Ladies and gentlemen, thank you for standing by for Autohome's First Quarter 2024 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. If you have any objections, you may disconnect at this time.

A live and archived webcast of this earnings conference call will also be available on Autohome's IR website. It is now my pleasure to introduce your host, Sterling Song, Autohome's IR Director. Mr. Song, please go ahead. .

Thank you. Thank you, operator. Hello, everyone, and welcome to Autohome's First Quarter 2024 Earnings Conference Call. Earlier today, Autohome distributed its earnings release, which can be found on the company's IR website at ir.autohome.com.cn. Joining me today on today's call are Chief Executive Officer, Mr. Tao Wu; and Chief Financial Officer, Mr.

Craig Yan Zeng. Management will go through their prepared remarks first, which will be followed by a Q&A session where they will be available to answer your questions. Before we continue, 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 not limited to, those outlined in our public filings with the U.S.

Securities and Exchange Commission and the Hong Kong Stock Exchange. Autohome doesn't undertake any obligation to update any forward-looking statements, except as required under applicable law. Please also note that Autohome's earnings press release and this conference call include discussions of certain unaudited non-GAAP financial measures.

A reconciliation of the non-GAAP measures to the most directly comparable GAAP measures can be found in our earnings release. I'll now turn the call over to Autohome's CEO, Mr. Tao Wu, for opening remarks. Please go ahead, Mr. Wu. .

[Foreign Language].

[Interpreted] Thank you, Sterling. Hello, everyone. This is Tao Wu, CEO of Autohome. Thank you for joining our earnings conference call today. .

[Foreign Language].

[Interpreted] I'm pleased to report a solid start to the year with total revenues growing by 4.9% year-over-year to RMB 1.61 billion. Revenues from the online marketplace and others continued to achieve double-digit growth, increasing by [ 13% ] year-over-year, rising to 34.5% of total revenue.

Notably, we continue to see strong growth in revenues from our data products, which increased over 10% in the quarter from a year earlier, driven primarily by our smart series products. We also saw robust growth in our NEV business with revenues for the quarter increasing by 49.6% year-over-year.

Adjusted net income attributable to Autohome for the quarter was up 2.2% year-over-year to RMB 494 million, while our adjusted net profit margin remained at a relatively high level of 30.7%. .

[Foreign Language].

[Interpreted] For our innovative business, as new franchise stores are on track to open, our Autohome Space will expand further into a broader geographic area, driving the development of our online and offline integration.

We also further strengthened our collaboration with Ping An Group through providing consumers with greater peace of mind and a more convenient user experience.

In addition, we actively responded to the national trade-in-for-new policy, launching a series of initiatives such as the Hundred Cities Trade-in for New Car-Buying Festival in collaboration with Ping An Group, allowing consumers to enjoy even more benefits. .

[Foreign Language].

[Interpreted] Looking forward, we are committed to maintaining our professionalism and expertise while driving continuous innovation and offering even more convenient and high-quality products and professional services to our users and clients.

Meanwhile, we will continue to refine, improve and optimize our overall business framework to ensure sustainable developments in both traditional and emerging sectors.

Additionally, we will fully leverage the Ping An Group's vast resources to explore and develop opportunities in various areas, including automotive ecosystem, big data, cooperative ownership services and user benefits. Together, we will develop even greater synergies and push forward with new business initiatives. .

[Foreign Language].

[Interpreted] With that, I will now turn the call over to our CFO, Craig Zeng, for a closer look at our first quarter 2024 operating and financial results. .

[Foreign Language].

[Interpreted] Thank you, Mr. Wu. Hello, everyone. I'm Craig Zeng, the Chief Financial Officer of Autohome. .

[Foreign Language].

[Interpreted] In the first quarter, we continued to focus on developing high-quality content, practical tools and premium services to enhance Autohome's brand influence.

In March, amid a flurry of new car launches, we introduced our original IP content, [indiscernible] on 8 major online platforms by offering comprehensive real-world testing and in-depth analysis of the latest models. We provided a fresh content experience that has received widespread positive feedback from both users and clients.

This new content carries more than 500 million exposures across all platforms, significantly enhancing Autohome's influence. .

[Foreign Language].

[Interpreted] In addition, in response to escalating price competition and frequent fluctuations in vehicle pricing, we introduced a number of innovative tools, including a price tracker and a comprehensive model comparison too.

The former enables users to intuitively see pricing trends while the latter provides enhanced detailed comparisons to improve the comparisons and decision-making process.

According to QuestMobile, average mobile DAUs reached 69.39 million in March, an increase of 8.1% from a year earlier, which clearly demonstrates the effectiveness of our content-focused strategy for user growth. .

[Foreign Language].

[Interpreted] Turning to NEV. Autohome Space continues to make significant progress.

Autohome Space is not only present in major cities, including Beijing, Shanghai, Guangzhou, Chongqing and Chengdu, but has also expanded into key second-tier provincial capital cities, including Kunming, Guiyang, and Jinan, et cetera, as well as promising third and fourth-tier cities like Lushan, Zhaoqing and Heyuan, et cetera, reaching broad market coverage.

During the quarter, we also granted franchise rights to partners in 9 additional cities, where stores are on track to open later this year. This expansion will significantly enhance the presence and the reach of our NEV services geographically expanding our reach to additional users. .

[Foreign Language].

[Interpreted] Our Autohome Space stores also function as an effective marketing platform equipped with substantial online and offline resources as well as advanced digital capabilities. Leveraging these advantages, we can provide OEMs with integrated one-stop marketing solutions.

Currently, our 3D holographic car models cover more than 80 mainstream NEV models in the market. In the first quarter, our new retail business collaborated with more than 30 brands, launching over 100 marketing events, including new car launches, test drives and driving comparison.

Revenues from NEV brands in the first quarter this year increased by 49.6% from a year earlier, consistently outpacing industry growth rate. .

[Foreign Language].

[Interpreted] For digital products, we are committed to applying large language models or LLM more widely across our business. We are gradually replacing existing strategy-based chat bots with customized LLM that are tailored to the automotive industry.

These LLM are now being used for AI outbound calls, customer services and the creation of marketing content, significantly enhancing the quality and efficiency of our existing data products. This initiative not only refines our product performance but also expands the coverage of our clients.

In the first quarter, the number of dealers that purchased our data products continued to increase, driving revenue growth of 27% year-over-year for our dealer data products. .

[Foreign Language].

[Interpreted] We have also applied our digital capabilities to the used car business, creating a transparent and trustworthy buying environment. For instance, for consumers, we provide a comprehensive set of tools to verify true vehicle conditions to help buyers accurately assess a vehicle and select quality car options.

For dealership, we offer a broad range of tools, including price and vehicle condition checks as well as digital marketing solutions to help them improve operational efficiency.

In the first quarter, the number of dealerships that [ queried ] our one-stop vehicle condition and pricing platform saw a year-over-year increase of more than 80%, reflecting leadership recognition of Autohome's expertise. .

[Foreign Language].

[Interpreted] In summary, Autohome achieved steady growth in revenue and profit in the first quarter this year, driven by the rapid development of our digital products and the NEV businesses.

Additionally, the introduction, replication and iterative updates to our new innovative business models are increasingly contributing, diversifying and optimizing our revenue mix.

Looking ahead, we will continue to explore new businesses, leverage Ping An Group's unique advantages, discover new opportunities to collaborate and promote the sustained and healthy development of Autohome. .

[Foreign Language].

[Interpreted] Next, let me briefly walk you through the key financials for the first quarter of 2024. Please note that as with prior calls, I'll reference RMB only in my discussion today, unless otherwise stated. .

[Foreign Language].

[Interpreted] Net revenues for the first quarter were CNY 1.61 billion. Breaking it down by segment, Media services revenues were CNY 327 million. Leads generation services revenues were CNY 726 million, and Online marketplace and others revenues were CNY 555 million, up 13% year-over-year. .

[Foreign Language].

[Interpreted] Cost of revenues in the first quarter was CNY 301 million compared to CNY 340 million in the first quarter of 2023. Gross margin in the first quarter was 81.3% compared to 77.8% during the same period last year. .

[Foreign Language].

[Interpreted] Turning to operating expenses. Sales and marketing expenses in the first quarter were CNY 641 million compared to CNY 523 million in the first quarter of 2023. Product and development expenses were CNY 336 million compared to CNY 324 million in the first quarter of 2023.

Finally, general and administrative expenses were CNY 150 million compared to CNY 149 million during the same period last year. .

[Foreign Language].

[Interpreted] Overall, we delivered an operating profit of CNY 276 million in the first quarter compared to CNY 263 million in the corresponding period of 2023. Adjusted net income attributable to Autohome was CNY 494 million in the first quarter compared to CNY 484 million in the corresponding period of 2023. .

[Foreign Language].

[Interpreted] Non-GAAP basic and diluted earnings per share in the first quarter were CNY 1.02, up from CNY 0.98 in the corresponding period of 2023. Non-GAAP basic and diluted earnings per ADS in the first quarter were CNY 4.08 and CNY 4.07, respectively compared to CNY 3.92 and CNY 3.91, respectively in the corresponding period of 2023. .

[Foreign Language].

[Interpreted] As of March 31, 2024, our balance sheet remains very strong with cash, cash equivalents and short-term investments of CNY 23.65 billion. We generated net operating cash flow of CNY 561 million in the first quarter of 2024. .

[Foreign Language].

[Interpreted] The above is our financial summary. With that, now we are ready to open up the Q&A session. Operator, please open the line for the Q&A session. .

[Operator Instructions] Our first question comes from the line of Brian Gong from Citi. .

[Interpreted] I have 2 questions. First is regarding the auto policy rollout by the government recently.

Can management share your view on this? How will the policy impact auto market in China? And what measures Autohome will take to cater to those policies? And the second question is regarding our data products for dealers, which has been a key growth driver to the company over the past several quarters.

How should we look at the growth potential for the segment in the future?.

[Interpreted] Okay. Thank you for raising these questions. Since you raised 2 questions, Mr. Wu Tao will take the first one. .

[Interpreted] Okay. I think that the 2 policies you mentioned are actually the [ notice of action ] plans to promote large-scale equipment [ renews ] and consumer goods trade-in issued by the state councils in March of this year.

And the other one is the notice on implementation rules for automobile trade-in subsidies issued by the Ministry of Commerce and the other [ 7 ] departments in April.

These 2 notices relate to the policy of capital subsidy for automobile trade-in, further clarifying scope and standard of the subsidy and also allow consumers to better participate in auto trade-in activity by increasing the policy guidance and support.

Therefore, promoting the trade-in of auto and other consumer goods have become the focus of domestic consumption promotion of this year. I think that these 2 policies are pretty clear. For example, for 1 NEV car, it will get a subsidy of CNY 9,000 and for 1 ICE car, it will get CNY 7,000 in terms of the subsidy.

So I do believe that it will further promote consumption. [Interpreted] So after the policy was issued, what will be the impact on the auto market? I think that since Q1, the release of the 2 notices, there are several characteristics happening on the auto market. There are some direct as well as indirect impact.

So next, I would like to elaborate on the topic from the 3 aspects. [Interpreted] Okay.

Firstly, from the macro perspective, data released by CPCA shows that China's auto market sales recovered in the first quarter of 2024, with retail sales increasing by 13.1% year-on-year due to price cuts by OEM, consumption promotion campaigns carried out in different places, sharp demand for car purchases have been [ realized ] in accelerated manner.

With the Beijing Auto Show held in April, OEMs began to launch new brands and new models and the [indiscernible] car market also heated up significantly, and the car market is expected to continue to rebound in the future. [Interpreted] And secondly, just as I mentioned before, the car sales volume has been constantly on a rise.

This is attributable to the trade-in policies. With the subsidy offered by both the government as well as the OEMs, of course, the consumption will be pushed up. While on the other hand, we should also see that the price competition in this industry is still quite fierce.

According to the data released by CPCA, we also see that in the first quarter of this year, the passenger vehicle car price [ scale ] is already [ 60% ] of that the same period last year, and also the total price cut level of the year 2022.

So we think that with this happening, there will still be a lot of pressure on the profit margin of the automakers, while on the other side, the competition landscape is still quite uncertain. [Interpreted] And the third thing, we have to look at market structure.

We see that from April 1 to April 14, new energy vehicle sales increased by 32%, while [indiscernible] and the penetration rate reached [ 50.1% ], which is much faster than many people expected.

With improvements of the range as well as the charging speed of the new energy vehicle, the completion of the charging facilities as well as the decline of the cost, more and more consumers are beginning to accept the new energy vehicle. As a result, we will see that the market structure changes will be also faster than our expectations.

[Interpreted] Next, I would like to elaborate on the concrete actions which will be taken by Autohome. As I said before, you can see that the impact of these policies have both pros and cons on the market. But for Autohome, it is favorable to us because it can deliver real benefits to the users and will also stimulate the demand on the market.

So for Autohome, we will definitely grab this opportunity and you can see that from our own size, we become the key cooperation unit of this campaign.

Together with [indiscernible] communications as well as the other enterprises, we will actively respond to the call of the national policy, [ give full play ] to its platform advantage and study the automobile market in depth and publicize relevant national policies. [Interpreted] Next, I would like to talk about 2 concrete actions taken by Autohome.

The first one is that the newly opened [ super trading season ] channel of our Autohome app is organized and integrated in detail for the subsidy policies of different cities and the car companies to help consumers better understand the details of the relevant policy.

While in the meantime, in collaboration with a number of automakers and Ping An Group, we provide high-quality sell-old and buy-new services through more than 20 Autohome new energy offline stores and we would like to activate the consumption potential and promote the development of the car market.

[Interpreted] The other thing is that comprehensively, we can see that Autohome, we have been joining hands with Ping An P&C to create the Hundred Cities Trade-in for New Car-Buying Festival covering 108 cities [ on 3 routes ] through mobile holographic camping caravans and Ping An insurance offline team and utilizing big data to accurately identify people with replacement needs along with test drive, insurance and other service guarantees to activate automobile consumption potential.

On the other hand, we also launched a special super-subsidy activity covering more than 100 brands, nearly 1,000 car models with the highest subsidy of CNY 6,000 to effectively stimulate the market purchasing power. [Interpreted] Overall speaking, the automobile industry will continue to be valued by the state as well as the government this year.

So we think that with the actual implementation of various policies, it will further stimulate the market consumption vitality and promote high quality and steady development of the automobile industry this year. We're pretty confident about that. [Interpretation] Okay, that's all for my answer to the first question. Thank you. .

[Interpretation] The second question about the dealer's data products future potential will be taken by Mr. Zeng. So the answer is that actually, we see the total number of the paid merchants for dealer data products already exceeded 20,000. So the growth potential is pretty significant. .

[Interpreted] So our objective is to let more merchants better utilize our modules to promote their own sales to help them to cut costs and improve efficiency. So in the future, we will continue to develop new modules in this aspect. We will also help those modules together operate so as to facilitate our merchants.

On average, each of the merchants, they purchase 5 products but we still have another 11 established under mature products. Therefore, there is still a lot of potential for us to tap into. In Q1 of this year, we see that the growth of this business is already [ 27% ]. It shows very strong competitive [indiscernible].

So we believe that there will be a big potential in the future. .

Our next question comes from the line of Ritchie Sun of HSBC. .

[Interpreted] I have a question about the used car business. I noticed that Tiantian Paiche has been under some impacts from the new car price wars in first quarter.

So if this actually continues, so how should we think about the future growth trend and what is our strategy to tackle this?.

[Interpreted] Okay. I will take this question from 3 different aspects. First, from the market perspective, we see that in the first quarter, you can see that the used car costs grew by 7.6% year-on-year, a slowdown in the growth.

By the end of March of this year, domestic used car trading PMI index has been below [ 50% ] mark for 16 consecutive months. The industry as a whole is under pressure. So I think that this is partly due to the price war. According to the data released by CPCA, you can see that the new car count has increased 18%.

But in the previous year it was only 12%. The new priced cars have been imposing a lot of pressure on the used cars. So we see that this is happening but it will not continue for a long time because it will only slow down the replacement but with only some postponement as well as delay. But it will not continue forever.

[Interpreted] And the second part is from policy perspective. I think that this is favorable to the used car market. Ministry of Commerce launched the trade-in policy, sell old and then buy new, bringing huge amount of opportunity to the used car industry.

So you can see that a large number of the car parts will also facilitate used car trade-in on this market. And TTP is also a very important link in the consumption of trade-in, sell old and buy new. So we believe that it will enjoy a lot in the future. [Interpreted] And the third part is from TTP itself.

We can see that recently TTP launched a 30-minute high-speed online national bidding service, including online inspection, instant online bidding, and online offers to sell cars quickly. Consumers can drive to the site for free testing and then get quotes from the real buyers online within 30 minutes.

This model greatly improves the efficiency of consumers' car purchases, realize the seamless connection between sell old and buy new, and combined with the new energy offline experience stores, consumers can sell old and buy new in one stop, which helps to activate the used car market as well as to promote the related transactions.

And with the offline collaboration between Autohome and the group as a whole, it will greatly support TTPs future expansion. .

Our next question comes from the line of Thomas Chong from Jefferies. .

[Interpreted] My first question is about management comments about the recent Beijing Auto Show and how we should think about the EV sector this year? And my second question is about the use of cash. .

[Interpreted] Okay, thank you for raising this question. Let me take this one. So this year's Beijing Auto Show was the first heavyweight auto show held in Beijing in the past 4 years, and therefore the most attention grabbing in recent years, attracting a large number of merchants from all walks of life and visiting groups.

In 10 days of the auto show, including the holiday, we attracted in total 900,000 visitors with the world debut of 117 vehicles and [ 378 ] new energy models. [Interpreted] So in the year 2023, we see that the NEV production and sales accounted for more than 60% of the global total.

China's automobile going global campaign continued to heat up and intelligent development accelerated year by year with a strong product power as well as the technical strength. Although the sales figures for the whole month of April are not yet available, but as Mr.

Wu Tao mentioned, market penetration of domestic NEV sales in the first half of April already hit 50%, exceeding traditional fuel vehicle sales for the very first time.

So while at the same time, we also see that the new energy industry continues to diverge in NEV players, we can see that the players represented by BYD and [indiscernible], whose scale effect gradually appear and profitability continue to improve, while at the same time, there are also car brands that may gradually lose market share and increase losses in a fierce price war.

The next [ 3 ] years will be an important period of competition for fuel cost, attractive technology and any of these companies with strong product power is expected to gain more market shares. Autohome will also adapt to the market trend, relying on new energy offline experience stores and cooperate with various new energy brands.

And second, our 3D holographic car models have already covered more than [ 18 ] mainstream new energy models. We have cooperated with most of the new energy brands and revenue from the new energy brands continue to outperform the industrial sales group.

[Interpreted] In terms of our cash use plan, we see that over the past few years, Autohome have been committed to continuously improving shareholders returns. In the year 2022, the Board of Directors updated the dividend payout policy which is to distribute fixed amount of CNY 500 million which is equivalent to 28% of the net profit of that year.

At the end of FY '23, the company further revised our dividend policy by announcing a decision to pay a dividend of CNY 1 billion and we have completed this dividend payout in the first quarter of this year.

As for the 3 years from FY '24 to FY '26, we plan to pay dividends every 6 months and with a total annual dividend of no less than [ CNY 1.5 billion ]. So you can see that Autohome has a strong history of solid financial position, adequate cash reserves and strong cash flows.

Over the past few years, we have been very strongly giving returns to our shareholders and we will continue to pay dividends and have been committed to continuously improving shareholders returns. At the same time, we will also closely monitor the market trend and we will continue to give the maximum return to our shareholders as our target. .

Our next question comes from Xiaodan Zhang from CICC. .

[Interpreted] It seems the advertising budget for OEM is still tight this year.

So what is your outlook for our Media services business for the subsequent quarters?.

[Interpreted] Okay. Thank you for raising this question. I will take this question. We see that in terms of the sales of ICE vehicles as well as NEV vehicles in first quarter, we see that actually, even though the sales volume increased by 4%; however, we see that actually all of the automakers have been pursuing their strategy of price for volume.

As a result, their profit margin has been squeezed. They have been spending more budget on subsidizing consumers so as to improve the volume. As a result, advertising budget has increased. [Interpreted] But at the same time, we see that NEV companies have increased their advertising investments.

For example, in first quarter, Autohome's media advertising revenue from NEV players doubled Y-o-Y. And it will continue to grow in the future. And we also expect that the price for volume strategy of OEMs will continue, but will not continue forever. So the advertising budget will still be under pressure in the short period of time.

However, in the long run, we believe that actually we will continue to pay more attention to advertising, and the advertising budget will come back to the normal track because the market will continue to follow the right direction. .

Okay, operator, if there's no extra question, we come to the end of this Q&A session. .

There are no further questions at this time. I'll turn the conference back to the management team for closing comments. .

[Foreign Language].

[Interpreted] Okay, thank you, everyone. Thank you for joining us today. We appreciate your strong support, and we look forward to updating you on our next quarter's conference call in a few months time. And in the meantime, please feel free to contact us if you have any further questions or comments. Thank you, everyone. Thank you. Bye-bye. .

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.].