Autohome Q4 2023 Earnings Call Transcript

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Provided by Quartr
February 6, 2024

There are 6 speakers on the call.

Operator

Ladies and gentlemen, thank you for standing by for Autohome's 4th Quarter and Full Year 2023 Earnings Conference Call. At this time, all participants are in a listen only mode. A question and answer 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.

Operator

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

Speaker 1

Thank you, operator. Thank you. Hello, everyone, and welcome to Autohome's 4th quarter and full year 2023 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.

Speaker 1

Joining me today on today's call are Chief Executive Mr. Cao Wu and Chief Financial Officer, Mr. Craig Yanceng. Management will go through their prepared remarks, Before we continue, please note that the discussion today will contain forward looking statements made under the Safe Harbor provisions of the U. S.

Speaker 1

Private Securities 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 our public filings with the U. S. Securities and Exchange Commission and the Hong Kong Stock Exchange.

Speaker 1

Autohome doesn't undertake any obligation to update 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 will now turn the call over to Autohome's CEO, Mr. Wu, For opening remarks, please go ahead, Mr.

Speaker 1

Thank you, Sterling. Hello, everyone. This is Tao Wu, CEO of Autohome. Thank you for joining us in our earnings conference call today. We delivered solid operational and financial results in 2023 with overall growth driven primarily by our new businesses.

Speaker 1

Total net revenues for the year grew by 3.5 percent year over year to RMB7.18 billion. Revenues from the online marketplace and others business increased by 14.6% year over year and accounted for 30.6% of Total revenue. Notably, we continue to see strong growth in revenues from data products and TCP, which each increased by more than 10% compared to 2022. We also saw robust growth in our NEV business, With revenues for the year increasing by over 80% year over year and accounting for nearly 18% of total revenue, Adjusted net income attributable to Autohome for the year was RMB2.16 billion with adjusted net margin of 30.1 percent. We also completed a US200 $1,000,000 share repurchase program and significantly increased the dividend payout to shareholders, demonstrate our commitment to generating returns for investors.

Speaker 1

In 2023, We made breakthroughs in the application of AI and large language models and the innovative new business model. We launched new AI driven data products We provide large language models in various business scenarios and combined model based decision making with human expertise to enhance the service quality of our data products. We also made rapid progress in expanding our physical new retail presence, Particularly in mid to low tier cities, where we see significant potential for growth as the NEB market evolves, Our Autohome Energy Space stores has a strong offline channel to complement our online capabilities and are present in 20 cities across the country, helping us build brand awareness among NEB users. Autohome has always been at the forefront of digitalization and business innovation, proactively promoting and leading the digital transformation of the entire automotive industry in China. Looking ahead, we are committed to maintaining our leadership in these key areas and creating unique advantages through the following strategies.

Speaker 1

1st, we'll accelerate the collaboration with Ping An Group and focus on creating a closed loop ecosystem for cat owners and leveraging finance resources to enhance our service capabilities. 2nd, we will enhance the quality of our content and reinforce Autohome as the go to brand for all things automotive, creating a strong and lasting brand image as the leading authority in this space. 3rd, we have put users at the center of our efforts, providing convenient access to high quality comprehensive services throughout the entire car ownership lifecycle. 4th, we will deepen our innovative business models, focusing on developing our Autohome and the space stores and TTP. We believe that by aggregating industry resources, leveraging PMA's potential business opportunities and the user resources, We can create a unique value proposition and establish a diverse and dynamic ecosystem that empowers our long term With that, I will now turn the call over to our Chief Financial Officer, Greg Sun, For a closer look at our Q4 and full year 2023 operating and financial results.

Speaker 1

Thank you, Mr. Hu. Hello, everyone. I'm Craig Zeng, In 2023, we made user experience our core focus, creating a comprehensive system encompassing content, tools and services to provide our users with high quality, convenience and efficient auto consumption experiences. In the Q4, we launched NEV breakthrough plan, a comprehensive evaluation program that assesses NEV safety across the 3 dimensions: Collisions, Batteries and Intelligent Driving.

Speaker 1

This program, which aims to address user concerns and accelerate the decision making process, has received 325,000,000 impressions and over 200,000,000 views across the entire network. Additionally, we launched NEB Supertest, a program which carries out real world evaluations of NEB performance over a period of 2 months. This initiative give us the opportunity to collaborate with other parties on developing a more consumer centric vehicle evaluation system, promoting the overall NEV category and helping automotive brands develop strong products with a better user experience. Looking ahead, we will maintain our focus on catering to the evolving needs of users so that we can create a rich and diverse content ecosystem that provides value and drives engagement. We also leverage a broad range of online channels to ensure that our high quality content reaches the widest possible audience.

Speaker 1

According to QuestMobile, Our mobile DAUs increased by 25.4 percent year over year to reach 68,190,000 last December, demonstrating the effectiveness of our content based user growth strategy. Our AAV business has grown rapidly with the expansion of Autohome and the space to 20 cities across the country. We've upgraded our brand, technology and store services to provide a high quality consumer experience across regional auto markets in East, South, Southwest and North China. We have also increased the number of energy space brand partners and expanded our offering of 3 d holographic car models to include over 70 mainstream models. We remain optimistic about the potential of this new retail model, which is distinguished by its cross brand and digital approach.

Speaker 1

Looking ahead to 2024, we plan to further expand our footprint By opening franchise stores in around 30 additional cities, by the end of this year, our NEV service ecosystem We'll have a presence in around 50 cities, allowing us to provide a comprehensive range of high quality 1 stop automotive service experiences to consumers across the country. For full year 2023, our revenue from NEB Brands increased 81.6%, demonstrating the strength of our offerings in this area and our ability to outperform industry We also made significant progress in our digitization efforts in 2023 as we applied AI technology and a large language models across a wide range of products and services. We launched products such as Cloud Smart Selection and Qixin Tong, which leverages our AI technology and big data capabilities to help dealers engage with high value users and manage instant messages with users in different scenarios. We also introduced applications based on large language models such as AIPC and Operation Butler, helping our dealer customer reduce overall costs and increase efficiency. In 2023, the average revenue for data products per dealer store and the average number of data products adopted by each dealer store Both grew by over 20% compared to the prior year as the number of dealer customers for data products continued to ramp up, driving a 38% year over year increase in dealer data revenue for the year.

Speaker 1

We expect our digital products to maintain their strong growth momentum, contributing to a more diversified revenue mix for Otoho. In terms of our used car business, we offer a wide range of products to help used car dealers manage their daily business operations more efficiently. For example, our one stop platform for vehicle condition and price inquiries provides a convenient way for dealers to access relevant information and has received positive feedback. We've also launched a membership product specifically designed for used cars, providing dealers with a comprehensive information management platform. On the other hand, we have successfully expanded TTP's business through new retail stores.

Speaker 1

In 2023, TTP delivered a year over year revenue growth of over 10%. In conclusion, we have steadily grown revenue while achieving a more optimal revenue mix and driving significant increase in user traffic. Our new retail business is growing rapidly, and our overall business is making steady progress. Looking ahead, we will continue to invest in new models, technologies and products and proactively explore opportunities that further for further business, resource and user synergies with Ping An Group. Through this effort, we aim to create new growth momentum and position ourselves for continued success in the future.

Speaker 1

Let me walk you through the key financials for the Q4 and full year 2023. Please note that as with prior calls, I will reference R and D only in my discussion today unless otherwise stated. Net revenues for the Q4 were CNY1.91 billion. Breaking down by segment, Media Services revenues were CNY 500,000,000, lead generation services revenue were CNY 841,000,000 and online marketplace and others revenues were RMB 569,000,000, up 14.8% year over year. Moving on to cost.

Speaker 1

Cost of revenues in the 4th quarter was CNY368 1,000,000 compared to CNY371 1,000,000 in Q4 2022. Gross margin in the 4th quarter was 80.8% compared to 80.4% in Q4 2022. Turning to operating expenses. Sales and marketing expenses in the 4th quarter were CAD730,000,000 compared to CAD630 CNY3 1,000,000 in Q4 2022. Product and development expenses were CNY3 56,000,000 compared to CNY330 1,000,000 in Q4 2022.

Speaker 1

Finally, general and administrative expenses were $157,000,000 compared to $103,000,000 in Q4 2022. Overall, we delivered operating profit of CNY367 1,000,000 in the 4th quarter compared to CNY530 1,000,000 in the corresponding period of 2022. Adjusted net income attributable to Autohome was $503,000,000 in the 4th quarter compared to $669,000,000 in the corresponding period of 2022. Non GAAP basis and diluted earnings per share in the Q1 were both 1.04 compared to 1 point 36 and RMB1.35, respectively, in the corresponding period of 2022. Non GAAP basic and diluted earnings per ADS in the Q4 were 4.15 and 4.14, respectively, compared to 5.42 and 5.31, respectively, in the corresponding period of 2022.

Speaker 1

Let me now turn to a short summary of our year 2023 full year results. Total revenues were CNY7.18 billion, an increase of 3.5% year over year. Of that, media services revenue were CNY1.87 billion, lead generation services revenue was CNY3.11 billion, And the online marketplace and the others business revenue increased by 14.6% year over year to CNY2.2 billion. In addition, we delivered an adjusted net income attributable to Autohome of RMB2.16 billion with adjusted net margin of 30.1%. As of December 31, 2023, Our balance sheet remained very strong with cash, cash equivalents and short term investments of CNY23.55 billion.

Speaker 1

We generated net operating cash flow of CNY2.45 billion in 2023. In November 2021, our Board of Directors authorized a share repurchase program under which we were permitted to repurchase up to $200,000,000 of Autohome CDs for a period not to exceed 12 months thereafter. In November 2022, our Board of Directors authorized an extension of this share repurchase program for another 12 months. As of December 31, 2023, we have completed this share repurchase program. We repurchased approximately CAD6.73 million for a total cost of approximately With that, now we are ready to take your questions.

Speaker 1

Operator, please open the line for Q and A session.

Operator

Thank you. We will now begin the question and answer session. The first question comes from the line of Thomas Chong from Jefferies. Please go ahead.

Speaker 2

Thanks management for taking my questions. My question is about the industry outlook. Can management comment about the 2023 industry performance and how we should think about the trend and the outlook in 2024 as well as the opportunities ahead? Thank you.

Speaker 3

Thank you very much for the question. Actually in 2023, we do see the trends of the first low and the then high momentum In the auto market in China, in terms of 2023, the sales volume hit historical high. According to the statistics of the CPCA, In Q4, we do see a quick recovery in auto sales, especially for the retail sales had gone up by 13.8% year over year and over quarter over quarter for the Q3, it was up 1.4%. That is because close to the end of the year, there are a lot of promotions nationwide, for example, the offline auto show and providing consumption vouchers and coupons for car purchasing and some of the destock for the combustion cars, which failed to meet the National VI standards. And also, in this way, it boosted the sales.

Speaker 3

As for 2023, The passenger car sales have gone up by 5.3%, majorly due to the NUV cars. We also see some challenges in this industry. For example, it's very competitive in starting the price wars and the margins have been squeezed. According to the data published by CPCA, for 2023, the whole auto industry, especially the revenue, has gone up by 12%. However, the margin is only 5% Compared with the overall industrial corporates margin, which was 5.8%, the auto market margin is quite low.

Speaker 3

So in this way, according to the data of CADA, for the first half of twenty twenty three, there were 50.3% of the dealers suffered loss and it's quite challenging for the 4S stores. Now looking into 2024, We firmly believe that the auto market will be a pillar industry for the national economy. It will be continuously supported by the government. Especially at the beginning of 2024, we do see a lot of local governments extended and initiated a lot of supportive policy to stimulate the purchasing of the car. For example, in January, Guangzhou launched the subsidy for purchasing cars during the new spring.

Speaker 3

And in Zhengzhou, they also issued consumption coupons for car purchasers. So this would help to stimulate the market demand and also help to drive up the sales in the auto market. According to CPCA, in 2024, the auto market will continue to stabilize And we'll continue to providing a good development momentum, which will achieve 3% of the growth. Finally, in terms of the structure of the auto market, NUV had always keep growing in a rapid way. The penetration rate of NUV has gone up from 28% back in 2022 to 35% in 2023, it will be expected to reach 40% in 2024.

Speaker 3

With the higher penetration rate, we do see some momentum change for the purchasers And we believe that the competition in the traditional combustion car market will be even more aggressive. So we do see that No matter it's domestic brands or the JV brands, a lot of the traditional car Makers are trying to explore to launch a lot of an EUV car models to fit into the EUV gross market. That would also help the OEMs to try to be more innovative to enhance its competency to fit into this market. In general, we believe that with more and more supporting policies to be released. This would further stimulate this market and regenerate the consumption vitality.

Speaker 3

We are quite confident in 20 24's auto market in China.

Operator

Thank you for the questions. One moment for the next question. Next questions we have the line from Xiaodong Zhang from CICC. Please go ahead.

Speaker 3

So thanks management for taking my questions and I got two questions here. So first of all, we have noticed that the gross margin and operating profit margin declined year on year in 2023. So what's your expectation for the margin trend in Q1, 2024 and onwards? And secondly, could you Please elaborate on your strategies for enhancing the synergies between Autohome and P9 Group. Thank you.

Speaker 3

Well, thank you very much for the question. Now talking about the GP margin. Well, yes, in 2023 compared with 2023, with compared with 2022, We do see some slightly down in the GP margin. Now talking about the cost, we have provided more diversified content ecosystem, So that's why it drives up some of the cost. In terms of the user experience, we have enhanced the re crew team of the new customers and the promotions.

Speaker 3

In this way, we also expanded about 20 renewable NEVs offline experience stores. And we provided some promotions, subsidies, and we also offered a lot of support for the dealers. So in this way, We provided also training and a lot of other resources to attract local consumers to come to the store to do the test drive and to boost the car sales. Now in terms of the content, we have invested more and more in high quality content, Not only the text and the picture base, we also invested in video and the live streaming. So in this way, it drives up some of the cost.

Speaker 3

Now in terms of the cost and expenses, we have enhanced some marketing investment. For example, we launched the 818 Auto Show, Global Auto Show and also Online Auto Show, etcetera. And also, we invested more heavily in the high quality IP. For example, we have initiated the NEV breakthrough plan and NEV super test. So in this way, we are providing more professional content.

Speaker 3

So we are focusing on providing professionalism and a unique content. Now in terms of the momentum of the profit, We do see that the whole industry is under stress and is receiving a lot of challenges, but Autohome has always been quite stable in terms of the profit, Although we are facing with some challenges, but if we can strictly control the cost and expenses and we would enhance efficiency as a long term goal, We believe we can achieve a good balance. Now talking about the second question, which is about the synergy between Autohome and the Ping An Group. Now I want to make the comments. So first of all, for Autohome and Ping An Group, each of them have its own unique characteristics as well as resources, And we can make our business quite complementary to each other.

Speaker 3

For example, Autohome has a lot of traffic. We have about 70,000,000 DAUs every day and we have professional content and the tools. We have Very enriched to see and to be services and experiences. For Ping An Group, they have about 60,000,000 car owners, which are their insurance customers. And in their platform, there are about 200,000,000 registered customers.

Speaker 3

So they also have a lot of enriched A and the 2C services and experiences. So in terms of The service quality, we believe that each of us can play the merits of our strengths and we can provide the online plus offline seamlessly connection and also providing the car owners for shopping the car, using the car and the post sales of the car services to create the closed loop ecosystem for the car users. In terms of the tools, content and the services, We believe that we can create a lot of synergy. We can consolidate a lot of resources to create the 1 plus 1 is higher and more than 2 effect. So in this way, we believe that our 2 companies are quite complementary to each other.

Speaker 3

And in this way, Autohome will leverage on the resource of Pian Group and to enhance our investment yield and see healthy efficiency and try to build our vision and make our vision, realizing our vision. We want to be the 1st class international to be and to see content provider, the tools and the service provider, And we want to be the unified auto purchasing and auto sales service platform.

Speaker 1

Thank you, operator. Please go ahead.

Operator

Thank you. Your next question comes from the line of Brian Kong from Citi. One moment please.

Speaker 4

I will translate myself. Thanks, gentlemen, for taking my question. I have two quick questions. First one is, along with rising Resumes from NUV, traditional OEMs, their scale is declining and this also impacts the scale of the dealer store. How does this impact our business, especially for our lead generation?

Speaker 4

And the second question is, in the end of last year, we announced the Dividends, how should we think about our dividend plan in the future? Thank you.

Speaker 3

Well, thank you for the question. Well, talking about the market, if you look at the market, we do The major sales were still contributed by the traditional combustion cars and also the dealership model is still the mainstream model Because 60% of the sales are still combustion cars, in 2023, for the combustion cars, There were about 336,000,000 cars, but like the renewable energy car, it's only about 20,000,000. So we do believe that to serve the growth based market, we do still need a lot of dealers and the 4 stores. However, in terms of the future momentum, we do see that with the penetration rate of the AMEV car gradually going up, We do see the shrinking of the 4S store and the dealership model would have been the future momentum, but it will not drop very sharply. So during this process, we would work together with RUST dealers and they try to transform along with RUST dealers and they try to readjust Now in terms of our cards ecosystem and as well as our service system, we are also trying to work very closely with Rasa combustion car dealers And they try to work together and to build a lot of our synergy.

Speaker 3

Now talking about our performance in the NEV car market, we are quite promising. In terms of the revenue, our revenue growth is higher than the market average. Now if you look at the NV car OEMs, originally they are shoulder the responsibilities from R and D, Manufacturing, sales, marketing and the post sales, but the whole value chain is too long. That is quite risky to cover all the value chain. So in this way, we do see some of the NEV OEMs started to adopt a lot of dealership and a franchising model.

Speaker 3

So in this way, they have to leverage our Autohome, which are the vertical media, which can help them to achieve better sales. So in this, we do see that our lead business are still very promising. We have no worries about our future, especially our lead business and the future growth. Well, actually we also readjust our business along with this new business model And with the new characteristics, we see the new market opportunities. For example, we established our new retail business That is the Autohome Energy Space Store.

Speaker 3

In this way, we help growth OEMs to get into the lower tier cities and into better channels to make their sales. This is a proactive change We're trying to get more fit into this new structure of this market and this is a brand new business model for us. It helped us to achieve a better collaboration with the NGV car brands and to enhance itself. So we believe that in the future, if our retail business is expanding, that would bring a lot of extra revenue for Autohome and we are very confident about this future business. Now talking about the dividend payout plan.

Speaker 3

In the past few years, Autohome had always continued to Providing a better return for our shareholders. Before 2021, our share actually dividend payout ratio is 20% of the net profit. Actually, in 2022, our Board actually renewed The dividend payout system and the policy, we announced that we are going to pay out no less than RMB 500,000,000 as the dividend, which equals to 28% of the net profit in that year. At the end of 2023, we Further, we adjusted the dividend payout ratio system. We announced that we are going to make about RMB 1,000,000,000 dividend payout And continuously from 2024 to 2026, for this future three years, we would provide no less than RMB 1,500,000,000 dividend payout.

Speaker 3

Now overall, You can see that in the past few years, Autohome had always continuously enhanced its dividend payout system and trying to provide a better return for our shareholders. On one hand, this indicates that our company has very good financial condition. We have abundant cash reservoir and a very strong cash flow. On the other hand, this also showed that we have long term commitment to providing better return to our shareholders And this was quite rare in this market. We not only have the dividend payout ratio, but also push up the absolute amount of the dividend we paid out.

Speaker 3

In the future, we will keep close attention to the market moves and we would be in a timely manner to report and communicated with our board meetings and we are trying to provide better returns for our shareholders.

Speaker 1

Operator?

Operator

Thank you. Our next question comes from the line of Richardson from HSBC. Please go ahead.

Speaker 5

Thank you management for taking my questions. I want to ask about the energy space stores. So we plan to open to 30 more cities in 2024. So could management share what would be the revenue contribution in 2024? And how much cost will be allocated to such expansion plan?

Speaker 5

Thank you.

Speaker 3

Thank you for the question. Yes, we build about 20 Autohome Energy Space stores in 2023. In 2024, Our plan is to open 30 new stores covering from Tier 1 city to Tier 3, Tier 4 city because we're providing the franchising model. So in terms of the cost, opening new stores would not drive up a lot of cost because we provide more function, supporting function. So that's why we didn't provide very rapid growth of these stores because we want our business to be stable, healthy and prudent.

Speaker 3

Because this is a new business, we are still in the exploration phase. Now talking about revenue. If you look at the revenue, especially in Q4 of 2023, it already reached over RMB 10,000 of Actually, it was RMB 16,000,000. And we do see with more and more stores get into a during operating stage that would drive up our retail revenue. And as for the future revenue incurred in 2024 because it's still too early for me to provide any guidance at the current stage, but I believe that We would keep in a timely manner to communicate with you if we further generate more and more revenue in the future.

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. Thank you, everyone, for joining us today. We appreciate your support, and we look forward to updating you in our next quarter's conference call in a few minutes' time. And in the meantime, if you have any further questions, please feel free to contact us. Thank you.

Speaker 1

Goodbye.

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