Autohome Inc (ATHM) 2014 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by for Autohome's fourth-quarter and full-year 2014 earnings conference call. (Operator Instructions). As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Cara O'Brien of FTI Consulting. Ms O'Brien, you may begin.

Thank you, operator. Hello, everyone, and welcome to Autohome's fourth quarter and full year 2014 earnings conference call. Earlier today, Autohome distributed its earnings press release and you can find a copy on the Company's website at www.autohome.com.cn.

On today's call, we have Mr. James Qin, Autohome's Chief Executive Officer and Mr. Nicholas Chong, Autohome's Chief Financial Officer. After their prepared remarks, James and Nicholas will be available to answer your questions.

Before we begin however, 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 the public filings with the SRC. 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 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 Chief Executive Officer, James.

Thank you, Cara, and hello, everyone. Before we begin let me wish you a very happy and prosperous new year of the Ram. (Spoken in Chinese).

So we are very excited to be here today as we delivered another fantastic fourth quarter and full year of 2014 performance, once again exceeding our guidance. We're also excited about -- as we enter 2015 with a robust first quarter.

Overall, 2014 was an important year for all of us at Autohome. If 2013 was the year where we successfully diversified into the Dealer Yellow Page business, then 2014 was the year we became "transaction platform centric" as this was our first year where more than 50% of our revenue came from the dealer network and we also established Autohome Mall.

And as I look to 2015, I expect 2015 will be the year when we continue to expand our transaction platform and engage our users with new types of mobile products and online experiences.

Fourth quarter and full year 2014 marked new records for Autohome, with revenue, net profits and the cash balance all reached historical high levels. Net revenues in the fourth quarter accelerated significantly to RMB739.1m, with 91.5% year-over-year increase. For full year 2014, we achieved a new height exceeding RMB2.1b with a year-over-year increase of more than [75.3%] (corrected by company after the call).

Net income in the fourth quarter 2014 more than doubled, increasing [103.4%] (corrected by company after the call) year-over-year to almost RMB250m. On a full-year basis, it increased 64.1% year over year to almost RMB750m.

Our net cash provided by operating activities in the fourth quarter 2014 increased 51% year over year to RMB487.2m. We ended 2014 with cash and cash equivalents and term deposits of RMB2.77b on hand.

These outstanding results were made possible by our great execution and proved our strategies are working very well.

Now let me also report the progress on each of the stages in our sales funnel. For stage one, it is critical to generate and grow traffic, which we have been doing extremely well. In short, it really was a transformational fourth quarter and full year with respect to diversifying traffic sources to mobile. We have been investing heavily in this area and those investments are paying off in the form of increasingly strong mobile traffic trends and contribution.

In December, the number of average daily unique visitors who accessed our mobile site and mobile applications amounted to approximately 4.3m and 3.4m, respectively. Indeed, in the fourth quarter, the mobile traffic has almost caught up with PC traffic. As of today, I am excited to report that based on our 2015 January and February log data, mobile usage already consistently exceeded PC.

Mobile in the fourth quarter contributed more than half, -i.e., 51.5% to our sales leads, compared to 24.5% in the fourth quarter of 2013. This is obviously a very big jump.

We also view mobile as a strong driving force in our Double 11 event, which I'll talk about in a few moments, as for the first time we launched the event on both mobile and PC platforms. And we were excited to see more than 20% of the orders were actually made from mobile devices.

On the PC side, according to iResearch, Autohome continues to be the leading online destination for automobile consumers in China. By the end of the year, we remained the clear number one among China's automotive websites and automotive channels of Internet portals, in terms of average daily unique visitors, average daily page views and average daily time spend.

The number of average daily unique visitors on PCs amounted to 7.8m in the fourth quarter. And the average daily time spent per user increased from 14.5 minutes in the fourth quarter of 2013 to 16.7 minutes in the fourth quarter of 2014. We can probably say that we are the number one player with the highest quantity and the best quality traffic.

We also note with respect to our social media websites, user generated content, we have remained the single largest online community across our industry, with approximately 80% of the auto-related forum posts generated from Autohome's platform.

Turning now to stage two of the funnel, it is critical here to have users enter a conversion phase, that is our lead generation business. One important trend in 2014 was the continued growth in size and revenue contribution from the dealer network. We have seen remarkable momentum in our Dealer Yellow Pages business, which includes our dealer advertising services and dealer subscription services.

Revenue from dealer subscription services increased 99.4% year-over-year in the fourth quarter of 2014 and we recorded an ARPU increase of 17.7%. That growth is a strong testament that the value that we provide to dealers is gaining huge traction and recognition.

We ended the fourth quarter with dealer subscribers reaching 17,080 versus 10,084 by the fourth quarter of 2013, representing an increase of 69.4%.

One annual event that I would like to highlight is that our annual dealers summit, something we hold to showcase our new products and services to dealer customers. We plan to hold a tour across nine cities from January through March 2015. So far five tours have already been done with approximately 3,000 dealers and automaker customers attending.

During the tour, we revealed the results of Autohome's first-ever published whitepaper, entitled "Chinese Auto Dealer Internet Marketing Trends". It reflects a survey conducted by Autohome's in-house research center through in-depth interviews with dealers covering 86 cities ranging from Tier 1 to Tier 6 cities.

One most important finding was that Autohome has been contributing the most sales leads and the best conversion rate among all the online and offline channels. This result certainly supports and helps explain the strong growth in our Dealer Yellow Page business.

In 2015, we will focus more efforts on further creating value to our dealer customers. One important product that we will launch is a new intelligent marketing system for our dealer customers called "iAutohub" or (spoken in Chinese) in Chinese. This is not just a dealer CRM platform, but is an integrated platform that enables auto dealers to improve conversion rates and customer services, thus resulting in increase in both revenue and profit as well as better operational efficiencies.

Through a centralized interface, our dealer customers can easily choose products and obtain services from Autohome, manage their sales leads, manage their storefront, their profile, listings and promotion actions. With extensive data integration features, this helps dealers to import data from other sources and manage all sales leads in one place, so they have all the user tracking, not just when consumer buying new cars but also on aftermarket services needs or even vehicle replacement needs and finance needs.

Autohome meanwhile will provide user data that they need to help them on decision making and improving the conversion rate. The new offering demonstrated our commitment to improving our value creation for our dealer customers and to enhance the services enjoyed by our users. In 2015 we will further improve our customer service for dealers by adding more and dedicated customer services teams to each of them.

Moving to stage three of the funnel, where we close the transaction loop. That was a very key focus for us both in the fourth quarter and in the full year of 2014. Throughout 2014, we conducted various transaction trials including promotions featuring coupons, online sales festivals, car pre-sales campaigns, group buy and so forth. And of course we formally launched Autohome Mall. Through this we were able to prove to automakers and dealers that the average sales conversion rate of our Autohome Mall was higher than [60%] (corrected by company after the call) or can be as high as 80%.

These capabilities show that our strategy of facilitating online transactions over the last year has paid off. With our transaction capability being established and proven, it attracted high quality car buying traffic to Autohome's website, which in turn drives premier automaker advertising business and attracts a bigger share of wallet from automakers and dealers, which translates into additional growth for our business.

A milestone achievement of our transaction initiative was the second annual Double 11 online sales promotion event which took place last November. This was the first time that we launched this on both mobile and PC platforms.

We also had an industry breakthrough with the introduction of a full-price car transaction trial with car buyers paying upfront online. A total of 2,488 orders representing more than RMB200m of GMV were completed with full payment online, while 20% of these payments were made through mobile devices.

Looking at the total, within just one day, we received orders exceeding 37,000 representing an increase of 109% year over year compared with last year's Double 11 event.

Also as part of this, we established our own payment system, connecting six major banks in China for the first time. In addition, we provided an integrated inventory and payment system to over 6,000 dealer partners, so that the car buyers can transact through the efficient and more transparent online platform provided by Autohome.

Through this event, we clearly demonstrated to automakers and dealers that we're not just able to generate quality sales leads, but we are the one who has solid capability to facilitate transactions when compared to other players in the industry.

Further, with our strong brand equity we have the absolute advantage in terms of automakers, dealers and car buyer confidence. According to the Baidu Index the popularity of our website is as high as 60 times versus our peer companies. For example, as of December 31, 2014 our score in the index was 338,039.

We are also seeing a lot of momentum as we move into Q1 2015 and we will continue to improve our products to enhance our transaction capability. For example, we're creating a more transparent car buying experience by providing actual car price transacted by our registered users. With this pricing index we are enhancing transparency and enabling our users to see what others have paid for the car they want to buy. In just four months since the launch of our pricing index in September 2014, we have successfully collected over 40,000 price contributions from our users. We firmly believe that this transparency can provide potential car buyers with more efficiency in decision making and shorten the conversion time for the dealers.

Apart from the new car business, building upon our strong user base, we also have used car business and aftermarket services to completely serve the automobile ownership lifecycle. In 2015 we plan to monetize our used car advertising and listings as the first step to collect revenue for this part of our business.

In terms of aftermarket services, in early February we officially introduced a mobile application, (spoken in Chinese) for users to purchase and reserve car care and maintenance services that are high quality and reasonably priced through vendors qualified by Autohome. This marked our official entry into the expanding automotive maintenance market with Beijing as the first trial city. Going forward, Autohome will continue to upgrade the user experience and cooperate with more third parties to provide increasingly diverse services. We'll keep you updated on this.

Before we hear from Nicholas, let me just summarize a few things. First, as we conclude our first whole fiscal year as a public company, we are very pleased with what we have accomplished, having delivered impressive operational and financial performance.

Further, we are now one of the biggest and have the fastest-growing dealer network in the industry and we're continuing to achieve more customer wins in this area.

Finally, we've successfully built out a very robust transaction platform with strong brand equity, extensive automaker and dealer support and the broadest user base in the industry. We firmly believe this sets us well apart from our peers.

In short 2014 was an impressive year, filled with many important achievements. In June 2015, Autohome will turn 10 years old. It has been an amazing journey so far and I would say this is true for all of us at the company, our customers and our users as well. Now what's ahead of us is even more exciting.

With that let me turn the call over to Nicholas, who will walk through the financials for the fourth quarter and the full year 2014 in more details and go over our outlook for the first quarter of 2015 as well. Nicholas.

Okay. Thank you, James, and hello, everyone. I am really excited to report earnings this quarter and proud of the teams at Autohome who delivered these results. Let me now go through the fourth quarter and full year 2014 results in more detail.

Note I reference RMB only in this discussion, but you can find the equivalent US dollar numbers in our press release issued earlier today.

For 2014, we witnessed strong growth across the board and we are especially pleased with the growth of our Dealer Yellow Page business as it was the first year we crossed the 50% contribution in dealer business. Also we ended 2014 with a spectacular quarter while continuing the strong momentum into first quarter 2015.

We have two key drivers propelling our business. First and foremost is strong dealer business as dealers are starting to shift their budgets to online and therefore to Autohome and we are getting a bigger share of wallet from them. In this area, we delivered on our promises during the IPO and ended the year not just on track but well ahead of our guidance.

The second driver for both the quarter and the full year has been our effort to turn into a transaction platform. We are especially pleased with the trials over 2014 that have indeed generated greater returns for automakers, dealers and users and eventually driving our own broad-based revenue growth.

Turning to the specifics of the fourth quarter. During the quarter, we performed well against all key financial priorities with net revenues increasing 91.5% to RMB739.1m from RMB386m in the corresponding period in 2013.

Breaking this down, automaker advertising services revenues increased 65.6% to RMB336.5m from RMB203.2m in the corresponding period in 2013.

Dealer Yellow Pages business which includes our dealer advertising services and dealer subscription services grew 120.2% year over year. Separately, dealer advertising services revenues significantly increased 151% to RMB185.2m from RMB73.8m in the corresponding period in 2013.

Meanwhile dealer subscription services revenues increased 99.4% to RMB217.4m from RMB109m in the compared to Q4 2013. The increase in automaker advertising services revenue was attributable to an increase in average revenues per automaker advertiser as automakers continued to allocate more advertising budgets to Autohome's online advertising channels.

Turning to Dealer Yellow Pages business, the increase in dealer advertising services revenues was mainly due to an increase in the volume of advertising purchased by dealer advertisers as well as the increased rates for the services. For dealer subscription services revenues here increased 99.4% to RMB217.4m compared to the corresponding period in 2013.

The growth in dealer subscription services revenues was primarily driven by the increase in the number of paying dealers and the ARPU increase of 17.7% year over year. As James has noted, we sold dealer subscription services to 17,080 dealers in the fourth quarter of 2014 compared with 10,084 dealers in the corresponding period in 2013 which is very encouraging.

Gross Profit for the fourth quarter increased 106.6% to RMB616.2m from RMB298.2m in the corresponding period in 2013 as we continue to enjoy further economies of scale from our operations.

Operating expenses for the fourth quarter increased 111.9% to RMB315.1m from RMB148.7m in the corresponding period in 2013. This is due to increases in sales and marketing expenses, product development expenses and general administrative expenses as we have been reinvesting in the business to drive future growth opportunities.

For example, we are investing in mobile platforms and capabilities, adding staff in various departments, and participating in marketing related cooperation agreements like the one with Baidu to drive the top line.

Operating profit for the fourth quarter increased 101.4% to RMB301.1m from RMB149.5m in the corresponding period in 2013.

All in all, net income for the fourth quarter increased 103.4% to RMB249.6m from RMB122.7m in the corresponding period in 2013.

Basic and diluted earnings per share and per ADS for the fourth quarter were RMB2.29 and RMB2.19 respectively compared to basic and diluted EPS in the corresponding period in 2013 of RMB1.23 and RMB1.16 respectively.

Adjusted net income, which is defined as net income excluding share-based compensation expenses and amortization expenses of intangible assets related to acquisitions, increased 103.6% year over year for the fourth quarter to RMB269.5m.

Non-GAAP basic and diluted EPS for the fourth quarter were RMB2.47 and RMB2.37 respectively compared to Non-GAAP basic and diluted EPS in the corresponding period in 2013 of RMB1.33 and RMB1.25 respectively.

Let me now turn to a short summary overview of our 2014 full-year results. As we look back on 2014 we are proud of all that we have accomplished this year. In short, we drove enormous annual revenue growth with an annual increase of 75.3% to RMB2,132.9m which set a new growth record over the previous three years time. Our operating expenses went up by 106.9% to RMB847.2m but this is mainly due to all we are doing to invest in the business and position us for even better and further and longer-term growth.

Having said that, we had a great deal of leverage given the strong top line and therefore net income reached 64.1% growth to RMB748.7m. EPS on a diluted basis came in at RMB6.64 versus RMB4.37 in 2013.

And lastly, as mentioned before we ended the year with significant cash on the balance sheet, nearly RMB2.8b leaving us very well positioned and well capitalized to fund our growth plans.

Let me now address our outlook for Q1 2015. Autohome currently expects to generate net revenues in the range of RMB573m to RMB602m in the first quarter of fiscal year 2015, representing a 67.5% to 76% year-over-year increase. Again I must mention that these comments on our outlook reflect our current and preliminary view on the market and operating conditions which is subject to change.

To conclude, 2014 was a year marked by tremendous achievement on almost every front and we are gratified to have recorded very strong annual top-line and bottom-line growth as well as solid cash flow for the full year.

This concludes our prepared remarks and now we would like to take any questions that you may have. Operator, please open the line for Q&A. Thank you.

(Operator Instructions). Amanda Chen, Morgan Stanley.

Thank you. Hi, management. Thank you for taking my questions. Congratulations on the strong quarter. I have three questions if I may. My first one is regarding your strong revenue growth this quarter. We saw every business line enjoyed a very fast growth. And we understand that you are winning market share in existing markets and also the new markets. But could you please give us more color why we can enjoy such high growth rate this quarter? Is that because of PC Aladdin's commercial contribution finally kicked in or is that because the -- or high quality sales leads or any other reason? Thank you.

Hi, Amanda, this is James. Let me try to crack this question first and maybe Nicholas can add more color on this. I think my understanding is in Q3 we introduced a CPL product, but it's more in the (inaudible) space and in Q4 we put it into gear. So I think probably I would think that is the number one attribute of our 2014 fourth quarter growth. So that's number one.

Secondly, it probably is the mobile traffic because we have seen the pick-up, to an accelerated growth rate in our mobile traffic in Q4. I believe Aladdin did play a relevant role, but probably not as much as we expected.

I think to view on that it's also -- I think we have done a lot of transactions throughout 2014 and this definitely has added value to the users, the OEMs and the dealers. So I think that in turn we get rewarded from the fact that you can see that we have strong growth in those OEM advertising business, the dealer advertising business as well and also as far as dealer subscription, the more dealers signing up with us. So I think this is -- yes, it's interrelated.

Got it. So do you expect this growth trend can continue in 2015?

I think we, in our Q1 --

I think the -- as you can see that we can -- despite having a very strong Q4 2014, we can see that we also have strong momentum getting into Q1. I think just by the guidance that we have given for Q1, the year-on-year growth is between 67.5% to 76%. For reference, Q1 2014 we grew at 64%.

So we definitely see the strong trend has been carried into the beginning of the year and we are very excited about our Q1 outlook. I think with respect to the full year, I would say we remain cautiously optimistic about our overall performance, because of a couple of things.

First is our transaction focus in 2014 actually built a very strong foundation and attracted more buyer traffic, the real car buying traffic, so that definitely brought in more budget allocation from both the OEM side and dealer side. And so that trend will continue.

Secondly, the monetization of our mobile advertising will definitely speed up in 2015. And because in the future we'll continue to monetize the dealer subscribers and we'll introduce new products and services to cover their more sales needs -- more needs, for example, the iAutoshop platform. And in 2015 we'll start to monetize -- at least to really monetize our used car business. I think all those things added together will give us more confidence about having a good result in 2015.

Got it, thank you. Very helpful. And my third question is regarding your (spoken in Chinese) application. Do you have any operating metrics that you can share with us at the current stage; for example, the active users and also orders number and so forth. And also in the long term do you think the after-sale market will be more promising or has more potential of than other --

Yes, I think this is -- first this is a very early stage development and we'll definitely provide more updates as we see progress. And this is a first-time trial. We only started it in Beijing. And the reason we start to enter into the business is we believe there is a promising future for the aftermarket services and industry. So that's why we started.

So with that, I think in the future down the road, we're going to get back to you with more detailed information. At this time probably it's too early for us to share any concrete or material information with you guys.

Okay, thank you.

Thanks.

Vivian Hao, Deutsche Bank.

Hi, James and Nicholas. Congratulations on a great quarter. I have three questions. My first one is could you please elaborate a bit more on what are the key drivers for such a strong dealer subscribers growth and also ARPU in fourth quarter, as both of them have a remarkable 17% quarter-over-quarter improvement? Also based on this, how should we expect the ARPU trend going into next year, given our deepening paying subscriber base?

My second question is related to the first one. Maybe I'll wait for you finish the first question, then I'll ask the second one.

Vivian, so I think on your -- I think your question is on the growth of the dealer subscription business. I think as you heard from us just now, the dealer subscription in Q4 went up by 99.4% of which 69.4% is due to the volume growth, I mean the number of subscribers has increased. And then the ARPU was 17.7%. Then the ARPU increase comes from two ways. One is that indeed the price increased in the start of the year, but the pricing only kicked in when the dealers renew the contract, so that's one. So this -- the second one is that also some of the dealers upgrade to the premium package, which offer them additional services.

All right, maybe I can add another two small things, that there is a couple of things we can increase our ARPU for three things, mainly because of Nicholas has said is the upsell from upgrade from one package to one level up.

The second one is the regular price increase, because we either renew the contract, most of them renew their contracts yearly. When they renew their yearly contracts, then the -- for the same package the price will have increased year over year. So that's a second factor.

The third factor is the operational efficiency, because in the past, when we do the annual renew of the contracts, sometimes there will be a week or maybe even two weeks lag between the end, the contract end and the new contract kick in, so that's will be one or two weeks revenue loss. And ever since 2014, we start to pay attention on those kind of revenue (inaudible) and we improve, we have a specific program to improve that. So right now we have seen some of the results shown in the 2014. I think in the beginning of 2015, you actually can see a little bit better result, because a lot more of our annual contract ends in December 31.

Yes, thank you. This is very thorough. Very quick follow-up on the contract renewal, I mean the price increase, what's the magnitude of this increase? Is that contributing like 10% or how much percentage of the total increase year over year?

Well, I think 10% is a rough number you can use.

Yes.

Okay. My second question is related to the first one. Just wondering if there is any contribution from the new revenue stream based on the cost-per-leads model. If there is any, what is the percentage contribution? And also what is the current adoption rate or adoption intention from our current existing dealer base? And also, how's the conversion rate has been trending in fourth quarter?

Okay. I think you're asking the CPL for dealers, right.

Yes.

The CPL for dealers, right now we have a trial in five cities and in Q4 there was an ongoing trial run with the -- about half -- like about 50 dealers and in those five cities. And we have seen very satisfactory results so far. We believe we should be able to scale up that business in the near term.

So currently it's still not material contribution to our P&L, I suppose.

Yes, I think the currently the CPL as a product, we have not been -- we have not sold it yet. It is still currently on trial.

In sum, your assessment was right. It has not materialized yet.

Okay. Very quick final question. So for our e-commerce business model, this time in this quarter we have RMB200m GMV, do we have -- have we monetized on this at all? What is exactly the monetization model for the e-commerce?

How should I answer that, I think basically, some of the business, some of the revenues generated from Autohome will be like this. An OEM pays us advertising dollars and sometimes with the subsidy, with the transaction subsidy. We pass through the transaction subsidy to consumers; however, we kept the advertising dollars for ourselves in order to promote the sales event on Autohome Mall. So we definitely generate some revenue on the Autohome property.

Okay. This is very helpful.

Yes, that is captured in the dealer advertising business.

Yes.

Understood. The same as last quarter, yes.

Yes, the treatment is the same yes.

Yes.

But just as you could see that overall the dealer advertising has very strong growth, especially strong in -- Q3 was strong but Q4 was even stronger.

Yes, that's a relief. Thank you.

So to quickly visit the product advertising dynamics the CPL product for dealers has not been kicked in yet, but the CPL for OEM has some effect in 2014 Q4.

Understood.

(Operator Instructions). Fei Fang, Goldman Sachs.

Hi James and Nicholas. This is Fei on behalf of Piyush. I wanted to add our congratulations to impressive results. For the used car business, can you elaborate on the perspective monetization model? Then I have a follow-up question. Thank you.

For the used car business, currently what we are thinking is -- we currently have approximately 5,000 active sellers, those are the commercial sellers on our site. And we plan to start to monetize by the ways of listing and advertising in 2015. So that's probably the number I can show you at this point.

That's great. And if we can just switch gear here on just overall -- the topline has been obviously very strong in the quarter and you have achieved operating leverage across most of the major cost lines, the only exception seem to be the G&A line, which seemed to accelerated to 49% year on year. So just from a modeling perspective, is that a one-off? And also more broadly, as you accelerate your revenue growth into next year, how should we think about the cost structure? Thank you.

I think you are asking for the -- Fei, you are asking for the cause of the margin, right?

Yes, Nicholas.

Yes, I think the -- if we look at 2014, we have a very strong performance overall in terms of both revenue growth and margin. I think our topline growth was 75.3% year on year and non-GAAP net margin, we came in for the whole year at 38%. But we do not provide full-year bottom-line guidance, but let me give you some you some -- but I can give you some colors.

I think if you look at our profit and margin levers has remained a leading in the industry. We are ahead of the peers. And this has been achieved despite the fact that we have been making many investments and particularly during 2014 in areas like sales and marketing expenses, by Aladdin transaction platform, mobile products and our used car business. But what we have done was making the right move at the right time and investing for the future, but also delivering appropriate returns to our shareholders.

I think that some of the investment, if we have not invested, last year I think it will be even more expensive this year like for example mobile. So I think we will -- we believe that our investment will be able to continue to bear fruits at the -- with the right strategies and the team to execute the right thing.

You can see that on a gross margin-wise, we have operating leverage. I think in fact our gross margin has gone up from 79.3% in 2013 to 82.2% in 2014. So if you look at our existing business, I think you will -- we should be able to continue to run at 30%-plus non-GAAP net margin.

And I think you also mentioned just now on the G&A, I think G&A percentage as revenue comes down because from an absolute cost standpoint, it increase much lower than the revenue increase.

Okay, that's helpful. Thank you.

Just to add one more strong point, I think, Fei, you asked the fourth quarter G&A percentage right?

That's right.

Yes, we did a have a [fall]in fourth quarter.

Fourth quarter.

I didn't know the exact number. I didn't know -- I think further analysis on that. But I think that definitely play a small part on that, because it was pretty expensive.

Okay. I understood. Thank you.

Ella Ji, Oppenheimer.

Hi good morning, management, and congratulations on a strong quarter. My first question is relating to the OEM budget for 2015. As we continue to see and you also talked about, there is a continuing shift to online advertisement and that certainly benefits your business. So as we look into 2015, as you talked to the OEMs, what type of online budget growth are you seeing overall on the market?

And then relating to that, in the past you have been successfully increased your price for online advertisement, do you think you can maintain the same rate of price increase in 2015? That's my first question. Thank you.

I think that the -- I'll probably address the question in terms of 2015 OEM advertising revenue growth. I think as the -- in the -- in 2014 and 2015, yes, we have seen the China's new car market grow at a very health rate, probably around 1.5 times the GDP growth. So this is probably -- is the only large OEM or large manufacturing sector which has a healthy growth and markets, very healthy markets. So we're very lucky to be part of this industry at this point. And so in the -- both in 2014 last quarter and 2015 we have seen relatively satisfactory new car growth. In the first two months of 2015, I think the new car growth rate published by at least the manufacturers about 10%, which is 1.5 time of the GDP growth. So I think we are pretty -- we feel pretty good about that.

However, on the OEM advertising side, what we have seen is that, in 2015, the OEM are going to spend more and more percentage of the budget on mobile -- on the mobile platform, and also with the effect of more and more Chinese OEMs are paying attention to some of the -- for the retail channel as an effective channel to do publishing campaigns. So from our point of view, with all those factors together in 2015, probably we are going to see a very high growth of the OEM advertising allocation on mobile media, which actually plays to our strengths, which -- because we have more than 7m [viewers] on our mobile platform, but at this point our mobile OEM advertising only accounts for probably less than 10% of our total OEM advertising spending on Autohome's website. So I think that is helpful for us.

So in the whole year of 2015, we're pretty -- we feel pretty good about that. With that, I think the advertising, the banner ads revenue, on the banner ads price increase in 2015, probably it will be less important for us. We definitely will have a price increase because on both -- just even on the PC platform, we have seen the DAU growth and also the average time spent growth on our platform. So that gives us a rational reason to increase our price. However I think on our OEM, advertising revenue growth side, we are going to pay more attention on the mobile platform.

Got it. Thank you, James.

Hopefully I answer your --

Yes, that's very helpful. Thank you very much. And then a second question is you have seen that some of your competitors are recently cooperating with some larger channels, internet channels, so can you also talk about your thoughts and there are you also opening to cooperation or will you continue to operate as an independent channel? Thank you.

Okay, thank you. We as a matter of practice, we do not comment on our peers, pr we do not speculate on those still evolving event in our industry. Probably I think we are -- we know probably as much as you do on those. I think with regard to Autohome, we have been and always will be open minded for all kinds of collaboration. And in fact, on the PC Aladdin, that is an evidence of us collaborating with one of the larger internet players in China. And going forward, we are going to do more collaboration with all those large companies and I think it's very important for Autohome to really build up our own value position, we create more value to the consumers and also we create value -- more value to the China's auto OEM carmakers and dealers. I think that is the sort of the entry barrier Autohome can build.

Got it. Thank you again, James. Lastly a quick question, could you update us with the total headcount you have as of end of 2014?

Definitely.

End of 2014, we have about 1,770 headcounts.

Okay. Thank you very much.

(Operator Instructions). Tian Hou, T.H. Capital.

Hi, James and Nicholas. I have a couple of questions. One question's related to your expansion. So you mentioned that you are expanding into a new geographic markets like a Tier 3, Tier 4 cities. So, would you please give us some colors regarding those expansions such as how much cities you have already covered and what is the goal at the end of (technical difficulty)? That is the first question. I will have a follow-up after this.

So in terms of the number of cities we covered, I think we cover 366 cities and I think if you ask me, I think probably your question is like, how many cities do we cover by people on the ground. I think that's roughly about 140 --

150 where we have on the ground support. Like what James said, we have 366 in total coverage. So the rest is like we cover through telesales.

Telesales.

Okay. That's helpful. And related to your e-commerce business at Autohome Mall and do you mind to give some colors on how many OEMs incorporation and what are the trends [technical difficulty] and how many models etc., etc?

I think in last, the whole of last year we have cooperated with 66 brands. And also, there is about 864 car -- sorry, I think in the whole of 2014, we worked with 80 car brands and the car models about 1,410 car models and yes, so we do work with, cooperate with wide range of brands.

I think this year what we will do is like, we will make the Autohome more, even more active. So we would have what we call the monthly event and also that is multi-brands, and also the other one -- what we call flash sales, and then the other one is what we call feature sales. Feature sales is more specific on some particular brands or particular models. So we have -- so what you can see is that in 2015 the Autohome Mall will be more active than in 2014. 2014 was the year where we trialed. So we definitely do gain quite a bit of experience over the whole of 2014 and we will make it more active in 2015.

Okay. So that's very helpful. For your new way of doing the e-commerce like feature sales and flash sales and what are the revenue model? Is that still going to be advertising model?

I think from the financial reporting point of view, I will assume in 2015 it will still show up in the dealer advertising revenue, dealer advertising services. So that is the model in reality. So basically the model is that we got two different type of monies. One is in terms of buying more -- OEMs buying advertisement from Autohome Mall to promote either the flash sales or feature sales.

The only difference between the flash sales and the feature sales is that feature sales probably last around a month and it's only designed for one OEM carmaker, while the flash sale is sort of a -- flash sale for three, four days, but it is sort of an all you can eat, everyone can join. So that's revenue for one. And secondly, is the -- is sometimes the carmakers keep the transaction subsidy through Autohome. So those are the two major money we kept from OEM.

Ming Zhao, UBS.

Good night, James and Nicholas. Congratulate on the strong quarter. So I have three questions. First one is regarding the CPL product for OEM advertisement, which James you just mentioned. Could you give us more color on that part of the business?

So in the past if a car marker say I do not have a brand promotion need, I only want to generate sales leads for all my dealers, in the past the only thing they can buy is buy banners. Currently, they can buy a new commercial product, which we price based on the number of sales leads or number of qualified sales leads we generate for them. So that's a new CPL product. It does not occupy the traditional banner space.

So, could you share us with more some operation data on like adoption rate or like revenue contribution, something like that?

So currently we don't have those kind of numbers.

Okay. So my second question is regarding the dealer advertising business, which is very strong. So could you give -- share with us more data on like the number of advertisers or the volume of ads you can place compared to like quarter, last quarter or compared to Q4 last year?

In compare -- in Q4 versus Q3 in terms of dealer advertising and the -- in terms of brand, in Q3 there are about 82 brands, models, 82 brands that dealers work with us and in Q4 there about 100. So that's --

So does this mean that brand of the car, car brands?

Yes, yes. So more -- so basically more brands dealers start to join the advertising services with Autohome.

Okay. So how should I understand the growth? Is it more come from more dealers signing up or dealers placing more ads, each dealer placing more ads on your platform? Which one is more significant?

I think is the share of wallet has gone up, is more significant. Because if you look at the number of brands increase, I think in Q4 versus -- 2014 versus 2013, it went up by about 29%. But you can see that our dealer advertising grew 100% plus. So that means the rest of the increase is really coming from the same advertiser buying more. So the share of wallet has gone up.

So in my mind, I probably will recommend you guys look at the dealer advertising and the dealer subscription as a one business rather than split in two. Because -- so for example, for the dealer advertising business, as -- I'll give you one example, we have a -- we are in the trial, we have a CPL product for dealers and as I've mentioned to you just now, the effect has not been kicked in 2014, we start in -- we start to launch it in 2015. We also have an upsell in the subscription business.

I think those business from Autohome point of view will generate a similar effect, which is the per sales lead we generate more revenue. And then from the dealer point of view, it achieved different purpose. The upsell of the premium package of the subscription will give them in the period of time more sales lead compared with the old non-premium service. However, on the CPL front, we can generate a lot more sales leads with very short period of time. It's basically like they want to get in sales in the last week of quarter end, they can use the CPL product.

So I think we start to offer more products and from Autohome point of view is to generate more revenue at -- on the same number of sales lead perspective. So -- and since we have also increased number of sales we generate from Autohome platform, so I will really recommend you guys look at the dealer advertising and dealer subscription as one business. Just unfortunately different, we sign contract in a different way, so it ends up in the financial reporting differently.

Okay, thank you, very helpful. So my final question is about the advertisement WeChat you just mentioned. So are we also noticed that the automakers such as BMW and Ford is among the -- are among the early adopters of WeChat advertisements. So I just want to know your comment on this. Is this -- what will be the impact on your business? Will this actually be a negative impact as dilution of wallet or is it actually a positive in fact that it increased the online migration of marketing budget by the OEMs.

It's definitely leaning towards your second point, which is we create more awareness among OEM, the key decision makers among OEM about the mobile as a channel to promote their product and brand. So I think mobile advertising probably could be one of the few bright spots in the media landscape in 2015.

And also there was a couple of advantages for the mobile advertising platform. One of them will be to deliver the right message to the right person at the right time. This is very important. And Autohome can generate similar effect. So I think if more and more China's automaker adopt WeChat as one of the platform that's definitely good news for us.

Okay. Thank you.

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

Yes. Thank you. So thank you, thank you very much for joining us today. We appreciate your support and we look forward to updating you on first quarter 2015 conference call in a few months' time, actually in two months' time. In the meantime please feel free to get in touch with us if you have further questions, concern or comments.

But before we end our call, I will like to wish everyone happy Festival of Lantern, because tomorrow will be Yuan-Xiao, so we're just happy for the Eastern Valentine's Day tomorrow. Wish everyone a happy and enjoy a good night with your family. With that I will end our call. Thank you.

Thank you.