Q1 2022 Autohome Inc. Earnings Call
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Ladies and gentlemen, thank.
Thank you for standing by for auto homes first quarter 2022 earnings Conference call.
At this time all participants are in a listen only mode.
Question and answer session will follow the formal presentation.
As a reminder, this conference call is being recorded.
If you have any objections you may disconnect at this time.
It is now my pleasure to introduce your host Sterling song.
Our homes our director Mr Song. Please go ahead.
Thank you operator.
Hello, everyone and this is starting soon welcome to auto homes fourth quarter plenty plenty to earnings conference call.
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Are there today auto home distributed its earnings press release, and you may find a copy on the Companys website at Www Dot auto home Dotcom Darcy Anne.
On today's call, we have chairman and the Chief Executive Officer, most of the channels and the Chief Financial Officer, Mr. Crockett Yang Zone.
After the prepared remarks, our management team will be available to answer your questions.
Before I begin. Please note that the discussion today will contain forward looking statements made under the safe Harbor provisions of the U S. Private Securities legislation 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.
Risks and uncertainties include but are not limited to those outlined in our public filings with Securities and Exchange Commission.
<unk> 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 searching on audited non-GAAP financial measure.
Our press release contains a reconciliation of the non-GAAP measures.
For the most directly comparable GAAP measures and is available all auto homes the IR website.
As a reminder, this conference call is being recorded.
In addition.
Live and archived webcast of this earnings conference call. We will also be available on auto home to our website.
I will now turn the call over to auto home Chairman and CEO most alone for opening remarks. Please go ahead Mr. <unk>.
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Thank you Hello, everyone. This is John Lowe, Chairman and CEO of Idaho.
You for joining us today for our discussion of our quarterly results.
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To begin we are delighted to announce and welcome a new member of Auto Holmes Senior management team Mr. Kravat Jensen, who joined the auto home as our Chief Financial Officer in the beginning of May.
Craig has over 20 years of experience in the capital markets and has held senior management positions with both public and private companies.
Making him a rare management talent with a full suite of capital market.
Earrings across mainland, China, Hong Kong and the U S.
He has in depth expertise in financial management.
Investor Relations M&A and the risk of control as well as an excellent business philosophy and our strategic mindset.
We believe that with his rich experience and outstanding leadership.
That will be an asset to the company and help auto home achieved this next stage of growth.
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With that I will now turn the call over to our CFO Craig zone for a closer look at our first quarter operating and financial results.
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Since the beginning of this year the resurgence of the COVID-19 pandemic in China has impacted most industries, including the automotive industry.
Despite the challenging macro environment.
<unk> reported an extraordinary first quarter with revenues totaling RMB, one 4 billion.
Of which the contribution from new business Rose to 33, 7% of total revenues.
Our adjusted net income in the first quarter, whereas RMB 438 million with adjusted net margin of.
29, 7%.
Our overall performance exceeded market expectations, and we maintained good profitability as well as a high profit margin levels.
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We believe our steady financial performance and strong cash flow will support auto home as where maybe it gets to market uncertainties and focus on long term development with sustainable competitive advantages.
Well, our healthy balance sheet and ample cash reserves allow us to continue to implement our strategy and the generator sets.
<unk> returned to our shareholders with our share repurchase program and dividend policy.
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Moving on to an overview of our first quarter highlights.
During the Carter waste strengthened our collaboration with partners throughout our ecosystem to build an online traffic alive and explore new ways to grow traffic.
According to quest, a mobile auto homes aggregated aberration.
Grow by seven 5% year over year to $45 $21 million in March.
Fortifying, our leading position in the auto media vertical and surpassing the total D are you off the second or third largest players in the market combined.
We also continue to develop the RFC and user base and strengthened the diversity of our content platforms through activity of outperformance of shop videos and live streaming content.
Furthermore, we upgraded our platform with a refreshed layout and it user friendly functionalities to cater to users' diverse needs and behaviors, creating a more flexible and convenient user interface.
These initiatives have successfully reinforced auto homes content ecosystem, while delivering a better user experience.
Furthermore, in the first quarter our baby.
And it used car business performed well exceeding the market growth rate.
Regarding digitalization, we have effectively expanded our OEM digital product lineup at the end of last year.
Continuous laser printing to digital transformation in Chinese auto industry as well as accelerating the progress the process of digital upgrading of the industry.
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The auto industry has been impacted by the pandemic. It is still one of the most important pillars in China's economy, and a full of potential for future development.
Given that elastic demand for cars and the ongoing development of the auto market.
We have maintained a close business relationships with most of our OEM and the dealership customers, who will continue to purchase popular media leads and a digital product from us.
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Next I'd like to provide more details on several aspects of our business.
In terms of content development by leveraging our big key brands, we have steadily advanced our strategy of promoting our video based content transformation.
Furthermore by.
Expanding content categories, and the more accurate recommending content that caters to users' preference.
We have attracted a more diverse audience.
In the first quarter auto home Lunched four series of IP video and accumulated over 100 million views in total.
In addition to me the E V users growing demand, we have upgraded our adv platforms accordingly.
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In the traditional business segment, we continue to focus on strengthening product differentiation and enhancing product and service quality for our membership product packages.
<unk> also steadily fortifying the fundamental foundation of the business, thereby creating a more future.
Cross selling opportunities to develop new.
New business lines and to promote new products in 2020 to over 9% other brands' renewed their contracts probably subscription package not only the number of paying dealers subscription to our newly launched premium theater and package between more than 12000.
During the quarter.
And the subscribers to attack version reached nearly 16000 together those two high end burden accounted for over 80% of total subscriptions.
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Data products from auto home continued to build out from big data analytic capabilities and our industry, leading technology to drive innovation and empower the digital transformation of Oems dealers and other stakeholders of the automotive industry for dealer data Pro Dex.
We remain focused on improving core product quality check speedy the infusion of our whole industry Chan shortage in the fourth quarter, we had over 18000 dealer customers and average port that to repurchase but dealer increased from 3.01 in 2020.
359 in 2021 on the tier 391 in this quarter, representing a little crazy.
Nearly 30% in the past two years.
The launch of our new data products at the end of last year. We have received the wild Vig a nation of Oems to our one stop solution and a service.
In the fourth quarter more than 40% of our OEM clients.
Data protect some friction at all of our business revenues continued to expand our revenue streams will become more diversify despite the pandemic current impacts we continue to provide additional digital product and actually accelerate the digital transformation and the upgrading of China.
Mobile industry, we expect that digital products will come to build a crazy amount of revenue to the company going forward.
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Regarding our <unk> business, we focus on integration of our brand and our sales to building a food Chan close loop marketing cycled through and you become more of a services. While also generating a diversified revenue streams in the first quarter, we maintained our cooperation with the most.
Matt speak mainstream and the brands and the revenue generated by our business soon or is it a 156, 1% year over yet.
And overall in the market and sales growth rate in February comes back to the quarters Yeah.
Given the rapid growth of annual sales, we continue to tap into new opportunities in the nev sector, especially with respect to the new retail sales model to reach more customers and the products and services that to me the specific demand we expect that the retail model would begin to.
Contribute to revenue to auto home this year.
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The fusion platform and vertical media platform in China, with the highest traffic volume and the number of user independent industry tender impact large online used car auction platform in China and the Ping.
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Tien Tsin Pi during the quarter are to enhance and grow our used car business through our matching and auction capabilities. We now you're building are markedly up about 20% of all used passenger car trades in China and <unk>.
Chris of about 4% points compared with last quarter going forward, we will continue to invest substantial resources in development to ensure successful market launch of a new data product for used cars.
And combined our car condition and car compress data product with our certified used car program to become Chinas largest online real used car daytime transactions pop from.
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The father, reaching the highest <unk> in conclusion, we will continue to satisfying our traditional business foundation, while actively investing in new business avenues as we move forward, although the COVID-19 resurgence in the first half of 2020 'twenty has posted a tremendous challenge.
To China's auto industry, and the broader Chinese economy at home for actually adjust our operation model to adapt to the new economic environment, We believe as the industry recovers in the second half of the year auto homes isn't it quickly rebound with it we will leverage our core competitor.
Tennessee is to explore larger markets are the more sustainable part for your margins to up 10 upgrade their longer term.
Benefits supported by our friend at work in fact, excellent innovation and capabilities and experienced management.
Management team, we believe that auto home and will continue to lead the development of China's auto industry and create lasting value of the entire industry.
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Let me walk you through the key financials for the fourth quarter of 2022. Please note that somebody's apartment course, our reference RMB only in my discussion today, unless otherwise stated.
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Net revenues for the fourth quarter were $1 $47 billion to decrease compared with the corresponding period of 2021 was primarily attributed to the impact of ongoing chip shortage as well as the COVID-19 pandemic on certain cities in China in quarter, one thinks to get for a detailed breakdown.
Media service revenue came in at 267 million leads generation service revenues of 170, 8 million and online marketplace and our revenues were 496 million.
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Moving on to cost cost of revenues was $255 million and the gross margin was 83%.
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But it <unk> feel like essentially you guys turning to operating expenses sales and marketing expenses in the fourth quarter were $592 million decline compared with the corresponding period of last year was primarily due to the decrease in promotional spending part that can be found in expenses worth three.
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<unk> protects finally general and administrative expenses were $107 million.
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Overall, we feel the operating profit of $241 million.
Net income attributable to auto homes, Inc.
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non-GAAP basic and diluted earnings per share were 0.870 point 87, respectively, non-GAAP basic and diluted earnings per ads were three seven and three 7% respectively.
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Prudential I felt from March 31, 2022, our balance sheet remained very strong with cash cash equivalents and short term investments of $22 7 billion, we generated operating cash flow of 496 million for fourth quarter of 2022.
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Do you want to keep really.
<unk> had some magic was running it on November 18, 2021, our board of directors authorized a share repurchase program under which we repurchase up to 200 million of auto homes for a period not to exceed 12 months thereafter.
As of May 2020, we have repurchased <unk> 157 million for total cost of <unk> $443 9 million.
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Chad we are ready to take your questions.
Thank you management, so ladies and gentlemen.
If you'd like to ask any questions to the management. Please press zero, one unintended from TT pad.
To cancel please.
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Once again, please press star zero, one archetypes from keypad to ask any questions.
Our first question is from Brent that child.
ICC. Please go ahead.
So hopefully that's helpful.
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Good evening management. Thanks for taking my question I have three here.
First one is about the industry.
Could management give some color on the supply chain pressure of auto companies and to what extent the permits cheap supply can meet market demand.
With the pre pandemic.
And what's management's expectation of the new car sales market.
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New car market.
Our management view on the used car market and please give some color on that.
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Well. Thank you very much for the question. Let me go with the question by quoting some of the data to you about the big market actually if you look at the whole market. If we look at Theyre. All really published the data you can see that in general around Sadly I read the market is still doing okay.
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Retail sales volume had a job by 35, 5% for the passenger car actually I'll call them into another data, which is released by the China Aldo.
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Sterling volumes, how did drop by 43.4% actually get into me titration get even worse for the first half of me. If you look at the passenger car Association's number.
Sales volume dropped by.
21%, it's only have some of sales volume in a way to dropped by 21% compared with the same period of last year.
Actually in the short term, we do see the pandemic actually still have some negative impact on the market and there are a lot of uncertainties tied to the pandemic. Thank you.
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After we were talking about the sales in the market now, let's shift to the supply side. If you look at the supply chain of the Chinese auto market actually starting from 2022 April we do see that.
<unk> experienced a lot of challenges, especially due to the lockdown policies for some of the cities a lot of companies have to sustain.
We have to stop functioning and also there are big challenges on the logistics side.
Actually it already affected as the supply chain the law, especially on the supply side the supply capabilities has significantly dropped.
Let me take Shanghai. As example, Shanghai has been under locked down for quite a while now Shanghai minutes with government is trying to proactively re open and restore some of the hotel market, especially the production side.
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Well actually now let me talk about the demand side.
All right. He said that the on the supply side. The government is trying to proactively push that we storment ended the reopening of some of the plants.
How about on the demand side, although a lot of consumption has been already covered by the pandemic. However, we do see the negative impact is getting the marginal effect, it's getting slimmer slimmer.
I personally think in the future I'm still quite confident about the Chinese auto market.
We also have to notice that because of the overall economy is still quite a week the cornerstone customers overall confidence.
Confidence level is still limited.
That's why auto car.
Function is a quite expensive and the large oh come on.
Kind of quite expensive consumption goods. So if the customers confidence level has not been fully.
We saw it I believe that it would impact the demand side.
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Michelle results.
So Don shareholder doesn't Yokota Qinhuangdao has jumped from.
No one who showed them that kind of a show me you told to the merchant Nevada.
Contracts are being shipped that doesn't change at all.
I also want to quote what the China, Aldo Association's Secretary General Mr. Chen Shah had recently made a comment he said that ever since February of 2022 due to the shortage of the cheap supply in the market and.
Asian, not the raw materials as well as the launch commodities priced over 20 Oems had already announced that they'll go into readjusted the pricing on the new renewable vehicles.
And actually after the price readjustment, we do see that on the demand side, the consumers had significantly reduced.
A number of consumers.
That's why a lot of consumers believe the price Mr. I'd like drop so the postponed purchasing demand. So you had this way from the perspective of consumer as well as the investors, we do see that the enthusiasm for investment on the consumption has been significant.
Actually weaker.
So you should learn more general chip.
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Well actually we do see that hotel as a quite expensive consumption goods. It is strongly related to peoples consumption communist level.
Confidence level is low and people are getting more and more cautious and prudent in purchased in the car. We believe the auto market in the future.
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If theres no significant supporting policy released by the government I believe such this year may not be easy to reach the annual target designed at the beginning of the year. So the gross targets is not that easy to achieve.
However.
Did you say that we are still very happy to see this actually the.
Silver lining for example.
May 21st morning, The State Council had held a meeting to discuss how what did the central government led to support the economy.
Announced lots of measures to stabilize and to boost US economy. For example in some of the cities that we stick to purchase in policy has been eased and people are getting more freely to purchased vehicles and also the tax cuts for the vehicles purchasing the total amount has reached $2 60.
So the 60 billion consumption tax has been cut which would boost to the consumption market for the auto.
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Well actually Luckily, we do see that a lot of local government as well as central government start to introduce more and more stimulus policies towards the auto market and we believe that with the more and the more supporting policy can be released.
I believe the market may turn around we bought he paid close attention to the market to move and then making our strategies. Accordingly now let me comment on the chip supply currently if you look at the chip supply in the auto market is still the supply is very tight it cannot fully meet the demand of though.
And it's not easy to restore it.
Level before the pandemic.
I believe either will take a while for the cheap.
Cheap supply to get back to the normal rate.
Before pandemic, so I hope that you chip supply.
Especially the tight situation will be eased to gradually in the future and the data would help the market to get to the normal track.
Thanks Lisa.
Oh.
Uhm.
Thanks Al.
When you usually give.
Okay.
Thank you Michelle.
Caught up.
I was just hoping that you can follow shock she's a sweetheart.
I'm going to start with just your thoughts.
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Well. Thank you very much in terms of the data product actually if you look at the OEM, which to the whole auto market tier.
And the core.
K P I, which is the sales falling we do see that the market even the sales team is very long.
There's no single company, which can cover such locked value and the business team actually we are the company who are trying to cover the whole marketing and sales teams by providing these.
Customized product.
For example from the lead generation to the store visits to boost transaction to the REO transaction to the customer satisfaction rate enhancement. We are building our data products to cover all the value chain actually 2022, why do we have done is to consolidate our data.
As well as upgrading our technologies by consolidating peanut stay there and a lot of data sources together, we are trying to create a big multidimensional profile off the data and we are trying to create a data barrier for our competitors.
We reached such a data barrier then we can come up with more stuff is key Ted and the more upgraded stayed up product.
Simple we provide three key.
A key part of our data products, one is we call it CRM plus.
And it covers the CRM the chain secondly, it is a more active management model and certainly it is a module based in a very flexible system.
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No. Thank you for the used car business, we are quite optimistic about the used car business and we expected that this year, there will be 90 million cars being transacted in the used car market the growth rates can be 8%.
Yeah, and then we also see a lot of supporting policies get released for example in January 21st B We.
Actually.
The reforming and developing an informal committee released a document to which is trying to boost to the green consumption concepts and they significantly pointed out the used car business need to be boosted.
I encourage the building of more dealers for the used car business and trying to enlarge the stipulation of the used car and boosted the liquidity of the used to come market and secondly on March 5th we do see that.
The government designed it further policy to boost the used car the white goods consumption and then they also designed some detailed policies for example in large as a parking lot establishment and appeal to more charge impose it et cetera. In this way the government released the multiple policies trying to.
To boost the used car business.
The auto took.
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Okay.
Well, we said it we used to be quite optimistic about they used to come market, but the real situation is more complicated than what we have been left for example, there are probably some accounts in this market on the pro side.
So for us it.
It was cheap supply shortage.
That car, but a lot of lunching off the cost.
In the new car market a lot of the dealers and Oems that don't have enough car to sell to sell if you wanted to purchase a new car you have to wait for a while or even a few months to get the car. So a lot of the buyers the shifted to the used car market to buy the used car, which boosted as a market which.
As a pro however on the car side, because you have to call a notch standardized products. It is not standardized so you have to look at the car test to drive the car offline due to the COVID-19 pandemic policies.
Especially the quarantine policies.
That covers a lot of offline.
Our visit to purchase used car. So in this way we do see that in Q1. The overall used to come market had a slightly dropped however, we encountered positive gross but the average market. The whole market had dropped in Q2, we believe the market may continue to be.
Weak, let's put the help on the second half of the year. If the pandemic policies can be you know the COVID-19 can be better controlled than we did.
The second half of the year, there will be more opportunities on the used car market. Thank you.
Okay.
Okay.
Thank you our next question from Matt <unk> at Jefferies. Please go ahead.
Hum.
For taking my questions I have some questions. So the first one is about Uh huh.
Provide some color on the monthly business momentum and the impact of the thinking also show.
Good quarter.
And I would expect.
Patients.
In the second.
Second half.
My question is about the competitive landscape.
Vertical.
And the first.
Well thank you all.
Media and lead generation.
Second half this year.
I don't know if I can you tell us a little some 20.
Why don't you tell.
Tell me.
You can tell me I'm sorry.
Hum.
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But what you said why do you think you're trying to say.
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Yeah.
Now that I have on hand.
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Yeah.
Hi, Susan.
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Good afternoon.
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Well. Thank you for the question no I'm talking about is the Beijing Auto show, Yes. The time it has been postponed and does the timing is still uncertain enough when either will be held.
Actually if you look at percent of the new car launching has already been postponed so that's why it already impacted as the new car market a lot if the COVID-19 pandemic.
Pandemic can be better controlled hopefully for the second half of the year. If we do see less current team of cities that we believe that starting from third quarter, we will see some pickup in the auto market. Thank you.
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How about you know basically at that level now.
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Andre Good Chancellor.
I don't know coming off.
He said no quibble with your model.
Before Jonathan you can kind of.
How long do they have on your Hudson, Colorado.
Now talking about the competition actually on the two besides we continue to be the number one player in the market our market share is more than 50%, which is 52% and actually for the rest of the two competitors they are quite close.
Look at the market share a breakdown between the top three players I believe it was 523 to two.
And secondly for the second half of the year in terms of how the media and lease business would evolve actually depends on the pandemic and also for the media business the advertisement and the marketing expenditures do get negatively impacted for the lead.
Business.
The COVID-19 pandemic can be better controlled I believe that starting from third quarter. The leaf business. We're just starting to perform better. Thank you.
Yeah.
Thank you there are no further questions at this time I'd like to turn the conference back to management for closing comments.
Okay.
Jim.
No more charters.
I'm going to try to answer that.
Rather.
Hugo.
Okay.
Are you, saying you won't issue.
Sure Roger.
Thank you everyone. Thank you very much but joining us today. We appreciate your support and I look forward to updating you on our next quarter's conference call. A few months' time in the meantime, please feel free to contact us. If you have any further questions or comments. Thank you everyone.
Okay.
Yeah.