Business context and reporting period
Uxin Limited filed this Form 20-F for the fiscal year ended March 31, 2021, prepared under U.S. GAAP. This is an annual report, not a report for 2020 Q4; the company changed its fiscal year-end from December 31 to March 31. Fiscal 2021 therefore covers 12 months, while the prior comparable calendar-year period ended December 31, 2019.
Uxin operates an online used-car business in China. It divested its loan-facilitation and 2C intra-regional businesses, salvage-car business, and 2B auction business during 2020, and shifted in September 2020 to buying and selling its own used-car inventory. The reported results reflect substantial business-model and reporting-perimeter changes.
Financial and operating performance
Amounts below are in RMB millions unless otherwise stated; U.S. dollar equivalents are as reported by the company.
| Metric | Fiscal year ended March 31, 2021 | Prior comparable period / context |
|---|---|---|
| Revenue | 657.4 (US$100.3) | 1,588.0 in calendar 2019; down 58.6% |
| Gross profit (loss) and margin | (16.3); (2.5%) | 898.7; 56.6% in 2019 |
| Loss from continuing operations | (717.0) net of tax | (1,327.7) in 2019 |
| Consolidated net loss | (421.2) | Includes 295.7 income from discontinued operations, principally reflecting divestiture-related gains |
| Net cash used in operating activities | (1,122.3) (US$171.3) | (1,194.1) in 2019 |
| Cash and cash equivalents | 192.6 (US$29.4) | Restricted cash was an additional 41.1 |
| Total assets / liabilities | 1,233.5 / 3,229.4 | Shareholders’ deficit: 1,995.9 |
- Fiscal 2021 revenue included retail vehicle sales of 463.5 and wholesale vehicle sales of 51.2; commission revenue was 41.9 and value-added service revenue 35.2. Vehicle sales became the principal revenue source under the inventory-owning model.
- Vehicle sales volume was 4,334 units: 3,603 retail and 731 wholesale. Online used-car transactions fell 89.9%, from 97,100 in 2019 to 9,835 in fiscal 2021.
- Operating expenses were 782.7, including sales and marketing of 339.0, research and development of 74.1, general and administrative of 277.9, and credit-loss provision of 91.6. Other operating income of 246.3 included 207.8 of guarantee income. Interest expense was 96.0.
- Borrowings were 312.6 and convertible notes were 1,614.0 at year-end. The company also recorded 272.1 in consideration payable to WeBank under its guarantee settlement arrangement. The current-assets deficit relative to current liabilities was approximately 314.3.
Material changes, outlook and risks
- Revenue fell 58.6% and gross margin moved from 56.6% to negative 2.5%. The comparison is not like-for-like: divestitures reduced the business perimeter, and the new inventory model changes revenue recognition from principally service fees to gross vehicle sales and adds vehicle acquisition costs.
- Management attributed the weak performance to business transformation, lower transaction volumes, and the continuing effects of COVID-19. The pandemic also contributed to a very large credit-loss provision in the three months ended March 31, 2020. No specific numerical financial guidance was provided. Management expects credit-loss provisions to decline as legacy loan exposures run off, while anticipating ongoing investment and possible increases in some operating expenses.
- Liquidity remains a significant risk given recurring losses, negative operating cash flow, low unrestricted cash, and substantial liabilities. Management said post-year-end financing, expected cash flows, and supplier-payable waivers alleviated substantial doubt about the company’s ability to continue as a going concern for the next 12 months. After year-end, it received US$100 million in the first closing of a preferred-share financing; additional amounts remained subject to closing conditions. The financing and convertible securities may materially dilute existing shareholders.
- Legacy guarantee obligations remain relevant. At March 31, 2021, the company reported maximum potential future guarantee payments of RMB146.4 million and a WeBank settlement obligation; a subsequent amendment capped the aggregate WeBank payment obligation at RMB324 million. Verify the current payment schedule and remaining exposure.
- The company settled two shareholder class actions in May 2021 for US$9.5 million, of which US$6.5 million was covered by insurance and US$3.0 million was its contribution. Other PRC disputes remained ongoing; the filing did not provide a reliable estimate of possible losses for those matters.
- Management concluded that internal control over financial reporting and disclosure controls were ineffective at March 31, 2021. Identified material weaknesses involved insufficient qualified accounting resources and inadequate documented period-end closing procedures. The auditor gave an unqualified opinion on the financial statements but did not attest to internal-control effectiveness.
- Key structural and regulatory risks include reliance on contractual VIE arrangements in China, evolving PRC rules on data and foreign investment, inventory sourcing and resale risks, competition, and potential U.S. trading restrictions related to auditor inspection.
Important facts for investors to verify
- Whether the inventory-owning model can produce positive unit economics, improve gross margins, and turn inventory quickly without markdowns or impairment.
- Current unrestricted liquidity, cash burn, debt and convertible-note repayment terms, and completion and terms of remaining financing transactions.
- The amount, timing, and collectability of legacy guarantee-related obligations, including the amended WeBank settlement.
- Progress in remediating the disclosed material weaknesses and the reliability of future financial reporting.
- Developments in VIE enforceability, PRC data and listing rules, and PCAOB inspection access that could affect operations or ADS trading.