Ladies and gentlemen, thank you for standing by for Autohome's Third Quarter 2021 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 Sterling Song [ph] Autohome's IR Director. Mr. Song, please go ahead.

Thank you, operator. Good evening. Hello, everyone. I'm Sterling Song. Welcome to Autohome third quarter 2021 earnings conference call. Earlier today, Autohome distributed its earnings press release, and you may find a copy on the company's website at www.autohome.com.cn. On today's call, we have Chairman and Chief Executive Officer, Mr. Quan Long; Co-President, Mr. Haifeng Shao; Chief Technology Officer, Mr. Bibo Xiang; Vice President, Mr. You Zhou and Finance Director, Ms. Hong Jiang. After the prepared remarks, our management team will be available to answer your questions. Before we begin, please note that discussion today will contain forward-looking statements made under the Safe Harbor provisions of the US 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 Securities and Exchange Commission. Autohome doesn't 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. Our 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 call is being recorded. In addition, a live and archived webcast of this earnings conference call will also be available on Autohome's IR website. I will now turn the call over to Autohome's Chairman and CEO, Mr. Long.

[Foreign Language] Thank you, sorry. Hello, everyone, and thank you for joining us today. [Foreign Language] In the third quarter of 2021 chip shortage and a rising raw material prices continued to impact the auto industry. The production cost of auto manufacture increased by more than 10% year-over-year and the marketing related targets were significantly reduced several rounds of power rationing across multiple regions in China also affected manufacturing including auto manufacturer, production of sales of new TV each fell 12% year-on-year in the third quarter. As a result Autohome is facing great challenges. Despite this headwind, we delivered total revenues of one RMB1.76 billion for the quarter and the revenue from our online marketplace and other business increased by 2.5% year-over-year accounting for 32% of total revenue. In addition, our adjusted net income attributable to Autohome, Inc in the third quarter was RMB583 million with adjusted net margins of 33.1%. On November 18, 2021, Autohome's Board of Directors authorized a share repurchase program under which the company made repurchase up to $200 million with American Depositary Shares over the next 12 months. The company plans to fund repurchases from its existing cash balance. [Foreign Language] First let me summarize the main progress we have achieved in this quarter in terms of speed and traffic, according to statistics from QM, the number of average DAUs were accessed by mobile website, primary app and the mini-apps grew to 43.87 million in September, representing a 12.3% increase year-over-year and topping the automotive media vertical. Looking at our user compensation, the proportion of active user using mobile phone priced about RMB5,000 was 37% much higher than the competing platform or industry average indicating the strong purchasing power of Autohome users. [Foreign Language] During the quarter, affected but decline in the auto market, our…

Thank you Mr. Long. Now, let me take you through the key financials for the third quarter. Please note that as with the prior calls I will reference RMB only in my discussion today unless otherwise stated. Net revenue for the third quarter were RMB1.76 billion, from the first half media services revenue scaling at RMB434 million. Leads generation services revenue was RMB768 million and the online marketplace and the other revenue increased by 2.5% year-over-year to RMB561 million primarily driven by the consolidation of TTP. Moving on to the cost, cost of revenues was RMB281 million compared to RMB260 million in the third quarter of 2020. Gross margin was 84.1% in the third quarter compared to 89.2% in the same period last year. Turning to operating expenses, sales and marketing expenses in the third quarter was RMB712 million compared to RMB979 million a year ago. The decrease was primarily due to the reduction in promotional spending and the continuous product control. Products and development expenses were RMB364 million compared to RMB349 million in the third quarter of 2020. Finally, G&A expenses were RMB111 million compared to RMB140 million in the third quarter of 2020. Overall, we delivered operating profit of RMB365 million in the third quarter compared to RMB744 million in the corresponding period of 2020. Adjusted net income attributable to Autohome Inc was RMB583 million in the third quarter compared to RMB902 million in the corresponding period of 2020. Non-GAAP basic and diluted earnings per share for the third quarter were RMB1.15 and RMB1.15 respectively, compared to RMB1.89 and RMB1.88 in the corresponding period of 2020. Non-GAAP basic and diluted earnings for ADS for the third quarter was RMB4.61 and RMB4.61, respectively, compared to RMB7.55 and RMB7.52 in the corresponding period of last year. As of September 30, 2021, our balance sheet remained very strong with cash, cash equivalents and short-term investments of RMB19.18 billion. We generated operating cash flow of RMB567 million in the third quarter of 2021. With that, we are ready to take your questions.

Thank you. [Operator Instructions] The first question is from Thomas Chong at Jefferies. Please go ahead.

[Foreign Language] I'll translate by myself. My question is I want to know about the competitive landscape in each business segment. Thank you.

[Foreign Language] Thank you for the question. Actually, according to the statistics from QuestMobile the number of daily DAU, of our access to mobile websites and also primary app and mini app grow to 43.87 million in September, representing 12.3% increase year on year. Actually among those, especially for those active users who actually are using mobile phones priced about RMB5,000 was 37%. Actually comparing that number with our peers, our major competitors' that number was only 20%. The industry average was only 15%, which indicate that our user is more high end and actually their purchasing power is stronger. While, according to the competitive landscape, maybe somebody will say, our competitors, they have a mother company, which is Tencent and ByteDance. Actually, our mother company, Ping An Group, was very capable. If for example, let me quote with you with a few numbers. For Ping An Group, we have 640 million Internet users and 210 million financial service users; out of that, we still have 60 million auto insurance of Ping An and 30 million the credit card users which are also the car owners of Ping An Bank. So, actually leveraging our Ping An Group's large and vast customer base, we actually can further grow our Autohome's business. We also expanded into the EV and renewable energy and UV business, as well as the live streaming and live broadcasting business. We also offered a lot of, for example, motorcycle car model library and also together with the live streaming and the live broadcasting business, we are attracting more and more users, especially the young users. Now, let me turn to [indiscernible] take more of your questions. Thank you.

[Foreign Language] I would like to share with you my outlook over the next 24 months, after market competition.

[Foreign Language] Now, let's look at our traditional business first. We believe that the traditional business actually would transform from quantitative based to qualitative based, which means the driver would be quantity, then transform into quality. The OEMs and the dealers would pay more attention to the quality of the data. For example, the effectiveness and the conversion rate of lease. In terms of this, Autohome is absolutely number one in the vertical auto media industry.

[Foreign Language] Now, in terms of the advertisement product perspective, we believe the advertisement with the transform from the exposure type to more interactive and immersive type. We believe that the leads in the future will be more direct to link him with the customers.

[Foreign Language] Now, let's look at the new business. We have three major piece of the new business. One is data business, second is NEV, now third one is used car. Now, let's look at the data business, for the big data we believe there's one thing which is quite a momentum, and it's for sure that is the digital transformation of OEMs under the dealers. This is for sure, and they would accelerating the whole process to go to digitalization. Comparing with our competitors actually, we are an early bird in the vertical media industry of the auto and compared with other competitors which are Internet players like the Baidu, Alibaba and iFly actually, we have better foundation and the more solid foundation -- growth companies. Actually, we have larger volume of the data because we accumulated the data ever since 2016 and secondly, we have did a great job in creating the data, classifying the data, and we import and seed our data into our models, which make our models more valid and more relevant and more smart. So, in this way, we have better results and effectiveness over our competitors in terms of the data business.

[Foreign Language] Now let's look at the NEV business. Actually, we already account for more than 50% of the market share in the NEV business. Looking into the next two years, we believe that the OEMs - their biggest challenge is how to maximize and enhance their sales under direct sales model. So for vertical media players if they don't transform their business and model - and their service model that will be a big challenge for them, plus we are already in the leading position, because we already promoted and also boosted the transaction and the sales in the NEV market. So, in this way we can help those OEMs to achieve more success under the direct selling retail model.

[Foreign Language] Now, let's comment on the used car business. Actually used car is a big market in China, but it's very much segmented. There is no giant player who dominates this market because there are so many small players. It's so much segmented. In terms of the B and the C on the B2B side and C2B side, lack of trust is the major challenge.

[Foreign Language] Actually in terms of the yield of cars -- our net combiner is 58.com. However, we are more successful in promoting the transaction because we had effectively boosted the transaction and in terms of the trading and transaction and auction process, we are more advanced comparing with 58.com.

[Foreign Language] Actually, in terms of the used car business, leveraging on Ping An Group's massive resources, one of our benefit and our advantages is that we can maximize our source of models -- the used cars. If we can monopoly the source of the used cars, and we can very quickly be leading the second player in the market by getting into the B2B model. In this way, we will be in the leading position and we actually is already in the leading position. And in terms of dealing with used car dealers -- used car dealers, currently we're working with more than 50,000 used car dealers and our target is to grow this number to more than 90,000. Currently, it's 50,000 and we're going to expand in 90,000 used car dealers. In this way, we can maximize our source of the used cars and we can boost the transaction to ensure we will be in the leading position in the used to car auction market.

Our next question will be from Brenda Zhao at CICC. Please go ahead.

[Technical Difficulty] Sorry to interrupt Ms. Brenda. It seems like you have a really bad signal. So can you please readjust and ask your question again? [Technical Difficulty] Sorry, sorry, everyone. Participant Brenda is having a bit of technical issues at the moment. Maybe we'll have her back later. Now, let's move on with next question was from HSBC, Ritchie Sun. Please go ahead.

[Foreign Language] So I'll translate question myself. So recently, there were some news talking about Ping An potentially selling Autohome's stake, can management respond to that and how do we see Ping An's involvement into Autohome's strategy and sort of the importance towards Ping An, how does it change so far? Thank you.

[Foreign Language] Actually, my comment is, rumor is just a rumor, there's no sound evidence. And internally, we haven't heard any things similar to what you quoted. We haven't heard any news like that. Actually, if you look at it, Autohome's shares, the share value currently is undervalued, the share price. Actually for Ping An Group and Autohome, we had very frequent and timely as well as routinely discussions about Autohome's business and also this morning, we just hold an internal meeting talking about Autohome remains to be one of the core part of the auto ecosystem of the Ping An Group and it will be in the future. So, Ping An Group attach great importance to support Autohome's development. Thank you.

Thank you. And your next question will be from Brenda Zhao at CICC. Please go ahead.

[Foreign Language] Thanks, management for taking my question. I have two questions here. First, could management share the view of 4Q and next year market outlook when the core business revenue growth is expected to recover? And next question is related to the customer end strategy, what the company's strategy -- the new emerging business model, such as live streaming? Thank you.

[Foreign Language] Well, actually to answer your question, firstly, in terms of the short supply of the chips in auto business, on the optimistic side, we believe net in Q2 the situation will be eased and for the later half of the next year, you can see that the whole market would be turned over. Actually for this year, Q3 and Q4 in terms of the new car sales, we would call it the darkest time -- the darkest hours. We believe this situation will be eased in the next Q1 and we believe the new car sales would go up next year in Q1, maybe it would be growing by 4% to 5%, so it would be middle single digit and I think it would be comparable to the growth rate of 2019.

[Foreign Language] Now, in terms of the live streaming business, actually we have to distinguish for our live broadcasting and the live broadcasting while live selling of the vehicles. Actually, in terms of live streaming and the live selling of the vehicles, we do see there are lots of discussion about that. However, the real sales is still very low because auto sales is very complicated transaction, it cannot easily be completely done online. So actually, we are expecting that only live streaming is the area there will be more new ways to we would see more way to be more interactive in the future. Actually, tomorrow would be the Guangzhou Auto Show and we would be hosting the seven hour live streaming campaign, which is quite innovative live streaming the activity. So we welcome you to join us for tomorrow's live streaming. Thanks Liping. We can turn to the finishing part, thank you. Operator?

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

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