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Autohome Inc. (NYSE:ATHM) Q1 2024 Earnings Call Transcript

Autohome Inc. (NYSE:ATHM) Q1 2024 Earnings Call Transcript May 8, 2024

Autohome Inc. isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

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 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. 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.

Sterling Song: 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.

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Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations. Potential risks and uncertainties include but are not limited to those outlined in our public filings with the 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 will now turn the call over to Autohome's CEO, Mr. Tao Wu for opening remarks.

Please go ahead, Mr. Wu.

Tao Wu: [Foreign Language] Thank you, Sterling. Hello, everyone. This is Tao Wu, CEO of Autohome. Thank you for joining our earnings conference call today. [Foreign Language] I'm pleased to report a solid start to the year with total revenue 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. 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 RMB494 million, while our adjusted net profit margin remained at a relatively high level of 30.7%. [Foreign Language] For our innovative business as new franchise doors are on track to open our Autohome 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 Hundred Cities Trade-in for New Car-Buying Festival in collaboration with Ping An Group allowing consumers to enjoy even more benefits.

[Foreign Language] 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 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 car ownership services and the user benefits. Together, we'll develop even greater synergies and push forward with new business initiatives. [Foreign Language] 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.

Craig Yan Zeng: [Foreign Language] Thank you, Mr. Wu. Hello everyone, I'm Craig Zeng, the Chief Financial Officer of Autohome. [Foreign Language] 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 so far so task forecasting on eight 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 tallies more than 500 million exposures across all platforms, significantly enhancing Autohome's influence.

An assembly line filled with the latest model of an automobile, ready to go to consumers.
An assembly line filled with the latest model of an automobile, ready to go to consumers.

[Foreign Language] In addition, in response to escalating price competition and frequent fluctuations in vehicle pricing, we introduced a number of innovative tools, including a price trend tracker and a comprehensive model comparison tool. The former enables users to intuitively see pricing trends, while the latter provide enhanced, detailed comparisons to improve the comparison 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] 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, Huiyang and Jinan, et cetera, as well as promising third and fourth tier cities like Zhoushan, Zhaoqing, and Shunyuan, et cetera, reaching broad market coverage.

During the quarter, we also granted franchise drives to partner in nine 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] Our Autohome Space stores also function as an adaptive 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 a driving comparison.

Revenue from NEV brands in the first quarter this year increased by 49.6% from a year earlier, consistently outpacing industry growth rate. [Foreign Language] 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's 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] 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 test 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 dealerships recognition of Autohome's expertise. [Foreign Language] In summary, Autohome achieved steady growth in revenue and profits 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] Next, let me briefly walk you through the key financials for the first quarter of 2024. Please note that, as with prior course, I will reference RMB only in my discussion today unless otherwise stated. [Foreign Language] Net revenues for the first quarter were RMB1.61 billion. Breaking it down by segment, media services revenues were RMB327 million, leads generation services revenues were RMB726 million and online marketplace and others revenues were RMB555 million, up 13% year-over-year.

[Foreign Language] Cost of revenues in the first quarter was RMB301 million, compared to RMB340 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] Turning to operating expenses, sales and marketing expenses in the first quarter were RMB641 million, compared to RMB523 million in the first quarter of 2023. Product and development expenses were RMB336 million, compared to RMB324 million in the first quarter of 2023. Finally, general and administrative expenses were RMB150 million, compared to RMB149 million during the same period last year. [Foreign Language] Overall, we delivered an operating profit of RMB276 million in the first quarter, compared to RMB263 million in the corresponding period of 2023.

Adjusted net income attributable to Autohome was RMB494 million in the first quarter, compared to RMB484 million in the corresponding period of 2023. [Foreign Language] Non-GAAP basis and diluted earnings per share in the first quarter was RMB1.02, up from RMB0.98 in the corresponding period of 2023. Non-GAAP basic and diluted earnings per ADS in the first quarter were RMB4.08 and RMB4.07, respectively, compared to RMB3.92 and RMB3.91, respectively in the corresponding period of 2023. [Foreign Language] As of March 31, 2024, our balance sheet remains very strong with cash, cash equivalents and short-term investments of RMB23.65 billion. We generated net operating cash flow of RMB561 million in the first quarter of 2024. [Foreign Language] 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: Thank you. We will now begin the question-and-answer session. [Operator Instructions]. Our first question comes from the line of Brian Gong from Citi. Brian, please proceed with your question.

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To continue reading the Q&A session, please click here.