Uxin Sees the Value in Selling Between Regions

Uxin (NASDAQ: UXIN) shareholders have had a bumpy ride since the fast-growing, China-based, online used-car dealer went public last June. Shares were priced at $9, but today they trade round $2 as macroeconomic worries, slowing growth, and even a short-seller's allegations of fraud have pressured the stock. There have been plenty of wild swings over the past year, including a spike of more than 200% when the company announced a partnership with Alibaba's Taobao marketplace.

Coming into the first-quarter report released Monday, investors were looking for signs that the Uxin growth story remained intact, that the company was continuing to capture the opportunity in the world's largest car market, and that it was taking steps toward profitability. Let's take a look at Uxin's first-quarter numbers.

Uxin results: The raw numbers

Metric Q1 2019 Q1 2018 Change (YOY)
Revenue $149.1 million $96.5 million 54.6%
Net income from continuing operations ($42.3 million) ($124.6 million) N/A
Adjusted diluted earnings per share ($0.04) N/A N/A

What happened with Uxin this quarter?

  • Uxin exceeded its revenue guidance of 900 million to 950 million RMB, with 1.003 billion RMB ($149.1 million) in revenue in the quarter.
  • As the company alluded to in its previous earnings report, Uxin sharpened its focus on cross-regional business, or sales from one region of China to the other. Cross-regional revenue skyrocketed $42.2 million, as the company sees a ripe opportunity in that market. Intra-regional revenue, or revenue within the same region, rose 33.3% to $88.9 million, making up the majority of Uxin's business. Overall, 2C (to consumers) revenue rose 94.9% to $131.1 million.
  • Uxin's dealer-focused 2B (to businesses) segment continued its decline, in line with the company's prioritizing the higher-margin 2C business; 2B revenue declined 36.2% to $10.3 million.
  • On the cost side, Uxin continued to slow its growth in sales and marketing expenses, its biggest line item, which increased 7.5% to 681.2 million RMB, helping to bring the company closer to profitability.
  • As previously announced, the company has formed a strategic partnership with 58.com, a Chinese online advertising company, to work together in areas like traffic and inventory acquisitions, used-car inspections, and data analysis. The company also sold $230 million in convertible notes to a group of investors including 58.com.

What management had to say

Given the explosive growth in the cross-regional category, management not surprisingly touted the opportunity in that segment. CEO Kun Dai said, "The cross-regional business is playing an increasingly integral role in driving the overall growth of our 2C business and, in the first quarter of 2019, cross-regional transactions contributed 26% of total 2C transaction volume and 32% of total 2C revenues, with both percentages being only 1% in the same period last year."

Kun also singled out three initiatives that the company will focus on to drive sustainable growth. He was quoted in the company press release as saying:

Looking ahead

Uxin's guidance for the second quarter was the same as the first quarter -- 900 million to 950 million RMB -- again forecasting a sequential decline in revenue. The company has a track record of topping its own guidance, so that forecast may again prove to be conservative, but it signals that investors should expect growth to moderate in the second quarter. Management had earlier forecast accelerating growth in the second half of the year, leaving room for optimism.

Still, with the robust growth in the cross-regional business and cost controls being implemented in sales and marketing and elsewhere, the company looks set to move closer to profitability during the coming year.

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Jeremy Bowman owns shares of Uxin Ltd. The Motley Fool recommends Uxin Ltd. The Motley Fool has a disclosure policy.