China Index Holdings Limited
Q2 2019 Earnings Call Transcript

Published: 22 Aug 2019

[Operator:]

Ladies and gentlemen, thank you for standing by and welcome to the China Index Holdings Limited Full Year 2019 Second Fiscal Quarter Earnings Conference Call. At this time, all participants are in listen-only mode. After the speaker’s 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 speaker today, Ms. Jessie Yang. Thank you. Please go ahead.

[Jessie Yang:]

Thank you, operator. Hello, everyone and welcome to China Index Holdings second quarter 2019 earnings conference call. Joining us today to discuss CIH’s results are 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 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 risks and uncertainties. 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 risks and uncertainties include, but are not limited to those outlined in our public filings with the SEC, including our Form S-1.Now, I would like to walk you through our second quarter and first half 2019 financials. After which, Ms. Huang will answer your questions for the Q&A session.CIH reported total revenues reported total revenues of RMB134 million in the second quarter of 2019, an increase of 37.2% from RMB97.7 million in the corresponding period of 2018. Revenues from information and analytics services, SaaS, were RMB57.4 million in the second quarter of 2019, an increase of 20.1% from RMB47.8 million in the corresponding period of 2018 primarily due to an increase in the number of customers. Revenues from marketplace services were RMB76.6 million in the second quarter of 2019, an increase of 53.5% from RMB49.9 million in the corresponding period of 2018. Cost of revenue was RMB24.6 million in the second quarter of 2019, an increase of 9.8% from RMB22.4 million in the corresponding period of 2018 primarily due to an increase in personnel cost to support our business expansion.Selling and marketing expenses were RMB23.9 million in the second quarter of 2019, an increase of 37.4% from RMB17.4 million in the corresponding period of 2018 primarily due to an increase in personnel costs resulting from the growing number of selling and marketing personnel headcount. General and administrative expenses were RMB18.6 million in the second quarter of 2019, an increase of 59% from RMB11.7 million in the corresponding period of 2018 primarily due to an increase in personnel costs to support our business expansion.Research and development expenses were RMB6.1 million in the second quarter of 2019, an increase of 69.4% from RMB3.6 million in the corresponding period of 2018, primarily due to an increase in staff costs driven by the growth of the research and development team. Operating Income was RMB60.8 million in the second quarter of 2019, an increase of 42.7% from RMB42.6 million in the corresponding period of 2018. Income tax expenses were RMB8.2 million in the second quarter of 2019, an increase of 28.1% from RMB6.4 million in the corresponding period of 2018. Net income was RMB51.5 million in the second quarter of 2019, an increase of 31.7% from RMB39.1 million in the corresponding period of 2018.In the first half of 2019, CIH reported total revenues of RMB253.1 million in the first half of 2019, an increase of 36.1% from RMB185.9 million in the corresponding period of 2018. Revenue from information and analytics services, SaaS were RMB114.2 million in the first half of 2019 an increase of 19.1% from RMB95.9 million in the corresponding period of 2018 primarily due to an increase of number of customers. Revenues from market place services were RMB138.9 million in the first half of 2019, an increase of 54.3% from RMB90.0 million in the corresponding period of 2018. Cost of revenue was RMB47.4 million in the first half of 2019 an increase of 5.6% from RMB44.9 million in the corresponding period of 2018 primarily due to an increase in personnel cost to support our business expansion. Selling and marketing expenses were RMB45.2 million in the first half of 2019 an increase of 36.6% from RMB33.1 million in the corresponding period of 2018 mainly due to an increase in personnel costs resulting from the growing number of selling and marketing personal accounts. General and administrative expenses were RMB24.8 million in the first half of 2019 an increase of 44.2% from RMB17.2 million in the corresponding period of 2018 mainly due an increase in personal costs to support our business expansion.Research and development expenses were RMB11.6 million in the first half of 2019 an increase of 54.7% from RMB7.5 million in the corresponding period of 2018. Mainly due to an increase in staff cost driven by the growth of the registration development team operating income was RMB124.1 million in the first half of 2019 an increase of 49.2% from RMB83.2 million in the corresponding period of 2018 income tax expenses were RMB18.4 million in the first half of 2019 an increase of 41.5% from RMB30 million in the corresponding period of 2018. Net income was RMB104.7 million in the first half of 2019, an increase of 39% from RMB75.3 million in the corresponding period of 2018. Based on current operations and market conditions CIH’s management remain confident that the total revenue for the year of 2019 is expected to be between approximately RMB580 million and approximately RMB610 million this represents the year to year increase from approximately 37.8% to approximately 44.9% these estimates represents the managements current and preliminary view which has subject to change.Thank you for joining us today and we are now open for questions. Operator, please go ahead.

[Operator:]

Thank you [Operator Instructions] We have a question from [indiscernible]. Please go ahead.

[Unidentified Analyst:]

Hi, good evening. I would just like to check I think previously when we spoke you mentioned that the commercial real estate initiatives in the books and in the process of being rolled out can I just check if these had been already launched or not yet or what is the status there?

[Jessie Yang:]

Okay, give me a few minutes to translate. Thanks. So with regards to commercial real estate nothing new it has already – we have already had services prelisting separately of China Index Holdings on NASDAQ so, before the [indiscernible] there exists a commercial listings including buildings and retail for both sale and lease and this after say each has become independent has achieved three times growth another area of commercial real estate services include data base services and before this is not charged separately to clients however, in the second quarter this was reorganized and upgraded as a product and they have already seen revenues from the commercial real estate database in the third quarter we plan to release the office version of the commercial real estate data base specifically by the end of august and we expect to see an increase in the number of clients and in terms of tools we are developing tools for agents real estate agents in the commercial real estate area as well as for businesses to help them with their listings and this we expect to launch in quarter 3 and thank you for your question.

[Unidentified Analyst:]

Okay. Could I just squeeze in maybe one general sense I think CIH is growing very quickly but one thing that’s really lacking is I mean just coverage on you guys nobody really knows there is no analyst reports and everything is management looking to change that or is there any initiatives going forward that you would try and get the word out that you guys separately list an independent company?

[Jessie Yang:]

Okay, one moment. Okay. So because we are a newly listed company, we do want to have first a track record in terms of revenues so that analysts and investors can have time to learn about us and to see what we can do. We are actually working on implementing our plan for getting the word out to the investor community and we are currently focusing on growing the business and gaining market share. However, we do want to hand-in-hand also engage the investor community and get the word out so that more people can find about China Index Holdings.

[Unidentified Analyst:]

Okay, great. Thanks.

[Operator:]

Thank you. [Operator Instructions] Yes, we have one from [indiscernible]. Please go ahead.

[Unidentified Analyst:]

[Foreign Language]

[Jessie Yang:]

Let me just translate for the English listeners so the question was about SaaS tools and how we differentiate ourselves in the market and our main products. And the answer was that we have 20 years of data aggregation and data collection history and data need time and history to be collected and we have been in this industry for a long time, because we have been a long-term player in this industry, we have researched and understood the industry very well. Our DNA is in technology and online platforms and we combine big data and industry tools to help solve the problems what was originally based by market participants. We want to help those in the industry, for example, landowners, we have land owner products and what it does is it helps buyers and sellers in terms of decision-making to purchase land as well as land auction. For example, buyers can see clearly parts of land through aerial photographs and use tools which are build upon big data and big data analytics to generate a one click report and this helps them determine the viability of whether to buy and invest in the land and increases the efficiency of these decision-makers by as much as 60% to 70% in terms of savings in time so that they can spend the 30% to 40% of the time on important decision-making. And we are working on building office building SaaS tools to help real estate agents in the commercial real estate area to increase their efficiency in sales and selling and leasing their office space and help them solve the main problems that they face everyday. Thank you.

[Operator:]

Thank you. Our next question comes from the line of [indiscernible]. Please go ahead.

[Unidentified Analyst:]

[Foreign Language]

[Jessie Yang:]

The question was congratulations on achieving 30% to 40% growth, does management have confidence to maintain this growth and what are the strategies of growth for moving forward? And the answer was the growth will come from different aspects, one will be from clients and currently, we have client to renew frictions with us as high as 70% and there is also going to be growth in new clients of around 20%. And in terms of products, we are working continuously on upgrading our existing products as well as rolling out new products such as the land tools you mentioned earlier as well as the office buildings of tools. We are already seeing revenue growth in the first half of 2019 for these new tools and we expect continued growth in the second half. In terms of database, we are working on building the foundation of our existing database by increasing the number of data types and diversifying the granularity of the data as well as the description of the data. We are also planning on increasing the coverage of the number of cities. For the second half of 2019, we plan to add 12 new cities. In the short-term perhaps the contribution to revenue maybe limited. However, it will be more apparent in the long-term. We see the market as a big opportunity, especially commercial real estate. We see that every part is more professional and more detailed data analysis and at the moment are no main competitors.

[Operator:]

Thank you. [Operator Instructions] No questions as of this time. Please continue.

[Jessie Yang:]

So, thank you everyone for joining the China Index Holdings second quarter earnings call today and we look forward speaking with you soon for our third quarter 2019 earnings call.

[Operator:]

Thank you. Ladies and gentlemen, that does conclude our conference for today and thank you for participating. You may now all disconnect.