Fangdd Network Group Ltd.

Ladies and gentlemen, thank you for standing by and welcome to Fang Duo Duo Network Group Limited's first quarter 2021 earnings call. At this time, all participants are in a listen-only mode. After the management's prepared remarks, we will have a question and answer session. Please note that this event is being recorded. Now I'd like to hand the conference over to your speaker host today, Ms. Linda Lee. the company's director of capital markets. Thank you. Please go ahead, Linda.

Thank you, operator. Hello, everyone, and thank you for all joining us on today's call. The company has announced its first quarter 2021 financial result today. An earning release is now available on the company's IR website. Today, you will hear from our co-CEO, Mr. Zheng Xi, who will start a call with an overview of the current industry dynamics and the details of our development strategies in the quarter. Afterwards, our CFO, Mr. Pan Jiaorong, will go over the financials before we open up to call for questions. Our management team will deliver their remarks in Chinese, and I will provide English translations. Before we continue, we would like to refer you to our safe harbor statement. in our earnings call release, earnings press release, please apply this call as we will be making forward-looking statements. Please also note that we will discuss non-GAAP measures today, which are more thoroughly explained and reconciled to the most comparable measures reported under the generally accepted accounting principles in our earnings release and the filing with the SEC. With that, I will now turn the call over to our co-CEO, Mr. Zheng Xi. Please go ahead, sir.

Hello, everyone. I'm Zheng Xi. Welcome to the phone call of the first quarter of 2021. First of all, let's talk about the changes in the industry in the first quarter of 2021. First of all, The scale of the new housing market is huge and has maintained a certain growth. However, the three red lines drive developers to pursue high-speed transition, which is more important to the ability of marketing to devise. The data of the National Bureau of Statistics shows that in 2020, the sales scale of Chinese commercial housing reached 17.4 trillion yuan, which increased by 8.7%. The scale of the new housing market continues to maintain growth. As of 2021, The growth rate of 44 developers' sales targets is 11.85%. People maintain a relatively high growth level. Developers' demand for scale is not small. Therefore, under the background of the three red lines policy, developers will pay more attention to the construction of marketing blockchain capabilities, and further accelerate the speed of circulation. On the second hand, The policy between the three lines leads to a rapid decline in the profit rate of developers. The cost of marketing is reduced, and the price of retail has become its core pain point. According to the data of WEND, the overall profit rate of the real estate industry in 2020 is 9.85%, with a decline of 1.19%. The net profit rate of the industry continues to decline, reaching the lowest level since 2015. and the two central policies of the Ministry of National Security and Security in the first quarter further promoted the rise in land prices. According to the KOL data, in October 2021, the interest rate of land transactions in key monitoring cities skyrocketed to more than 25%. The profit-making rate of investors continues to decline, land costs continue to rise, and the addition of new housing channels In the context of the constant growth of the rate, the demand for developers to reduce their costs is very strong. Thirdly, developers are also actively striving to transform. Through the construction of digitalization capabilities, they strive to transform from development to service, and pay great attention to digitalized industry coordination and extension of business. As the real estate industry slowly enters the storage era, the use of real estate from the development gradually turned to asset operation and service. This requires real estate companies to switch from the development model of the past to the sophisticated operation and service model. And the core of the sophisticated operation depends on digital ability. Typical houses, such as Biguiyuan, Xingcheng Konggu, Longhu Group, etc., have set up a digital development center to create their own digital ecology. Fourth, in the core of the first and second-tier cities, the capital of the second-hand market and the credit period for city renewal businesses are gradually coming. As the Chinese real estate market continues to mature, more and more cities are entering the second-hand market era. Shanghai, as a super-large city with a long triangle, the second-hand market exchange rate reached 120 million yuan in 2020. It accounts for 16.5% of the country's volume. The second-hand housing flow rate reached 2.7%, which is 1.1% higher than the national average level. The market volume and activity level are among the top in the country. We are concerned that in the long triangle area of 2020, in addition to Shanghai, Nanjing, Hangzhou, Ningbo, and other second-hand housing transactions have entered the top 10 in the country. In Shanghai, which is the corner of the Yangtze River, its second-hand market shows a huge cash and city renewal space. In the first quarter of 2021, VendorDuo continues to surround a platform with a strategic layout of three core businesses, relying on the business platform. The new house business uses the service of developers as a guide to make model upgrades. The second-hand business Using the new technology alliance and innovative asset operation model to quickly advance offline layout First of all, let me introduce the business platform Business platform stable development Fondot economic business platform It persists in the nature of open and independent technology rich people Continuous through the economic business of SaaS products Job standardization, process optimization Continuous improvement of product usage connectivity First quarter The platform's active agents are 22.1 million. The growth rate is 1.2% compared to the first quarter of 2020. From the three business aspects, the first business, the new housing distribution business, continues to take effect with the new model, focusing on the construction of profit and loss. The current market competitors are mainly through electricity, to avoid the return of single units. 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In the first quarter, we served a total of 1,941 new projects, and achieved a sales revenue of 2.7 billion yuan. The second aspect is the cloud defense SaaS business. In line with the demand of digital marketing for developers, our cloud defense business completed the product online, and started the cooperation of NVP with dozens of developers. In the first quarter, on the one hand, we continued to polish and upgrade products, and on the other hand, we promoted the four-point cooperation of key developers. The anti-cloud SaaS business will begin to generate revenue in the second quarter. In the first quarter, anti-cloud SaaS has launched the door-to-door smart recommendation, merchant dynamic, sales network, and new features such as high-idea visitor reminder, to help on-site sales to quickly launch economic merchants at the B-end. At the same time, the anti-cloud app has also been released through a private marketing tool. Supporting developers to launch live broadcasts, short video guests, building, one-shot VR, 11-page user online viewing, etc. Fangyun continues to promote 4-point cooperation with the platform's key developer group. Since the first quarter, Fangyun has signed a partnership with 42 hundred developers, including Bigoyen, Wanke, Rongchang, LiDi, Fuli, and other 22 top 30 companies. Third, In terms of second-hand business, VendorDuo is based on innovative business, focusing on the core market and rapid development. In the first quarter, the company's second-hand business must pay JNV 135.6 billion yuan, which is 81.8% higher than in the first quarter of 2020. YuanCui has opened up a new technology model that is leading the industry. TingHaoZhu Business has opened up a new technology model The city has updated its business model and achieved rapid development. In the first quarter, the income of the second-hand business is 1880.8 million yuan, which is 183.6%. It is expected that the income of the second quarter will show a fast growth. In the first quarter, the original business is centered in Shanghai. National cooperation and collaboration In the first quarter, The asset yield rate of the three sets reached 15% to 20%. The sales period of the house is 22 days on the platform. The asset growth rate and transaction efficiency are significantly higher than the current level of the industry. With the advance of the business layout, we also actively strengthen the upgrade of the talent structure. In the first quarter, in terms of team upgrade, In our second-hand housing business, Mr. Liu Tianyang, the chairman of China's top-notch industry, is joining the company as a senior vice president. On the basis of the original business, he is fully responsible for the second-hand housing and offline innovation business. The internal integration and external expansion accelerate the development of second-hand housing. In the new housing business, The company has newly appointed six excellent young city general managers in the post-90s. Under the background of rapid digitalization of the new housing market, it has strengthened the adaptability of talent withdrawal. Finally, I would like to share with you the expectations and expectations for the future of Fang Duoduo. In the second quarter, Fang Duoduo's new housing distribution business will continue to pass product We expect that in the period of business development, we expect that in the period of business development, we expect that in the period of business development, we expect that in the period of business development, More than 50 developers are on-line operating the SaaS operating service system, promoting cooperation with key developers, and carrying out business cooperation in 18 offline cities. In the second quarter, it is expected that SaaS business will begin to generate revenue. In terms of second-hand housing, second-hand housing business will enter a growth period. The size of the store and the turnover of the GMV will grow. The second quarter of the second-hand business income is expected to rise from 40 million to 50 million. In the second quarter of 2021, we expect the overall income of the company to be between RMB 3.8 billion and RMB 4.2 billion. This prediction also reflects our market and operations. Let me translate this part. Hello everyone and welcome to our first quarter 2021 earnings call. I would like to start off the call with a review of the real estate market in the quarter.