Coming into the company's third-quarter earnings report, Uxin (NASDAQ: UXIN) shareholders were looking for some good news to reverse the stock's post-IPO slide. Before the release, shares of the Chinese online used-car platform had dropped 43% since its debut in June. The company seemed to get swept up in broader negativity on Chinese stocks amid ongoing trade tensions between the U.S. and China and concerns about the slowing Chinese economy.
Uxin turned in another strong quarter of top-line growth, beating its own guidance, and took steps toward profitability, though investors seemed disappointed in the results as shares were down about 9% at 1 p.m. EST Tuesday. Let's take a closer look at the earnings report.
Uxin: The raw numbers
|Metric||Q3 2018||Q3 2017||Year-Over-Year Change|
|Revenue||$125.5 million||$78.7 million||59.6%|
|Net income from continuing operations (loss)||($86.3 million)||($110.3 million)||N/A|
|Diluted earnings per share*||($0.10)||($3.36)||N/A|
Data source: Uxin Limited. *Share count increased from 49.3 million to 877.2 million
What happened this quarter
Uxin, the leading online used-car platform in China, put up another round of impressive top-line growth, beating its own guidance of $117 million to $122 million. Transaction volume increased 19.7% to 221,309 vehicles, though that growth came entirely from the "2C" business, while "2B" transactions declined.
Uxin is divided into two segments: Uxin Used Car, or 2C, which facilitates used-car sales to consumers; and Uxin Auction, or 2B, which handles used-car sales to businesses.
Last quarter, the company announced a strategic change in its 2B business, saying it would no longer provide services like inspections for consumers selling on its 2B platform, instead connecting them with dealers who can provide such services. As a result, transaction volume in its 2B segment fell in the third quarter by 8.5% and gross merchandise volume (GMV) declined 14.8%.
Its 2C business remained strong, with transactions up 53.2% and GMV rising 34.5%. Loan facilitation revenue, which now makes up more than half of total revenue, nearly doubled, increasing 96.4% to $68.6 million, and its loan delinquency rate improved by 10 basis points to 1.43%.
What management had to say
Commenting on the company's performance in the quarter, CEO Kun Dai said:
Our marketplace approach and nationwide service network enabled us to make more than 290,000 cars available to consumers on the Uxin platform as of Sept. 30, 2018. Our unique ability to facilitate cross-regional transactions is creating an unprecedented selection of used cars for consumers. In addition, the Uxin platform optimizes prices for consumers by driving transaction efficiency and mitigating information asymmetry. With our determination to enhance value propositions for our users, we believe we can expand our market leadership in China's underserved used-car market.
CFO Zhen Zeng touted the company's financials:
We achieved robust revenue growth in the third quarter of 2018, driven by 108.7% year-on-year growth of our 2C business. In addition, we continued to improve operating efficiency, particularly in our sales and marketing efforts. With Uxin's growing brand awareness and higher conversion rate, our sales and marketing expenses as a percentage of total revenues decreased to 87.5%, compared to 100% in the same period last year and 91.6% in the second quarter of 2018. Looking forward, we are confident that our focus on growing our 2C platform and improving operating efficiency will enable us to build a sustainable business over the long term.
For the fourth quarter, Uxin expects revenue of $146.9 million to $152.7 million, up from $108.1 million a year ago, representing 38.6% growth at the midpoint. That forecast signals that Uxin's revenue growth is slowing considerably after surging 80% in the second quarter, though that shift may be a result of the company's transition in the 2B business.
Growth in the 2C segment remains strong, and the company is taking clear steps toward profitability. Meanwhile, the natural growth in both the Chinese used-car market and e-commerce should provide a natural long-term tailwind for Uxin.
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