Autohome Inc. (NYSE:ATHM) Q3 2021 Results Earnings Conference Call November 18, 2021 7:00 AM ET Company Participants Quan Long - Chairman and CEO Haifeng Shao - Co-President Bibo Xiang - Chief Technology Officer You Zhou - Vice President Hong Jiang - Finance Director Conference Call Participants Thomas Chong - Jefferies Brenda Zhao - CICC Ritchie Sun - HSBC Operator Ladies and gentlemen, thank you for standing by for Autohome's Third Quarter 2021 Earnings Conference Call. At this time, all participants are ...

Financial Data and Key Metrics Changes - Total revenues for Q2 2021 were RMB1.94 billion, with adjusted net margin rising 2.7 percentage points year over year to 40.8% [6][7][18] - Media service revenue was RMB600 million, leads generation service revenue was RMB744 million, and online marketplace revenue increased by 10% year over year to RMB594 million [16] - Gross margin decreased to 86.5% from 88.5% year over year [17] Business Line Data and Key Metrics Changes - Online marketplace and others business contributed 30.7% to total revenue, up from 23.4% in the same period last year [6] - Data products revenue increased by 47.1% year over year, driven by higher contributions from OEM data products [7] - Revenues from new energy vehicle (NEV) brands surged 238% year over year [7][12] Market Data and Key Metrics Changes - The production and sales of new EVs in May decreased by 2.7% and 1.7% year over year, with further declines of 13.7% and 11.1% respectively in subsequent months [8] - The used car market in China is experiencing expanding trading volume, indicating a mixed performance across different segments [9][15] Company Strategy and Development Direction - The company is focusing on improving user experience and implementing hierarchical management for B-end customers to provide high-value derivatives [9] - A dedicated new energy business department has been established to explore market opportunities and address industry challenges [12] - The company plans to announce a strategic upgrade plan at the upcoming Investor Day on September 15 [14] Management Comments on Operating Environment and Future Outlook - Management anticipates that the auto industry will gradually recover from current challenges, with long-term growth trends remaining unchanged [15] - The company expects single-digit growth in auto sales for the year, impacted by supply chain issues and rising costs [21] Other Important Information - The company achieved breakeven at the operating level for TTP in June, marking a significant milestone [7][13] - The average daily active users (DAU) reached 44.1 million, representing a 16% year-over-year increase [10] Q&A Session Summary Question: Auto industry outlook - Management noted that the auto market saw a sharp drop in Q2 due to chip shortages and rising costs, predicting single-digit growth for the year [20][21] Question: Regulatory environment impact - Management highlighted the chaotic nature of the used car market and the potential for profitability in C2B and B2B models, while emphasizing the need for trust and transparency [23][24] Question: Competition in the auto vertical - Management stated that competition is welcomed as it drives industry development, and emphasized their leading position in traffic and market share [26][27] Question: Advertising budgets of automakers - Management indicated that automakers' advertising budgets are closely tied to sales volume and profit targets, which may be under pressure [30] Question: User growth strategy - Management outlined strategies to expand user base, focusing on lower-tier cities and attracting younger users [35] Question: Data products outlook - Management confirmed robust growth in data products and plans to enhance their contribution to total revenue [37][38] Question: Blue-sky plan impact - Management reported a 10% increase in lead quality following the implementation of the Blue-sky plan, which aims to enhance data protection and lead quality [42]

[Financial and Operational Highlights](index=2&type=section&id=Financial%20and%20Operational%20Highlights) This section provides an overview of Autohome's Q2 2021 performance, highlighting key financial metrics and management's strategic outlook [2021 Q2 Performance Highlights](index=2&type=section&id=2021%20Q2%20Performance%20Highlights) In Q2 2021, Autohome's total net revenues were RMB 1.938 billion, a year-over-year decrease, though online marketing and other businesses (including data products) grew by 10.0% year-over-year, while net income and adjusted net income slightly declined 2021 Q2 Key Financial Metrics | Indicator | 2021 Q2 (RMB Million) | 2020 Q2 (RMB Million) | Year-over-Year Change | | :--- | :--- | :--- | :--- | | Total Net Revenues | 1,938.0 | 2,313.3 | -16.2% | | Online Marketing and Other Revenues | 594.3 | 540.2 | +10.0% | | Net Income Attributable to Ordinary Shareholders | 746.7 | 824.5 | -9.4% | | Adjusted Net Income (Non-GAAP) | 790.2 | 881.0 | -10.3% | - Data product revenues showed strong performance, growing **47.1% year-over-year**, becoming a key driver for online marketing and other business growth[3](index=3&type=chunk)[27](index=27&type=chunk) [Management Review and Outlook](index=3&type=section&id=Management%20Review%20and%20Outlook) Management highlighted strong momentum in new businesses, particularly data products, used car platforms, and new energy vehicle services, with new business revenue share increasing and user traffic maintaining leadership despite traditional business challenges - New business revenues increased **10.0% year-over-year**, raising their contribution to total revenues from **23.4% to 30.7%**[4](index=4&type=chunk)[28](index=28&type=chunk) - Data product revenues grew **54.7% year-over-year** in the first half; used car platform 'Tiantiantianche' achieved monthly operating breakeven for the first time in June[4](index=4&type=chunk)[28](index=28&type=chunk) - New energy vehicle business performed exceptionally, with revenues from new energy brands surging **238% year-over-year** in Q2[4](index=4&type=chunk)[28](index=28&type=chunk) - The company maintained industry leadership in traffic, with mobile daily active users growing **16.1% year-over-year**[4](index=4&type=chunk)[28](index=28&type=chunk) [Unaudited Financial Results for Q2 2021](index=3&type=section&id=Unaudited%20Financial%20Results) This section presents the unaudited financial results for the second quarter of 2021, detailing operating performance, financial position, and cash flows [Operating Performance](index=3&type=section&id=Operating%20Performance) Core media and lead generation service revenues declined due to global chip shortages impacting automaker and dealer advertising budgets, while online marketing and other revenues grew, with effective control over sales and marketing expenses despite increased general and administrative costs [Net Revenues](index=3&type=section&id=Net%20Revenues) 2021 Q2 Net Revenue Composition (RMB Million) | Revenue Category | 2021 Q2 (RMB Million) | 2020 Q2 (RMB Million) | Year-over-Year Change | Primary Reason | | :--- | :--- | :--- | :--- | :--- | | Media Services | 599.8 | 932.1 | -35.6% | Global chip shortage impacting automaker advertising budgets | | Lead Generation Services | 744.0 | 841.0 | -11.5% | Reduced dealer advertising spending | | Online Marketing and Other | 594.3 | 540.2 | +10.0% | Consolidation of Tiantiantianche and increased contribution from data products | [Cost of Revenues and Operating Expenses](index=4&type=section&id=Cost%20of%20Revenues%20and%20Operating%20Expenses) - Cost of revenues remained relatively stable at **RMB 261.6 million**[6](index=6&type=chunk)[30](index=30&type=chunk) - Sales and marketing expenses significantly decreased year-over-year to **RMB 562.4 million** (from RMB 872.4 million in the prior year period), primarily due to reduced promotional spending[7](index=7&type=chunk)[31](index=31&type=chunk) - General and administrative expenses increased year-over-year to **RMB 176.8 million** (from RMB 82.5 million in the prior year period), mainly due to the consolidation of Tiantiantianche and bad debt provisions[7](index=7&type=chunk)[31](index=31&type=chunk) [Profitability and EPS](index=4&type=section&id=Profitability%20and%20EPS) 2021 Q2 Profit and EPS Performance (RMB Million) | Indicator | 2021 Q2 (RMB Million) | 2020 Q2 (RMB Million) | | :--- | :--- | :--- | | Operating Profit | 673.0 | 870.7 | | Net Income Attributable to Autohome | 754.9 | 824.5 | | Diluted Net Income Per Share (RMB) | 1.48 | 1.72 | | Adjusted Net Income Attributable to Autohome | 790.2 | 881.0 | | Adjusted Diluted Net Income Per Share (RMB) | 1.56 | 1.84 | [Financial Position and Cash Flow](index=5&type=section&id=Financial%20Position%20and%20Cash%20Flow) As of June 30, 2021, the company maintained a strong cash position with total cash, cash equivalents, and short-term investments reaching RMB 18.43 billion, generating robust net cash inflow from operating activities in Q2 - As of June 30, 2021, the company's total cash, cash equivalents, and short-term investments amounted to **RMB 18.43 billion** (**US$2.85 billion**)[11](index=11&type=chunk)[35](index=35&type=chunk) - Net cash flow generated from operating activities in Q2 2021 was **RMB 580.8 million** (**US$90.0 million**)[11](index=11&type=chunk)[35](index=35&type=chunk) [Financial Statements](index=9&type=section&id=Financial%20Statements) This section provides the unaudited condensed consolidated financial statements, including the statements of comprehensive income, GAAP to Non-GAAP reconciliation, and balance sheets [Unaudited Condensed Consolidated Statements of Comprehensive Income](index=9&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) This statement details key income statement items including revenues, costs, expenses, profits, and earnings per share for the three and six months ended June 30, 2021, compared to the prior year period - Provides detailed income and loss data for the three and six months ended June 30, 2021, serving as a core statement for evaluating the company's current operating performance[22](index=22&type=chunk)[46](index=46&type=chunk) [Unaudited GAAP and Non-GAAP Reconciliation](index=10&type=section&id=Unaudited%20GAAP%20and%20Non-GAAP%20Reconciliation) This table reconciles GAAP net income to Non-GAAP adjusted net income and adjusted EBITDA, primarily adjusting for share-based compensation, intangible asset amortization, and Tiantiantianche-related profit and loss adjustments to aid core operating performance evaluation - Reconciles GAAP net income to Non-GAAP adjusted net income, primarily excluding non-cash or non-core operating items such as share-based compensation expenses, amortization of certain intangible assets, and Tiantiantianche minority interest adjustments[23](index=23&type=chunk)[47](index=47&type=chunk) [Unaudited Condensed Consolidated Balance Sheets](index=11&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) This statement presents the company's assets, liabilities, and shareholders' equity as of June 30, 2021, compared to year-end 2020, reflecting its financial health and capital structure at the reporting period end - As of June 30, 2021, the company's total assets were **RMB 26.925 billion** and total liabilities were **RMB 3.774 billion**, indicating a robust balance sheet structure[24](index=24&type=chunk)[48](index=48&type=chunk) [Other Information](index=5&type=section&id=Other%20Information) This section provides general information about Autohome and details regarding the earnings conference call [About Autohome](index=6&type=section&id=About%20Autohome) Autohome is China's leading online automotive consumer service platform, offering comprehensive content and services throughout the car ownership lifecycle, alongside advertising, lead generation, data analytics, and value-added services for automakers and dealers - The company is positioned as China's leading online automotive consumer service platform, with businesses covering content, advertising, lead generation, data services, online transactions, and automotive aftermarket value-added services[15](index=15&type=chunk)[39](index=39&type=chunk) [Conference Call Information](index=5&type=section&id=Conference%20Call%20Information) The company held an earnings conference call on August 25, 2021, providing dial-in numbers and webcast details, with a replay available until September 1, 2021 - The earnings conference call was held at 8:00 PM Beijing Time on August 25, 2021, with call replay and webcast available[12](index=12&type=chunk)[14](index=14&type=chunk)

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