Uxin achieves 154% retail transaction growth in Q2 2025, expects continued momentum and profitability improvements

OPERATOR - (00:01:57)

Ladies and gentlemen, thank you for standing by and welcome to Uxin'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 and 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. Ali Wong. Please go ahead, Ali.

Ali Wong - Moderator - (00:02:32)

Thank you Operator. Hello everyone. Welcome to Uxin's earnings conference call for the second quarter ended June 30, 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 and 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 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, BK. 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. 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 65 this quarter, maintaining the highest level in the industry for five consecutive quarters.

BK - (00:06:02)

Over the past few years, we have built a standardized management and operating system in our flagship superstores 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 1400 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 ensured 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 superstores in Xi'an and Hefei, startup losses in Wuhan have been meaningfully smaller. 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 extension. Additionally, we are actively exploring the integration of AI technologies into our business operations to unlock greater efficiency and scalability over time. Our new store extension is progressing steadily as planned. On September 27, we officially opened our Cheongzhou Superstore. With a plant 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 Henan Province. Looking at the Industry China's used car market had 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 car market has moderated and the destructive price wars have 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. With that, I will turn the call over to our CFO to walk you through the financial results. John, please. Thank you. BK 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 year over year and a 38% increase quarter over quarter, demonstrating that our retail business remains firmly on a path of rapid growth. 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. 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. 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 gross margin in the third quarter and 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. 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 gross 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 and A session.

OPERATOR - (00:18:37)

Thank you. And we will now begin the question and Answer session. To ask a question, you may press Star then one 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 two. 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.

Fei Dai - Equity Analyst - (00:19:19)

Hello. 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.

John Lin - Chief Financial Officer - (00:20:04)

Thank you for your question. Let me take this one. The rapid rollout 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. Now on balancing profitability with expansion needs. 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. Yeah. From a financial perspective, opening a new superstore requires about eight to $10 million US, of which roughly $2 million is allocated to 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.

OPERATOR - (00:24:10)

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

Wenjie Dai - Equity Analyst - (00:24:53)

The management mentioned earlier that the Wuhan Superstore has ramped up very successfully, much faster than the Hefei and Xi'. An. Could you share what information? differentiation measures were taken in Wuhan. Thank you.

ck - General Manager of Wuhan Superstore - (00:25:28)

Sure. Thank you for the question. This is ck. 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've summarized 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 Superstores. It is now highly mature and capable of being replicated quickly. These digital capabilities also benefit from a self reinforcing slide by wheel effect. Take our intelligent 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 Xi' an and Hubei data, this system has adapted very effectively in the Wuhan market. Second, 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 superstores, each new location will build upon the proven experience of earlier ones, making operations smoother and more efficient over time.

UNKNOWN - (00:29:24)

New Superstar just opened. How does management view the competitive landscape in Zhengzhou? Can the success in Wuhan be replicated there and the other new superstars. Thank you.

ck - General Manager of Wuhan Superstore - (00:30:05)

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 is one of the most active used car trading hubs in China. 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 omnichannel control, offers clear differentiation and resonates well with our target customers. 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 superstores. That's my answer. Thank you.

OPERATOR - (00:32:47)

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.

Ali Wong - Moderator - (00:33:00)

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

OPERATOR - (00:33:16)

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