Uxin Limited

Ladies and gentlemen, thank you for standing by and welcome to USHN's earnings conference call for the quarter ended June 30, 2025. 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 is being recorded. If you have any objections, you may disconnect at this time. I would now like to turn the call over to your host for today, Today's conference call, Ms. Allie Wong. Please go ahead, Allie.

Thank you, operator. Hello, everyone. Welcome to Houston's earnings conference call for the second quarter ended June 30th, 2025. On the call with me today, we have BK, our founder and CEO, and John Lin, our CFO. BK 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 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, DK. Please go ahead, sir.

Hello everyone and thank you for joining our earnings conference call.

To ensure smooth communication with both our domestic and international investors, I will share our latest updates in both Chinese and English.

We have achieved very good business progress in the second quarter. The retail sales reached 10,385 units, which increased by 154% in the same period last year. The sales increased by 140% in five consecutive seasons. The performance of the business proved that the business model has a potential for continuous high-speed growth. The storage cycle speed of the vehicle lasted for about 30 days. In the second quarter of 2025, we delivered another strong set of results.

Retail transaction volume reached 10,385 units, up 154% year-over-year. This marks the fifth consecutive quarter with year-over-year growth above 140%. underscoring the strong and sustainable growth potential of our model. Inventory turnover also remained healthy at roughly 30 days, reflecting our efficient operations and a balanced inventory structure. On customer satisfaction, our net promoter score was 65th quarter, maintaining the highest level in the industry for five consecutive quarters.

We established a standardized management operating system in Hefei, Xi'an, in the past few years. to speed up the operation of our new store. Since the opening of the new store in February this year, the sales and management of the business have exceeded expectations. The one-stop shopping experience provided by the U-shaped large store model is very popular with local consumers. From the beginning of the 250 retail storage scale in March, the Wuhan store has maintained a sales cycle of about 30 days. The retail sales in September are expected to be close to 1,400, and are still in the process of rising. Over the past few years, we have built a standardized management and operating system in our flagship super stores in Xi'an and Hefei,

This framework enables new locations to ramp quickly and efficiently. Our Wuhan Superstore, which opened at the end of February, has performed well above expectations in both business ramp-up and operational maturity. The one-stop used car experience offered by our large-scale Superstore model has been warmly received by local consumers Starting with an initial retail inventory of 250 units in March, the Wuhan store has consistently sustained approximately 30-day inventory turnovers. By September, the store's retail transaction volume is expected to reach around 1,400 as its momentum continues to build. On the sourcing side, our capabilities have been thoroughly tested and proven. We have integrated diverse vehicle acquisition channels, improved pricing precision, and ensure smooth operations at our reconditioning facilities. Together, these strengths provide a stable, sufficient vehicle supply. As such, profitability at the Wuhan store is improving quickly alongside its rapid sales growth. Compared with our super stores in Xi'an and Hefei, start-up losses in Wuhan have been meaningfully smaller.

At the same time, through the exhibition of the market in Wuhan, we have further strengthened the ability of the machine operation to complete the management of the market. First of all, it is a real-time improvement of various digital management systems and capabilities. Combining more real-time trading data obtained by actual businesses to optimize pricing, preparation, customers, and so on, to adapt to the new market environment faster. Second, continuous progress in the business service process ensures that our customer technology is quickly expanded, while still being able to well realize the basic business concept of customer value. At the same time, the ramp up of our Wuhan Superstore has also enabled us to further improve our operational precision and enhance our Superstore model.

First, we have continued to improve the capabilities of our digital management system, drawing on real transaction data from daily operations to fine-tune our in-house engines for pricing, reconditioning, and customer acquisition, allowing us to adapt more swiftly to evolving market conditions. Second, we're continuously optimizing service workflows to ensure that even as our customer base expands rapidly, we remain firmly rooted in our core operating philosophy of delivering customer value. Third, we have also been refining our talent development framework to help new store employees build professional competence and service capabilities more quickly, supporting rapid business growth while preparing a solid talent pipeline for future expansion. Additionally, we are actively exploring the integration of AI technologies into our business operations to unlock greater efficiency and scalability over time.

The layout of the new market is also steadily advancing according to the plan. Yuxing Zhengzhou Market has officially opened on September 27. The market's planned building area is about 150,000 square meters. It can accommodate a maximum of about 5,000 vehicles. It is the fourth major market to open after Xi'an, Hefei and Wuhan in the world. As a transportation hub city in the central part of China, Zhengzhou has more than 13 million people living in Changzhou, and 5 million cars. The second-hand car trading scale and activity level are unprecedented. Our new store extension is progressing steadily as planned.

On September 27, we officially opened our Zhengzhou Superstore. With a planned floor area of approximately 150,000 square meters, The facility can accommodate up to 5,000 vehicles on display and for sale. This is our fourth large-scale superstore, following Xi'an, Hefei, and Wuhan. Zhengzhou is a major transportation hub in central China, with a resident population of more than 13 million and over 5 million registered vehicles. The city ranks among the top 10 nationwide in used car transaction scale and activity, making it an ideal location for a large-scale superstore. With this opening, we can serve more consumers in the region with high-quality vehicles and professional services, while significantly strengthening our market presence in Hunan Province.

In the past few years, the Chinese second-hand car industry has been greatly affected by the price gap in the new car market. But we are glad to see that with the launch of a series of industry-led companies in the Chinese government, the competition in the new car market has become more and more regular, and the price competition has come to a standstill. Wuhan's sales have also entered a stage of increased labor by six months. Looking at the industry, China's used car market has been heavily affected in recent years by aggressive price competition in the new car segment.

We are encouraged that following a series of policy guidelines introduced by the Chinese government, competition in the new card market has moderated and the destructive price war has effectively ended. After six months of operation, our Wuhan Superstore has entered a phase of margin improvement. Looking ahead to the third quarter, we expect our retail transaction volume to remain on a strong growth trajectory with year-over-year growth of over 120% and a significant improvement in profitability. Based on the momentum across the first three quarters, we anticipate our full-year 2025 retail transaction volume growth to reach approximately 130% year-over-year.

That's all for today. Next, our CFO, John, will show you the financial situation. John, please.

With that, I will turn the call over to our CFO to walk you through the financial results. John, please.

Okay. Thank you, DK. Hello, everyone. Since there is an international and domestic investor meeting, we will use Chinese and English to share the company's performance.

Thank you, DK. Hello, everyone. Since we have both domestic and international investors participating today, we will continue to present the company's performance in both Chinese and English to better communicate with all of you. In the second quarter, our retail transaction volume reached 10,385 units representing a 154% increase year-over-year and a 38% increase quarter-over-quarter. demonstrating that our retail business remains firmly on a path of rapid growth.

本季度的零售收入总额是6.1亿人民币, 同比增长87%,晚比增长31%。 零售车辆的平均售价ASP是5.9万元, 上个季度是6.2万元,去年同期为7.9万元。 那销量大幅增长,受到了车价下降, Retail revenue for the quarter totaled 610 million RMB, up 87% year over year, and 31% quarter over quarter.

The average selling price, or ASP, for retail vehicles was 59,000 RMB. compared to 62,000 RMB in the prior quarter and 79,000 RMB in the same period last year. While ASP declined as we shifted toward a more affordable inventory mix, the strong growth in transaction volume more than offset the pricing impact and drove our overall revenue extension. Our current inventory structure is well aligned with mainstream consumer demand, and we believe pricing has now stabilized at a rational level As such, we expect ASP to remain relatively steady in the near term.

车辆批售方面,二季度的批售销量为1,221台, 同比下降19%,环比增长70% 批售总收入是2,990万元 综合零售和批售,二季度的总收入是6.58亿人民币, 同比增长64%,环比增长31%

Turning to our wholesale business, our wholesale transaction volume was 1,221 units in the second quarter, representing a 19% decrease year over year, but a 70% increase quarter over quarter. Total wholesale revenue was 29.9 million RMB. Combining both retail and wholesale, total revenue for the quarter reached 658 million RMB. representing a 64% increase year-over-year and a 31% increase quarter-over-quarter.

本季度毛利率为5.2%, 较去年同期的6.4%下降1.2个百分点, 那较一季度的7%下降1.8个百分点。 这主要是由于新车市场的价格战 挤压了二手车市场整体的利润水平。 and the market in Wuhan, which opened in February this year, is still in the initial stage of operation, and the interest rate is in a gradual climb. The impact of these two factors will not last until the third quarter. We will see the interest rate rebound to about 7.5% in the third quarter.

Gross margin for the quarter was 5.2%, down 1.2 percentage points from 6.4% a year ago, and down 1.8 percentage points from 7% in the prior quarter. This decline was primarily due to the price war in the new car segment, which has exerted margin pressure on the used car market, as well as the early stage ramp-up of our Wuhan Superstore, which opened in February and is still in the process of scaling its profitability. However, we do not expect these factors to impact growth margin in the third quarter, and we anticipate seeing a rebound to around 7.5%.

The increase in operating expenses this quarter was primarily related to the initial ramp-up of our Wuhan Superstore, including investments in staffing and infrastructure.

As a result, our adjusted EBITDA loss for the quarter was 16.5 million RMB, representing a substantial 51% reduction year over year.

展望2025年三季度, 我们预期零售销量会在13,500台到14,000台, 年比年同比增长会接近130%。 Looking ahead to the third quarter of 2025, we expect retail transaction volume to be in the range of 13,500 to 14,000 units.

representing year-over-year growth of over 130%. Total revenue is expected to be between 830 million RMB and 860 million RMB, with growth margin recovering to approximately 7.5%.

That concludes our prepared remarks for today.

Thank you, everyone. Operator, we're now ready to begin the Q&A session.

Thank you, and we will now begin the question and answer session. To ask a question, you may press star, then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then 2. At this time, we will pause for a moment to assemble our roster. And our first question today will come from Fei Dai of TF Securities. Please go ahead.

Hello, DK. Hello, DK. Congratulations on the company's strong sales momentum and continued high growth trajectory. With new superstars opening at such rapid pace, how do you balance short-term profitability pressures with your expansion needs? Will you need additional financing?

Thank you. Thank you for your question.

Let me take this one.

Okay.

The rapid roll-out and ramp-up of our new superstore significantly strengthen our market presence in the cities where we expand and also help us build out a nationwide sales network. This carries major strategic importance for us.

As for the balance of profit and expansion speed, first of all, I would like to say that we will definitely not continue to expand. All new retail industries will carry out a detailed business and financial planning. Now I'm balancing profitability with extension fees.

I want to emphasize that we will never pursue extension blindly. Every new superstore is carefully planned both from a business and financial perspective. That said, once a new store begins operations, there will be some short-term profitability pressure. To mitigate this, we are focused on raising the level of standardization and high-quality replication across stores. By further upgrading our digital management systems and improving organizational efficiency,

we can reduce early stage cost pressure and losses and accelerate the time to break even. under a mature operating system, a new market needs about two to three years to mature from opening to profit balance. Every mature market can support a new market opening every year. Because we don't have many markets in the mature period, in the next two to three years, we will need to support the rapid expansion of the new market through small and fast funds.

From a financial perspective, opening a new superstore requires about $8 to $10 million, of which roughly $2 million is allocated to factory equipment and store preparation, with the rest mainly for inventory buildup. Under our current operating model, it typically takes two to three years for a new superstore to reach break-even and then maturity. Once mature, each store can generate enough profits to support the launch of another new store. Since our number of mature stores is still limited, we do plan to rely on measured incremental equity financing to support rapid expansion over the next two to three years.

Given that our business has consistently delivered over 100% year-over-year growth and that we are seeing early signs of recovery in capital markets, we are not overly concerned about funding.

We are confident in our ability to raise sufficient capital in line with our expansion plan.

This is my answer to this question. Thank you.

Thank you.

And again, if you would like to ask a question, please press star and then 1. Our next question today will come from Wenjie Dai. of SWS Research. Please go ahead.

Okay. Thank you, Manager Chen. I'm Dai Wenjie, an analyst at Shenzhen Motor Company. First of all, congratulations to the company for achieving such excellent results, especially in a bad environment. I have two questions here. I'd like to ask the first question. Just now, Manager Chen shared in the phone call that the business is doing very well after the opening of the new market in Wuhan. The speed of sales improvement is actually much faster than that of Hebei and Xi'an. The management mentioned earlier that the Wuhan Superstore has really ramped up very successfully, much faster than the Hefei and Xi'an. Could you share what different measures were taken in Wuhan? Thank you.

Sure. Thank you for the question. This is DK.

I'll take this one. In addition to being the CEO of the company, I'm also the general manager of the Wuhan Superstore. So I've personally experienced the entire journey from preparation to selling our first car to achieving today's results.

I think there are three aspects that have promoted the development of Wuhan's business. First of all, digitalization and business management systems have gone through four years of polishing of the original two markets. They are now highly mature and have the ability to reproduce quickly. Digitalized capabilities also have the positive effect of continuous self-degradation. For example, the smart pricing system we are using now, the core of which is actually a large number of real second-hand car trading trading data. Only the cars we buy and sell will really master it. In fact, it is difficult to get it from the outside. With the increase in our trading volume and increasing data acquisition, the accuracy of pricing is also increasing, and the efficiency of car sales will also be higher. Therefore, after accumulating the real trading data training of Xi'an and Hefei, the pricing system is more practical in the actual battle in the Wuhan market.

I'd summarize the reasons in three areas. First, our digital business management system has been refined over more than four years of operations at the Xi'an and Hefei super stores. It is now highly mature and capable of being replicated quickly. These digital capabilities also benefit from a self-reinforcing flywheel effect. Take our intelligence pricing system, for example. It's powered by a vast database of real transaction data, something you can only truly accumulate if you're directly engaged in buying and selling vehicles yourself. The more transactions we do, the more accurate our pricing becomes, which in turn improves efficiency in both sourcing and sales. Thanks to the training on SCIA and HOPE data, this system has adapted very effectively in the Wuhan market.

The second point, the second and the third, I will summarize it. The second and the third, one is the standardization of the business process. The other is the standardization of the organizational system and talent training. The experience of the sales management team is getting richer and richer. Because many people, we have a lot of management teams from Xi'an. So we can reduce some unnecessary mistakes. Our business processes are now fully standardized

and our organizational and talent development systems are increasingly well established. The management team at Wuhan brought rich experience, which helped avoid repeating unnecessary mistakes, thereby accelerating both production and sales execution. At the same time, the talent development cycle continues to shorten. Typically, within one to two years of operation, each superstore is able to develop one to two new management teams to support future extensions.

That's my answer.

We're confident that as we open more super stores, each new location will build upon the proven experience of earlier ones, making operations smoother and more efficient over time.

Thank you for your answer. My second question is, How does management view the competitive landscape in Zhengzhou? Can the success in Wuhan be replicated there and in other new superstars? Thank you.

The competitive environment in Zhengzhou is indeed intense.

There are a number of dealers there with relatively advanced operating practices, and some dealers have inventories of more than 500 vehicles. At the same time, Zhengzhou is a much larger market with a population of over 13 million and more than 5 million registered vehicles, and it's one of the most active used car trading hubs in China.

From the current market situation, we are different from other business models. The positioning is actually very different. Our large-scale model has a richer choice, higher cost-effectiveness, better quality, and more convenience. In terms of shopping experience, we are ahead of traditional car manufacturers. We have done statistics before. Our sales transfer rate of over 40% of 100 groups of power delivery customers. Therefore, we have confidence in our full chain of business models. We have our own differentiated competitive advantage, and we have our own target customer group that is good at serving.

Currently, players in the market adopt different business models and target different positioning. Our Superstore model stands out with broader selection, better value for money, higher quality assurance, and a more convenient one-stop service experience. On the customer side, for every 100 customer groups visiting the store, over 40% results in a purchase. This shows our business model with a strong omni-channel control, offers clear differentiation, and resonates well with our target customers.

We will analyze Zhengzhou's market environment and be fully prepared for competition. The business process and system are mature enough. I am confident that Zhengzhou will also achieve good results. In the future, several industrial cities will be on the top 20 list of the number of cars in China. The market conditions are very good. We are very confident in the success of the Wuhan market and the new market.

We will continue to analyze the Zhengzhou market carefully and prepare thoroughly to compete. With our mature business processes and digital systems, we are confident that Zhengzhou can also achieve strong results. Looking further ahead, the cities we're targeting for expansion are all among the top 20 in China by vehicle ownership, which provides very favorable market conditions. So we are confident that the success of Wuhan can be replicated in Zhengzhou and in our future new super stores.

That's my answer.

Thank you.

At this time, we will conclude our question and answer session. I would like to turn the conference back over to Ali Wong for closing remarks.

Thank you again for joining today's call and for your continued support and use. We look forward to speaking to you again soon in the future.

Okay, bye-bye.

The conference is now concluded. We thank you for attending today's presentation. You may now disconnect your lines.