Thank you, operator. Thank you.

Hello everyone and welcome to Autohome's fourth 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.

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, which will be followed by a Q&A session, where they will be available to answer all your questions.

Before we continue, please note that the discussion today will contain forward-looking statements made under the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995.

Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations. Potential risks and uncertainties include but 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 for 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. Wu.

[Foreign Language] Thank you, Sterling. Hello, everyone.

This is Tao Wu, CEO of Autohome. Thank you for joining us in our earnings conference call today.

[Foreign Language] We delivered solid operational and financial results in 2023 with overall growth driven primarily by our new businesses. Total net revenues for the year grew by 3.5% 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 TTP, 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 an adjusted net margin of 30.1%.

We also completed a US$200 million share repurchase program and significantly increased the dividend payout to shareholders, demonstrating our commitment to generating returns for investors. [Foreign Language] In 2023, we made breakthroughs in the application of AI and large language models and innovative new business model.

We launched new AI-driven data products, deployed 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 spending our physical new retail presence, particularly in mid- to low-tier cities, where we see significant potential for growth as the NEV market evolves.

Our Autohome Energy Space stores as a strong offline channel to complement our online capabilities are now present in 20 cities across the country, helping us build brand awareness among NEV users. [Foreign Language] 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. First, we will accelerate the collaboration with Ping An Group and the focus on creating a closed loop ecosystem for car owners and leveraging Ping An's resources to enhance our service capabilities.

Second, we'll 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. Third, we'll put users at the center of our efforts, providing convenient access to high quality, comprehensive services throughout the entire car ownership lifecycle.

Fourth, we will deepen our innovative business models focusing on developing our Autohome Energy Space stores and TTP. We believe that by aggregating industry resources, leveraging Ping An'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 growth.

[Foreign Language] With that, I will now turn the call over to our Chief Financial Officer, Craig Zeng for a closer look at our fourth quarter and the full year 2023 operating and financial results.

[Foreign Language] Thank you, Ms. Song.

Hello, everyone. I am Craig Zeng, the CFO of the Autohome.

[Foreign Language] 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, convenient and efficient auto consumption experiences. [Foreign Language] In the fourth quarter we launched NEV Breakthrough Plan, a comprehensive evaluation program that assesses NEV’s safety across the three dimensions: collusion, battery and intelligent driving, this program which aims to address user concerns and accelerate the decision-making process has received 325 million impressions and over 200 million views across the entire network.

Additionally, we launched NEV Super Test, a program which carries out real-world evaluation of NEV performance over a period of two 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'll 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 drive engagement. We will also leverage a broad range of online channels to ensure that our high-quality content reaches the widest possible audience.

According to QuestMobile, our mobile DAUs increased by 25.4% year-over-year to reach 68.19 million last December, demonstrating the effectiveness of our content-based user growth strategy. [Foreign Language] Our NEV business has grown rapidly with the expansion of the Autohome Energy 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've also increased the number of energy space brand partners and expanded our offering of 3D holographic car models to include over 70 mainstream models.

We remain been optimistic about the potential of this new retail model, which is distinguished by its cross brand and digital approach. Looking ahead to 2024, we plan to fully expand our footprint by opening franchise stores in around 30 additional cities.

By the end of this year, our NEV service ecosystem will have a presence in around 50 cities, allowing us to provide a comprehensive range of high quality, one-stop automotive service experiences to consumers across the country. For full year 2023, our revenue from NEV brands increased 81.6%, demonstrating the strength of our offerings in this area and our ability to outperform industry sales growth rates.

[Foreign Language] We also made significant progress in our digitalization efforts in 2023 as we applied AI technology and large language models across a wide range of our products and services. We launched products such as cloud smart selection and [indiscernible] 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 AITC and Operation Butlerhelping our dealer customer reduce overall cost 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.

We expect our digital products to maintain their strong growth momentum, contributing to a more diversified revenue mix for Autohome. [Foreign Language] 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 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. In 2023, TTP delivered a year-over-year revenue growth of over 10%.

[Foreign Language] In conclusion, we have steadily grown revenue while achieving a more optimal revenue mix and driving a 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 efforts, we aim to create new growth momentum and position ourselves for continued success in the future.

[Foreign Language] Let me walk you through the key financials for the fourth quarter and full year 2023. Please know that as with prior course, I will reference RMB only in my discussion today unless otherwise stated.

[Foreign Language] Net revenues for the fourth quarter were RMB1.91 billion, breaking down by segment, media services revenues were RMB500 million, leads generation services revenue were RMB841 million, and online marketplace and others revenues were RMB569 million, up 14.8% year-over-year. [Foreign Language] Moving on to costs.

Cost of revenues in the fourth quarter was RMB368 million compared to RMB371 million in Q4 2022. Gross margin in the fourth quarter was 80.8% compared to 80.4% in Q4 2022.

[Foreign Language] Turning to operating expenses. Sales and marketing expenses in the fourth quarter was RMB730 million compared to RMB633 million in Q4 2022.

Product and development expenses were RMB356 million compared to RMB313 million in Q4 2022. Finally, general and administrative expenses were RMB157 million compared to RMB103 million in Q4 2022.

[Foreign Language] Overall, we delivered operating profit of RMB367 million in the fourth quarter compared to RMB513 million in the conspiring period of 2022. Adjusted net income attributable to Autohome was RMB503 million in the fourth quarter compared to RMB669 million in the corresponding period of 2022.

[Foreign Language] Non-GAAP basic and diluted earnings per share in the fourth quarter were both RMB1.04 compared to RMB1.36 and RMB1.35 respectively in the corresponding period of 2022. Non-GAAP basic and diluted earnings per ADS in the fourth quarter were RMB4.15 and RMB4.14 respectively compared to RMB5.42 and RMB5.41 respectively in a corresponding period of 2022.

[Foreign Language] Let me now turn to a short summary of our year – 2023 full year result. Total revenues were RMB7.18 billion, an increase of 3.5% year-over-year.

Of that, media services revenue were RMB1.87 billion, leads generation services revenue were RMB3.11 billion and the online marketplace and others business revenue increased by 14.6% year-over-year to RMB2.2 billion. In addition, we delivered an adjusted net income attributable to Autohome of RMB2.16 billion with adjusted net margin of 30.1%.

[Foreign Language] As of December 31, 2023, our balance sheet remains very strong with cash, cash equivalents and short-term investments of RMB23.55 billion. We generated net operating cash flow of RMB2.45 billion in 2023.

[Foreign Language] In November 2021, our board of directors authorized a share repurchase program under which we were permitted to repurchase up to US$200 million of Autohome's ADS for a period not exceed 12 months thereafter. In November 2022, our board of directors authorized an extension of this share repurchase program for another twelve months.

As of December 31, 2023, we have completed this share repurchase program with repurchase approximately 6.73 million ADS for a total cost of approximately US$200 million. [Foreign Language] With that, now we are ready to take your questions.

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

[Foreign Language] Thanks management for taking my questions. My question is about the industry outlook.

Can management comments 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.

[Foreign Language] Thank you very much for the question. Actually, in 2023, we do see the trend of the first low and 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 quarter-over-quarter for the third quarter, 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 de-stock for the combustion cars, which failed to meet the National Six Standards.

And also in this way, it boosted the sales. As for 2023, the passenger car sales has gone up by 5.3%, majorly due to the NEV cars.

[Foreign Language] We also see some challenges in this industry. For example, it's very competitive in starting the price wars and the margins has 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 corporate margin, which was 5.8%.

The auto market margin is quite low. So in this way, according to the data of CADA, for the first half of 2023, there were 50.3% of the dealers suffered loss and it's quite challenging for the fewer stores.

[Foreign Language] 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 sprint.

And in Chenzhou, 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 would continue to stabilize and would continue to providing a good development momentum, which will achieve 3% of the growth. [Foreign Language] Finally, in terms of the structure of the auto market, NUV had always keep growing in a rapid way.

The penetration rate of the NUV has gone up from 28% back in 2022 to 35% in 2023, it will be expected to reach 40% in 2024. 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 would be even more aggressive.

So we do see that, no matter it's the domestic brands or the JV brands, a lot of the traditional car makers are trying to explore to launch a lot of NUV car models to fit into the NUV gross market. That would also help the OEM to try to be more innovative to enhance its competency to fit into this market.

[Foreign Language] 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. We are quite confident in 2024’s auto market in China.

[Foreign Language]

[Foreign Language] 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 2003.

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 Ping An Group?

Thank you.

[Foreign Language] Well, thank you very much for the question. Now, talking about the GP margin.

Well, yes, in 2023, compared with 2020 or 2023 – with – compared with 2022, we do see some slightly down in the GP margin. Well, 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 recruiting of the new customers and the promotions.

In this way, we also expanded about 20 renewable energy – NEVs offline experience stores. And we provided some promotion 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 the 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 based, we also invested in video and the live streaming. So in this way, it spreads up some of the cost.

[Foreign Language] 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 on-line auto show, et cetera.

And also, we invested more heavily in 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. So in – we are focusing on providing professionalism and a unique content.

Now, in terms of the momentum of the process, 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.

[Foreign Language] 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, Autohome and the 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.

For example, Autohome has a lot of traffic. We have about 70 million DAUs every day, and we have professional content and tools.

We have very enriched 2C and 2B services and experiences. For Ping An Group, they have about 60 million car owners, which are their insurance customers, and in their platform, there are about 200 million registered customers.

So, they also have a lot of enriched 2B and 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 from shopping the car, using the car, and the post sales of the car services to create the closed-loop ecosystem for the car users.

[Foreign Language] In terms of the tools, content, and services, we believe that we can create a lot of synergy. We can consolidate a lot of resources to create the one plus one is higher and more than two effect.

So, in this way, we believe that our two companies are quite complementary to each other, and in this way, Autohome would leverage on the resource of Ping An Group and to enhance our investment yield, and to enhance efficiency and try to build our vision and make our vision – realizing our vision, we want to be the first-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 and service platform.

Thank you. Operator, please go ahead.

[Foreign Language] I will translate myself. Thanks, management, for taking my question.

I have two quick questions. First one is along with rising mix from NEV 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 leads generation?

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.

[Foreign Language] Well, thank you for the question. Well, tell me about the market, if you look at the market, we do see 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 million cars, but whereas renewable energy car is only about 20 million.

So we do believe that to serve the most base market, we do still need a lot of dealers and four stores. However, in terms of the future momentum, we do see that with the penetration rate of the EV cars gradually going up, we do see the shrinking of the four stores and the dealership model would be the future momentum, but it will not drop very sharply.

So, during this process, we would work together with risk dealers and they try to transform along with risk dealers and they try to readjust our business model. [Foreign Language] Now, in terms of our cars ecosystem and as well as our service system, we are also trying to work very closely with those combustion car dealers and they try to work together and build a lot of our synergy.

[Foreign Language] 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.

[Foreign Language] Now, if you look at the NEV car OEMs, originally they showed the responsibilities for R&D, manufacturing, sales, marketing, and 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 dealerships and the franchising model.

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 businesses are still very promising.

We have no worries about our future, especially our lead business and the future growth. [Foreign Language] 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. In this way, we help those OEMs to get into the lower tier cities and into better channels to make themselves.

This is a proactive change, trying to get more fit into this new structure of this market. And this is a brand new business model for us.

It helps us to achieve a better collaboration with the NEV car brands and to enhance its self. 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. [Foreign Language] Now talking about the dividend payout plan, in the past couple 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 payout no less than RMB500 million as the dividend, which equals to 28% of the net profit in that year. At the end of 2023, we further readjusted the dividend payout ratio system.

We announced that we are going to make about RMB1 billion dividend payout and continuously from 2024 to 2026 for this future three years, we would provide no less than RMB1.5 billion dividend payout. [Foreign Language] Now overall, if 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 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 enhance the dividend payout ratio, but also push up the absolute amount of the dividend we paid out. [Foreign Language] In the future, we will keep a close attention to the market moves and we would be in a timely manner to report and communicate with our Board meetings and we are trying to provide better returns for our shareholders.

Operator?

[Foreign Language] 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?

Thank you.

[Foreign Language] First, 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 cities, because we 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 providing very rapid growth of these stores, because we want our business to be stable, healthy and prudent, 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 to over RMB10,000, actually, it was RMB16 million. And we do see with more and more stores get into a maturing 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?

[Foreign Language] 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 months time. And in the meantime, if you have any further questions, please feel free to contact us.

Thank you. Good bye.