This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk02: Ladies and gentlemen, thank you for standing by and welcome to UCSIN's earnings conference call for the fourth quarter and fiscal year ended March 31st, 2022. At this time, all participants are in listening mode. After management's 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 would like to turn the call over to your host for today's conference call, Ms. Joyce Tang, IR Director of the company. Please go ahead, ma'am.
spk06: Thank you, Operator. Hello, everyone. Welcome to Yoji's Earnings Conference Call for the quarter ended March 31st, 2022. On the call today are DK, Founder and CEO, and John Lin, 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. Before we start, I would like to remind you that this form may contain forward-looking statements made under the safe public provision of the U.S. Private Security Solicitation Reform Act of 1995. These statements 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. U.C. does not undertake any obligations to update any forward-looking statements, except as required under applicable law. For more information about a potential risk and uncertainties, please refer to our filings with SEC. With that, I will now turn the call over to our CEO, CK. Please go ahead.
spk00: Thanks, Joyce. Hello, everyone. It's a pleasure to meet you again through the phone conference. Thank you for coming to our conference.
spk06: Hello everyone, thank you for joining our earnings call today to better communicate with both domestic and international investors. My particular remarks today will still be in both English and Chinese.
spk00: In the fourth quarter last year, I elaborated on our growth strategies and business model transformation in order to provide our customers a hassle-free use card purchase experience
spk06: with massive high-quality and value-for-money vehicle connections, as well as superior before and after-sales services. Having successfully transitioned from a third-party commission-based model to an inventory-only model, we opened here on IRC our first vehicle inspection and reconditioning center, as well as a warehouse-type superstore.
spk00: In the year 2022, we insist on the development direction of the previous year. In the fiscal year 2022, we have continued in the same direction and remain committed to our mission of creating an industry-leading youth car buying experience.
spk06: with the customer-centric approach. Despite the variety of challenges we faced, such as the repeated research of COVID, we have made significant progress in quality use of our offering, one-spot service, customer-centric experience, and social responsibility.
spk00: This year, we have achieved a set business goal. The four seasons of retail business have improved significantly. The revenue has also improved significantly. The total sales in 2022 was 15,755 vehicles, of which 5,211 were retail sales, and the sales revenue was 16.4 billion yuan, which is more than 100%. From January 2022 to March, the fourth quarter of this fiscal year, although affected by the Xi'an epidemic and the Spring Festival, it is due to the strong growth of Hefei IRC, with a retail sales of 1,848, which is called the last quarter of the year. In the fiscal year 2022, we achieved our business goals for the year. Total transaction volume for the year was 15,755 units, representing a 49% year-over-year growth. Total retail transaction volume for the year was 5,811 units,
spk06: maintaining sequential growth momentum in every quarter of the year. Total revenues were RMB 1.64 billion, representing a 149% year-over-year growth. Our CIIS operations were disrupted by COVID-19 countermeasures in the fourth quarter, which is also the traditional youth car off-season due to the spring festival holidays. However, we achieved a higher retail transaction volume, as a result of the sales ramp-up in our Hefei IRC. While we still occasionally face COVID-related challenges, we are committed to executing our development plan and sustaining our growth momentum.
spk00: Since our first IRC in Xi'an, last year, we have completed the second new IRC in Hefei. Using professional technology and modern technology, we have realized a large-scale transformation to create high-quality, high-price second-hand products. The IRC that Hefei has opened is the first stage of Hefei's two-wheeled car smart remodeling factory project, jointly built by Youxin and Hefei's Changfeng County Government in joint investment of RMB 250 million. The Hefei Changfeng project is jointly built by Youxin and Hefei's Changfeng County Government in joint investment of RMB 250 million. Hefei's active and open economic policy, developed car industry, and mature upstream and downstream supply chain will provide great support to Youxin's remodeling factory. After building our first IRC in Xi'an, we opened our second IRC in Hefei in November 2021. This is the first phase of our Hefei IRC.
spk06: The whole Hebei IRC is backed by our joint investment of RMB 2.5 billion with Hebei Changfeng Government. Hebei is renowned for its booming auto industry with favorable policies, leading vehicle manufacturers, as well as mature upstream and downstream supply chains. Consolidating these resources, we plan to leverage our expertise and some of the art technologies to recondition vehicles at a super-large scale. The desired production capacity is expected to be between 6,000 and 100,000 units annually to ensure a stable and reliable supply of high-quality and cost-effective used cars. The project is progressing well, and the completion of the Hebei IRC to serve as a solid foundation for Yuxin to gain customer trust and fuel its sustainable business growth in the long term.
spk00: In the construction of the key parts of the supply chain, such as vehicle inspection and preparation, we have also continued to polish. In the expansion of the vehicle, we have established a diversified collection channel, including consumer procurement, auction platform, host company, and retail network. Among them, consumer procurement as an important vehicle channel, the proportion of procurement reached more than 30% in the fourth quarter. Direct purchasing to consumers helps to reduce our purchasing cost. We can also make a better profit for consumers at the sales end.
spk06: In the past few years, we have heavily invested in the refinement of our used card supply chain, especially in retail acquisitions, inspections, and reconditioning. We have established acquisition channels to purchase used cards from individual consumers, auction platforms, auto manufacturers, and car dealerships. Direct purchase from individual consumers accounted for 30% of our total acquired vehicles in the fourth quarter. The increasing proportion of such direct purchase allow us to further reduce our acquisition cost, which will ultimately enable us to offer more competitive pricing to our customers.
spk00: We actively upgraded and optimized our inspection instruments
spk06: and system powered by CHAP Auto. CHAP Auto is our national patent used car inspection system to ensure that our retail vehicles pursue or surpass all national standards. On the reconditioning front, we further streamline workflows and introduce modern techniques. These initiatives help us improve vehicle quality with lower costs through economic upscale under our IRC operations. To maximize its end-to-end supply chain efficiency, we have developed and integrated information systems covering the whole process from vehicle acquisition, inspection, and recondition to sales and after-sales services.
spk00: But with the rapid development of new energy vehicles, Youxin is also actively developing in the field of new energy cars. We are now covering many mainstream new energy car brands, including Future, Ideal, Xiaopeng, Biadi, and Tesla. In anticipation of the rising era of new energy vehicles, Yuxing is proactively expanding its business in this domain. Our Yuxing offerings now cover multiple mainstream and EV brands,
spk06: including Tesla, NIO, C-Auto, cell phone, BYD, and stretch bus. We have proactively built vehicle acquisition channels and developed inspection, reconditioning, and service capabilities especially designed for use in EVs. Targeting on expanding existing services pipe, we are establishing strategic partnerships with any EV manufacturers, suppliers of spare parts, as well as NEE dealerships. With solid strategy and operational initiatives, Youxin is well prepared for the opportunities in the rising NEE market.
spk00: In order to make consumers feel more directly about our products and services, we have completed the upgrade from online sales to warehouse-style and online integrated service model. In 2018, Youxin was the first to launch all online shopping malls in the industry to break the limit of second-hand car transactions. Based on our in-depth understanding of customers' used car purchasing behaviors in China,
spk06: we have upgraded our sales channels from online-only to an army-channel approach. In 2018, we launched the Yuxin Nationalwide Online Shopping Mall, making us the first to offer one-store online cross-region search services in the used car industry in China. After four years of operations, we managed to achieve back-in-class cross-region online transaction capabilities and experiences for our customers. On top of our leading online model, we offer IRCs in Hefei and Xi'an as a type of warehouse superstore. The IRCs enable regional customers to have a direct in-store experience through visiting, selecting, consulting, test driving, and purchasing their favorite parts. 特别是合肥卖场,当前总面积近10万平米,为已知中国最大 的单体自营二手售卖场。
spk00: Bashley.
spk06: The first phase of our first day IRC is currently the largest self-owned used car superstore in China. The IRC has a total floor area of nearly 100,000 square meters and the capacity for 2,500 retail vehicles with compact, mid-sized, and luxury models from 52 brands. Our first day NTI IRC and warehouse superstores have become famous and popular used car shopping destinations. in their respective regions. Both stores have gained leading regional market shares and are still growing. The regional brand recognition and reputation among customers will further strengthen our credibility nationwide and boost our online sales.
spk00: YouXin has become one of the most reliable brands to buy second-hand cars in China. Consumers' satisfaction continues to increase. From January 2022 to March, the customer recommendation value, which is NPS, is 61 points, which is an increase of 45% compared to the same period last year. We carry out a timely summary based on customer feedback, and continue to improve the customer experience from sales to delivery and then to sales. We insist on building the consumer's reputation to achieve high-quality growth.
spk06: Our commitment to providing high-quality useful products and superior customer service is paying off. We are now one of the most trusted used car brands in China. In the fourth quarter, our net promoter score, MPS, increased by 45% year-over-year to 61%, making it the sixth consecutive quarter with MPS improvement. We vigorously analyze and respond to customers' feedback in all aspects, From sales to delivery and after-sales services, we are encouraged by the NPS increase and will remain focused on its further improvement. Yongxin believes that reputation among customers is the ultimate driver of sustainable and high-quality business growth. 二手车行业是国家循环经济的重要组成部分。
spk00: It is important to reduce waste and reduce pollution, and to increase the use rate of social resources. As a leader in the industry, Youxin is actively spreading the green consumption experience of choosing two-wheeled vehicles and choosing a wise life. It is a pioneer in the green low-carbon lifestyle and industry performance reduction. This year, Youxin also released the ESG report for the first time. It is aimed at integrating the sustainable development concept with the operation and business development of the company into a deep fusion to help the high-quality green development of the two-wheeled vehicle industry.
spk06: The used car industry is an integral component of China's circular economy. The healthy circulation of used cars serves to extend the vehicle lifestyle and maximize their residual value. It also plays a critical role in lowering production weight, reducing disposal pollution, and improving resources utilization. As an industry leader, Yuxin takes the concept of environmental protection seriously and acts as a pioneer in energy conservation and emission reduction. In July 2022, we released our inaugural ESG report. The report highlighted how we integrate sustainable development principles into our business planning, IRC design, and construction, and daily operations. You see, it's determined to lead China's used car industry to evolve in the most socially responsible and green direction.
spk00: China's second-hand car market has been in the best development period. China has become the world's largest car storage market. In 2021, China's second-hand car trading volume broke 17 million. The trading volume has reached 10 million, and there is still a great room for growth.
spk06: China's used car market is experiencing its golden age of growth. It is reported that China has become the world's largest auto market measured by vehicle units by 2021. Building on that, China's used car market is already massive with more than 17 million units sold in 2021. It also has tremendous growth potential compared to developed markets.
spk00: From 2019, The country requires the implementation of the 2nd-hand car policy. In 2020, the 2nd-hand car trade tax will be increased from 120 to 1,500 yuan. In 2021, more than 300 cities across the country will implement the electronicization of car documents. The country has been giving policy support to promote the consumption and circulation of 2nd-hand cars. In particular, in July this year, 17 ministries, including the Ministry of Commerce, jointly issued a notice on the expansion of car traffic and the consumption of cars. From the main policy of the market, The used car industry has become a key area of focus to state regulators, who have introduced multiple supporting policies in the past four years.
spk06: Notably, in July 2022, the Ministry of Commerce, together with 15 other state departments, published an official notice to stimulate auto circulation and consumption. The notice included comprehensive measures to facilitate first region registration and filing, regulate accounting payments and invoice issuance, and remove restrictions on used car business operations. In 2021, government policies required the digitalization of card documents, and more than 300 cities have implemented electronic title transfer and registration. In 2020, the used card transaction value added tax was reduced from 2% to 0.5%. All these policies and initiatives demonstrated yet regulated strong guidance to build a unified national market for used card transactions. Additionally, the policies also focus on promoting strong brands, large-scale, and compliant US truck companies in the industry. We have been deeply rooted in the industry for over 11 years as a Yucca e-commerce company with nationwide coverage and regional market penetration. We believe that Yuxin as a well-branded, super large-scale, highly socially responsible company in the Yucca industry will fly well when the tailwind arrives.
spk00: Our new year has begun. We will focus on the following three aspects of work. First, continue to improve brand influence and customer reputation, increase sales and market share, so that more consumers can experience our products and services. Second, on the existing basis, continue to strengthen the two-fold industry chain of information management and construction, and create a digital work system with a single car as a core. In the new fiscal year 2023, Yuxin will focus on the following three priorities. First,
spk06: to significantly extend our brand recognition and credibility among customers to boost sales and market shares. We aim to gain more customers by enabling them to experience our products and services. Second, to further upgrade the end-to-end supply chain information system, AI pricing system, intelligent inventory management system, etc. at an individual vehicle level. Third, to continuously optimize operational efficiency to control cost and expense expenses with the ultimate target of possibility in the mid to long term.
spk00: Once again,
spk06: I would like to thank our customers for their trust and every member in our Yuxin family for their hard work. I'm so grateful for the strong support from our shareholders and investors. We will stay committed and focus to shape industry in the new era and deliver sustainable returns to our shareholders on our journey to high-quality growth.
spk00: Next, please introduce the financial situation of this system.
spk06: With that, I'd like to turn the call over to our CFO to walk you through the financial results.
spk03: John, please. Okay. Thanks, CK. Hello, everyone. Thank you all for joining us today. I will walk you through some key financial results in the quarter and in March 31, 2022, as well as the full fiscal year 2022. During the fourth quarter, despite the COVID and off-season impacts CK shared earlier, our total revenues or RMB $505.7 million, pretty much the same level compared to the third quarter. Hence the retail sales volume ramp up in the Hefei IRC. Specifically, our retail revenue is RMB $319 million, representing a 37% quarter-over-quarter growth and 156% year-over-year, driven by higher retail transactions. As for the overall fiscal year 2022, it was our first full year of operation under the inventory owning model. Driven by our continued sales growth momentum, our total transaction volume was 15,755 units, representing a 49% year-over-year growth, and our total full-year revenues were around 1.6 billion, representing a 150% year-over-year growth. When we look at the gross margin in the first quarter, as you can see in the first three quarters, our gross margin was stable at around 4%. However, in the fourth quarter, it fell to 0.2%. The reason was that we experienced a key IRC lockdown for more than one month due to COVID. And February was the traditional Chinese New Year off-season, so used car transactions were almost frozen for a month. So we have to proactively restructure our inventories and accelerate the sales of the relatively long-age vehicles through pricing adjustments. The inventory management actions compressed our gross margin in the fourth quarter. As a result, the overall gross margin for fiscal year 2022 was 2.9%. We did observe, after the Chinese New Year, a clear upward trend in our retail sales, and we do expect our gross margin to gradually return to a reasonable level in the following quarters. We continued our stringent expense management in the fourth quarter. The total operating expenses were RMB 119.4 million, relatively stable compared with the third quarter. As I repeated every time, The culture of reducing unnecessary spending is already one of the company's culture in the machine. We have been proactively seeking opportunities to optimize organizations, increase operation efficiency, and promote cost-effective technology. As a result, our fiscal year 2022 operating expenses were RMB $409 million, representing a 48% decrease year over year. Consequently, the non-GAAP-adjusted loss from continuing operation was RMB 96.1 million in the fourth quarter compared with RMB 68.6 million in the third quarter. The full fiscal year non-GAAP-adjusted loss from continuing operation was RMB 96.1 million. It was substantially narrowed by 56% compared with fiscal year 2021. Other than the financial results, I would like to share some of our recent developments in financing and liabilities restructuring. Last year, we announced the U.S. dollar $315 million investment by Neo Capital and Jury Capital. And by now, we have received U.S. dollar $150 million from the investment. The remaining U.S. dollar $165 million is in the form of a warrant. the investors still retain a right to exercise the warrants with a total amount of up to US dollar 165 million. On top of that, yesterday, we closed an additional US dollar 100 million follow-on investment from Neo Capital. In addition, we also recently completed the issuance of ordinary shares to 5A.com in exchange for the full release of the company's US dollar 63 million obligations under the convertible notes issued to 5A.com. We believe closing of these transactions allow us to substantially streamline our financial resources and then devote more focus to execution of our long-term growth strategy. We plan to accelerate the pace of our expansion strengthen our reconditioning capabilities, and further digitize our supply chain. We are confident that our investment in these areas will enable us to provide customers with more vehicle selections and a better one-stop, hazard-free shopping experience. The detailed financial statements were published in our early release online, so I will not repeat the numbers here at this time, but I do want to emphasize one thing. In the fourth quarter, similar to the past quarters, there was a fair value impact related to our financing transactions. The share price was US dollar 1.02 per ADS on March 31st, 2022, and on January 3rd, 2022, the share price was US dollar 1.57 per ADN. So this resulted in a non-cash gain of RMB 476.8 million from fair value change of the warranted liabilities and forward liabilities on our balance sheet. I would like to emphasize again that this fair value impact was a non-cash gain and not a result of our operations. In regard to the first quarter guidance in fiscal year 2023, we currently expect our total revenues to be in the range of RMB 600 million to 620 million for the three months ended June 30, 2022. Please note that this forecast reflects our current preliminary views on the market and operational conditions, which are subject to changes. So this concludes our prepared remarks. Thanks, everyone. And operator, we are ready to receive the questions.
spk02: We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. When asking a question, please state your question in Chinese first, then repeat them in English for the convenience of everyone on the call. At this time, we will pause momentarily to assemble our roster. Our first question will come from Carl with American Trust Investment Services. You may now go ahead.
spk01: Good evening, gentlemen. Congratulations on your outstanding financial performance in light of the circumstances with COVID. I am a managing director at American Trust, and I have coverage in China. I have two questions. The first is, through our news media reports in the United States, we know that China continues to keep COVID zero policy. That restricts travel and lockdowns the potential risk areas. What's the economic outlook and consumer sentiment? Will this affect Unix business going forward?
spk00: Thank you, Cal. Let's translate the question. Cal's question is, I didn't see the news report.
spk06: China continues to maintain a strict epidemic prevention policy. How is the economic progress and the consumer's mood? Will this affect the new business? We will answer you in Chinese.
spk00: The epidemic prevention policy will still affect everyone, especially the city, because it affects people's travel. First of all, we will definitely cooperate with the government's epidemic prevention policy.
spk06: The implementation of COVID-19 measures will still have an impact. Citywide lockdowns in particular will limit people's activities. We will certainly comply with all the government's COVID prevention policies.
spk00: In terms of our financial results, the lockdown in Xi'an disrupted operations of our Xi'an IRC, which in turn affected our financial performance.
spk06: The closure of our CNIRC during the lockdown peppered our overall south, slowed our inventory turnover, and compressed our growth margin in the fourth quarter of this year.
spk00: However, these impacts are temporary.
spk06: Since June, our business has fully recovered after China started to ease COVID restrictions and lifted Shanghai's lockdown. That's the answer to this question. Thank you.
spk01: Great. Thank you very much. The second question is, can you break down your vehicle acquisition by source, and what are the differences between these channels in terms of cost average prices, and turnover. Okay.
spk00: Our acquisition sources mainly include individual car owners, auction companies, and dealerships of new cars. These dealerships partner with us when their customers trade in their vehicles. Regarding the cost, our acquisition cost only consists of the vehicle's purchase price, and there are no other causes in the acquisition process. Also, there's no material difference
spk06: in the averaging selling price and turnover between these acquisition sources.
spk00: However, purchasing directly from individual car owners
spk06: simplifies the acquisition process, so generating a higher growth margin. As such, we highly value individual car owners as an acquisition source, which contributed to over 30% of our total acquisitions compared to 15% in the middle of the last year. We expect this percentage to continue climbing going forward. That's the answer to the question. Thank you.
spk01: Thank you all. Thank you so much.
spk02: Our next question will come from Faye Dye with TF Securities. You may now go ahead.
spk05: Okay. Good evening. I'm Faye Dye from TF Securities. May I ask, in 2022, what are the advantages of the online platform that the company uses to purchase vehicles? From the purchase of vehicles to the delivery of vehicles, what is the current layout of the company? Repeat my question in English. In 2022, what optimizations has the company made on the user-side online platform? What is the company's current arrangement from purchase to delivery of the car? What technical upgrading and optimization and has been made this year compared to 2021 about the online car buying platform what kind of competitive advantages or barriers does the company have thank you okay
spk00: Um,
spk06: We implemented several upgrades to the online purchase of our vehicle. One of these upgrades is the complete self-service online order and purchase process for customers. This process does not require any salesman intervention and allows the customer to make a more independent and direct decision. They can then complete the transaction smoothly.
spk00: Another example is the outweighed online display of our vehicle details.
spk06: Now, customers can view each car with its specific condition and rating, as well as the vehicle condition scores that were implemented under the national standard. The display of these indicators enable customers to make a more comprehensive assessment of the vehicles online to form a purchase decision.
spk00: In terms of the logistics and the network,
spk06: Our delivery network now covers 20 cities nationwide. We also plan to gradually expand our network in the future.
spk00: The third one is the advantages. First of all, our vehicle quality is higher, because we support all the vehicles. And this is in line with the high-end standard of the standard of quality. So now we have the lowest return rate in the industry. First, our vehicles have higher qualities as we have the highest standard for the reconditioning, so we can have the lowest return rate in the industry.
spk06: Secondly, after years of effort, we have built a robust system for vehicle delivery and local ownership registration. Our delivery efficiency is very high. Usually, our customers can receive their vehicles around 72 hours after they place the order. Thirdly, all of our vehicles are self-owned, so we have better control of the vehicles and the transactions. That answers the question. Thank you.
spk00: Thank you.
spk02: Our next question will come from Ying Ying from China Securities. You may now go ahead.
spk04: Hello, I'm Zhou Ping from China Securities. I have a few questions for you. The question is, we can see that the traffic of electric vehicles has changed dramatically. Thank you, Yingying, from China Security. Given that electric vehicles
spk06: electric vehicle sales have caught up with gasoline cars. Can you share more about your expansion plans in this market? Are the margins different from gasoline cars? And how many new energy vehicles do your customers have in your inventory?
spk00: Electric vehicles are now our key investment and preparation products. Due to the huge difference between the structure of the electric vehicle and the combustion engine, in the past, MEV is a critical segment that we are focusing on and investing in. As you know, MEV and gasoline vehicles are viewed very differently.
spk06: This is why in the past few months, we have established separate systems and teams for the testing and maintaining of used Use new vehicles.
spk00: Now, in general, the development of second-hand electric vehicles in China still needs some time. The main reason is that the development of the new electric vehicle industry is actually more related to the maintenance of new electric vehicles. So, because the new car is sold, it will take some time for it to become a second-hand car. By the end of 2021, To the market perspective, China's used EV market still needs time to develop. The growth of the used EV market is directly tied to the overall ownership. At the end of 2021, China's passenger car ownership reached $300 million, while
spk06: and EV ownership was around 8 million, or less than 3% of the total.
spk00: From our current storage structure, the total storage capacity of our new cars is about 5% to 6%. In terms of business, our electric cars are actually very popular. We have also seen that new cars have better sales trends in the storage structure. In addition, our private brands, such as Tesla,蔚来, Xiaopeng, Diage, and Li Xiang, are the mainstream new car brands that consumers prefer.
spk06: As of now, MEV accounted for 5% to 6% of our inventory. From a business perspective, our MEV offerings are quite popular among customers. MEV in our inventory also has a stronger sales performance. Additionally, we mainly cover mainstream MEV brands. They are welcomed by consumers, such as Tesla, NIO, Samsung, BRD, and Viotto.
spk00: Thank you for your question.
spk02: Thank you. We have reached the end of question and answer session. I would like to hand the conference back over to Joyce for closing remarks.
spk06: Thank you for everyone joining our call today. We look forward to seeing you next time. Bye-bye.
spk03: Bye-bye. Thank you, everyone.
spk02: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
Disclaimer