Q3 2020 Fangdd Network Group Ltd Earnings Call

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This event is being recorded and will not like to hand the conference over it. Speaker hosted a mr. Warren Financial controller of the company, please go ahead.

Yeah, thank you operator. Hello everyone and thank you all for joining us on today's call. The company has announced a result today and earnings release is now available on the company's websites. And today you will hear from our co-ceo Mister Johnson who will start the call with a review of our progress and the current industry Town makes and the details of our development strategy in this quarter this quarter afterwards our CFO. Mr. Pendulum will go over our credentials before we open up the calls for questioning. Our management team would deliver their remarks in Chinese and I will provide the English translations. And before we continue I would like to refer you to our Safe Harbor statement in our earnings, press wage, which applies to this call as well and we will be making forward-looking statements. And please also note that we will discuss non-gaap measurements today which and more thoroughly explains and reconciles.

To the most comparable meshes reporting under the generally accepted accounting principle in our earnings release and filings with the SEC. And with that I will not turn the call over to our code. Mr. And please go ahead.

Aha was then she at all from hello everyone and Welcome to our third quarter 2020 running scope month. So what you eat, you know the highlights I would like to share an update on the current state of the relative Market in China.

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so proposition sections and the transaction Services have maintained their growth trajectories according to

So live in your total property transaction value in China to put your key to growth of the 9.3% which in R&B 27.6 trillion and twenty twenty-three while to the real estate transaction facility for agent in China is expected to grow that the kangaroo 49.4% witching and the 13.6 trillion in 2023 in particular the transaction Choice market. It's been growing sadly as to the total value of the property transaction service is expected to reach on be 343.6 billion by 23 at the Kangaroo the 22.6% the total value of the resale property Inspection Services is expected to reach be $229 billion by the year twenty twenty-three growing at a kegger of the 20.6%

The audience off WeMo bath so she's dead. So how soon and the second realistic Regulators announced the establishment of the lines three lines policy for domestic real estate developers in October twenty. This policy has effectively introduced feelings for the debt-to-cash get to exit and the objectivity ratios of a real estate developers as a result of the new age.

The real estate developers are now being forced to place a great exerciser in celebrating the sales collecting the accounts receivables am reducing the adapt. This shift has encouraged developers to rely on real attentions to Greater portion of their cells and start utilizing other channels reduce their inventory based off on National control of the statistics and our own analysis. The total value of the developers parking space inventory has waged R&B 1.5 trillion and the total value of the Community Centre business and property has reached the 13.2 trillion as of March 13th, 2020. The ability to quickly reduce inventory has become an essential component of the developers strategy to better manage their business and their cash flow.

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Basal rate of Agents of this has maintained a stable in terms of resale properties and sections dependent change the rate of Aging Services for new construction property transaction has grown grown. Now meanwhile within agencies we have observed that the majority of Highly capable agents continue to deliver the a lion lion share of quality issue resolved. Therefore, we believe that aggregating capable agents will be the key to unlock our future growth potential.

You see the answer does to enjoy your food she died. She took off each hand on Thursday. And then on the subsidy competition between platforms speak, Diaz as platforms a leveraging the capital funding to offer higher commissions or subsidies to quickly gain market share.

Tickling for example, we have the same platform super white thing advances of a commission in several projects in full with additional incentives Fortune section ranging from 1000 to 2000 for each closed deals. And in other cities including some high-end package also following up this chant. However, this subsidy is in commission of answers have been pushing up the developers commission costs while forcing real estate agencies to be on sheer quantity of agents to achieve their results.

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Despite the intensified and Market competition. We have still found that the demand for technology in the relative service industry remain strong as technology continues to be essential for agents to conduct their business and provide their services our online Solutions, five key elements of the construction progress our process including property listings customer online reactions and real estate agent online services and the transaction management online services and the transaction service fee payment would be online as a result. Our solution has a significantly improved about the transaction efficiency and the user experience.

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Based on how accumulation of a valuable experience in the past nine years. We have implemented three Majors the optimizations in the third quarter the first first strategic of optimization, we made with our decision not to offer any subsidies customer advances or advances for food commissions instead. We plan to leave our sights offerings and the technology to empower more small and medium-sized agencies, which also improve our ability to facilitate closed-loop transactions off from our perspective The Vicious subsidy competitions, not a long-term solution for the industry nor does it help to improve the market overall efficiency as such a short-term performance in the market is unsustainable. The last section sections have relatively low frequency and the average annual turnover rate of Agents is typically more than birth.

Sam's they healthy and sustainable relationship between the platform and its agents cannot be built on subsidies. We believe that the future of a realistic industry live in Virginia technology to improve once operating efficiency standardizing their services and implementing appropriate to timelines.

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Align with our first strategic optimization. We have remained committed to utilize to utilizing our staff solution to empower our agent Partners, which we believe is at the core of our long-term economic mold as such we continue to upgrade our total property sales start solutions in the third quarter agency still got the market. They just lose their solution through their agents private Network by leveraging official accounts and Minnie program on beach at our service Lane Naples agencies that attract customers through the release of introductory videos for high-quality property listings. Meanwhile, we have also developed a new features to help agents refine the operations without the different stage of with throughout the different stages of their careers, for example during this quarter we introduced

I series of a marketing incentives including new user creation Awards and the property viewing price and to to stimulate agents activity. We also introduced a platform coupons as as a compliment to this marketing incentives as well as an agent development system, which has helped agent banking transaction more effectively while augmenting the efficiency of of agency transactions and agent agency user acquisition efforts at the same time wage developments Innovative features to help agents. We find the operations throughout the different stage of their career to help enhance the quality of Agents work. For example, we live our ability to analyze to analyze it operating data of agents at the individual level to gain an in-depth understanding of agent needs in relation to wage.

Slow procedures customer management and other area at different levels.

Those of development through this analysis. We have helped agencies to improve their management capabilities in number of ways such as enabling agencies to assign tasks to the agents online and set the reminders for agents keep responsibilities throughout the agents work process. These initiatives have happy new agencies in particular empowering those organizations to acquire customers and organize the property viewing faster. We have also addressed needs of of most small and medium-sized agencies for agent training increase the usage of our products and higher engagement on our platform as a result of Technology capability have enabled us to continue optimizing our Staff Solutions and service offerings and that's attract more agents to our platform in a month.

Quarter of the twenty-twenty the number of active agent on our platform exceeded 276,000 representing an increase of twenty 198% year-over-year Thursday the same. Of the 2019 more importantly in September the number of active agents on our platform increased by 12.9% year-over-year while the number of active agents on our upon which the monthly record high of 185000.

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Yeah, the goal of the seconds to teach it optimization is to maximize the number of agents that complete real estate transaction to use exclusively on our platform for this particular focus on utilizing our solution and operations services to empower those agents in our preferred agent aligned Network. This initiative will enable us to wage a Tri-Valley Mutual growth with our agents and enabled our transaction service capabilities over the long run.

Send you do not showing any time. So I shut off during the third quarter. We establish the Strategic cooperation with the Centerline group through this partnership. We plan to develop a leading search way technology-enabled franchising system in the office what quarter we are confident that ability to empower our agent will enable will help us to secure the exclusivity of our agent partnership over the long run and we have we have announced is overall cooperation with Centerline group and yesterday from the start to kro. Ji Kya, June 18th, June.

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In the last nine years. Our platform has accumulated over a million agencies result of what technology leadership Centerline group is based on displaced in Hong Kong and has been a thousand active in mainland China as well as Market since nineteen ninety years the combination of extensive experience in offline operations and sophisticated management system has made Centerline open of the past bills agent service providers in the center in this country as part of our partnership. We have jointly invested some money somehow eventually Information Technology Company Limited and this joint venture will focus on creating a new technology and the service oriented real estate agent model to further Empower those agents in our preferred agent Alliance Network here and Innovative and technology-enabled franchising system. Yep.

Newton young director of the Centerline group vice-president of the Centerline China property agency limited and the chairman of the China's real estate agent Union New Jersey serve as the president of this John Venture which console manage over 400 with agent shops online agent shops in China.

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Strengthening our offline resale Property Services probabilities and expanding the service offerings of our transaction service centers offline centers by utilizing our total transaction CRM. Our transaction service centers are able to fully digitized the management process of the transactions during the third quarter. We built an additional 10 self on transaction service centers and exotic established 241 online stores while while for the lifeline stores while expanding our courage to eleven cities in the South Bay Area to jaunt operations.

In addition, we have a provided online solutions from the transaction of commission payments today. We have already established Partnerships with Iraq and the bank of the communications and interface our system with both Banks to enhance the efficiency of the mortgage process.

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That's probably listings essential for agent to conduct their business. We continue to expand our property listing library in the order to better serve agency off on our platform. We can see that this is the core supply of of production materials for the for the for the agents Thursday. We further enhance our products and services to a real estate developer to expand our developer who work collaborations in our library for a new construction property. Just things by the end of the third quarter. We have Ford to strategic Partnerships with 25 top-tier developer in China. These Partnerships have enable us to age expand our coverage of the new property construction projects as well. As you grow grow. The number of new projects on a platform with the focus on those projects in case it he's dead.

as a result during this period the number of the new

Company projects and on a platform increase to 3479 representing an increase of eleven point $26 26% year-over-year and nineteen Point twenty 19.3% quarter-over-quarter in terms of our realistic related Asset Management business. We continue to expand our parking space pause business during this quarter executing try out new projects in seven new cities such as the Lan chong ching brutal and off since our edition of 9358 parking spaces.

In the in this quarter the total number of listed parking spaces on our platform which twenty-three thousand for a total value in the sense of worth a billion. We also continue to expand our property we Novation Services through our exclusive access to we sell properties as such we live in a cold in the whistle property renovation space to forge partnership with the leading provider of leading providers of innovation services and Indigenous environmental health Enterprises. This partnership enabled us to actively promote technology and health during our home renovation process to help our customers home better smarter and safer than before.

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So you said you do not take that off off the engine, and 2000's agencies by providing agency with the quality sort of solution digitizing agencies offline operations and becoming a long-term and reliable our line for our groceries agents. We will continue our conservative approach manage our risk diligently and execute those rotors strategies. They can generate long-term value going forward.

Lastly, let me share an update on our current outlook for the fourth quarter. We expect our strategic decision not to offer any subsidies agents will have a short an impact on our clothes look transaction for a new construction properties. However, we remain confident in our ability to continuously expand our age and the properly listing Library. We also plan to invest more in empowering those agents in our preferred agent Alliance Network through cooperation with Centerline and the establishment of the joint venture Centerline you entry which we believe will enable us to exactly small long-term and exclusive Partnerships with those same agents as a result. We expect our offering costs to increase in the next quarter.

In addition, we will be making a commitment to upgrading our service offerings including our platforms sticking news for agent strengthening of real estate developer Partnerships and expanding our company listing library in the fourth quarter of 2020 based on those expectations and assumptions. We are currently for calling I would Revenue to be between R M D 600 million and on the 700 million in the fourth quarter of the twenty-twenty. This forecast is based on our views of the market environment which are subject to change.

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All right.

Thank you. Mr. I will now provide a closer look into the third quarter Financial results before the game. Please know that all numbers are in terms unless otherwise to say that money Revenue in your third quarter of the 2020 was 819.1 Million which represented a decrease of 13.6% from 948 and in the same period of 2019 and an increase of 11% from 737.7 million in the second quarter of 2020 and the cost of the revenue in the third quarter of the 12 was 626.8 Million which represented a decrease of the 16.3% $749 for 1 million in the same period of 2019 and an increase of the 1.6% from 616.7 million in the second quarter of the twenty-twenty. The year-over-year decrease was mainly attract attributable.

to a decrease in

Payable to agents for the services they rendered which resulted from the decrease in conditions revenue from our transaction.

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Thursday at 5 and just actually buy the one piece and Jello passenger expenses in the circle of the twenty-twenty including share-based compensation expenses of the 26th. One point 1 million worth on the 168.8 million which represented an increase of 38.4% from 100 to 22 million in the same period of 2019 and increase of 9.7% from 153.9 million in the second quarter of the twenty two twenty

Darling Hindi Santi to the Social Security office and desist your body and then sell short questions on yourself only ten shop to our show. You can shut that. You need a jump box in Spanish in the third quarter of a 21.5 million, which was presented that decrease of the 60.5% from 3.8 million the same period of 2019 and the decrease 30.3% volume to nine million in the second quarter of the twenty-twenty decreases were primarily due to our reduction in spending our frame from promotion and marketing activity to Iraq proper listing from Real Estate sellers to our platform to our Marketplace and platform.

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Okay product development expenses in the circle of the Twins were $65 million as compared to seventy three point four million in the same. The 2019 and 717.5 million the second quarter of a 2020 the decrease on the year basis was primarily attributable to our commitment to the continued Opera.

station of our product development teams operating efficiency and and therefore lead to the decreasing the person ability expenses in the.

Do you sent you the one you say on weight off your life to continue things out to travel expenses in the circle of the twenties when we were 182.3 million as compared to forty four point eight million the same period of 2019 and 81 five million the second quarter of the twenty-twenty the year-over-year increase in general and I mean utterly destroy the expenses in the period including share-based compensation expenses were ninety million and the remaining increase of what the eight point five million wage.

Attributable to the first and increased head count and various expenditures to both improve our corporate governance and ensure compliance compliance relations in relation to our status as a real estate company and the second and increase in provision for doubtful status.

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That income in the third quarter of 2020 with 21.9 million as compared to eighteen point three million in the same period of the 2019 and the name of the 14 million in the second quarter of 2029. Non-gaap. Net income in the third quarter of the 2020 was 48 million as compared to eighty point three million in the same period of the 2019 and eleven or nine million in the second quarter of 2022 Chef keep the time about immigrants and they're waiting in our Lounge.

Okay. So basic and diluted the income for a d as in the third quarter of a 2020 World Series in one 28 and 0.26 respectively off in comparison of the basic and diluted net loss or in the second quarter of the twenty-twenty were both 0.18 while our basic and diluted net income the trouble to go to AutoZone in the circle of the 2020 were $2 and $1 respectively.

Yes, I am. I remain be sent him home. Give me a beat beat anybody else other September thirteen twenty twenty. We had cash and cash equivalents restricted cash and the short term investment of home, uh one thousand and seventy three point seven million short on time bowling of 447.9 million and 1/8 the banking facilities of 386 million for the third quarter of the twenty-twenty net cash provided by operating activities was 11.6 million.

Enclave today and operator we are now ready to take presents.

Certain Lisa. Maybe. It's an inch and someone will now begin the question-and-answer session. If you wish to ask question, please press one and your telephone and read for your name to be announced. If you wish to consult your request, please press the pound or hash key. And when asking a question, please State your question in Chinese first there immediately repeat your question in English for the convenience of everyone on the call. Again, it is star one.

There's no question at this time. Once again, ladies and gentlemen. If you wish to ask question, please press star one on your telephone.

We have the first question from the line of way home from UBS. Your line is not open.

And you said you wanted dead dead dead. We expect the primary distribution business the size of the business would be impacted in the short-term and we will plan to invest more in offline in the fourth quarter as well. So my question is how long would we expect to see the impact on the primary distribution business? And also what kind of offline Investments are we expecting to see dead?

and how

That impact our margin. Thank you.

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Okay, we believe through our continued strengthening on our staff solution offerings. We will continue improve our objective of the size of our active agents. For example, we have reached a record high of our active users in the in the September and we also upgrading our new page listings by the third quarter we have which record hi Don of our new property listing and number of new property listings. And so that way we are working we Endeavor to improve both on the activeness of our agencies and agents and also our new property listings however off because of the vicious competition on the subsidy and we still consider there will be a negative impact on the rate of closed-loop dead.

That is the agents and agencies who who close their deals on the platform. We have observed that some of the agencies have obtained the information on a new property listings on the platform. However, they close their deals on other platform. However, we believe this is not going to be long because all the competition is based on the property local of the gross profit. And therefore we forecasted the the competition on the subsidy game with last like one or two quarter and we believe after this and the our competitors and the competition landscape. We will be will become a more reasonable and stable after that then English in in respect of the investment on our own offline presence with the cooperation. Yep.

And how long ago been in particular the entry information technology company, we we continue focused on empowering our outstanding agent see on our platform and we Empower them with our online traffic. We kept working capital and authors of operation management and we have we we focused on forming and exclusive cooperation with this agents. And so that we can build up a uh war against build up a protection against the vicious competition like subsidies subsidizing off without Without Limits and therefore we believe this our key strategy going forward for the field quarters to come off.

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Right. We have we we have see a increase in our gross. Margin by this quarter Wireless. We have seen I haven't seen there is a decrease in the gross margin in our competitors. And that is the result of we have insist and we have long insisted not to offer too much subsidy in terms of the competition and in terms of our offline presence in in our investment took it offline agent stops. We both we we expect there will not be a significant increase in the offline presence in in in and it's just hit Revenue. So we expect the gross profit will will not be positively improved in the short-term.

I should have on his own. Thank you very much.

Thank you. You don't have any further questions on the line and a conference center is for closing remarks. Thank you.

Do I have any further questions operator?

There are no further questions at this time. I'll now hand the conference back to the dates percenters for closing remarks. Thank you.

Okay. Thank you everybody and thank you for joining this on this call, and this is my name's call now and thank you again.

Ladies and gentlemen that does conclude our conference for today. Thank you all for participating. You may now disconnect.

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