Autohome Q1 2024 Earnings Call Transcript

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Provided by Quartr
May 8, 2024

There are 5 speakers on the call.

Operator

Ladies and gentlemen, thank you for standing by for Autohome's First Quarter 2024 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 this earnings It is now my pleasure to introduce your host, Sterling Sung, Autohome's IR Director. Mr. Sung, please go ahead.

Speaker 1

Thank you. Thank you, operator. Hello, everyone, and welcome to Autohome's Q1 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.

Speaker 1

Ca. Joining me today on today's call are Chief Executive Officer, Ms. Tao Wu and Chief Financial Officer, Ms. Craig Yanceng. Management will go through their prepared remarks first, 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 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.

Speaker 1

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.

Speaker 1

I'll now turn the call over to Autohome CEO, Mr. Tao Wu, for opening remarks. Please go ahead, Mr. Thank you, sir. Hello, everyone.

Speaker 1

This is Paul Wu, CEO of Autohome. Thank you for joining our earnings conference call today. I'm pleased to report a solid start to the year with total revenues growing by 4.9% year over year to RMB1.61 billion. Revenues from the online marketplace and others continue to achieve double digit growth, increasing by 7% year over year, rising to 34.5% of total revenues. 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.

Speaker 1

We also saw robust growth in our NEB business, with revenues for the quarter increasing by 49 0.6% year over year. Adjusted net income attributable to Autohome for the quarter was up 2.2% year over year to RMB494 1,000,000, while our adjusted net profit margin remained at a relatively high level of 30.7%. For our innovative business, as new franchise stores are on track to open our auto home space, to 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 100 Cities Trade in for new car buying festival in collaboration with Ping An Group, allowing consumers to enjoy even more benefits.

Speaker 1

Looking forward, we are committed to maintaining our professionalism and expertise. We are 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 development 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 ecosystems, big data, cooperative ownership services and user benefits. Together, we will develop even greater synergies and push forward with new business initiatives.

Speaker 1

With that, I will now turn the call over to our CFO, Greg Sung, for a closer look at our Q1 2024 operating and financial results. Thank you, Ms. Wu. Hello, everyone. I'm Craig Zeng, the Chief Financial Officer of Autohome.

Speaker 1

In the Q1, 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 Sofa So Test, forecasting 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 targets more than 500,000,000 exposures across all platforms, significantly enhancing Autohome's influence. 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 tool The former enables users to intuitively see pricing trends, while the latter provides enhanced detailed comparisons to improve the comparison and decision making process. According to QuestMobile, average mobile DAUs reached 69,390,000 in March, an increase of 8.1% from a year earlier, which clearly demonstrates the effectiveness of our content focused strategy for user growth.

Speaker 1

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 2nd tier provincial capital cities including Kunming, Guiyang and Jinan, etcetera, as well as promising 3rd and 4th tier cities like Leshan, Zhaoqing and Qingyuan, etcetera, reaching broad market coverage. During the quarter, we also granted franchise drives 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 AUV services geographically, expanding our reach to additional users.

Speaker 1

Our own home 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 3 d holographic car models cover more than 80 mainstream NEV models in the market. In the Q1, our new retail business collaborated with more than 30 brands, launching over 100 marketing events, including new car launches, test drives and driving comparisons. Revenues from NEB Brands in the Q1 of this year increased by 49.6% from a year earlier, consistently outpacing industry growth rate.

Speaker 1

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 chatbots with customized LLMs that are tailored to the automotive industry. These LLMs 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 Q1, the number of dealers that purchased our data products continued to increase, driving revenue growth of 27% year over year for dealer data products. We have also applied our digital capabilities to the used car business, creating a transparent and trustworthy buying environment.

Speaker 1

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 dealerships, 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 Q1, 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 dealerships' recognition of Autohome's expertise. In summary, Autohome achieved steady growth in revenue and profit in the Q1 this year, driven by the rapid development of our digital products and the AUV businesses. Additionally, the introduction, replication and interactive updates to our new innovative business models are increasingly contributing, diversifying and optimizing our revenue mix.

Speaker 1

Looking ahead, we'll 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. Next, let me briefly walk you through the key financials for the Q4 of 2024. Please note that as with prior calls, our reference are only in my discussion today unless otherwise stated. Net revenues for the Q1 were CNY1.61 billion. Breaking it down by segment, media services revenues were CNY3 CNY37 1,000,000, lease generation services revenues were CNY726 1,000,000 and online marketplace and others revenues were RMB555 1,000,000, up 13% year over year.

Speaker 1

Cost of revenues in the first quarter was CNY301 1,000,000 compared to CNY340 1,000,000 in the Q1 of 2023. Gross margin in the Q1 was 81.3% compared to 77.8% during the same period last year. Turning to operating expenses. Sales and marketing expenses in the first quarter were CNY641 1,000,000 compared to CNY523 1,000,000 in the Q1 of 2023. Product and development expenses were CNY 336 1,000,000 compared to CNY324 1,000,000 in the Q1 of 2023.

Speaker 1

Finally, general and administrative expenses were CNY150 1,000,000 compared to CNY149 1,000,000 during the same period last year. Overall, we delivered an operating profit of CNY 2 CNY276 1,000,000 in the Q1 compared to CNY263 1,000,000 in the corresponding period of 2023. Adjusted net income attributable to Autohome was CNY494 1,000,000 in the 1st quarter compared to CNY484 1,000,000 in the corresponding period of 2023. Non GAAP basic and diluted earnings per share in the Q1 were RMB 1.02, up from RMB0.98 in the corresponding period of 2023. Non GAAP basic and diluted earnings per ADS in the Q1 were 4.08 and 4.07, respectively, compared to 3.92 and 3.91, respectively, in the corresponding period of 2023.

Speaker 1

As of March 31, 2024, our balance sheet remains very strong with cash, cash equivalents and short term investments of CNY 23,650,000,000. We generated net operating cash flow of CNY 561,000,000 in the first quarter of 2024. The above is our financial summary. With that, now we are ready to open up the Q and A session. Operator, please open the line for the Q and A session.

Operator

Thank you. We will now begin the question and answer Our first question comes from the line of Brian Kong from Citi. Brian, please proceed with your question.

Speaker 2

Thanks, management for taking my question. I have two questions. First is regarding the auto policy rollout by the government recently. Can management share your view on this, how the policy impacts auto market in China? And what measures Autohome will take to cater those policies?

Speaker 2

And the second question is regarding our data products for dealers, which has been key growth driver to the company over past several quarters. How should we look at the growth potentials for the segments in the future? Thank you.

Speaker 3

Okay. Thank you for raising these questions. Since you raised the 2 questions, Mr. Vu Ta will take the first one. Okay.

Speaker 3

I think that the 2 policies you mentioned are actually the notice on action plan to promote large scale equipment renew and consumer goods trading issued by the State Council in March of this year. And the other one is noted on implementation rules for automobile trading subsidy issued by the Ministry of Commerce and the other 7 departments in April. These two notices relate the policy of capital subsidies for Osmadu Trade In, further clarifying gold and standard of the subsidy and also allows consumers to better participate in auto trading activity by increasing the policy guidance and support, therefore promoting the trading of auto and other consumer goods has become the surface of the negative consumption promotion of this year. I suspect these two policies are pretty clear. For example, for 1 NVJ card, it will get a subsidy of RMB9000 and for 1 NVDA card, it will get RMB 7,000 in terms of the subsidy.

Speaker 3

So I do believe that it will further promote concession. 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, where some direct as well as indirect impact. So next, I would like to elaborate on this topic from the 3 Okay. Firstly, from the macro perspective, data released by CCCA shows that China's auto market sales recovered in Q3 of 2024 with retail sales increasing by 13.1% year on year due to price cuts by OEM, consumption promotion campaigns can result in different places, some demand for car purchases have been released in an accelerated manner.

Speaker 3

This debate also shows how in April OEMs began to launch new brands and new models and the choice of the car market has also heated up significantly and the car market expected to continue rebound in the future. And secondly, just as I mentioned before, the cost of volume has been constantly on a rise. This is attributable to the trading policies. With the subsidy offered by those developments 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.

Speaker 3

According to the data released by CVC, we also see that in Q2 of this year, the passenger vehicle car price scale is already 60% of that the same period last year and also the total price cost 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

Speaker 2

uncertain.

Speaker 3

And the second 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 while the penetration rate reached 50.1%, which is much faster than many people expected. This improvement 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 expectation. Next, I'd like to elaborate on the concrete actions, which will be taken by Autohome.

Speaker 3

As I said before, you can see that the impact of these palaces have both pros and cons on the market. But the auto home, it is favorable to us because it can give us a real benefit to the users and will also stimulate the demand on market. So for Autohome, we will definitely grasp this opportunity. And you can see that from our own side, we become the key cooperation unit of this campaign. Together with Bai Yi Group's value of communication as well as the other enterprises, we were actively respond to the core of the national policy, give full price to its platform advantage and study the optimal view of markets in GAAP and publicize revenue's national policy.

Speaker 3

Next, I would like to talk about 2 concrete actions taken by LG Home. The first one is that the newly opened super trading season channel of our Alto Home app is organized and integrated in detail for the subsidy policies of different cities and and car companies to help consumers better understand the details of the ramp up policy. While in this time, in collaboration with a number of automakers and Ping An Group, which provide high quality sellout and buy new services through more than 20 autoforming energy offline stores, and to we would like to activate the consumption potential and promote the development of the car market. The other thing is that comprehensively, we can see that Autohome, we have been joining hands with Ping An P&C to create the interest of 100 city trading for new car buying festival covering 108 cities on free routes through mobile holographic camping caravans and Tianan Insurance OQ-twenty and utilizing big data to accurately identify people with replacement needs along with test drive insurance and other service guarantee to activate automobile consumption potential. On the other hand, we also launched a special super subsidy activity, having more than 100 brands, nearly 1,000 car models with the highest subsidy of RMB6 1,000 effectively simulate the market purchasing power.

Speaker 3

Both are speaking, the automobile industry will continue to be balanced the state as well as the government for this year. So we think that with the actual implementation of various policies, it will further suit similarly the market consumption by policy and promote high quality and steady development of automobile industry this year. We're pretty confident about that. Okay. That's all for my answer to the first question.

Speaker 3

Thank you.

Operator

Thank you.

Speaker 3

The second question about the dealers, data product, the future potential will be taken by Mr. Zeng. So the answer is that actually we see the total number of the merchants for dealer data products already exceeded 20,000. So the growth potential is pretty significant. So our objective is to let more merchants to better utilize our modules to promote their own sales to help them to cut costs and improve efficiency.

Speaker 3

So in the future, we'll continue to develop new modules in this aspect. We will also have this model together cost offered to actually facilitate our merchants. On average, each of the merchants will purchase 5 products, but we still have another 11 established and 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 is 27%.

Speaker 3

It shows very strong competitive act. So we believe that there will be a big potential in the future.

Speaker 1

Okay, operator, the next one.

Operator

All right. Thank you. Our next question comes from the line of Richie Sun of HSBC. Please proceed with your question, Richie.

Speaker 4

Thank you management for taking my questions. I have a question about the used car business. So I noticed that Tian Tianpai Che has some has been under some impacts from the new car price wars in Q1. So this actually is this continues, so how should we think about the future growth trend? And what is our strategy to tackle this?

Speaker 4

Thank you.

Speaker 3

Okay. I will take this question from 3 different aspects. First, from the market perspective, we see that in the Q1, you can see that the unit cost grew by 7 point 6% year on year, a slowdown in the growth. By the end of March of this year, domestic used car trading PMR index has been below 50 point mark for 16 consecutive months. The industry as a whole is under some pressure.

Speaker 3

So I think that this is partly due to the price pull. According to the data release of ICPCA, you can see that the new car discount has increased 18%, but in the previous year, it was only 12%. The new car first car has been imposing a lot of pressure on the used car. So we see that this is happening, but it is that this will not continue for a long time because this will only slow down the replacement, but there's only some postponement as well as delay, but it will

Speaker 1

not continue

Speaker 3

And the second part is from policy perspective. I think that this is favorable to the used car market. Ministry of Commerce launched the trading policy, sell old and then buy new, bringing new opportunities to the used car industry. So you can see that a large number of the car parts will also facilitate used car trading on this market. And CTP is also a very important link in the consumption of trade in, selling old and buying new.

Speaker 3

So we believe that it will endure a lot in the future. And the third part is from TGP itself. We can see that recently TGP launched a 30 minute high speed online national bidding service, including on-site inspection, instant online bidding and online offer to sell cars quickly. Consumers can drive to the site for free testing and then get calls from the real buyers online within 30 minutes. This model greatly improves the efficiency of consumers' car purchases, realize the seamless connection between selling old and buying new and combined with the new energy offline experience so consumers can sell old and buy new in one stock, which helps to activate the used car market as well as to promote the related transaction.

Speaker 3

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

Speaker 1

Okay, operator, the next question please.

Operator

Thank you. Our next question comes from the line of Thomas Chong from Jefferies. Please ask your question, Thomas.

Speaker 1

Thanks management for taking my question. My first question is about management comments about the recent staging, auto show and how we should think about the EV sector this year? And my second question is about the use of cash. Thank you.

Speaker 3

Okay. Thank you for raising the questions. Let me take this one. So for this year, Beijing Auto Show was the 1st 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 attention from all of our supplies and listing groups. In 10 days of the auto show, including the holiday, we attracted in total 900,000 visitors with a world value of 117 vehicles and 278 new energy models.

Speaker 3

So in the year 2023, we see that the NDC production and sales accounted for more than 60% of the global total. China's automobile going global campaign continued to keep up and intelligent development accelerated year by year with a strong product power as well as the technical strength. Although the sales figure for the whole month of April are not yet available, but as Mr. Wu Tang mentioned, market penetration of domestic NVV sales in the first half of the 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 continues to diverge in NEB players.

Speaker 3

You can see that the players represented by BYD and re auto, whose skill effect gradually appear and profitability continue to improve. While at this time, there are also card brands that may gradually lose market share and increase losses and appear to price war. The next 3 years will be an important period of competition for sales, cost, athletic technology and any big companies will grow with strong products of power and expected to gain more market shares. Autohome will also adapt it to the market trend, relying on new energy offline experience stores and corporate with various new energy brands And 2nd, our 3 d 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 brand continue to outperform the industrial sales growth.

Speaker 3

In terms of our cash use plan, we see that over the past years, Autohome has been committed to continuously improving shareholders' returns. In the year 2022, the Board of Directors updated the dividend payout policy, which is to distribute a fixed amount of RMB500 1,000,000, which is equivalent to 28% of the net profit of that year. At the end of FY 'twenty three, the company further revised our dividend policy by announcing a decision to pay a dividend of RMB 1,000,000,000, and we have completed this dividend payout in the Q1 of this year. As for the 3 years from FY 2024 to FY 2026, we plan to pay dividend every 6 months and with the total annual dividend of RMB1.5. So you can see that Autofrom has a strong history of solid financial position, adequate cash reserves and strong cash flow.

Speaker 3

Over the past few years, we have been very strongly given return to our shareholders, and we will continue to pay dividends and have been committed to continuously improving shareholders' return. And at this time, we will also closely monitor the market trend, and we will continue to give the maximum return to our shareholders as our target.

Speaker 1

Operator, the next please.

Operator

Thank you. Our next question comes from Xiaodong Zhang from CICC. Please proceed with your question, Xiaodong. So thanks management for taking my questions and 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?

Operator

Thank you.

Speaker 3

Okay. Thank you for raising this question. I will now take the question. We see that in terms of the sales of ICE vehicles as well as MEV vehicles in the Q1, we see that actually even though the sales volume increased by 4%, however, we see that actually all of the automakers have been purchasing the have been procuring their strategy of price for volume. As a result, their profit margin has been squeezed.

Speaker 3

We have been spending more budget on direct subsidizing consumers as to improve the volume. As a result, advertising budget has increased. Well, in the same time, we see that NEV companies have increased their advertising investments. For example, in Q3, Autohome's media advertising revenue from any of the 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 OEM will continue, but will not continue forever.

Speaker 3

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.

Speaker 1

Okay. Operator, if there is no extra question, we come to the end of this Q and A session.

Operator

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

Speaker 1

Okay. Thank you, everyone. Thank you 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. And in the meantime, please feel free to contact us if you have any further questions or comments.

Speaker 1

Thank you, everyone. Thank you. Bye bye.

Operator

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

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