Ladies and gentlemen, thank you for standing by for Autohome's Fourth Quarter and Full Year 2017 Earnings Conference Call. At this time all participants here in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder this conference call is being recorded. [Operator Instructions] I would now like to turn the meeting over to your host for today's conference, Ms. Fang Liu. Please go ahead.

Thank you, operator. Hello, everyone and welcome to Autohome's fourth quarter and full year 2017 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 Mr. Min Lu, Autohome's Chairman and Chief Executive Officer; and Mr. Jun Zou, Autohome's Chief Financial Officer. After prepared remarks, Mr. Lu and Mr. Zou will be available to answer your questions. Before we begin, please note that the 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 the current expectations. Potential risks and uncertainties include, but are not limited to those outlined in our public filings with the Security and Exchange Commission. Autohome does not undertake any obligation to update any forward-looking statements, except as required under applicable law. The earnings press release in this call also includes discussion of certain unaudited non-GAAP financial measures. The 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 is being recorded. In addition, a webcast of this conference call will also be available on Autohome's IR website. I would now turn the call over to Autohome's Chairman and CEO, Mr. Lu.

Before I begin, on behalf of Autohome. I would like to thank all of our consumers, clients and the shareholders for your trust and the contribution to our continued success. We wish everyone a very happy and a prosperous New Year of the Dog. 2017 was the first full year in which we brought out our 4+1 strategy. And I'm very pleased to report today that it generated record results. Our media and the leads generation services revenues increased 31% and 34% year-over-year during the fourth quarter and the full year 2017 respectively. Volume [ph] as per [ph] net income during the quarter grew 74% year-over-year to RMB776 million representing a net margin of 44%. Full year 2017, we generated RMB2.2 billion in adjusted net income. I believe these strong top end, bottom line results demonstrated the effectiveness of our 4+1 strategy. In strengthening Autohome's market leading position and in driving our long-term sustainable growth and the profitability. As we head into 2018, we will begin executing the next phase of our 4+1 strategy to further strengthen the foundation of our business and sharpen the focus of our management team. As I mentioned in the last earnings call, our 4+1 strategy which we codenamed EV Structure in Chinese or 'Four Ways to Eat One Fish' refers to the four business pillars that will drive further growth momentum well into 2018. These four pillars comprise of our four media and leads generation businesses which are our key growth drivers and are supported by two new initiatives, our data product suites and auto-financing and the insurance business. These four pillars combined will endeavor us to better serve our users and clients. I'll now go over each pillar in some more detail to business provide some color on our future endeavors. The first…

Thank you, Min. Hi, everyone. As Min has already highlighted, we are very pleased to report another record quarter at a very strong 2017 result. Please note that the numbers I'll reference today are all in RMB. Net revenue for the fourth quarter decreased 13% year-over-year to RMB1.751 billion primarily due to the de-emphasis of our direct vehicle sales business. However for the media and the lead generation services combined net revenue increased 31% on year-over-year. Media services revenue once again outgrew the underlying auto sector, increasing 32% year-over-year to RMB969 million. The strong growth throughout 2017 demonstrates how Autohome continues to gain market share from its competitors due to continued traffic expansion, customized content and optimized product offering as well as brand leadership. Leads generation services revenue was up 29% year-over-year to RMB718 million. This increase was primarily driven by an increase in ARPU and our client base, which demonstrates how we continue to build trust among dealers by increasing sales lead volumes and enhancing conversion rates. Online marketplace revenues which mainly consist of commission based from our new car ecommerce in the financing business was RMB65 million. During the same last year online marketplace revenue excluding direct vehicle sales was RMB22 million. Cost of revenue decreased 66% year-over-year to RMB323 million mainly due to a decrease in cost of goods sold relating to direct vehicle sales. Sales and marketing expenses during the quarter were RMB507 million, representing a slight decrease of 2% year-over-year. This was primarily due to our continued efforts in enhancing customer content which result in flat traffic evolution cost compared with the same period last year. P&D expenses were RMB266 million, up 59% year-over-year. Again, this reflects an increase in R&D headcount during the past few quarters and is proof of our commitment to technology…

[Operator Instructions] the first question is from Liping at CICC. Your line is open. Please go ahead.

I've two questions here and the first question is related to your first quarter 2018 guidance. We noticed that the guidance there is impact of the direct vehicle sales as well as the new accounting standards. So what's the core business growth in next quarter, if we use the order convinced standards and my second question is about your new business. So what's your development on financing services and your target on this business for next year? Thanks.

[Foreign Language]

Actually as we explained in our earnings release, we started adopting new ASC 606 revenue recognition policy and all Chinese ADRs start to adopt this new revenue recognition policy starting from 2018. And if we were to report revenue on a growth basis like last year then you know our revenue guidance would be RMB1.345 billion to RMB1.375 billion and that is roughly a 25.3% to 28.1% increase. And now starting from this year we adopted policy and we report revenue on net off [ph] VAT basis and if we compare to that of the same significant net tax revenue last year then our gross rate will - 25.5% to 28.5% as we reported in our earnings. So giving you an example, now we will report actually a revenue net off VAT but the same VAT will be also deducted from our cost revenue and basically, we'll see an operating profit and net profit aligned that is going to be same as, if we report on a gross basis. But operating margin and net margin will be higher because now we have a smaller revenue base, after tax. And Liping sorry, your second question was?

On your financing service business, so is there any like new developments you can share with us? And what's your for example the target for this year, for example the loan balance or etc.?

[Foreign Language]

So actually as I've mentioned above financing is one of the pillars, one of the four pillars of the to eat the fish in four ways, so financing is very important for us.

[Foreign Language]

Last year we have done a lot of basic works with mainly with Ping An Group and the work we've done includes the design of a product and to put the procedures on the internet platform.

[Foreign Language]

And this year as we've seen that in the first quarter we have celebrated the first of all finance and in the years to come and in the times to come, we'll further promote our financial business.

[Foreign Language]

Actually the financial business is comprised of three parts, the first one before transaction, second in the middle transaction and third, after transaction.

[Foreign Language]

Actually before the transaction we have an independent transaction channel, this actually has little to do with transaction itself. It means that before buying a car some of the customers may have the financial demand so we can carry this part.

[Foreign Language]

Secondly in the middle of transaction we have two e-commerce platforms. The first is used car platform and the other is another platform.

[Foreign Language]

And the other is new vehicle platform.

[Foreign Language]

As I've mentioned we have already established the used car platform because our SaaS system has covered 300,000 second car dealers.

Over 30,000.

Over 30,000.

[Foreign Language]

And over this platform we provide the sourcing of car, leads of car and the merchant loan for the for the used car dealers.

[Foreign Language]

So this year I believe that this platform develops the transaction over this platform will also grow and we will also have more and more merchant loans, the consumption loans and the car insurance.

[Foreign Language]

And as for the new car platforms as I've mentioned we have already covered the four provinces and this year our target is to cover 20 provinces in China and over this platform our main focus is to provide those customers in the first and third tier cities in China where there are no 4S stores, to help them to buy cars.

[Foreign Language]

And we hope that as this platform grows the financial transaction over this platform will also grow.

[Foreign Language]

Market service platform. It's also needed to take some time so this year we will focus on the before and in the middle part. we hope that as our business grows the financial revenue will also contribute to the total revenue of Autohome.

[Foreign Language]

As a gentle reminder, each person only one question at a time. Each person only one question at a time. Our next question is from Hillman Chan at Citigroup. Your line is open, please go ahead.

So I have a question regarding the data product, could you shed more color on the adoption by OEMs and dealers in recent months and what's the FH contract size and also, how do we see this feedback from underlying on top of the existing sales and marketing budgets for that? that's my first question. And the second one is, also on the auto-finance, so what is the mix that we're looking at between Ping An and other third-party financial institutions for our consumer loan and automation in 2018. And could you help us to understand the current order size in the four provinces that we have expand the platform and that will be great. Thank you.

[Foreign Language]

[Foreign Language]

[Foreign Language]

Actually we have three kinds of dealer products one for OEM and the second for dealer and the third for user. The dealer product was launched at the second half of last year and now 4,000 dealers have bought our dealer product and our OEM product was also launched last year. it is called the Auto AI Cloud and it contains eight products in its series. I think it also takes more time to have more sales of our data products and this is also different from the medium service and we have to focus more on the R&D side to look at these data products.

We need to also focus on the R&D and marketing department of the OEMs because for the traditional media services we only deal with the marketing and the branding departments. Now we need to go to R&D department, but it takes a little bit more time it's - they are all big companies the procedure it takes a long time, but it's attractive to them, I think. [Foreign Language]

And also as for the user product, it have emerged in our applications, we will further strengthen these products so that our users can better experience in the selection and in the acquisition of car.

[Foreign Language]

And I also want to add that, apart from these standard products, this year we will have some major project data corporation and this year some of the several major projects will be launched and by doing so, it means that we will transform from the public cloud to the private cloud.

[Foreign Language]

And these are my opinions for the data product.

[Foreign Language]

[Foreign Language]

[Foreign Language]

Actually our cooperation with Ping An and other financial institution are going on ahead at the same time, but we have different cooperation with Ping An Group. For example, traditionally the financial institution find it difficult to sell their products over the internet.

[Foreign Language]

For example, now we're cooperating with Ping An Group and other financial institutions, what we do is redefining and redefining the products for example, now we're issuing the new kind of credit card. This card is different from the traditional card and this which means that if the users see and apply for this card over the internet all of the approval, the other procedures can be online, so the users does not needed to go to the physical site to finish all of these procedures. Otherwise the conversion rate will be very low. So to achieve this goal we still needed to cooperate more with our financial partners.

Just add to that, this is a Autohome brand card issued jointly with Ping Ag Bank and we're actually into streamline the process to actually eliminate offline face interview in branch office.

[Foreign Language]

And usually if we cooperate with the financial institution, it will not spend a lot of time in redefining and changing the design of the product and also changing the procedure and the standard of risk control. But since we have a lot of cooperation with Ping An and we're familiar with them, so we find it easier to do so in cooperating with Ping Ag in doing this thing.

[Foreign Language]

As I've mentioned we've covered the four provinces in China currently and I don't think the volume is big enough now, so this year our target is to expand to 20 provinces in China, as we do so the financial services will also grow.

[Foreign Language]

[Operator Instructions]. Next question is from Wayne Wang at HSBC. Your line is open. Please go ahead.

I have a quick question on the SaaS platform. And so it seems previously some other competitor also have similar products here, so could management add more color on our - on the - our products versus the competitor product what's our advantage? And also I would like to have a full quick follow-up on the data product. So it seems as Lu [Foreign Language] mentioned that, we were likely to have some project based data product corporation with some OEM. So how much would be the project size? Thank you very much.

[Foreign Language]

As for the SaaS they're for the used cars and they have been expanded to 30,000.

[Foreign Language]

It is true that some of our competitors have the similar product, but we mainly focus on our own advantage.

[Foreign Language]

The first thing is that we have the sourcing of used car, for example last year every day we have the sourcing of used car of 10,000.

[Foreign Language]

And also by the end of last year we have achieved about we have 40,000 leads for purchasing used cars.

[Foreign Language]

That's why the used car dealers are willing to cooperate with us because we have our own advantage.

[Foreign Language]

And now we're building the platforms for our business and we will also use more resources in Autohome to support the establishment of these platforms. And I hope that this year, every day we will have - first thing or secondly of used car and the purchasing leads of the used car will continue to grow.

The platform is already, so we will put more resources into this platform and then, we hope to increase the sources of used cars every day and the auto number of leads per day. [Foreign Language]

And also as I've mentioned for the high quality dealers, we will provide them with the merchant loans.

[Foreign Language]

And this year the loans grew very fast.

[Foreign Language]

By doing so we have formed a corporation ecosystem which as we say is empowerment and a win-win.

[Foreign Language]

So as we help the users, we'll also help the used car dealers to make the business easier, this is why they are willing to use or SaaS platform.

[Foreign Language]

This is my answer to SaaS.

[Foreign Language]

[Foreign Language]

[Foreign Language]

Actually the detailed number of the project remain secret now because this and I've mentioned these are private cloud, but what we're doing is that we're cooperating with the OEMs to further expand the product and to expand the client base because this is also one of our new missions that is to further promote the development of auto industry in China. Thank you.

The next question is from Eddy Wang at Morgan Stanley. Please go ahead.

So I've a quick follow-up on the used car dealer platform business. actually as you mentioned as the coverage of number of dealers grow significantly from last earning call, the number in last earning call you mentioned. So my question is that, where we're talking about the opportunity in the used car market. Do you see earning very strong gross momentum in this year? and is that the reason you have been going grow this business prior to business. because in my view, I think we have been talking about used car business for years but the relative the compare with new car in terms of sales volume value used car is still relatively small. So can you elaborate a little bit more on this business and in terms of competition versus the new car business? and I also have a very quick follow-up on the lead gen business. So we see that the average revenue per payer, dealer is actually in the fourth quarter last year is around 12%. It seems lower at the end versus three quarter last year. so is there anything related to the reason that we increased the used car dealers or the new car sales dealers in the lower tier cities, is this the reason because of that or is any reasons lead to this relatively low the average revenue per paying dealers. Thank you.

[Foreign Language]

Actually in Autohome we have been exploring the used car business and now we have established the platform in our business mode.

[Foreign Language]

As I've mentioned the motto in our platform is a win-win mode. We're not directly involved in the buying or selling of a car.

[Foreign Language]

We're just providing that platform for our partners to complete the transaction.

[Foreign Language]

There are a lot of different things and different development in the second car market.

[Foreign Language]

As for Autohome we do not invest a lot in the large scale advertisement.

[Foreign Language]

As I've mentioned our advantage is that in the used car market we have a lot of sourcing, a lot of leads and also offline partners.

[Foreign Language]

So I think our advantage over the platform is B2B to B2C.

C2B to B2C.

C2B to B2C

[Foreign Language]

And this year we will do more in the used car market, actually also inside of our team, we have indicators for our business so I think and I also hope that we can recover to achieve our indicators.

[Foreign Language]

Also as we have question related to the dealers, actually I think they're not in conflict the 4S store because we're promoting our business in the cities where there are no dealers and we also have.

No, 4S.

No, 4S, of course so we're also having a lot of opportunities with the dealers, a cooperation with the dealers.

[Foreign Language]

Yes, Eddy to answer your second question actually in the fourth quarter you see the ARPU grow actually at a slower pace compared to third quarter that's mainly because we're - actually have a slight decrease in dealer advertising because you know the dealer advertising we actually discontinued are mainly offline advertising and offline trade shows that would generate lower margin compared to online marketing, online promotion for dealers. And in the fourth quarter, we believe we have already had a very strong quarter with very decent growth already and we are purposely actually decreasing our effort on offline promotion and advertising for dealers.

Thank you.

[Operator Instructions] next question is from Thomas Chong at Credit Suisse. Please go ahead.

Thanks management for taking my questions. I've two quick questions. Can management provide us some guidance in terms of the headcount by the end of 2017 and what's our expectation for 2018 because it seems that we have lot of initiatives going on just wanted to see if there will be a significant increase in headcounts? And my second question is about the traffic for the mobile app traffic growth. Because I see we're talking about 39% year-on-year for Q4 and actually I noticed that it's more on accelerating trend. Can management talk about why we did so well in our traffic and how AI actually helps on this front? Thank you.

[Foreign Language]

Actually last year the - our headcount in Autohome is 4,097 actually when I was in Autohome in 2016 the headcount was 4,000 and we have downsized 400 to 500. But last year as our business grown, our headcount was over 4,000 once again but we have made sure that growth in revenue - surpassed the growth in headcount.

[Foreign Language]

So that we can make sure that our company can have sound development and more importantly we have improved our collaboration across different department. Every week we have a lot of meetings and conferences among different departments and our Autohome can unite as one team.

[Foreign Language]

And as for your second question, it is true that last year we had a sound momentum on the mobile traffic.

[Foreign Language]

And this year we will make sure that, these momentum will be remained. We are doing several things to achieve this target. The first one is to increase the content. For example, we have launched the new energy channel. We're also going to launch the channel for used in March and also the channel for tourism and at the same time as for PGC we have now over 6,000 sales media writers.

[Foreign Language]

And secondly it's about the selection and buying over cars. We're renewing the product in this regard, so that we can help our customers to have better experience in selecting and buying cars.

[Foreign Language]

And the third part is about social activities. In previous we have the largest forum on these areas and now we're building the ecosystem of the car users.

[Foreign Language]

So this offline network connects the car users, we have the common habit and they can offer suggestions and they can also get some service, so we have paint [ph] a lot of hope on these offline network.

[Foreign Language]

And the first part is the gaming part. now we have launched the game card, the Auto City and in this game that young users and consumers can come to this game to complete reading, complete selection buying of a car.

This Auto City is not a game, but it's game-like, like a user interface that with different appearance. [Foreign Language]

And in this Auto City we have introduced series of games and the first series is the car games.

[Foreign Language]

And the fifth part is the AI, called the EV structure [indiscernible] it wants to use the voice recognition to help users to finish different tasks.

[Foreign Language]

And the sixth part is that we're exploring the application of new technologies.

[Foreign Language]

To summarize, we hope that we want to put more energy and vigor and vitality into the application and also websites of Autohome. So that customers can have a better experience of watching, selecting and buying the car.

And even in the future, when they use the car, they can come to our website, come to our app. [Foreign Language]

So actually we have put a lot of resources in the efforts in the user.

[Foreign Language]

So this is my information on the user side.

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

We appreciate your support and we look forward to updating you on our next quarter's conference call.