Autohome Inc (ATHM) 2022 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by Autohome's Second Quarter and Interim 2022 Earnings Conference Call. At this time, all participants are in listen-only mode. A question-and-answer 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, Mr. Craig Yan Zeng. After the prepared remarks, our management will be able 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 U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations. Potential risks and uncertainties include, but 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. (Chinese 00.02.36)

(Chinese 00.02.37 - 00.02.50).

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.

(Chinese 00:03.01 - 00.04.10).

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 epidemic outbreak 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 a high profit margin level, a testament to our ability to navigate evolving market cycles.

(Chinese 00:05.25 - 00.06.30).

COVID-19's 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 a daily necessity in people's lives. The industry typically has a long life cycle, and there's tremendous potential as China's automotive consumption continues to upgrade. Autohome has also constantly adjusted its business model, expanded its business boundaries 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 close commercial contact with them and have gained their trust and appreciation. Bolstered by our steady operations and 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 rebounds, aided by the implementation of various favorable policies, Autohome will continue to enhance its performance and deliver satisfactory results to the market.

(Chinese 00.07.41 00.07.47)

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.

(Chinese 00.07.55 - 00.08.01).

Thank you, Mr. Long. Now I'd like to give you an overview of our second quarter highlights.

(Chinese 00.08.06 - 00.08.40).

During the second quarter, we continued to augment our traffic entrances by building our online traffic alliance, covering more users across various scenarios to accelerate traffic growth. According to QuestMobile, Autohome's aggregated average daily users grew by 8.1% year-over-year to 47.63 million in June. User composition-wise, the proportion of our high-value users utilizing smartphones worth over RMB 5,000, is 37%, supporting that of all our competitors, which demonstrates the value of our user traffic.

(Chinese 00.08.18 - 00.09.55).

Furthermore, we continued to diversify our content ecosystem and executed our video-based strategy. To this end, we launched regular "cloud auto shows" and our brand-new NEV car model database to expand our product service and offerings, providing a wider range of choices and a better experience for our customers. During the first half of the year, in response to the pandemic's resurgence, we proactively hosted 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, a brand-new promotional model empowering users to safely review and buy cars during the pandemic, while also helping dealer clients increase sales and upgrade the experience they offer users.

(Chinese 00.10.52 - 00.11.22).

With respect to new business, our digital products have rapidly 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 NEV business also continued to improve, with revenue growth rate accelerating and sales outperforming the average market level. The ecosystem synergies we are building between Autohome and Ping An Group are progressing according to the plan, and we continued to leverage our unique advantages to bring better services and experiences to Autohome's users.

(Chinese 00.12.05 - 00.12.55).

Moving on to content development. By leveraging our big IP brands, we've steadily advanced our strategy of promoting a video-based content transformation. For example, we augmented the content of our show "Super Test", with crossover luxury automobile content to its motorcycle reviews, enabling us to achieve a breakthrough in our efforts to expand our IP content from passenger vehicles only to other transportation methods. In the first half of this year, our four original IP series accumulated over 148 million views on Autohome's platform and over 207 million on the entire network. We also launched our brand-new NEV car model database in June. Meanwhile, we'll continue to upgrade our NEV platform, greatly shortening our path to reach users and helping users make better decisions with more refined content categories and search tools, as well as real data on NEVs' driving range, energy consumption, charging efficiency and other NEV-specific statistics.

(Chinese 00.14.02 - 00.14.42).

Autohome attaches great importance to developing the company's brand and is committed to the sustained building and upgrading of the brand in the long-term. This year, driven by the targeted needs of our users for car search, purchase and use, as well as the overall condition of the automobile market, we've signed Eileen Gu, the 2022 Beijing Winter Olympic champion, as our Brand Ambassador. We'll use her digital image widely in our online auto shows and the user interactions through cutting-edge technologies such as VR. Eileen Gu is an excellent representative of China's younger generation. With her as our brand ambassador, we believe Autohome will attract more younger and female users going forward.

(Chinese 00.15.32 - 00.16.32).

Now turning to our traditional business segment. Given the pandemic and market-wide changes, we promptly launched a new operational model while proactively helping our clients to overcome their difficulties. In response to the cancellation of local offline auto shows and events, travel inconveniences and disruption to automakers' sales activities and offline store operations, Autohome reacted by launching regular "online auto shows" and "safety to store" services. The former enabled users to search and select cars anywhere at any time and allowed automakers to release localized promotional messages through our platform. The latter offered ride vouches to help users to get to 4S stores solving their last-mile problem during the car buying process. For our lead generation business, our dealers' membership products include various tools and services to help dealers to connect with potential customers. In the second quarter, over 12,000 clients purchased our premium version and over 6,000 clients purchased our tech version, with the number of clients purchasing high-end versions remaining high.

(Chinese 00.17.52 - 00.19.06).

On the data product front, we rely on our data and tech as our bedrock and continue to push forward on innovation to enhance our core competitiveness. We expanded our product lineups with digital products and "VR car search" products, helping dealers achieve "touchless" operations and conduct sales safely during the pandemic. In the second quarter, revenue generated by dealer's digital products surged by over 40% year-over-year with more than 18,000 clients. During the first half of 2022, number of products purchased per store and average revenue per store increased vastly, achieving 32% and 20% year-over-year growth, respectively. In addition, riding on development opportunities arising from the digital transformation within the auto industry, our R2S intelligence solutions tackled pain points and the core demands from automakers, aiding traditional auto companies throughout the digitalization process. Since we launched our first innovative digital and technology products in late 2021, we have continuously upgraded them and have now collaborated with over 30 automakers, representing an enormous step forward in our efforts to expand our business beyond the vertical media industry. We believe our digital business will continue to grow and generate future revenues as well as help us achieve our second growth curve.

(Chinese 00.20.46 - 00.21.45).

For our NEV business, we focus on providing comprehensive branding solutions for automakers, organizing activities and events for car owners, reflecting each manufacturer's brand image to promote their brands' unique car lifestyle. Combining online and off-line operating methods, we helped automakers to promote their messages, increase user interactions and user stickiness and diversify our income streams. In the second quarter, revenue generated from NEV brands greatly increased year-over-year and continued to outperform the sales growth rate of the market. Furthermore, as the penetration rate of NEV increases, we have also expedited our development in this sector, resuming construction work on our new sales model source as the pandemic eased. We expect to launch these stores in Beijing and Shanghai within the third quarter, exploring an unprecedented auto sales model by using high-tech in a physical store setting. Our goal is to help NEV automakers expand their exposure through our unique, cutting-edge sales model and channels. We expect this operation to generate revenues for the company within 2022.

(Chinese 00.23.05 - 00.24.04).

On the used car front, we upgraded our full-chain used car service ecosystem by consolidating resources from Autohome, TTP and Pan An Group. Leveraging their resources, we built a one-stop, cloud-based platform for trusted used car services, which seamlessly connects users and clients and provides value-added and digital services in addition to leads generation services. With the support of diversified content on our platform and Ping An's offline channel resources, we'll continuously expand the platform's scale to cover more car sellers. Furthermore, we continued to deepen business synergies with TTP through consolidation and auction services. In the second quarter, our platform accounted for around 23% of all used car trading volume in China, an increase of 3 percentage points quarter-over-quarter and 6 percentage points year-over-year. We also made headway building our certified used car system, which has been launched in 47 cities in the country. The number of our certified car sources has grown by leaps and bounds and we expect it will continue to grow steadily in the future.

(Chinese 00.25.25 - 00.25.57).

In the second quarter, China's State Council removed relocation restrictions for all small-sized, non-operating used cars that meet the national V safety emission standards and refined certain used car management regulations, including vehicle registration, trading registration and filings. This will boost used car sales and accelerate car replacement, leading to a smoother circulation of used cars overall. The series of new policies will benefit the development of the used car market in China by encouraging more trading activities, which will positively impact used car consumption and the used car market.

(Chinese 00.26.20 - 00.27.58).

To summarize, we are pleased to have made progress in all of our business segments during a challenging quarter. Since June, with the pandemic slowly easing and the government announcing a series of economic stimulus policies to boost the economy and promote auto sales, delayed car consumption demand has gradually been released. We anticipate that these factors will positively affect the auto market and promote its recovery. Passenger vehicle sales increased by over 22% year-over-year in June and the multiple sales and manufacturer indicators are exhibiting significant signs of recovery. As most factories suspended production in April and May, market demand in June led to a significantly higher trading volume. The auto industry, as one of the most important pillars in China's economy, is recovering at a steady pace. With Autohome's edge in tech, strong business foundation and brilliant financial performance, we have been proactively seeking new development opportunities in various sectors. We believe Autohome will continue to lead the development of China's auto industry and propel its steady long-term growth while creating lasting value for all of our stakeholders with outstanding performance that navigates market cycles.

(Chinese 00.29.25 - 00.29.36).

Next, let me walk you through the key financials for the second quarter of 2022. Please note that as with prior calls, I will reference RMB only in my discussion today, unless otherwise stated.

(Chinese 00.29.50 - 00.30.02).

Net revenues for the second quarter were 1.73 billion. For a detailed breakdown, media services revenues came in at 531 million. Leads generation services revenues were 753 million, and online marketplace and others revenues were 450 million.

(Chinese 00.30.22 - 00.30.37).

Moving on to costs. Cost of revenues in the second quarter was 279 million compared to 262 million in Q2 2021. The increase was primarily attributable to our continuous investment in content. Gross margin in the second quarter was 83.9% compared to 86.5% in Q2 2021.

(Chinese 00.31.04 - 00.31.32).

Turning to operating expenses. Sales and marketing expenses in the second quarter were 739 million compared to 562 million in Q2 2021. The increase was primarily attributable to the escalation of marketing and promotional spending. Product and development expenses were 362 million compared to 335 million in Q2 2021. The increase was primarily attributable to greater investment in research and development activities for digital products. Finally, general and administrative expenses were 127 million compared to 177 million in Q2 2021. The decrease was primarily attributable to the reduction of expected credit losses.

(Chinese 00.32.25 - 00.32.41).

Overall, we delivered operating profit of 301 million in the second quarter compared to 673 million in the corresponding period of 2021. Adjusted net income attributable to Autohome Inc., was 472 million in the second quarter compared to 795 million in the corresponding period of 2021.

(Chinese 00.33.07 - 00.33.32).

Non-GAAP basic and diluted earnings per share in the second quarter were both 0.94 compared to 1.58 and 1.57, respectively, in the corresponding period of 2021. Non-GAAP basic and diluted earnings per ADS in the second quarter were both 3.77 compared to 6.31 and 6.30 respectively in the corresponding period of 2021.

(Chinese 00.34.02 - 00.34.19).

As of June 30, 2022, our balance sheet remained very strong with cash, cash equivalents and short-term investments of 20.94 billion. We generated net operating cash flow of 488 million in the second quarter of 2022.

(Chinese 00.34.37 - 00.34.58).

On November 18, 2021, our Board of Directors authorized a share repurchase program under which we may repurchase up to $200 million of Autohome's ADS for a period not to exceed 12 months thereafter. As of July 31, 2022, we have repurchased approximately 1.88 million ADSs for a total cost of approximately $54.2 million.

(Chinese 00.35.28 - 00.35.32).

With that, we are ready to take your questions. Operator, please open the line for the Q&A session.

Thank you, management. (Operator Instructions). Our first question is Robin Leung from Daiwa.

Congratulations on a solid set of results. Could management give us some color on the auto market trend in second half of this year and how the impact from the government stimulus policy and chipset supply situation affects auto supplier willingness to allocate the marketing budgets.

(Chinese 00.36.43 - 00.37.08).

[Interpreted] 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.

(Chinese 00.37.47 - 00.38.33).

[Interpreted] Why is this the 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 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.

(Chinese 00.39.10 - 00.39.40).

[Interpreted] As you know, the auto consumption accounts for a very important pillar industry for the consumption market in China. It accounts for about 10% out of the national total retail consumption. So that's why the government starting from April adopted a lot of stimulus policies to boost the auto market. So that's why we can see a lot of large scale consumption policies has been released.

(Chinese 00.40.10 - 00.41.05).

[Interpreted] So luckily in April, the State Council released opinions and policies to boost and release the consumption power in the auto market. And actually, in May, the government has cut a lot of tax, especially the purchasing tax for the cost. And 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 has already increased by 22.6%. And in July, the data increased by 17%, which means the auto market retail has really turned around.

(Chinese 00.42.07 - 00.43.06).

[Interpreted] We are very confident that the Chinese auto market has a huge market potential to be further released. Actually, we do see that on the second half of this year, we would expect the consumption market would be very strong for the auto market. According to the latest forecast made by the China Auto Association, in 2022, the total car sales in China can reach 27 million units, which would be 3% up over the same period of last year. And also, the passenger car, the total sales can be expected to reach to 23 million, which is 7% up. For the NEV, it will grow very robustly. The total sales can reach to 5.5 million units, and the growth rate can be 56%. So you can see that we are very optimistic about the future of the Chinese car association and auto industry. We believe the market potential would be huge, and we are very confident that we would enjoy a bright future in the Chinese car auto market.

(Chinese 00.44.23 - 00.44.55).

[Interpreted] Now let me take the second part of your question, which is about the chips. Actually, according to the prewarning made by the Passenger Car Association of China in January, in this year, there will be about 1 million cars, which would enjoy the lack of chip supply. Actually, if you look at Toyota, the Toyota from Japan, they already cut production due to the lack of supply of chips. So this would affect the production speed of the carmakers.

(Chinese 00.45.32 - 00.45.59).

[Interpreted] Now let's look at the domestic OEMs in China. Actually, compared with the second half of 2021, we believe the situation has been eased, and it's already been improved in terms of the supply of the chips. We do not think we would encounter the massive scale lack of chip supply. So which means we are more optimistic than the beginning of the year's forecast

(Chinese 00.46.29 - 00.47.22).

[Interpreted] Actually, according to the MIIT, which they made a speech in early of July, they said they will keep a close eye on monitoring the whole industry and ensure that the chip supply and the raw material supply can be very smooth for the auto industry, they would try their best to protect the smooth of the supply chain management for the whole industry. So this laid a solid foundation to help the chip supply to be better improved. We believe that for the later half of this year, the new car would gradually launch to the market in a steady way. And especially for the second half of the year, there will be a series of very important auto shows and events will be held. So in this way, this provides more opportunities for the OEMs to showcase their latest models. We believe that the chip supply would no longer be the bottleneck for the OEMs.

(Chinese 00.48.27).

[Interpreted] That's all. Thank you.

Our next question is Liping Zhao, CICC

(Chinese 00.48.43 - 00.49.36). Good evening 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 off-line campaigns in the second half, such as your August 18 Festival, how should we expect the sales and marketing expenses in third and fourth quarter of this year?

(Chinese 00.50.02 - 00.51.34).

[Interpreted] Well, thank you very much for the question. As for the first question, which is the data product, that's true, because in Q2, there was some postponing of the new car launch and also some of the events have 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 the [third] (corrected by company after the call) [MOU1]quarter, if the COVID pandemic can be better controlled, the OEMs would quicken steps in launching the new car models. So that's why for the second half of the year, we would expect the data product revenue to increase and 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 August 18th auto show. We also have the online auto show and online 4S store, et cetera. So we believe that in the third quarter, our revenue from advertising [year-over-year growth rate] would turn positive, so which would 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 [growth rate] would turn positive.

(Chinese 00.52.15).

Operator, operator?

Next question is Ritchie Sun, HSBC.

I've got two questions. First of all is we have seen even video accounts, Weibo and Bilibili, are getting more auto ad budget than before. So how do we feel 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 live streaming. (Chinese 00.54.00 - 00.54.33).

(Chinese 00.54.55 - 00.55.37).

[Interpreted] Well, thank you for the question. Yes, you mentioned that Weibo, 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 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 lead generation business, et cetera. So that's why we are more diversified in terms of revenue rather than a single media company.

(Chinese 00.56.34 - 00.57.50).

[Interpreted] Well, actually, as you know, for those media, there are more entertainment-based content. For us, we also invested heavily into the content. For example, special effect on our core IP, we have four major original IPs, which generated about 200 million view clicks and we are also in a leading position in a lot of our content. For example, the 3D modeling, we are in a leading position. And we also provide 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 those media or entertainment-based content. So we are more professional car purchasing tools provider. We also established the traffic alliance with a lot of partners, except TikTok, Douyin and Tencent. So in this way, by collaborating with road traffic providers, we would continue to be in a leading position, especially when providing the professional content and providing the effective tools to people to purchase a car.

(Chinese 00.59.08 - 00.59.27).

[Interpreted] For example, in the second quarter, if you check the QuestMobile data released, you can see our users have grown by 8.1% over last year, which is a very significant result.

(Chinese 00.59.43).

[Interpreted] Thank you. Next question please.

Next question is Brian Gong, Citi Group.

(Chinese 00.59.55 - 01.00.17). I will translate myself. Can management share the revenue sale for TTP in the second quarter and with government stimulate policy, what's our expectation on TTP for the second half of this year. Thank you.

(01.00.40 - 00.01.11).

[Interpreted] Thank you for the question. Talking about the used car, actually, according to the forecast made in January of 2022, the year-round used car transaction can be 19 million units, which would 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. In starting from June, with the better management of the COVID-19, we can see the used car market is gradually picking up

(Chinese 01.01.52 - 01.02.14).

[Interpreted] Now talking about the used car business. Currently, the used car transaction volume and the total revenue still accounts for a very small portion out 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.

(Chinese 01.02.41 - 01.03.21).

[Interpreted] 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 merit 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 digitalize the services for the used car business

(Chinese 01.04.03 - 01.04.18).

[Interpreted] So we would expect that with the implementation of real 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.

(Chinese 01.04.38).

[Interpreted] Okay. Thank you.

Next question is Thomas Chong.

(Chinese 01.04.46 - 01.05.15). I translate my question. First, congratulations on a very strong set of results. And for new energy vehicles, 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 this segment in the future? Thank you.

(Chinese 01.05.45 - 01.07.13).

[Interpreted] Well, thank you for the question. Talking about the competition. As you know, Autohome had 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 the market trend. So that's why Autohome has 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 products. 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 leads generation, the clicks management, the 4S store management, and CRM system. So maybe some of the competitors, they are very strong in a certain area. However, if you look at the combined strength, we are definitely a very solid market-leading position.

(Chinese 01.08.32 - 01.09.21).

[Interpreted] 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 sales or business model. That's why we are already prepared to mostly suitable for the NEV sales, which we call it a new retail sales model, we provide 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 experiment stores and to feel by yourself.

(Chinese 01.10.23 - 01.10.27).

[Interpreted] Okay. Due to time limit, let's allow the last question. Thank you.

Operator, please.

And our last question is Steven Chan, Morgan Stanley.

(Chinese 01.10.50 - 01.11.31). My question is about your media services segment. This segment revenue saw around 100% quarter-on-quarter growth despite some city lockdowns and supply chain impact. Could you kindly share with us the underlying drivers behind such growth? What did you do differently than other 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 is expected that PV sales is likely to reach a full year high level. Any structural reason that the revenue line cannot go back to the previous high levels that we saw in 2019 and 2020? Thank you.

(Chinese 01.12.11 - 01.13.00).

[Interpreted] 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 Jilin, they gradually have completed the city lockdown as they gradually reopened. So that's why the expenditure improved.

(Chinese 01.13.35 - 01.14.31).

[Interpreted] Now looking into the future, whether 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 and 2020 because we are not only providing a single service, rather, we are providing a more comprehensive and more combined services. Because all our 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 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 will turn the conference back to the management for closing remarks.

(Chinese 01.16.05 - 01.16.16).

Thank you, everyone, for joining us today for the earnings conference call. We appreciate your support and look forward to updating you on our next quarter's conference call in a few months' time. In the meantime, please free to contact us if you have any further questions or comments. Thank you very much. Thank you. Bye.

[MOU1]Changed to "third" according to the context, please check