Earnings Call Transcript - ATHM Q2 2025

Operator, Operator

Ladies and gentlemen, thank you for standing by for Autohome's Second Quarter and Interim 2025 Earnings Conference Call. 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, Mr. Sterling Song, Autohome's IR Director. Mr. Song, please go ahead.

Sterling Song, IR Director

Thank you, operator. Good morning, everyone, and welcome to Autohome's Second Quarter and Interim 2025 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 on today's call are Chief Executive Officer, Mr. Song Yang; 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 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 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. Yang, for opening remarks. Please go ahead, Mr. Yang.

Song Yang, CEO

Thank you, Sterling. Hello, everyone. This is Song Yang. Thank you for joining our earnings conference call today. In the first half of the year, we made steady progress in advancing our O2O strategy by effectively optimizing the synergies between our online and offline resources; we improved both user experience and service quality. At the same time, we accelerated AI-driven product innovation and upgrades, leveraging intelligent technologies as a core enabler to empower user decision-making and help customers reduce costs while improving efficiency. On the new retail front, we are redefining the automotive consumer experience through technology. Online, our 'Buy For Me' live stream enables multi-vehicle comparisons and citywide trial inquiries. Offline, we deliver a differentiated experience through three key services: immersive VR movies, AI-assisted test driving with car owner guidance, and AI-powered purchasing assistance. These innovations significantly reduced transaction costs for both ends, users and customers, creating a complete online to offline service ecosystem. As of the second quarter, the number of new retail franchise stores has surpassed 200, continuously expanding our service coverage and reaching a broader consumer base. In terms of AI technology applications, we've created end-to-end intelligent solutions. For consumers, our AI Smart Assistant now covers all scenarios for both new and used cars with industry-leading performance in question and answer. For dealerships, we've integrated AI technology into the entire customer journey from marketing to customer acquisition to transaction conversion and to after-sales services, creating a comprehensive and close digital marketing loop that enhances operational efficiency. To date, we've already served over 50 automotive brands. Additionally, we've established an extensive ecosystem of alliances and continue to expand our partnership network through strategic collaboration with leading platforms, including Alipay. Through jointly developed channels and co-branded marketing initiatives, we've built a comprehensive user engagement network to amplify our brand influence. Notably in late June, we officially launched the international version of the Autohome website, featuring over 1,900 vehicle models from 52 Chinese automobile brands going global. This not only provides substantial support for the globalization of China's auto industry, but also marks a crucial step forward in our international business expansion. Looking forward, we will continue to expand AI applications across our products and services and deepen the deployment of our automotive ecosystem by capitalizing on the industry trends of electrification, intelligence, and globalization. We will further drive the transformation of the automotive consumer experience. With that, I will now turn the call over to our Chief Financial Officer, Craig Zeng, for a closer look at the second quarter 2025 operating and financial results.

Craig Yan Zeng, CFO

Thank you, Mr. Yang. Hello, everyone. I'm Craig Zeng, the CFO of Autohome. In the second quarter, we reinforced our brand position as a go-to platform for discovering new car launches with the position of 'for new car launching come to Autohome.' We did this by developing a comprehensive new vehicle content matrix centered around live streaming. This initiative focuses on four key dimensions: view showcasing, initial test driving, professional testing, and technical intelligence, effectively driving the content growth around new vehicle consumption. For example, in June, we launched the Autohome new car first test program and created a special feature titled 'The Ultimate New Energy SUV Showdown.' This intensive testing marathon delivered more than 50 hours of intensive testing live streaming across five vehicles in five days, generating over 160 million views across various platforms. The program not only strengthened consumer understanding of newly launched vehicles, but also significantly enhanced Autohome's industry influence as a trusted authority in professional vehicle assessment. In June, at the International Automotive & Supply Chain Expo in Hong Kong, we took Chinese brand globalization as our core theme. Through a continuous six-hour bilingual live streaming in both Chinese and English, we showcased the exhibition highlights while establishing a dedicated interactive technology zone to demonstrate Autohome's cutting-edge AI technology and VR innovation to global audiences. This initiative, together with the launch of the international version of the Autohome website mentioned by Mr. Yang, underscores our strong progress in supporting Chinese auto brands in their global expansion and promoting our global capabilities. Additionally, we continue to expand our traffic alliance network by promoting multi-platform and multi-scenario collaboration to create synergies across the entire value chain, further enhancing Autohome's brand popularity and industry influence. A prime example is our strategic partnership with Alipay Auto Life service sector in May. Together, we launched a dedicated card billing and selection service for Alipay users and certified car owners, including a special subsidy section to serve trade-ins and potential car buyers. According to QuestMobile, our average mobile DAUs reached 75.74 million in June 2025, up by 11.5% from the same period last year, reflecting our sustained growth in user scale and expanding platform influence. Turning to NEV, our new retail business is committed to building a one-stop automotive ecosystem, empowering customer service through emerging technologies. Online, we use polygraphics live streaming technology and expand digital services into offline experiences. The Autohome Space stores leveraged immersive VR movies as a new driver of store traffic and performed multi-vehicle test drives with real car owners to increase trust and improve conversion rates. Meanwhile, our AI-powered car purchasing assistant provides objective and neutral vehicle recommendations, further improving in-store service efficiency. As of the second quarter, the total number of Autohome Space and satellite stores has reached more than 200. Total revenues from NEVs in the second quarter, including those from the new retail business, continued to grow, increasing by 27% from last year. On digitalization, we've adopted a development strategy centered on data plus technology as the core development driver, integrating our proprietary data resources and industry analysis models to upgrade and launch five major digital intelligence product lines, including AI Marketing Brain, AI Customer Acquisition, AI Leads Master, AI Sales Champion, and AI Vehicle Inspector. These tools empower a comprehensive range of marketing needs, including enabling accurate marketing decision-making, automating content creation with intelligent distribution, improving user engagement efficiency and store visit conversion, strengthening frontline sales consultant capabilities, as well as providing vehicle condition and pricing inquiry systems. Powered by AI, we've redefined the entire marketing value chain, delivering a comprehensive set of intelligent solutions from insight to conversion for our partners, which effectively drives improvements in customer business efficiency. In our used car business, we continue to enhance the integration of our online and offline services system. In late June, we officially launched our flagship Certified Used Car section, featuring carefully selected top-tier brands for cooperation and strictly controlling used car dealer qualification. Each used vehicle in the store comes with comprehensive inspection reports to ensure the safety and transparency of vehicle conditions. Additionally, we also provide reliable aftersales support, ensuring that what consumers see online is what they get offline. At present, we have already onboarded our first group of dealers to our platform. In the future, we will continue to prioritize integrity and standardized processes as our principles, expand cooperation with leading auto dealers, increase the coverage of high-quality vehicle sources, and enable consumers to purchase with greater peace of mind in their purchasing journey. In summary, we are accelerating the implementation of our auto development strategy while continuously incubating new growth drivers and are fully committed to building Autohome into an authoritative professional information platform and a seamless transaction platform. We will focus on the long term, continue to broaden our business horizon with new technologies, and create a more efficient automotive service ecosystem to promote our steady development. With that, now please let me briefly walk you through the key financials for the second quarter of 2025. Please note that I will reference RMB only in my discussion today, unless otherwise stated. Net revenues for the second quarter were CNY 1.76 billion. Breaking it down, media services revenues were CNY 279 million; leads generation services revenues were CNY 733 million; and online marketplace and others revenues were CNY 746 million, up 20.5% year-over-year. On cost, the cost of revenues in the second quarter was CNY 503 million compared to CNY 346 million in the second quarter of 2024. Gross margin in the second quarter was 71.4% compared to 81.5% during the same period last year. Turning to operating expenses. Sales and marketing expenses in the second quarter were CNY 630 million compared to CNY 753 million in the second quarter of 2024. Product and development expenses were CNY 253 million compared to CNY 315 million in the second quarter of last year. General and administrative expenses were CNY 133 million compared to CNY 118 million during the same period last year. Overall, we delivered an operating profit of CNY 297 million in the second quarter compared to CNY 412 million for the same period of 2024. Adjusted net income attributable to Autohome was CNY 476 million in the second quarter compared to CNY 572 million in the corresponding period of 2024. Non-GAAP basic and diluted earnings per share in the second quarter were both CNY 1.01 compared to CNY 1.18 in the corresponding period of 2024. Non-GAAP basic and diluted earnings per ADS in the second quarter were CNY 4.06 and CNY 4.04, respectively, compared to CNY 4.72 and CNY 4.71, respectively, in the corresponding period of 2024. As of June 30, 2025, our balance sheet remains robust with cash, cash equivalents, and short-term investments of CNY 22.05 billion. We generated net operating cash flow of CNY 495 million in the second quarter. On September 4, 2024, our Board of Directors authorized a new share repurchase program under which we are committed to repurchase up to USD 200 million of Autohome's ADS for a period not to exceed 12 months thereafter. As of July 25, 2025, we have repurchased approximately 5.35 million ADS for a total cost of approximately USD 142 million. Okay. The above is our financial summary. With that, now we are ready to open up the Q&A session.

Operator, Operator

Our first question coming from the line of Thomas Chong with Jefferies.

Thomas Chong, Analyst

My question is about the media services revenue. Can management share your thoughts about the trend in the second half and also the expectations?

Craig Yan Zeng, CFO

Okay. Thank you for raising this question. As for the media service business, I believe that we'll continue to look at the OEM budgeting trend. Because we're still experiencing the price war, as a result, we still need some time for the price to stabilize. I believe that with the government's intervention and the policy being released, we will expect that the OEMs' profit will gradually recover and the OEMs will invest more in advertising budgets during the traditional peak season of Golden September and Silver October in the second half of the year. At the same time, Autohome can also meet the needs of different manufacturers through online and offline integrated services and obtain automakers' budget through multiple channels. As a result, we think that in the second half of the year, we're more bullish about the media service business than the first half of the year.

Operator, Operator

Our next question coming from the line of Xiaodan Zhang with CICC.

Xiaodan Zhang, Analyst

So first of all, could management share your outlook on the auto market for the second half of 2025? And are there any updates on the shareholder return plans?

Song Yang, CEO

Thank you for raising this question. Xiaodan, I will take the first question, and the second question will be addressed by Mr. Zeng. First of all, let me share some of the recent market dynamics and the future trend. First of all, we think that in order to cope with the price war of the auto industry, we can see that multiple government authorities have been releasing all kinds of policies for guidance to fight against this kind of rat racing trend. Since July, we have seen that the price has been gradually stabilizing. In the medium and long run, we think that the price war will ease, and this will be very positive for the entire industry as well as Autohome. The second thing we see is that the auto market differentiation is intensifying. On the one hand, you can see sales volume and profits of the automakers concentrating on the top players with the share of independent brands continuing to rise. However, at the same time, due to trading price for volume, the overall profit of the auto industry is still under a lot of pressure. Thirdly, we can see that NEV continues to grow, but the growth rate has slowed down compared to the second half of the year. The third point I want to talk about is that the auto exports have performed brightly. According to the data from the China Passenger Car Association, in the first half of 2025, China's passenger vehicle exports increased by 6.8% year-on-year, among which new energy vehicle exports increased by 48% year-on-year. So you can see that Chinese automakers are accelerating their overseas expansion, and this will be very positive for Autohome. Based on the above-mentioned three understandings and forecasts about the market trend, Autohome will also have the following strategies. First of all, we have been heavily investing in AI technologies, and there are many AI-related technologies, as well as deliverables, that are attributable to our efforts over the past 20 years, particularly in terms of the database, content creation, and AI-related research and development. We have been quickly taking advantage of our AI strength in the above-mentioned areas and turning it into actual productivity. Specifically, this will be showcased online, offline, as well as in the products we deliver to our OEMs and dealers. Secondly, we will continue to heavily work on the O2O ecosystem, which features online plus offline. We are actually the only Internet company with a very large scale of social media deployment in the auto sector. We understand that for the auto industry, it heavily relies on the closed loop with both online and offline. As a result, you cannot only rely on online service delivery to resolve all consumer demand. In the future, you're going to see that we will better connect our offline network with our online platform to continue to innovate our business models and deliver better performance. Such strategy aligns closely with the going global trend of the Chinese market. For example, in June of this year, at the Hong Kong Auto Expo, we actually served as the only official auto media partner. We have been introducing the Chinese branded auto to the rest of the world. On June 30th, we also launched the overseas version of the Autohome website. This is for the first time we introduced Chinese auto brands to global consumers. So far, we have covered six countries and regions, including China, Hong Kong, Thailand, Saudi Arabia, the United Kingdom, Australia, and Brazil. It also covers more than 1,900 models. This is the first time we have done such media introduction in this manner. We hope that through this international website, we can bridge Chinese auto brands with global consumers. I expect that this year, the overall Chinese auto export will be around 7 million units. In the next one or two years, this number will increase to 10 million units. This kind of overseas business deployment will also become the new growth curve for our business. That's the answer to the first question. Now I would like to hand the floor to Mr. Zeng.

Craig Yan Zeng, CFO

In terms of the stock repurchase plan, I already gave you some briefing about these numbers. I think that this will remain unchanged. As committed by the Board, actually in the year 2025, the whole year cash dividend payout will be no lower than RMB 1.5 billion, and this will remain unchanged. In the future, we will continue to return and reward our shareholders in a sustained manner.

Operator, Operator

Our next question coming from the line of Brian Gong with Citi.

Dapeng Gong, Analyst

Management just mentioned after the government's intervention, you have seen some improvement in the OEMs' competition. How does management think about the industry competition in the second half of this year? And if the competition for new car sales can ease, when could we see the used car industry recover?

Song Yang, CEO

Let me take these two questions. We have been seeing that since May until now, we have witnessed that the government has been releasing policies for several times and calling for an end to the evolution-related growth, asking the OEMs to stop this kind of disordered price war. At the same time, we also see some brands, such as BYD and Changan Automobile, abolishing this year's one-price policy and only returning the trading policy or announcing reductions in volume to maintain prices. The fundamental reason for this situation is overcapacity. The production capacity keeps expanding, and we are witnessing that sales and profit margins are shifting towards top-tier players. As a result, small- and medium-sized OEMs will face bigger pressure. In the segmented area, we can see that luxury as well as joint venture brands are losing market shares, and the sales of self-owned brands have increased from less than 50% three years ago to more than 60% in the first half of this year. At the same time, this pressure on profit margin is also forcing OEMs to shift from a size-first or scale-first approach to a quality-first approach. We expect that through all of this policy guidance, the market will quickly return to reasonable competition. Regarding the second question, when can the used car market recover? This is closely related to the total car park, or car ownership, as well as the car age. Generally speaking, you can see that in China, car ownership keeps increasing, while the average car age is around 6.8 years old. Many people are interested in buying a used vehicle; however, they are still hesitant. This hesitation can be attributed to several aspects. First, even though eight government authorities, including MOFCOM, have initiated car circulation and consumption reform pilot programs and also optimized the car registration mechanism, there's still a lot of intransparency in terms of car maintenance, repair, and other historical data. Secondly, as the top player in this industry, Autohome is making efforts to enhance industry standards and transparency. Since June 27th, we have launched the secondhand vehicle official flagship store. The first deal signed was with Lei Shing Hong, and we have helped Lei Shing Hong to build a brand and promote the online/offline integration of services. If consumers want to find a vehicle source, they can directly come to the flagship store in the Autohome secondhand vehicle column. All the sources are validated to ensure the quality. Additionally, we have developed our own AI tools, such as the used car AI Smart Assistant, photo car recognition, vehicle condition checking, and car price checking tools. As we all know, used cars are nonstandard products that necessitate higher accuracy in AI replies to users. These products are constantly being polished and upgraded. This year, the Car Circulation Association predicts that used car sales will increase by 6.5% year-on-year. If the price war can be eased and prices stabilize, I believe that more consumers will choose to buy used vehicles.

Operator, Operator

Our next question coming from the line of Ritchie Sun with HSBC.

Ritchie Sun, Analyst

I have two. First of all, regarding the NEV business, including the franchise stores, what is the progress over there? And what are our thoughts on the second half and next year's development plan and expectations? Secondly, for the data products, what is the progress? Can you update us on the late product suites that we have and any new product pipeline?

Song Yang, CEO

Thank you for raising this question. By the end of the second quarter, the total number of stores already exceeds 200, covering both major and lower-tier cities. In terms of functionality innovation, our Space stores have integrated many new features, such as 3D naked eye viewing of cars, multi-car simultaneous comparison on a single screen, and one-stop purchases. With the help of our AI technologies, we have also created many AI-related experiences, such as AI buyers, car owner accompaniment, AI comparison test drives, and VR space blockbuster movies, just to reshape the car consumption experience. For future development plans, we will continue to deepen our business models focusing on product and service refinement, operation efficiency enhancement, and customer reputation. At the same time, the revenue generation capacity of the new retail model will also be gradually enhanced. Furthermore, we will continue to strengthen technology integration to connect with AI big models, not only serving terminal and consumer experience upgrades but also delivering more products and services based on this technology. We will also deepen our market insights to serve our customers' global requests. Concerning our product metrics and business progress, we have launched the AI Smart Assistant for both new and secondhand cars. Based on the self-developed large model, which integrates almost 20 years of industry accumulation of Autohome and knowledge base, we can deliver professional answers to users' car-related questions. Additionally, we also have AI Buyer, the industry's first intelligent voice assistant that integrates AI large model and ultra-high-definition 3D interaction technologies, supporting natural language dialogue and helping users customize car purchasing plans and compare car sources, thus improving car selection efficiency. For our products, as I previously mentioned in my opening remarks, for all the OEMs, we have integrated five AI-related functions covering marketing, customer acquisition, customer outreach, and store services. I have mentioned all of this content earlier. Regarding the future development trend of our data products, I believe Autohome's strength is attributable to our more than 20 years of professional content accumulation. We have both data users and industry know-how, and we will implement various solutions. In the future, we will continue to leverage these strengths to accelerate our professional capabilities. On one hand, we will think about how to assist our customers in refining operations to meet their individual needs, while on the other hand, we will build Autohome's knowledge base to adapt to the large language model era and better serve our users and clients.

Operator, Operator

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

Song Yang, CEO

Thank you, everyone. Thank you for joining us today. We appreciate your support and look forward to updating you on our next quarter conference call in a few months' time. In the meantime, please feel free to contact us if you have any further questions or comments. Thank you. Bye-bye.

Operator, Operator

This concludes today's conference. Thank you for your participation. You may now disconnect.