Earnings Call: Q1 2021

May 27, 2021

Earnings release

Ladies and gentlemen, thank you for standing by for Autohome First Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference call is being recorded. If you have any objection, you may disconnect at this time. It is now my pleasure to introduce your host, Ejik Chao, Autohome's IR Manager, Ms. Chao, you may begin. Thank you, operator. Hello, everyone, and welcome to Autohome's Q1 2021 earnings conference call. Earlier today, Autohome distributed its earnings And you may find a copy on the company's website at www.autohome.com.cn. On today's call, We have Chairman and Chief Executive Officer, Mr. Quan Long Co President, Mr. Haifeng Sha Chief Financial Officer, Mr. Jun Zou and Chief Technology Officer, Mr. Xia Wang. After the prepared remarks, Mr. Long, Mr. Sha, Mr. Zou and Mr. Wang will be available to answer your questions. Before we begin, please note that the Discussion today will contain forward looking statements made under the Safe Harbor provision of the U. S. Private Securities Communications Reform Act of 1995. Forward looking statements are subject to risks and uncertainties that may cause actual results to Those are lined in our public filings with the Securities and Exchange Commission. Autohome does not undertake any obligation to update any Forward looking statements, except as required under applicable law. The earnings press release in this call also includes discussions of certain to the most direct comparable GAAP measures and is available on Autohome's IR website. As a reminder, this conference call is being recorded. In addition, a live and archived webcast of This earnings conference call will also be available on Autohome's IR website. I will now turn the call over to Autohome's Chairman and Thank you, Edgy. Hello, everyone, and thank you for joining us today. I'm pleased to report a solid quarter with total revenues growing 19.1% to RMB1.84 billion. Revenues from our online marketplace and other business increased by 74% year on year and contributed to 29.3% of total revenues. Data products continued its strong growth trajectory with revenues increasing 64.9% year on year, primarily driven by increasing contribution from OEM data products. In particular, TTP's revenue Distribution was larger than our prior expectations. Adjusted net income in the Q1 continued to expand, up 13.7% year on year. Before we Discussing our results in detail, I'd like to share some thoughts about industry lending as a whole and some of our own recent developments. We are I think that changes are coming to the automobile industry. In the face of a challenging macro environment and fluctuation in automobile sales stemming from the pandemic, The auto industry has started to step up efforts towards the digital transformation. Emerging premium Vehicle brands and the traditional auto manufacturers' investment in a new energy vehicle have also accelerated the growth in the NEV space. In addition, some new players with extensive expertise in Internet services are Into the smart automobile market, intensifying the competition in this field, all these trends are reshaping the auto market landscape, including the overall industrial data Against the backdrop of this new market and industry On one hand, in the past 2 years, we have been consistently optimizing and trimming low margin businesses, 2nd, offline insurance business, while staying away from price competition to ensure high quality business portfolio. On the other hand, We rolled out our 4.0 strategies last year, namely AI, big data and cloud capability and SaaS strategies. Now we are also planning an upgrade of this strategy by fine tuning our action plans to execution as we seek to better capture industry opportunities and achieve continued high quality development. We expect to announce updates on this action plan in the second half of this year As a platform with a massive and engaged user base of more than 40,000,000 daily active users, solving business fundamentals, Industry leading innovative capabilities as well as effective and strong execution capabilities, we are confident that Autohome can grow beyond its current standing and tap into new growth potential. Next, let's move to our Q1 results. In the Q1, the new energy Vehicle market expanded the upward growth trend that began in the second half of last year as sales volumes rose year on year and accounted for over 9% of total new passenger vehicle sales compared to At least 6% for full year 2020. The prosperity of the NEV market brought new growth opportunities for us. In the Q1, we expanded and deepened our cooperation with NEB Automakers. Revenue from these automakers Increased close to 170% compared to the same period of last year. In terms of our used car business, We're exploring further opportunities in this area, leveraging our capabilities in lead, financing and relevant supported service resources to empower our customers and serve our users. In the Q1, the transaction volume for TTP When we next To our product advances, recently, we unveiled a new version of our intelligent new car launch, integrating VR showrooms and Mini Video products, while combining our intelligent activities with offline operations. This is allowing new car model debuts to gain more In the Q1, a total of 31 automakers utilized our data products and the total number of programs for 3.0 version works as a marketing platform for dealers to capture private traffic, their own users and obtain incremental leads. On the product of the users front, we recently upgraded our main app to offer a streamlined user In the meantime, we also took steps to improve the quality of our sales leads by requiring SMS verification When users leave their cell phone numbers with us, which further strengthens the protection of user privacy and security. In conclusion, we have a solid first quarter driven by our resilient core business as well as robust new initiatives. Data once again delivered strong revenue growth, while TTP bolstered our used car business line. We also accelerated our product innovation and Iteration in order to further enhance our overall service quality. These achievements reflect Autohome's leading position in Going forward, we remain committed to better serving the interest of our users and customers and delivering long term value to our With that, I will now turn the call over to our CFO, Jun, for more business details and conclude our Q1 financial results. Thank you, Chen. To start, let me go through some business metrics. In March 2021, the number of Average DAUs who access our mobile websites, primarily, APP in the mini apps Grew further to RMB 42,300,000, representing an increase of 33.3% compared to the prior year. For the Q1, all of our OTC, PTC, UDC and other content categories gained solid user contraction. Now I will talk to you through the key financials for the Q1. Please note that as with prior calls, I will reference RMB only in my discussion today Last otherwise stated. Net revenues for the Q1 were RMB 1,840,000,000, A 19.1% increase compared to the corresponding period last year. For a detailed breakdown, media Services revenue were RMB 605,000,000. Lead generation services revenue were RMB 698,000,000 and online marketplace Others revenue increased by 74% year over year to 537,000,000 39,000,000, sorry, primarily driven by the impact of consolidation of TTP and increased contribution from data products. Now moving on to costs. Cost of revenues was RMB243 1,000,000 compared to RMB178 1,000,000 in Q1 last year. The increase was primarily attributable to the impact of consolidation of TTP. Gross margin was 86.8% in the 1st quarter compared to 88.5% in Q1 last year. Turning to operating expenses. Sales and marketing expenses in the Q1 were RMB683 1,000,000 compared to RMB524 1,000,000 in Q1 The increase was primarily attributable to the impact from consolidation of TTP, increased execution costs to Now P and D expenses were $305,000,000 compared to $292,000,000 in Q1 2020. The increase was primarily driven by higher investment in research and development activities. Finally, G and A expense were RMB129 1,000,000 compared to RMB89 1,000,000 in Q1 2020, the increase was primarily attributable to the impact of consolidation of TTPs. Overall, we delivered Operating profit of RMB 567,000,000 for the Q1 compared to RMB586,000,000 in Corresponding period of 2020. Adjusted net income attributed to Autohome Inc. Was RMB 735,000,000 compared to RMB646,000,000 in the corresponding period of last year. Non GAAP basic and diluted earnings per share for the Q1 were RMB RMB 1.52 compared to RMB 1.36 and RMB 1.35, respectively, in the corresponding period of last year. Now non GAAP basic and Diluted earnings per ADS for the Q4 were RMB6.08 and RMB6.06, respectively, compared to RMB5.43 and RMB5.4, respectively, in the same As of end of Q1 2021, our balance sheet remained very strong with cash, cash equivalents and short term investments Of RMB 17,270,000,000, we generated operating cash flow of RMB 546,000,000 in the Q1 of 2021. As a listed company on the Hong Kong Stock Exchange, we will follow the common practices adopted by public companies in Hong Kong market. As a result, we will no longer provide guidance on revenues going forward. In mid March, Autohome successfully listed Hong Kong Stock Exchange. Additionally, Hong Kong Auto Homes Hong Kong stocks will be added to Hanson Tech Index and Hanson Composite Index, marking a key milestone in our history in opening a new Autohome has been leading the development of the industry. As we move forward with our strong balance sheet and profitability, we are confident that Autohome will bring more value Thank you. We will now begin the question and answer session. Please note that each participant is limited to 1 question. Shall we have more than one question to post, kindly rejoin the queue again. Participants with questions to First question is from Mr. Dua Chuang from Bank of America Securities. Please go ahead. Thank you. Thank you for taking my question. Can management share your thoughts on the business outlook for the Q2 and the second half this year, especially for the second half? Because previously, management mentioned that company will announce action plans for strategic upgrades in the second half. So can you give us The hint of what kind of areas will company focus on and what kind of products or services upgrades may be taken? Thank you. Okay. Thank you for raising this question. I'd like to take the question about the strategic upgrading. You know that in China, our Market changes very fast, and we do witness 3 different characteristics. The second characteristic is that the sales volume for auto Has been volatile and has been very dramatic changes over the past several quarters. In Q1, You can see that there's a very big growth comparing with the same period of last year. There's a growth of 69%. Of course, there's also the factor caused by the COVID-nineteen pandemic. And in April, we can see that we only have the growth of about 12%. So the growth jumped from 69% to 12%. And for the 1st 3 weeks of May, actually for the wholesale business, There's a negative growth year on year. So the second characteristic is that because of COVID-nineteen pandemic, The digital transition of those automakers has been accelerated. And the third characteristic is that you can see the sales of Our NAV has been growing up very rapidly. And from January to April of this year, you can see that the Sales of the new electric passenger vehicle increased by 2 88%, almost 300%. So there's a lot of new players, including some of the intelligent some of the Premium car brand as well as some of the carmakers with very good At the same time, we also find The entire auto industry has been developing as well as changing very fast. We'll be getting in touch with the automakers with those auto OEMs. And we also discovered these changes. For example, a lot of the automakers, they have been directly connecting with the users and some of them directly connected with the operation of the users. At the same time, the iteration of the products of the auto OEM is also accelerated. So for Autohome, we think that we're dedicated to pursue long term sustainable and healthy development of the auto market. So we considered about the upgrading of our strategy. Last year, we launched our 4.0 strategy. And this year, based on the above mentioned new changes on the market, we are considering about the upgrading of the strategy. Got it. And according to the plan of Ourofeng, we are actually going to announce the update of the fine tuning of the action plan to the execution in the second half of this year. So actually, we are dedicated to have the long term Sound stable as well as a good development high quality development in the longer term. Actually, for this year, we're still maintaining our estimate about the auto market growth in China and at the very beginning of the year, which is the estimate of a growth of about 10%. And actually, we still have to observe the changes and Development on the market. The first thing we have to take notice is about the shortage of the auto level chips production. There's a shortage for a while. And secondly, we have to take notice of the relapse of COVID-nineteen in specific geography. And the second thing is that, I think that for the auto OEMs, their budgeting of the whole year is closely related to the sales volume of the cards. So this is the two points I'd like to add. So operator, next question please. Thank you, Miranda. Next question is Eddie Wang from Morgan Stanley. Please go ahead. Thank you, Longsai and Zou Zou for taking my question. My first question is about your comments on the new car sales in the Pro, which has been a little bit slow down. And in May 1st 3 weeks of May, actually, you see a year over year decline in terms of new car sales volume. So would you please give us some color how this will impact our revenue in the That's the first question. And second question here that you have been talking about in the prepared remarks that the TDP car has delivered a larger expected contribution to your top line. So can you give us a little bit All color in terms of, firstly, how does the used car industry have been so far this year? And Secondly, that how can you how do you did you achieve the how the expected the top line growth of TTB car. And how what was your strategy in the overall used car kind of sector? Thank you very much. So to answer your first question, you can see that in the first two Of this year, in particular, from January to April as well as the 1st 3 weeks of May, there's a declining trend of the new car sales. So I think that there are basically two reasons for that. The first one is the shortage of the 2. And second one is COVID-nineteen pandemic. So as we estimated the growth for the whole year, which was about 10%, you can see that so far in Harrison, there's a downward trend. And in Autohome, we think that for the automakers, their is closely related to the sales volume. As a result, you can see that our advertising business is affected because of that. However, we're still exploring the potential of other businesses. And your second question is about the used car business. You can see that, so Part of the secondhand card, the used card is higher than the new card sales. And last year, we acquired TTP and now we are thinking about the cooperation between Autohome and TTP. That is to say, we hope that the business of the used In Autohome as well as TGP, we can form some cash flow actions. We can form some synergy. The first one is that in terms of the used car business, we still stick to the platform based business model, which is actually focusing on the light assets. And for the Yuju Card business, together with GTP, from the seller's We are actively providing the lead gen services as well as the auction services so as to Enable the sellers of the used car. And from the buyer side, we are offering the lead gen services as well as some platform services to enable the buyers. So I think that in the future, we're also considering about Launching the trade in services and the relevant projects so that to better integrate our I'd like to add 2 points. Firstly, just like Mr. Shao mentioned, the advertising budget of those automakers are closely linked With the auto sales, so we are also exploring the acquisition of other businesses by offering More products to our clients. And the other thing is that we will pay more attention to the operation of the users so as to Enable those auto OEMs, automakers. But in terms of NEV, I should see that actually Our clients would like to pay a much higher premium for the lead gen comparing with the lead of the traditional auto So I will not tell you the details about the gap between the two, but I think that this premium is very significant. So I think that through advertising as well as the CPM, we will continue to empower the traditional automakers as well as those Emerging premium TV brands. Yes. Well, also said that we offer a comprehensive suite of services to EV makers and traditional makers, the auto makers that makes EVs through advertisement, through orders and through UPS. So thanks, Eddie. Operator, next question please. Thank you, everyone. Next question is Brenda Chow from CICC. Please go ahead. Thanks management for taking my questions. I have a Follow-up question on NEV. So could management elaborate a little bit more on the cooperation model of NAB Automakers and our future like potential other models of this business. Thank you. We have very comprehensive cooperation with the EV automakers as well as the Our premium EV brand, actually, since 2019, we already entered into cooperation with the big names like Like NIO as well as Li Auto, etcetera. So there's very sustainable and very stable cooperation between us. So in terms of the model of the corporation, actually, the lead gen is actually produced based on the demand and the price of those leads will be based on the quality of the leads. So this is the principle of our operation model. So we offer a package of total sales increased solutions to those clients. And during the upgrading of our strategy, we will also iterate the cooperation model between us And those are the automakers. There are 2 main directions. The first one is that we will enhance our services, in particular, The order placement services as well as the online reservation of the test drive. And the second thing is that actually We will help those NEV automakers to expand their coverage in the different geographies, in particular, in Tier 1 cities. Okay. Thanks. Operator? Thank you, Brenda Chow. Next question is Thomas Chong From Jeffrey, please go ahead. Thanks management for taking my questions. I have a question relating to our OpEx trend. Can management comment about our cost Strategy for this year as well as our headcount plan. And my second question is about the overseas expansion strategy. Given that COVID is still quite uncertain outside China and our strategic We actually have some changes in our overseas expansion. Thank you. Okay. I would like to take the first question and Mr. Will take the second question. Just like our Chairman said in the opening presentation, now we are planning about the upgrading of our strategy. So it's very difficult for me to give you a forecast about the changes in the cost as well as the expenses. But according to our Traditional legacy, actually, we're very good at cost control as well as the operation efficiency enhancement. And for the cost of safety in our business, we'll use them in the incubation of the new business. I think that this principle will remain unchanged. So for the second question about our overseas business, We will still follow the principle of empowerment as well as output. In terms of empowerment, I mean, We will actually empower our users through the content. It means that there will be very rich content provided online To facilitate the users to see different models online, to actually have the test drive and To make the reservation online, things like that. And in terms of the output, we mean technical output. We will continue to enhance our 3 gs plus VR auto show capability so that we can launch different activities online and to provide more convenience to the online users. And from the feed channels, it means that we will empower the dealers and distributors through our SaaS capabilities and platform. And in terms of our cooperation with the auto OEM, we will empower them with our lead gen And you can see that in March, our total MUC is about 3 0.12000000 and we actually connected with 6,500 and 50 dealers and the FTU is 1,200,000. Just add one point to Our CTOs answer. In some other certain other markets, we don't mind looking into investments or acquisition opportunities to expedite our inroads into those local markets. And we are still confident that our overall technology content and our ability and Experience to work with OEM and dealers will help us to penetrate those markets. And Thank you. Next question please. Thank you, Thomas. Next question is Brian Kong from Citigroup. Please go ahead. I will quickly translate for myself. So can management share some thoughts on In terms of our cooperation with Ping An, I think that there are mainly 3 dimensions Can discuss about the cooperation. The first one is technology collaboration and the second one traffic collaboration and third one is product collaboration. And the first one being technology collaboration. I think that we have been greatly empowered and enabled by Ping An in AI, automation technology as well as machine learning. And second one is to traffic collaboration. We have been cooperating with Ping An and we have been making our presence on a lot of the mini programs on Ping An website. For example, We are good car owners as well as the gold bustlers as well as pocket brands, things like that. We have been cooperating with them by making our presence in those mini programs. And in Sunrise, the product collaboration, these are mainly based on specific Projects, say, these data projects we have been talking before, in this one, we can marketing towards the users based on the accurate user profiling. And take this August 18 campaign, for example, Ping Anzhi has been recently empowered us through their communication as well as media resources capabilities. I'd also like to add one point. Actually, since this year, PIA has intensified The collaboration, cooperation as well as support with Autohome actually for all the subsidiaries tentatively engaged with the corporation with Autofol. And recently, you can see that when we are actually dealing with The OEMs as well as the dealers, actually, we get a lot of support from Ping An in terms of the daily work. Thank you, Brian. Due to the tariff constraint, I will turn the conference back to management for closing comments. Thank you very much for joining us today. We appreciate your support, and we look forward to updating you on our next quarter's conference call in a In the meantime, please feel free to get in touch with us if you have any further questions or comments. Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for participation. You may disconnect now.