ATHM 汽车之家

Operator

Ladies and gentlemen, thank you for standing by for Autohome's Third Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. If you have any objections, you may disconnect at this time. A live and archived webcast of this earnings conference call will also be available on Autohome's IR website. It is now my pleasure to introduce your host, Mr. Sterling Song, Autohome's IR Director. Mr. Song, please go ahead.

Sterling Song

Thank you, operator. Hello, everyone, and welcome to Autohome's Third Quarter 2025 Earnings Conference Call. Earlier today, Autohome distributed its earnings release, which can be found on the company's IR website at ir.autohome.com.cn. Joining me on today's call is our Chief Financial Officer, Mr. Craig Yan Zeng. Management will go through the prepared remarks, which will be followed by a Q&A session, where it is available to answer all your questions. Before we continue, please note that the discussion today will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations. Potential risks and uncertainties include, but are not limited to, those outlined in our public filings with the U.S. Securities and Exchange Commission and the Hong Kong Stock Exchange. Autohome doesn't undertake any obligation to update any forward-looking statements, except as required under applicable law. Please also note that, Autohome's earnings press release and this conference call include discussions of certain unaudited non-GAAP financial measures. A reconciliation of the non-GAAP measures to the most directly comparable GAAP measures can be found in our earnings release. I'll now turn the call over to Autohome's Chief Financial Officer, Mr. Craig Yan Zeng, for opening remarks. Please go ahead, Craig.

Yan Zeng

[Interpreted] Thank you, Sterling. Hello, everyone. This is Craig Zeng. Thank you for joining our earnings conference call today. In the third quarter, we continued to advance our AI and O2O strategies. On AI, we significantly strengthened the integration of AI technologies with our products, fostering business innovation while enhancing both user experience and customer operational efficiency. On O2O, we continuously improved our O2O platform by integrating online and offline resources, optimizing the end-to-end user experience and building a comprehensive closed-loop ecosystem that spans the entire customer journey from initial traffic acquisition to transaction completion to after sales services. In terms of AI technology applications, we completed a comprehensive upgrade of our AI assistant by strengthening model capabilities, integrating user inquiries with specific vehicle models and expanding usage scenarios we achieved precise matching between user queries and car models. This has created a decision-making loop of content drives engagement, engagement lead to action. In addition, we've also introduced 2 new features, the AI car selection system and AI vehicle for diagnostics, providing users with more intuitive and efficient tools for their car-related needs. In September, we launched the first inaugural Global AI Technology Conference. This established a premium platform for technical exchange among leading enterprises, showcased cutting-edge advances in China's intelligent automotive technologies, and elevated the collective image for Chinese auto brands. The conference's success also serves as a testament to Autohome's professional influence as a trusted media platform. The conference received authoritative endorsements from 5 major automotive associations and was strongly supported by 14 key corporate partners. 7 top executives from leading companies in the industry delivered impact keynote speeches. Following the conference, over 30 automotive brands engaged with Autohome's official Weibo account, while more than 60 professional editors, technical experts and PGC creators formed a multidimensional communication matrix that drew widespread attention across the industry. In building our auto ecosystem, we soft launched our Autohome Mall on September 20, marking a major milestone and significant progress in our one-stop online to offline strategy. This initiative further improves our new retail business model through continuous upgrades and makes our model more complete. This strategy extends Autohome's role from being a decision-making hub for car selection and research to the final car purchase and ordering per transaction creating a full digitalized closed loop for the entire car purchase experience and significantly increasing the value of our traffic. Specifically, on content, we strengthened our content matrix by increasing professional depth and expanding the breadth of perspective, while continuously advancing our diversified content ecosystem. For our 2025 series of coverage on domestic and international auto shows, we adopted a dual-track approach to achieve comprehensive reach from global influence to local penetration. At the Munich Auto Show, we took a global perspective, focusing on world's premiers and the Chinese brands going global. We built a professional and exclusive content matrix through intensive bilingual live streaming and video production that leveraged global mainstream media networks to amplify China's automotive innovation and brand recognition worldwide. At the Chengdu Auto Show, we focused on new car launches and purchase guidance, integrating resources from 18 automakers to create Autohome exclusive live streaming sessions. This provided users with an immersive auto show experience. On the first day of the auto show, we achieved 100% coverage of all new car launches. Beyond our professional auto show coverage, we made significant strides in developing a content-centered interactive ecosystem. The newly established Autohome Media MCN is committed to building a multi-category influencer matrix that centers on automotive vertical, while expanding into technology, travel and overseas content. We've also developed a rich and diverse content ecosystem that combines professional and engaging PGC content, in-depth and authoritative OTC insights and authentic user-generated experiences that resonate. To date, we have gathered over 200 high-quality creators across multiple platforms covering professional car reviews, technology, travel and other areas, continuously enhancing Autohome's platform influence. According to QuestMobile, the average mobile DAUs reached 76.56 million in September 2025, up by 5.1% from the same period last year. In NEVs, we continue to focus on user and client needs while building a comprehensive automotive ecosystem. Online centered around our newly soft launched Autohome Mall introduced in late September, provides transaction services, while our offline network of franchise stores, CARtech outlets and used car dealerships is designated to integrate the entire process from online ordering to offline delivery and service. Building on the success of trial, we plan to officially launch the Autohome Mall during the Double 11 shopping festival. By integrating resources from across the industry value chain, we are committed to providing users with more precise, professional and efficient car purchasing experiences. Furthermore, total revenues from NEVs in the third quarter, including those from the new retail business has continued to grow, increasing by 58.6% from last year. On digitalization, our 5 major digital intelligence product lines are leveraging Autohome's platform capabilities of full life cycle data tracking to continuously help clients improve targeting accuracy and service efficiency. Furthermore, at the Global AI Technology Conference, we officially launched the Tianshu Intelligence Service Platform powered by Autohome's proprietary Cangjie Large Language Model, the platform uses an open toolkit and service distribution capabilities to redefine collaboration among users, the platform and the ecosystem partners. This advancement drives Autohome's transformation from an automotive information platform to an industry-wide intelligent hub, further strengthening our field advantages in technology and ecosystem. For our used car business, we continue to advance the standardization of both transactions and services. The AI car inspection expert developed based on historical transaction data and algorithmic models have achieved industry-leading accuracy in vehicle valuation. Meanwhile, our flagship certified used car stores have further expanded its network of partner dealers. In the future, we will continue to uphold integrity and standardization as our foundation, deepen our collaboration with high-quality used car dealers and continuously strive to provide consumers with a more reliable and worry-free used car buying experience. In summary, this year, we focused on AI and O2O to comprehensively accelerate our business expansion. Looking ahead, we will continue driving innovation in both products and business models, building a more efficient automotive ecosystem and service system that creates sustained value for the industry and ensures our long-term stable development. With that, now please let me briefly walk you through the key financials for the third quarter 2025. Please note that, I will reference RMB only in my discussion today, unless otherwise stated. Net revenues for the third quarter reached RMB 1.78 billion. To break it down further, media services revenues contributed RMB 298 million, leads generation services revenues were RMB 664 million and the online marketplace and others revenues increased by 32.1% year-over-year to RMB 816 million. With respect to cost, cost of revenues in the third quarter was RMB 646 million compared to RMB 408 million in the third quarter of 2024. Gross margin in the third quarter was 63.7% compared to 77% during the same period last year. Turning to operating expenses. Sales and marketing expenses in the third quarter were RMB 620 million compared to RMB 877 million in the third quarter of 2024. Product and development expenses were RMB 279 million compared to RMB 339 million in the third quarter of 2024. General and administrative expenses were RMB 125 million compared to RMB 137 million during the same period last year. Overall, we delivered an operating profit of RMB 147 million in the third quarter compared to RMB 83 million for the same period of 2024. Adjusted net income attributable to Autohome was RMB 407 million in the third quarter compared to RMB 497 million in the corresponding period of 2024. Non-GAAP basic and diluted earnings per share in the third quarter was RMB 0.87 and RMB 0.86, respectively, compared to RMB 1.02 for both in the corresponding period of 2024. Non-GAAP basic and diluted earnings per ADS in the third quarter were RMB 3.47 and RMB 3.45 respectively, compared to RMB 4.09 and RMB 4.08, respectively, in the corresponding period of 2024. As of September 30, 2025, our balance sheet remains robust with cash, cash equivalents and short-term investments of RMB 21.89 billion. We generated net operating cash flow of RMB 67 million in the third quarter. On September 4, 2024, our Board of Directors authorized a new share repurchase program under which we are permitted to repurchase up to USD 200 million of Autohome's ADS for a period not to exceed 12 months thereafter. On August 14, 2025, the Board approved an extension of the term of this program through December 31, 2025. As of October 31, 2025, we have repurchased approximately 5.48 million ADS for a total cost of approximately USD 146 million. In addition, in accordance with our dividend policy, our Board of Directors has approved a cash dividend of USD 1.20 per ADS or USD 0.30 per ordinary share payable in U.S. dollars to holders of ADS and ordinary shares of record as of the close of business on December 31, 2025. The aggregate amount of the dividend will be approximately RMB 1 billion and expected to be paid to holders of ordinary shares and ADS of the company on or around February 12, 2026, and February 19, 2026, respectively. On September 30, 2025, the company announced the approval of a cash dividend of approximately RMB 500 million. Overall, the company has fulfilled its commitment to shareholders to distribute no less than RMB 1.5 billion in dividends for the full year of 2025. Looking ahead, we remain committed to maintaining a long-term stable and proactive approach to shareholder returns, and we sincerely thank our shareholders for their continued strong support to the company. So that concludes our financial summary. We are ready to open up Q&A session. Operator?

Operator

[Operator Instructions] Our first question comes from the line of Thomas Chong of Jefferies.

Thomas Chong

[Interpreted] I have 2 questions. The first question is about the outlook for 2026 auto market. How should we think about the industry trend? And my second question is about AI. We mentioned AI in our prepared remarks. So, I just want to get some more color about the progress of our AI product offerings.

Yan Zeng

[Interpreted] Thank you for your question. First, let me share some market recent developments and the future trends with you. First of all, the price war in the auto market has shown some signs of easing and the automakers are accelerating their intelligent technology efforts. In recent months, multiple government agencies have rolled out intensive policies calling for the industry to end devolution and provided policy guidance to ease the ongoing price war in the auto sector. So, all these measures have helped to cool down the price war in the auto market. And we have also observed that over 20 automakers have gradually phased out their fixed price promotions. Since the start of this year, major automakers have successfully announced their plans for intelligent driving technologies, to accelerate the adoption and application of intelligent driving. So, from this, it's quite clear that future industry competition will depend more on the company's comprehensive capabilities in integrating intelligent technology, user scenarios and meeting user needs, et cetera, rather than any single technological advantage. So, for next year, the price competition is expected to shift more towards a battle of technological cost effectiveness. Secondly, the NEV market still remains the core growth driver, even though this year, their growth number is comparatively a little bit slower than last year. But according to the data from the China Passenger Car Association, CPCA, the NEV penetration rate exceeded 50% in 7 out of the first 9 months of this year. So, this was mainly driven by the extension of favorable policies, et cetera. So, we believe for next year, the overall market -- auto market is expected to continue to undergo structural adjustments, which will redefine how consumers to make their purchasing decisions. At the same time, the China's auto industry continues to remain under high pressure, which has been lasted so long. And this pressure includes severe capacity -- overcapacity, declining profit margins and intense or fierce market competition, et cetera. So, we see both traditional automakers or dealers also undergoing such business pressure. So confronted with both price wars and shrinking profit and margin, we see OEMs and dealers alike. So, they have raised their expectations for both online consumer acquisition and offline sales conversion efficiency. Looking ahead to next year, we believe the following few points merit our attention. We believe there are short-term challenges, but it coexists with long-term opportunities because the auto market still face significant short-term pressures, mainly stemming from the shift of the NEV purchase tax exemption policy from full exemption to half exemption and the expiration of tax incentives for the ICEs. So combined with the price war in traditional ICEs, all such factors may further impact the auto market. Despite the above short-term pressures that we just mentioned, there are still upgrades in intelligent technologies, improvements to and recovery in the market order, and if there's further supported by introduction of additional long-term policies, we believe it will still stimulate consumer demand in the auto market and the market is expected to achieve modest and steady growth in 2026. So, for us, for Autohome, we will continue to deepen our AI and auto strategies, as I just mentioned. On one hand, we will keep advancing the product innovation and upgrades, accelerating the application of AI technology across content, intelligent customer services and scenario-based services, et cetera. On the other side, we will continuously explore ways to leverage our online and offline resources to achieve integration, build a closed loop for auto transactions and better serve our users and clients. The second question is our AI product progress. So, in the field of intelligent technologies, we have already completed the strategic layout of multiple products, built a technology product mix. Spans the entire life cycle of auto consumption and continuously we drive improvement in both user experience and customer business efficiency. For our users, our AI smart assistant and the used car AI smart buyer are continuously being upgraded. The new generation of the smart system has moved beyond simple question-and-answer model to proactive understanding and links provision. So, it can automatically identify the car models and series mentioned in the conversation and directly push product links. So, it shortened the users' search process and improve our decision-making efficiency. And for our clients, we have deployed 5 major AI product lines covering core business scenarios such as marketing insights, online customer acquisition, store visit invitation, dealer store operations and used cars, et cetera. So, through the intelligent tools, we can continuously empower our business team members and to realize the full chain digital operations. And for our technology foundation, we have our own proprietary Cangjie large language model. For example, our used car AI smart buyer is powered by this Cangjie engine, and it is -- besides, it is combined with Autohome's unique data assets, so it can deliver highly accurate and efficient recommendations, achieving a high degree of matching between the vehicle sources and the user needs. So currently Autohome is comprehensively and vigorously promoting the AI-driven upgrade of the products, achieving a comprehensive transformation from the underlying architecture to application scenarios. So, in the future, we will continue to deepen the integrated application of AI across multiple scenarios using the technological innovation to drive an efficiency revolution in the auto sector in the industry.

Operator

The next question comes from the line of Xiaodan Zhang from CICC.

Xiaodan Zhang

[Interpreted] So can management share your outlook on the traditional business for the upcoming quarters? And also, is there any update on the shareholder return plans?

Yan Zeng

[Interpreted] Thank you for your question. In the third quarter, we do see that the OEM promotional discount still remains at high level and the price war has been there for so long. And the overall discount for OEMs has already exceeding 23%. So, for the car sales volume and profit, I still remain concentrated among the leading companies. So, the price cutting for volume strategy has made a lot of OEMs to control their marketing budgets. For the media services revenue in Q3 still declined year-over-year, but the decline has narrowed down significantly. And the continued decline is mainly due to the continued pressure from the OEMs price war in the market. And as Q4 approaches to the year-end, and we believe OEMs is expected to maintain high professional discounts to boost their sales revenues and this still put pressure on our media services revenue. So, we do expect we will achieve a slight year-over-year decline. For our lead generation business, because of the market inventory backlog and the inverted pricing, so dealers continue to face operational pressure, and we see that over 50% of dealers operating at a loss in the first half of the year, and it doesn't look very optimistic for their survival for many dealers. So accordingly, our lead generation services also faced some ongoing pressure in the second half of the year. Nevertheless, our customer penetration rate still remains at a good level. As the market -- once the market and customer operating conditions improve, our traditional business can be hit the bottom, rebound and stabilize. As I just mentioned, our media segment, business segment already narrowed down their decrease. And on the other hand, our innovative business developed quite strong, quite well. So, to some extent, our -- it offsets the situation of our traditional businesses. On the shareholder return on dividends today, we just announced a cash dividend of RMB 1 billion for the second half of this year. And combined with RMB 500 million we announced in September, we have fulfilled our commitment to a total annual cash dividend of no less than RMB 1.5 billion for the whole year 2025. Our Board of Directors will continue this stable dividend policy. On the share repurchase program, of the USD 200 million share repurchase program, until today, we have completed over 70% and the overall execution of this program is progressing quite well. So, in the next few months, we will continue to carry out the remaining share repurchase program. For a long time, we have been committed to building a comprehensive shareholder return plan centered on the continuous dividends and the share repurchases, providing shareholders with predictable and stable shareholder returns. So, over the long term, we are very confident in our business operations in the future. So, we will continue to uphold our long-term stable and proactive approach to shareholder returns. We sincerely thank all shareholders for their long-standing strong support to the company.

Operator

The next question comes from the line of Ritchie Sun from HSBC.

Ritchie Sun

[Interpreted] So I have 2. First of all, the gross profit margin it has been dropping year-on-year and Q-on-Q in first quarter. So why is that? And what is the trend going forward? Secondly, I want to ask about the energy space stores and satellite stores. So, what is the development progress and the 2026 target?

Yan Zeng

[Interpreted] Thank you for your question. Since the beginning of 2025 this year, so in order to accelerate the development of our new innovative businesses, we have been actively expanding in -- we have been actively developed our business and so it increased our upfront investment and consequently, it resulted in higher costs. Specifically, our innovative business such as the new retail business has scaled up in the third quarter, as compared to the same period last year. For example, we soft launched Autohome Mall business in September. And although, this model is quite early in its early stage, but we observed where we get quite positive market feedback. And we believe such staged investments is quite necessary to -- for our future development for our -- to explore new avenues of growth and create much greater room for future development. So, the gross margin of our transaction business, it cannot be -- of course, it cannot be compared for our traditional business. For example, the media business and the lead generation business is much lower than our traditional business. So going forward, we will adhere to our consistent practice of the strict cost controls, and we'll hold the prudent principles in managing the scale of our investment. So, we will pay attention to our gross margin change. We will focus on that. The second question is about Autohome space station and satellite stores development. The development of our offline network is always centered on using our digital technology to streamline the car purchasing process and improve the transaction efficiency. So, our advantage is in our ability to cover areas in low-tier markets where OEMs or dealers, they don't reach. So, we can help them to expand their sales network. So, this business model is also being continuously upgraded and iterated. As I just mentioned, we are integrating the online and offline resources, bringing our online technology and the traffic advantages to offline. So, we try to transform from an auto content-oriented platform to a transaction service platform. So, after we complete the controlling shareholder, we will continue to working on combining our online and offline efforts to provide platform services that are more convenient and efficient, and we try to find new ways to grow beyond our traditional business model.

Operator

Our final question comes from Brian Gong from Citi.

Brian Gong

[Interpreted] I will translate myself. The used car market seems still a little bit weak recently. How does management view the outlook for used car market ahead?

Yan Zeng

[Interpreted] Thank you for your question. Since the beginning of this year, the used car market has generally shown a trend of rising transaction volume and the falling prices according to China Automobile Dealers Association, CADA, for the first half, the transaction volume for used cars rose 2% year-over-year, while the average transaction price decreased by 12% year-over-year. At the same time, we see there are 2 notable structural trends emerged in the market. First is the increased cross-regional flows. Second is the rapidly increasing NEV used cars sales. While the transaction volumes are expanding, the operational pressures in the industry continue to intensify due to the impact of price wars in the auto market, we see the proportion of loss-making used car companies has expanded to over 70%, with lengthening average inventory cycles, continued high customer acquisition costs and intensified homogeneous competition, et cetera. But despite this, positive factors still remain. For example, the trade-in policies have stimulated replacement demand and brought more high-quality used cars into the market with the new energy used car becoming a key growth engine. So, the CADA forecast for the full year, the used car transaction volume could exceed 20.5 million units, an increase of 4% to 5% year-over-year. Currently, the used car sector has entered a crucial stage of deep adjustment and value chain reconstruction. The negative impact from the price cutting for volume model are gradually becoming apparent. However, China's large vehicle ownership base and relevant consumer demand provide strong support for the mid-to long-term development of the used car industry. So Autohome will continue to collaborate with industry partners to actively address challenges through refined operations and service upgrades, exploring new business models, unlocking new value to advance the used car industry towards high-quality development.

Operator

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

Yan Zeng

[Interpreted] Thank you very much for joining us today. We appreciate your support and look forward to updating you on our next quarter's conference call in a few months' time. And in the meantime, please feel free to contact us if you have any further questions or comments. Thank you, everyone.

Operator

This concludes the conference for today. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]