Liping Zhao - CICC Brian Gong - Citigroup Ritchie Sun - HSBC.

Ladies and gentlemen, thank you for standing by for Autohome's Fourth Quarter and the Full Year 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder this conference call is being recorded.

[Operator Instructions] It is now my pleasure to introduce your host, Anita Chen, Autohome’s IR Director. Ms. Chen, you may begin..

Thank you, operator. Hello everyone and welcome to Autohome's fourth quarter and full year 2020 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 Chairman and CEO, Mr. Quan Long; Co-President, Mr.

Haifeng Shao; Co-President, Mr. Jingyu Zhang; and CFO Mr. Jun Zou. After the prepared remarks Mr. Long, Mr. Shao, Mr. Zhang and Mr. Zou 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 discussion of current unaudited non-GAAP financial measures.

Our 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 live and archived webcast of this earnings conference call will also be available on Autohome’s IR website.

I will now turn the call over to Autohome’s Chairman and CEO, Mr. Long..

[Foreign Language] Thank you, Anita. Hello everyone and thank you for joining us today. Before we start discussing our results, on behalf of everyone at Autohome, I would like to express my sincerest gratitude to Mr. Min Lu, our previous Chairman for his extraordinary contributions over the past several years.

I would also like to take this opportunity to thank shareholders for your continued support. And I look forward to working closely with you as we move ahead. I'm very honored to be joining Autohome and to be working with such a talented and passionate team.

It is by far the most well-known automobile media brand in China serving the largest number of automobile user communities in the industry. Even further, this company has a healthy business model, solid fundamentals and always stands at the forefront of innovation in the digital automotive industry.

I'm also very encouraged by Autohome's strategic initiatives in the new car and used car area, which I believe will be a huge benefit of a long-term development. Prior to joining Autohome, I served in various roles at the Ping An Property & Casualty Insurance Company for over 20 years.

Ping An Property & Casualty is one of the leading automotive-related insurance providers in China. And I therefore through my time there gained a comprehensive understanding of the automotive industry.

In addition, my experience with Lufax Holding and the Ant Group gives me tremendous practice exposure to the integration of online and offline business models, which will be invaluable for me at Autohome.

In summary looking ahead, I'm confident that with my experience and what Autohome has already established, we can take Autohome to the next level of success. [Foreign Language] Before our CFO, Jun provides more details of our business, let me delve into high-level key financials and provide some color on some of our strategic business.

Total revenues for the year reached RMB8.66 billion, an increase of 2.8% year-over-year, once again, outperforming the new car market in China. During the year revenue from our online marketplace and others revenue increased by 34.4% year-over-year and contributed to 23.2% of total revenues.

Notably, data products delivered robust year-over-year growth at 70%. Adjusted net income for the year continued to expand and increased by 6.2% year-over-year. As is well-documented, China's auto industry was heavily hit by the COVID-19 pandemic in early 2020, yet began to gradually recover during the year.

During the year, the sector saw significant increase in demand for digital transformation along with the continuous value migration from offline to online across the industry.

As a leading platform, we further leveraged our strength and established a comprehensive matrix of data products and solutions ranging from R&D sales and marketing to aftersales. This has demonstrated our ability to empower the digital development of automakers and the dealers throughout the value chain.

With this proven ability, we once again, were able to outperform the market with steady growth even with China's total new passenger vehicle sales falling 6% during 2020. In regards to our used car business, our annual invest in TTP Car Inc. marks an important milestone for Autohome's development in this area.

Autohome in combination with TTP has become a leading player in China's used car market. Bolstered by Autohome's strong online platform, TTP is able to expand access to a wider upstream supply of used car, while facilitating connections among users, automakers and dealers customers to improve transaction efficiency.

Leveraging the transaction business, we are able to further develop our auto financing operations and expand our service capability. Despite the decline in China's used car transaction in 2020, the transaction volume of TTP still achieved year-over-year growth.

As the used car market in China further develops, we believe that our used car platform will be readily equipped to capture market share and be another contributor to our overall growth. [Foreign Language] Looking back at 2020, we have rolled out a set of favorable practices in order to do our part in supporting our automakers and dealer partners.

During this unprecedented difficult COVID-19 period, as we move ahead we will continue to work closely and serve these partners by leveraging our extensive industry know-how while adding more value in their digital transformation.

With that, I will now turn the call over to our CFO, Jun for more business details and our closer look at our fourth quarter and full year 2020 financial results as well as the business outlook for the first quarter of 2021..

Thank you, Quan. To start, let me go through some of our key businesses first. In December 2020, the number of average DAUs, who accessed our mobile websites primary app and mini apps grew further to 42.1 million, representing an increase of 14.4% compared that of last year.

On the content front, we continue to make progress in enhancing the user experience by providing expanded content offering and optimizing useful tools. For example, we're encouraged to see the light version of the Autohome application has started to gain recognition in lower-tier cites with the market appeal to a younger demographic..

While during the year, we also delivered 15 total road trip activities helping auto brands attract users. In 2020, the cumulative GMV for the road trip businesses has grew to about five times that of 2019.

In terms of data products in 2020, a total of 45 automakers will engage with our data products and the total number of programs for Intelligent New Car Launch and Intelligent Marketing Solutions more than doubled as compared to the year of 2019.

As for data products to dealers in the fourth quarter of 2020, over 17,000 dealers purchased our data products. For auto financing business, our total GMV for consumer loans increased by 20% on a year-over-year basis in 2020. Now I will walk you through the key financials for the fourth quarter of 2020.

Please note that as with prior calls, I will reference RMB only in my discussion today unless otherwise restated. Now net revenues for the fourth quarter were RMB2.48 billion, a 6.6% higher than the corresponding period of the year before.

For a detailed breakdown, media services revenue were RMB1.03 billion, lead generation services revenue were up RMB847 million and online marketplaces and others revenue increased by 35.5% on a year-over-year basis to RMB607 million, primarily driven by the growth of our data products. Now moving to costs.

Cost of revenues was RMB268 million compared to RMB265 million in Q4 of 2019. Gross margin remained stable at 89% in the fourth quarter. Turning to operating expenses. Sales and marketing expenses in the fourth quarter were RMB871 million compared to RMB735 million in Q4 of 2019. P&D expenses were RMB397 million compared to RMB300 million in Q4 of 2019.

Finally G&A expenses were RMB71 million compared to RMB60 million in the fourth quarter of 2019. Overall, we delivered operating profit of RMB947 million for the fourth quarter compared to RMB1.1 billion in the corresponding period of the year before. Adjusted net income attributed to Autohome Inc.

was RMB1.19 billion for the fourth quarter compared to RMB1.15 billion in the corresponding period of 2019. The non-GAAP basic and diluted earnings per share or per ADS for the fourth quarter were RMB9.95 and RMB9.91 respectively compared to RMB9.67 and RMB9.62 respectively in the corresponding period of 2019.

Now let me turn to a short summary of our 2020 full year results. We continue to drive growth in total revenues, which increased by 2.8% year-over-year to RMB8.66 billion. Media services revenue were RMB3.46 billion. Lead generation services revenue were RMB3.2 billion.

And online marketplace and others revenue increased by 34.4% year-over-year to RMB2 billion primarily attributable to the increased contribution from our data products service line. In addition, we delivered an adjusted net income of RMB3.62 billion, representing a 6.2% year-over-year growth.

As of December 31, 2020, our balance sheet remained very strong with cash, cash equivalents and short-term investments of RMB14.63 billion. And we generated, operating cash flow of RMB3.33 billion in 2020.

I'm very pleased to announce that our Board of Directors have approved a cash dividend of approximately US$0.87 per ADS or US$0.2175 per ordinary shares after reflecting the proposed of four-for-one share split.

Following this dividend payment, we still have ample capital resources to invest in our businesses and further strengthen our relationship position going forward. Let me now address our first quarter 2021 outlook which reflects our current and preliminary view on the market and operating conditions and maybe subject to changes.

At this point, we expect to generate net revenues in the range of RMB1.81 billion to RMB1.84 billion. The revenue guidance includes approximately RMB100 million impact from the consolidation of TTP Inc.

for the first quarter of 2021, which was acquired in the end of December 2020, and the operating results of which will be fully included in the company's consolidated financial statement for the fourth quarter of 2021.

In conclusion, as mentioned earlier, but important to reiterate despite the challenging automobile sales – our efforts throughout 2020 to develop new initiatives enabled us to achieve another solid year. Our data products continue to lead our overall growth, driven by high data product adoptions.

In addition, the expanded adjusted income also reflected our enhanced operating efficiency. Looking ahead, we'll continue to invest strategically in our ecosystem to remain at the forefront of innovation in the digital automotive space, while maintaining a disciplined cost structure in our core business. With that, we are ready to take your questions.

Operator, please open the line for Q&A..

[Operator Instructions] The first question is from Eddy Wang at Morgan Stanley. Please go ahead..

Hello. [Foreign Language] Thank you for taking my question. My question is about the guidance for the first quarter. So, your guidance actually in prior around 17% to 19% year-over-year growth. If stripping out the consolidation of TTP Car, we still have a low-teen growth for the first quarter revenue.

So is it – we know that the OEMs are starting to do the annual budget around Chinese New Year.

So just wonder, if you have some initial color from the OEMs in terms of the budget this year, which is a little bit better than expected or it is because that we have very strong growth momentum of data product, especially given that in the fourth quarter data products growth is over 80% year-over-year. Thank you..

[Foreign Language] Thank you for the question. I would like to take this question first then Mr. Jun may have some add-on opinions. So, first of all, let me comment on the market. According to the association that in 2021, the total sales in the auto market would grow between 7% to 9%.

As you know for the automakers their budget usually would grow together with their sales. So they are coordinated. So that's why we foresee they would have a higher budget if the sales would be growing.

And also compared with 2020, we will see new models will be released to the market, because in 2020 due to the negative impact of the COVID-19, there are some delays of the new car models and some would choose to launch online. So we would foresee there will be new car launching business in 2020 -- 2021.

And also there are some not-so-positive news, because in 2021 we do see some outbreak of the epidemic in some of the local regions, but I have to say that firstly, this is only local and regional. And secondly, as to how much that would affect the automakers we are still under some estimation and investigation and survey.

So that's why it's still too early to make any further prediction. Thank you..

Yes. Just to add to Mr. Shao's comment, our -- we'll see actually our traditional businesses will turn back into positive territory. But at least in the first half, our primary growth drivers are still going to be our data business and our used car businesses. Thank you Eddy. That's our answer.

Operator?.

Thank you. Our next question is from Miranda Zhuang at Bank of America Securities. Please go ahead..

Thank you. [Foreign Language] My question is about the used car business.

Can management elaborate more about how you will integrate the TTP with your existing business? And what's your new business plan for your overall used car business? And also it will be helpful if you can share with us TTP's operating metrics such as transactional volume, market share and their trends.

And lastly, can you comment on how the consolidation of TTP could potentially impact the revenue and profitability in 2021? Thanks..

[Foreign Language] Thank you for the question. I would like to join Mr. Zou to answer this question, especially, related to the integration and the planning of the used car platform business. After we control the shares of TTP we actually continued our Autohome used car strategy. To summarize, that is light asset model and make it as a platform.

We used double cloud to serve our customers. We also want to connect the full value chain. And we want to create a closed loop of the C2B and B2C. So we are dedicated to bring this platform as the biggest used car online transactional platform. And in this regard, we have bring the most critical part, which is the transactional part, to this whole loop.

For the TTP, in terms of the transactional volume in the C2B model, it is already the biggest in China. And under 2020, when the home market was not so good, but TTP is, on contradictory, is growing its business. Our next step would be join hands together with Ping An Bank and Ping An P&C.

We want to bring chemical reactions together with [Technical Difficulty] and we would help to see to sell cost better and also help [Technical Difficulty] to deal better inventory. And in this way we can create more value. .

To add on what Mr. Shao said, we also narrowed its loss last year, despite actually a declining used car market. And I think they are expected to, sort of, breakeven sometime in the second half of this year. And they will have a minor impact on our bottom line and the contribution to our top line are definitely a positive.

And also, I think, all used car online platforms has seen a declining sales volume and revenue last year in China, except for TTP. So if we are not misunderstood, not, sort of, a misunderstanding then, I think, they are already the largest online transaction platform in Chinese used car market last year. Thank you. That's my -- our answer. .

Our next question is from Thomas Chong at Jefferies. Please go ahead..

Thank you. [Foreign Language] So, thank you management for taking my questions. This is Mavis asking on behalf of Thomas. And so, I'm not sure if you can comment about our data product strategy in 2021. And also, can you comment about online advertising outlook this year on the back of the recent outbreak of COVID? Thank you..

[Foreign Language] Thank you. I would like to take the data product question. If you look at 2020 our year-over-year data product growth is 70% and we actually had 45 clients. In 2019, this number is only 36, so which means we have nine new customers in 2020. In terms of intelligent new car launch and intelligent marketing solution, we doubled.

And also for the smart series offerings to the dealers, we already had business relations with more than 17,000 dealers. Now, talking about 2021, we already have some new products and we would already continue to serve the OEMs and the dealers and we are also going to further expand our market share.

And in terms of the intelligent series of products, we are going to have more on the sell-side new offerings. And also for the smart -- we would have more R&D side of solutions. So, in this way we are going to add on new products in 2021.

And in 2021, we are also going to launch the industrial Internet network and we are going to build a whole comprehensive business model out of that. Thank you..

[Foreign Language] Now, I want to take your second question. In terms of 2021, there are some bouncing-back after COVID-19 in some of the regions. But I think the situation is totally different for 2020. Because in 2021 there is only one or two regions which have the outbreak which is local and regional.

And also the state government already took grid-style anti-epidemic measures to control the epidemic. So we only see one to two regions the sales may go down. Now, talking about the OEM budgeting. Actually during the epidemic a lot of our expenditure would be transformed from offline to online.

And the second trend is that a lot of purchase would be concentrated on the top players especially the leading players. That's also a trend. And the third trend is the total expenditure on the budget will always go with the sales. If the sales grow, then the budget will also grow. Now, let me summarize.

If 2021, epidemic only occur in some of the local regions and this only affects the OEM sales in some of the local regions. And as for how would that impact the overall online budget of advertising of the OEMs, it's still too early to make any conclusion. Thank you..

Our next question is from Liping Zhao. Please go ahead..

[Foreign Language] Thanks for taking my questions. I have two questions here. The first question is related to the TTP consolidation.

So, can management share the growth expectation of TTP for next maybe two to three years and the key growth driver behind it? And my second question is about the new clean energy cars, because we see a lot of new OEMs appear in the market. And what will be the impact on Autohome's business operation? Thank you..

Hi. I will take your first half of your question and Mr. Shao will address your second half of your question. So, I think TTP's growth driver will be several. The primary driver will be the growing used car market in China, which we think will be growing much faster than the new car market.

And now they are the -- as I mentioned, the largest online transaction platform already, not only the auction platform in China.

And we are hoping that with the sort of help from us by providing them with seller short leads, buyer leads and financing from Ping An financing, let's say and insurance, they will be able to grow not only their online C2B and B2B auction, but will be able to provide a lot of value-adding services to sellers and buyers of used car and also dealers and other players in the value chain.

We have seen that -- the sort of integration was still going on in the past two years quite smoothly. And we hope that, we'll see a winner-take-all sort of scenario in the online used car sector for TTP and together with us..

[Foreign Language] I would like to take your second question related to the renewable energy car. Actually, we have very good collaboration with those new players in the renewable car business. We are an early bird in this sector because we had a lot of planning in terms of content and in the channels and the business models.

We actually adopted very innovative models, very different from our collaboration with the traditional OEMs. Now, talking about our collaboration with the EV car OEMs, our perspective is from the 2C side users. We are helping them to select the most suitable EV car for them.

And we also provide comprehensive solution, one-stop solution and a full process solution to the EV car OEMs. If you look at the total EV car sales in terms of the Chinese car market, it only accounts for 5% out of the total car sales. In Autohome, our EV business already exceeds 5% of our revenue..

Operator, next question please?.

Our next question is from Brian Gong at Citigroup. Please go ahead..

Thanks management for taking my question. Congratulations on the solid results, especially for data products.

So given our penetration on OEM side further increase and our base further enlarged, may I know what's the management view on the growth rate for data products for 2021? And also any new data products this year? I remember management mentioned that the SaaS segment for OEM and dealers is going to be like over RMB 20 billion in 2025.

And may I know, if we have any internal target or plan to – what market share for Autohome to take in 2025? Thank you..

Thank you for the question. Actually talking about the data products, in addition to the intelligent marketing solutions, we are going to further enhance the market share. And we are also going to launch new products to cover the non-marketing solutions part, especially on the digitalization part and also the R&D, the research side of the OEMs.

So that would be the incremental new part of our business. And that would have helped us to establish a very good blueprint for the next few years. And we do – would grab more market share from the digitalization process..

Okay. To answer your second – second part of your question. I think even though you have seen a very high growth in 2020 in our data products, but the overall market is big as you mentioned and then a lot more let's say car models for us to help them to do intelligent new car launch or intelligent marketing.

And then we are going to roll out more services to dealers as well in this year. So we believe in the mid-term – mid- to long term, the only ceiling to our growth in that sector is probably our ambition. And that's our answer to you. Thank you..

Operator?.

Our next question is from Ritchie Sun at HSBC. Please go ahead..

Thank you management for taking my questions. I will translate it myself. So first question is about the user growth strategy. So we see 4Q has a strong user growth teens-level growth again. So I wonder what about the sales and marketing spending to drive the user growth in 2020.

What will be the strategy and area to spend? And the second question is about the negotiation of the lead generation product price model with the dealers. So what is the latest update on that? Thank you..

[Foreign language] Thank you for the question. Now talking about our DAU. Actually in 2021, we would expect our DAU to continue to grow. We would have three features to summarize our DAU growth, firstly, more video-based, secondly, younger generation and thirdly more granular level, at the lower-tier cities and the lower-tier markets.

Now talking about the lead generation product pricing, actually in our last quarter report, we already said 30% of the OEMs and the dealers already accepted, the floating pricing model. And also this year, we have two strategies. Firstly, for dealers, who already accepted the floating pricing model, we are going to offer them better service.

And also we are going to offer those dealers more incremental perhaps leads and incremental services. And secondly, we are going to expand the coverage of this pricing model. So, we are going to offer more business opportunities for those dealers who have not signed agreement with us. We are going to offer them more choices.

And we are going to offer more deluxe services for them. And also for those who already accepted the floating pricing model dealers, we are going to offer them better services and more incremental services..

Thank you. There are no further questions at this time. I will turn the conference back to management, for closing comments..

[Foreign language] Thank you very much for joining us today. We appreciate 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 any further questions or comments. Thank you..