Fangdd Network Group Ltd. Q1 FY2021 earnings call

• Real estate market overview: New construction property scale maintained growth; real estate industry net profit margin declined in 2020; shift from development to service-oriented model dependent on digitalization; resale property market in first and second-tier cities maturing.
• Company initiatives: Upgraded new construction property business to provide superior services; accelerated offline expansion of resale property business using technology-enabled franchising systems; optimized management team, appointing new executives for resale and new construction property businesses; refined and upgraded SaaS solution for new construction property business with pilot partnerships starting.

New construction property's SaaS-based business: In the first quarter of 2021, the number of new construction property projects on the platform was 1,941, and distribution revenue was RMB270 million. Resale property business: Closed-loop resale property GMV reached RMB13.56 billion, an increase of 81.8% from Q1 2020. Revenue from the resale properties segment reached RMB18.8 million, up 183.6% sequentially. Revenue contribution details: New construction property distribution revenue was RMB270 million, resale property segment revenue was RMB18.8 million.

• Second quarter 2021 new construction property business revenue expected between RMB314 million and RMB370 million.
• SaaS solution expected to start generating revenues in Q2 2021.
• Resale property business revenue expected in the range of RMB40 million to RMB50 million in Q2 2021.
• Total revenue expected between RMB380 million to RMB420 million in Q2 2021.

• Risk of bad debts and low internal rate of return (IRR) from advanced commission payments.
• Need for effective risk control in supply chain financial products to mitigate potential negative impacts.

Q: About getting supply chain financing, how far off would that be to put that in place and how much of an improvement do you think that would make to your current business?

A: Last year, cooperated with about seven banks on supply chain financial, around RMB2 billion. Expanding cooperative initiatives, focusing on risk control for better impact on business.

Q: About the second quarter, expect increasing gross margins. But are you also going to be spending, or will the net loss decrease from Q1?

A: In Q2, will adapt proportion of revenue in business, SaaS begins to generate revenue, resale property and construction business grow rapidly, focus on efficiencies to raise gross profit and improve profitability.

Q: As far as the SaaS business, do you feel already that it’s going to be successful or if there’s still some risk that customers won’t be interested?

A: Believe new construction business market is in fierce competition, but will insist on gross profit, margin, and distribution efficiencies, have confidence in the field as resale property business enters growth period with income and profit growth