Vivian Xu - Investor Relations Manager Nicholas Chong - Chief Financial Officer.

Amanda Chen - Morgan Stanley Ming Xu - UBS Terry Chen - HSBC Nora Zhang - Merrill Lynch Alvin Jiang - Deutsche Bank Robert Cowell - 86Research.

Thank you for standing by and welcome to the Autohome's earnings conference call for the first quarter 2016. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. [Operator Instructions]. I must advise you that this conference is being recorded today, Wednesday, June 1, 2016.

I would now like to hand the conference over to your first speaker today, Vivian Xu, Autohome's Investor Relations Manager. Please go ahead..

Thank you, operator. Hello everyone and welcome to Autohome's first quarter 2016 earnings conference call. Earlier today, Autohome distributed its earnings press release and you may find a copy on the company's website at www.autohome.com.cn. On today's call we have Mr. Nicholas Chong, Autohome's Chief Financial Officer.

After the prepared remarks, Nicholas will be available to answer your questions. Before we begin, please note that the discussion today will contain forward-looking statements made under the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995.

Forward-looking statements are subject to risks and uncertainties that 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 Securities and Exchange Commission.

Autohome does not undertake any obligation to update any forward-looking statements except as required under applicable law. The earnings press release in this call also includes discussions of certain unaudited non-GAAP financial measures.

The press release contains a reconciliation of the non-GAAP measures to the most directly comparable GAAP measures and is available on Autohome's IR website. As a reminder, this conference is being recorded. In addition, a webcast of this conference call will also be available on Autohome's IR website.

Before we review our results, I want to directly address nonbinding going-private proposal we recently received. As we disclosed in our press release of April 18, 2016, our Board of Directors received a proposal on April 16, 2016 from a consortium to acquire all outstanding ordinary shares and ADS not already owned by the consortium.

And the Board of Directors has formed an independent special committee consisting of Mr. Ted Tak-Tai Lee, Mr. Guangfu Cui, and Mr. Junling Liu, all of whom are our independent directors to evaluate this proposal.

In addition, we notice that one of our shareholders, Telstra, announced on April 15, 2016 the sale of its 47.7% interest in the company to Ping An Insurance Group. Completion of this transaction is subject to the required Chinese regulatory approvals and Autohome's Board approval.

We do not intend to comment further and we ask for your understanding so that we can focus this conference call on our first quarter operational performance and business opportunities. I will now turn the call over to Autohome's Chief Financial Officer, Nicholas..

Thank you. Hello everyone. Thank you for joining our first quarter 2016 conference call. Before I start discussing our first quarter results, our view is that for each company to succeed you must compete well in three dimensions, mainly the right market with the right product portfolio and precise execution.

None of these three fundamentals have changed for Autohome as of today. For the first factor of total addressable market, we estimate that our total addressable market has increased over RMB400 billion since we entered the online market transaction space.

Given Autohome's current revenue base, we still have a lot of opportunities for growth in this market.

Second, our product portfolios provide the basis for long-term competitive differentiation that is obviously based on our user traffic and engagement as well as the value propositions we have provided to many of our OEMs and dealer partners over the past few years.

We will continue to pursue our performance-based product development into filling each stage of our user's ownership lifecycle with the corresponding stage of our auto partner's sales cycle. Finally, precise execution.

We still have the same team and employees who have dedicated and focused their professionalism in growing Autohome's revenue by 2.8 times from RMB1.2 billion in 2013, the year of our IPO to RMB3.5 million in 2015.

We will continue to execute the three strategic priorities we mentioned earlier this year, which are to grow our consumer audience, to drive expansion of our core advertising and lead generation business, and finally to significantly grow our emerging transaction marketplace. So let me start the discussion of our first quarter operations.

Our first quarter performance is a direct result of our structural alignment of the leading online advertising media platform, the fast growing lead generation platform, and the ramping up of our transaction platform in driving Autohome's double digit revenue growth exceeding the top end of our original expectations.

Effectively, this means that we are on track in executing these three strategic priorities. First, we have continued to grow our consumer audience.

The combined number of average daily unique visitors for our mobile website and mobile applications reached approximately 16 million as of March, representing about 65% year-over-year growth and about 16% quarter-over-quarter increase.

Our mobile advertising revenue grew 178% compared to the same period last year accounting for 26.6% of the OEM advertising revenue.

The primary reasons for the traffic growth are the increase in brand value and the differentiated offerings of our platform in retaining and attracting automobile consumers in China as well as the strong collaborations we have built with branded partners.

In addition, we continue to create innovative contents, products, and services that drive the consumer audience and empower them in making the optimal decisions for their car purchases. Our multimedia contents that are originated from us or our users continue to reinforce and accelerate the overall network effects.

For example, the content of our blogger program have significantly enhanced and expanded since its launch in mid-2013. These bloggers are attracted to publish on Autohome's platform because of the unique and large user base focused on automobiles.

And the same user's keen interest are able to retain the bloggers on Autohome platform for increased publications. As of the end of the first quarter 2016, there were close to 1,500 bloggers on our platform with monthly publication of close to 3,000 blog posts and monthly unique visitors of over 25 million.

Second, in driving the growth of our core advertising and lead generation business, we continue to differentiate our value proposition to automakers and dealers with higher ROI results. Consequently, our core media and lead generation business continued to show solid growth of over 32% in Q1 2016, which was within our expectation.

Within our media services business, branded OEM advertising continued to be solid, although regional advertising by our clients slowed down a bit as some this advertising is being moved into our client's central advertising budgets.

We expect such trend to continue so that our media services business growth will lag behind our lead generation business.

Now to on our lead generation business, we offer a powerful value proposition to our dealers because of our ability to reach a large and engaged base of automobile consumers, thus expanding the reach of the dealer's physical showroom to millions of online users in China and generating sales leads for the dealers.

This year, we are even more focused on solutions and technology development in order to fine tune our user experience in generating improved conversion rate and high ROI for the dealers.

One specialization is our shopping assistant services that leverages the C2B model in providing personalized attention, customized knowledge of products and pricing in order to not only precisely match the consumers and suppliers but also to significantly enhance the efficiency of the purchasing process.

For example, within shopping assistant, we first aggregate extensive vehicle inventory and pricing information for a potential shopper with enhanced transparency.

Then we have a professional team of members who meticulously guide the individual shoppers through the purchasing process in order to precisely match the shopper with the vehicles of his or her dream. The shopping assistant service is currently deployed into several Tier 1 cities. We plan for an expansion by end of 2016.

Now I would like to spend some time on the transaction marketplace, our third strategic priority. In 2015, we decided after capital analysis of the market, consumer trend, Autohome's intrinsic capabilities and competitive advantages and test trial in 2013 and in 2014, to enter early into this mainstream market and be an early mover advantage.

Our number one position in user traffic and user engagement in our sector has allowed us to build massive and comprehensive data about consumer demand and behavior. Our data and behavior analytics will increasingly help us match consumer and supplying partners such as dealers and OEMs with whom we have a long-standing relationship.

Beyond an expanded total addressable market, our transaction platform will bring us increased revenue and commission fees from OEMs and dealers.

As we generally enhance customer experience, improve transparency and improve the efficiency of the sales process for all parties we will solidify our brand equity, market leadership and financial performance.

We are encouraged by the 4,957 new vehicle transactions we completed on our platform during the first quarter, about half bought from direct B2C vehicle sales and the other half from commission-based facilitations. This is a strong proof that consumer demand exists.

We expect consumer adoption to grow, although at this very early stage, it's still unclear how fast. Now let me give you a quick overview of how the business works currently. We select special motors from our OEM partners for which we are granted online exclusivity.

Unlike traditional dealers who are typically limited to selling one brand and have a big whatever inventory the OEMs send them, there is potentially no limit to the number of brands we can sell and we have enhanced flexibly on inventory size.

Meanwhile we will work to further expand our OEM partnerships and support our OEM partners with their online marketplace initiatives. Internally we will continue to focus on optimizing our transaction infrastructure in order to further reduce our cost such as logistic and inventory control, et cetera.

Looking ahead, we are very focused on achieving our 2016 target. We currently estimate that our direct B2C sales volume will surpass the commission based sales volume. In addition, I do want to caution investors that given the early development of our online market business, transaction volume may be somewhat volatile from quarter-to-quarter.

This is partnering work with no precedent historical or competitive data and visibility is somewhat limited.

This being said, we remain strongly confident in our vision and opportunities for an early mover who has the largest user base and an extensive array of information content services, big data and behavioral analytical capabilities and well-developed ecosystems of OEMs and dealership.

Now let me summarize our financial performance for the first quarter. Note that I will reference RMB only in this discussion, but you can find an equivalent U.S. dollar numbers in our press release issued earlier today. Net revenue for the first quarter increased 75.5% to RMB1,093.5 million from RMB622.9 million in the corresponding period in 2015.

This surpassed the high-end of our initial guidance, primarily due to robust growth from our core advertising and lead generation business as well as the new transaction related revenue as we are capturing more of the automakers' budget with higher ROI and more diversified services.

As you may recall, starting in the first quarter of 2016, we are changing our revenue reporting for better transparency as our business continues to grow.

So in terms of revenue breakdown, media services revenue which primarily includes automaker advertising services and regional marketing campaign conducted by certain automobile brand's regional offices, increased 22.6% to RMB442.1 million from RMB316.8 million in the corresponding period of 2015, representing 40.4% of total revenue.

This robust growth is primarily driven by an increase in average revenue per automaker advertiser as automakers continued to allocate more of their advertising budgets to Autohome's online advertising channels.

During this quarter, lead generation services revenue, which was previously reported as dealer yellow page business and mainly included dealer subscription services, advertising services sold to individual dealer advertiser and the other value-added services, increased 46.8% to RMB384.1 million from RMB261.5 million in the corresponding period of 2015, representing 35.1% of total revenue.

The increase was primarily attributable to a year-over-year increase of 31.6% in average revenue per paying dealers as dealers continued to allocate a greater portion of their budget to the company's services.

Lastly, for the first quarter of 2016, online marketplace revenue, which is primarily composed of direct vehicle sales and commission-based services to facilitate transaction on Autohome Mall platform contributed RMB267.3 million, representing 24.4% of total Q1 revenue.

This new business is mainly driven by direct vehicle sales which accounted for 93.5% of the online marketplace revenue. Moving on to cost of revenue. The 271.7% increase year-over-year to RMB383.4 million was primarily driven by the cost of goods sold of direct vehicle sales.

Excluding the transaction cost of the vehicles, the cost of revenue for our core media and lead generation business has increased 34.2% year-over-year, resulting in a gross profit margin of 83.2% for the first quarter in 2016.

However, given the nature of an early development stage of our transaction business, the overall gross profit margin for first quarter 2016 was at 64.9%. Now let's take a closer look at our operating expenses by line item.

Note that I mentioned in the past that while we are investing into new growth opportunities in accordance with our plans, we are very cost efficient and prudent with our overall spending. Sales and marketing expense in the first quarter was RMB329.1 million or 30.1% of our revenue, down 5 percentage point as a percentage of revenue year-over-year.

The increase in absolute amount is primarily due to increased headcount and related compensation costs as well as marketing expenses. Product and development expenses was RMB115.5 million or 10.6% of revenue, relatively stable compared to the corresponding period in 2015.

The increase in absolute amount is primarily due to increased headcount and related compensation costs in support of our rapid growth. Finally, general and administrative cost was RMB72 million or 6.6% of revenue, relatively stable compared to the corresponding period in 2015.

The increase in absolute amount is primarily due to increased salaries and benefits. As a result, total operating expenses for the first quarter increased 62.4% to RMB516.6 million from RMB318.2 million in the corresponding period in 2015.

However, it is important to note that as a percentage of revenue, operating expenses were down to 47.2% from 51.1% year-over-year. Even with increased expenses during the quarter, we still delivered strong profitability.

Operating profit decreased by 4.1% year-over-year to RMB193.4 million, primarily due to the gross margin profile change as I already mentioned because of the online marketplace. Adjusted net income increased 49.1% to RMB294.4 million from RMB197.5 million in the corresponding period in 2015.

Basic and diluted earnings per share and per ADS for the first quarter were RMB2.16 and RMB2.11 respectively compared to RMB1.49 and RMB1.44 respectively in the corresponding period of 2015.

I would like to point out that one of the reasons for our net income increases is the fact that one of our wholly owned subsidiaries was qualified for a preferential tax rate of 15% for three years from 2015 to 2017.

This change in that enacted tax rate resulted in a one-off tax benefits of RMB69.4 million, which was recorded in the first quarter of 2016. As of March 31, 2016, our balance sheet remains very strong with cash and cash equivalents, restricted cash and term deposits of RMB4.4 billion.

Net cash provided by operating activities in the first quarter was RMB162.2 million compared with RMB283.9 million in the corresponding period of 2015. As we have discussed in the past, we believe the strength of our balance sheet and cash position is an important competitive differentiator that provide us with great financial flexibilities.

Also the inventory level for our direct B2C sales in the first quarter was relatively healthy.

However, I want to point out that given the business model of our transaction marketplace, as I explained earlier, there will be some volatility in inventory turnover which is why we will continue to focus on optimizing our transaction infrastructure in order to further reduce our logistic and inventory cost as I already mentioned.

Before I move on to guidance, I would like to emphasize that in order to execute our strategy in 2016, we will invest in several areas such as mobile traffic enhancement, marketing and branding of Autohome with certain event driven campaigns we have deployed historically and headcount increase in support of our business expansion.

Let me now address our second quarter of 2016 outlook which reflects our current and preliminary view on the market and operating conditions that may be subjected to changes.

I would like to caution investors that given the early development of our online market business, the transaction volume and the related revenue may be somewhat volatile from quarter-to-quarter although we will try our best in providing the guidance based on the current visibility.

So currently, we expect to generate net revenue in the range of RMB1,323 million or $205.2 million to RMB1,376 million or $213.4 million, representing a 53.7% to 59.8% year-over-year increase. In summary, we are pleased with how the business performed in the first quarter of 2016.

We continued to execute well, delivered double-digit revenue and net profit growth, managed cost effectively and make sound investment that we believe are a necessary foundation for sustained long-term growth. With that, I am ready to take your questions. Operator, please open the line for Q&A..

[Operator Instructions]. We will now take your first question from Amanda Chen from Morgan Stanley. Please go ahead. You line is now open..

Hi. Good evening, Nicholas and Vivian. Thank you for taking my question. I have two here. The first one is regarding your second quarter guidance. I think the first quarter result is quite good, while the second quarter guidance seems relatively slower than the consensus numbers.

So could you please elaborate the reasons behind this soft guidance? Thank you..

Okay. Amanda, on the Q2, I think the core business will continue to grow around 30%. So for the transaction business, I think for the whole year, we are still looking at 30,000 to 40,000 units. It's just that seasonality, I think is more skewed towards the second half of the year..

Got it. Thank you.

So for your full year transaction volume target, it still will be around the 30,000 to 40,000, right?.

Yes. Currently, we are still holding on to the 30,000 to 40,000 units. Of course, it will be based on the actual execution. In Q2, I think we are signing up two more additional OEMs. I think the volumes are more coming into the Q3..

Got it. Thank you. And the second one is a small question regarding your net profit, I think it is higher than people expectations because of a tax benefit this quarter. So can you tell us what's the benefit from and also what's the future trend in next few quarters? Thank you..

Okay. This is actually because we successfully have gotten the high-tech status for one of our subsidiaries. So from 2015 to 2017, because the formal certification came in 2016. That's why, according to the one-time wealth tax benefit in Q1. Actually, we have most of it reflected in the 20-F..

Okay. Got it. Thank you for taking my question..

Thank you..

We will now take our next question from Ming Xu. Please go ahead from UBS..

Good evening, Nicholas and Vivian. Thank you for taking my questions. So I have three questions. The first one is on the revenue breakdown of the media and lead generation business, I think the classification of that two segment is slightly different from your previous segment of advertising and dealer business.

So could you maybe give us a breakdown for the, obviously in your Q1 result you gave the breakdown for Q1 2015 number of the two business lines. So for the Q2 to Q4 of 2015, what's the respective revenue was for the media and lead generation business? That's my first question..

What I can share with you is that overall, for the whole year as you grow the media and lead gen around 30% as we communicated before, and going forward because we started to change the revenue presentation effective Q1.

So right now what is really meaningful, as we announced in the results, we will also show the corresponding period of prior quarters..

Okay. But could you maybe give us now the media and lead generation business revenue for Q2 through Q4 of 2015? So that maybe give us a better comparison base when we look at the revenue numbers for Q2 to Q4 of this year..

We will get back to you on that..

Okay. No problem. So my second question is on the margin of the media and lead generation business. I understand that because you only started the transaction business, so understandably the margin is lower.

So could you give us some color on the margin of the media and lead generation business in Q1, and how that compares to the past few quarters?.

If you look at just on the gross margin of the core business, it's about 83.2%, as I mentioned just now in the script. So last year this time, it was about 83%. So, as far as the core business, the gross margin remains at 83%-plus. And then the overall margin came down precisely because of the transaction marketplace margin being more..

So is it possible to have operating margin for the traditional business?.

I think the traditional business is still running and I think the margin profile is more or less as same as previously.

We have some improvement in efficiency, but at the same time we will continue to reinvest back into the business because there is some, like for example on the media side, we are continuing to invest in acquiring more users, coming out with more data content and then on the dealer business we also have some new businesses, like for example the group buy and the CPS.

So as I said, the margin on the existing business, on the media and lead gen will be more or less the same as before..

Okay. Got it. A final, two small questions on the financials. So firstly, we notice that share-based compensation in Q1 actually rose significantly compared to Q1 of last year, particularly in the general and administrative expenses line.

So could you maybe elaborate on that?.

So your question is, our share-based compensation?.

Rose significantly in Q1, particularly in the general and administrative part? So could you maybe elaborate on what is the reason for that?.

Because there are some new brands in 2016 Q1..

Okay. Nicholas, one final question. So I notice from the 20-F that in full year 2015, so in the cost CPS line, the content related cost rose significantly from around 6% of revenue to around 8.6% of revenue. I think that is related with the spending on video related content last year.

So how do you see that part, content related cost, the trend going forward? And also for the other parts like depreciation and bandwidth and tax, all of those actually declined as a percentage of revenue. So how do you see those parts, the trend going forward? Thanks..

If we look at the gross margin for the existing business, it will be around the 82%, 83% range. So obviously there are some items that may go up adding and some will come down. This is in line with what we have been trying to manage. Again, they are important things, like for example you mentioned about video, obviously that is important.

We have more and more mobile usage. I think it is important that we enhance the video content because content is one of our differentiator and we want to continuously do well there. So we spend more, but at the same time we try to get the cost efficiency for some of our items. So overall the gross margin is intact, yes..

Got it. Thanks..

Thank you..

We will now take our next question from Terry Chen from HSBC. Please go ahead. Your line is now open..

Hi. Good morning or good evening everyone. Thank you Nicholas and Vivian for taking my questions. I would like to ask about your traditional advertising business. The combined media and lead gen revenue is growing very healthily in 1Q, up 33% year-over-year.

May I know how sustainable do you think the growth will be into the next few years? I am particularly interested in your view from the ARPU expansion angle. Thank you..

Thanks. One thing we are able to continue to see is that we continue to gain market share. I think that's why we are encouraged because you can see that our first quarter numbers also we grew significantly higher than our peers.

I think as we said previously, for this year, we will be able to grow about 30%, around 30%, if we have continue to work on it and improve on it. I can't say for now what it is few years down the road yet. But I think we will continue to spend and invest correctly and build the team and grow the business. So that's on the media front.

On the ARPU, I think if you look at Q1 actual, just for the lead generation business, our ARPU went up by 31.6%. It's partly due to the increase in price and the subscription, but more importantly it's because we have expanded and provided more services to our dealers.

Like for example, beside the subscription, we sell dealer advertising, we have CPL and CPS. So we give them more broader services and product portfolios. That's why we can see that our ARPU continue to increase..

Yes, very helpful. Thank you. Just a quick question on the operating margin level, the product development expenses increased 42% sequentially. Could you give us more color on that? And any guidance on the operating margin in the second half when you transaction business start to accelerate will be very helpful? Thank you..

I think there are two parts to your questions, right. I think the first one is on the product development. One of the cost of business is that a good internet company must have is strong and technical product development.

That is exactly what we spend money on that, bringing in good people and building the system and processes trying to build [indiscernible] capabilities, big data analytics and others to make sure that especially to take advantage of our big consumer base. That's why we will continue to spend on the product development.

On overall margin, I think as we shared previously, having the increase in profit from the existing business, we believe that we are able to offset the investment in new businesses. Yes..

Okay. Great. Thank you..

Thank you..

We will now take our next question from Nora Zhang from Merrill Lynch. Please go ahead. Your line is now open..

Hi. Good evening Nicholas and Vivian. Thank you for taking my question. I have two questions. First one is about the transaction business. Just now you mentioned we sold 4,900 cars in first quarter.

Could you give us the breakdown of direct sales and commission based on volume?.

Yes. I think of the 4,957 units, you can distribute it as half-half from a unit standpoint, half-half between the buyer and commission. But from a revenue contribution, buyer is about 93.5% of the revenue..

Okay. And my second question is about the headcount expansion. I noticed that headcount increased by 400 this quarter. How many additional headcount are we expecting this year? And how many headcount for transaction business currently? Thank you..

So by end of the year, it will be around 5,000. Of course, we will manage it tightly. So as for now, if you ask me, I will say around 5,000. Currently in the transaction business, we have about 355 headcount. So by the end of year, around 500. So we are expanding in a disciplined fashion. And that we will be discipline.

Let me also elaborate, discipline also means that they will be in line with, of course, the volume that they are driving. So we will manage that closely..

So I just have a quick follow-up. If we are looking at 5,000 as a headcount until year end, so it means that we are adding a lot of the headcount in our traditional business. So our transaction business is looking at 500.

So why do you have to add so many people in the traditional business?.

We haven't talked about this used car business as well. Used car business, end of the year, will be around 800..

Okay. Got you. So I also have a third question about the transaction revenue. In first quarter of 2015, so I noticed that we have RMB0.6 million one year ago.

So what's that revenue from?.

So Nora, you are saying the RMB0.6 million in Q1 2015 for transaction? Yes, that is because of the flash sales. As you know we [indiscernible].

That's your coupon business? So we are actually recording coupon business into our transaction revenue..

Yes. Because from Q1 this year, we reclassified our revenue into media, services and online marketplace. So we went back and did our apple-to-apple comparison. So that's why there was RMB0.6 million. Of course, it is very negligible.

But your question is linked to the flash sales, because we have been doing flash sales from 2014, with autohome.com with the coupon, right..

Got you. That's very helpful. Thank you..

We will take our next question from Alvin Jiang from Deutsche Bank. Please go ahead. Your line is now open..

Hi Nicholas and Vivian. Thank you for taking my question. I have two quick questions..

Alvin, could you speak louder? We barely hear you..

Okay. Sorry.

Is it better?.

Much better. Yes..

Okay. Great. The first question is on the margin side. I guess when you just begin the e-commerce transition, you had a target like keep the non-GAAP operating profit, I mean the absolute number stable or flat year-on-year in 2016.

I am not sure if this is still a target for your target on operating profit side?.

Yes. I think on the non-GAAP, yes, I said just now that the incremental profit that we get from the existing business is able to offset the investment in the new business. So, yes. So the answer is yes to your question..

Okay. The second question is on the disclosure.

Actually can you give us more color on like the new business breakdown? So how many advertisers? And what's the ARPU in the first quarter of 2016?.

Sorry.

Alvin, could you repeat the question?.

Like in the media services, could you give us a breakdown like what's the number of automaker advertisers and what's the ARPU and also for the leads generation services? So what's the number of paying dealers per quarter and what's the ARPU?.

I think right now what I will say is because we have changed the way we present the revenue, but I wanted to share with you on the dealers side, first quarter, we have about more than 20,000 dealers that pay for our lead gen services. More than 20,000..

Okay. Got you..

And the ARPU, as I said just now, we saw 31.6% ARPU year-on-year increase for the whole overall dealer lead gen services..

Got you. I have a very quick follow-up as on the cash flow. I noticed in the first quarter of this year, the cash flow has year-on-year decline of 42% or 43%.

So what's our long-term outlook or view on the free cash flow or the operating cash flow?.

Well, you can see that Q1, the operating cash is still increasing. It's just that it's versus Q1 last year that is increasing at a slower rate. Last year we increased by RMB203 million. This year we increased by RMB162 million. So it's still increasing.

So that's why you could see that right now our cash and cash equivalent has increased to RMB4.4 billion. Versus Q1 last year the operating cash has dropped a bit, the rate of increase has dropped is because we started to engage in the new car e-commerce where we have to spend some money on the inventory to buy the inventory.

Hello, Alvin?.

We will now take our next question from Thomas Chong from Citigroup. Please go ahead. Your line is now open..

Hi. This is [indiscernible] on behalf of Thomas. Thanks for taking my question. I have two questions. The first one is about the used car business.

So could you please comment on your used car business, like how many used cars did you sell in the first quarter, just to help us to better understand how big this business is? And could you share with us any color on the market trend of used car e-commerce business in China? This is my second question. Thank you..

First of all, the used car business, we are still at early stage. So it is really not that meaningful to talk about the operating margin. So I think it is still at the early stage. But we think that this business is an important initiative that we need to work on and that's why we will work on it in a disciplined fashion.

We think that it is opportunities that will come in the next few years. So we decided we need to build up for that..

My second question, is there any color on your internet financing initiatives? Like how many of your transactions are financed and total financing amount and your strategy going forward? Any color would be helpful. Thank you..

Well, I think we are working and we recognize the opportunities in internet financing. That's why we have a team working on the financing. And also we have a JV that we was formed at the end of the year to look into this opportunity. So I think right now, the business is still at a very early stage.

I think we will get back to you probably in the next quarter..

We will now take our next question from Robert Cowell from 86Research. Please go ahead. Your line is now open..

Hi Nicholas. Thank you for taking my question. I wanted to ask about the mobile advertising revenue. It seems quite strong in the first quarter and actually is bucking the normal seasonal trends, if I am not mistaken where normal you would expect ad revenues to be down quarter-on-quarter in the first quarter.

So my question is, what's driving the strong growth in the mobile ad revenue? And do you have a target for the contribution from mobile by the end of this year? Thank you..

First of all, we are very encouraged by the trend. I think if you look at the first two quarters of last year was about 12%, 15%, second half was about 20%. So I think right now first quarter we came in at 26.6%. I think the growth is really because of the adoptions of mobile usage by the consumer.

You can see that our mobile view has superseded the PC view quite a bit, right. The mobile view has increased to 60 million right now at the Tier 1. So that's why we expect that mobile has a potential. So overall OEM advertising revenue will continue to grow. So I think we should be able to exceed 30% positively..

Okay. Thank you..

There are no further questions at this time. I will now hand the call back to Nicholas Chong for any closing remarks..

Okay. Thank you operator. So thank you very much for joining us today. We appreciate all your support and we look forward to updating you on our next quarter's conference call in a few months' time. In the meantime, please feel free to get in touch with us if you have further questions or comments on the business and on the financials.

Thank you everyone..

That does conclude our conference for today. Thank you for participating. You may all now disconnect..