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Bitauto Holdings Limited (BITA)
Q1 2019 Earnings Call
May 30, 2019, 8:00 a.m. ET


  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Hello and thank you for standing by for Bitauto's First Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. After management's prepared remarks, there will be a question-and-answer session. Today's conference is being recorded. If you have any objections, you may disconnect at this time.

I would like to turn the meeting over to your host for today's conference.

Unidentified Speaker

Thank you. Welcome to Bitauto's First Quarter 2019 Earnings Conference Call. Speakers from the Company today are Mr. Andy Zhang, CEO; Mr. Xiaoke Liu, COO and Mr. Ming Xu, CFO.

After management's prepared remarks, Andy, Xiaoke and Ming will be available to answer your questions. In addition, Catherine Liu, CFO of Yixin, will be available to answer your questions related to Yixin.

Before we proceed, please note that discussions today will contain forward-looking statements made under the Safe Harbor provisions of the US Private Securities and Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties, which may cause actual results to differ materially from our current expectations.

Potential risks and uncertainties include, but are not limited to, those outlined in our public filings with the SEC, including registration statement on Form F-1. Bitauto does not undertake any obligations to update any forward-looking statement, except as required under applicable law.

This call will include discussions of certain unaudited non-GAAP financial measures. Please refer to our earnings release, which was issued earlier today for reconciliations of these unaudited non-GAAP measures to the most directly comparable unaudited GAAP measures.

As a reminder, this conference call is being recorded. In addition, a live and archived webcast of the conference will be available on our website.

I will now turn the call over to Andy Zhang, CEO of Bitauto.

Andy Xuan Zhang -- Chief Executive Officer and Director

Hello, everyone and thank you for joining us for our first quarter 2019 earnings conference call. Despite a challenging auto industry environment, we were pleased to deliver a set of solid results for the first quarter of the year. With total revenue growing by 26% year-over-year to RMB2.73 billion, our advertising and our subscription business continues to grow steadily with revenue reaching RMB897 million representing 13.9% year-over-year increase.

Our transaction services business also continued to expand rapidly with revenue reaching RMB1.65 billion representing a 40.7% year-over-year growth. For our advertising and our subscription business, as we have emphasized over the past few quarters,Bitauto has been devoted to consistently -- to constantly enhancing our content and improving user experience on our upgraded apps to drive traffic for media business and we are beginning to see positive results from our efforts. In the first quarter, we saw substantially increasing traffic, user time spent and the number of sales leads generated. According to Questmobile in April 2019 DAU on the Bitauto Media app increased by 197%, since October 2018 while we rolled out a major upgrade to the media app. The combined DAU on both our Bitauto Media app and Auto Pricing app rose by approximately 50% over the same period in 2018.

In the first quarter, our total number of sales leads grew by about 15% year-over-year as quality of our sales leads improved, thanks to greater contribution from organic leads. As a result of the strong momentum in the quantity and quality of our sales leads more dealer customers are willing to sign-up for our premium and the recently launched deluxe premium service packages.

Further driving and improving our subscription business upwards. We also further build out our network of independent dealers to over 26,000 through which we served more than 42,500 sales persons during the first quarter of 2019. As of the end of this May, we had developed over 23,00 paying customers among these independent second tier dealers.

In our transaction services business, Yixin continued to grow faster than the industry. Strengthening its marketing market leading position and enhancing its competitive advantages. Yixin facilitated approximately 147,000 financed automobile transactions in the first quarter, a year-over-year increase of approximately 30%.

Yixin's loan facilitation services contributed 66% of its total financed automobile transactions, with transactions volume lined up nearly 10 times compared to the same period last year. Also during the quarter Yixin's finance new automobile transactions increased by approximately 23% year-over-year while China's new passenger vehicle sales dropped by 14% year-over-year. According to the Chinese Association of Automobile Manufacturers.

Moreover, Yixin's financed used automobile transactions increased by approximately 39% year-over-year during the quarter, while China's used car passenger vehicle sales increased only by 2% year-over-year according to China's Automobile Dealers Association. Looking forward, we will remain dedicated to executing on our four core business strategies to build Bitauto into China's top online automobile media and transaction services platform. First, we will continue to improve content and the user experience on the upgraded the Bitauto Media app with more engaging and the user-centric content and functions. Covering user needs across the entire automobile consumption cycle, we have seen robust improvement in DAU, retention rate as well as content generation and the consumption of our auto media app. And we believe this will greatly increase our ability to bring higher quality sales leads to our automaker and the dealer customers. Helping enhance their sales conversion rates and demonstrating our value proposition amid the current soft market environment for automobile sales.

Second, we will drive incremental revenue growth in our advertising business through the launch of our data products which provide automakers with integrated results-driven marketing solutions, including highly targeted advertising, content and the marketing campaigns, leveraging Bitauto's AI and the big data analytic capabilities. Our data products enable automakers to analyze real-time consumer behavior, including browsing, search and purchasing to further improve automakers conversion results. We plan to gradually ramp up our data products throughout the course of this year.

Third, we will further develop our subscription business this year as we enhance ARPU from OEM, dealers customers through increasing penetration of premium and the deluxe premium service packages and expand our services to cover more independent dealers, while gradually increasing monetization among this vast and under-tapped market segment.

Fourth, Yixin will remain focused on rapidly expanding its financed automobile transactions, growing its loan facilitation business and developing its technology capabilities to better understand, connect and to serve customers.

Financial institution partners and automobile dealers, we believe that Yixin is well-positioned to gain market share in the Auto Mobile Finance industry.

With that, I'll turn the call over to Ming to go over the financials.

Ming Xu -- Chief Financial Officer

Thank you, Andy. Good evening, everyone. Despite soft sales in the auto industry, our results for the first quarter of 2019 maintained a steady growth trajectory with strong performance from both our advertising and subscription business and transaction service business. We also increased profitability in the first quarter mainly due to improved probability at Yixin and effective cost control of sales and marketing expenses. With rising traffic and enhanced user experience, our upgraded Bitauto Media app should continue to strengthen Bitauto's value proposition which we believe will be increasingly recognized by our OEM and dealer customers, as they focus more on the effectiveness of their advertising spending.

We remain confident that the growth of our users' base and then value will further solidify our industry-leading position, reduce our customer acquisition cost and enhance our margins. We are also optimistic about Yixin's margin outlook for the full year, as it further grows its financed transaction volume.

Now let's look at our Q1 2019 financial highlight before moving to Q&A. Please note that our only reference -- our reference mainly to financial figures in RMB in the following discussion.

Bitauto reported revenue of RMB2.73 billion for the fourth quarter 2019 representing a 26% increase from the corresponding period in 2018. The increase in revenue was attributable to the growth of the Company's transaction service business and advertising and subscription business. Revenue from the advertising and suppression business for the first quarter of 2019 was RMB897 million representing a 13.9% increase from RMB788 million in the corresponding period in 2018. Revenue from the transaction service business for the first quarter of 2019 was RMB1.65 billion representing a 40.7% increase from RMB1.17 billion in the corresponding period in 2018, mainly attributable to the revenue growth of the Company's loan facilitation services and self-operated financing business.

Revenue from the digital marketing solutions business for the first quarter of 2019 was RMB188 million compared to RMB211 million in the corresponding period of 2018. Cost of revenue for the first quarter of 2019 was RMB1.07 billion, representing an increase of 29.8% from the corresponding period in 2018. The increase was primarily due to increased commissions associated with loan facilitation services and increased costs associated with higher sales of automobiles. Cost of revenue as a percentage of revenue in the first quarter of 2019 was 39%, compared to 37.8% in the corresponding period in 2018.

Gross profit for the first quarter of 2019 was RMB1.67 billion, representing a 23.6% increase from the corresponding period in 2018. Selling and administrative expenses were RMB1.5 billion for the fourth quarter of 2019 representing a 0.5% decrease from the corresponding period in 2018. Product development expenses were RMB160.4 million for the first quarter of 2019, largely the same as such figure in the corresponding period in 2018. Share-based compensation which was allocated to related lines -- line items of operating expenses was RMB144 million in the first quarter 2019 compared to RMB150 million in the corresponding period in 2018. Non-GAAP income from operations in the first quarter of 2019 was RMB375.8 million representing a significant increase from RMB8 million in the corresponding period in 2018. Non-GAAP operating margin for the first quarter of 2019 was 13.4% compared to 0.4% in corresponding period in 2018.

Net income in the first quarter 2019 was RMB92.8 million compared to a net loss of RMB288 million in the corresponding period in 2018. Net income attributable to Bitauto in the first quarter of 2019 was RMB32.5 million compared to a net loss attributable to Bitauto of RMB168 million in the corresponding period in 2018.

Non-GAAP net income in the first quarter of 2019 was RMB285 million representing a significant increase from RMB76 million -- RMB37 million in the corresponding period in 2018. Non-GAAP net income attributable to Bitauto in the first quarter of 2019 was RMB152.1 million, a 122.3% increase from the corresponding period in 2018.

Basic and diluted net income per ADS each representing one ordinary share in the first quarter of 2019 amounted to RMB0.43, $0.06 and RMB0.29, $0.04 respectively. Non-GAAP basic and diluted net income per ADS in the first quarter of 2019 amounted to RMB2.12, $0.32 and RMB1.68, $0.25 respectively.

As of March 31st, 2019, the Company has cash and cash equivalent, time deposit and restricted cash of RMB9.69 billion. Cash provided by operating activities, cash provided by investing activities and cash used in finance activities in the first quarter of 2019 was RMB294 million, RMB1.86 billion and RMB2.11 billion respectively. Number of employees totaled 8,570 as of March 31st, 2019 including employees of entities in which Bitauto has acquired or hold -- and hold controlling interest as of such date. This represented a 4.4% year-over-year decrease primarily due to the decrease headcount in Yixin, following its strategic de-emphasis of used care automobile transaction facilitation services. In addition, given Yixin's scale and significance Bitauto, I would also like to share with you some of Yixin's operating and the financial highlights for Q1 of 2019.

In the first quarter of 2019, Yixin facilitated approximately 147,000 financed automobile transactions, an increase of approximately 30% from the corresponding period in 2018. The total aggregated automobile finance amount facilitated through its loan facilitation services and self-operated financing business was approximately RMB11.3 billion. In the quarter, through its loan facilitation services for financing partners, Yixin facilitated approximately 97,000 financed automobile transactions, representing a year-over-year increase of nearly 10 times and approximately 66% of Yixin's total financed automobile transactions.

In the first quarter of 2019, under US GAAP, Yixin's total revenues reached RMB1.66 billion, representing a 35.3% increase from the corresponding period in 2018; gross profit reached RMB843 million, representing a 40.8% increase from the corresponding period in 2018. Net income was RMB104.5 million compared to a net loss of RMB221.4 million in the corresponding period in 2018. And non-GAAP net income was RMB233.4 million representing a non-GAAP net loss of RMB62.3 million in the corresponding period in 2018. In the first quarter of 2019, Yixin's Non-GAAP net income is calculated as net income excluding share-based compensation of RMB85.3 million, amortization of intangible assets resulting from asset and business acquisitions of RMB43.6 million, and offset by tax effect of RMB0.04 million. In the first quarter of 2019, Yixin entered into certain transactions with other subsidiaries of Bitauto, which have been eliminated upon Bitauto's consolidation of Yixin. The cost of revenue and expenses that Yixin recorded for the services purchased from those subsidiaries of Bitauto amounted to RMB7 million. As of March 31, 2019 Yixin has cash and cash equivalents and restricted cash of RMB5.63 billion, total finance receivable of RMB34.64 billion and total borrowing including bank borrowings and asset-backed securitization debt of RMB28.17 billion. As of March 31st, 2019, 90 days plus past due ratio including 100 days plus and 100 days plus past due ratio for all financed transactions, including the third-party loan facilitation were 0.9% and 0.43% respectively.

90 days plus, including 180 days plus past due ratio and 180 days plus past due ratio for Yixin's self -operated finance business were 1.17% and 0.58% respectively. On the US GAAP, Yixin's provision for credit losses of financed receivable for the first quarter of 2019 was RMB81.1 million, the balance of finance -- for credit loss of financed receivable was RMB361.5 million as of March 31st, 2019.

Before we turn to guidance for the second quarter, I would also -- I would like to provide you with a quick update on the early redemption of our convertible notes. In May 2019, Bitauto has reached an agreement with PAG and its affiliates to repurchase the outstanding $125.5 million aggregate principal amount of the 2% convertible note due 21st issued by the Company on August 2nd, 2016 prior to the scheduled maturity date.

The total purchase price of $126.8 million including the principal of and interest on the notes were paid and settled as of May 22, 2019. Bitauto has canceled all the notes outstanding post this early redemption and there are no notes outstanding as of now.

With that, I will turn to guidance for the second quarter of 2019. For the second quarter of 2019, Bitauto currently expects to generate revenue in the range of RMB2.7 billion, $402.3 million to RMB2.8 billion, $417.2 million in the second quarter of 2019, representing a 5.3% to 9.2% increase from the corresponding period in 2018. This forecast takes into consideration of seasonality factors in Bitauto's business and excludes any impact of foreign currency fluctuation. It reflects management's current and preliminary view which is subject to change.

Let's now start the Q&A session. Andy, myself and Xiaoke and Yixin's CFO Catherine Liu are available to take your questions. Operator, please go ahead.

Questions and Answers:


Thank you. Ladies and gentlemen, the question-and-answer session of this conference call will start in a moment. In order to be fair to all callers who wish to ask the questions, we will take one question at a time from each caller. If you have more than one question, please request to join the question queue again after your first question has been addressed. (Operator Instructions)

Your first question comes from the line of Hillman Chan from Citi. Please ask a question.

Hillman Chan -- Citi -- Analyst

Good evening, management. Thank you for taking my question. Firstly, could you share your thoughts on the OEM advertising (Technical Difficulty) in the context of weekend trade war and also strong macro outlook and will that change our view on the OEM advertising budget for the rest of the year, please? And how are we seeing the ad budget trends allocation among different online and offline channels of auto OEMs?

And my other question would be that in your prepared remark, you mentioned the solid growth in our DAU and also the sales leads volume. Can you share more on the drivers behind and how we should think about the strategy for the DAUs and sales leads volume going forward, please? Thank you very much.

Andy Xuan Zhang -- Chief Executive Officer and Director

(Foreign Language) So thank you for all your questions. I'll first address your first question about the advertising market.

(Foreign Language)

So firstly, as you may have observed the car market so far this year has been very weak and we expect that market to remain weak for the remainder of the year without any -- if the government does not issue any policy support.

(Foreign Language)

So for the first quarter of this year, we observed that overall speaking the advertising market has been declining year-over-year. And the advertise -- the automakers are cutting their advertising budget.

(Foreign Language)

So, in this market environment, we think the OEM advertisers even though they are -- even for they branding advertising, they have been focusing more and more on a sales lead and on the effectiveness of their spending. Therefore, for the first quarter of this year, we have been seeing that the verticals and the social media that both of them have more effective ads than the pure branding ad -- pure branding media. These two types are still having some growth in the first quarter.

(Foreign Language)

And we think these verticals and the social media hype, we believe that the budget are skewing -- concentrating to the top-tier media, and at the same time the smaller lower tier media are gradually being squeezed out of the market.

(Foreign Language)

And for our own business we -- from our interaction with the companies -- with automakers we're seeing that the automaker customers are spending more on their -- on the sales lead-driven, effectiveness driven advertising and cutting their budget on the pure branding ad. And we believe this will be the trend going forward.

(Foreign Language)

And so far as our proposition on the advertising market trend. So let me now address your second question about our DAU growth.

(Foreign Language)

So, our -- since we launched the new upgraded our Yiche app in November 2018, last year and started our campaign to grow our user base. And so far we've maintained a very strong growth.

(Foreign Language)

I think so far our growth can be seen in two stages. From November of last year to March of this year, the growth we have been focused on in getting more incremental new user and also optimizing the channels where we get the new users. And from March of this year till May, till now, our focus more is while we maintain this strong growth in incremental new users. We also focus more on the quality of the user base. We focus more on improving our retention rate and also time spend on our app.

(Foreign Language)

So we focused more on the lower tier cities. We find that so, since our campaign starts, we get more incremental new users from the tier 3 to 5 cities, because more users are coming from the lower tier cities, we also find that more of them are actually first-time buyers. Actually, among our incremental new users, 70% of them are first-time users. This compares with the overall market where only like roughly 50% are first-time buyers. So because we have more first-time buyers, they also contribute more sales lead to our business.

(Foreign Language)

So in terms of our content strategy, because of more of our new users are first-time buyers and they are -- more of them are interested in the new models. So we actually focus -- in terms of content, we focus on getting more -- creating more content and providing more content about these new models to these type of users. And we try to maintain a leading position in the competition in terms of these new models.

(Foreign Language)

Specifically in the recent months as we have been putting more resources and the focus on the UGC, User Generated Content. For example, for the new -- for these new models, we focus on contents like review -- user reviews, buyer reviews and also Q&A content for these models and in this type of UGC content, we try to lead in the competition.

(Foreign Language)

Also two things. One is I just -- we just -- I just talked about the UGC content. Also we on the PGC content, on the KOL side, we also upgrade our partnership with the key opinion leaders and try to leverage more of their content. And the second thing is that we -- from a technology point of view, we improved our recommendation engine to make our content more tailor-made for the users. And this also improved the user stickiness to outperform.

(Foreign Language)

In some way, in the past over six months, we believe we have established a sustainable methodology about how to improve our product, how to optimize our channel and also how to improve the operation of our community of our products. And we believe this method -- methodology will continue to work and drive continued strong growth of our user base.

(Foreign Language)

Thank you. Next question.


Thank you. Your next question comes from the line of Miranda Zhuang from Merrill Lynch. Please ask your question.

Miranda Zhuang -- Merrill Lynch -- Analyst

Thank you for taking my question and congratulations on the solid results. So the management has shared the color about the drivers behind the traffic and this volume growth. So can you share more color about the organic traffic and organic leads, the mix of them, and then the growth trend for them separately?

And my second question is about the lift in business. So can management share with us the like number of paying dealers for first quarter and the trend that you are seeing for -- up to now and then what's your outlook for the full year? Thank you.

Ming Xu -- Chief Financial Officer

Thank you. Thank you, Miranda. So for your first question about the contribution from our organic traffic and leads, we have -- because we -- our user organic track -- organic user base have been growing very strongly, we also seeing the lead also -- the contribution from organic traffic and lead are also improving. So right now the organic traffic contributes to around half of our DAU. And on the sales lead side it's about the same -- similar percentage, about half of them are coming from organic sources. This improved a lot from the same period of last year.

And as for the trend, well because we believe that the traffic of Yiche app will continue to grow. So we believe the total contribution from Yiche app and also the Price Quote app will continue to improve. And at the same time importantly as the contribution of organic traffic and lead improves, the quality of our total sales lead, blended sales lead is also improving a lot. And we believe that has been gradually recognized by our OEM and dealer customers.

And I would believe this, in turn, will lead to a higher growth of our -- on the revenue side. And secondly, on the paying dealer -- on the subscription business. So firstly for the paying customers by the end of Q1, we have roughly around 20,000 paying dealers for business. This only refers to the 4S dealer business, not including the independent dealer business.

For the independent dealer business as we just mentioned in the script -- in the prepared remarks we have around -- by the end of May, we have around 2200, 2300 of them among the independent dealers. For the 4S dealer business clearly, it declined a bit from last year's level and also from last quarter's level. I think this is more because of the industry downturn. Lot of dealers are running into difficulties very high inventory level and very low probability. We don't think that our gap with our competitors is large. We believe we are facing the same problem. So starting from Q2, we're also trying to -- we have been trying to find ways, to find the -- trying the solutions for this problem. We have been trying to launch some new product to increase our paying dealer numbers. So for example, starting from April, we have been trying to launch a -- what we call an entry-level package, which has a relatively lower output. It's more affordable for those leaders and also we are trying some like CTL (ph) products et cetera. With this, we hope to further increase the number of paying dealers and at the same time for the independent dealer business, we continue to progress on that path. So first of all, as we mentioned the number of dealers -- independent dealers on our platform is now around 26,000 and from those of 26,000 dealers more than 14,000 people are using our platform.

And also for a key part of the business, we -- for the -- one key function for the business which is facilitating the car transaction between use car -- between these independent dealers and 4s dealers, we have so far on our platform more than 400 -- more than 400,000 listings on our platform and in the first four months we have closed around the 50,000 transactions between the independent dealers and 4s dealers.

And we believe we are now in a very strong position in this competition in the independent dealer business.


Thank you. Your next question comes from the line of Liping Zhao from CICC. Please ask a question.

Liping Zhao -- CICC -- Analyst

Good evening, management. Thanks for taking my questions. I have three questions here. The first question is related to your advertising and subscription business. I noticed you continue to invest in branding, such as the promotion of beta media application. So how much is the investment, should we expect for this year that is to say that impacts on your bottom line this year? And how much revenue growth will the investment bring to your advertising and subscription business?

My second question is related to Yixin. So I'm curious how much the funding cost of Yixin in first quarter? And what's your trend of the transaction volume, funding costs and past due ratio in coming quarters? And my last question is about your cash position. You said you paid back the convertible note ahead of the due date. So what's the impact on your liquidity and do you have any share buyback plan in the future? Thank you.

Ming Xu -- Chief Financial Officer

Thank you Liping. So I will answer the first and third question and Catherine will answer the second question. So Catherine why not you go ahead first.

Catherine Liu -- Chief Financial Officer

Sure. From Yixin sides in 2019, the self-operated business funding cost is decreasing compared to 2018, for the for the new capital that we -- for the new total borrowings. So -- but since our total funding costs is a mix of the new borrowings and then the old borrowings. So the funding costs is gradually decreasing as the time goes by. So I think in the rest of the year we'll probably see the funding costs probably will still gradually decreasing if the macroeconomic environment and then the central government's policies keeps -- stimulates. For the past the duration as you can see for our self-operated financing business and that the loan facilitation business, our past due ratio has been kept pretty stable and slightly decreasing for the past five -- I would say five quarters.

So, for the self-operated financing business the past due ratio slightly increases mainly because the balance of the finance receivables has been decreasing since our loan facilitation percentage went up. So that's -- but if you look at the total assets that's more like apple-to-apple comparison. It is stable and slightly decreasing.

Okay. Ming?

Ming Xu -- Chief Financial Officer

Okay. Thank you. Thank you, Catherine. I'll answer your first and third question, I think. So, on the first one for the investment in our media. So, we have been very satisfied with the progress so far in the user base growth trend and also the help they bring to our overall business. And we are -- it gives us more confidence to continue our investment in this area. I think the -- our overall -- in the long-term speaking the -- this -- as I mentioned in the prepared remarks when our user base grows larger and our brand value becomes a more substantial to significant. This will help us to decrease the traffic acquisition cost and the reliance on external traffic. But in the immediate term, we believe that although this -- the traffic growth this year, the growth of sales lead this year can help us to spend less on external sales lead. At the same time, to getting these new users and to invest in the content, it also will consume some money.

So I think that in the immediate term, we believe there is actually a mismatch between the amount -- I'm only talking about the media business alone not including the Yixin business. For the Yixin -- for the media business, we believe this year there's somewhat a mismatch between revenue growth and the -- and our spending. On the one hand, we need to spend to grow our traffic, grow our content, grow organic sales lead. While these efforts have been gradually paying out and have been gradually recognized by our dealer and advertise -- our OEM and dealer customers but we believe that -- but because for the -- in our business, as you know the pricing negotiation happens at the end of every year. So the pricing for this year are largely set by the end of last year and earlier this year when our traffic unfortunate -- when our organic traffic, unfortunately, was still relatively low.

So as a result of the traffic growth, I think we will be more recognized by our customers going into the second half and the more going into 2020. So as a result in 2019, the revenue growth will still only reflect the organic traffic that we had last year. But at the same time, we need to spend more on the -- to grow the organic traffic. So this year, we believe that there will be a certain de-leverage in our media business.

Fortunately, the Yixin business will -- as Catherine mentioned will have a very strong growth this year as evidenced in the first quarter. So this will offset the pressure, margin pressure on our media business. But long-term speaking, we believe this -- our investment on content will help. Actually, as I mentioned, for the growth in traffic and sales we have already been gradually recognized by our OEM and dealer customers and also as we mentioned in the prepared remarks, the AI marketing, data-driven marketing solution that we offered to the OEM are largely driven by -- not --- supported by our growth in organic traffic, because of part of that solution is to increase -- improve the sales lead for those ever -- OEM advertisers. And we believe that this will be -- going into second quarter or second half and the next year this will be more recognized by the -- on the -- more reflected on the monetization side.

And your third question about our liquidity and capital allocation. So firstly on the CB, we have a very friendly negotiation with PAG on the CB and because we have ample liquidity both onshore and offshore, we decided to early redeem the convertible bond to lock-in some of the uncertainties and also lower the potential dilution by the CB buyer -- actually by redeeming this CB, we decreased the potential dilution by around 7% considering our fully diluted share base.

But even after paying back the CB, we still have ample liquidity both onshore and offshore and this already predominantly ph] certainly have no impact on our operations whatsoever. And on the buyback question, firstly, we believe -- we certainly believe our share price has been -- is being undervalued and we are looking at various ways to solve this issue.

But unfortunately, the previous buyback has -- the previous buyback expired already. It has a one-year authorization. So we are looking at ways to -- to get new authorities on the Board. But at the same time, considering the overall liquidity, sorry, the overall sentiment and risk (inaudible) -- risk appetite in the overall market, we believe we also need -- and also the weak macro environment in China, we think that we will also need to balance the use of cash -- to optimize the use of cash.

So the simple answer is we are looking at different ways to evaluate the optimal capital allocation or the optimal use of cash.


Thank you. We are now approaching the end of the conference call. I will now turn the call over to Bitauto's CFO, Ming Xu for closing remarks.

Ming Xu -- Chief Financial Officer

Thanks again. Thank you for joining us today. Please don't hesitate to contact us if you have any further questions. Thank you for your continued support and we look forward to talking with you in the coming months.


Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.

Duration: 51 minutes

Call participants:

Unidentified Speaker

Andy Xuan Zhang -- Chief Executive Officer and Director

Ming Xu -- Chief Financial Officer

Catherine Liu -- Chief Financial Officer

Hillman Chan -- Citi -- Analyst

Miranda Zhuang -- Merrill Lynch -- Analyst

Liping Zhao -- CICC -- Analyst

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