China Index Holdings Limited
Q1 2020 Earnings Call Transcript
Published:
- Operator:
- Ladies and gentlemen, thank you for standing by, and welcome to the China Index Holdings Limited Full Year 2020 First Fiscal Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a presentation there will be a question-and-answer session. [Operator Instructions] please be advised that today’s conference is being recorded.I would like to hand the conference over to your first speaker today, Ms. Jessie Yang. Thank you. Please go ahead.
- Jessie Yang:
- Thank you, Operator. Hello, everyone, and welcome to China Index Holdings’ first quarter 2020 earnings conference call. Joining us today to discuss CIH's results are our CEO, Ms. Yu Huang; and Financial Controller, Ms. Lili Chen. After the prepared remarks, our management will answer your questions.Before we get started, I would like to remind you that during the course of this conference call, we may make Forward-Looking Statements, statements that are not historical facts, including statements about our beliefs and expectations. Forward-looking statements involve inherent risk and uncertainty. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statements. CIH assumes no obligation to update the forward-looking statements in this conference call and elsewhere. Potential risk and uncertainties include, but are not limited to those outlined in our public filings with the SEC, including our Form F1.Now I would like to walk you through our first quarter 2020 results, after which, Ms. Huang will answer your questions for the Q&A session.CIH reported total revenues of RMB132.8 million in the first quarter of 2020, an increase of 11.5% from RMB119.1 million in the corresponding period of 2019. Revenues from Information and Analytics Services were RMB61.4 million in the first quarter of 2020, an increase of 8.1% from RMB56.8 million in the corresponding period of 2019, primarily due to an increase in the number of customers.Revenues from marketplace services were RMB71.4 million in the first quarter of 2020, an increase of 14.6% from RMB52.3 million in the corresponding period of 2019, primarily due to an increase in the number of customers.Cost to revenue was RMB19.5 million in the first quarter of 2020, a decrease of 14.5% from RMB23.8 million in the corresponding period of 2019. Primarily due to a decrease in campaign costs, as offline campaigns were restricted or prohibited, due to the quarantine measures implemented in China in response to the outbreak of COVID-19.Operating expenses were RMB43.8 million in the first quarter of 2020, an increase of 32.7% from RMB33 million in the corresponding period of 2019. Selling and marketing expenses were RMB23.9 million in the first quarter of 2020 an increase the 12.2% from RMB21.3 million in the corresponding period of 2019, primarily due to an increase in personnel costs resulting from the growing number of selling and marketing personnel headcount.General and administrative expenses were RMB19.9 million in the first quarter of 2020, an increase of 69.7% from RMB11.7 million in the corresponding period of 2019. Primarily due to an increase in personnel costs to support our business expansion and the accrual of professional fees.Operating income was RMB59.5 million in the first quarter of 2020, an increase of 9.8% from RMB63.3 million in the corresponding period of 2019. Income tax expenses were RMB11 million in the first quarter of 2020 an increase of 7.8% from RMB10.2 million in the corresponding 2019. Net income was RMB53.8 million in the first quarter of 2020, an increase of 19.9% from RMB53.2 million in the corresponding period of 2019.Based on current operations and market conditions, Management maintains CIH's annual revenue for 2020 to be approximately RMB695.6 million representing a year-over-year increase of approximately 20%. These estimates represent management's current and preliminary review which are subject to change.Thank you for joining us today. And we are now open up for questions. Operator, please go ahead.
- Operator:
- [Operator Instructions] We have a first question from the line of [Antony Sheath] (Ph).
- Unidentified Analyst:
- Hi guys, thanks for taking the call and congratulations on the great results. I have got three questions. First one is with regards to the growth. I'm just wondering you guys could break down the growth between new clients price and also the cross selling to fund for this quarter and also just retrospectively for 2019?
- Jessie Yang:
- Please give me a second. I will translate for Ms. Yu Huang.
- Yu Huang:
- [Foreign Language]
- Jessie Yang:
- Hi Andrew, we didn't increase our prices during the COVID epidemic. And we also gave discounts to agency claims in consideration of everyone's economic realty during this time and so our growth is mostly due to an increase in new clients. And in terms of cross selling was strong, we didn't make the press release earlier that we have terminated the 60% revenue sharing agreement with firm. Thank you.
- Unidentified Analyst:
- Okay great. The next question, I have got is just in regards to your competitive position. So I know you guys say that you are the leader. I think there is one other guy out there. Who has the CRIC, I have asked around - it seems that they charge a little bit more than we do. Just wanted to get your thoughts on how our product differentiate between what they offer, why the prices are different. And also anything else you would like to add on this is what makes us different from everyone else?
- Yu Huang:
- [Foreign Language]
- Unidentified Analyst:
- Yes. our Competitors differentiate, if whether we focus on land sales more or whether the others focus on apartment sales more that type of thing?
- Yu Huang:
- [Foreign Language]
- Jessie Yang:
- Hi, Andrew. There are differences between the two companies, which is more focused on data services and SaaS analytics, as well as promotion, and research based on data. The CRIC is more of a broker.You can see from their annual report that they are mostly they do have brokerage services for new home projects, as well as alliances with other developers. Their consulting and data services represent a lower percentage of revenue.And in terms of product differences, they are mostly different from ours in that, for example, they do not have a land stuff tool like stage and also in commercial real estate or database and analytics. They do not have this service.And in terms of data, they are mostly focused on residential real estate as you had mentioned. Thank you.
- Unidentified Analyst:
- That is very clear. Thank you, guys. The last question I have is more in relation to, I suppose, the optics of the company or an ADR and as you know, there has been some controversy around Chinese, Americans listed stuff to the Chinese. I mean, business is very cheap at the moment, it is on a trailing - of like 3.2 it should be 10 times the price, right?And I think part of the reason is what I was talking about there with some of the controversy in the market. But another product that could be, because I mean, there is so much cash on the balance sheet half the value of the companies and cash of RMB407 million in cash, which is half the market cap.How are you thinking about the possibly doing some sort of like dividends or buyback. Just show that you are willing to give money back to the shareholders. I mean, I can't think of a better way to let the shareholders know that you care about them than giving them some money. If I can get your comments on that would be great.
- Jessie Yang:
- Okay. Thanks.
- Yu Huang:
- [Foreign Language]
- Unidentified Analyst:
- Sorry, just to clarify. The question is, how is the company thinking about dividends or buybacks in terms of buying back CIH's own shares. That is perceived as also returning capital to shareholders, right? So just to clarify.
- Yu Huang:
- [Foreign Language]
- Jessie Yang:
- Yes, Andrew, so we will make press release if we do plan to have a dividend or a stock buyback. So please follow us on IR.
- Unidentified Analyst:
- I mean, I know getting money out of the country is difficult. I mean do you have plans for an acquisition. Just as a common Chairman, who controls everything that happens at this stage? Just want to get aside from this checking what you guys are putting out in terms of news press. How do you think about these things, because I mean, it is fantastic company. And I think shareholders just want to see some sort of sign that you are thinking about returning capital. That is all.
- Yu Huang:
- [Foreign Language]
- Jessie Yang:
- So for the English speakers, because we are listed for less than a year, we do these type of preparations, but we are happy to discuss further offline. Thanks.
- Unidentified Analyst:
- Alright. Thank you very much. Thanks guys.
- Yu Huang:
- [Foreign Language]
- Jessie Yang:
- Thanks Andrew.
- Operator:
- [Operator Instructions] The next question is from the line of [Wei Chan] (Ph). Please go ahead.
- Unidentified Analyst:
- [Foreign Language]So the question is, we see that the Company's revenue and profits continues to grow at double-digit rate in the first quarter which is commendable considering the epidemic. And the question is we would like to ask management what is the overall plan for the business year? And where will we see growth in the next three quarters? Thank you.
- Yu Huang:
- [Foreign Language]
- Jessie Yang:
- Thank you for the question. Originally, I had not been for the epidemic, we did expect a higher growth rate based on our existing operations. Due to COVID-19, we do see a slower growth. And in the past quarter we helped our clients through the difficult time with our platform and tools which aim to improve their efficiency for their work.And to accompany our clients, during this typical time, we did not increase our prices for any for clients. And in Q2, we continue to provide our clients with our products and services and look forward to improving expecting the functionality of our products. And for 2020, we maintain our guideline of 20% overall growth. Thank you.
- Unidentified Analyst:
- [Foreign Language]
- Operator:
- The next question is from the line of [Josh Read]. Please go ahead.
- Unidentified Analyst:
- Thank you for taking my question and very pleased with the Q1 results or given the environment. I just had a couple of questions. I wanted to get a sense for where the businesses are fed in long-term. So wanted to get an overview of what is management's goal for the company over the next two to three years sort of in the revenues and profits?
- Yu Huang:
- [Foreign Language]
- Jessie Yang:
- So in 2020, I want to state our plan for growth, and in 2021, if you see a broad economic recovery globally, we believe that CIH will also perform very well. We do have a clear strategy and our focused on existing services and products.And for example, we do see to first increase the size and depth of our database. And we look forward to developing new products based on the database as a foundation, including tools to serve the real estate development industry.Our goal is very clear, which is to empower the commercial real estate industry through Big Data and innovative technologies, and we are keen on following the scope. Thank you.
- Unidentified Analyst:
- Okay, thank you. And follow-on question from that was given the size of the market and also given that the company has about 2,000 or so clients, how many new clients tend to come to me so realistically? Well I guess how many clients are there left for the company to acquire over the next two to three years?
- Yu Huang:
- [Foreign Language]
- Jessie Yang:
- So, currently, we have around 2,000 Enterprise claims. And on a per user basis, that number is actually much bigger because one company can have multiple accounts. So that is around 10,000 on an account basis.And for the future, actually, the potential for new clients is very big, because we are moving from enterprise usage to individual usage. So there are we have a lot of possible new accounts that can be opened. Thank you.
- Unidentified Analyst:
- Okay, that makes sense. But just on the enterprise clients, this individual clients, I guess an individual clients will probably have a much lower average spend. So I guess you can probably acquire loads more sort of individual clients, so I guess just to get a sense of the number, how many more enterprise clients is there less to acquire? And how many individual clients could we acquire at the same time?
- Yu Huang:
- [Foreign Language]
- Jessie Yang:
- So in terms of enterprise clients, we generally do not have enough clients since, the whole is still in the beginning stages of digitalization. The trend is towards increasing digitalization. And our Chinese clients on at the moment represent only the tip of the iceberg in terms of potential clients.Because we serve it's not only the real estate industry, but also real estate verticals, including property managers, commercial real estate, and commercial real estate brokers. So in that sense, we are really at the infancy and developments in China in terms of using online tools and online databases.And now more users are getting used to this method and these technologies for their daily work in our industry. So we believe we still have a lot of potential going forward.
- Unidentified Analyst:
- Okay, sounds good. And just my last question is kind of similar to Andrew's question just from the Company's cash balances. So I guess given the rate of cash accumulation, the cash balance for probably equal to market cap in a few years. So I wanted to just know and also know the company had a guarantee over Fang Holdings convertible debt. So I wanted to just know, does the Company anticipate having to repay Fang's convertible debt or develop any of us of acquisition opportunities that the company might use the cash flow?
- Yu Huang:
- [Foreign Language]
- Jessie Yang:
- So most of this information is in our most recent F1 annual report, and in the future we will announce these plans as they come to fruition, but at the moment we cannot discuss in public. Thank you.
- Unidentified Analyst:
- Okay. No problem. Okay, thank you.
- Operator:
- Next question is from the line of [indiscernible]. Please go ahead.
- Unidentified Analyst:
- [Foreign Language]So the question was due to the impact of the recent epidemic, most people can only work-from-home and maintain their social distance. So that resulted in a surge in demand for cloud sources in all industries. And so the question is regarding cloud services, and what is the current situation in your company's products and what can we expect from in the future for its use in our industry? Thank you.
- Yu Huang:
- [Foreign Language]
- Jessie Yang:
- So thank you for the question. In terms of cloud services, we did see an increase in the number of users. For example, for our land cloud, which we have been promoting for the past year. And we found an increase of 14,000 new users from Q1 during the epidemic. And we have a total of 60,000 registered users. And the increase in one quarter has been significantly greater than all of 2019.And through our land platform, we did have many online events for our clients and the public during Q1 and over 100,000 to 200,000 active participants join these events, each event. And this was great marketing for CIH.And we also have the CIH cloud, which is a database cloud that has cumulative 60,000 users. And we have new database clients moving to the cloud service, and that's around 10,000 users. And this helps our entire digitalization and online service, development and promotion for our products.And we also have a property management class, which is relatively new platform for property managers. And we are working currently to build this up. Thank you.
- Operator:
- Next question is from the line of [indiscernible]. Please go ahead.
- Unidentified Analyst:
- [Foreign Language]So the question is basically a breakdown of products. Based on database products, promotion products and analytics products.
- Yu Huang:
- [Foreign Language]
- Jessie Yang:
- So our products and services can be broken down into four sections. Our database products include databases bases based on land or cities, region, as well as enterprise. And they form different editions of our database products.And they cover data and information from the land sale to developments to the ultimate apartment or a commercial real estate. And these are to serve as a foundation for our analytic services and tools. And the database represents subscription based products.The second is our analytical tools and analytic service. This includes the land SaaS tool mentioned earlier, where random developers can see loss of land immediately, as long as it is relevant information, and they can use our one click report generation tools to write their own reports, as well as to supplement his her own reporting and analysis.And this also includes our commercial real estate, which is a tool for investors and brokers in commercial real estate. And they can also generate their own reports, as well as relevant data that they are interested in.The third area is our promotions, including promotions and marketplace. And within promotions, there is the commercial real estate receive service, which was originally from firm and this is a platform for agents and clients looking to buy or sell commercial real estate.And the last area is our promotions section and these are based on our database, as well as CIH’s see as authority in brand and industry. And these promotions are to promote commercial and residential real estate developer's brands help them with marketing. And they can also be projected.
- Unidentified Analyst:
- [Foreign Language]So the follow-up question is, we see that marketplace revenue is going higher than the database analytics. So we would like to just get a perspective on what we expect in terms of future growth in two areas.
- Yu Huang:
- [Foreign Language]
- Jessie Yang:
- So in the first quarter, we saw that information analytics was growing higher than marketplace services. And this is mainly due to the fact that the information analytics are more subscription based. So, we normally see that their growth is more towards the end of the year when subscriptions are renewed.And in terms of promotions, you do see that there are more promotional events in the beginning of the year. So there is some seasonably in that sense, and traditionally, at the beginning of the year for information and analytics, it is seasonably lower. And so we do - we expect that the first and third quarter to perform normally better than the rest.In terms of future trends for growth, we see that data and analytic services have greater potential and demand. And we saw this is especially during the epidemic, where our increasing clients were mostly in database analytical products, especially in our cloud services. And we do expect this trend to continue in the future. Thank you.
- Unidentified Analyst:
- [Foreign Language]
- Operator:
- [Operator Instructions]. No question at this time. And I would like to hand the conference back to Jessie Yang.
- Jessie Yang:
- Thank you, operator. And thank you everyone for joining China Index Holdings’ first quarter earnings call today. We look forward to speaking with you again at our second quarter 2020 earnings call. Thanks.
- Operator:
- Thank you. Ladies and gentlemen, that concludes your conference for today and thank you for participating. You may all disconnect.