Ladies and gentlemen, thank you for standing by for Autohome’s Second Quarter and Interim 2022 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 objection, you may disconnect at this time. It is now my pleasure to introduce your host, Sterling Song, Autohome’s IR Director, Mr. Song. Please go ahead.

Thank you, operator. Hello, everyone. I'm Sterling Song. Welcome to Autohome’s second quarter and interim 2022 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; and Chief Financial Officer, Craig Yan Zeng. After our prepared remarks, our management team will be available to answer all 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 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 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 for opening remarks. Please go ahead, Mr. Long.

[Foreign Language] Thank you, Sterling. Hello, everyone. This is Quan Long, Chairman and CEO of Autohome. Thank you for joining us today for our second quarter 2022 earnings conference call. We are pleased to report a strong operational performance in the second quarter of 2022. Our total revenues for the second quarter were RMB 1.73 billion and adjusted net income attributable to Autohome was RMB 472 million with adjusted net margin of 27.2%. The challenging macro environment and particularly, the pandemic upgrades in multiple cities in China in Q2, has impacted the supply chain and sales in the automotive industry. Although the market began to recover in June with passenger vehicle sales nationwide increasing by 22% year-over-year, the overall passenger vehicle sales volume fell by about 10% in the second quarter. Against the backdrop of macro headwinds, our solid overall performance clearly demonstrates our strong growth momentum, and we achieved substantial sequential growth in operating results in the second quarter and continued to maintain good profitability as well as high profit margin level, a testament to our ability to navigate evolving market cycles. COVID-19 resurgence repeatedly affected the Chinese auto market during the quarter. Despite this, the automotive industry remains a key pillar of the national economy with cars updating strategies in people's lives. The industry typically has a long life cycle, and there is tremendous potential as China's automotive consumption continues to upgrade. Autohome has also constantly adjusted its business model, expanded its business boundary and launched more new products and services during the pandemic to address customers' pain points and meet their demands. We have continued to empower customers, keeping those commercial contacts with them and have gained their trust and appreciation. Bolstered by steady operations and the solid business fundamentals, Autohome outperformed the wider market in the first half of this year. In the second half, as China's automotive market quickly revamped aided by the implementation of various favorable policies, Autohome will continue to enhance its performance and deliver satisfactory results to the market. With that, I will now turn the call over to our CFO, Craig Zeng, for a closer look at our second quarter operating and financial results.

Thank you, Mr. Long. Now, I'd like to give you an overview of our second quarter highlights. During the second quarter, we continue to augment our private entities by building our online test align, covering more users across various scenarios to accelerate traffic growth. According to QuestMobile, Autohome's aggregate average daily users grew by 8.1% year-over-year to RMB 47.63 million in June. User composition-wise, the proportion of our high-value users utilizing smartphones was over RMB 5000 [ph], 37%, surpassing that of all our competitors, which demonstrates the value of our user traffic. Furthermore, we continue to diverse our content ecosystem and executed our video-based strategy. To this end, we launched regular cloud auto shows and our brand-new EV car model database to expand our product service and offerings, providing a wider range of prices and a better experience for our customers. During the first half year, its response to the pandemic reserve we proactively helped more than 300 national and local online auto shows covering over 70 million people throughout China. Meanwhile, we also initiated our safety to store campaign, our new promotional model empowering users to safely review and buy part during the pandemic, while also helping dealers, clients increase sales and upgrade the experience they offer users. Going on to the full year, with respect to new business, our digital products have gradually penetrated the market since their launch covering over half of all mainstream automakers in China. Furthermore, we achieved double-digit year-over-year growth in all of our dealer digital products, key indicators. Our energy business also continued to improve with revenue growth rates accelerating and still outperforming the average market level. The ecosystem synergies we are building between Autohome and Ping Group are progressing according to the plan and we continue to leverage our unique advantages to…

Thank you, management. [Operator Instructions] Our first question is Robin Leung from Daiwa. Please go ahead.

Hi. Thanks management for taking my question and congratulations on a solid set of results. Could management gives us some color on the auto market trend in second half of this year? And how the impacts from the government stimulus policy and chipset supply situation affects auto supplier willingness to allocate their marketing budgets? Thank you. [Foreign Language]

[Foreign language] Let me take this question. I'm the president of Autohome. My name is Long Quan. So, actually your question covers two parts. The first part is about the auto market. The second is about the chip supply. Why is this a case? Actually starting from March, we can see that Shanghai and Changchun, they were under very serious lockdown. Shanghai and Changchun both are very important to car OEM cities. So, that's why in April, you can see the car retail data dropped by 35%, out of the whole sales. In May, the number dropped by 16.9%. So roughly speaking, in the second quarter the retail market for the passenger car really declined a lot. As you know, the auto consumption accounts for a very important pillar industry for the consumption market in China. It accounts for about 10% of the national total retail consumption. So, that's why the government starting from April adopted a lot of stimulus policies to boost its auto market. So, that's why we can see a lot of large consumption policies has been released. So, luckily in April, the State Council released -- opinions on the policies -- boost and release the consumption power in auto markets. And actually in May, the government had cut a lot of tax, especially the purchasing tax for the cars. And we -- in April -- and actually starting from April, we still see a lot of government associated with other agencies. In July, the Ministry of Commerce, starting with 17 departments, have released aggressive consumption-boosting policies to further boost the market. As a result, we can see in June, the market consumption had already increased by 22.6%. And in July, the data increased by 17%, which means the auto market retail has really turned around. We…

Thank you. It’s very helpful. Thanks.

Our next question is Liping Zhao, CICC.

[Foreign Language] Thanks for taking my questions. I have two questions here. First, could you please give more color on the data products growth momentum in the second half of this year? And second, because there will be more offline computing in the second half, such as your overstatement [ph] accessible, how should we expect the sales and marketing expenses in third and fourth quarter of this year? Thank you.

[Foreign language] Well, thank you very much for the question. As for the second question -- first question which is data product. That's true, because in Q1 there was some postponing of the new car launch and also some of the events has been canceled. So that's why this has delayed and actually created a headwind for our data product revenue, especially, some of the smart new car launch has been postponed. We believe that in second quarter, if the COVID pandemic can be better controlled, the OEMs would quicken the steps in launching the new car model. So that's why for the second half of the year, we would be back to the data product revenue to increase and to climb up. Now the second question, which is about the sales and marketing expenditure. That's true for the second half of the year, we would have the 818 August 18 auto show. We also have the online auto shows and online 4S [ph] store, et cetera. So we believe that in third quarter our revenue from advertising and – but the revenue would turn positive. So, which would it be very clear for Q3. For Q4, we have to look at some other factors. But for Q3, which is very clear that the revenue from the media and advertising would turn positive. [Foreign Language] Operator?

Next question is Ritchie Sun, HSBC.

Thank you management, for taking my questions. I've got two questions. First of all, is we've seen video accounts Weibo and Bilibili, are getting more auto ad budgets than before. So how do you say, view the competition from these other non-vertical platforms? And what is our strategy to tackle that? Second part is, can you share the progress made in our traffic and content investments, such as short video and livestreaming? [Foreign Language]

[Foreign Language] Well, thank you, for the question. Yeah. That's, true. You mentioned that to Weibo or Bilibili also includes TikTok, Douyin. They all have more and more car advertising business. That's very normal, because the media has been diversified, and that naturally attracted a lot of car advertising, which is beyond -- which is felt in our expectations. However, I have a few statements to make. Firstly, for Autohome, we are still the major stakeholder, in this vertical auto industry -- media industry. Secondly, our business is not-only-limited to the vertical media, but we also launched diversified business including the digital product, the leads generation business etcetera, so that's why we are more diversified in terms of our revenue, rather than a single media company. Well actually as you know for Rose [ph] Media they are more entertainment-based content. For us we also invested heavily into the content for example, special effect and our core IP. We have four major original IPs which generated about 200 million view clicks and we're also in a leading position in a lot of our content. For example, the 3D modeling we're in a leading position and we also provided the tools which would be practical tools for people to purchase a car. For example, we have the car model database which our traffic would be very different from Rose Media or entertainment-based content. So, we are more professional car purchasing tools provider. We also established the traffic alliance with a lot of our partners except TikTok, Douyin and the Tencent. So, in this way by collaborating with road traffic providers, we would continue to be in the leading position especially when providing the professional content and providing the effective tools for people to purchase a car. For example in the second quarter, if you check the QuestMobile data released, you can see our user has grown by 8.1% over last year, which is a very significant result. Okay. Thank you. Next question please.

Next question is Brian Gong, Citigroup.

I'd like to translate myself. Management shared the last revenue share for TTP units second quarter and with government stimulate policy, what's our expectation on TTP for the second half this year? Thank you.

[Foreign language] Thank you for the question. Tell me about the used car. Actually according to the forecast made in January of 2022, the yield around used car transaction can be 90 million units, which would it be 8% growth rate. However, starting from second quarter, especially the lockdown of Shanghai that has been greatly impacted the used car transaction. So, that's why the real transaction volume in second quarter is negative growth. And starting from June, with the better management of the COVID-19, we can see the used car market is gradually picking up. Now tell me about to the used car business. Currently the used car transaction volume and the total revenue still accounts for a very small portion of our total revenue. And we believe that for the second half of the year the used car business would continue to grow. The growth can be 23%, so it will continue to grow, especially on the second half of this year. According to the National State Council, they issued a policy, which would boost the circulation of the used car market in China. Actually, each of the vendor, can only work for a portion of the value chain, leveraging on Autohome TTP and Ping An. If we combine the three together, we can consolidate all the married resources, which we can provide a one-stop solution for the car users and the car purchases. So in this way, we can better provide value-added services and digitalized services for the used car business. So we would expect that with the implementation of WFOE supportive policies and the consolidation of the three players, next year the used car business would generate a higher portion out of the total revenue.

[Foreign language] Okay. Thank you.

Next question is Thomas Chong. Please go ahead.

[Foreign language] I'll translate my questions. First, congratulations on the really strong set of results. And for new energy vehicle, we are seeing very fast revenue growth during the second quarter. May I ask about the competitive landscape at the moment? And in the next couple of years, how should we think about the revenue contribution from these segment in the future? Thank you.

[Foreign language] Well, thank you for the question. Talking about the competition, as you know, Autohome continued to be a market leader in this market. Actually, we are not only limited to media business. If you look at the overall trend, the media providers had always been more diversified. That's a market trend. So that's why Autohome had already been diversifying our revenue rather than only relying on the media and advertising. We diversified our revenue by providing leads generation business, digitized products, the auto ecosystem, and auto lifestyle or car lifestyle product. So in this way, we are trying to reshape the value chain for the whole industry and to digitize the whole value chain. We provide a CRM Plus business model, which we provide the lead generation, the clicks management, the first store management and the CRM system. So maybe some of the competitors they are very strong in a certain area. However, if you look at the combined strengths, we are definitely a very solid market-leading position. [Foreign language] Now talking about the NEV market. We are continuing in a very strong position and the NEV has become a very strong power in the auto market. However the NEV sales is a brand new marketing and sales model, which they do not adopt the traditional threat for model. That's why we are already prepared to mostly suitable for this NEV sales, which we call it a new retail sales model. We provide a virtual reality technology or hybrid virtual reality technology to boost the car sales for the NEV OEMs. And in the third quarter we are going to launch some of the experience stores. And we welcome you to visit the experience stores to feel by yourself. [Foreign language] Okay. Due to time limit, let's allow the last question. Thank you. Operator, please.

Our last question is Steven Tsai [ph] Morgan Stanley.

[Foreign language] Thank you management for taking my questions. My question is about your media service segment. This segment revenue saw around 100% “growth” despite some city lockdowns and supply chain impact. Could you kindly show us the underlying drivers behind such growth? What did you do differently than media entertainment and other vertical platforms? Also, looking into the second half how should we think about the media service revenue growth trajectory? As you mentioned that, it is expected that PV sales is likely to reach a four-year high level. Any structural reason that the revenue line cannot go back to their previous high levels that we saw in 2019 and 2020? Thank you.

[Foreign Language] Well, thank you for the question. What are the major drivers? Actually, if you look at Q1, we believe there are some seasonality factors, because there was Spring Festival, which is the biggest festival in China, and also the COVID pandemic. So that's why the media expenditure has been postponed, due to those factors. However, after Q2 Shanghai and Jiling they gradually have completed the city lockdown. As they gradually reopened. So that's why – expenditure improved. [Foreign Language] Now, looking into the future, whether we are -- we will be as good as what happened between 2019 and 2020, we have to say the current situation is very different from what happened in 2019 to 2020 because we are not only providing a single service, rather we are providing a more comprehensive and more combined services. Because all the services to OEMs and the dealers all have been improved to a comprehensive service. So we may revise some of our accounting in the financial reports and the financial statements to better reflect our business model change, which we provide a combined and comprehensive services, including the NEV, the car lifestyle, the OEMs plus used car business, which we are not only providing a single service, but rather we are providing comprehensive service. Our service has been deepened and broadened.

Operator, this is the end of the Q&A. Please go ahead.

Thank you. This is the end of Q&A session. So I'll turn the conference back to the management for closing remarks.

Thank you everyone for joining us today for the earnings conference call. We appreciate your support and we look forward to updating you on our next quarter 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 very much and good-bye.