Yahoo Finance Bitauto Holdings Limited (BITA) Q4 2018 Earnings Conference Call Transcript
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Bitauto Holdings Limited (NYSE: BITA)
Q4 2018 Earnings Conference Call
March 19, 2019, 8:15 a.m. ET
Contents:
Prepared Remarks
Questions and Answers
Call Participants
Prepared Remarks:
Operator
Hello, and thank you for standing by for Bitauto's Fourth Quarter and Fiscal Year 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. After management's prepared remarks, there will be a question-and-answer session. Today's conference is being recorded. If you have any objections, you may disconnect at this time.
I would now like to turn the meeting over to your host for today's conference. Please go ahead.
Unidentified Speaker --
Thank you. Welcome to Bitauto's fourth quarter and fiscal year 2018 earnings conference call. Speakers from the company today are Mr. Andy Zhang, CEO; Mr. Xiaoke Liu, COO; and Mr. Ming Xu, CFO. After management's prepared remarks, Andy, Xiaoke and Ming will be available to answer your questions. In addition, Catherine Liu, CFO of Yixin, will be available to answer your questions related to Yixin.
Before we proceed, please note that discussions today will contain forward-looking statements made under the safe harbor provisions of the US Private Securities and Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties which 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 SEC, including registration statement on Form F-1. Bitauto does not undertake any obligations to update any forward-looking statement, except as required under applicable law. This call will include discussions of certain unaudited non-GAAP financial measures. Please refer to our earnings release, which was issued earlier today, for reconciliations of these unaudited non-GAAP measures to the most directly comparable unaudited GAAP measures. As a reminder, this conference is being recorded. In addition, a live and archived webcast of the conference will be available on our website.
I will now turn the call over to Andy Zhang, CEO of Bitauto.
Andy Xuan Zhang -- Chief Executive Officer and Director
Hello, everyone, and thank you for joining us for our fourth quarter and fiscal year 2018 earnings conference call. We were pleased to conclude 2018 with robust growth across all three of our business lines, amid softer passenger vehicle sales in China during the second half of the year. Our full year revenues reached RMB10.58 billion, representing year-over-year growth of 31%, the first auto vertical in China to pass the RMB10 billion revenue milestone.
In our advertising and subscription business, we achieved a revenue of RMB1.16 billion for the fourth quarter, representing a 15.2% year-over-year increase from the same period in 2017. Our revenue from advertising and the subscription business for the full year 2018 reached RMB4.07 billion, representing 13.5% growth. As part of our efforts to strengthen our media business, we introduced our upgraded Bitauto media app in October 2018. Since then, the app has seen significant growth in traffic, daily sales leads generated and the user time spent. According to Questmobile, daily active users of Bitauto media app in February 2019 were up by 135% as compared to October 2018.
In our advertising business, we continue to see new managing vehicles emerging as a growth driver. Advertising revenue from new energy vehicle manufacturers are those still relatively small in absolute terms, grew 19 times year-over-year in the fourth quarter and eight times for the full year 2018. We anticipate that this robust growth momentum will continue in 2019.
In our subscription business, we further improved ARPU in the quarter to -- mainly to the migration of more members to premium service packages with the penetration of premium packages reaching 74% up from 63% in the corresponding period last year. We also made progress in building out our independent dealer network and covered 22,000 independent dealers, although which we serve -- we service more than 35,000 salespersons in the fourth quarter of 2018. As of end of February 2019, we have developed over 1,000 paying customers among China's independent directors.
In our transaction services business, Yixin delivered steady results as its services continued to gain traction in the market. Yixin facilitated approximately 143,000 financed automobile transactions during the quarter with loan facilitation services accounting for 60% of Yixin's total financed automobile transactions, up significantly from 24% in the previous quarter. We expect Yixin's loan facilitation services to continue grow in the following quarters.
Looking ahead, although new passenger vehicle sales remain softer at the beginning of 2019, we are cautiously optimistic about the outlook of China's automobile industry this year. While in January, wholesale figures, the new passenger vehicles were down 18% year-over-year; retail sales figures for new passenger vehicles were up 23% year-over-year. Signaling the automobile dealers have been clearing up their inventories. We expect the new passenger vehicle wholesale market in China just stabilizing gradually recover throughout the course of the year.
As our content services become increasingly attractive to car buyers, our marketing solutions are also become increasingly effective for our OEM and our dealer customers with higher measurable ROI. We believe we will continue to gain wallet share against traditional media, which was down 9% year-over-year, overall, in January, according to CTR market research. As we remain dedicated to executing our core business strategies, we're confident in building Bitauto into China's top online auto media and the transaction services platform.
First, we will continue to improve content and the user experience on the upgraded Bitauto media app to further solidify our leading industry position. With a wider range of engaging, user-centric content, we expect to see continuous increase in traffic, usual time spent and a number of high-quality sales leads generated. Our Bitauto media app's ability to fulfill user needs across the entire automobile consumption cycle including automobile research, purchasing, ownership and replacement is driving popularity among automobile consumers. We believe this will be a key factor in helping Bitauto to gain further share this year. Also since then, over 70% of users log on before they browse our media app's content, we are able to optimize our user profile database and improve the quality of the sales leads generated and increased the percentage of organically generated sales leads. We believe our upgraded media app will continue to enhance the value of Bitauto brand and they help reduce our customer acquisition costs going forward.
Second, we will drive incremental revenue growth in our advertising business through data products that provide automakers with integrated results-driven marketing solutions. Building upon our extensive industry knowledge and AI and big data analytic capabilities, our data products will allow automakers to roll-out roughly targeted -- sorry, to roll-out highly targeted advertising, content and the marketing campaigns to achieve higher conversion results. For example, our AI marketing engine is able to adjust content distributed just specific users based on analysis of their browsing history with position down to the second. This will greatly enhance the effectiveness of advertisements on our media platforms, improving user experience and the increased user stickiness. We target to roll-out and optimize our data products throughout the course of 2019.
Third, we will further develop our independent dealer network and expect to start monetization this year. As our subscription products already enjoy a high penetration rate in the new car 4S dealer market, we're looking to further drive subscription revenue growth by offering tailored solutions for independent dealers, a vast and under-tapped market segment in China.
Fourth, Yixin will remain focused on rapidly expanding its loan facilitation service business, which is highly scalable and features a more attractive margin profile than its self-operated financing business. We believe that Yixin is well-positioned to gain market share in the auto finance industry.
With that, I'll turn the call over to Ming to go over the financials.
Ming Xu -- Chief Financial Officer
Thank you, Andy. Good evening, everyone. Despite the lackluster industry environment, since the second half of 2018, we closed this year -- we closed the year of 2018 with solid top-line growth in the fourth quarter, which exceeded the high-end of the company's guidance and marketing consensus. Thanks to strong results across our advertising and subscription as well as transaction services businesses.
Yixin saw healthy top-line results driven by higher accumulated volume in its self-operated business as well as rapid growth in its loan facilitation business. While we incurred additional marketing expense during the quarter due to marketing campaigns to support our upgraded media app, we still saw margin expansion within our advertising and subscription business for the full year. Looking forward, with these factors behind us, we are optimistic about our margin outlook as we continue to benefit from operating leverage and cost from optimization measures. And as Yixin enhances profitability through accelerating growth in the loan facilitation business.
Now, let's look at our Q4 and full year 2018 financial highlights before moving to Q&A. While Q4 2018, Bitauto reported revenue of RMB3.12 billion, US$453.7 million for the fourth quarter of 2018, representing a 25.2% growth from the corresponding period in 2017. The increase in revenue was attributable to the growth of the company's transaction services business, advertising and subscription business and digital marketing solutions business.
Revenue from the advertising and subscription business for the fourth quarter of 2018 was RMB1.16 billion, US$169.1 million, representing a 15.2% increase from RMB1.01 billion, US$146.8 million in the corresponding period in 2017. Revenue from the transaction services business for the fourth quarter of 2018 was RMB1.56 billion, US$227.3 million, representing a 32.5% increase from RMB1.18 billion, US$171.5 million in the corresponding period in 2017, mainly attributable to the revenue growth of self-operated financing business and loan facilitation services. Revenue from the digital marketing solutions business for the fourth quarter of 2018 was RMB393.7 million, US$57.3 million, representing a 29.7% increase from RMB303.6 million, US$44.2 million in the corresponding period in 2017.
Cost of revenue for the fourth quarter of 2018 was RMB1.43 billion, US$207.7 million, representing a year-over-year increase of 52% from the corresponding period in 2017. The increase was primarily due to increased funding costs related with Yixin's self-operated financing business, increased commissions associated with Yixin's loan facilitation services, and increased costs associated with sales of automobiles. Cost of revenue as a percentage of revenue in the fourth quarter of 2018 was 45.8%, compared to 37.7% in the corresponding period in 2017.
Gross profit for the fourth quarter of 2018 was RMB1.69 billion, US$246 million, representing an 8.9% increase year-over-year. Selling and administrative expenses was RMB1.94 billion, US$282.5 million for the fourth quarter of 2018, representing a 7% decrease year-over-year. Product development expenses was RMB133.4 million, US$19.4 million for the fourth quarter of 2018, representing an 18.2% decrease year-over-year.
Share-based compensation, which was allocated to related operating expenses line items, was RMB421.6 million, US$61.3 million in the fourth quarter of 2018, compared to RMB527.7 million, US$76.8 million in the corresponding period of 2017. The decrease was mainly due to the options granted by Yixin to its employees in the second half of 2017, which created a higher comparison base.
Non-GAAP income from operations in the fourth quarter of 2018 was RMB265.4 million, US$38.6 million, a 184% increase year-over-year. Net loss in the fourth quarter of 2018 was RMB398.3 million, US$57.9 million, compared to a net loss of RMB803.4 million, US$116.8 million in the corresponding period of 2017. Net loss attributable to Bitauto in the fourth quarter of 2018 was RMB416.7 million, US$60.6 million.
Non-GAAP net income in the fourth quarter of 2018 was RMB199 million, US$28.9 million, a increase of 101% year-over-year. Non-GAAP net income attributable to Bitauto in the fourth quarter of 2018 was RMB118.6 million, US$17.2 million.
Basic and diluted net loss per ADS, which represents one ordinary share, in the fourth quarter of 2018 amounted to RMB5.38, US$0.78 and RMB5.38, US$0.78, respectively taking into consideration of the accretion of redeemable non-controlling interests amounting to RMB7.1 million, US$1 million.
Non-GAAP basic and diluted net income per ADS in the fourth quarter of 2018 amounted to RMB1.58, US$0.23 and RMB1.45, US$0.21, respectively, taking into consideration of the accretion to the redeemable non-controlling interests amounting to RMB7.1 million, US$1 million.
As of December 31st 2018, the company had cash and cash equivalents and restricted cash of RMB9.37 billion, US$1.36 billion. Cash provided by operating activities, cash provided by investing activities, and cash used in financing activities in fourth quarter of 2018 were RMB489.2 million, US$71.2 million, RMB1.2 billion, US$203.7 million, and RMB1.49 billion, US$217.2 million, respectively. I only go through a few selected highlights for the fiscal year of 2018 and basically cover the details in our earnings release.
Revenue in 2018 were RMB10.58 billion, US$1.54 billion, representing a 31% increase year-over-year. The increase in revenue was attributable to the growth of the company's transaction services business, advertising and subscription and digital marketing solutions business.
Revenue from the advertising and subscription business in 2018 was RMB4.07 billion, US$592.6 million, representing a 13.5% increase from RMB3.59 billion, US$521.9 million in 2017. In particular, our core advertising and subscription business, which excludes contributions from its subsidiaries in which we hold controlling interest, grew 17.9% year-over-year for the full year.
Revenue from the transaction services business in 2018 was RMB5.37 billion, US$781.2 million, representing a 49.8% increase year-over-year from 2017, mainly attributable to the revenue growth of self-operated financing business and loan facilitation businesses. Revenue from the digital marketing solutions business in 2018 were RMB1.13 billion, US$165 million, representing a 25.7% increase year-over-year.
Gross profit in 2018 were RMB6.34 billion, US$921.4 million, representing a 16.7% increase from 2017. Non-GAAP income from operations in 2018 were RMB1.11 billion, US$161.6 million, a 26.7% increase from 2017.
Non-GAAP net income in 2018 was RMB934.7 million, US$135.9 million, a 30.1% increase year-over-year. Non-GAAP net income attributable to Bitauto in 2018 were RMB708.9 million, US$103.1 million. Non-GAAP basic and diluted net income per ADS in 2018 amounted to RMB9.62, US$1.4 and RMB8.9, US$1.29, respectively, taking consideration of the accretion to redeemable non-controlling interests amounting to RMB28.1 million, US$4.1 million.
Cash provided by operating activities, cash used in investing activities, and the cash provided by financing activities in 2018 were RMB678 million, US$98.6 million, RMB7.47 billion (ph), US$1.09 billion, and RMB5.01 billion, US$728.8 million, respectively.
The number of employees totaled 8,316 as of December 31st, 2018, including employees of entities in which Bitauto has acquired and holds controlling interests. This represented a 2.83% year-over-year decrease, primarily due to the decreased headcount in Yixin, following its strategic de-emphasis of used automobile transaction facilitation services. In addition, given Yixin's scale and significance to Bitauto, I would also like to share with you some of Yixin's operating and financing -- financial highlights for Q4 and full year of 2018.
In fourth quarter of 2018, Yixin facilitated approximately 143,000 financed automobile transactions, with the aggregate auto financing amount of approximately RMB11.3 billion, US$1.64 billion, through its loan facilitation services and self-operated financing business. In particular, Yixin's third-party loan facilitation transactions continued to gain momentum, contributing to 60% of total financed automobile transaction volume into the fourth quarter, up from 24% in the previous quarter. In the fourth quarter of 2018, through its loan facilitation services for partner banks, Yixin facilitated approximate 86,000 financed automobile transactions, a year-over-year increase of approximately 11 times from the same period of 2017.
In the fourth quarter of 2018, under US GAAP, Yixin's total revenues reached RMB1.59 billion, US$231.3 million; gross profit reached RMB614.7 million, US$89.4 million; net income was RMB17.3 million, US$2.5 million; and non-GAAP net income was RMB119.2 million, US$17.3 million. Yixin's non-GAAP net income is calculated as net income excluding share-based compensation of RMB67.5 million, US$9.8 million, amortization of intangible asset resulting from asset and business acquisition of RMB34.4 million, US$5 million, and offset by tax effect of RMB0.04 million, US$0.01 million. In the fourth quarter of 2018, Yixin entered into certain transactions with other subsidiaries of Bitauto, which has been eliminated upon Bitauto's consolidation of Yixin. The revenue that Yixin recorded for the services provided to those subsidiaries of Bitauto amounted to RMB11.4 million, US$1.7 million during the fourth quarter.
For the full year ended December 31st, 2018, Yixin's total financed automobile transaction increased by 21% year-over-year to approximately 484,000. The aggregate auto financing amount facilitated through its loan facilitation services and self-operated financing business was approximately RMB38 billion, US$5.53 billion, representing a 26% year-over-year increase. The accumulated total financed automobile transactions reached 1.1 million as of December 31st, 2018. In 2018, Yixin cooperated with six banks and facilitated approximately 144,000 financed automobile transactions through its loan facilitation services, representing a 15 times increase year-over-year and approximately 30% of total financed automobile transactions during the entire year of 2018.
For the year ended December 31st, 2018, under US GAAP, Yixin's total revenue were RMB5.53 billion, US$804.7 million; gross profit reached RMB2.48 billion, US$360 million; net loss was RMB182.9 million, US$26.6 million; and non-GAAP net income was RMB328 million, US$47.7 million. Yixin's non-GAAP net income is calculated as net loss excluding share-based compensation of RMB348.8 million, US$50.7 million, amortization of intangible asset resulting from asset and business acquisition of RMB163.1 million, US$23.7 million, and offset by tax effect of RMB1 million, US$0.1 million. In 2018, Yixin entered into certain transactions with other subsidiaries of Bitauto, which were eliminated upon Bitauto's consolidation of Yixin. The revenue that Yixin recorded for the services provided to those subsidiaries of Bitauto amounted to RMB96 million, US$14 million.
As of December 31st, 2018, Yixin has cash and cash equivalent and restricted cash of RMB5.65 billion, US$822.4 million, total finance receivable of RMB36.98 billion, US$5.38 billion, and total borrowing, including bank borrowing and asset-backed security debt of RMB30.2 billion, US$4.39 billion.
As of December 31st, 2018, 90 plus, including 180 days plus past due ratio and 180 days plus, days past due ratio for the -- all the financed transactions including the third-party loan facilitation were 0.92% and 0.42%, respectively; 90 plus days, including 180 days, plus days past due ratio and 180 days plus past due ratio for Yixin's self-operated financing business were 1.1% and 0.52%, respectively.
Under US GAAP, Yixin's provision for the credit losses of finance receivables in the fourth quarter of 2018 was RMB80.8 million, US$11.8 million, and for the year ended December 31st, 2018 was RMB519 million, US$75.5 million. The balance of provision for credit losses of finance receivables was RMB350.8 million, US$51 million as of December 31st, 2018.
With that, I will turn to guidance for the first quarter of 2019. Bitauto currently expects to generate revenue in the range of RMB2.47 billion, US$359.2 million to RMB2.52 billion (ph), US$366.5 million in the first quarter of 2019, representing a 13.8% to 16.1% increase from the corresponding period in 2018. This forecast takes into consideration of seasonality factors in Bitauto's business, and excludes any impact of foreign currency expansion -- fluctuation. It reflects management's current and preliminary view, which is subject to change.
Let's now start the Q&A session. Andy, myself, Xiaoke and Yixin's CFO, Catherine Liu, are available to take your questions. Operator, please go ahead.
Questions and Answers:
Operator
The question-and-answer session of this conference call will start in a moment. (Operator Instructions) Ladies and gentlemen, we will now begin the question-and-answer session. (Operator Instructions) Your first question comes from the line of Binbin Ding from JPMorgan. Please ask your question.
Binbin Ding -- JPMorgan -- Analyst
Good evening, and thanks for taking my question. My question is regarding your new version of Bitauto mobile app. We were seeing a pretty nice trend in terms of the DAU expansion during past few months. So can management give us some color regarding the feedbacks from dealers, auto OEMs or maybe individual users? And also how does the most recent operating matrix progress? And what is implication on monetization in the mid to long? My second question is on dealer subscription. You mentioned in your press release that you expanded your service to over 22,000 independent dealers, but so far, only 1,000 of them are paying accounts. So how shall we think about the revenue generation from these independent dealers in 2019? And what is our strategy to drive the monetization? Thank you.
Xiaoke Liu -- Chief Operating Officer
(Foreign Language)
Thank you. Let me take the first question.
(Foreign Language)
Now talking about our mobile app, we do see a trend of more and more DAUs and also in terms of the lease numbers and retention rate is also goes up. Now talking about the dealers feedback on us, as you know, the leads generation takes time and also it takes time for the dealers to really give us a proper feedback. So in the short-form, we would not expect them to give us a comprehensive feedback. However, in terms of the leads generation, the Bitauto app only accounts for portion of our leads generation.
(Foreign Language)
We believe that with the driver of a more and more DAUs and more and more leads, especially the quality of leads has been optimized, we believe that in the future, in terms of the dealers and OEMs, they would provide us with very positive feedback. We also have -- as you know, we have optimized our apps to better optimize the traffic. We also have enhanced our technology to be better adaptive to this environment by providing more divestment after good quality apps to enhance the product experience of our customers. And we believe that the feedback of the apps would be further pushed up by our users.
Ming Xu -- Chief Financial Officer
I'll pick up the second question, in terms of the penetration down to the second tier dealers. We've done -- throughout the last year of 2018, we've done quite a bit testings as to whether or not our SaaS-based products will be something that will be of an interest of the second tier dealer. We tapped into various different markets. The feedback has been fairly positive. Therefore that we have reached out to the number of upwards with 20,000. I think the addressable market with the second tier dealers, I'm looking at about maybe somewhere between 20,000 to 30,000 in total.
Moving forward, I think in monetizing with this second tier dealers, even though we've only done about 1,000 in the first two months, but this will be part of our strategy moving forward. Obviously, we have seen the growth of the new car dealers, or the 4S dealers has not been anything sort of more in the last few years. So therefore given that we already serviced somewhere around 25,000 for us. I think, the natural improvement will be actually thinking of the second tier.
Moving forward, I think over months, over months, over the course of the entire year, we will continue to add more fee-paying members. The ARPU that we're looking at potentially in the future, I wouldn't say that it will be directly comparable to that of 4S, but at least, I think a reasonable charge rate given that we have provide not only the lead gen capability, but also other additional functionalities that will be quickly adapted by these dealers who will also help us in terms of generating additional ARPU.
I guess, in the entire market there are few different types of potential subscribers to our Easypass platform; new car 4S dealers, second tier dealers, also potentially aftermarket services providers, as well as financial expertise. In addition to that used car, long-tailed dealers could also potentially be the targeted market. So while we're looking at five different types, we're moving, we're initiating our move into the first type, which is the second tiers dealers. But I think, as you know, given that, if we do achieve any success in this particular area that will continue to move into the other areas as well. Their demand of different service modules are little bit different, but in general, I think, customer acquisition, promotion and advertising, financing, inventory movement and the CRM are the naturally consistent four or five major functions that everyone's interested in. So we do see the similarities. We do see the consistencies among all of those potential players. So we're looking at this business to a larger scale than what it used to be. So that's just putting in simpler words. And given the success of what we tap into the second tier market that we will continue to move into additional territory as well. And so this is the strategy of the company moving forward on the Easy platform side of the business. Thank you.
Binbin Ding -- JPMorgan -- Analyst
Thanks very much for the color. Thank you.
Operator
Your next question comes from the line of Hillman Chan from Citi. Please ask your question.
Hillman Chan -- Citibank -- Analyst
Good evening, management. Thank you for taking my question. Could you share more thoughts on the autos OE advertising and dealer subscription revenue growth for 2019 on the back of lukewarm auto retail sales in China this year? And related to that, could you also update us on the year renewal so far, including the percentage of dealers that was paid and also renewed up till now into late March? Thank you.
Xiaoke Liu -- Chief Operating Officer
(Foreign Language)
Well, thank you for the question. Let me take this question. Well, if you look at the 2019's OEMs, the trend of their advertisement is, their marketing dollars are spent more wisely. And in terms of Q1, Q2, if you look at auto market in China, it's still a down market. However, the OEMs starting from the later half of 2018, they would pay more attention of the two results of the advertisement and how they can generate leads and then in terms of the conversion rate of the leads. So that's why the vertical website, like us, would benefit out of these circumstances.
(Foreign Language)
So that's why this year to better fit into the circumstances of results driven advertisement needs of the OEMs, we have launched the AI and the technology-enabled solutions for our OEMs. So that's why the OEMs would have a better results driven advertisements campaign under the financial pressure. So that's why OEMs would benefit out of our new products.
(Foreign Language)
One thing I have to mention is that we are very optimistic about the renewable energy cars and OEMs advertisement expenditure. We do think this year as the beginning year for the renewable energy cars to have a real outburst of the marketing dollars spend. In terms of the new brands, as well as the traditional OEMs who are going to launch more renewable cars, they are going to spend more in terms of renewable energy cars advertising and marketing. So we are quite optimistic about this market.
Ming Xu -- Chief Financial Officer
Okay. Hillman, I'll take your second question. Regarding dealer subscription renewal, so far we have renewed comfortably with close to 20,000 dealers and this looks bit slower than last year, but I guess would you -- as you have seen the weak sales in Q4 last year and in December of last -- December -- November, December last year actually, I think, calls a hesitation of dealers -- on the dealer side to renew the contract before Chinese New Year. But the good thing is that as we have mentioned in January and February, the retail sales actually have been pretty good. And we have seen industrywide the dealers inventory levels coming down. So we look to renew contract with another 1,000 or 2,000 dealers in the before the end of Q1.
Hillman Chan -- Citibank -- Analyst
Thank you very much management for the color. Thank you.
Operator
Your next question comes from the line of Wendy Huang from Macquarie. Please ask your question.
Wendy Huang -- Macquarie -- Analyst
Thank you. First, I want to follow up on the -- on your comment about the renewed dealers, 20,000 number. So that number is slightly lower than previous year. Is it because of the slower cost of sales, or is it because of the net decline in the total authorized dealer in market? And is it because of that or should we expect the total paying dealer number -- the authorized paying dealer number to also kind of decline further 25,000 level in 2019 as well. Certainly, there is a follow-up question on the traffic side. So given that your app traffic has more than doubled in just a few months' time, what was the percentage of the contributions on the organic traffic before October? And now where is it standing? And also, you mentioned earlier about lots of initiatives you're doing on the AI to help with the OEM? Can you elaborate a little bit further how those initiatives will actually help to increase the sales leads conversion rate, and also the eventual transaction for the OEMs?
Ming Xu -- Chief Financial Officer
Sure. On the dealer renewal side, as you know, every year from Q4, end of Q4 to beginning of Q1, we face some dealer -- from, we lose some subscription and then we add some new subscription. So this happens every year. The loss of subscription every year is due to like the close down of dealers and also like the turnover of our customers. So this year, as you mentioned, the number we have in Q1, so far we have in Q1 is, in term of a pure paying subscriber, which is lower than the last year. I guess it's partly, it's mainly caused by close down of offline dealers and also as I mentioned, some hesitation or slower than normal renewal process on the dealer side. But we do think that as time goes by, we will add on more subscribers from the dealer side. Your second question is about the...
Wendy Huang -- Macquarie -- Analyst
Organic traffic contribution?
Ming Xu -- Chief Financial Officer
The traffic contribution, yeah, sure. So in terms of, I guess, in terms of traffic, so we -- more than half -- more than half of our traffic are organic and I guess the more important factor -- benefit from the growth of our apps user base is on the self-lead side. So previously, as you probably know -- as Xiaoke mentioned, the lead from Yiche app is used to be -- used only account for a portion, rather small portion of our total sales leads, but that number, as you may have read from some third-party research, will lead -- the lead generated from the app has increased by most -- up to 10 times since the upgrade. And so the leads now from the Yiche app accounts for a much larger percentage of our total lead and because the leads from the app is organic and of higher quality than lead from other sources. So we believe that the overall quality of our sales leads is also quickly improving.
Andy Xuan Zhang -- Chief Executive Officer and Director
Just speaking from an overall strategy standpoint, I think, we pinpointed the capability of revamping the entire app at the later half of last year. And since content and as well as the data generating capability of that particular app has been really refreshing compared to the older version, I think the focus of the entire company has been really trying to drive the popularity of this particular application. Like some of the other players in the market, I think most people are adopting a single app strategy. Historically, we have two. The pricing app as well as user app.
Moving forward, I think we will be also more geared toward concentrating on the primary one and then making sure that particular app and the brand is a lot more well-known among the consumers. This is also coming from the success of this complete new revamping of the app. Obviously, we have not purely focused on the strategy prior to this entire renewal of the app, because of the content level, because of the original structure of that particular app is not capable of accumulating the data that we wanted to, which will be useful for various different matters. So in order to be suitable for our future growth, that's what we did in terms of in the fourth quarter. And ever since then, our focus has been on that. And also we've been able to deliver a pretty pleasant result in terms of this particular product as well as promoting this product in the last few months.
So moving forward, this will be the main thing and that's where we drive our organic traffic. This will be our driving of the high quality lead gens and as well as the collecting, recording and analyzing all of the consumers that comes to this data and being able to provide a push to different contents suitable for their individual demands. This also ties exactly with what we have been -- what we are looking to commercialize with the OEMs on the business side of the table where that the AI's and the big data were placed into a good part in terms of our product mix. I think Xiaoke can give you a little bit more color on the AI and data side of the effort. Obviously, last year, we were completely lacking of that, but this year, those will be the new addition of the weapons that we have in our arsenal, so to speak.
Xiaoke Liu -- Chief Operating Officer
(Foreign Language)
Now, I will talk about -- more about AI and big data products. As we mentioned, in terms of the OEMs marketing campaigns, we want to focus on more results driven solution. So that's why our AI and big data analytic capabilities, data products would allow automakers and the world OEMs to roll-out highly targeted advertisements. For example, they would have a more analytic tools to make prediction of their sales, they would have more precise recommendations of the products, they would have a more targeted marketing campaigns and that they can have a smarter call services. So in this way, we would enhance the OEM automakers, its product experiences. So our AI and big data driven products would be quite beneficial to them.
(Foreign Language)
We believe that the AI and big data would also help us to accumulate more data. If we accumulated more and more data and we can also optimize the algorithms based on realistic data, in this way, we can better upgrading our products by launching new versions and we can provide comprehensive and a smart and intelligence driven product. In this way, we can help the automakers to reduce the cost and enhance efficiency. So this results driven campaign they had already proven to be successful, and we would continue this approach, but deepen our relationship with the automakers and also help them to achieve better results. So in this way, we are going to roll this out to more automakers and also try to deepen our products.
Andy Xuan Zhang -- Chief Executive Officer and Director
Operator, next question please?
Operator
Your next question comes from the line of Monica Chen from Credit Suisse. Please ask your question.
Monica Chen -- Credit Suisse -- Analyst
Good evening, management. Thank you for taking my question. I have two here. First one, can management talk a little bit more about our cost control measures and how to drive the margin expansion in 2019, because I noticed the way we see our selling and administrative and product development cost decreased in fourth quarter. So should we expect that trend to continue in upcoming quarters or do we still expect to spend a little bit more to promote our updated Bitauto app? And my second question is about Yixin and Bitauto, because we see in this year, both companies have made a lot of achievements. So looking to 2019, so try to understand what are the new areas that Bitauto and Yixin are exploring in order to create more synergies and create more revenue opportunities. Thank you.
Andy Xuan Zhang -- Chief Executive Officer and Director
Sorry, we were on mute. You want to repeat everything?
Ming Xu -- Chief Financial Officer
Yeah. Sorry for that. I'll repeat our answer for the first question. So, yeah, we remain confident on the margin expansion for 2019, which is driven by two factors; firstly, it's on the BITA side itself. We continue to look at benefit from cost control on the admin side, on the headcount side. And also we look to offset some of our incremental spending on the app user app from a decreased spending on the -- our traffic acquisition from mobile website, which used to be a larger part of our traffic -- total traffic acquisition cost. And secondly, is the margin, the margin expansion was also supported by Yixin's business, as it quickly ramp up its loan facilitation business. We believe the margin profile for Yixin will also significantly improve from 2018 level.
Andy Xuan Zhang -- Chief Executive Officer and Director
The first -- the second question's answer to you is that, yes, we're exploring something very exciting and new. We looked at a lot of the larger ecosystems that, in the existence of the BATs. We realize one thing is that when you actually have different assets where that, they each generate their own customer acquisition, then they wind up keeping their customers for a period of time. It will be a good opportunity to introduce a structure similar to that of a membership to these consumers where we can create different value, not only on the customer acquisition side, but also retaining these customers in the future. So the movement moving forward or the new initiative moving forward will be something similar to that of the Alibaba's ADA member where that we have approximately current, not only fee pain, but existing consumers of more than 1.1 million as of last year for Yixin and they continue to grow quite quickly. And that part of the existing consumer who I would like to offer them additional member services, which also can help BITA to retain them as new customers as well as providing benefits to and the vice versa.
So that initiative will be actually, hopefully sometime this year taking place, not only between Yixin and the BITA, but also Taoche, but also additional players within our so called vertical ecosystem that includes other players such as car, parking garage apps and as well parking space apps, car washing apps, as well as the training and the traffic apps and whatnot. So these are within the reach of our immediate investees and the partners within this particular ecosystem. So this will be something that very new and exciting for the year and we're trying out. So the reason that we started this year is because Yixin's existing customer only reached 1 million last year. So to me, I think, the key for this entire membership to really become something valuable and the material is that each of the participants has to have their own pool of large number of customers. BITA, since we started registering where you actually view our content on the apps, not only on the primary Yiche app, but also the pricing app as well as other assets that we have. Yixin, undoubtedly, we're locking up the customer for the next 30-some months. Even though if its facilitation, we still have the right to work with these customers on different fronts. Similarly for culture and this list goes on and on.
So we're looking into very similar schemes such as Ali's ADA membership to provide additional values to my existing customers, simultaneously, helping each other to acquire new additional customers with a minimum level of costs. So this will actually take place, we're building up the team now. This would have our initial analysis and as well as a membership roll-out, hopefully, sometime in the third quarter. So this will be something that would be very new for us, but I think is definitely worth a try. Thank you.
Monica Chen -- Credit Suisse -- Analyst
Thank you, Andy, and (inaudible)
Operator
We are now approaching the end of the conference call. I will now turn the call over to Bitauto's CFO, Ming Xu, for closing remarks.
Ming Xu -- Chief Financial Officer
All right. Now, once again, thank you for joining us today. Please don't hesitate to contact us if you have any further questions. Thank you for your continued support and we look forward to talking with you in the coming months.
Operator
Thank you for your participation in today's conference. This concludes your presentation. You may now disconnect. Good day.
Duration: 60 minutes
Call participants:
Unidentified Speaker --
Andy Xuan Zhang -- Chief Executive Officer and Director
Ming Xu -- Chief Financial Officer
Binbin Ding -- JPMorgan -- Analyst
Xiaoke Liu -- Chief Operating Officer
Hillman Chan -- Citibank -- Analyst
Wendy Huang -- Macquarie -- Analyst
Monica Chen -- Credit Suisse -- Analyst
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