China Index Holdings Limited
Q4 2019 Earnings Call Transcript

Published: 9 Mar 2020

[Operator:]

Ladies and gentlemen, thank you for standing by, and welcome to the China Index Holdings Limited FY 2019 Fourth Fiscal Quarter Earnings conference Call. At this time all participants are in a listen-only mode. There will be a presentation followed by a Question-and-Answer Session. [Operator Instructions] I must advise you that this conference is being recorded today the 9th of March 2020.I would now like to hand the call 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 Fourth Quarter 2019 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 fourth quarter 2019 results, after which, Ms. Huang will answer your questions for the Q&A session.CIH reported total revenues of RMB168.3 million in the fourth quarter of 2019, an increase of 39.1% from RMB121 million in the corresponding period of 2018. Revenues from Information and Analytics Services, SaaS, were RMB76.8 million in the fourth quarter of 2019, an increase of 34.3% from RMB57.2 million in – I am sorry, RMB57.2 million the corresponding period of 2018, primarily due to an increase in the number of customers.Revenues from marketplace services were RMB91.5 million in the fourth quarter of 2019, an increase of 43.4% from RMB63.8 million in the corresponding period of 2018, primarily due to an increase in the number of customers.Cost of revenue was RMB33.9 million in the fourth quarter of 2019, an increase of 44.9% from RMB23.4 million in the corresponding period of 2018, primarily due to an increase in personnel cost to support our business expansion.Operating expenses were RMB47.6 million in the fourth quarter of 2019, an increase of 3.3% from RMB46.1 million in the corresponding period of 2018.Selling and marketing expenses were RMB26.4 million in the fourth quarter of 2019, an increase of 18.9% from RMB22.2 million in the corresponding period of 2018, primarily due to an increase in personnel cost, resulting from the growing number of selling and marketing personnel headcount.General and administrative expenses were RMB21.2 million in the fourth quarter of 2019, an increase of 11.3% from RMB23.9 million in the corresponding period of 2018, primarily due to the one-off listing fees RMB23.9 million in the corresponding period of 2018, primarily due to the one-off listing fees of RMB9.2 million in the fourth quarter of 2018.Operating income was RMB86.8 million in the fourth quarter of 2019, an increase of 68.5% from RMB51.5 million in the corresponding period of 2018. Income tax expenses were RMB15.2 million in the fourth quarter of 2019, an increase of 100% from RMB7.6 million in the corresponding period of 2018.Net income was RMB74.7 million in the fourth quarter of 2019, an increase of 69.4% from RMB44.1 million in the corresponding period of 2018.For fiscal year 2019, CIH reported total revenues of RMB579.7 million for 2019, an increase of 37.7% from RMB421 million in 2018. Revenue from information analytic services, SaaS, were RMB258.6 million for 2019, an increase of 30.3% from RMB206.2 million in 2018, primarily due to an increase in customers.Revenues from marketplace services were RMB311.1 million for 2019, an increase of 44.8% from RMB214.8 million in 2018, primarily due to an increase in the number of customers.Cost of revenue was RMB110.5 million for 2019, an increase of 26% from RMB87.7 million in 2018, primarily due to an increase in personnel costs to support our business expansion.Operating Expenses were RMB181.6 million for 2019, an increase of 25.5% from RMB144.7 million in 2018.Selling and marketing expenses were RMB99 million for 2019, an increase of 27.4% from RMB77.7 million in 2018, primarily due to an increase in personnel costs resulting from the growing number of selling and marketing personnel headcountGeneral and administrative expenses were RMB82.6 million in 2019, an increase of 23.3% from RMB67 million in 2018, this is due to an increase in personnel costs to support our business expansion.Operating Income was RMB287.6 million for 2019, an increase of 52.5% from RMB188.6 million in 2018. Income tax expenses were RMB44.7 million for 2019, an increase of 49% from RMB30 million in 2018.Net income was RMB245.5 million for 2019, an increase of 48.4% from RMB165.4 million in 2018.Based on current operations and market conditions, management expect CIH’s total revenue for 2020 to increase approximately 20% year-over-year. This represents management’s current and preliminary view and is to subject to change.Thank you for joining us today, and we're open for questions. Operator, please go ahead.

[Operator:]

[Operator Instructions] Your first question comes from the line of Wei Pan from China Galaxy Securities. Please ask your question.

[Wei Pan:]

[Foreign Language]

[Yu Huang:]

[Interpreted]The question was, what are some of the growth areas for the business? And the response is, first area is information and analytics. In Q4, our growth was 35% and the other is promotional services, which the growth was 42%.

[Operator:]

Your next question comes from the line of Yijing Wang from China Galaxy Securities. Please ask your question.

[Yijing Wang:]

[Foreign Language][Interpreted]So the question was, excuse me, during the Coronavirus epidemic, CIH held a lot of online live conference calls and other online events. What is the result of these events on business?

[Yu Huang:]

[Interpreted]And the response was, we held 13 live large conference calls and we follow-up with the business participants of these calls. And one example is for our land cloud services, we have live auctions as well as live broadcasts and these broadcasts had over 100,000 participants and views and including 2,000 enterprise participants.And also, the articles for – during the epidemics that we send out had over 1 million readers. We currently have over 5,000 users for our land cloud service and we also just introduced CIH cloud as a new service and we already have 1,400 registered users. For another new cloud product is the financial risk assessment product, we have over 4,000 new registered users.All of this helps to improve our image and brand in the industry and helps us to gain new clients as well as influence. Thank you for the question.

[Operator:]

Your next question comes from the line of Gerard Chua from Resurgence. Please ask your question.

[Gerard Chua:]

Hi. Yes it sounds like the COVID-19 virus generally impacts China Index will be watched – was there any impacts to the business at all? Are you seeing any impact in the first few months of the year?

[Yu Huang:]

[Interpreted]So, the epidemic has no doubt affected China’s real estate industry. The real estate industry is not like food or travel services where lost revenues may not be easily regained and we have done some research on the results of the effect of the epidemic on the industry and we expect a further 2% decrease on the real estate – China’s real estate sales.And originally, we had expected that in 2020, sales will decrease by 5% to 6.5% and with this additional 2% impact from the Coronavirus, we expect 7% to 8.5% decrease in sales. And as part of the China real estate industry, it is also inevitable let’s say each will be affected.So, we’ve also done a forecast for the entire year and we see greater effects from the epidemic in the first half of the year. In the second half we expect some bounce back. So in terms of February, we have done research and it shows that sales has decreased 80% in various cities across China. In March, we see the market recovering. However, the epidemic does have different effects on different cities.In the first quarter, a lot of our own clients, their employees are still returning to work and we have seen that approximately 50% of employees have returned to work as of last week. And so we expect everyone to return to work at the end of March for a full recovery.So, in general, the real estate industry in China used to be relatively traditional in their methods of working and due to the Coronavirus epidemic, they have changed their methods and moved a lot of offline work to online.And this has provided an opportunity for CIH and we have taken advantage of the opportunity by providing free trial accounts for everyone during the epidemic and this no doubt will help us in our business going forward.So, as I have mentioned, we have done a lot of online events and activities in the past. However, we increased the number of events online during the Coronavirus epidemic. As a result, as mentioned in the second question, we have a lot of participants for each events and this increases our number of clients, as well as helps us promote our tools for them.So, China’s economy and China’s real estate economy will no doubt be impacted by the Coronavirus. This cannot be avoided. However, at the same time, we have tried to capture a lot of the opportunities presented and this epidemic also encouraged a lot of our clients and trial users to use our databases and use our SaaS tools.

[Gerard Chua:]

Okay. Got it. Just a follow-up if I may. I think you said that the business – in the business outlook, the company expects a 20% year-over-year increase in sales. Does this take into account your outlook for the first half not doing too well and then recovering in the second half or?

[Yu Huang:]

[Interpreted]So this definitely takes into account the first half being affected by the epidemic and this factors into our full year outlook for revenue.

[Gerard Chua:]

Got it. Understood. Thank you very much.

[Operator:]

[Operator Instructions] your next question comes from the line of David. Please ask your question.

[Unidentified Analyst:]

[Foreign Language]

[Yu Huang:]

[Interpreted]The question was, it has been stated in the past that CIH has modeled after CoStar in America and they are very strong in commercial listings and the question is, what are some growth points and trends in this area for CIH?The response was, after studying CoStar, we see that they have long-term and stable growth and originally, they were based – they were founded based on a solid database and analytics platform. And then, they had some M&A in the listing space which provided growth for the company.For CIH, our foundation is definitely on data and it’s mostly residential since this has been China’s real estate development in the past fifteen years. During our spin-off from Fang, we also spun-off Fang’s commercial real estate platform and to combine that with our own commercial cloud platform which we develop.So, not only do we have listings, but we also have data analysis and for commercial real estate agents, they have more professional needs and we have as a result, a more comprehensive service provided to them which is not only analytical – which is not only listing but also analytical.And we have been working in the past as well as present towards this. During the epidemic, we see that commercial real estate has also been negatively affected and we also see that their demand for high quality and professional increase – for professional services increased and we work very hard to fill this demand with our products and services. Thank you.

[Unidentified Analyst:]

[Foreign Language]

[Yu Huang:]

[Interpreted]So, the follow-up question was, what is the growth from the commercial listing service for 2019? And the response is, for Q4, it was 42.6% and for 2019, it’s slightly higher than that. Thank you.

[Operator:]

[Operator Instructions] There are no further questions at this time. I would now like to hand the conference back to today’s presenters. Please continue.

[Jessie Yang:]

Thank you, everyone, for joining China Index Holdings' Fourth Quarter Earnings Call today. We look forward to speaking with you again for our first quarter 2020 earnings call. Thank you.

[Operator:]

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may all disconnect.