Business context and reporting period
Uxin Limited operates an online used-car platform in China. This is a transition Form 20-F, not a report for 2019 Q4: it covers the three months from January 1 to March 31, 2020, and the condensed financial statements for that period are unaudited. The company changed its fiscal year-end from December 31 to March 31; its next fiscal year ends March 31, 2021.
After divestitures, Uxin’s continuing business is primarily cross-regional 2C used-car transactions, with commission and value-added service revenue. The filing presents 2B and loan-facilitation results as discontinued operations. The salvage-car business was sold in January 2020; the 2B sale to 58.com and the Golden Pacer loan-facilitation transaction closed in April 2020, after the reporting date.
Key financial metrics
| Metric | Three months ended March 31, 2020 | Comparable period |
|---|---|---|
| Revenue | RMB103.9 million | RMB335.8 million in Q1 2019; down 69.1% |
| 2C transactions / GMV | 6,584 / RMB723.3 million | 20,647 / RMB2.3 billion in Q1 2019; both down 68.1% |
| 2C take rate | 12.2% | 12.5% in Q1 2019 |
| Gross profit (loss) / margin | RMB(6.9) million / (6.6%) | RMB179.4 million / 53.4% in Q1 2019 |
| Net loss from continuing operations | RMB2,034.4 million | RMB295.5 million in Q1 2019 |
| Total net loss, including discontinued operations | RMB2,489.6 million | RMB284.984 million in Q1 2019 |
| Net cash used in operating activities | RMB411.3 million | RMB188.1 million in Q1 2019 |
The principal driver of the continuing-operations loss was a RMB1,939.6 million credit-loss provision tied to historically facilitated loans and the effects of COVID-19. The filing also records RMB56.0 million of other operating income and a RMB179.0 million gain on the salvage-business disposal. No EBITDA figure is provided.
At March 31, 2020, cash and cash equivalents were RMB342.5 million; restricted cash was RMB454.9 million, for total cash, cash equivalents and restricted cash of RMB797.4 million. Current assets were RMB2.239 billion versus current liabilities of RMB3.076 billion. Total assets were RMB2.647 billion, total liabilities RMB4.992 billion, and shareholders’ equity was negative RMB2.345 billion.
Reported borrowings were RMB353.7 million, including RMB119.1 million current. Convertible notes totaled RMB2.055 billion, including RMB375.4 million current. Total contractual obligations were RMB2.789 billion, including RMB559.0 million due in less than one year. Operating cash use and cash-balance figures include discontinued operations where applicable.
Material changes versus the prior comparable period
- Revenue fell 69.1%, primarily as COVID-19 closures and logistics and title-transfer disruptions reduced 2C transaction volume and GMV.
- Gross margin swung from 53.4% to negative 6.6%: cost of revenue declined only 29.2%, substantially less than the revenue decline.
- The continuing-operations net loss increased from RMB295.5 million to RMB2.034 billion, mainly due to the credit-loss provision. Uxin adopted the expected-credit-loss standard on January 1, 2020; adoption reduced opening accumulated equity by RMB319.0 million.
- Operating cash use increased from RMB188.1 million to RMB411.3 million. Cash, cash equivalents and restricted cash declined from RMB1.210 billion at December 31, 2019 to RMB797.4 million at March 31, 2020.
- The 2C take rate eased to 12.2% from 12.5%; the commission rate remained 6.6%, while the value-added-service take rate declined to 5.6% from 6.0%.
For context, FY2019 revenue was RMB1.588 billion, up 140.9% from 2018; continuing-operations net loss was RMB1.328 billion, compared with RMB1.352 billion in 2018. These full-year figures are not directly comparable to the three-month transition period.
Outlook, risks, contingencies and unusual items
- COVID-19 and outlook: Management said Q1 operations were materially adversely affected and expected financial condition, results and cash flows for the first half of 2020 to be materially adversely affected, with possible effects beyond that period. It cited gradual market recovery from April but emphasized substantial uncertainty. No quantified revenue or earnings guidance is provided.
- Liquidity and going concern: The filing says accumulated losses, operating cash use, pandemic disruption and financing obligations could cast substantial doubt on the company’s ability to continue as a going concern. Management said actions had alleviated that doubt and expected cash, divestiture proceeds and operating cash flows to cover working-capital needs for the next 12 months.
- Guarantee and credit exposure: At March 31, guarantee liabilities were RMB910.9 million. The maximum potential future payments associated with underlying facilitated loans were RMB12.9 billion. The company said remaining guarantees related to loans not transferred to Golden Pacer.
- Subsequent financing and settlement events: In July 2020, Uxin agreed to settle remaining WeBank guarantee liabilities for RMB372 million in installments through 2025, capped at RMB84 million in any year, subject to meeting the schedule. PacificBridge holders converted their 2020 and 2021 notes into 136.3 million Class A shares after conversion prices were reset to 78% of the applicable 30-trading-day volume-weighted average price, creating dilution risk.
- Divestitures: The salvage-car disposal generated a RMB179.0 million accounting gain. The 2B sale for gross consideration of US$105 million and the Golden Pacer transaction closed after March 31, 2020. A RMB407.7 million impairment of net assets transferred was recorded in discontinued operations during Q1.
- Legal matters: Two putative securities class actions relating to the 2018 IPO remained pending; the filing says no loss accrual was recorded because potential losses could not be reasonably estimated. A separate competitor dispute was settled in June 2020 for RMB6.6 million, accrued at March 31.
- Other risks: Uxin operates through PRC subsidiaries and variable interest entities (VIEs); the filing notes uncertainty over PRC regulation and enforceability of VIE arrangements. Cash remittances and distributions from China are also subject to regulatory restrictions.
Investor facts to verify
- Confirm the scale, assumptions and subsequent performance of the RMB1.940 billion Q1 credit-loss provision, including recoveries on guaranteed loans and collateral.
- Verify the timing and amounts of proceeds, liabilities transferred and remaining exposures from the Golden Pacer, 58.com and Boche divestitures.
- Assess near-term liquidity against operating cash burn, restricted cash, current maturities and convertible-note obligations, including the effect of the July 2020 note conversions and resulting dilution.
- Track whether the WeBank settlement installments are paid as agreed and how much guarantee exposure remains with other financing partners.
- Monitor post-pandemic 2C transaction volumes, GMV, gross margin and take rate; Q1 results show steep volume contraction and negative gross margin.
- Review developments in the IPO-related litigation and PRC regulatory risks affecting VIE control and access to subsidiary cash.