ATHM 汽车之家

Operator

Ladies and gentlemen, thank you for standing by for Autohome’s Fourth Quarter and Full Year 2014 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 objections, you may disconnect at this time. It is now my pleasure to introduce your host Cara O’Brien, of FTI Consulting. Ms. O’Brien, you may begin. Cara O’Brien: Thank you operator. Hello everyone and welcome to Autohome’s fourth quarter and full year 2014 earnings conference call. Earlier today Autohome distributed its earnings press release and you can find a copy on the company’s website at www.autohome.com.cn. On today’s call we have Mr. James Qin, Autohome’s Chief Executive - After their prepared remarks, James and Nicholas 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 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 the public filings with the SEC. 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 unaudited non-GAAP financial measures. The press release contains a reconciliation of the non-GAAP measures to the most directly comparable GAAP measures and is available on Autohome’s IR website. As a reminder, this conference is being recorded. In addition, a webcast of this conference call will also be available on Autohome’s IR website. I will now turn the call over to Autohome’s Chief Executive Officer, Mr. James Qin. James?

James Qin

Thank you Cara and hello everyone. Before we begin, let me wish you a very happy and prosperous New Year of the [Foreign Language] So we’re very excited to be here today as we delivered another fantastic fourth quarter and full year of 2014 performance, once again exceeding our guidance. We’re also excited about, as we enter 2015 we said we’re past the first quarter. Overall 2014 was an important year for all of us at Autohome, if 2013 was the year where we successfully diversified into the dealer Yellow Page business. Then 2014 was the year we became transaction platform centric, as this was our first year where more than 50% of our revenue came from the dealer network, and we also established Autohome Mall. And as I looked through 2015, I expect 2015 will be the year when we continue to expand our transaction platform, and engage our users with new types of mobile products and online experiences. Fourth quarter and the full year 2014 marked a new records for Autohome, with revenue net profits and the cash balance outreached historical high levels. Net revenues in the fourth quarter accelerated significantly to RMB739.1 million, with 91.5% year-over-year increase. For full year 2014, we achieved a new height exceeding 2.1 billion with year-over-year increase of more than 75%. Net income in the fourth quarter 2014 more than doubled, increasing 103% year-over-year to almost a RMB215 million, on a full year basis it increased 64.1% year-over-year to RMB almost a RMB750 million. And net cash provided by operating activities in the fourth quarter 2014 increased 51% year-over-year to RMB487.2 million. We had this in 2014 with cash and cash equivalents and term deposit of RMB2.77 billion on hand. These outstanding results were made possible by our great execution and proved our strategies are working very well. Now let me also report a progress on each of the stages in our sales part. So stage 1, it is critical to generate and grow traffic, which we have been doing extremely well. In short, it really was a transformational fourth quarter and the full year with respect to diversifying traffic versus to mobile. We have invested heavily in this area, and those investments are paying off in the form of increasingly strong mobile traffic trends and contribution. In December the number of average daily unique visitors who accessed our mobile sites and mobile applications have come to approximately 4.3 million and 3.4 million respectively. Indeed in the fourth quarter, the mobile traffic has almost caught up with PC traffic. As of today, I’m excited to report that based on our 2015 January and February, lot data. Mobile usage already consistently exceeded PC. Mobile in the fourth quarter contributed more than half, almost it’s - that is 51.5% to our sales lead, compared with 24.5% in the fourth quarter of 2013. This is obviously a very big jump, we also view mobile as a strong driving force in our Double 11 Event, which I’ll talk about in a few moments. As for the first time we launched the event on both mobile and the PC platform. And we were excited to see more than 20% of the orders were actually made from mobile devices. On the PC side according to iResearch, Autohome continued to be the leading online destination for automobile consumers in China. By the end of the year we remained the clear number one among China’s automotive websites and automotive channels of internet portals. In terms of average daily unique visitors, average daily page views, and average daily time spent, the number of average daily visitors on PC’s amounted to 7.8 million in the first quarter. And average daily time spent for user increased from 14.5 minutes in the first quarter of 2013 to 16.7 minutes in the first quarter of 2014. We can proudly say that we are the number one player that reached the highest quantity and the best quality traffic Also I’ll note, with respect to social media work done, user generated content, we have remained the single largest online community across our industry, with approximately 80% of the auto digital forum poles generated from Autohome platform. Turning now to stage 2 of the funnel, it is critical here to have users enter at the merchant phase that is our lead-gen business. One important trend in 2014 was the continued growth in site and a revenue contributions from the dealer network. We have seen remarkable momentum in our dealer Yellow Page business, which includes our dealer advertising services and dealer subscription services. Revenue from dealer subscription services increased 99.4% year-over-year in the first quarter of 2014. And we recorded 17.7%, that grows a strong testament that the value that we provided to dealers is gaining huge attraction and recognition. We ended the fourth quarter with dealer subscribers reaching 7,080 versus 10,084 by the fourth quarter of 2013, representing an increase of 69.4%. One annual event that I would like to highlight is our Annual Dealer Submit, something we hold to showcase our new products and services to dealer customers. We plan to hold a tour across nine cities from January through March 2015, so far five tours have already been done, with approximately 3000 dealers and automaker customers attending. During the tour, we reviewed the results of Autohome’s first ever published web paper entitled China Auto Dealer Internet Marketing trends. It reflects a survey conducted by Autohome’s in-house research centre to invest interviews with dealers covering 86 cities, reigning from Tier 1 to Tier 6 cities. One most important finding was that Autohome has been contributing the most sales leads, and the best conversion rate among all the online and offline channels. This results certainly supports and helps explain the strong roles in our dealer Yellow Page business. In 2015 we will focus more efforts on further creating values to our dealer customers, one important product that we’ll launch is the new intelligent marketing system for our dealer-customer called I-Autohub or [Foreign Language] in Chinese. This is not just the dealer CRM platform, but it’s an integrated platform that enables auto dealers to improve conversion rate and customer services. Thus resulting in increase in both revenue and profit, as well as better operational efficiencies. Through our centralized interface, our dealer customers can easily choose products and obtain services from Autohome, managing their sales lead, managing their store front, their profile lifting and promotion access. With intensive data integration features, this helps dealers with important data from other sources and then managed all sales leading in one place. So they have all the user tracking, not just when consumer buying new cars, but also on aftermarket service’s needs or even vehicle replacement needs and financing needs. Autohome meanwhile will provide user data that they need to help them on decision making and improving the conversion rate. The new offering demonstrated our commitment to improving our value creation for our dealer customers and to enhance the services enjoyed by our users. In 2015 we will further improve our customer service for dealers, by adding more and dedicated customer services team to each of them. Moving to stage 3 of the funnel, where we closed the transaction loop. That was the very key focus for us, both in the first quarter and in the full year of 2014. Throughout 2014 we conducted the various transaction trials, including promotions featuring coupons, online sales festivals, car pre-sales campaigns grew by and so forth. And up close, we formerly announced automobile, through this we were able to approve to automaker and dealers that the average sales conversion rate of automobile was higher than 80%, or can be as high as 80%. These capabilities show that our strategy of facilitating online transactions over the last year has paid off. With our transaction capability being established and proven, it attracted a high quality car buying traffic to Autohome’s website, which in turn drives a premiere automaker advertising business, and attracts a bigger share of wallet from automakers and dealers, which translated into additional growth of our business. A milestone achievement of our transaction initiative was the second Annual Double 11 online sales promotion, which took place last November. This was the first time that we launched this on both mobile and PC platform, we also had an industry breakthrough with the introduction of full priced car transaction trial with car buyers paying upfront online. Our total of 2488 orders, representing more than RMB200 millions of [indiscernible] were completed with full payment online, while 20% of these payments were made through mobile devices. Looking at the total, within just one day we received orders exceeding 37,000 representing an increase of 109% year-over-year, compared with last year’s Double 11 EBIT. Also as part of this, we established our own payment system connecting six major events in China for the first time. In the recent, we provided and integrated inventory and payment system to over 6,000 dealer partners, so that the car buyers can transact through the efficient and a more transparent online platform provided by Autohome. Through this event, we clearly demonstrated to automaker and dealers that we’re not just able to generate quality sales lead, but we are the one who has solid capabilities to facilitate transactions when compared with other players in the industry. Further, with our strong brand equity we have the absolute advantages in terms of automaker dealer and car buyer confidence, according to Baidu index, the popularity of our website is as high as 60 times versus our peer company. For example, as of December 31st 2014, our score in the index was 338,039. We are also seeing a lot of momentum as we move into Q1 2015, and we will continue to improve our products to enhance our transaction capability. For example, we’re creating a more transparent car buying experience by providing actual car transaction price by our registered users. With this pricing index, we are enhancing transparency and enabling our users to see what others have paid for the car they want to buy. In just four months, since the launch of our pricing index. In September 2014, we have successfully collected over 40,000 price contributions from our users. We firmly believe that this transparency can provide potential car buyers with more efficiency in decision making, and shorten the conversion time for the dealers. Apart from the new car business, building up our strong user base, we also have used car business and the aftermarket services, to complete serve the automobile ownership lifecycle. In 2015, we plan to modify our used car advertising as listed as the first step to collect revenue for this part of our business. In terms of aftermarket services, in early February we officially introduced a mobile application - app for users to purchase at a reserved car care and maintenance services, at a high quality and reasonable priced to vendors qualified by Autohome. This marked our official entry into the expanding automotive maintenance market, with Beijing as the first trial city. Going forward, Autohome will continue to operate the user experience and cooperate with most of the parties, to provide increasingly diverse services. We’ll keep you updated on this. Before we hear from Nicholas, let me just summarize a few things. First, as we conclude our first full fiscal year as a public company, we are very pleased with what we have accomplished, having delivered impressive operational and financial performance. Further, we are now one of the biggest and have the fastest growing internetwork in the industry, and we’re continuing to achieve more customer wings in this area. Finally, we successfully build up a very robust transaction platform with strong brand equity, extensive automaker and dealer support, as broad as the user base in the industry. We firmly believe this set us well apart from our peers. In short, 2014 was an impressive year, fuelled with many important achievement. In June 2015, Autohome will turn ten years old it has been a amazing journey so far. And I would say this is true for all us as a company, our customers and our users as well. But what’s ahead of us is even more exciting. With that, let me turn the call over to Nicholas who will walk through the financials for fourth quarter and the full year 2014 in more details, and go over our outlook for the first quarter of 2015 as well, Nicholas?

Nicholas Chong

Okay, thank you James, and hello everyone. I’m really excited to report earnings this quarter and proud of the teams at Autohome who delivered these results. Let me now go through the fourth quarter and full year 2014 results in more detail. Note that I have referenced RMB only in these discussions, so that can find a equivalent US dollar numbers in our press release, issued earlier today. For 2014, we witnessed strong growth across the board, and we are especially pleased with the growth of our dealer Yellow Page business, as this was the first year we crossed the 50% contribution in the dealer business. Also, we ended 2014 with a spectacular quarter, while, continuing the strong momentum into the first quarter 2015. There are two key drivers propelling our business. First and foremost is strong dealer business, as dealers are starting to shift their budget to online and therefore to Autohome and we are getting a bigger share of wallet from them. In this area, we delivered on our promises during the IPO and ended the year not just on track, but well ahead of our guidance. The second driver for both the quarter and the full year, has been an effort to turn into a transaction platform. We are especially pleased with the trials over 2014 that have and beat the generated greater returns for automakers, dealers, and users, and eventually driving our own broad based revenue growth. Turning to the specific of the fourth quarter, during the quarter we performed well against all key financial parties, with net revenue increasing 91.5% to RMB739.1 million, from RMB386 million in the corresponding period in 2013. Putting this down, automaker advertising services revenue increased 65.6% to RMB336.5 million, from RMB203.2 million in the corresponding period in 2013. Dealer Yellow Pages business which includes our dealer advertising services and dealer subscription services, grew 120.2% separately dealer advertising services revenue significantly increased 151% to RMB185.2 million from RMB73.8 million in the corresponding period in 2013. Meanwhile, dealer subscription services revenue increased 99.4% to RMB207.4 million, from RMB109 million as comparing to Q4 2013. The increase in automaker advertising services revenue was attributable to an increase in average revenue for automaker advertiser as automaker continue to allocate more advertising budgets to Autohome online advertising channels. Turning to the dealer Yellow Pages business, the increase in dealer advertising services revenue was mainly due to increase in the volume of advertising purchased by dealer advertiser as well as the increased rate for the services. For dealer subscription services, revenue increased 99.4% to RMB217.4 million compared to the corresponding period in 2013. The growth in dealer subscription services revenue was primarily driven by the increase in the number of paying dealers and ARPU increase of 17.7% year-over-year. As James had noted, we saw the dealer subscription services to $17,080 in the fourth quarter of 2014, compared with $10,084 in the corresponding period in 2013, which is very encouraging. Gross profit for the fourth quarter increased 106.6% to RMB616.2 million from RMB298.2 million in the corresponding period in 2013. As we continue to enjoy better economy of scales from our operations. Operating expenses for the fourth quarter increased 111.9% to RMB215.1 million from RMB148.7 million in the corresponding period in 2013. This due to the increases in sales and marketing expenses, product development expense in general, administrative expenses as we invest in the business to drive future growth opportunities. For example, we are investing in mobile platforms and capabilities, adding staffs in various departments and participating in market related corporation agreements they’d wanted due to drive the top line. Operating profit for the fourth quarter increased 101.4% to RMB301.1 million from RMB149.5 million in the corresponding period in 2013. All in all, net income for the fourth quarter increased 103.4% to RMB249.6 million from RMB132.7 million in the corresponding period in 2013. Basic and diluted earnings per share, and per EPS for the fourth quarter, were RMB$2.39 and RMB$2.19 respectively, compared to basic and diluted EPS in the corresponding period in 2013, of RMB$1.33 and RMB$1.16 respectively. Adjusted net income which defines net income, excluding share based compensation expenses and amortization expenses of intangible assets related to acquisitions, increased 103.6% year-over-year for the fourth quarter to RMB269.5 million. Non-GAAP basic and diluted EPS for the fourth quarter were RMB$2.47 and RMB$2.37 respectively, compared to non-GAAP basic and diluted EPS in the corresponding period in 2013, of RMB$1.33 and $1.35 respectively. Let me now come to a short summary overview of our 2014 full year results, if you look back on 2014 we are proud of all that we have accomplished this year. In short, we grew enormous annual revenue growth with an annual revenue increase of 75.3% to RMB2132.9 million, we set a new growth record over the previous three years time. Our operating expenses went up by 106.9% to RMB347.2 million, but this is mainly due to all we are doing to invest in a business, and position us for an even better in further and longer term growth. Having said that, we had a great deal of leverage given the strong top line and therefore net income reached 64.1% growth to RMB748.7 million, EPS on a diluted basis came in at RMB$6.64 versus RMB$4.37 in 2013. And lastly as mentioned before, we ended the year with significant cash on a balance sheet nearly RMB2.8 billion, leaving us very well-positioned and well-capitalized to finance our growth plan. Let me now address our outlook for Q1 2015. Autohome currently expect to generate net revenues in a range of RMB573 million to RMB602 million in the first quarter of fiscal year 2015, representing a 67.5% to 76% year-over-year increase. Again, I must mention that these comments and our outlook reflect our current and preliminary view on a market and operating conditions, which is subject to change. To conclude 2014 was a year marked by tremendous achievement on almost every front, and we are gratified to have recorded very strong annual top line and bottom-line growth and so has solid cash flow for the full year. This concludes our prepared remarks and now we would like to take any questions that you may have. Operator, please open the line for Q&A. Thank you.

Operator

We will now begin the question-and-answer session. [Operator Instructions] Your first question comes from Amanda Chen from Morgan Stanley. Your line is open, please go ahead.

Amanda Chen

Congratulations on the strong quarter. I have three questions if I may. My first one is regarding your strong revenue growth this quarter, we saw every business line, enjoyed a very faster growth. And do we understand that you’re being - here this year in existing markets and also the new markets. Could you please give us more colors on why we can interest such high growth rate this quarter? Is that because of PC, other things commercial contributions finally kicked in? Or is that because we - over high quality sales leads or any other reason? Thank you.

James Qin

Hi Amanda this is James. Let me try to crack this question first up maybe, Nicholas can add more color on that. I think my understanding is, in Q3 we introduced a CPL product, but it’s more in the tight space. And in Q4 we put it in full gear. So I think that probably, I would think that is the number I asked you about our 2014 first quarter growth, so that’s number one. And secondly, probably is the mobile traffic, because we have a significant sort of accelerated growth rate in our mobile traffic in Q4. I believe that did play a relevant role, but probably not as much as you expected.

Nicholas Chong

Yeah, adding to view on that is also, I think we have done a lot of transaction throughout 2014 and this definitely has added value to the users, the OEM’s and the dealers. So I think that in turn we get rewarded on the fact that you can see that we have strong growth in those OEM advertising business, the dealer advertising business as well, and also as far as dealer subscription and the more dealers signing up with us. So I think this is yeah, it’s interrelated.

Amanda Chen

So do you expect this growth trend can continue in 2015?

Nicholas Chong

I think as you can see that we can be - it’s like having a very strong Q4 2014, we can see that we also have strong momentum getting into Q1. I think just on the guidance that we have given for Q1, the year-on-year growth is between 67.5% and 76%, for reference Q1 2014 we grew at 64%.

James Qin

So we definitely see the strong trend have been carried into the beginning of the year. And we definitely are very excited about the Q1 outlook. I think with respect to the full year, I will say we remain cautiously optimistic about our overall performance because of a couple of things. First is, our transaction focus in 2014 actually build a very strong foundation and that attract more car buying traffic, the real car buying traffic. So that will definitely result in more budget allocation from both OEM side and dealer side. And so that trend will continue. Secondly, as the mobilization of our mobile advertising will definitely speed up in 2015 and, because in the future, we continue to monetize the dealer subscribers and we introduced new product and services to cover their more needs, for example the I-Autohub platform. And in 2015 we start to monetize, at least to really monetize our used car business. I think all those things add together will give us a more confidence about having a good result in 2015.

Amanda Chen

And my third question is regarding your [indiscernible] application. Do you have any operating metrics that you can share with us at the coming stage? For example, the active users and also orders number and so forth. And also in the long term, do you think that after sale market would be more from, I think, or has more potential of them as –?

James Qin

I think this is firstly, it’s a very early stage development, and we’ll definitely report more of this as we see progress, and this is the first time trial that only started in Beijing. And the reasonably start to enter into this business is with the [indiscernible] there has a promising future for the aftermarket services and industry, so that’s why we start. So with that, I think in the future down the road revenue, get back to you with more detailed information, at this time probably it’s too early for us to share any confident and mature information to you guys.

Operator

Your next question comes from Vivian Hao from Deutsche Bank. Your line is open please go ahead.

Vivian Hao

I have three questions. My first one is, could you please elaborate a bit more on what are the key drivers for such a strong dealer subscribers growth, and also ARPU in fourth quarter, is both of them have a remarkable 17% quarter-over-quarter improvement. Also based on this, how should we expect the ARPU trend going into next year, given our deepening paying subscriber base? My second question is related to the first one, maybe I’ll wait for you to finish the first question, then I’ll ask the second one.

Nicholas Chong

Vivian, so I think your question is on the growth of the dealer subscription business. I think as you heard from us just now, the dealer subscription in Q4 went up by 99.4% of which 69.4% is due to the volume growth. I mean the number of subscriber has increased. And then the ARPU was 17.7% that ARPU increase comes from two areas. One is that EBITDA price increase in the start of the year, but the pricing only kicked in when dealers renewed the contract. So that’s one, so there’s the second one is that also some of the dealers upgrade to the premium package, which offer them additional services.

James Qin

Maybe I can add another two small things, there’s a couple of things we can increase our ARPU for three things. Mainly because of Nicholas has said, is to up sell from, upgrade from one level up. The second one is the regular price increase, because when dealer renew the contract, most of them renew their contract yearly. When they renew a yearly contract, then for the same package the price will have increased year-over-year, so that’s the second factor. The third factor actually is the operation efficiency, because in the past, when we do the annual renewal of the contracts, sometimes there will be a week, or maybe even two weeks, lap between the contract and the contract kick in. So that’s what we’ll be one or two week’s revenue loss, and ever since 2014 we started to pay attention to those kind of revenue true-ups. And we improve - we have a specific program to improve that, so right now we have seen some of the results showing in 2014. I think in the beginning of 2015, you actually can see a little bit better result because a lot more of our annual contract as in December 31st.

Vivian Hao

This is very thorough. Very quick follow-up on the contract renewal, I mean the price increase, what’s the magnitude of this increase? Is that contributing like 10%, or how much percentage of the total increase year-over-year, yeah?

Nicholas Chong

I think 10% is a rapid number we can use, yeah.

Vivian Hao

Okay. My second question is related to the first one, just wondering if there’s any contribution from the new revenue stream based on the cost per lease model, if there is any, what is the percentage contribution? And also, what is the current adoption rate or adoption intention from our current existing dealer base? And also, how’s the conversion rate has been trending in fourth quarter?

Nicholas Chong

Okay. I think you’re asking the CPL for dealers right? The CPL for dealers, right now we have a trial in five cities and in Q4 there was an - run that about half, like about 50 dealers and in those are five cities. And we have seen very satisfactory results so far. We believe we should be able to skew up that business in the near term.

Vivian Hao

So currently, it’s still not material contributions to our P&L, I suppose?

Nicholas Chong

Yes, I think the currently the CPO has put up, we have not sorted yet, they’re still currently on track.

James Qin

In some, your last assessment was right, it has not materialized yet.

Vivian Hao

Okay. Very quick final question. So for our ecommerce business model, this time in this quarter we had 200 million TMB, do we - have we monetized on this at all, or what do you think is exactly the monetization model for the ecommerce side?

Nicholas Chong

Let me answer that. I think basically some of the business, some of the revenue generated from Autohome model would be like this, a OEM pays us advertising dollars. And sometimes with the subsidy with the transaction subsidy, we pass through that transaction subsidy to consumers. However we cap the advertising dollars for ourselves in order to promote the sales event on the Autohome Mall. So we definitely generate some revenue on the Autohome Mall property.

James Qin

And that has captured in the dealer advertising business.

Vivian Hao

Understood, the same as last quarter.

James Qin

Yes the treatment is the same, yes. But just as you can see that we overall, the dealer advertising has very strong growth. Especially strong in, Q3 was strong, but Q4 is even stronger.

Nicholas Chon

So quickly basically put everything in hand. So the CPL product for dealers has not been ticked in yet. The CPL for OEM has some effect in 2014 Q4.

Operator

[Operator Instructions] Your next question comes from the line of Fei Fang from Goldman Sachs. Your line is open. Please go ahead.

Fei Fang

Hi James and Nicholas, this is Fei on behalf of Piyush. I wanted to add our congratulations to your impressive results. For the used car business, can you elaborate on the perspective monetization model? Then I have a follow-up question, thank you.

Nicholas Chong

For our used car business, currently what we are thinking, we currently have approximately 5,000 active sellers those are the commercial sellers on our site. And we plan to start to monetize by the ways of loosing and advertising in 2015. So that’s probably the number I can actually give you at this point.

Fei Fang

That’s great. And if we can just switch gear here, just overall the top line has been obviously very strong in the quarter and you have achieved operating leverage across most of the major cost lines. The only exception seemed to be that E&A line, which seemed to accelerate to 49% year-on-year, so just wanted more perspective, is that a one off? And also more broadly, as you kind of accelerate your revenue growth into next year, how should we think about the cost structure? Thank you.

Nicholas Chong

I think you’re asking for the, Fei you are asking for the cost of the margin right?

Fei Fang

Yes Nicholas.

Nicholas Chong

Yeah, I think if you look at 2014, we have a very strong performance overall in terms of both revenue growth and margin. I think top line growth was 79.3% year-on-year, and non-GAAP net margin, we came in for the whole year 38%. But we do not provide full year bottom-line guidance, but let me give you some, but I can give you some colors. I think if you look at it, our profit end margin levers has remained leading in the industry, way ahead of the peers. And this has been achieved, despite the fact that we have been making many investment, in particularly during 2014 in areas like sales and marketing expenses, the Aladdin transaction platform, mobile products and our used car business. But what we have done was making the right move at the right time, and investing for the future. But also delivering appropriate returns to our shareholders, some of the investment if we have not invested last year, I think it will be even more expensive this year. Like for example mobile, so I think we believe that our investment will be able to continue to bare fruits at the right - with the right strategies and the team to execute the right thing. You can see that on the gross margin-wise, we have operating leverage I think, in fact our gross margin has gone up from 79.3% in 2013 to 82.2% in 2014. So if we look at our existing business, I think we should be able to run at 30 plus non-GAAP net margin. And I think you also mentioned just now on the G&A, G&A percentage as revenue comes down, because from a revenue cost and point, it increased much lower than the revenue increase.

Fei Fang

Okay that’s helpful, thank you.

James Qin

Just to add one more for Fei. I think Fei you asked the first quarter G&A percentage right?

Fei Fang

That’s right.

James Qin

Yes we did have a fall in first quarter. I didn’t know that exact number, I think our finance team can give thorough analysis on that. But I think that definitely play a small part on that because it was pretty expensive.

Operator

Our next question comes from Ella Ji from Oppenheimer, your line is open, please go ahead.

Ella Ji

Hi, good evening management and congratulations on a strong quarter. My first question is relating to the OEM budget for 2015, as we continue to see, and you also talked about there’s continuing shift to online as a attachment that certainly benefits your business. So as we look into 2015, as you talk to the OEM, were the type of online budget growth are you seeing overall on the market? And then relating to that, in the past you have been successfully increase your price of online advertisement. Do you think you can maintain the same rate of price increase in 2015, that’s my first question? Thank you.

James Qin

I think the, I’ll probably address the question in terms of 2015 OEM advertising revenue growth. I think it’s in the 2014 and 2015 we had seen the China’s new car market grow at a very healthy rate, probably around 1.5 times the GDP growth. So this is probably is the only large OEM, our large manufacturing sector, which has a healthy growth and market, very healthy market. So we are very lucky to be part of this industry at this point. And so both in 2014 last quarter and 2015, we have seen relatively satisfactory new car growth. In the first two months of 2015, I think the new car growth rate published by, at least manufacturers fell 10%, which is 1.5 time of the GDP growth. So I think we feel pretty good about that. Around the OEM advertising side, what we have seen is, in 2015 the OEM are going to ship more and more percentage of the budget on mobile - on the mobile platform. And also with the effect of more and more China’s OEM are paying attention to some of the retail channel, as effective channel to do publishing campaign. So from our point of view with all those factors together in 2015, probably we are going to see a very high growth of the OEM advertising allocation of mobile media, which actually plays to our strength which, because we have more than 7 million viewers at our mobile platform. But at this point our mobile OEM advertising only accounts for probably less than 10% of our total OEM advertising spend on Autohome’s website. So that I think that is helpful for us. So in the whole year of 2015 we’re pretty, we feel pretty good about that. With that, I think the advertising, the banner ads driving and the banner ads price increase in 2015 probably would be at last important for us. We definitely will have a price increase because I hope, just even on the PC platform we have seen the DAU growth and also the advertising spend growth our platform. So that give us a rational reason to increase our price, however I think our OEM advertising revenue growth side, we’re going to pay more attention on the mobile platform. Hopefully I answered you.

Ella Ji

And then second question is you have seen some of your competitors recently incorporating with some larger channels, internet channels. So can you also talk about your thoughts and then are you also opening to corporation or you continue to operate as an independent channel?

James Qin

We have better practice, we do not comment on our peers, or we do not speculate on those still evolving event in our industry, probably I think we are, we know probably as much as you do on those. I think with regard to Autohome, we have been, and always will be open-minded for all kinds of collaboration. And in fact on the other, PC Aladdin, that is a evidence of us collaborating with one of the larger internet players in China. And going forward, we are going to do more collaboration with all those large companies. And I think it’s very important for Autohome to really build up our own value proposition, we create more value to the consumers, and also we create more value to the China’s auto OEM car makers and dealers. I think that is the sort of the entry barrier Autohome can build.

Ella Ji

Lastly, quick question, could you update us with the total headcounts you have as of end of '14?

Nicholas Chong

At the end of ‘14 we have about 1,770 headcounts.

Operator

[Operator Instructions] Your next question comes from [indiscernible] Capital. Your line is open. Please go ahead.

Unidentified Analyst

James and Nicholas I have couple of questions. One question is related to your expansion. So you’ve mentioned that you’re expanding into a new geographic market like Tier 3, Tier 4 cities. So would you please give us some colors regarding those expansions, such as how many cities you have already covered and what is the goal at the end of the 2015. That is the first question, I will have a follow-up after this.

James Qin

So in terms of the number of cities we covered, I think we covered 360 cities and I think if you ask me, I think probably your question is like how many cities we cover by people on the graph. I think that’s roughly about a 140 –

Nicholas Chong

150 where we have underground support, and like what James said we had 366 in total coverage, so the rest is recovered through the - sales.

Unidentified Analyst

And related to your ecommerce business at Autohome Mall, and do you mind to give some colors on how many OEM incorporation and what are the sequences involved? And how many mall growth etcetera, etcetera?

James Qin

I think in the whole last year, we have incorporated, we have 66 brands. And also there’s about 864 - I think in the whole of 2014 we worked with 80 car brands and the car orders about 1,410 car orders. And yeah, so we do work with cooperative wide range of brands. I think this year what we would do is like, we’ll make the Autohome even more active. So we would have what we call the monthly event, and also there is multi-brands, and also the other one what we call flash sales. And then the other one is what we call feature sales, feature sales is more specific on, that’s on some particular brands or particular model. So we have, so what you could see is that in 2015 the Autohome Mall will be more active than in 2014, because 2014 was the year where we triumph, so we definitely do gain quite a bit of experience over the whole of 2014 and we’re making it more active in 2015.

Unidentified Analyst

Okay, so that’s very helpful, for your new way of doing the ecommerce like a feature sales and the flash sales, and what are the revenue model, is that still going to be advertising model?

James Qin

I think from the financial reporting point of view I would assume in 2015, it will still show up in the dealer advertising revenue, advertising services. So that is the model and we had, so basically the model is that we got two different type of money. One is in terms of OEM buying advertisement from Autohome Mall to promote either the flash sales or feature sales. The only difference between the flash sales and feature sales is that feature sales probably lasts around a month, and it’s only designed for one OEM car maker. While the flash sale is sort of a flash sale for three, four days, but it is one of our, everyone can join, so that’s revenue for one. And secondly is - sometimes the car makers keep the transaction subsidies through Autohome. So those are the two major money we get from OEM.

Operator

Your next question comes from Ming Zhao from UBS. Your line is open. Please go ahead.

Ming Zhao

Good night James and Nicholas, congratulate on the strong quarter. So I have a few questions, first of all it’s regarding the CPL product for OEM advertisement, which James you just mentioned. Could you give us more color on that part of the business?

James Qin

So in the past if they come in for say, I do not have a brand promotion these, I only want to generate sales feed for all my dealers. In the past, the only thing they advise is by banners, currently they can buy a new commercial product, which we price based on the number of qualified sales feed we generate for that, so that’s a new CPL product, it does not occupy the traditional banner space.

Ming Zhao

So could you share with us more from operation data on like adoption rate or like revenue contribution, something like that?

Nicholas Chong

So currently, we do have those kind of numbers.

Ming Zhao

Okay. So my second question regarding the dealer advertising business, which is very strong. So could you share with us more data on like the number of advertisers or the volume of as compared to like last quarter, or compared to Q4 last year?

Nicholas Chong

In Q4, versus Q3, in terms of dealer advertising, and in terms of brand, in Q3 there were about 82 brands or models, 82 brands the dealers worked with us. And in Q4 there were about 100, so that’s –

Ming Zhao

And this means brand or the car brand?

Nicholas Chong

Yes, so basically more brands dealers start to join the advertising services with Autohome.

Ming Zhao

Okay. So how should I understand the growth? Is it more come from more dealer signing up, or dealers placing more ads, each dealer placing more ads on your platform? Which one’s more significant?

James Qin

I think it’s the share of wallet has gone up, is more significant, because if you look at the number of brands increased. I think Q4 versus 2014 versus 2013, we went up by about 29%, but you can see that our dealer advertising grew 100% plus. So that means the rest of the increase is really coming from the same advertiser buying more, so the share of wallet has gone up.

Nicholas Chong

So in my mind, I probably will recommend you guys to look at the dealer advertising and the dealer subscription as one business, rather than split into because, so for example, for the dealer advertising business, as I’ll give you one example. We have a CPL product for dealers, and as I mentioned to you, you should not, in fact it has now been kicked in 2014, we start to launch that in 2015. We also have an up sale in the subscription business, I think those business from Autohome point of view generate a similar affect, which is per sales lead we generate more revenue. And then from the dealer point of view, it achieved deeper purpose, the up sale of the, the premium package of the subscription will give them in pivotal time, more sales lead compared with the old non-premium service. However, on the CPL front, we can generate a lot more sales leads with very short period of time. It’s basically at the end of the day, they want to get in sales in the last week of a quarter end, they can use a CPL product. So I think we start to offer more products, and from Autohome point of view is to generate more revenue on the same number of sales lead perspective. So, and we at the same time, we also increase number of sales we generate from Autohome cycle. So I will really recommend you guys to look at the dealer advertising and the dealer subscription as one business. Just unfortunately different, we sign contracts in different ways, so it adds up in the financial report differently.

Ming Zhao

Okay, thank you, very helpful. So my final question is about the advertisement we had, as you’ve just mentioned. So we also noticed that the automakers such as BMW and Ford are among the early adopters of WeChat advertisement. So I just want to know your view or your comment on this. Is this a, what would be the impact on your business? Will this actually be a negative impact as a dilution of wallet, or is it actually a positive in fact that it increased the online migration of marketing budget by the OEMs?

Nicholas Chong

It’s definitely leaning towards your second point, which is creating more awareness among OEM, the key decision makers among OEM about the mobile as a channel to promote their product and end brands. So I think mobile advertising public would be one of the few bright spots in the media landscape in 2015. And also, there was a couple of advantages for the mobile advertising platform, one of them would be to deliver the right message, to the right person at the right time. This was a very important and Autohome can generate a similar effect. So I think for more and more China’s Automaker adopt WeChat as one of the platform, that’s definitely a good news for us.

Operator

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

James Qin

Thank you very much for joining us today, we appreciate your support and we look forward to updating you on our first quarter 2015 conference call in a few months time, actually in two months time. In the mean time please feel free to get in touch with us if you have further questions concerns or comments. So before we end our call I would like to wish everyone a happy festival - because tomorrow would be - so we’re just happy probably Eastern Valentine’s Day tomorrow, wish everyone a happy and enjoy a good night with your family. With that I would end our call. Thank you.

Operator

This concludes today’s conference. Thank you everyone for your participation.