Autohome Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
November 2, 2023

There are 5 speakers on the call.

Operator

Ladies and gentlemen, thank you for standing by for Autohome's Third Quarter 2023 Earnings Conference Call. The session will follow management's prepared remarks. 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 the earnings conference call will also be available on Autohome's IR website.

Operator

It is now my pleasure to introduce your host, Sterling Song, Autohome's IR Director, Mr. Song. Please go ahead.

Speaker 1

Thank you, Heidi. Thank you. Hello, everyone. Welcome to Autohome's 3rd quarter 2023 earnings conference call. Earlier today, Autohome Distributed is earnings press release, which can be found on the company's IR website at ir.

Speaker 1

Autohome.com.cn. Joining me today on the call are Chairman and CEO, Ms. Qu Yuan Lung and Chief Financial Officer, Ms. Craig Yansong. Management will go through their prepared remarks, which will be followed by a Q and A session, where they will be available to answer your questions.

Speaker 1

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 could differ materially from our current expectations. Potential risks and uncertainties include, but are not limited to, those Outlined are public filings with the U.

Speaker 1

S. Securities and Exchange Commission and the Hong Kong's tax change. 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 for the most directly comparable GAAP measures can be found in our earnings release.

Speaker 1

I will now turn the call over to Autohome's Chairman and CEO, Ms. Long, for opening remarks. Please go ahead, Ms. Thank you, Sterling. Hello, everyone.

Speaker 1

This is Juan Long, Chairman and CEO of Autohome. Thank you for joining our earnings conference call today. In the Q3, our new businesses continue to drive Autohome's overall growth As we further optimize our revenue structure, this marks our 1st straight quarter of top line and bottom line growth on a year over year basis, while consistently maintaining a high net profit margin. Net revenues for the Q3 were RMB1.91 billion. Revenues from Online Marketplace and Others Business increased 25.2% year over year, accounting for 31 4% of total revenue.

Speaker 1

Revenue from data products in particular generated strong growth momentum increasing more than 30% compared to the same period last year. We also made substantial progress in deepening our collaborative efforts with NEV Automators. Revenues from NEV Brands were up by nearly 70% year over year as a result. Moreover, adjusted net income attributable to Autohome for the quarter was up 2.3% year over year with our adjusted net margin hitting 31.7%. During the quarter, we accelerated the build out of our content ecosystem, which combines efficient tools, Content and services to offer users the information they are seeking motivates creators to produce content and engage with our community and creates a virtuous cycle that drives growth across the platform.

Speaker 1

We also continue to explore new ways to develop, integrate and create synergies between the diverse business models across our ecosystem. The Autohome and the space franchise stores we recently launched in cooperation with TTP in Chengdu and Chongqing have given us the opportunity to further refine the new retail plus used car business model and drive further business development. In addition, we also upgraded the foundational infrastructure and capabilities Our digital platform to enhance the value of our data products and seamlessly integrate big data and cutting edge technologies to empower the digital transformation of dealers. The rapid adoption of NEVs is accelerating the transformation of the automotive industry, bringing new technologies and business models to the forefront. In this new market environment, we are focused on capitalizing on the major opportunities NEVs and digitalization presents supporting our partners in the transformation of their businesses and broadening the services we have our offer.

Speaker 1

This will ultimately create a one stop ecosystem that spans the entire Consumer cycle from the research and the purchase phase through to the use and exchange of cars to drive long term sustainable growth. With that, I will now turn the call over to our Chief Financial Officer, Ms. Craig Sheng, for a close look at our Q3 operating and financial results. Thank you, Ms. Long.

Speaker 1

Hello, everyone. I'm Chris Zeng, the CFO of Autohome. In the Q3, we set up our efforts to systematically develop tools and content, widen the platform mode and broaden our profile across the industry. With interest in NEVs growing, for example, we tested nearly 100 popular models to provide users with comprehensive, easy to understand and professional analysis and information. To date, more than 2,600,000 users have used our testing tools to assist their car buying decision making.

Speaker 1

In addition, we promoted Autohome's August 18 Super Auto Festival on multiple platforms in collaboration with CCTV finance channel and other broadcast and social media platforms. Total exposure exceeded RMB14.5 billion session, which further strengthens our profile in the industry. At the same time, We launched the next development phase for our service system, which combines online content with offline experiences By our highly experienced editors, we also launched A shopping guide program to encourage content creators to produce and promote content that facilitates the decision making process for consumers and boost overall car consumption through our platform. According to QuestMobile, mobile DAU in September increased 39.3% year over year to RMB369.01 million underscoring our ability to steadily strengthen our leadership Following the launch of our 1st brick and motor NEV experience store last September, We further refined this business model by integrating our used car business. In addition to providing a one stop Service for NEVs from multiple brands that spans from car selection to purchase services.

Speaker 1

These stores now offer consumers Additional opportunities for car sales and take advantage of TTP's vehicle disposal capacity. Autohome and the Space Chengdu store, which opened this past August, has become particularly popular among younger consumers with its innovative marketing activities and automotive culture offerings, including a car museum. In addition, the Chongqing store, which officially opened 2 weeks ago is our 1st location to feature a dedicated used car selection within the store. This provides consumers with a one stop experience allowing them to sell their old cars and purchase an EV or a used car at the same time. This innovative service model capitalizes on the synergies between our new and the used car businesses and offers consumers a complete field of additional services, including vehicle inspection, purchase and replacement.

Speaker 1

Our new retail business at the moment is developing rapidly with the construction of new retail stores in certain cities having already begun. Over the next 2 years, we plan to increase the penetration of Autohome and Space franchise stores across the country, allowing Autohome to turn its online advantages into offline business across a broad range of markets. TTP will also leverage the Autohome Energy Space Network to accelerate the expansion of its operations nationwide. On the digitalization front, we upgraded our technology and information channels to improve communication and the user profiling and strengthened the efficiency and accuracy of customer outreach. We also broadened The application of AI into our smart products to generate further labor savings, improve content quality and provide More value to dealer customers.

Speaker 1

In the 1st 9 months of the year, key metrics such as the average number of data products Adopted by each dealer store and average revenue from data products per dealer store both increased by double digits when compared to the same period last year. We are rapidly expanding our digital product portfolio across a range of application scenarios in order to support dealers as they shift from human driven to digital driven operations to improve their operational efficiency and ultimately lower the out the door prices for customers. Turning to our used car business. In addition to our ongoing cooperation with new retail stores, We launched a 1 stop vehicle price inquiry product during the quarter based on used car auction and the new car transaction data. This platform provides used car dealers with the real vehicle transaction prices as well as valuation tools Supported by large language model capabilities, dealers can now accurately evaluate each vehicle by clearing the transaction prices for new and used vehicles across different regions, brands and models.

Speaker 1

In addition, we are also boosting the transaction conversion rate by increasing Customer and user satisfaction rates. In the Q3, Autohome's matching and auction services platform accounted for about 24.4 percent of all used car transactions in China, a year over year increase of approximately 3 percentage points. In summary, we delivered steady revenue and profit growth during the quarter, We are continuing to optimize our revenue structure. Our new retail business is gaining growth momentum As synergies among our diverse business lines begin to take hold, which will greatly strengthen overall growth prospects going forward. Looking ahead, we will continue to advance our ecosystem approach by creating new business models that connect the online and offline channels To help automakers transform and adapt to NEV trends, we are confident that our diversified business will drive Autohome growth to the next level.

Speaker 1

Next, let me walk you through the key financials for the Q3 of 2023. Please note that as with prior calls, I'll reference RMB only in my discussion today unless otherwise stated. Net revenues for the 3rd quarter were CNY1.91 billion, up 3.4% year over year. Breaking it down by segment, Media Services revenues were CAD477 1,000,000, Lease generation services revenues were CNY830 1,000,000 and online marketplace and other revenues were RMB599 million, up 25.2% year over year, driven primarily by increasing revenue contribution from Data Products. Moving on to costs.

Speaker 1

Cost of revenues in the 3rd quarter was R374 $1,000,000 compared to R331 $1,000,000 in the Q3 2022. The increase was primarily attributable to an increase in content and operational costs. Gross margin in the 3rd quarter was 80.4% compared to 82.1% in Q3 2022. Turning to operating expenses. Sales and marketing expenses in the 3rd quarter were CNY935 1,000,000 compared to CNY863 1,000,000 to CNY863 1,000,000 in Q3 2022.

Speaker 1

The increase was primarily attributable to the increase in marketing and promotional spending. Product and development expenses were RMB355 1,000,000 compared to RMB387 1,000,000 in Q3 2022. The decrease was primarily attributable to a decline in personnel related expenses. Finally, General and administrative expenses were RMB141 1,000,000 compared to RMB136 1,000,000 in Q3 Overall, we delivered operating profit of CNY166 1,000,000 in the 3rd quarter compared to CNY192 million in the corresponding period of 2022. Adjusted net income attributable to Autohome Inc.

Speaker 1

Was C604,000,000 in the 3rd quarter compared to C590,000,000 in the corresponding period of 2022, representing an increase of 2.3% year over year. Non GAAP basic and diluted earnings per share in the 3rd quarter were RMB1.23, respectively, compared to 1.18, respectively, in the corresponding period of 2022. Non GAAP basic and diluted earnings for ADS in the 3rd quarter were 4.93 and 4.92 respectively compared to 4.73 and 4 point 72, respectively, in the corresponding period of 2022. As of September 30, 2023, Our balance sheet remains very strong with cash, cash equivalents and short term investments of CNY 23 point RMB43 1,000,000,000. We generated net operating cash flow of RMB425 1,000,000 in the Q3 of 2023.

Speaker 1

On November 18, 2021, our Board of Directors authorized Our share repurchase program under which we were permitted to repurchase up to US200 $1,000,000 of Autohome ADS for a period not exceed 12 months thereafter. On November 3, 2022, Our Board of Directors authorized an extension of the share repurchase program for another 12 months, expiring on November 17, 2023. As of October 27, 2023, we have repurchased approximately of CAD6.25 million for a total cost of approximately CAD187 1,000,000. With that, we are ready to take your questions. Operator, please.

Operator

Thank We will take our first question. Your first question comes from the line of Kenny Wang from CICC. Please go ahead. Your line is open. Thanks for management for taking my questions.

Operator

And I got two questions here. First of all, could you please share your views on market outlook for the upcoming quarters? And do you expect continuous price competition among OEMs? And secondly, could you update us on the progress of the new retail model for NVs? Especially could you share with us the key operating metrics of Pioneer cities such as Shanghai or Chengdu?

Operator

Thank you.

Speaker 2

Okay. I will take the first question. In Q3, Yes, but China continued to recover and rebound. According to the statistics released by National Bureau of Statistics, In Q3, our GDP grew by 4.9% year on year, higher than market expectation. However, according to the data from CPCA, in Q3, passenger vehicle retail sales grew by 1.8%.

Speaker 2

In Q2, this number was 21.4%. You can notice there is a big slowdown of the growth speed. This is because of the high base number of The same period last year, while at the same time the consumers continue to be precautious about the commodities consumption. As a result, there is still challenges for the entire auto industry. According to the data from CPCA, in the 1st 9 months of 2023, the overall profit margin for the Chinese auto industry is 9%, much lower than 5.7%, which is the overall industrial company's profit margin.

Speaker 2

However, I think that this is because even though ICE cars are still making profit, but their market share is declining, Well, NEVs experienced a high speed growth, but most of them are still suffering from losses. As a result, entire auto sector are still going on the restructuring. So far, central and different levels of the local government, We have been paying great effort to uplifting and stabilizing the auto production and also released a series of policies and incentives to promote auto consumption. For example, there is policy about optimizing the car purchase restriction management to support the trading of the old cars for the new ones and accelerate the development of the used car market and accelerate and strengthened the development of NEV supportive facilities. We believe that with the above mentioned favorable policies, In terms of the outlook and the trend for the auto market of next year, we think that there are mainly the following First of all, NEV will continue to be the priority of the development.

Speaker 2

According to the data of CPCA, by the end of September, AUV passenger vehicle market penetration hit 36.9% and Central as well as the local government continued to launch More targeted and effective measures to promote consumption of the NEB. We estimate that next year, NEB penetration will continue to go higher. And the second trend is that the used car market will continue to expand its market potential. We've noticed that the used car consumption Quickly and rapidly emerged in China. In the 1st 9 months of 2023, the used car Trading volume was 13,490,000 units and the trading value was RMB 859,800,000,000.

Speaker 2

The used car market in China is indeed a trillion level market. And with the development of AUV, more consumers, they got the Advantage of purchase and used car in the low cost, while in the same time, the separate endorsement policy and its implementation for the used car Also, to offer more development potential and space for a car dealership industry, I believe that there's a huge potential for the used car development in China. In a word, the Chinese auto sector in the medium and long term will enjoy a stable and upward trend, And we are very confident about the long term development trend and its potential of the Chinese auto market. Autohome will continue to grow our AUV and Used the car business to grasp the new market opportunities and use diversified ecosystem to empower Okay. Mr.

Speaker 2

Zhang will take the second question. So for the second question, the first thing we The number of the stores we built. Now actually in Shanghai, Haikou and Chengdu and Chongqing, we already officially Put our stores into operation. And besides, by the end of the year, we're going to build another 20 new shops. So this is very important indicator for us, the number of the stores.

Speaker 2

Well, at the same time, you can see that now for the numbers and indicators, we haven't disclosed These numbers in the essential cities, however, the speed of building our stores as well as the feedback We get from the consumers are pretty positive. And I think that this is a very popular trend in the future. And if you get We welcome all of you to visit our stores in different cities. And in the next 1 or 2 years, according to our development in different cities as well as our cooperation with different partners, we will continue to promote the number of our stores. We have not only built stores In Tier 1, Tier 2 and Tier 3 cities, but also Tier 4 and Tier 5, we see very strong vigor and vitality in different tiers of the cities.

Speaker 2

We plan that next year, we're going to cover another 50 cities. And by the end of 2025, We're going to cover a total of 100 cities in China. We expect that with different penetration of the

Operator

Thank you. We will take our next question. Please standby. Your next question comes from the line of Richie Sun from HSBC. Please go ahead.

Operator

Your line is open.

Speaker 3

I have 2. So firstly, after the previous question that talked about used car, can management further Quantify the expectation towards the used car market growth outlook in the next year? And what is your expectation to us the revenue and margin for this business. 2nd or 4, various Internet platforms are using AI and large language models In Media Services, Lease Generation, Data Products and among other business lines, do we see any room to improve the efficiency further? Thank you.

Speaker 2

Okay. Firstly, I will address the question about the used car market. Used car market is a very important segment in the entire auto sector And used to come market always got high attention from the government. Recently, the government continuously to release a series of incentives to promote The consumption on the used car market. According to the data of Auto Dealers Association, in the 1st 3 quarters of this year, our used car Market trading volume hit almost $13,500,000 grew by 12.6% year on year.

Speaker 2

And also according to the forecast of Auto Dealers Association, this year, our national used car trading volume is expected to hit historical high. We expect that next year used car market will continue to keep today's and this year's good trend and continue to be very active and embraced a new stage of high quality development. In terms of the revenue, you can see that this year, the new car price cuts and promotion campaigns do generate some challenges for the used car market. But for Autohome, our used car business shows a very strong resilience. In the 1st 3 quarters, The overall used to comp business, including TTP, maintained a very good momentum.

Speaker 2

And TTP still makes Profit so far and next year with more and more new retail shops and stores operating in different cities, I believe that TTP would also leverage the Space stations and to have their businesses all over China and we are very confident that next year, The overall used car business revenue will continue to expand. And the second question, from the application side, we continue to apply AI and large language model related technologies and to seek more business operation opportunities so as to improve our product competitiveness as well as customer satisfaction. In the beginning of the year, we entered into strategic partnership with Baidu Earnibot And we will leverage the capability of Baidu Smart Cloud connecting with earning bots and based on our own data and technology stress, We're going to have the comprehensive convergence of intelligent dialogue technology with the auto digital services. This is also And product wise, in the first half of this year, we have launched AI based intelligent tool, which is called Smart Selection to facilitate and empower the dealers to quickly segment their clients and to reach out to the high net worth individuals As soon as possible, release the capacity and improve service quality.

Speaker 2

And based on GPT model, we are also helping the users and the clients to select the cars and also have the dealers to do the operation analysis. And for another example, our AI smart Writing instrument is also one of the functions in our intelligent assistant. It can actually facilitate and empower the dealers to Complete high quality and very good writing as well as the content release. We hope that By relying on this kind of large language model products, we can continue to help the dealers to cut costs and improve efficiency as well as to enhance their Okay, next question.

Operator

Thank you. We will take our next question. Your next question comes from the line of Thomas Chong from Jefferies. Please go ahead. Your line is open.

Speaker 3

Thanks management for taking my questions. My first question is about the budget spend by OEM in the second half this year as well as 2024? My second question is related to the overall used car market as well as the strategies for Pan Pan Pipes. Thank you.

Speaker 2

Okay. I will firstly take a question about the budget plan for the OEM in the second half as well as next year. In the second half of this year and in particular since Q4, we see that actually the OEMs, they would like to invest more of Their budget in promoting the transaction from the user side, for example, to support the lead generation as well as to invest on advertisements or directly subsidize the consumers. And for next year, just like Mr. Long mentioned, We think that actually for the market investments, we will continue to be precautiously optimistic because for the OEMs, Since their profit margin are under some pressure, they will pay more attention to the effectiveness of their budget investment.

Speaker 2

For example, they will prioritize the Support to the dealers are directly subsidized the consumers. As a result, in terms of the ad investments, they will be more precautious and they tend to for diversified their investment. So they will also pay more and higher attention to the effectiveness of the And looking into the future, I think that we will continue to grasp the opportunities, in particular, in 2 areas. 1st of all, accelerate The digital application of AI and secondly, we do prioritize and focusing on NEV. And by leveraging our strength, We will also try to win more customers and try to get their budget and investment.

Speaker 2

And for the used car market, I already mentioned that due to the price cut of the new vehicles and because of COVID-nineteen, We do see that used car market has been under some pressure as well as some restrictions, but I believe that in the future years, The price cuts for the new cars already come to a specific limit, and we believe that the used car market can expect a double digit growth. And for TTP, TTP is already generating process. It means that It's already gone through the stage of survival. It's already entered into the stage of expansion and future development. In the future, we will continue to leverage the resources From the group as well as the other partners to facilitate the development of TGP.

Speaker 2

And in the previous Answered the questions, we also mentioned the 3 in one service format. So we think that it will greatly help TTP to develop and will continue to facilitate this high speed growth.

Speaker 1

That's how you went.

Speaker 2

Okay. Next question, please.

Operator

Thank you. We will take our final question. Your final question comes from the line of Brian Gong from Citi. Please go ahead. Your line is open.

Speaker 4

Can management share when we will start the contract renewal with dealers for this generation? And what's our expectation for the contract renewal this time? Do we still have room to raise our price? And along with the rising new auto sales from new AUVs, how does management think about the numbers Of dealers from traditional OEMs, will the number gradually decline in the future? Thank you.

Speaker 2

Thank you, Brian, for raising this question. Yes, we already initiated a contract to renew with our dealers. However, we will not use price increase as a strategy for us to gain more profit. It has never been our strategy. Of course, sometimes you think that we charge more from the dealers.

Speaker 2

That is because we have been providing more services to our dealers, including More digital products to them. And I think that we never take a price increase as a strategy for us to gain more and higher performance. And this year, as we know, the dealers, they generally encounter some difficulties. So we will, of course, never raise the price. So From our side, we would like to empower and enable the dealers by offering more digital products and helping them to cut costs and improve efficiency.

Speaker 2

So in a word, in the past and in the present, we have never been using the price increase as a strategy for us to gain more profit. And the second The number of the dealers in your question, in Q3, we see that the sales from the ICE car dealers dropped by a little bit less than 9%. Of course, the dealers are under some impact and see that the sales of the ICE vehicles have been However, at the same time, the NEV penetration has been on a rise. And you can see that in Q3, the penetration already hit 37%. So there are some record development trends for the NEV brands, while at the same time some traditional dealers are also transforming themselves into the NEV dealers.

Speaker 2

So for our new retail business model, we are also trying to help those NEV dealers to further And I believe that the number of dealers It's not an issue at all. The thing is that how we can better adapt to all kinds of changes and dynamics to reposition those dealers So as to be more adaptable, so by offering those digital products and by facilitating them with our new retail model, I believe that we can

Speaker 1

Operator?

Operator

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

Speaker 1

Thank you, everyone. Thank you for joining us today. Appreciate your 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. Thank you.

Speaker 1

Thank you. Bye bye.

Operator

This concludes today's conference call. Thank you for participating. You may now disconnect.

Remove Ads
Powered by Quartr
Earnings Conference Call
Autohome Q3 2023
00:00 / 00:00
Remove Ads