Ladies and gentlemen, thank you for standing by and welcome to Uxin's Earnings Conference Call for the Fourth Quarter and Full Fiscal Year ended March 31, 2023. At this time, all participants are in a listen-only mode. After management's prepared remarks, there will be a question-and-answer 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 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 fourth quarter and full fiscal year ended March 31, 2023. On the call with me today, we have D.K. our Founder and CEO; and John Lin, our CFO. D.K. will review business operations and company highlights, followed by John, who will discuss 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]. Good day to you everyone and thank you for joining for your continued interest and support. It's a pleasure to welcome you on our earnings call today. To better communicate with our domestic and international investors I will be discussing our performance over the last fiscal year as well as providing insights into our prospects in both Chinese and English. [Foreign Language]. The 2023 fiscal year which is spent from April 2022 to March 2023, presented a myriad of challenges. You've seen along with numerous other Chinese enterprises, helped to navigate the societal and economic headwinds caused by the COVID-19 pandemic. Despite these obstacles our online-offline used car retail operations experienced the phases of growth, moments of stagnation, and subsequent resurgence. Nevertheless, we managed to overcome these hurdles and delivered a commendable performance. Our retail transactions increased to 10,703 units, recording a remarkable year-over-year growth of 105%. Notably, our net promoter score or NPS remained consistently high at approximately 60 points over six consecutive quarters, solidifying our position as the industry leader. The excellent quality of our used car offerings, combined with our exceptional customer service received increasing recognition from our expanding customer base. Furthermore, Uxin’s offline superstores have become the benchmark for industry upgrades within China's used car sector. [Foreign Language]. China's flourishing used car market is a force to be reckoned with, already at a staggering trillion RMB level with a whopping 320 million vehicles, China boasts the world's largest car ownership. Each year a significant number of vehicles enter the circulation stage, fueling the swift growth of the used car industry. In the first half of 2023, the nation witnessed a remarkable surge in used cars transactions, reaching approximately 9 million units, showing a notable 15% increase compared to the previous year. Drawing from the…

[Foreign Language]. 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 for the first quarter and fiscal year of 2023. [Foreign Language]. Looking back at the fourth quarter of fiscal year 2023, which covered the period from January to March 2023, the quarterly retail transaction volume reached 2,259 units, a growth of 22% year-over-year. We experienced a 23% decrease compared to the previous quarter, mainly due to the impact of the traditional weak season during the spring festival holiday with most of the used car transactions halted for nearly a month. Also in March, the aggressive pricing promotion in China's new car sector also affected the used car market, with customers showing stronger wait and see sentiment. The total retail sales revenue for the fourth quarter amounted to RMB 264 million, a 17% year-over-year decrease. This was primarily attributed to the average selling price of retail vehicles dropping from RMB 173,000 in the same period last year to RMB 117,000 this quarter. The decline in ASP reflects our proactive optimization of inventory structure over the past year. [Foreign Language]. In terms of wholesale, the transaction volume for this quarter reached 1,348 units, a 32% decrease compared to the previous quarter. Based on our operational experience during peak and off-peak seasons, we proactively reduced the overall inventory acquisition before the spring festival, which led to a corresponding decrease in wholesale transactions. The ASP of wholesale vehicles also decreased from RMB 67,000 in the previous quarter to RMB 65,000 this quarter. Consequently, the total wholesale sales revenue for the fourth quarter amounted to RMB 73.6 billion, a 44% quarter-over-quarter decrease.…

[Operator Instructions]. Our first question will come from Tom Kerr of Zacks Investment Research. Please go ahead.

Hello, good morning. Can you discuss any recent market trends or any significant changes in consumer purchasing behavior lately?

Indeed, as we highlighted during our previous earnings call, the onset of aggressive pricing strategies in the new car market since January had a significant impact on the used car sector. Consumers' increasing uncertainty over additional reductions in new car prices led to a noticeable hesitation, particularly when considering premium used car price over 10,000 -- sorry, RMB 100,000. However, since June, we've seen the market start to stabilize, and our sales efficiency has been on an upward trajectory. Our inventory turnover rate of vehicles on sale in the last month, standing at approximately 40 days has surpassed the previous monthly record. As our brand presence amplifies in the regions where our superstores are located, we will further strengthen the network effect among our consumer base. Looking ahead we remain confident in our capacity to continue expending our market share within those territories. And that's our answer to your first question, Tom.

Okay, thank you. One more question. Can you provide further commentary on future IRCs, are you looking at many regions or any specific areas for expansion?

So as we've mentioned earlier, in our ongoing commitment to growth, we're marking out the establishment of two to three additional superstores in the fiscal year of 2023. So in determining the low new patients, we will be evaluating a range of criteria, including population density, the used car market size, regional economic vitality, geographical positioning and local government incentives. Each new establishment -- with each new establishment, our aim is to fortify Uxin’s position as a leader in the local used car market, improving our penetration into off-line markets while bolstering our brand synergy with our online operations. So for more detailed information and also time and updates on our ongoing and future developments, I would encourage you and our investors to stay connected to our IR website or official WeChat account, Doin or TikTok and Twitter.

Thank you. That is all the questions I had.

Operator, let’s move on to next.

Our next question comes from Fei Dai of TF Securities. Please go ahead.

You mentioned in your earnings release that there will be a significant improvement in gross margin next quarter, where that momentum for the gross margin expansion come from, what are your long-term gross margin targets? Thank you.

So this is the translation from our CFO, John. As you pointed out, our recent operational performance has been promising, especially the marked improvement in our gross margin. For the quarter, spanning April to June, as we've mentioned earlier, our gross margin had already reached 6%. So looking forward, we forecast further growth throughout the fiscal year of 2024 aiming for a midterm target of 10% with aspirations for even higher margin in the long-term. So our gross profit for retail vehicle primarily stems from two sources; the gross profit from vehicle sales and the gross profit from value-added services. We have seen marked improvements in both areas. So the uptake in our vehicle sales gross profit is due to the combination of our sales margins steady recovery and the significant decrease in our reconditioning costs. The past two years presented challenges with the pandemic causing disruptions and dampening market activity. This led to an extended inventory sales cycle, significant inventory depreciation, and a contraction in our sales margins. However, post pandemic, our inventory structure has improved with older vehicles making up a smaller fraction and the average sales cycle reducing to within 45 days. Consequently, our sales margins are trending back to standard levels. Moreover, the inauguration of our Xi’an reconditioning facility and the integration of the state-of-the-art reconditioning techniques, coupled with our transparent digital management system, has significantly elevated our overall efficiency. Under the scaled production, our reconditioning cost per vehicle, per retail vehicle have dropped by an average of 70% compared to last year. Collectively, these elements have fueled our gross margin resurgence in vehicle sales. Our high-margin value-added services, including the finance, insurance, repair, and other value-added services have seen a continuously increasing penetration rates. Revenue generated from these services per retail vehicle has surged by above 30% compared to six months ago, making another key driver for our gross growth. Our cutting-edge large-scale reconditioning facilities empower us to offer a comprehensive suite of value-added services to our used car buyers, similar to what new car flash shops offer, but with a distinct cost advantage. This Uxin superstore, a large showroom model apart from traditional used car marketplaces and small used car dealerships. We are heartened by the market enhancements in our gross margin, which bolsters our confidence in obtaining EBITDA profitability for our superstores this year. As we start scaling up our inventory, achieving profitability from our large-scale sales, it's just a matter of time. We're committed to achieving EBITDA profit from our two major superstores in Hefei and Xi'an within 2023. And that's our answer to your question.

Operator, can we move on.

The next question comes from Kai Kang of Citi. Please go ahead.

Do you think that [indiscernible] trying to expand into the used car business, will intensify completion and post challenges to Uxin and compared to those leadership sales in used car sector, where are Uxin’s stand? Thank you.

So thank you for the question. The transformation and industry upgrade in China's used car market is well underway. We generally welcome all responsible participants committed to fostering trust with consumers and elevating the industry standard. Going forward, in China's used car landscape, those retailers who emphasize product quality, customer experience, integrity and compliance will undoubtedly be at the forefront. And collectively, we have the potential to steer the industry towards stronger growth and broader expansions. So it's my belief that the used car sector is not winner takes all market. Each retail model can find its niche and flourish. To draw from a mature market analogy, consider the U.S. where CarMax is leading used car retailer and captures less than 3% of the market share, whereas branded dealerships represent around 40%. It's not about -- competition. Each player taps into their strength, catering to a specific brand or pricing segment, thereby nurturing their customer base and establishing mutual respect within the market. So compared to our U.S. peers, both we and new car dealerships in China still have significant growth potential in capturing market share. And in comparison to new car dealerships, building into the used car arena, our unique selling proposition is the contrast between our extensive superstores and more niche specialty stores. So operating under a warehouse style superstore model, we emphasize volume and turnover. We pride ourselves on the vast array of choices available to customers with thousands of vehicles under a single window. Moreover, we possess the industry's most advanced larger-scale used car reconditioning factories. With a streamlined reconditioning process and cutting-edge digital management, we offer a cost-effective solution without compromising on vehicle quality. When comparing vehicle types and pricing with new car dealerships, we believe our portfolio is both compelling and competitively priced. And that essentially sums it up. Thank you for the question.

Thank you.

That concludes our call today. I will now hand the call back to management for any closing remarks.

Alright. Thank you. Thank you again for this call and for your continued support for Uxin. We look forward to speaking to you again very soon in the future. Thank you. Bye-bye.

Bye-bye. Thank you.