Fangdd Network Group Ltd. Q4 FY2020 earnings call

Management Statement and Operational Highlights

• Strategic Business Plans: Positioned as a pioneer in Chinese real estate service industry digitalization with SaaS solution at core. Established development roadmap with three key business segments.
• Agency Services: Upgraded SaaS offering, launched Duoduo property sales app version 5.0. In the fourth quarter, agent development system achieved a retention rate of 88.64%. Off-line service team expanded to 124 cities, and a digital registry for agencies covering over 1 million agents from 288,000 agencies was established.
• Developer Collaboration: Improved collaboration with developers. In the fourth quarter, new construction property projects increased. Launched property sales SaaS solution for developers, with pilot partnerships with over 30 top developers.
• Resale Property Initiatives: Partnered with Centaline, launched Yuancui platform with franchising system. Off-line transaction network with 11 managed centers in Shanghai, closed-loop transactions through the network increased sequentially.

Segment Performance

• New Construction Property: In the fourth quarter of 2020, the closed-loop transaction GMV was RMB30.9 billion, a sequential decrease of 6.25%. For the full year 2020, the closed-loop transaction GMV was RMB107.9 billion, a year-over-year decrease of 23.6%. In the fourth quarter, the number of new construction property projects on the platform increased to 3,479, a year-over-year increase of 11.26% and a sequential increase of 19.23%. For the full year 2020, 5,825 new construction property projects were served, a year-over-year increase of 24.15%.
• Resale Property: In the fourth quarter, the closed-loop resale property transaction GMV increased by 15.4% sequentially. For the full year 2020, the closed-loop resale property transaction GMV was RMB73.1 billion, a year-over-year increase of 15.26%. Through partnership with Centaline, the Yuancui platform expanded to 28 cities with 3,940 agents across 455 agencies.
• Asset Inventory: Continued to provide effective operation support services to help developers monetize low-turnover parking spaces, efficiently reducing inventory for developers.

Guidance

• 2021 focus on upgrading SaaS for agencies to ramp up new construction property transaction revenue.
• Aim to increase investment in developer service system with SaaS core to drive revenue growth.
• Plan to invest more in resale property to establish leading model and achieve breakeven.
• Forecast for Q1 2021 revenue: between RMB270 million and RMB290 million.

Risks

• Intensified subsidy competition in real estate agent sector, with short-term impact on sales performance.
• Government policies like property price caps and three red lines affecting developers' profit margins.
• Market competition leading to cost pressure for developers.

Question and Answer

Q: Given your change in strategy for this year, what do you expect gross margins to be going forward? And also, what are your plans for spending on operating expenses?

A: New property sales commission gross profit margin to remain at 15% to 20%. SaaS solution for developers has gross profit margin at 60% to 80%. Product development expenses expected to increase within 10% to 20%. Sales and marketing expenses increase expected to be minimum. Total operating expenses expected to have a minimum increase within 10%.

Q: Is the Chinese real estate market 100% back to normal or are you still recovering from shutdowns?

A: Basically back to normal. Anticipated transaction volume: new construction property RMB15 trillion, resale property RMB6 trillion. Government controlling prices affects developers' margins, creating opportunity for digital sales channel.