Earnings Call Transcript - ATHM Q4 2024

Operator, Operator

Ladies and gentlemen, thank you for joining us for Autohome's Fourth Quarter and Full Year 2024 Earnings Conference Call. This call is being recorded. If you have any objections, you may disconnect now. A live and archived webcast of this call will be available on Autohome's Investor Relations website. It is now my pleasure to introduce your host, Mr. Sterling Song, Autohome's Investor Relations Director. Mr. Song, please proceed.

Sterling Song, IR Director

Thank you, operator. Hello, everyone. I'm Sterling, and welcome to Autohome's fourth quarter and full year 2024 earnings conference call. Earlier today, Autohome distributed its earnings release, which can be found on the company's IR website 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, 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 to the most directly comparable GAAP measures can be found in our earnings release. I'll 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, CEO of Autohome, and thank you for joining our earnings conference call today. Today is my first time to join the earnings conference call as the CEO of the company. We suppose you have read the update filing by the company earlier today; Haier Group has become the new controlling shareholder of Autohome. Autohome, as China's leading online automotive consumer platform, is supported by the core foundation of data plus technology, a broad user base, deep industry insights, professional content, a strong network of OEMs and dealers, and a robust financial system. Haier's strategic investments reflect recognition of Autohome's business model and market potential and will inject new vitality into Autohome's long-term development. In the future, Autohome will serve as a key hub in Haier's automotive industry ecosystem, continuing to solidify and develop the existing businesses while leveraging the advanced management experience of Haier and the operational systems of CARTECH in delivering deeper user experiences, smart software connectivity, and new automotive retail to continue to strengthen Autohome's O2O intelligence exchange and comprehensive service capabilities, further driving innovation and growth for the company and better serving every user. At the same time, Ping An Group will remain a key shareholder of the company and will continue to strongly support Autohome's long-term development. Next, let us take an overview of the company's financials. We concluded 2024 strongly with significant breakthroughs across each of our innovative businesses. Total revenue for the year reached RMB 7.04 billion, with revenue from online marketplace and others increasing by 8.1% year-over-year and accounting for 33.8% of total revenue. Notably, our NEV business maintained strong growth momentum, with revenues in 2024 increasing by 55.2% year-over-year. Adjusted net income attributable to Autohome in 2024 reached RMB 2.05 billion, yielding an adjusted net margin of 29.1%. Additionally, we announced a combination of RMB 1.5 billion in dividends for the year. And as of last week, we had repurchased approximately USD 88.5 million worth of shares. Moving forward, we remain committed to executing the Board's approved dividend and share repurchase program, enhancing our shareholder returns. Our strategic focus throughout 2024 was integrating our online-to-offline ecosystem highlighted by significant milestones in user growth, enhancements of our content matrix, expansion of our new retail business, and the deployment of AI applications, which were particularly successful for our innovative businesses. I'd like to take a moment to review these achievements in great detail. First, our online traffic reached new highs again with average mobile DAU exceeding 77 million in December 2024, reflecting the effectiveness of our high-quality content-driven strategy in driving user growth. We also expanded partnerships with multiple Internet platforms, leveraging open collaboration to engage with a broader demographic and expand our reach. Second, since the launch of our first Autohome Space stores in 2022 and the subsequent large-scale rollout at the end of 2023, along with the accelerated expansion of satellite stores into low-tier cities in 2024, we've made substantial progress in building out our offline channels. The total number of franchise offline stores now exceeds 150, generating strong brand aggregation and extensive channel coverage. At the same time, we helped more than 1,200 cities trade-in for new auto shows in over 200 cities during the year, effectively promoting trade-in for new and NEVs into rural area policies. In terms of technological innovation, we've seamlessly integrated AI across all aspects of our business from content creation for consumers to operational management and decision-making analysis for clients, significantly enhancing productivity and operational efficiency for our customers. Automobiles play a crucial role in driving domestic demand and expanding consumption, making the industry vital to China's economic growth. In the automotive media sector, we will continue to build differentiated competitive advantages by diversifying and expanding online traffic through our professional content matrix and ecosystem of partnerships. We also deepened our presence in offline regional markets with improved services for users and leverage our digital tools to connect online and offline operations by utilizing our deep understanding of consumer needs and capitalizing on opportunities to transform the industry. We are building a virtuous cycle between our online and offline businesses. Looking forward, we continue to target the substantial business opportunities we see in low-tier markets, deepen our presence in these regions, operate and refine our business models, and enhance operational quality to propel our development to new heights. 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 full year 2024 operating and financial results.

Craig Zeng, CFO

Thank you, Mr. Yang. Hello, everyone. I'm Craig Zeng, the CFO of Autohome. In 2024, we continued to make progress in content development, leveraging our professional evaluation capabilities and a deep understanding of our user needs. We focused on two core technological areas, smart vehicles and AV. With this in mind, we developed a series of professional IP matrices that are both useful for users and beneficial for the industry. For example, in December last year, we launched the first winter dual temperature test program focused on NEVs. This initiative directly addressed three major industry pain points under low temperature conditions: short range, slow charging, and high energy consumption. We conducted comprehensive tests on the reliability and comfort of vehicles in a low-temperature environment, covering more than 50 models across 30 brands, generating over 600 million views across various platforms. Multiple OEMs shared our content, underscoring the industry's broad recognition of our expertise in professional content creation. Additionally, our content localization strategy was successfully implemented in several pilot cities such as Chengdu and Xi'an. In these locations, we adopted an open platform model to create localized content channels that integrate services and promotional activities from local automotive partners. This approach connects regional user needs with local resources, forming a complete closed loop from user demand to service and merchant cooperation. This initiative not only helped us acquire traffic from low-tier markets but also laid a foundation for the further expansion of our regional businesses. According to QuestMobile data, the number of our average mobile DAUs in December 2024 reached 77.48 million, an increase of 13.6% from the same period in 2023, reflecting our leading position in the automotive media vertical. Turning to NEVs, during the fourth quarter, our new retail business focused on strengthening operations in online live streaming and offline activities. Online, we utilized our exhibition halls and holographic cabin at Autohome Space stores to boost local user acquisition capabilities through live streaming. Offline, we leveraged vehicles from several brands to create curated sales events that simplified the car selection process for users while making purchasing more cost-effective. We also observed rapid growth in new media matrix accounts and key influencer accounts related to new retail in the fourth quarter, driving significant growth in both leads and transaction volumes on a sequential basis. To date, we have established 28 franchised Autohome Space stores and more than 130 satellite stores nationwide. We are also pleased to report that total revenues from NEVs during the year, including those from the new retail business, increased by 55.2% from last year, reflecting its huge growth potential. In addition, as China's largest automotive Internet platform, we actively support national trade-in policies. We aggregate subsidy policies and promotional offers from manufacturers in real time through our online platform, providing users with a one-stop service for discount information and automatic matching of benefits that accelerate demand for vehicle upgrades and trade-ins. Moreover, we organized the '100 cities trade-in for new' series of offline auto shows to bring our products and services into third and fourth tier cities. By focusing on these low-tier markets, we create transaction scenarios and facilitate the implementation of trade-in for new and NEV policies in rural areas. In 2024, we hosted nearly 1,000 offline auto shows covering almost 250 cities nationwide, with over 80% of them in low-tier cities. On the digital front, during the fourth quarter, we prioritized AI-driven upgrades for our products, particularly subscription package services. For example, our AIGC video generation tool now features modular graphics and video production capabilities that greatly enhance the format of content while empowering dealers to create high-quality content efficiently. Additionally, it also supports one-click distribution of content across multiple mainstream media platforms, significantly improving operational efficiency for dealers. We also integrated AI into core products for dealership operations. For example, in lead management, AI-driven smart follow-ups provide dealers with comprehensive strategies and tools for managing leads from initial content contact to transaction, improving store staff's issue resolution efficiency by over 20%. In business management, AI incorporates each store's operational data and standardizes complex operational data analysis processes so that managers can quickly obtain insights to guide their decision-making. This upgrade not only enhanced the efficiency of content creation and distribution but also significantly improved operational and management efficiency of dealerships. For our used car business, in 2024, we enhanced digital applications, providing users and clients with a broad range of digital inquiry and other marketing tools such as vehicle condition and pricing to enhance the user experience and improve client operational efficiency. We also continue to strengthen vehicle sourcing, particularly for certified high-quality vehicles to ensure vehicle quality and promote the healthy development of the industry. Over the year, the number of average daily certified vehicles on our platform almost doubled compared to the previous year. Moving forward, we will continue to focus on strict cost control while optimizing operational efficiency to ensure the stable development of our business. Before discussing the specifics of our financials, I believe everyone has already noted that the decrease in our media services revenues during the fourth quarter narrowed significantly on the back of an improving auto sales market. Looking ahead to the new year, we hope to see our traditional businesses continue to stabilize and recover as we will continue to prudently invest in innovative growth initiatives in order to achieve our dual objectives of business expansion and financial stability. With that, let me briefly walk you through the key financials for the fourth quarter and full year 2024. Please note that I will reference RMB only in my discussion today unless otherwise stated. Net revenues for the fourth quarter were RMB 1.78 billion. Breaking it down, media services revenues were RMB 437 million. Lead generation services revenues were RMB 758 million and online marketplace and others revenues were RMB 588 million, up 3.3% year-over-year. On cost, the cost of revenues in the fourth quarter was RMB 429 million compared to RMB 368 million in the fourth quarter of 2023. Gross margin in the fourth quarter was 76% compared to 80.8% during the same period of 2023. Turning to operating expenses, sales and marketing expenses in the fourth quarter were RMB 718 million compared to RMB 730 million in the fourth quarter of 2023. Product and development expenses were RMB 328 million compared to RMB 356 million in the fourth quarter of last year. General and administrative expenses were RMB 131 million compared to RMB 157 million during the same period of 2023. Overall, we delivered an operating profit of RMB 232 million in the fourth quarter compared to RMB 367 million for the same period of last year. Adjusted net income attributable to Autohome was RMB 487 million in the fourth quarter compared to RMB 503 million in the corresponding period of 2023. Non-GAAP basic and diluted earnings per share in the fourth quarter were both RMB 1 compared to RMB 1.04 in the corresponding period of 2023. Non-GAAP basic and diluted earnings per ADS in the fourth quarter were RMB 4.02 and RMB 3.99, respectively, compared to RMB 4.15 and RMB 4.14 respectively, in the corresponding period of 2023. Now I'll briefly summarize our 2024 full year results. Total revenues were RMB 7.04 billion, of which media services revenues were RMB 1.52 billion. Lead generation services revenues were RMB 3.14 billion, and online marketplace and others revenues were RMB 2.38 billion, an increase of 8.1% year-over-year. In addition, we delivered an adjusted net income attributable to Autohome of RMB 2.05 billion with adjusted net margin of 29.1%. As of December 31, 2024, our balance sheet remains robust with cash, cash equivalents, and short-term investments of RMB 23.32 billion. We generated net operating cash flow of RMB 1.37 billion in 2024. On September 4, 2024, our Board of Directors authorized a new share repurchase program under which we were committed to repurchase up to USD 200 million of Autohome's ADS for a period not to exceed 12 months thereafter. As of February 14, 2025, we've repurchased approximately 3.3 million ADS for a total cost of approximately USD 88.5 million. The above is our financial summary. With that, we are ready to open up the Q&A session.

Operator, Operator

Thank you. The first question comes from Thomas Chong of Jefferies. Please go ahead.

Thomas Chong, Analyst

So, thanks, management, for taking my question. I will transfer my questions. So I have two questions. First is for the transaction with CARTECH. So what's the background and the purpose of this transaction? And how will it impact our business in the future and in what areas plan to cooperate? And my second question is we saw the recovery in the fourth quarter in 2024. So how's the reason the positive policies will impact the auto market and Autohome? And what's the management outlook for the auto market in 2025? Thanks.

Song Yang, CEO

Thank you for the question. My name is Yang Song. Firstly, we cannot comment on Haier's investment decision-making, but we believe that Haier CARTECH's strategic shareholding in Autohome is a decision based on multi-phased consideration. As you know, stated in the news release for Haier, as China's leading online service platform for automotive consumers, Autohome takes data plus technology as its core support, and it has a wide user base, in-depth industry insights, professional content, as well as a strong network of vehicle manufacturing OEMs and dealers, and a stable financial system. Haier's strategic shareholding reflects its recognition of Autohome's business model and the market potential, and we are also injecting vitality into the long-term development of Autohome. In the future, as a key hub in Haier's automotive industry ecosystem, Autohome will continue to consolidate and develop its existing business, and at the same time, draw on Haier's advanced management experiences on the CARTECH operating system to further promote the company's innovation and growth, with the aim to better serve every user and the customers. At the same time, Haier will utilize its leading advantages in technological innovation, user insights, consumer service systems, and the people and order combination management model to integrate the online and offline upgrading of CARTECH, especially its advanced store management and inventory management experiences, and comprehensively empower Autohome. It will also develop in synergy in the field of in-depth user experience, intelligent hardware connection, and automotive new retail, and continuously strengthen Autohome's O2O intelligence integration, interaction, and comprehensive operating and service capability. So overall speaking, we firmly believe that by combining the resources and professional knowledge of the two parties, more synergy can be created, providing users with more high-quality and innovative solutions. In addition, I have a supplementary note. After the transaction is completed, Ping An Group will continue to be the major shareholder of Autohome and deepen collaboration with Autohome in multiple assets, such as after-sales vehicle services, online marketing, and support the long-term development of Autohome together with Haier. Okay. Now it would be my great pleasure to answer your second question. Thank you for the question. I consider this to be a great question. According to our official data, the auto market performed strongly in the fourth quarter of last year, with sales volume increased by 13.2% year-over-year. We believe that this is mainly due to approaching the end of the year, as auto companies made efforts to achieve annual growth. We coupled with the expiration of some two new policies at the end of December, which effectively boosted the auto market itself and helped the recent recovery of the industry's confidence. As you know, as a professional vehicle media platform in the automotive industry, we aim to meet users' needs for the two new policies, which is a large-scale equipment renewal and consumer goods trading incentive. And we do see that Vodafone has created a localized content channel, integrated and updated local trading for new policies, and accurately connected the user needs with local resources. According to the QuestMobile data, the average daily number of mobile users of automotive in December 2024 increased by 13.6% year-over-year, further consolidating its industry influence. At the same time, with the recovery of the auto market, Autohome's media business has also picked up, growing by 34% quarter-over-quarter. We expect this trend to continue in 2025. Next, I would like to share with you my outlook for 2025. According to the market detail sales in 2025, it will increase by 2% year-on-year. And also, we can see that the cumulative retail sales in 2024 increased by 5.2% year-over-year, among which, the retail sales of new renewable energy passenger vehicles will increase by 20% year-over-year and that this penetration rate will reach 57%. We believe that this overall pattern of both markets in 2025 will be stable and positive, and that the following trends may appear. I would like to provide you with three detailed analyses. Firstly, we see continued favorable policies and steady growth of the auto market. Secondly, we observe the continuous growth of renewable energy vehicles and the emergence of intelligent trends. And thirdly, we anticipate that industry price competition will continue. In summary, in the long run, with the continuous development of the renewable energy vehicle industry, and the government introducing new favorable policies to support the auto market consumption, we believe that the auto market will experience strong long-term growth, and we will continue to deepen our efforts in the new renewable energy business and develop healthily together with the Chinese automotive industry. That's all for my answer. Thank you very much.

Operator, Operator

Thank you for the questions. Next question comes from Brian Gong from Citi. Please go ahead.

Brian Gong, Analyst

I will transfer myself. Thanks, management, for taking my question. I have two questions. First is regarding our lead generation business. How is the contract renewal situation so far? And are there any areas to further explore potentials for this segment? And the second question is about the outlook for the 2025 used car market. And when does management expect the industry and our business to recover for used cars? Thank you.

Song Yang, CEO

Thank you very much. I appreciate your question. Regarding the renewal of DealerConnect, it began at the end of 2024 as usual and was completed after the Spring Festival in 2025. The renewal rate is very good, exceeding 85%, which is better than in previous years. We attribute this success to two main factors. First, the full-scale implementation of AI in our products, which integrates data and workflows on our platform. This has helped reduce costs and improve revenue for dealers through enhanced efficiency and decision-making. Second, our strong brand influence, high user traffic, and optimized operating experience continue to attract a substantial number of customers to renew. I want to discuss the business potential from three perspectives. First, the Chinese auto market is expected to trend upward, despite differing projections. As total sales increase, leads will also rise. We can further enhance digitization and intelligent validation. For instance, we can optimize our AI technology to create more accurate customer profiles and personalized recommendations, allowing dealers to reach target customers effectively. We can also analyze customer vehicles and utilize big data to develop more efficient targeted marketing strategies. Additionally, we recognize more opportunities in lower-tier markets, which will help us acquire more customers. Secondly, regarding our lead business, we are currently focused on new car sales but see potential for expanding into post-sales services, including maintenance. Now, about the used car business, in 2024, while used car sales increased, profits declined. The transaction volume for used cars rose by 6.5%. However, among the top 100 used car dealers, many reported low gross profit margins. The growth in sales is largely driven by policy support, which has created replacement demand for used cars and simplified the trading process, thereby reducing costs and improving efficiency. The renewable used car market has seen a significant increase in transaction volume, reaching over 1 million vehicles in 2024, up 48% year-over-year. Despite the positive growth, profits have been pressured by price wars in the renewable vehicle market, leading to fluctuations in the purchase and sale prices of used cars. This has extended inventory cycles and complicated cash recovery, resulting in lower gross profit margins for dealerships. Looking ahead to 2025, we anticipate continued market demand driven by the ongoing implementation of supportive trading policies and the promotion of renewable energy used cars. While price wars may persist, we expect less volatility, which should help stabilize the market. Our aim is to address issues such as enhancing the transparency of used car transactions regarding pricing and vehicle conditions. Autohome plans to promote trustworthy used car sources, which should significantly increase, as certified and high-quality vehicles often command higher prices, improving dealer profitability. Additionally, digital tools that enhance visibility into vehicle conditions and pricing can improve business efficiency. Overall, we see a positive long-term growth trend in the market, but do not expect rapid short-term growth.

Operator, Operator

Thank you for the questions. One moment for the next question. Our next question comes from the line of Xiaodan Zhang from CICC. Please go ahead.

Xiaodan Zhang, Analyst

So thanks, management, for taking my questions. Could you please share your outlook on the 2025 revenue and margin outlook for the NEV's new retail model? And how should we think of its expansion pace going forward? Thank you.

Song Yang, CEO

Well, thank you very much for the question. As you know, renewable energy vehicles are one of the key development strategies for Autohome. We believe that the new retail business will focus more on O2O, the online and offline collaboration. We believe that this will be the main driver for future growth of the business. Our past experience shows that this strategy is effective. For example, in 2022, we only had one space store in Shanghai. By the end of 2023, we established 28 space station franchise stores. Since starting to test the satellite stores in May, the total number of space station and satellite franchise stations now exceeds 150. So it can be seen that the construction of our offline channels has taken initial shape, achieving wide coverage across high and low tier cities. This year, we will continue to explore, especially in the lower tier cities, to expand our coverage. In terms of profits, we believe the profit levels will be reasonable, and it is not a cash-burning business for renewable energy and the new retail business. We want to see our franchisees achieve financial recovery and balance in the short term. In this way, our 2025 business will continue to grow.

Operator, Operator

Thank you. One moment for the next questions. Our next question comes from the line of Ritchie Sun from HSBC. Please go ahead.

Ritchie Sun, Analyst

Thank you, management, for taking my question. I want to ask: how should we consider further increasing the payout ratio or shareholder returns? Thank you.

Song Yang, CEO

Well, thank you very much for the great question. Actually, if you look at the past three years, in 2022, we had already paid out a USD 500 million dividend. In 2023, this number reached RMB 1 billion. And in 2024, it further increased to RMB 1.5 billion. Our Board of Directors also made a promise that in the next three years, we would pay out no less than RMB 1.5 billion. In addition to the dividend payout, we also find other ways, for example, through share buyback policies to better boost our share price. This helps investors reduce risk. Out of the USD 200 million share buyback plan, we have executed approximately USD 88.5 million so far. So in the future, in addition to the dividend payout, we will continue to do more share buyback policies and other effective ways to provide better returns to our shareholders.

Operator, Operator

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

Song Yang, CEO

Thank you, everyone. Thank you very much for joining us today. We appreciate your support for the company, and we look forward to updating you on our next quarter's conference in a few months' time. In the meantime, if you have any questions, please feel free to contact us. And thank you for joining us today. Thank you, everyone. Bye-bye.

Operator, Operator

This will conclude the conference call. Thank you for your participation. You may now disconnect your lines.