Q3 2021 Fangdd Network Group Ltd Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to Thank D. D Network Group Limited's third quarter 2021 earnings call. At this time, all participants are in a listen only mode.
After the managements prepared remarks, we will have a question and answer session.
Please note that this event is being recorded I would now like to turn the conference over.
Your host speaker today.
Linda Li the company's director of capital markets. Please go ahead.
Thank you cooperate operator, Hello, everyone and thank you for all for joining us on today's call. The company has announced its start to call at her conducted in one finance sugars out today.
And our news release is now available on our Companys IR website.
Today, you will hear from our co CEO, Mr. Chi Chow, who will start the call waste Oh mobile current industry dynamics and the details of what the investment strategies in the quarter.
Afterwards I will.
CFO, Mr. Joseph Tung will go over our financials before we open up the call for questions.
Our management team will do they will they are remarks in Chinese and I will provide the English translation.
Before we continue I would like to refer you to our safe Harbor statement in our earnings price rates.
Which applies to this call and we will break beam make him looking forward statement.
But he's also note that we will discuss non-GAAP measure of today.
More soulful they explained and reconciled to the most comparable measures reported under the generally accepted accounting principles in our earnings release and filings with the S. E C.
With that I will now turn the call over to our co CEO. Mr. <unk> Dong. Please go ahead Sir.
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Hello, everyone and welcome to our third called her 2021 earnings call.
I'd like to start the call with a revote, revealing some other changes and opportunities to weigh up its up in the real estate market Gallery in Dakota.
But the real estate market has reacted a quote a quote off and expected to continue its downward trend in the short term.
They are in the so called her impact at a macro economic regulation and the tightening of the smoke gauge long.
The real estate market as we update it could help.
According to the National Bureau of.
Stock is takes the total volume of their real estate transactions in China decreased by 17, 514.1% year over year to RMB four point to trading in the so called her a 2021.
According to data released by the real estate industry Digitization Research institution.
Total transaction volume for South property in the tier one suitcase decreased by 32% year over year in the third quarter of 2021.
The most notable year over year decrease occurred in Asia, which so.
So an 8-K, 1% decline in total transaction volume for Leer South property during the so called her up 'twenty or 'twenty one.
Market sentiment has become more bearish on the developer to correct. It.
Risk has been reviewed to the market in the short term, but also ties to have emphasized the appraisal.
Appraisal of.
Keeping the real estate market stable and protecting that like like.
Commit right and even interest of a housing consumers.
Accelerating the launch of a pilot prep kit tax reform schemes.
This suggests that the control and the regulation marish won't be relaxed significantly and nobody believed that a near term focus of the commentary means stabilization.
If the market expectations.
As a result, we believe the real estate market will continue its downward.
Kept it and get a trajectory in addition.
Addition, as real estate, there Fabrice I entering peak season full repayment of always eat that.
No credit risk, we will further intensify.
Second your real estate is that a prep increased investment in digital transformation.
First pet.
Onward trend and the competitive landscape continues to evolve.
With the era of the irrational expansion drive driven by high level rate to come in 'twenty and.
Differentiation among real estate, there that price continues to increase.
And the industry face declining margins and increasing computation with high inventory levels.
Most of the real estate market.
Nevada has realized that to refine the operations and management through Digitization is a long term solution.
All content. According to data released by the TMT past.
More than 90% of their real estate developers participants in the survey increasing investment in digital transformation in 2020 one.
26% of at least a rather press increasing their investment in digital transformation by more than 30% year over year.
This data indicates that they can talk transformation for me is an important area of investment for the amount of Paris.
However, they told transformation of their real estate industry at scale until early stage of development and the complicated landscape, it's faisel stable.
They indicated by the multiple factors such as transformation model options the founding mentor character it can.
Cause rate case, the characteristics of the management and the liability of the pilot.
Third under the current context of the housing is fully begin note post vaccination.
Computation, you the new prep kitchen distribution market your Huntington's they fight.
Driven by excessive supply.
Meanwhile, we are seeing a new market opportunities emerge from the real estate asset management service sector.
And due to the general office of the State Council issued an opinion of accelerating the development of affordable rental housing.
It gives states that idle in a efficient commercial officer's staff.
SAP choice.
Our housing and the other nonresidential building are allowed to be converted into affordable residential housing.
It's also encourage especially like large scale residential leasing enterprise to operate and manage affordable residential housing.
According to the win data all of Asia listed companies in China was 11, 25% in 2020.
Marc Malkin, our historical loans since the financial crisis in 2018.
As a result.
It's a bad project has argued to eat but as such dreadful lactation.
Right.
The title found.
And the stabilization there I E.
In addition bias and that are becoming more demanding in terms of surveys qualities and the transaction transpiration.
His parents.
As a result under the current contacts that house housing is for leading notes for speculation more innovation. So basically will emerge as the Reds out over the evolving needs of the government developers and consumers, which will drive product innovation and development.
We have a diversified service for the real estate assets.
Fashion, the accretion, but I did survey stays in the mall.
[noise], yeah, a radically changing not market environment, we continue to closely follow the evolving regulatory policies and Clive requirement to proactively adapt to change in the real estate market and agents service sector.
Implementing a number of NIS eight tapes.
But he adjustment our strategy strategic direction.
Our initiatives include proactively reducing the distribution of new properties.
Zero risk control efforts.
Focusing on our SaaS business on key accounts and establish a benchmark and quickly exploring their real estate as a service business.
While maintaining the efficiency of our operations.
We have adjusted our business scales play out and the strategic direction to improve the robustness and the compliance of our business operations.
And the same time, we have continued to exploring growth opportunities for the future.
First we adhere to maintain inclined to open operations and focus on cost control.
He was about government regulations on data security and privacy.
They graduate all our data quality cloud in the third quarter.
We also conducted a comprehensive reflect reached the fluctuation.
Our current production protected based on the regulatory requirements and achieved book lies in our management of users and agency information.
H S. So based on our Python, we improved operational capabilities for agent to stuff they need a focused market and its customers through a copper murderous.
I'll now hand, what conducted a comprehensive evaluation and optimization of our organizational and team structure.
The other hand, we enhanced the cooperation and the appeal, but there's all 50 integration between the different regions and areas.
However.
They were in the downward impact of the overall real.
The real estate industry.
Total number of close loop agents on our platform was $10 6000 in the third quarter.
Second.
In terms of a new property distribution business.
The proactive later.
The scale of the new property distribution and enhanced our risk control.
We focus on the business development in the youngest of the rave up the avatar, Guangdong Fujian enjoyed young coastal J T plotters and other key probing show capital cities.
And the same time, we trimmed it down our service team in non chrome cities.
Full cooperation with the bad parts, we also take initiatives to access credit risk and the folks and otherwise reliable developer.
Julie Ouch highway right of higher risk developers.
They're in our corporation, where red tape there, while it puts the credit worthiness and the Mark corporates corresponding provision for bad debt in order to control credit risk.
Following the conclusion of our corporation, we implement our pre established internal procedures to manage developers with a high credit risk.
With the aim of.
The matrix gate mitigating the risk of default.
We have developed a project evaluation index system based on the multiple criteria.
Including developers during the Suez project gross margin receivable cycle Commission split and so.
It's under evaluation without which selected Premier project with a high productive it protected and the credibility and to allocate additional resources towards human resources capital and technology bulky project.
Due to the impact of the market downturn and our pages of model adjustments.
Nope G M b of new property, what's the RMB nine three bidding and the number of new prototype projects. So what 1815 in the third quarter of 2021.
He took upgrading outbid for small doleful new properties, we establish business got it got it.
Cause I better take for asset management service.
We congratulate explore possibilities for serving in multiple categories.
It gets asset.
Also we have also continued to improve the capabilities for our pushing now in business development capital that.
And the risk control to promote our implementation of a high quality project.
[noise] third.
Well, our protease that solution business.
We've focused on key.
Key account and establishing a benchmark during this third quarter, we felt that the web to our corporation with a scaled down.
And integrate camped out internal sales management system without C and B apps.
Falling this system integration.
So again Dallas office, so flat shape staff in our C. App is stopped.
Aggregates real time information to get him Dallas priorities for new South and Phoenix with its internal system.
Allowing us to provide the Paris.
Seizures.
Precision online marketing services by leveraging our platform Big data and then now that takes.
At the same time, Ken Galvo is able to manage customer so it's self operating system.
That's reducing the transition cost of cooperating with us by me by me.
Our first solution.
And as of the end of the stuff caught her gum Gal has.
I have long had launched still take property projects using our SaaS solution digital marketing service.
In addition, we added the instant messaging messaging and telephone consolidate patient features to ourself system during the third quarter.
Enabling seamless connection between the homebuyers.
Agents and property sales galleries.
In the third quarter, our revenue from SaaS solution business increased by 8.8% consider she principally to RMB 3.2 meeting.
Fourth we are quickly reacting to their rapid crude down of their property red cell market in the two waiting two ways.
On one hand, we implement decade loose the loss control measures to subject potentially reducing the skills of a young business.
On the other hand, they've continued to X.
Executes.
You can always take asset service model in the race out publicly transaction services space, So our working how to protect.
We have to tend the healthy backlog in this segment.
Accelerating properties, south and optimizing our risk control model.
Although the impact of the marketing environment, our close loop Harris out public transaction G. M. B was RMB five nine bidding in the third quarter.
Lastly, please allow me to share an update on our current outlook and expectation you know.
Both cloth her Oh, all business development will continue to be based on our platform for agents.
In terms of our solution business, we will continue to deepen our cooperation with key accounts Q on lease our values in digital marketing. After this is coming integration.
In terms of new public asset service, where we'll continue to execute our strict risk control measures to manage their bilateral credit risk our new property distribution business.
And the same time, we will continue to develop our asset service full real estate cap rates, we will continue to do it.
Better life, our assets increased scale of the project we serve.
And the drip and drive improvement in our financial performances.
In terms of desert South property, we will maintain a reasonable pace of business development under the current marketing environment and they sure up plus.
Sufficient supply of the second half of the.
For sale housing.
So we refined our business model to a cheap stadia development.
Due to the downward trend of the industry environment, we face great uncertainty in the fourth quarter performances.
As a result, we expect our revenue in the first quarter to be between RMB why have just said take meeting and.
RMB 150, maybe less.
This forecast only reflects our current to prudently preliminary wheel on the market and operational conditions, which are subject to change.
With that I will turn the call over our CFO, Mr. Kelvin pants to reveal its called her financial without.
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Okay sure it went back on that.
Thank you see now I will provide a close the coach I'll do it and I was struck called her financial result in 2021.
I begin. Please note that all numbers are in RMB terms, unless otherwise otherwise noted.
Revenue in the third quarter of a 2021 they crashed by 15 57, 8% to RMB 169.2 mating from RMB 401 for me.
Second quarter opportunity to 'twenty one.
So consequently show the craze.
The sequential decrease was mainly due to.
Several factors.
First the real estate market continued downturn led to.
For eight five percentage Crane show the crashing total closed loop G M b facilitate our platform.
Second our strategic adjustments to our business scaled to manage a downturn in the real estate transaction market.
So the new property transactions so its fitness.
As such it does typically reduced our business scale to avoid.
Vinicius computation.
Photos with South property transaction service fitness based.
<unk> subsequently reduced our reentry.
Avoid fifth flood their doses in the third quarter.
Despite the current challenges, we continue to optimize revenue mix and prioritize the generation of revenue from value added services and the new business and initiate it.
Putting our SaaS solution for various platform, particularly pet.
Revenue from search solution increased by 38, 8% to RMB three one too many so called her over 2021 from RMB two three maybe in the second quarter of 'twenty to 'twenty one.
The increase was primarily attributable to an increase in the number of New Cup date project, which were pro white solutions for developers.
Yeah.
Costar revenue, even as the quarter with 22 into one day, Chris 551.
Eight to RMB 163.
3.2, mainly from RMB 338, nine maybe even the second quarter of 2021.
But they crashed towards a parameter due to the significant drop in <unk>.
Revenue for both new property and there is south property transaction services.
Richard without hedging update Chris in the commission fees payable to agents from the ASO is surrounded.
Gross profit in the third quarter of 'twenty or 'twenty, one they crashed by 19.4% to RMB six meeting from the <unk>.
<unk> six <unk> 2.5, maybe in the second quarter of 2020 one.
Gross margin in the third quarter of 'twenty or 'twenty, one decreased to three 5% from 15, 6% in the second quarter of 221.
The decline was mainly due to our strategic reduction of our three business to cut.
The low fares and our strategic adjustments to reduce our business scale to English output K transaction and a new property transactions.
Operating expenses in the fourth quarter with Trinidad to new one which included RMB 11, plus seven maybe you share based compensation expenses.
Christine by 54.3% to RMB 316 points for many from RMB 205.1, Lady in the second quarter of 2021.
They concluded on the 11th.
130, you share based compensation expenses.
Let's take a look at the breakdown of operating expenses for the third quarter of 'twenty I can do that.
Sales and marketing expenses in the first quarter of 2021 decreased to RMB eight six.
Six meeting from RMB 13.1, mainly in the second quarter of 'twenty to 'twenty one.
The decrease was primarily due to our optimization of staff come.
Our compensation for the sales department by where they are spending on our marketing activities related to the new property transaction services.
Our adoption of the registry business of our increased focus on new SaaS solution.
And the other value added services offered to various platform participants in the third quarter of 20th century one.
Product development expenses in the third quarter of 'twenty to 'twenty, one was RMB 40 points, the remaining compared to RMB six tape to pay for.
$4 five maybe in the second quarter of 'twenty or 'twenty one.
If there Chris what's the outreach both bolt to Chris you can push it now related expenses following our decision to hunt for their investment English search and divestment program trade business and.
Hey tend to focus on the research and development for our value added services and SaaS solutions.
General and administrative expenses in the third quarter opportunity to do a bond was RMB 267.5, maybe compared to RMB 127, 5 million in the second quarter of 'twenty or 'twenty one.
This increase was mainly due to two reasons first.
The increasing in provision of clean parament assets, such as the account receivable feel from developers and other accounts receivable from Church Act deposit.
Try on V 200 mm one nice meeting you.
Third quarter over 2020, one from RMB 70, 79.1, maybe in the second quarter. It will tend to do well.
Second based on our judgment regarding the continued downturn in the real estate real estate transaction market weight.
We've reduced or redundant staff to improve our operating efficiency and optimized our completion of our staff structure, which increased our current.
Correct.
Called her.
Everest expenses, all with the purpose of the long term expenses savi.
Net loss was RMB 355 meetings in the third quarter of 22, one which included the impairment of accounts receivable deal from developers because of tighter financial conditions as well as the impediment.
Well intelligent intangible asset and the accounts receivables deal from the individuals and the rates out of the company's subsea change shows it function reductions of certain trade business under the situation with continuous downturn of their risk reserve property transaction market is.
As compared to the net loss of RMB 130 night meeting in the second quarter of 2021.
Non-GAAP net loss was RMB 343.4, maybe in the third quarter of 2021.
Compared to a non-GAAP net loss of RMB 127.9, maybe in the second quarter I would tend to do well.
Basic and diluted net loss.
Erica depositor raised here in the quarter up 22, new wound with both RMB four important once III in comparison, our basic and diluted net loss contributed to contribute both to all of you know she is harder to put a dish in the second quarter often to do it contained what what both RMB 164.
Each ads represents 25 of our class a ordinary shares.
And the September 30th 'twenty to 'twenty one.
Cash and cash equivalents restricted cash and short term investment.
RMB 632 nine meeting.
Short term back Barry book, RMB 222 meeting.
And utilize our bank facilities of RMB 118 meetings.
We caught a contributed to keep our cash flow at CIT libel tagging crazy, the cash inflow and reducing the cash outflows to improve our abilities of going concern.
Understood cultural or 22, one net cash used in operating activities get Chris to be RMB.
12.8 meeting from RMB 53, mainly.
Mainly in the second quarter authentic container.
Holiday, Chris about RMB 40 point to make.
[noise]. This if this concludes our prepared remarks for today I'll pray talked about rite aid to take precedence.
So if DRAM Vinson gentlemen, even now begin the question involves the session. If you wish you all frequent should be spread.
One on your telephone keypad.
It needs to be involved.
Unless you can put the phone bill hatch the once again strong followed by one on your telephone keypad. If you wish to ask a question.
Yeah.
Yeah.
We have no further questions at this moment.
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Thank you all for your participation you may disconnect your lines as well.
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