Uxin Limited — Form 20-F summary
Period clarification: The supplied filing is Uxin Limited’s annual report for the fiscal year ended December 31, 2019, filed May 12, 2020—not a 2018 Q4 filing. It does not provide a clear standalone Q4 2018 or Q4 2019 financial summary. Financial statements are prepared under U.S. GAAP; amounts below are RMB unless stated otherwise.
Business context and reporting period
Uxin operated an online used-car platform in China. Its 2019 activities included consumer transactions (2C), business auctions (2B), loan facilitation and salvage-car services. Management had shifted its strategy toward 2C online transactions. After year-end, Uxin completed or agreed to divest its 2C intra-regional and loan-facilitation businesses to Golden Pacer, its salvage-car business to Boche, and its 2B auction business to 58.com. Following these transactions, Uxin expected to focus primarily on 2C cross-regional online used-car transactions.
Key financial metrics
| Metric | FY 2018 | FY 2019 |
|---|---|---|
| Revenue, continuing operations | RMB 659.1 million | RMB 1,588.0 million (US$228.1 million), up 140.9% |
| 2C revenue | RMB 369.6 million | RMB 1,347.4 million, up 264.5% |
| Gross profit / margin | RMB 240.2 million / 36.4% | RMB 898.7 million / 56.6% |
| Net loss, continuing operations | RMB 1,351.8 million | RMB 1,327.7 million (US$190.7 million) |
| Total net loss, including discontinued operations | RMB 1,538.3 million | RMB 1,990.1 million (US$285.9 million) |
| Net cash used in operating activities | RMB 2,281.3 million | RMB 1,194.1 million (US$171.5 million) |
| Cash and cash equivalents at year-end | RMB 801.0 million | RMB 478.2 million (US$68.7 million) |
| Restricted cash at year-end | RMB 1,011.7 million | RMB 707.0 million (US$101.6 million) |
| Total liabilities at year-end | RMB 4,977.7 million | RMB 4,918.0 million |
2019 2C online transactions rose 153.8% to 97,100, and 2C GMV increased 155.3% to RMB 11.3 billion. The 2C take rate rose from 8.4% to 12.0%; commission rate increased from 4.6% to 6.3%, and value-added-service take rate from 3.8% to 5.6%.
Operating expenses remained substantial: sales and marketing was RMB 1,185.0 million, or 74.6% of revenue; research and development was RMB 140.0 million; general and administrative expense was RMB 402.0 million. Guarantee-liability losses were RMB 194.4 million and provision for credit losses was RMB 271.4 million. The company remained loss-making and generated negative operating cash flow.
Material changes versus the prior comparable period
- Revenue and gross margin expanded sharply as 2C online transaction volume and take rates increased. Gross profit rose 274.1% year over year.
- Sales and marketing expense declined 20.4%, and general and administrative expense declined 62.4%, largely reflecting lower share-based compensation. Share-based compensation was RMB 100.3 million in 2019 versus RMB 1,052.0 million in 2018.
- Credit costs worsened: guarantee-liability losses increased from RMB 4.4 million to RMB 194.4 million, while the credit-loss provision rose from RMB 40.6 million to RMB 271.4 million. Management linked deterioration partly to lending and debt-collection regulations introduced in late 2019.
- Continuing-operations net loss improved only modestly, while total net loss increased because discontinued operations recorded a net loss of RMB 662.5 million in 2019.
- Operating cash outflow narrowed, but cash and cash equivalents fell by RMB 322.8 million from year-end 2018. Total cash, cash equivalents and restricted cash also declined.
- Uxin issued convertible notes and repaid earlier notes. Year-end balances included RMB 504.5 million of borrowings and RMB 1,997.4 million of convertible notes.
Outlook, risks, contingencies and unusual items
- Liquidity outlook: Management expected cash, cash equivalents and proceeds from divestitures to fund operating expenses, capital needs and contractual obligations for at least 12 months from issuance of the financial statements. Uxin expected to receive RMB 330 million for the salvage-car business and US$105 million for the 2B business; portions had been received by the filing date. Management said additional capital might still be needed.
- Divestitures and legacy guarantees: Uxin ceased new loan-facilitation guarantee services in late 2019 but retained obligations on certain historically facilitated loans. It transferred XW Bank-related loan assets and liabilities to Golden Pacer and expected to receive 85% of net cash inflows from those transferred assets and liabilities. Remaining exposures included other historical loans and dealer inventory financing.
- COVID-19: Management reported severe first-quarter 2020 disruption from market and dealership closures, logistics constraints and delayed vehicle title transfers. It expected material adverse effects on first-half 2020 results and cash flows, with possible continuing effects. It also expected significant first-quarter 2020 credit-loss and guarantee-liability provisions for historical loans not transferred to Golden Pacer; the amount was not clear in the filing.
- Debt and dilution: Convertible notes included US$230 million of 3.75% notes due in 2024 and US$50 million of higher-interest notes due in 2020 or 2021. Conversion, repayment and refinancing terms merit review. Additional equity financing could dilute shareholders.
- Controls and reporting: Management concluded internal control over financial reporting and disclosure controls were ineffective at December 31, 2019. Two material weaknesses involved insufficient U.S. GAAP/SEC reporting personnel and inadequate documented closing procedures, especially expense cutoff and accruals. The auditor did not attest to internal controls.
- Legal matters: Uxin faced two putative securities class actions related to its 2018 IPO, as well as trademark, unfair-competition and other proceedings. The company reported no accrual for the cited proceedings at year-end and said outcomes or loss ranges could not be reliably estimated.
- Other material risks: The filing highlights PRC regulatory uncertainty around historical guarantees and the VIE structure, customer and service quality risks, competition, data security and privacy, restricted access to cash held in China, and the possibility of PFIC status for U.S. tax purposes in 2019 and likely 2020.
- Unusual item: The board approved a reduction in exercise prices for certain outstanding options in 2019, producing US$4.1 million of incremental compensation cost, of which US$2.1 million was recognized in 2019.
Most important facts for investors to verify
- Confirm the relevant period: this annual filing reports FY 2019; it does not provide standalone Q4 figures.
- Reconcile continuing-operations results with discontinued operations and verify the final accounting and proceeds for each divestiture.
- Assess the amount, collectability and runoff timing of remaining historical guarantee obligations, associated restricted cash and loans recognized after guarantee payments.
- Review the 2020 convertible-note maturities, interest costs, conversion terms and available liquidity, including whether promised divestiture proceeds were received.
- Track the effects of COVID-19 and the new expected-credit-loss standard on subsequent credit provisions, guarantees and cash flows.
- Monitor remediation of the disclosed material weaknesses and any subsequent control findings or financial-statement revisions.
- Check developments in the shareholder lawsuits and PRC regulatory matters, including VIE and financing-guarantee compliance.