Fangdd Network Group Ltd. Q2 FY2021 earnings call

1. Real estate market dynamics: Low sales and tightened financing forced real estate companies to shorten cash conversion cycle; real estate companies are in a long-term digitalization process with a focus on digital marketing; the era of reckless competition on real estate transaction platforms is passing. 2. Core business progress: Total closed-loop GMVs reached RMB29.6 billion; revenue grew 37.9% to RMB401.4 million; gross margin improved by 36 percentage points; the number of active agents on the platform increased to 250,000, a 13% quarter-over-quarter rise. 3. Business line details: New property sales saw improved listing quality and expanded developer collaborations; property cloud SaaS solutions had early success in pilot projects; resale property business maintained steady development with revenue growth.

In the second quarter of 2021, Fangdd Network Group Limited's total closed-loop GMVs facilitated on the platform amounted to RMB29.6 billion. Revenue increased by 37.9% to RMB401.4 million. For new property sales, closed-loop new property transaction GMV rose 15.7% to RMB18.9 billion, and net revenue from new property transaction services grew 32.1% to RMB358.8 million. Regarding resale property business, core new resale property transaction GMV reached RMB10.6 billion, and net revenue from resale property transaction services jumped 114.4% to RMB40.3 million. Revenues from SaaS solutions soared 268.4% to RMB2.3 million. Gross margin improved to 15.6% from 11.4% in the previous quarter.

The company expects its revenue for the third quarter of 2021 to be between RMB250 million and RMB300 million, reflecting the current preliminary views on market and operational conditions, which are subject to change.

1. Bad debt reserve concern: A significant bad debt reserve was taken this quarter, related to strategic changes and market influences. 2. Market and policy impacts: Affected by COVID-19, regulations, and changes in developer fee structures, impacting GMV and revenues.

Q: Took a very large bad debt reserve this quarter, almost double of last year. Did any developers go bankrupt? Any hope of collecting bad debt?

A: Changed strategy to focus on gross profit, not directly related to developer bankruptcies; recycling of accounts receivable is normal, but will closely monitor developers with risk.

Q: Any hope of collecting some bad debt allowance back?

A: Recycling of accounts receivable is normal, but focus on developers' basic operations and commission payments, and will reduce cooperation with risky developers.