Ladies and gentlemen, thank you for standing by for Autohome’s Third Quarter of 2018 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 call is being recorded. If you have any objections, you may disconnect at this time. It is now my pleasure to introduce your host, Joyce Tang, Autohome’s IR Senior Manager. Ms. Tang, you may begin.

Thank you, operator. Hello, everyone and welcome to Autohome’s third quarter 2018 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 CEO; Mr. Haifeng Shao, Autohome’s President; and Mr. Jun Zou, Autohome’s CFO. After the prepared remarks, Mr. Lu, Mr. Shao 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 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 does not undertake any obligation to update any forward-looking statements except as required under the applicable law. The earnings press release in this call also includes discussions 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 will now turn the call over to Autohome’s Chairman and CEO, Mr. Lu.

Thank you, Joyce. Welcome everyone and thank you for joining us today to discuss our third quarter 2018 results. I’m pleased to report another strong quarter in which revenue, excluding direct sales increased 35% year-over-year to RMB1.89 billion, which outpaced overall market growth despite the relatively softer macroeconomic environment in China. Please allow me to start with a quick review of our successful and ongoing 4+1 strategy which is to transform Autohome from a content led vertical media platform to an automotive eco-platform based on the data and technology. As data and technology is the core infrastructure, over the past few years, we have made aggressive investments spanning a wide scope of hardware, software and talent in order to aggregate vast amount of data from the entire ownership cycle and to seamlessly link and integrate these data from all of our business result units with more adverse eco-driven. As a result, we innovated a highly precise segmentation in terms of user, value, need and behavior, we call UVNB model. Thus, substantially enhanced the intelligent recommendation based on people like ply [ph] behavior profiles and next best action, NBA decision making. These adverse data capabilities enabled us to commercialize a series of successful data solutions for OEMs and dealers like [indiscernible]. Currently, we have started to further monetize our data capabilities with the development of intelligent total marketing solution based on the UVNB model, capable of differentiated advantages in accurate user segmentation, dynamic customization, decision outreach, efficient delivery and consistent performance. As a strong testament, we have completed eight projects for OEMs which have all been very successful. For example, one of these OEMs has significantly increased conversion at each stages throughout the online sales funnel, of which the followers increased by 192%. The interest to the users increased by 36%.…

Thank you, Min. Hi, everyone. As Min has already highlighted, we are very excited to report another solid quarter. Please note that as with the prior calls, I will reference RMB only in my discussion today. Net revenue for the third quarter was 1.89 billion, representing a 35% year-over-year increase, excluding direct sales. Of which media services revenue once again outperformed the underlying auto sector, increasing 20% year over year to 901 million. Despite perceived headwind in the physical auto market, Autohome continued to be auto makers’ partners of choice and continues to gain further share from their budgets. Lead generation service revenue increased 20% year-over-year to 739 million, primarily driven by ARPU increase and expanded dealer client base, which is a strong evidence that we continue to build confidence among dealers. Online marketplace and other revenue increased by 620% annually to 248 million. Excluding direct sales, a significant part of this revenue increase was generated from auto financing and data solutions, so we are very pleased with increasing market demand from these new initiatives. Moving on to costs, the cost of revenue decreased slightly by 3% year over year, to 215 million. If excluding the cost of direct sales from third quarter of 2017, the cost of revenue would have increased by 4%. Now, for operating expenses. Sales and marketing expenses in the third quarter were 677 million, compared to 422 million in Q3 of 2017, mainly because of increased costs in offline execution and branding expenses. Product development expenses were 297 million compared to 207 million in Q3 of last year. Again, this reflects our commitment to technology advancement at our professional talent. Finally, general and administrative expenses were 100 million compared to 87 million in Q3 of last year. Overall, we delivered an operating profit of 698…

[Operator Instructions] Your first question comes from CICC by Liping. Your line is now open.

So I have one question related to the industry and your co-business. So with another new car sales data released in October, actually, [indiscernible] next year’s industry growth. So what’s the management view on that? And how will be our co-business growth momentum? And in addition, I’d like to know what will be the growth, what will have the most growth potential in our new business initiatives. Thank you.

[Foreign Language] So let me answer the question in Chinese. [Foreign Language] Well, if you look at this year, on the latter half of this year, for a few months, we do see an active growth for the auto car market. [Foreign Language] This is very closely tied to the macroeconomy. [Foreign Language] So that is why for next year, we do believe that we are quite prudent in terms of outlook of the auto market next year. [Foreign Language] We foresee that it would be quite difficult for the market to grow as robustly as a few years back without stimulus policy and stimulus supported policies addresses this market. [Foreign Language] However, for Autohome, we’re still very confident in our development. [Foreign Language] Well, I would like to elaborate more on two angles. One is from our internal objectives and other is from the OEMs. [Foreign Language] We’re going to continue to increase our wallet share. [Foreign Language] If you look at the number of the leads we generated for the latter half of the year, it’s increasing. [Foreign Language] And also, we’re very happy to take the feedback from the OEMs. They are telling me that the conversion rate from the leads to sales doubles the market average. [Foreign Language] So under such above measurement scenario, we believe our market share will continue, our wallet share will continue to increase. [Foreign Language] And secondly, we just launched our smart marketing campaigns. [Foreign Language] Just two days ago, in the Wuzhen city of China that hosted the International Internet Conference and we held a sub-conference, we discussed to a lot of OEMs. [Foreign Language] In terms of this smart or intelligent marketing, we already completed 8 campaigns and we’re going to receive 3 more. Our total will be 11.…

[Operator Instructions] Your next question comes from Eddy from Morgan Stanley.

[Foreign Language] My first question is about the transaction business development and you mentioned last week in the Open Day that it will accelerate the transaction business development, especially on the back of intelligent market. And second question is about the lead generation and media service, the core business. Is there any preliminary view regarding the ASP lift of the lead generation package to dealers as well as the OEMs, the budget for next year.

[Foreign Language] Thank you, Eddy for the question. Now, let me take this question. Talking about CPUV and CPS, I already elaborated on the CPS model before. [Foreign Language] So the CPS business, this is real transaction business or trading business. [Foreign Language] For the CPUV, actually, it’s based on the OEM’s request. We actually would count the single unified lead generated may be multiple person. We will count the people who invest in the store and consider them as single leads, it’s like a combined leads. [Foreign Language] So based on the already existing eight project and the coming three projects, altogether 11 projects, we all charge OEMs based on the CPUV model, the unique visitor redundancy model. [Foreign Language] So this is actually a new element added to the existing business model of our [indiscernible]. [Foreign Language] So this business, the revenue would be booked under the traditional business. [Foreign Language] However, this business not only contributes to the traditional business revenue, but also bring up a lot of new business, like the data business. [Foreign Language] As I said, during the opening day, with that, the OEMs do need the clear data on each steps for the smart market intelligence to bring one of the leads for them and for each of the steps that would have a precise targeting of the customer. [Foreign Language] Because the CPUV model is already proven to be successful, so next year, we are going to massively roll it out with all our strategic partners. [Foreign Language] For the CPS, we would create them as the online order. [Foreign Language] For the users, after they place orders, they have to put some down payment or security payment and this is not refundable. [Foreign Language] In this way, with the down payment…

Thank you. Your next question is from Monica from Credit Suisse.

[Foreign Language] So I have one question about, so this year, we have launched a lot of initiatives and they have been making very good progress and next year, I understand we will continue to launch more products and new services and just want to understand what is our key investment areas for next year and the margin trend for next year?

[Foreign Language] I would like to invite the CFO, Mr. Jun Zou to answer the question. I may add up more comments.

Monica, thanks for the question. I guess, for the next year and on, we will continue to invest in our new business, especially with data financing and transaction and now, we have implemented very effective cost control programs on our core business, which help us to enjoy economy of scale in core business and we are also rolling out very high margin new business such as our big data and smart services to OEMs and dealers. And now, we are building a trading and financing marketplace in which we are actually a sales – we are an agent and do not take any inventory or balance sheet risk. So, those businesses will be a high margin business in the long run, of course. In the short term of course, as we mentioned before, we may share some of those income or commission with partners of ours, such as dealers, maybe consumers that are actually going to start to utilize our platforms. But overall in the long term, we think we’re positive on the margin trend.

[Foreign Language] Let me add a few more comments. Just recently, we have launched our new strategy. [Foreign Language] We’re talking about how can we leverage on our users, customers and try to build a smart platform as a eco platform for the whole auto business. [Foreign Language] Ever since our new team get into the business in mid of 2016, we have experienced it in a few stages. [Foreign Language] Stage 1, we call it B stage, which is big data stage. [Foreign Language] We invested a lot of resources in building the infrastructure for the big data. [Foreign Language] And also based on this platform, we developed a lot of data driven products. [Foreign Language] All these data products can be tools for OEMs and dealers to do analytic works. [Foreign Language] Now, we get into stage 2, which is we call it AD stage. [Foreign Language] The A means AI, B means big data. So it’s AI plus big data stage. [Foreign Language] We come up with marketing solutions. [Foreign Language] Which is intelligent marketing. [Foreign Language] We actually moved one step ahead, because last year, we just offered big data, which is a tool and this year, we launched this solution which is intelligent marketing solution. [Foreign Language] Now, we are thinking whether we can launch the third stage, which is ABC stage. [Foreign Language] Which is AI plus big data plus cloud solutions. [Foreign Language] We want to leverage on the OEM data, Autohome’s data and data to establish a private cloud. [Foreign Language] So we can leverage on this private cloud to offer a comprehensive solution for the OEMs. [Foreign Language] So let me start on these three sources of data, we can comprehensively offer OEMs better upgrading on this RMB on its sales and marketing and also post sales and services. [Foreign Language] We already have the initial ideas. The next step we’re going to put on the resources and make this achievable. [Foreign Language] That’s all. Thank you.

Your next question is from Hillman from Citigroup.

[Foreign Language] So regarding the OEM advertising and dealer subscription business, how do we see the competition from them, given that the fast rising the AU enhanced share of that?

[Foreign Language] Let me echo on this question. Firstly, competition is in there and it’s actually, you can find the competition any time anywhere. [Foreign Language] We believe competition is benefiting the whole business to further develop. [Foreign Language] I believe no matter who want to be successful in this auto vertical market, the magic formula is one we have mentioned, that is the number of leads multiplied by the conversion rates. [Foreign Language] We believe that the Autohome do have a lot of advantages and the competency over this regard. [Foreign Language] After I get into the Internet business for years, I did identify that the 2B business and the 2C business, the DNA matters differently and differs differently. [Foreign Language] For example the 2C’s gaming business, if you get one game right, you can quickly grow and expand. [Foreign Language] But this model doesn’t fit into the 2B business. [Foreign Language] The 2B business needs a top level strategy designing and it need to put a lot of concentrated resources. [Foreign Language] Only in this way can you deeply serve your customers well. [Foreign Language] And also, it takes time to establish the business ties with your 2B customer and that business penetration rate can never be achieved overnight. [Foreign Language] For example, this year, when we launched the data service business, it’s quite difficult to do the marketing, because for 2B business, the decision making process can be very long and there are lot of cycles along the decision making value chain. [Foreign Language] And also for the 2C customers, the auto sales is very different from the fast consumption goods. [Foreign Language] For example on the Double 11’s day, if you place order on the fast consumption goods, it will take you only a few seconds…

Your last question comes from Wendy from Macquarie.

[Foreign Language] My first question is a follow-up on your agency private cloud strategy. We all know that cloud business for most of the Internet companies is highly CapEx since loss making. So just wonder with your collaboration with OEM and also how will be the cost structure for your future cloud business? And second you gave a great example about how the leads conversion can improve by almost three times with intelligent marketing campaigns. So I just wondered, does that imply the price increase potential for the leads, can be like 2 to 3 times in the longer term. And lastly, regarding the light asset business you’re going to aggressively rollout next year, how should we think about pricing strategy of how you will determine the CPS, will it be backed out from the magic formula you just mentioned, the leads multiplied the commercial rate.

[Foreign Language] Thank you. Let me answer the first question regarding the cost of the private cloud. [Foreign Language] In terms of the cloud technology, we are leveraging on Ping An’s Technology. [Foreign Language] They already have quite matured cloud platform. [Foreign Language] Actually what we are focusing more is not like the small players or small OEMs, they put a lot of attention on hardware like the service, et cetera. However, we pay more attention to the software side, for example, the data, how can we pull all the data together and make it effective. [Foreign Language] We are now talking with OEMs, because we know it’s collective efforts for everybody is joining hands together, just like we did in the smart intelligent marketing. [Foreign Language] On the second question, although I give example of how can we enhance the leads conversion rate, but actually different product differs and dealers differ from each other and OEMs differs from each other. So it’s not necessarily translating into how much more we can raise up the price. [Foreign Language] But one thing is for sure, we would charge by the CPUV model. [Foreign Language] Now, the last question regarding the pricing on the CPS model, this is even more complicated because it depends on whether it’s dealership model or lower website model. So it’s different. [Foreign Language] For example, if we are working with dealers, we would never hurt the dealers’ benefits or their interests. So in this way, otherwise, they would not collaborate with us. [Foreign Language] And also for the secondary website, in the lower tier cities, because we have to take into consideration of the logistics cost and auto cost in the fees. So the fee modeling would be different. [Foreign Language] But roughly speaking, you can make your calculation by utilizing the conversion rate. [Foreign Language] We have to negotiate with OEMs one by one, because each of them differs from each other.

Thank you. Due to limited time, I will now turn the conference back to your management for closing comments. Please continue.

Okay. Thank you very much for joining us today. We appreciate your support and we look forward to updating you on our next quarter’s conference call in a few months’ time. In the meantime, please feel free to get in touch with us if you have further questions or comments. Thank you.

Thank you. Ladies and gentlemen, thank you all for your participation. You may all now disconnect.