthier. Secondly, the complete repayment creates better conditions for potential financing in the future. The outstanding convertible note had been a major concern for potential investors who are interested in the company. With the full repayment, the investment risks of Uxin has significantly decreased, allowing future investment funds to focus on our business development rather than debt repayment. Accompanied by our efforts to achieve profitability on a single store basis this year, this repayment will enable us to plan for a series of capital market initiatives from a more favorable position. And thirdly, the complete repayment has laid the foundation for our corporation with domestic financial institutions. At present, we are actively collaborating with several well-known domestic financial institutions to implement various forms of supply chain financing partnerships with the full repayment of convertible notes, it has cleared the way for smoother corporation between us and financial institutions. Vehicle acquisition is a capital-intensive process in our business model. With the implementation of supply chain financing, it will significantly reduce the need for our own cash into vehicle acquisition process. As we continue to expand into new areas and establish new superstores in accordance with our business plan, our funding needs will be significantly reduced. This provides greater flexibility in our pace of business expansion, allowing us to move faster or slower as necessary while simultaneously bringing a higher return on investments to our business model. And finally, I would like to emphasize that at Uxin, we prioritized sustained growth and long-term value. Our financial management is also strategically planned in line with our long-term business development goals. With the successful receipt of NIO Capital's investment and the full repayment of our convertible note, we can move forward with greater agility and fill our high-quality development in the future.

And that's the answer to the question earlier. Now we have another question from CITIC Security. The question is, how do you see the impact of price cuts in early March on the used car market? And what are your strategies in response to price cuts on both electric and gasoline cars? I will direct this question to our CEO, D.K., to address.

[Foreign Language] [Interpreted] The market volatility began to surface in early January when Tesla announced a price reduction. At that time, the used car market was still recovering from the impact of COVID with high demand and limited supply resulting in most used car dealers purchasing cars at higher prices. From late February, industry-wide new car price cuts started across various brands. Consumers who initially intended to buy used cars decided to adopt a wait and see approach, leading to turnover pressure on inventory in the used car industry and a notable impact on the market. We were minimally affected by the recent fluctuations in new car prices. We rely on our sophisticated big data analysis and information systems to make informed business decisions, which are also guided by our strict management governance discipline. Following the easing of COVID restrictions, the Chinese used car market experienced a rapid recovery with most used car dealers purchasing vehicles at elevated prices in January and February. However, our AI pricing model continually scanned and analyzed both internal and external market data, conducting vehicle competitive analysis in recent markets and came to the conclusion that current market acquisition price has deviated from its reasonable level. Following the analysis, we implemented a prudent vehicle acquisition strategy and maintained low inventory levels throughout the first three months of 2023. With a relatively low inventory scale and a reasonable inventory structure, we have controlled our risk exposure to fluctuations in new car prices and minimized that the impact of price fluctuations. As such, our inventory turnover efficiency in the first three months of 2023 was not affected and the profit contribution per vehicle has also increased. Our AI pricing capability based on over 11 years of data, as well as our systematic decision-making mechanism has withstood the challenges of the market under extreme conditions, especially in the past two years. This further bolsters our confidence in our business model and management capabilities and provide a solid foundation for our future business expansion. Now that the first three months of 2023 have passed, we have observed that China's new and used car markets has been stabilizing since April. We anticipate that the rest of the year will not see the same level of volatility observed earlier this year. As such, we expect China's used car sales to grow by approximately 15% year-over-year in 2023. With this in mind, we plan to gradually increase our inventory and achieve a far higher growth rate than the industry average.

And that's the question -- that's the answer to the earlier question. We have received another question from CITIC. So the question is about based on our experience in Xi'an and Hefei, how long does it take for one of our stores to breakeven? We talked about a single store breakeven earlier. So what's the company's key plans to achieve that? I will direct that question to our CFO, John, to address.

[Foreign Language] [Interpreted] After two years of hard work, we are now very clear about the management systems operation specifics and business growth trajectories of each of our IRC and superstores. When we established a new superstore in a new area, we expect it to take about 12 months to 18 months from the initial launch to achieving profitability. Currently, we are able to achieve breakeven in the monthly retail sales volume of a single superstore. When a single store reaches around 1,000 units, we are also continuing to optimize the business and strive to achieve profitability at even lower sales volumes. One of our main business objectives this year is to achieve breakeven on a single store basis. To achieve that, we have identified three key areas of focus. Firstly, we plan to increase our inventory levels while maintaining high sales turnover to boost the retail transaction volume. As D.K. has mentioned earlier in the first three months of 2023, we adopted a prudent acquisition strategy to minimize the negative impact of market fluctuations. As a result, our in-store inventory levels are currently relatively low. However, our sales turnover has been steadily increasing in the first three months of 2023. Starting from April, we will gradually ramp up our inventory and aim to achieve a monthly retail sales volume of 1,000 units per store while maintaining high sales turnover. In September 2022, our Hefei superstore had achieved 1,000 retail sales. If similar or even lower retail sales is achieved in 2023, our Hefei superstore would breakeven and start to generate profit. And the second area of focus is to further increase the gross margin of each vehicle we sell. In the past months, we have observed that our advantages, product strength, service quality and branding power have resulted in a notable increase in our gross profit from vehicle sales. Additionally, with the opening of our new superstores and the completion of our advanced reconditioning factory, we will gradually grow our revenue and gross profit contribution from high-margin value-added services, such as vehicle financing, insurance, aftersales maintenance, accessory upgrades and others. And thirdly, we will continue our drive for lean management and maintain our focus on cost reduction and efficiency improvement. We will continually refine our business and management processes, enhance our digital systems, incorporate cutting-edge used car reconditioning technologies and reduce operational costs across all aspects of our business. By doing so, we will improve our management efficiency to ensure that each of our stores can achieve profitability at a monthly sales volume of 1,000 vehicles or lower. As D.K. has shared earlier, we are also very confident in our ability to achieve single store profitability by 2023. Please stay tuned for our performance in achieving this goal. Thank you.

Okay. That’s all the questions we have received from the investment community. We are sorry about the technical issue that you are experiencing. Hopefully, we get to sort this out when we talk to you next quarter. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.