Business context and reporting period
This is Uxin Limited’s annual Form 20-F for the fiscal year ended March 31, 2022, filed August 1, 2022, not a standalone 2021 Q4 report. The company changed its fiscal year-end to March 31; comparisons below are FY2022 versus FY2021. Financial statements are prepared under U.S. GAAP. Amounts are in RMB millions unless stated otherwise.
Uxin operates a used-car sales platform in China. Since September 2020, it has shifted from a commission-based model to owning and selling vehicle inventory, supported by inspection and reconditioning centers (IRCs) and online and in-store sales.
Financial and operating highlights
| Metric | FY2022 | FY2021 |
|---|---|---|
| Revenue | RMB 1,636.1 million (US$258.1 million) | RMB 657.4 million |
| Gross profit/(loss) | RMB 47.7 million; 2.9% margin | RMB (16.3) million; (2.5)% margin |
| Net loss from continuing operations | RMB 143.2 million (US$22.6 million) | RMB 717.0 million |
| Cash used in operating activities | RMB 845.0 million (US$133.3 million) | RMB 1,122.3 million |
| Cash from/(used in) investing activities | RMB (16.8) million | RMB 443.0 million |
| Cash from financing activities | RMB 764.4 million | RMB 130.3 million |
- Revenue rose 148.9%. Retail vehicle sales were RMB 780.4 million and wholesale sales were RMB 823.5 million; other revenue was RMB 32.3 million. FY2021 still included commission and value-added-service revenue from the prior model.
- Vehicle sales volume was 15,755: 5,211 retail and 10,544 wholesale. Management attributed the high wholesale share partly to inventory capacity constraints and cash-turnover needs.
- Sales and marketing expense fell 34.5% to RMB 222.1 million; R&D fell 51.2% to RMB 36.2 million; and general and administrative expense fell 45.7% to RMB 151.0 million.
- At March 31, 2022, cash and cash equivalents were RMB 128.0 million, restricted cash RMB 8.3 million, and inventory RMB 426.3 million. Current assets were RMB 874.3 million against current liabilities of RMB 1,298.6 million; net current liabilities were RMB 424.3 million.
- Reported debt included RMB 233.0 million of current borrowings and RMB 919.9 million of long-term debt, of which RMB 102.2 million was current. The company also reported RMB 107.6 million of non-current consideration payable to WeBank; further WeBank amounts were included in current payables.
- Total liabilities were RMB 2,234.8 million, total assets RMB 1,251.2 million, and shareholders’ deficit RMB 1,510.1 million.
Material changes versus the prior comparable period
- Gross margin improved by 5.4 percentage points, from (2.5)% to 2.9%, as the inventory-owning model scaled; the company remained loss-making and cash-flow negative.
- Operating cash outflow declined by RMB 277.3 million, but remained substantial. Inventory increased by RMB 372.1 million, a significant use of operating cash.
- Investing cash flow changed from RMB 443.0 million generated to RMB 16.8 million used; FY2021 included divestiture proceeds.
- Financing cash inflow increased to RMB 764.4 million, primarily from senior convertible preferred-share financing.
- Cash, cash equivalents and restricted cash fell to RMB 136.3 million from RMB 233.7 million at the prior year-end.
Outlook, risks, contingencies and unusual items
- Liquidity and going concern: Management said financing proceeds and expected cash flows would cover the next 12 months and that its plans alleviated substantial doubt about continuing as a going concern. The auditor identified this assessment as a critical audit matter. The conclusion depends on expected subscription payments, a third-party borrowing, limited near-term Hefei IRC lease outflows and no significant additional cash needs.
- Funding and obligations: A further US$100 million preferred-share subscription was agreed in June 2022, payable in installments through June 2023; only US$71,400 of par value was received at closing as described in the filing. In July 2022, Uxin also arranged a RMB 290 million loan, due in December 2024, to address a borrowing due in December 2022. Holders retained warrants to buy preferred shares for up to US$165 million, exercisable through January 2023. These funds and warrant exercises are not assured.
- Debt restructuring and dilution: In July 2022, Uxin issued 183.5 million Class A shares to 58.com in exchange for release of obligations under notes and certain historical claims. Preferred shares carry an 8% dividend preference and a 150% liquidation preference, among other rights. Further share issuance could dilute existing holders.
- Unusual earnings items: FY2022 included RMB 186.2 million of net fair-value impact related to preferred-share financing instruments, RMB 82.0 million of other operating income (including gains from waived payables), and only RMB 0.7 million of credit-loss reversal. These items affect comparison with underlying operating performance.
- IRC commitment: Uxin and Hefei planned a jointly funded IRC with total investment of up to RMB 2.5 billion. Uxin expects to lease the facility after completion, creating future rental commitments; the filing does not quantify the eventual rent.
- Controls and audit: The auditor gave an unqualified opinion on the financial statements but concluded internal control over financial reporting was ineffective because of insufficient accounting staff and U.S. GAAP/SEC reporting expertise. Management had not fully remediated this material weakness.
- China and market risks: COVID-19 lockdowns disrupted business, including the Xi’an IRC in December 2021. Other key risks include competition, inventory sourcing and resale, data and cybersecurity regulation, PRC regulatory uncertainty, and potential U.S. trading restrictions under the HFCAA if the auditor cannot be inspected by the PCAOB.
- Corporate structure: The former VIE contractual arrangements were terminated in March 2022 and the former VIEs became wholly owned subsidiaries. The filing says their historical revenue contribution was immaterial, but notes uncertainty around PRC regulatory interpretation and historical reporting.
- No quantified revenue, profit or cash-flow guidance is provided. Management’s stated priorities include growing retail volume, improving inventory sourcing and operating efficiency, controlling expenses, and preserving liquidity. The company does not expect to pay dividends in the foreseeable future.
Important facts for investors to verify
- Whether the remaining preferred-share subscription installments were received on schedule, and whether warrant holders exercised their warrants.
- Current cash, operating cash burn, debt and WeBank payment schedules, and the timing and cost of the Hefei IRC lease.
- Retail versus wholesale sales mix, inventory turnover, write-downs, and whether gross margin improved without relying on non-recurring items.
- Progress in remediating the material weakness in financial reporting controls.
- Developments in PCAOB audit access, HFCAA trading risk, and applicable PRC cybersecurity, overseas-listing and corporate-structure requirements.
- The effect of preferred-share conversion, redemption, dividend and liquidation terms on existing shareholders’ dilution and economic priority.