Yahoo Finance Uxin Limited (NASDAQ:UXIN) Q3 2024 Earnings Call Transcript
Uxin Limited (NASDAQ:UXIN) Q3 2024 Earnings Call Transcript April 25, 2024
Uxin Limited isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good day and welcome to the Uxin Third Quarter Fiscal Year 2024 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] I would now like to turn the conference over to Mr. Jack Wang. Please go ahead, Jack.
Jack Wang : All right. Thank you, operator. Hello, everyone. Welcome to Uxin's Earnings Conference Call for the Third Quarter of Fiscal Year 2024 and the December 31, 2023. On the call with me today, we have DK, our founder and CEO, as well as John Lin, our CFO. DK will review business operations and company highlights, followed by John, who will discuss our financials and our guidance. They will both 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 I'll turn the call over to our CEO, DK. Please go ahead, sir.
Kun Dai : [Foreign Language] [interrupted] Hello, everyone. Thank you for joining us today. I'm pleased to reconnect with you all on the call. To facilitate communication with both domestic and international investors, I will share our company's latest progress in both Chinese and English. I will begin by reviewing the key highlights from this quarter before sharing the work we're currently engaged in and our plans for the future. During the third quarter of fiscal year 2024, from October to December 2023, the domestic new car market in China began another round of price reduction, which also impacted the used-car industry. Despite these challenging external conditions, we continue to see growth in our retail business, with total retail sales [for this] (ph) the quarter reaching 3,081 vehicles.
This represents a 34.7% increase quarter-over-quarter and a 5.2% increase year-over-year. In addition, our super stores are operating more smoothly than ever, maintaining a highly efficient turnover of vehicles of less than 30 days and achieving an industry-leading net promoter score for NPS of over [six] (ph) consecutive quarters. Currently we are focusing on enhancing the scalability of our profitability. It’s worth noting, in January 2024, we have achieved EBITDA profitability at a store-level for the first time. We are confident that within the calendar year 2024, we will reach EBITDA profitability at the company level as well. The diligent efforts of the past few months have advanced us significantly toward this goal. And today I'm pleased to share our progress in three major areas.
Firstly, our vehicle sales system continued to evolve and mature, maintaining a robust vehicle turnover rate. Despite the market's volatility in recent quarters, we have further enhanced our vehicle pricing capabilities, allowing us to rapidly adjust prices in response to market shifts, ensuring that our pricing can always be competitive. The inherent branding strength of our physical super-stores has also become increasingly evident and our comprehensive customer services have received wider recognition, further boosting customer acquisition and sales conversions. During the [intense] (ph) new car price competition in the first three months of 2024, our store operations demonstrated resilience, with vehicle turnover remaining stable despite market fluctuation.
Secondly, while maintaining vehicle turnover efficiency, our profitability has substantially increased. This improvement stems from our superior quality service and branding over traditional car dealers, which enabled us to effectively achieve the favorable market-level price differential for our vehicles. Additionally, leveraging our super-stores, we have launched customized, diverse, and cost-effective value-added products in collaboration with our supply chain partners. The penetration rates of financial products, insurance, accessories, extended warranties, and maintenance services are rapidly increasing, which will contribute further to our gross margin in the future. Thirdly, we have conducted comprehensive business reviews and optimizations to initiate a new round of cost reduction and efficiency enhancement.
In our retail operations, we have rigorously refined our processes and fully utilized digital management tools. Specifically, we have meticulously examined costs in all areas, optimized our workforce structure, and enhanced the cost of efficiency ratio to improve the operating cash flow of our super-stores. Notably, following the Spring Festival, we realigned our organizational structure to better meet the development needs of our super-stores and executed a series of initiatives to further reduce costs and expenses. Starting from April, we expect these efforts to save us over RMB15 million in our quarterly costs and expenses going forward. As you have seen, we implemented a conscious vehicle acquisition strategy in the past few quarters in response to the recent price [wars] (ph) in the new car market, which helped us maintain a relatively low inventory level.
Now our pricing, sales, and operational capabilities are very well-equipped to manage market fluctuations effectively. So we have started to increase our inventory levels, anticipating that our end of year on-hand inventory will reach approximately 4,000 units, which is around 3 times to 4 times of our third quarter inventory level. This expanded inventory will provide consumers with more options and enable us to achieve monthly EBITDA breakeven before September 2024, as well as company-wide EBITDA and profitability in the December quarter of 2024. Additionally, as part of our strategic development plan, we are on track to complete the site selection and operational preparation for one to two new super-stores within 2024. This initiative will further strengthen our integrated network of online operations and offline super stores.
Our business model has garnered significant recognition from local governments, especially following their visit to our Hefei and Xi'an super stores. Consequently, we have received active invitations from these regions to establish new super stores. We're currently advancing implementation plans with several cities, which will propel using nationwide expansion and drive business growth in the coming years. Early in March, the company launched a new round of financing, which I personally participated as an investor. And my personal commitments reflects my confidence in the substantial opportunities for development in China's used car market, the competitive strength of Uxin super-store model, and its robust growth trajectory. I am deeply committed to steering Uxin towards becoming a leader in China's used car industry.
With that, I would like to turn the call over to our CFO John to walk through the financial results.
Feng Lin : [Foreign Language] [interrupted] Thank you, DK, and hello everyone. I will provide a closer look at our financial results from the third quarter of fiscal year 2024. As DK just highlighted, the Chinese automotive market in 2023 was characterized by multiple rounds of price wars, and the market fluctuations had also impacted the used-car sector. As our superstore model has become increasingly mature, our sales system has enhanced its capability to respond rapidly to market fluctuation, enabling timely adjustments in vehicle pricing and sustaining high levels of vehicle turnover. From October to December 2023, even though our inventory levels were only half of what they were in the same period last year, we almost doubled our sales turnover rate, achieving a total retail transaction volume of 3,081 units.
This represents a 35% increase quarter-over-quarter and a 5% increase year-over-year. Our total retail revenue for the third quarter reached RMB319.2 million, a 28% increase from RMB248.9 million in the previous quarter. In response to the current economic conditions and market demand, we actively optimized our inventory structure. However, the heightened competition in the industry over recent quarters led to a reduction in the average selling price, or ASP, of our retail vehicles, which decreased from RMB112,000 in the same year last year to RMB104,000 this quarter. And in terms of wholesale, the third quarter saw our transaction volume reached 1,273 units, marking a 20% decrease quarter-over-quarter and 35% decrease year-over-year. The wholesale revenue declining to RMB82.2 million.
As our super-store model is now operating at full effectiveness, we are increasingly focusing on our retail segment, which naturally reduces the proportion of our wholesale business. Considering these factors, our total revenues for the third quarter increased 16% to RMB410.5 million from RMB356.1 million in the second quarter. Despite intensifying the competition within the industry this quarter, we successfully maintained a high vehicle turnover and a healthy inventory structure, achieving a gross margin of 4.8%, [that] (ph) 1.4 percentage point from the previous quarter. However, as DK just emphasized, our capacity to respond to market fluctuations has enhanced, and our pricing adjustments have become more prompt. Consequently, we anticipate that the gross margin will recover to above 6.5% in the upcoming quarter.
With the increasing revenue contribution from value-added services such as financing, insurance, accessories, maintenance, and repairs, we are optimistic about achieving significant improvements in our gross margin going forward. Our total operating expenses for the third quarter were RMB99.8 million. Through our diligent Uxin's management, we continued to implement stringent cost and expense controls, achieving a stable level of operational expenditures in-line with previous quarters. Moreover, we have recently completed a new round of organizational optimization and executed a series of initiatives to further reduce costs and expenses. Starting in April, these adjustments will result in a monthly reduction of fixed expenses by RMB5 million, accumulating in a quarterly decrease of over [RMB15 million] (ph).
Our adjusted EBITDA loss for the quarter was RMB43.8 million, a decrease of RMB32.6 million from the adjusted EBITDA loss of RMB76.4 million in the same period last year, narrowing the loss by 43%. This also represents a 5% sequential reduction from the adjusted EBITDA loss of RMB45.9 million in the previous quarter. In addition we closed an equity [financing] (ph) in March, leasing approximately $34.8 million. Our CEO DK, has shown his commitment into our future by personally investing round as well. These funds will be used to expand our inventory targeting at [four quarter] (ph) increase by end of 2024, which we anticipate will significantly amplify our sales growth trajectory. There is still substantial potential for increased sales and profitability at our existing superstores.
We have already achieved the EBITDA profitability for our superstores as of January 2024. The improvement in vehicle turnover efficiency enhanced the margin profiles and affected the implementation of company-wide cost reduction. And the efficiency gains will contribute to improve the financial performance going forward. We're confident in achieving monthly EBITDA break-even by September 2024 and attaining company-wide EBITDA profitability in the December quarter of 2024. Now moving on to the guidance for the fourth quarter, January through March, which included the Chinese New Year holiday, it's traditionally an off-season for the used-car industry. Nevertheless, we're maintaining a high level of sales turnover efficiency, and we forecast a total retail transaction volume of approximately 3,100 units, and wholesale transaction volume of about 900 units.
We expect our total revenues to be between RMB300 million to 320 million with gross margin rebounding to above 6.5%. And that concludes our prepared remarks today. Operator, we're now ready for questions.
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