Q3 2025 Uxin Ltd Earnings Call
Speaker Change: Good day and welcome to the Yuxin 3rd Quarter 2024 Earnings Conference Call. All participants will be in a listen-only mode.
Speaker Change: Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one.
Speaker Change: To withdraw your question, please press star then 2. Please note this event is being recorded. I would now like to turn the conference over to Jack Wang. Please go ahead.
Jack Wang: Thank you, operator. Hello, everyone. Welcome to Yuxin's earnings conference call for the third quarter ended September 30, 2024.
Jack Wang: On the call today with me, we have DK, our founder and CEO, and John Lin, our CFO. DK will review business operations and company highlights, followed by John, who will discuss financials and guidance. They will both be available to answer your questions during the Q&A session that follows.
Speaker Change: Before we proceed, I would like to remind you that this call may contain overlooking statements which are inherently subject to risks and uncertainties that may cause actual results to differ from our current expectations.
Speaker Change: For detailed discussions of the risks and uncertainties, please refer to our filings with the SEC.
Speaker Change: Now with that, I will turn the call over to our CEO, DK. Please go ahead, sir.
Lin, Kun Dai, Jack Wang
DK: Hello, everyone. I am very happy to meet you again through the telephone conference.
DK: Thank you all for coming to our sales conference. In order to facilitate communication with domestic and foreign investors, I will share with you the company's latest developments in Chinese and English.
DK: Hello everyone. Thank you for joining us today. I'm pleased to reconnect with you all on this call. Before we start, I'll be sharing, as before, we will be sharing our company's latest progress in both English and Chinese to accommodate our domestic and international investors.
DK: We are very happy that we have achieved high-quality performance growth again this quarter.
DK: The share price rose by 47%, and the share price rose by 163%.
DK: The sales efficiency of the vehicle is in a healthy state The inventory turnover rate is within 30 days Far below the average level of the Chinese industry in 55 to 60 days The毛利率 has also reached 170 Achieved a new high since self-employment We expect the next quarter's retail volume to be between 7,800 to 8,100 units Over 150% growth in comparison
Thank you.
Lin, Kun Dai, Jack Wang
We're excited to report another quarter of high-quality growth.
DK: From July to September 2024, our quarterly retail transaction volume reached 6,005 units, representing a sequential increase of 47% and a year-over-year growth of 163%. Our vehicle sales efficiency remains robust, with inventory turnover days maintained below 30 days, much lower than the Chinese industry average of 55 to 60 days.
DK: Our gross profit margin also expanded to 7%, marking a new high since we transitioned to our self-operated business.
DK: We anticipate that retail transaction volume in the next quarter will be 7,800 units to 8,100 units representing a year-over-year increase of over 150 percent.
DK: Customers' satisfaction with the advantage of purchasing a car has remained at the highest level in the industry for 11 consecutive quarters. This quarter's NPS has risen to 66, relying on advanced smart factories to create high-quality second-hand car products, a comprehensively guaranteed sales service system, and full-fledged digital technology applications. Our super-sales model has a significant advantage over traditional car manufacturers, and our customer sales conversion rate is more than 40%.
Speaker Change: Customer satisfaction with purchasing vehicles from Yuxin has remained at the highest level in the industry for 11 consecutive quarters, with our net promoter score rising to 66 this quarter.
Speaker Change: By leveraging advanced intelligent reconditioning factories to produce high-quality used cars, a comprehensive and reliable sales service system, and the application of full-spec digital technology, our superstore model offers significant advantages over traditional car dealerships.
Speaker Change: The sales conversion rate of customers visiting our stores exceeds 40%.
Speaker Change: As our base of transacting customers continues to grow, our positive reputation is reaching potential customers more rapidly, further consolidating our competitive advantage in regional markets.
Lin, Kun Dai, Jack Wang
值得一提的是在贯穿检测准备销售交付售后等二手车交易权流程上
Speaker Change: We have made efforts to standardize non-standardized second-hand car products and the results have been recognized by the industry.
Speaker Change: In this month, we have received the honor of the Chinese car industry standard-bearer jointly recognized by the National Market Supervision and Management Bureau, the Development and Reform Commission, the Science and Technology Department, the Industry and Information Technology Department, the Finance Department, and the People's Bank of China. We will continue to build our products and services with higher standards to lead the high-quality development of the Chinese car industry.
Lin, Kun Dai, Jack Wang
Speaker Change: Importantly, used car transactions have traditionally been considered non-standard processes. However, our efforts and achievements in standardizing the entire transaction process from inspection and reconditioning to sales, delivery and after-sales services have been increasingly recognized by the industry.
Speaker Change: the Ministry of Science and Technology, the Ministry of Industry and Information Technology, the Ministry of Finance and the People's Bank of China. We will continue to elevate our product and service standards leading the high quality development of China's used car industry.
Lin, Kun Dai, Jack Wang
Thank you.
Speaker Change: All business actions are also in full swing. The first step is to steadily improve the storage level to meet the high demand of consumers.
Speaker Change: At the same time, we use the online trading scene to increase the service penetration rate to increase the contribution to Maoli
Speaker Change: Secondly, we will gradually supplement and optimize the configuration of the vendors to adapt to the increasing demand of the business scale. In addition, due to the increase in the number of customers, we have further improved the service network. In the cities and other areas where the vendors are located, we have deployed several post-sale maintenance service points.
Speaker Change: This will allow us to be closer to our customers in terms of physical space, to meet the daily maintenance and maintenance needs of our customers' vehicles.
Speaker Change: We are also actively executing various business initiatives. First, we are steadily increasing our inventory levels to meet the strong consumer demand for power purchases. At the same time, by leveraging the one-stop transaction service environment of our offline superstores, we are enhancing the penetration of value-added services to contribute more to our gross profit.
Speaker Change: Second, we're gradually supplementing and optimizing our superstore staffing to accommodate the demands of our expanding business scale.
Speaker Change: Additionally, as our existing customer-based growth, we're further improving our service network by deploying additional maintenance service outlets in other areas of the cities where our superstores are located.
Speaker Change: This allows us to be physically closer to our customers, meeting their daily vehicle maintenance and servicing needs.
Speaker Change: As sales continue to improve, capital gains continue to improve, and costs continue to optimize, we have achieved EBITDA profit at the sales level this quarter. We will achieve the goal of EBITDA profit for the entire company in October to December, which is the next quarter.
Lin, Kun Dai, Jack Wang
Speaker Change: Driven by continuous sales growth, ongoing improvements in gross profit margins, and consistent expense optimization, we have achieved adjusted EBITDA profitability at the superstore level this quarter. We remain on track to achieve our goal of company-wide adjusted EBITDA profitability in the upcoming December quarter.
Speaker Change: At this stage, we have successfully verified the second-hand car super large-scale sales model. Our new sales expansion is also progressing smoothly.
Speaker Change: At the same time, the automotive industry chain in Wuhan is developed and has the nickname of China's automobile valley.
Speaker Change: have huge business development potential. Zhengzhou and Wuhan are expected to start operations next year. In addition, we still have some other cities under construction. The expansion of new markets will greatly improve the market influence in the new industry area and continue to promote future sales growth and performance.
Thank you.
Building on our proven superstore model,
Speaker Change: The expansion of our new superstore is progressing smoothly. Following our cooperation agreement with the Zhengzhou Airport Economic Zone, we are pleased to announce that we have entered into another cooperation agreement with the city of Wuhan. Wuhan is a major city in central China with a population of 14 million and a vehicle ownership of 4 million.
Speaker Change: Additionally, Wuhan has a well-developed automotive industry value chain that is known as China's Auto Valley, offering massive potential for business development.
Speaker Change: Our superstores in Zhengzhou and Wuhan are expected to commence operations next year. Furthermore, we are in discussions with several other cities. The expansion of new superstores will significantly enhance Yuxin's market presence in new regions, driving future sales growth and financial performance.
Speaker Change: That's all for today. Next, our CFO John will show you the financial situation. John, please.
Lin, Kun Dai, Jack Wang
Speaker Change: And that concludes my remarks for today and now I will let our CFO John to provide a closer look at our financials. John, please go ahead. Okay, thank you DK. Hello everyone, today we will share with you the company's performance in Chinese and English.
Speaker Change: First of all, we need to explain that in order to fit the habits of investors, we have made financial year changes in this quarter. During the financial year, from the current April 1st to the next year's March 31st, the changes are from January 1st to December 31st.
Lin, Kun Dai, Jack Wang
Speaker Change: Thank you, DK. Hello, everyone. We will deliver our remarks in both Chinese and English to communicate better with you.
Speaker Change: And first, I would like to note that to better align with the common practice in the investment community,
Speaker Change: We have adjusted our fiscal year this quarter. Our fiscal year now runs from January 1st to December 31st each year, instead of the previous period from April 1st to March 21st.
Speaker Change: From July to September of 2024, which is the third quarter of the 2024 financial year, we have again achieved very strong performance growth. Sales have increased significantly on the basis of the historical new high of the last quarter. The retail sales of this quarter were 6,005 units, a 47% decrease from the previous year, and a 163% increase in the same period last year.
Speaker Change: For the period from July to September 2024, which is now the third quarter of fiscal year 2024, we once again delivered very strong growth. Transaction volume increased significantly on top of last quarter's record high.
Speaker Change: Quarterly retail transaction volume reached 6,005 units, representing a sequential growth of 47% and a substantial year-over-year growth of 163%.
Lin, Kun Dai, Jack Wang
Speaker Change: The total sales revenue of this quarter is RMB4.4 billion The return has increased by 37% and the share price has increased by 79%
Speaker Change: The average selling price of a car was 109,000 yuan in the same period last year, down to 740,000 yuan this quarter. The sales have increased significantly, which has reduced the price of the car, which has an impact on the income level.
Speaker Change: From 109,000 RMB in the same period last year to 74,000 RMB this quarter, the strong increase in transaction volume had offset the impact of lower vehicle prices on overall revenue.
Speaker Change: In terms of wholesale sales of vehicles, the wholesale sales of three-seasons are 1041 units, which is 31% lower than before and 35% lower than before. The total income of wholesale sales is 37.8 million yuan.
Speaker Change: In total, the total revenue of the second quarter of retail and wholesale sales is 49.7 billion yuan, which is 24% higher than the previous year and 40% higher than the previous year.
Speaker Change: As for the wholesale segment, our third quarter wholesale transaction volume was 1,041 units.
Speaker Change: A sequential decrease of 31% and a year-over-year decrease of 35%, with total wholesale vehicle sales revenue of 37.8 million RMB.
Speaker Change: Combining retail and wholesale, total revenues for the third quarter were 497 million RMB, representing a sequential increase of 24% and a year-over-year increase of 40%.
Lin, Kun Dai, Jack Wang
Speaker Change: In this quarter, our gross profit margin was 7%, an improvement from the previous quarter. Importantly, our gross margin is on an upward trend.
Speaker Change: And with the market recovering and higher penetration of value-added services, we anticipate significant room for further improvement.
Speaker Change: While our performance and operating efficiency have improved significantly, we are also continuously monitoring more strict costs and cost control. This quarter, the EBITDA loss after adjustment is 9.2 million yuan, which is 73% lower than the previous quarter and 80% lower than the previous quarter.
Speaker Change: And while our performance and operational efficiency have improved substantially, we continue to enforce strict cost and expense control.
Speaker Change: As of 2024, our sales will continue to grow at 7,800 to 8,100 units.
Speaker Change: The total sales revenue is expected to be 5.6 billion RMB to 5.8 billion RMB. We plan to realize the company's single-term adjusted EBITDA certificate in the fourth quarter.
Now looking ahead to the fourth quarter of 2024.
Speaker Change: Our retail transaction volume is expected to continue its growth trend reaching 7,800 units.
Speaker Change: to 8,100 units, with total revenues projected to be between 560 million RMB and 580 million RMB. We also plan to achieve positive adjusted EBITDA for the company in the fourth quarter.
Speaker Change: That concludes our prepared remarks for today. Thank you, everyone. Operator, we are now ready to begin the Q&A session.
Speaker Change: Thank you. We will now begin the question and answer session.
Speaker Change: To ask a question, you may press star, then 1 on your touchtone phone.
Speaker Change: If you are using a speakerphone, please pick up your handset before pressing the keys.
Speaker Change: If at any time your question has been addressed and you would like to withdraw your question, please press star then 2.
Speaker Change: At this time, we will pause momentarily to assemble our roster.
Speaker Change: As you can see, one day in the north, the tsunami will hit our city. Our war will begin. Will it hit shrine or site? Will it hit the city too? Will it destroy my city? From my country, I would say. Algoin will continue to give right, from my city. Alternately, it won't defend its right to hold the city Freedom. Is there guarantee that powder bomb simultaneously would be blown off the city?
Speaker Change: Once again, to ask a question, please press star and 1.
Lin, Kun Dai, Jack Wang
Speaker Change: The first question today comes from Gary Zvorshek with Water Tower Research. Please go ahead.
Speaker Change: Hey everyone. So we've seen that in previous years China's used car transaction volumes grew by double digits annually, but now in recent months the growth rate is significantly slowed. I think the year-over-year growth is like around 5% from January to September. So could you share whether the development of China's used car market is slowing down or not, the reasons behind the trend and your outlook for the market's future?
[inaudible]
Speaker Change: Thanks, Gary. Let me translate that question first. We see that the number of second-hand cars in China has increased by two-fold every year. However, we have observed a significant slowdown in the number of second-hand cars in China in the past few months. From January to September, the number of second-hand cars in China has increased by about 5%. So I would like to ask you, Mr. Guan, what is the reason for the slowdown in the development of the second-hand car market in China and what is our outlook on the market in the future?
DK, please answer the question.
Speaker Change: The sales of the new car increased by 120% compared to the previous year, and the second-hand car increased by about 150%. The main reason is that the economic environment is still fluctuating. The consumption demand of the car has been limited.
Speaker Change: At the same time, there is also a counter-wind factor in the Audi car market, which is the price drop trend in the first half of this year, which has also affected the consumption mood of Audi cars.
Lin, Kun Dai, Jack Wang
Speaker Change: Okay, thanks for the question. Yeah, thanks for the questions. This is DK. And this year we have observed a moderation in the growth rates for both new and used car transactions in China. And specifically, the production and sales of new cars have increased by approximately 2% over the year, while used car transactions have grown by about 5%.
Lin, Kun Dai, Jack Wang
Speaker Change: The primary factors contributing to the slowdown include fluctuations in the economic environment, which have somewhat suppressed consumer demand for cars.
Speaker Change: Additionally, the used car market faced headwinds due to price reductions in new cars during the first half of the year, which impacted consumer sentiment towards purchasing used vehicles.
Speaker Change: They play Amerikan Squ以日本宣城 They play Amerikan Square以日本台 Chinatown以日本固極 And Chinatown Square以日本美人 愣住聽 少年中共 Little Chinese They seem to memorized it They seemed to remembered it Korean They don't understand Korean They don't like Japanese
Speaker Change: But in the long run, we are very confident in the development of the second-hand car market.
Speaker Change: On the one hand, China's per capita automobile export volume is less than one-third of the United States, and the total automobile export volume is still increasing. On the other hand, the Chinese auto market is still in the early stages of development, and it is expected to maintain a two-digit high trading volume in the next few years. In recent years, the trading data of the auto market in the second half of the year has also begun to warm up.
Lin, Kun Dai, Jack Wang
Speaker Change: However, despite these short-term challenges, we remain highly confident in the long-term prospect of China's used car market.
Speaker Change: First, China's per capita car ownership is still less than one-third of that of the United States.
Speaker Change: and the overall car ownership in the country continues to rise.
Speaker Change: And second, the Chinese used car market is still in a very early stage of development. We expect it will maintain double-digit transaction volume growth in the coming years. In fact, since the second half of this year, we've already begun to see a rebound in used car transaction volumes.
Lin, Kun Dai, Jack Wang
Lin, Kun Dai, Jack Wang
Speaker Change: In terms of sales, our sales volume has increased by about 150% in the past few quarters. Although our occupancy rate in the two operating markets has already exceeded 15%,
Lin, Kun Dai, Jack Wang
Speaker Change: That's why you don't like this show? Then I think you have the good in your house, so you might ask this 15-year-old on Lin Giao's TV program when he grows up. How would you prepare for a family that might have a party? I'll let you decide. Beat it.
Speaker Change: So for us, we've achieved around 150% year-over-year growth in retail transaction volume over the past few quarters. While our market share in the two cities where our current superstores are located has exceeded 15%, our nationwide market share remains relatively low because we're currently focusing on deepening our presence through our offline superstore model in these cities.
Lin, Kun Dai, Jack Wang
Speaker Change: And this indicates a significant headroom for growth. In the coming years, we plan to open several new superstores every year.
which will drive sustained growth in our sales volume.
Speaker Change: and we believe that our sales growth rate will significantly up his ban of the overall market.
Speaker Change: And that's our answer to the question, operator. We can move on to the next.
Thank you.
Speaker Change: The next question comes from Fei Dai with TF Securities. Please go ahead.
Thank you.
Speaker Change: Hello, GK. I am very happy to see that the company is starting to expand its new market. I would like to ask, what is the timeline between the construction of new markets in Zhengzhou and Wuhan, from construction to operation, to the realization of single-point profit? What impact will it have on the financial performance in 2025?
Speaker Change: It's encouraging to see the company expanding with new stores. Could you provide the timeline for the two new stores planted in Zhongzhou and Wuhan, from construction to operating to achieving individual stores' profitability? Also,
Speaker Change: What impact will this have on the company's financial performance in 2025?
Lin, Kun Dai, Jack Wang
Okay, I will answer this question.
Okay, bye-bye.
Speaker Change: Our two new plants are being prepared as planned. Wuhan plant is expected to open in the first half of next year, which is the first half of 2025.
Speaker Change: So, we expect that after the opening of the new vendor, it will be possible to achieve a profit-loss balance in 6 to 12 months.
Speaker Change: Hi, this is Zhang, and I will address your questions. Both of our new stores are progressing as planned. The Wuhan store is expected to open in the first half of 2025, while the Zhengzhou store is anticipated to open in the second half of 2025.
Speaker Change: And now, building on the experience and refinements from our superstore models in Xi'an and Hefei, we've already fully validated this concept and accumulated valuable operational know-how.
Speaker Change: So, as a result, we expect these new stores to reach breakeven within 6 to 12 months after opening.
Lin, Kun Dai, Jack Wang
Speaker Change: As for the impact on financial statements, it depends on the pace of our opening operations.
Speaker Change: For the opening of the new warehouse, we need to invest a portion of the operating funds mainly used for the purchase of equipment for the preparation of the factory and the investment of car loans. This portion of the funds will be gradually invested as the storage scale increases, so the funds needed for the opening of the warehouse will not be too much.
Speaker Change: Regarding the impact on our financial performance, this will largely depend on the rollout schedule of the new locations.
Speaker Change: Prior to opening, we will need to invest operating capital primarily for purchasing equipment for reconditioning facilities and acquiring vehicles.
Speaker Change: This investment will be phased in gradually as our inventory levels grow, so the initial capital requirement for each new store won't be substantial.
Speaker Change: We also anticipate a normal level of operating losses during the first six months after a store opens But starting around the sixth month, we expect the impact on our income statement to begin turning positive
Speaker Change: Okay, this is my answer to this question. Thank you, Jeffrey.
Lin, Kun Dai, Jack Wang
Speaker Change: Thank you, Director Lin. The second question is that the company has been talking about increasing the inventory in recent quarters. The inventory assets have increased by about 30% in each quarter. I have two questions. The first one is, from the point of view of market demand, how do you plan to limit the inventory of different cities? The second question is, there is a 30-day turnaround. Will it decrease as the inventory increases? How does the company plan to balance inventory and turnaround?
Speaker Change: Translated in English, over the past few quarters, the company has consistently mentioned increasing inventory, with inventory assets growing by about 13% each quarter. I have two questions. The first is...
Speaker Change: From a market demand perspective, how do you plan the upper limit of inventory levels in different cities? The second is, will the 30-day turnover rate decrease as inventory increases?
Speaker Change: And how does the company plan to balance inventory levels and turn over its decisions?
Thank you.
Thank you. Thank you.
Speaker Change: Our plan for the storage size of different city vending machines is related to the level of the car volume in the city and our target market share. With the development of the auto industry, about 70,000 new cars are expected to enter the auto market every 500,000 car volume cities. About 6,000 cars a month.
Speaker Change: And this is DK, and I will address that question. Our approach to planning inventory levels in different cities is closely tied to the local car ownership levels and our targeted market share in those regions.
Speaker Change: The annual used car transaction volume in this city will be around 70,000 units, and this translates to approximately 4,000 units per month.
Speaker Change: At present, the combat rate in Xi'an and Hefei has reached more than 15%.
Speaker Change: Therefore, for every 500,000 vehicles in the city, we have about 6,000 trucks with 20% of the total sales volume. This can support us to build a 1,000-unit-scale market. For cities like Wuhan and Zhengzhou, where the number of vehicles is about 5 million, this can support us to build a 10,000-unit-scale market.
Lin, Kun Dai, Jack Wang
Speaker Change: In our existing markets like Xi'an and Hefei, we have achieved a market share exceeding 15% with an ultimate goal of surpassing 20%.
Speaker Change: To put this into perspective, and also to highlight our competitive advantage and effective business model.
Speaker Change: The leading used car companies in the U.S. generally attain around a 3% market share only.
Speaker Change: So, based on these metrics, in cities with 500,000 vehicles, capturing 20% of the monthly used car transactions, which would be around 1,200 units.
Speaker Change: supports the operation of a superstore with an inventory capacity of approximately 1,000 cars. In larger cities, such as Zhengzhou and Wuhan, where car ownership is around 5 million, our superstores can effectively manage inventory capacities of around 10,000 cars.
Thank you so much for watching this video.
Speaker Change: Every time we enter a new city, we will first plan the inventory according to the level of car exposure in the city, and then increase the occupancy rate by constantly increasing the inventory according to the sales climb.
Lin, Kun Dai, Jack Wang
Speaker Change: So when entering a new city, we first establish an inventory plan that aligns with the city's car ownership levels and our market share objectives. We then progressively scale our inventory in line with sales growth, which helps us enhance market penetration while efficiently managing resources.
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Speaker Change: Since March of this year, we have been steadily increasing the storage. The storage level at the end of September is twice that of the end of March.
Speaker Change: The monthly sales amount is more than twice The sales growth is faster than the inventory The inventory turnover rate has been accelerating
Speaker Change: On the one hand, due to the rise in the market market, demand is rising. On the other hand, as the scale continues to expand, more and more consumers are choosing. This is becoming more and more obvious to the trend of our large-scale market purchase of cars, forming the target effect and the middle ground of traffic.
Speaker Change: Since March of this year, we have been steadily increasing our inventory levels.
Speaker Change: This is due to several factors. First, the market has been recovering, with strong demand driving higher sales volumes.
Speaker Change: And second, as we expand our scale, consumers benefit from a wider selection of vehicles available in our superstore.
Speaker Change: The increase of variety enhances our brand attractiveness, effectively making our stores the preferred destinations for used car purchases. As a result, more customers are drawn to our brand, improving sales efficiency.
Speaker Change: Currently, the inventory levels at our two existing superstores have not yet reached their planned limits, so we aim to maintain an inventory turnover rate of around 30 days even as we continue to increase inventory.
And that's how we answer to your second question.
Thank you, Dafei.
Thank you.
Thank you.
Speaker Change: This concludes our question and answer session. I would like to turn the conference back over to the company for any closing remarks.
Lin, Kun Dai, Jack Wang
Thank you.
Speaker Change: Alright, thank you again for joining today's call and for your continued support in Yuxin. We look forward to speaking with you next quarter. Thank you.
Thank you.
Speaker Change: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
Thank you for your attention.
The End Thank you for watching