Autohome - Earnings Call - Q4 2024

Transcript

Operator (participant)

Ladies and gentlemen, thank you for standing by for Autohome's fourth quarter and full year 2024 earnings conference call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow management's prepared remarks. As a reminder, this conference call is being recorded. If you have any objections, you may disconnect at this time. 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. 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 at ir.autohome.com.cn. Joining on today's call are Chief Executive Officer Ms. 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 Provision 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 filing 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 know 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 CEO Ms. Yang for opening remarks. Please go ahead, Ms. Yang. Yang Song.

Song Yang (CEO)

[Foreign language]

Thank you, Sterling. Hello everyone, this is Yang Song, 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, both a broad user base, deep industry insights, professional content, a strong network of OEMs and dealers, and a strong 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 advanced management experience of Haier and operational systems of CarTech in deeper user experiences, smart hardware connectivity, and the new automotive retail to continue to strengthen Autohome's O2O intelligent interaction 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 as 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 revenues for the year reached RMB 7.04 billion, with revenues from online marketplace and others increased by 8.1% year-over-year and accounted 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, had repurchased approximately $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, enhances 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 partners 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, and 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 1,000 county cities trade-in for new autos in over 200 cities during the year, effectively promoting trade-in for new and NEVs into rural areas 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.

Automobile plays 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'll continue to build differentiated competitive advantages by diversifying and expanding online traffic through our professional content matrix and the ecosystem of partnerships. We'll also deepen 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 our opportunities to transform the industry. We are building a virtuous cycle between our online and offline businesses. Looking forward, we'll continue to target the substantial business opportunities we see in low-tier markets, deepen our presence in these regions, upgrade 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 the full year 2024 operating and financial results.

Craig Zeng (CFO)

[Foreign language]

Thank you, Mr. Yang. Hello everyone. I'm Craig Zeng, the CFO of Autohome. In 2024, we continue to make progress in content development, leveraging our professional evaluation capabilities and a deep understanding of our user needs. We focus on two core technological areas: smart vehicles and NEVs. With this in mind, we've 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 low temperature environments, 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 serving and merchant cooperation.

This initiative not only helps us acquire traffic from low-tier markets but also lays 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 exhibition halls and holographic cabins 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 simplify 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 franchise 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 a 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-in.

Moreover, we organized the Hundred 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 products, particularly for leads generation services. For example, our AIGC Video Generation 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 into the transaction, improving store staff 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. These upgrades 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 controls 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 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 the 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, leads generation services revenues were RMB 758 million, and the online marketplace and others revenues were RMB 588 million, up 3.3% year-over-year. On cost, 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, leads generation services revenues were RMB 3.14 billion, and the 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 remained robust with cash, cash equivalent 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 permitted to repurchase up to $200 million of Autohome 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 $88.5 million. The above is our financials summary. With that, we are ready to open up the Q&A session. Operator.

Operator (participant)

Thank you. We will now begin the question-and-answer session. To ask a question, please press star one one and wait for a name to be announced. If you'd like to cancel your request, please press star 11 again. First question comes from the line of Thomas Zhang of Jefferies. Please go ahead.

Thomas Zhang (Research Analyst)

[Foreign language]

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

Song Yang (CEO)

[Foreign language]

Thanks. 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 strategic shareholding in Autohome is a decision based on multiple considerations.

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 manufacturers, OEMs, and dealers, and a stable financial system. Haier's strategic shareholding reflects recognition of Autohome's business model and market potential, and it will also inject 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 and the CarTech operating system to further promote the company's innovation and growth, with the aim to better serve every user and customer.

At the same time, Haier will utilize its leading advantages in technological innovation, user insights, consumer services systems, and the human and order combination management model, integrate the online/offline integrated operating of Autohome, especially its advanced store management, 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 intelligent integration and interaction, and comprehensive operating and service capabilities. Overall speaking, we firmly believe that by combining the resources and the 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 notice.

After the transaction is completed, Ping An Group will continue to be the major shareholder of Autohome and deepen collaboration with Autohome in multiple aspects, such as after-sales vehicle services, online marketing, and support the long-term development of Autohome together with Haier. Okay.

Craig Zeng (CFO)

[Foreign language]

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 the 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 because, approaching the end of the year, auto companies made efforts to achieve their annual goals.

Coupled with the expiration of some two new policies at the end of December, it effectively boosted the auto market itself, and it helped the recent recovery of the industry confidence As you know, as a professional vehicle media platform in the automotive industry, we are to meet users' needs for the two new policies, which are the large-scale equipment renewal and the consumer goods trade-in incentives. And we do see that Autohome has created a localized content channel, integrated and updated the local trade-in for new policies, and accurately connected user needs with local resources. According to the QuestMobile data, it shows that in December of 2024, the average daily number of mobile users of Autohome 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 be continued in 2025. Next, I would like to share with you my outlook for 2025. According to the market retail 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 5.5% year-over-year, among which the retail sales of new energy passenger vehicles will increase by 20% year-over-year, and the penetration rate will reach 57%. We believe that this overall pattern of auto market in 2025 will be stable and positive, and the following trends may be shown. I would like to provide you with three detailed analyses.

First, we do see continued favorable policies and steady growth of the auto market. Second, we do see the continuous growth of the new energy vehicle and also the emergence of the intelligent trends. Third, we do see the industry price competition will continue. In summary, in the long run, with the continuous development of the new energy vehicle industry and the government's introduction of the new favorable policies to support the auto market consumption, we believe that the auto market will have strong long-term growth, and we will also continue to deepen our efforts in the new energy business and develop healthy together with the Chinese automotive industry. That's all for my answer.

Thomas Zhang (Research Analyst)

Thank you very much.

Operator (participant)

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

Brian Gong (VP and Equity Research Analyst)

[Foreign language]

Thanks, management, for taking my question. I have two questions. First is regarding our leads generation business, how is the contract renewal situation so far and any areas to further explore potential for this segment? And the second question is about the 2025 outlook for used car market and when does management expect the industry and our business to recover for used car business, thank you.

Song Yang (CEO)

[Foreign language]

Thank you very much. I would like to take your question. Talking about the renewal of the Dealer Connect, actually it started at the end of 2024 as usual and was basically completed after the Spring Festival in 2025. The renewal situation is very good, actually it exceeds 85%, which is better than previous years. Why we can achieve such success is because of the two factors.

One is a product upgrade: full-scale AI implementation, upgrading the platform information data and workflow through AI operational reduction, AI follow-up, efficiency improvement, and AI decision-making assistance. It reduces cost and increases revenue for dealers. Secondly, the brand advantages. We have very strong brand influence, high user traffic, and also we have the optimized operating experience and a comprehensive service guarantee, continuously attracts a large number of customers to renew. I want to talk about the business potential in the following three aspects. First is the Chinese auto market, although maybe different sources may have different projections, but we believe the overall trend would be upward. If the total sales go up, the leads would also go up, that is for sure the trend. We can do more on digitization and intelligent realization.

For example, we can further optimize the AI technology to achieve more accurate customer portraits and personalized recommendations, helping the dealers to reach targeted customers in a more effective way. We can also analyze the user's car and use big data and AI to better achieve more efficient targeted market strategy suggested for dealers and also we do see more opportunities and more coverage. In the past, our market is more focused on the big cities, and in the future, we can get into the down market, which is more at the lower tier cities and help us to achieve more customers. and secondly, in terms of the lead business, we focus a lot on new car sales. In the future, we can do more post-sales services, including the maintenance and etc. so in this way, we can further expand the business scope.

Now talking about your second question, which is about the used car business, I should say in 2024, the used car sales increased while the profits declined. The annual used car transaction volume increased by 6.5%. However, out of the top 100 used car dealers, 49 had a single vehicle gross profit margin, which is only between 4%-6%, and 29 had a GP margin of less than 4%. Now talking about the reasons for sales growth, for example, they are from the policy support. For example, the trading for new policies in the new car market has driven the replacement demand for used cars to a certain extent, and also cross-provincial business handling under the listing of the National Five emission limits has simplified the trading process, reduced the trading cost, and improved the trading efficiency.

One interesting part is about the new energy used car market. In the past, there are a lot of not so much transparency in this market, and the volume is not big. However, the transaction volume in 2024 exceeds 1 million vehicles, an increase of 48% year-over-year, which is an important driving force for the market growth. Well, there are pros and cons. For example, the reason for the profit declining is majorly due to the price wars in the new energy new car market, which has led to large fluctuations in the purchase and the sales price of the used car, an extended inventory cycle, and a difficult capital recovery. So this single vehicle gross profit margin of used car dealership enterprises had generally declined. Now I would like to share with you my outlook for 2025.

Firstly, the market, with the continuous implementation of the trading for new policy, the market demand would continue to be released. Coupled with the promotion of the new energy used car, the sales volume of the used car industry in 2025 is expected to continue to grow. Talking about the price war, I should say in 2025, the price war would continue, but the volatility would be less. We do believe that that would help to improve the market. We are aiming to address the pain points in the market, for example, to enhance the transparency of the used car transaction in terms of the pricing and the condition of the car. So that's why in Autohome, we want to promote the trustworthy used car source, which would increase significantly.

This certified and high-quality car source usually has higher selling price, and we help the dealers to improve the profitability. And also, digital tools such as vehicle condition and price query can effectively improve the business operation efficiency. In this way, we believe that the overall momentum is that it will be a long-term growth of the market, but do not expect to see short-term, you know, outbursts of the rapid growth of the market.

Operator (participant)

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 (Equity Research)

[Foreign language]

Thanks so much, management, for taking my questions, and could you please share your outlook on 2025 revenue and margin outlook for the NEV's new retail model, and how should we think of its expansion pace going onwards? Thank you.

Song Yang (CEO)

[Foreign language]

Thank you very much for the question. As you know, the new retail business is one of the key development strategies for Autohome, and we believe that the new retail business we would focus more on O2O, the online and offline collaboration. We believe that this would be the major driver for the future growth of the business. Actually, our past experience shows that this is a very good strategy. For example, in 2022, we only have one space store in Shanghai. By the end of 2023, we had 28 Space Station franchise stores. Since we started testing the satellite stores in May, and also the total number of the Space station and satellite franchise stations has now exceeded 150.

So it can be seen that the construction of our offline channels has taken initial shape, achieving the wide coverage of the high- and low-tier cities. And this year we would continue to explore, especially in the lower-tier cities. We want to have a wide coverage in the smaller- and lower-tier cities. In terms of the profit, we believe the profit would be reasonable, and it is not a cash burning business for the new retail business. And we want to see that our franchisees can achieve the balance in terms of revenue balance in the short term. So in this way, our 2025 business would continue to grow.

Operator (participant)

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 (Equity Analyst)

Thank you, management, for taking my question. I want to ask how should we think about or what is your view on further lifting the payout ratio or shareholder return? Thank you.

Craig Zeng (CFO)

[Foreign language]

Well, thank you very much for the great question. Actually, if you look at the past three years, in 2022 we had already paid RMB 500 million dividend payout. In 2023 this number reached to RMB 1 billion, and in 2024 it further reached to RMB 1.5 billion. And also our board of directors also made a promise that in the future in next three years we would pay out no less than RMB 1.5 billion. In addition to the dividend payout, we also find that other ways to, for example, for the share buyback policies to better boost our you know share price. It helps the investors to reduce its risk.

Actually, out of this 200 million share buyback plan, as for now we had executed approximately $88.5 million. So in the future, in addition to the dividend payout, we would continue to do more share buyback policies and other effective ways to help to better give back to our shareholders.

Operator (participant)

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

Song Yang (CEO)

[Foreign language]

Thank you, everyone. Thank you very much for joining us today. We appreciate your support to the company, and we look forward to updating you on our next quarter's conference call 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.

Thank you for your participation. You may now disconnect your lines.