Autohome Q2 2024 Earnings Results & Report

Autohome EPS Results

• Actual EPS: $4.71
• Consensus EPS: $0.59
• Beat/Miss: Beat by +$4.12
• One Year Ago EPS: $0.59
• EPS Beat Rate: 4 of last 8 quarters

Autohome Revenue Results

• Actual Revenue: $1.87 billion
• Expected Revenue: $1.87 billion
• Beat/Miss: Beat by +$2.99 million
• YoY Revenue Growth: +2.20%

Autohome (NYSE:ATHM) (NYSE: ATHM) operates an online platform serving automobile consumers and industry participants in China. The company provides automotive news, reviews, buying guides, videos and other user-generated or professionally produced content designed to help consumers research vehicles and make purchasing decisions.

Through its websites and mobile applications, including Autohome and Che168, the company offers vehicle search and comparison tools, pricing information, listings for new and used vehicles, dealer information and online communities. Its platform also supports automotive manufacturers, dealers and other industry customers with digital advertising, marketing, lead-generation and data-related services.

Autohome was founded in 2008 and listed its American depositary shares on the New York Stock Exchange in 2013. The company primarily serves the mainland Chinese automotive market, connecting consumers with automakers, dealerships and other businesses throughout the country.

Autohome Q2 2024 Earnings Call Transcript

Key Takeaways

• 2Q24 revenues rose 2.2% year-over-year to RMB 1.87 billion, fueled by double-digit growth in online marketplace & others (up 14% YoY), data products (up >15% YoY) and NEV revenues nearly doubling.
• Adjusted net income reached RMB 572 million, delivering a strong 30.6% non-GAAP net profit margin and US$1.18 diluted EPS, underscoring healthy profitability.
• Expanded its offline footprint with the “satellite plan” around flagship Autohome Space stores, accelerating new retail reach into low-tier cities and boosting NEV brand revenues.
• Launched digital tools—including the Smart Series platform, Smart Digital Connection and Smart Test Drive—to enhance dealership operations and drive data product revenues up over 15% YoY.
• Ended Q2 with RMB 23.47 billion in cash, equivalents and short-term investments, and generated RMB 452 million in operating cash flow, supporting future growth initiatives.

Presentation

[Operator]

Ladies and gentlemen, thank you for standing by for Autohome's second quarter and interim 2024 earnings conference call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow management's prepared remarks. 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, Sterling Song, Autohome's IR Director. Mr. Song, please go ahead.

[Sterling Song, IR Director at Autohome]

Thank you. Thank you, operator. Hello, everyone. I'm Sterling Song, and welcome to Autohome second quarter and interim 2024 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 today on this call are Chief Executive Officer, Mr. Tao Wu, and Chief Financial Officer, Mr. Craig Yan Zeng. Management will go through their prepared remarks, which will be followed by a Q&A session, where they will be available to answer all your questions. Before we continue, please know 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.

[Sterling Song, IR Director at Autohome]

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 and applicable laws. Please also know that Autohome's earnings press release and this conference call include discussions of certain non-GAAP, audited 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 will now turn the call over to Autohome's CEO, Mr. Wu, for opening remarks. Please go ahead, Mr. Wu. Tao Wu.

[Tao Wu, CEO at Autohome]

[Foreign language].

[Sterling Song, IR Director at Autohome]

Thank you, Sterling. Hello, everyone. This is Tao Wu, CEO of Autohome. Thank you for joining our earnings conference call today.

[Tao Wu, CEO at Autohome]

[Foreign language].

[Sterling Song, IR Director at Autohome]

In the second quarter, Autohome's net revenues grew steadily, user traffic increased noticeably, and our innovative business continued to make breakthroughs, driving the continuous optimization and upgrade of our entire business structure.

[Tao Wu, CEO at Autohome]

[Foreign language].

[Sterling Song, IR Director at Autohome]

Specifically, in the second quarter, total revenues grew by 2.2% year-over-year, to reach RMB 1.87 billion. Of which, revenues from the online marketplace and others business continued to maintain double-digit growth year-over-year, reaching 33.1% of total revenue. Notably, many business lines, such as data products and NEV, have experienced robust growth, with revenues for the quarter increasing by over 15% and nearly doubling, respectively, year-over-year. In addition, we have maintained a healthy profitability while driving the development of our businesses and fulfilling our commitment to provide stable shareholder returns. In the second quarter, adjusted net income attributable to Autohome was RMB 572 million, allowing our adjusted net profit margin to reach 30.6%.

[Tao Wu, CEO at Autohome]

[Foreign language].

[Sterling Song, IR Director at Autohome]

In our innovative business arenas, we further expanded our new retail business reach, increasing and intensifying our penetration from high-tier to low-tier cities.

[Sterling Song, IR Director at Autohome]

By leveraging our established flagship Autohome Space store as the core hub, we have rapidly initiated our Satellite Plan. This plan utilizes our Autohome Space stores as the core hubs to expand our reach into neighboring low-tier cities, create a network that radiates from single point to cover an entire region. This network dynamic not only accelerates the reach and depth of the sales network, but also significantly broadens the scope of our services, enabling us to access a broader market and a wider range of users. On digitalization, we continue to drive product innovation and upgrade by leveraging the capabilities of our Smart Series products.

[Sterling Song, IR Director at Autohome]

We've introduced a comprehensive digital business management platform for our dealership partners, encompassing everything from infrastructure, setup and development, digital tools, empowerment, and the implementation of sophisticated operations management, providing our dealership partners with an advanced and systematic digital support system, allowing them to achieve increased efficiency in their business operations. In addition, our cooperation with Ping An Group has also entered a new phase.

[Sterling Song, IR Director at Autohome]

During the second quarter, we integrated various resources, including car purchasing tools, content, and vehicle services, to establish a comprehensive service system that spans the entire life cycle of car owner, providing users with a convenient one-stop service experience. Looking forward, we will remain focused on our user-centric approach, harnessing innovation to drive development, while continuously exploring new models of online to offline integration, and in the process, strive to provide users with even higher quality, even more convenient, and even more efficient service experience.

[Sterling Song, IR Director at Autohome]

Over this course, we will fully explore and elaborate the extensive resources and technology of Ping An Group to seek even greater synergies and identify additional opportunities in the automotive ecosystem. We believe that with our solid business foundation and diversified range of businesses, Autohome is well-positioned to achieve a new phase of high quality development.

[Tao Wu, CEO at Autohome]

[Foreign language].

[Sterling Song, IR Director at Autohome]

With that, I will now turn the call over to our CFO, Craig Zeng, for a closer look at our second quarter 2024 operating and financial results.

[Craig Zeng, CFO at Autohome]

[Foreign language].

[Sterling Song, IR Director at Autohome]

Thank you, Tao Wu. Hello, everyone, this is Craig Zeng, the Chief Financial Officer of Autohome.

[Craig Zeng, CFO at Autohome]

[Foreign language].

[Sterling Song, IR Director at Autohome]

In the second quarter, we continued to deepen our focus on enhancing our content portfolio, revitalizing the content through two categories: professional content and broader, general auto related content, establishing Autohome new IP matrix.

[Craig Zeng, CFO at Autohome]

[Foreign language].

[Sterling Song, IR Director at Autohome]

For example, regarding professional evaluation, we have expanded our content to include targeted evaluation for hybrid vehicles, NEVs, and ICE vehicles. On general auto-related content, we've expanded our design, automotive culture, off-road vehicles, and other content for unique scenarios, resulting in the creation of eight IP programs, including So Far So Test, Top 10 Horizontal Evaluation, and Road of Life. We are also integrating live streaming and short video format into our content to form a more comprehensive content matrix that caters to our users' diverse consumption preferences.

[Sterling Song, IR Director at Autohome]

To date, these eight IP programs have garnered a total exposure of 860 million views across the entire network, significantly enhancing the influence of our platform.

[Craig Zeng, CFO at Autohome]

[Foreign language].

[Sterling Song, IR Director at Autohome]

In addition, by focusing on the new vehicle launch event prioritized by OEM, we've developed a set of content offerings that spans the pre-launch, during launch, and post-launch phases of each new car launch.

[Sterling Song, IR Director at Autohome]

This approach begins with exclusive 3D car model speculation during the pre-launch, progressing to an in-depth introduction during launch, and then customized evaluation post-launch, effectively prolonging the exposure time for each new car's selling point. This not only helps the end customers efficiently promote their products, but also allows Autohome to gain influence among the end users. According to QuestMobile, our number of average mobile DAU reached 67.91 million in June, an increase of 8.3% from a year earlier, and securing our leading position in the auto media vertical.

[Craig Zeng, CFO at Autohome]

[Foreign language].

[Sterling Song, IR Director at Autohome]

Turning to NEV, as Mr. Wu just mentioned, we initiated the Satellite Plan in mid-May, a strategic initiative to establish satellite stores in low-tier cities adjacent to the flagship Autohome Space stores. This initiative establishes a 1+N synergistic service ecosystem, where a single core Autohome Space store could support multiple satellite stores, thereby broadening our service reach to more regional markets. To date, we have established Autohome Space stores in 28 cities, including first-tier and super first-tier cities across China, achieving full coverage in these key urban areas. Additionally, we are piloting and testing the waters for the satellite store model in five cities. Through effective collaboration between core Autohome Space stores and these satellite stores, we've developed a comprehensive sales network, upgrading the new retail model from a single point to an upgraded, comprehensive model.

[Sterling Song, IR Director at Autohome]

We are confident that the ongoing implementation of the Satellite Plan will enable us to influence and serve more users in low-tier cities.

[Craig Zeng, CFO at Autohome]

[Foreign language].

[Sterling Song, IR Director at Autohome]

In response to the national trade-in for new policy, we leveraged our Autohome Space stores and holographic exhibition tracks as platforms to organize the Hundred Cities 'Trade-in for New Car-Buying Festival, providing consumers with immersive car searches, multi-brand comparative test drives, and other services. The event brings even more mainstream NEV brand models and used car exchange services to regional markets. Spanning two months, the festival featured over 100 offline auto shows and attracted more than 500,000 consumers. We are also pleased to see that revenues from NEV brands saw a continuous rise in the second quarter, nearly doubling compared to the same period last year, consistently outpacing industry growth rates.

[Craig Zeng, CFO at Autohome]

[Foreign language].

[Sterling Song, IR Director at Autohome]

In the digital realm, we are embracing the trend of refined operations and have introduced Smart Digital Connection, a data product using model algorithms to improve user profiling, helping customers to more accurately identify target users, assess vehicle replacement intentions, leading to increased store visit rates.

[Sterling Song, IR Director at Autohome]

Smart Test Drive, another data product, integrates software, hardware, and AI-driven quality control capabilities to address the customer pain points of information opacity in test drive scenarios. This solution provides dealership clients with digital management tools covering the entire test drive process. Enhances the user test drive experience, and helps dealers establish a closed-loop, data-driven ecosystem for their offline services. During the second quarter, total data products achieved an increase in revenues year-over-year of over 15%.

[Craig Zeng, CFO at Autohome]

[Foreign language].

[Sterling Song, IR Director at Autohome]

In the used car segment, our vehicle condition inspection tools have seen continued momentum, with the proportion of strictly verified high-quality vehicles in our system consistently on the rise.

[Sterling Song, IR Director at Autohome]

In the first half of this year, there has been an increase of 55.4% year-over-year in the number of authenticated used car on our platform, effectively promoting the standardization for the entire used car industry. In terms of our business model, our used car business combines Autohome Space stores for offline services with Ping An's extensive network of car owner service centers to provide after-sales support. This one-stop used car service model has achieved strong results at our Chengdu pilot store. We plan to expand this model to additional cities in the second half of the year as the model continuously improves and matures.

[Craig Zeng, CFO at Autohome]

[Foreign language].

[Sterling Song, IR Director at Autohome]

Overall, Autohome's core businesses remain strong and stable, while our innovative businesses steadily makes constant progress, contributing to generate incremental revenue streams.

[Sterling Song, IR Director at Autohome]

This reflects the substantial strides we have made in implementing our automotive ecosystem strategy. Looking ahead, we'll continue to focus on long-term development by enhancing our user experience with more diverse and richer content, professional services, and more personalized and intelligent solutions. Furthermore, we will seek out and seize opportunities for growth in new business areas, injecting new vitality into the company's development, with the aim of creating stable, long-term, positive returns for our shareholder.

[Craig Zeng, CFO at Autohome]

[Foreign language].

[Sterling Song, IR Director at Autohome]

Next, let me briefly walk you through the key financials for the second quarter of 2024.

[Sterling Song, IR Director at Autohome]

Please note that as with prior quotes, I will reference RMB only in my discussion today, unless otherwise stated.

[Craig Zeng, CFO at Autohome]

[Foreign language].

[Sterling Song, IR Director at Autohome]

Net revenues for the second quarter were RMB 1.87 billion. Breaking it down by segment, media services revenues were RMB 433 million.

[Sterling Song, IR Director at Autohome]

Leads generation services revenues were RMB 820 million, and online marketplace and others revenues were RMB 619 million, up 14% year-over-year.

[Craig Zeng, CFO at Autohome]

[Foreign language].

[Sterling Song, IR Director at Autohome]

Cost of revenues in the second quarter was RMB 346 million, compared to RMB 330 million in the second quarter of 2023.

[Sterling Song, IR Director at Autohome]

Gross margin in the second quarter was 81.5%, compared to 82% during the same period last year.

[Craig Zeng, CFO at Autohome]

[Foreign language].

[Sterling Song, IR Director at Autohome]

Turning to operating expenses. Sales and marketing expenses in the second quarter was RMB 753 million, compared to RMB 824 million in the second quarter of 2023.

[Sterling Song, IR Director at Autohome]

Product and development expenses were RMB 350 million, compared to RMB 330 million in the second quarter of 2023. General and administrative expenses were RMB 118 million, compared to RMB 91 million during the same period last year.

[Craig Zeng, CFO at Autohome]

[Foreign language].

[Sterling Song, IR Director at Autohome]

Overall, we delivered an operating profit of RMB 412 million in the second quarter this year, compared to RMB 342 million for the same period of 2023.

[Sterling Song, IR Director at Autohome]

Adjusted net income attributable to Autohome was RMB 572 million in the second quarter, compared to RMB 569 million in the corresponding period of 2023.

[Craig Zeng, CFO at Autohome]

[Foreign language].

[Sterling Song, IR Director at Autohome]

Non-GAAP basic and diluted earnings per share in the second quarter were RMB 1.18, up from RMB 1.16 and RMB 1.15, respectively, in the corresponding period of 2023.

[Sterling Song, IR Director at Autohome]

Non-GAAP basic and diluted earnings per ADS in the second quarter were RMB 4.72 and RMB 4.71 respectively, compared to RMB 4.62 and RMB 4.61 respectively in the corresponding period of 2023.

[Craig Zeng, CFO at Autohome]

[Foreign language].

[Sterling Song, IR Director at Autohome]

As of June 30th, 2024, our balance sheet remained quite strong with cash, cash equivalents and short-term investments of RMB 23.47 billion.

[Sterling Song, IR Director at Autohome]

We generated net operating cash flow of RMB 452 million in the second quarter of 2024.

[Craig Zeng, CFO at Autohome]

[Foreign language].

[Sterling Song, IR Director at Autohome]

The above is our financial summary. With that, we are ready to open up the Q&A session. Operator, please open the line for Q&A session, please.

[Operator]

Thank you. We will now begin the question and answer session. To ask a question, please press star one one on your keypad. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Thomas Chong from Jefferies. Please ask your question, Thomas.

[Translator]

[Foreign language].

[Translator]

For transfer myself, thanks management for taking my question. Recently we saw some luxury car brands exited the price war, what do you think the reasons behind? Also government launched some policies a couple days ago, how it will positively impact us and the whole industry? Thanks.

[Tao Wu, CEO at Autohome]

[Foreign language].

[Translator]

Okay, thank you for raising this question. Since last year, we see that the auto market competition becomes even more fierce with very severe rat racing, and all kinds of automakers start to wage the price war, and in order to gain more shares from the market. You can see that the duration of this round of price war, the intensity of the price cuts, as well as the depth to this impact, goes beyond everybody's expectation. Since the beginning of last year to now, the price war has already lasted for more than 500 days. So for BBA as well as the other luxury brands, they decided to withdraw from the price war after participating for more than one year. We think there might be the following reasons.

[Tao Wu, CEO at Autohome]

[Foreign language].

[Translator]

First of all, from the OEM perspective, we have observed is that price for volume strategy doesn't slow down the decline of the sales. You can see, there's one example, the originally price, the RMB 300,000 cars now only sold as RMB 200,000, with a price cut of RMB 100,000. Even like that, in first half of this year, Mercedes-Benz and BMW, their... in China, sales continue to decline versus the similar period last year. However, at the same time, the price cuts also imposes negative impacts on the brand image of those luxury brands. Besides, we can see continuous price war also harms the profitability of the automakers.

[Tao Wu, CEO at Autohome]

[Foreign language].

[Translator]

And secondly, from the dealer's perspective, those dealers are also under big operation pressure because of the continuous price war. There are two aspects of it. The first to say is a pretty high inventory pressure. According to the statistics of Chinese Association of Automobile Manufacturers, in June, you can see that the Chinese dealers' inventory alert index was 52.3%, which is already above the threshold of PMI. And by brands, luxury and imported brands, their inventory early alert index was 66.4%, and for those mainstream joint venture brands, 60.8%, and the Chinese domestic brands 61.5%. We can see that the luxury brands are under the biggest pressure, much higher than the other two categories.

[Tao Wu, CEO at Autohome]

[Foreign language].

[Tao Wu, CEO at Autohome]

[Foreign language].

[Translator]

The second side is actually BBA dealers already start to suffer from big losses. You can see, according to the statistics, in the first half of this year, more than 80% of the dealers cannot complete their sales goals and tasks. If they continue to go for the price for volume strategy, quite a few BBA dealers they cannot survive anymore. In this circumstances, BMW Brilliance CEO said that BMW will continue to keep the close contact and discussion with upstream and downstream partners so as to explore commercially viable model and to ensure all the partners can make enough money so as to live for the future.

[Tao Wu, CEO at Autohome]

[Foreign language].

[Translator]

As a result, with the decline of the sales volume, with all kinds of pressures such as profitability, brand value as well as dealership, BBA decided to withdraw from the price war. So after BBA decided to withdraw from the price war, we see that different automakers, they don't act in a consistent manner. Some choose to follow, and the others choose to withdraw from the price war. However, most of the automakers still adopt a wait-and-see attitude. We think that in short term, the price war cannot be totally ended, and with price cuts as well as poor sales performance, the price adjustments as well as withdraw from the price war may imposes pressure on the sales volume of the automakers. As a result, we can see that market competition is still pretty fierce.

[Tao Wu, CEO at Autohome]

[Foreign language].

[Translator]

In terms of the policy update, this July 25th, NDRC and the Ministry of Finance has printed out the document called Several Opinions on Intensifying the Support on Large-Scale Equipment Replacement and Consumer Products Trading for New so as to encourage trade-in to promote the consumption of the automobiles, and also at the same time, the designated car scrappage subsidy standards have been greatly improved. And now, for the purchase of the NEV passenger vehicles, we can get a subsidy of RMB 20,000, and the purchase of 2.0 L and below, ICE cars can get a subsidy of RMB 15,000. So versus the previous policy, now car scrappage can get a doubling subsidy.

[Tao Wu, CEO at Autohome]

[Foreign language].

[Translator]

Mr. Cui Dongshu, Secretary General of the CPCA, also said that this round of car scrappage and replacement subsidy expansion and doubling is a very favorable news for the entire auto market. It is expected to drive around 2 million car consumptions of this year, sorry, 2 million cars scrappage of this year, and also in favor of driving more than hundreds of billions of replacement related consumption. For Autohome, you can see that with the increase of the NEV replacement, it will be favorable for our NEV business. With the opening of the offline franchising stores, we will better satisfy the customers needs on car selection, and car purchase. For Autohome, we can see that the revenue coming from the NEV brands will also quickly on the rise in the near future.

[Tao Wu, CEO at Autohome]

[Foreign language].

[Tao Wu, CEO at Autohome]

[Foreign language].

[Translator]

In short term, you can see that more than one year of rat racing in this industry really compromise the profitability of the automakers and also triggered a series of issues. We are also affected by this industrial headwind. However, in the long run, with the mitigation of the price war and with government keep launching favorable policies to support the auto market consumption, we strongly believe that the auto market still equipped with long-term growth potential, and we are also bullish about the long-term sound development of the auto industry in China.

[Operator]

Thank you. Our next question comes from the line of Brian Gong from Citi. Please ask your question, Brian.

[Brian Gong, Internet and Media Research at Citi]

[Foreign language]. Thanks, management, for taking my question.

[Brian Gong, Internet and Media Research at Citi]

I have two questions. First question is, regarding the used car markets. Given recently easing, price war by OEMs, what's the latest situation for used car markets? Have you observed any, you know, improvement, marginal improvement, for used car market? And the second question is about dealers. Have we seen, you know, a lot of, you know, closure, of those dealers recently, or do you expect any large scale closure in the future? Thank you.

[Craig Zeng, CFO at Autohome]

[Foreign language].

[Craig Zeng, CFO at Autohome]

[Foreign language].

[Translator]

Okay, thank you for raising this question. If you look at the used car market, because the new car price has been keeping declining, as a result, it imposes a lot of pressure on the used car market. In June, you can see that the used car sales dropped by 1 percentage points year-on-year. Well, in this time, a lot of used car potential buyers tend to purchase the new car and the car holders, because of their price volatility, they wouldn't like to sell their cars. So here you can see that we are already approaching the half year, so for the half year, volume campaign resulted in a very big volatility of the new car transaction price. As a result, the sales rate for the used cars is already intensifying. And in June, you can see that used car UCMI index is also declining to 41.2%, a drop of 2.4 percentage points year-on-year, and also highlighting that the used car market is not performing pretty well with a lot of big competition as well as the pressure of the entire market.

[Craig Zeng, CFO at Autohome]

[Foreign language].

[Translator]

So if you look at the market, we can observe the following two characteristics of the used car market. The first thing is that the price remains low, and in June, you can see that the used car average price remains at about RMB 64,400, which is the low point within this year. And I think that this is within our expectation because of the new car price. And the second thing is that cross regional trading is very active and the entire market is still have a lot of vigor and vitality. This is pretty unique in the Chinese market. As a result, to construct a integral and trustworthy and transparent industrial environment is very important.

[Craig Zeng, CFO at Autohome]

[Foreign language].

[Craig Zeng, CFO at Autohome]

[Foreign language].

[Translator]

Even though there are some challenges in short term for the used car market, but in the long run, we think that the sale, the scale, the policy environment, market structure, as well as the consumer demand of the used car market doesn't fundamentally change. I think that with the car consumption market expansion as well as the rising recognition of the consumers for the used car. In the longer future, we think that used car market is still got a lot of potential and expected to grow in a sound manner. You can see from Autohome perspective, we're also very much focusing our own capacity building. For example, we intensify our products in terms of the car conditions and car status inquiry products.

[Translator]

In the first half of this year, we mentioned our platform, the authenticated high quality vehicles number increased by 50% year-on-year. We hope that with the entrance of Autohome into this market, the consumers can actually purchase the used car in the reassured manner, and the used car market can become very active again.

[Craig Zeng, CFO at Autohome]

[Foreign language].

[Translator]

The second question is about whether there is a closure of the stores for the traditional ICE dealers. And I think that if you look at the ICE dealers volume as well as the any of the announcements of the listed company, I think that the closure of the traditional ICE dealers is inevitable. If you look at the first half of this year, there are almost 5,000 stores are shut down.

[Craig Zeng, CFO at Autohome]

[Foreign language].

[Translator]

But this is not a one-way change or adjustment. If you look at the overall auto sales volume, actually there's no big decline. So this is actually the restructuring of this industry. We see the emergence of the NEV as well as the bigger penetration into the lower-tier cities. So I think that in these circumstances, no matter for the OEM or the dealers, they have to adapt and have to transform according to this trend.

[Craig Zeng, CFO at Autohome]

[Foreign language].

[Translator]

From Autohome's perspective, we're also actively empower our clients to cope with this kind of challenges. As I mentioned before, in our new retail businesses, we also launched the Satellite Plan that to enable our dealers as well as our OEM partners. And for dealers, we also actually help them in the used car services acquisition as well as expansion. So for Autohome, it builds opportunities as well as challenges.

[Sterling Song, IR Director at Autohome]

Okay, operator, the next one, please.

[Operator]

Thank you. Our next question comes from the line of Ritchie Sun from HSBC. Please ask your question, Ritchie.

[Ritchie Sun, Director of Internet Research at HSBC]

[Foreign language].

[Ritchie Sun, Director of Internet Research at HSBC]

Thank you, management, for taking my questions. I have two. First of all, in terms of competition, we have observed that a lot of Internet platforms started to develop the leads generation businesses, as well as using large language model to improve the efficiency and conversions. So what will management do to address these challenges? Second of all, in terms of the cash balance, it is very adequate, and profit is also quite stable. What does management view on the potential special dividends or even lifting the dividend payout ratio? And would management consider launching a big scale buyback program? Thank you.

[Craig Zeng, CFO at Autohome]

[Foreign language].

[Translator]

So for your first question, which is actually about the other entrance into the lead generation businesses, actually this is not something new, and it already happened for quite a long time. And for Autohome, we think that this is a long term challenge for us, because we cannot monopolize this business.

[Craig Zeng, CFO at Autohome]

[Foreign language].

[Translator]

Before Autohome enter into this area, actually there are already some search platforms as well as some pan media, engaging in this business. After we enter into this area for more than 10 years, we still face a quite serious competition. For Autohome, we think that our specialty is about professionalism in the verticals, and we actually cover the whole life cycle, including car selection, car purchase, car use, as well as car replacement.

[Craig Zeng, CFO at Autohome]

[Foreign language].

[Translator]

In terms of the content measures to the challenges, we have three solutions. First, in terms of the content innovation. In recent years, Autohome have introduced a lot of short form videos and live streaming as well as the other new formats, so as to enrich our ecosystem of the content, while at the same time, we also build a lot of exclusive and unique IP that to have our IP ecosystem to differentiate from our competitors. The second is in terms of the user experience enhancement, we keep optimizing our website as well as app interface design, so as to offer more convenience to our users. Third one is in terms of the cooperation, cooperation channel expansion. We have incorporating with a lot of third-party media platforms so as to build the traffic matrix and so as to deliver win-win against the competition.

[Craig Zeng, CFO at Autohome]

[Foreign language].

[Translator]

So the second question is about dividend payout. Let me first review our dividend payout history. Over the past years, we have been keep enhancing the return to our shareholders. From 2019-2021, we actually distributed 20% of our net margin to the shareholders as a dividend. And in, in the year 2022, we also updated our dividend payout policy, with a fixed amount of RMB 500 million, which is equivalent to 28% of our net margin of the same year. And in December 2023, we keep amend our dividend payout policy and announce about RMB 1 billion dividend payout decision, which is enhance of, our dividend payout ratio to 50% of our net margin. So I think that, in the next three years, from 2024-2026. The annual dividend payout amount will be no less than RMB 1.5 billion.

[Operator]

Please remain on the line. Your conference will resume shortly. Please remain on the line. Your conference will resume shortly.

[Sterling Song, IR Director at Autohome]

Operator, the next question, please.

[Translator]

Thank you. Next question comes from the line of Xiaodan Zhang from CICC. Please ask your question.

[Xiaodan Zhang, Equity Research at CICC]

[Foreign language]. Thanks management for taking my questions, and my question is regarding your new retail model for NEVs.

[Xiaodan Zhang, Equity Research at CICC]

As Autohome launched the so-called Satellite Plan in the second quarter, so how should we think of your expansion plan going onwards? Thank you.

[Craig Zeng, CFO at Autohome]

[Foreign language].

[Translator]

Okay, thank you for raising this question. I think that since the launch of the first offline store in September 2022, now we already, actually our Space store already take roots in 28 cities in China, and then covering south, east, and the southwest as well as north part of China. And so far, you can see that our satellite store model already covers five cities, including Yueyang, Yiyang, Loudi, Xiangtan, as well as Zhuzhou. And since this is actually a new trial, and in the future we're going to have the similar trial from the different angles, and the store opening pace is quite consistent with our communication at the beginning of the year. Because the satellite store is pretty new model, and the major purpose is to cover more low-tier cities, so that our Space stores can have a better reach out and coverage.

[Sterling Song, IR Director at Autohome]

Okay, operator, that's the end of the Q&A session.

[Operator]

Thank you. I'll now turn the conference back to the management for closing comments.

[Craig Zeng, CFO at Autohome]

[Foreign language].

[Sterling Song, IR Director at Autohome]

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

[Operator]

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

Participants

Executives

• Craig Zeng, CFO
• Sterling Song, IR Director
• Tao Wu, CEO

Analysts

• Brian Gong, Internet and Media Research at Citi
• Ritchie Sun, Director of Internet Research at HSBC
• Xiaodan Zhang, Equity Research at CICC
• Translator