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.

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.

[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…

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

[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.

[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…

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

[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?

[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.

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

[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?

[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.

Our final question comes from Brian Gong from Citi.

[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?

[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.

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

[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.

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