Leju Holdings Limited
Q3 2020 Earnings Call Transcript

Published: 23 Nov 2020

[Operator:]

Hello and thank you for standing by for Leju’s Third Quarter 2020 Earnings Conference Call. I would now like to turn the meeting over to your host for today’s conference, Ms. Michelle Yuan, Leju’s Deputy CFO. Thank you. Please go ahead, madam.

[Michelle Yuan:]

Hello, everyone and welcome to Leju’s third quarter 2020 earnings conference call. Today, we will update you regarding our financial results for the third quarter ended September 30, 2020. If you would like a copy of the earnings press release or would like to sign up for our e-mail distribution list, please go to our IR website at ir.leju.com. Leading the call today is Mr. Geoffrey He, our CEO, who will review operational highlights for the third quarter 2020. Mr. Li-Lan Cheng, our Acting CFO, will then discuss the financial results in more detail. We will then open the call to questions.

[Geoffrey He:]

Thanks everyone for joining us on today’s call. We maintained a strong momentum for our business development in the third quarter and have realized healthy growth in our both advertising and e-commerce business. We continue to promote our digital marketing capabilities in the third quarter and our online marketing promotions were well received throughout the industry. Also, we saw that the innovations we implemented in our online advertising business have been a strong match for the new wave of online marketing needs, we see emerge recently. In addition, we further developed the innovative tools on our online transaction platform, which also benefits the long-term growth of our e-commerce business. Following upon our 618 Festival in June, during the third quarter, we once again successfully held our Suning & Leju 818 Summer Storm’ sale. These two activities deepened our partnership with Suning and involved more than 100 brands and over 500 real estate projects. In September, our affiliate company E-House and Alibaba jointly launched the Tmall Housing platform and the real estate transaction cooperation mechanism which is called ETC. As part of this, together with the Tmall Housing, Suning e-buy and E-House, we jointly launched Double 11, Tmall Housing 10 Billion Subsidy promotion during the Double 11 period. These activities have received strong industry recognition, especially our Double 11 promotion, which involved 302 brands and over 2,000 real estate projects.

[Li-Lan Cheng:]

Thank you, Geoffrey. Good morning and good evening, everyone. For the third quarter of 2020, we recorded total revenues of $209.4 million, a 13% increase from the same period of 2019. Our e-commerce services revenues for this quarter increased by 12% to $172.4 million, as a result of an increase in the number of discount coupons redeemed. E-commerce services contributed to 82.3% of our total revenues this quarter. Our online advertising services revenues for this quarter increased by 17% to $36.7 million, as a result of an increase in property developers’ demand for online advertising. Online advertising services contributed 17.5% of our total revenues this quarter. Our listing services revenues for this quarter decreased by 45% to $0.3 million from the same quarter last year, as a result of a decrease in demand from secondary real estate brokers. Our cost of sales for this quarter increased by 12% to $14.8 million from the same quarter last year, primarily due to increased cost of advertising resources purchased from media platforms related to our online advertising business. Our selling, general and administrative expenses increased by 16% to $181.8 million from the same quarter last year. This increase was primarily due to increased market expenses related to our e-commerce business. Income from operations was $12.9 million for the third quarter of 2020 compared to $15.8 million for the same quarter of 2019. Net income attributable to Leju shareholders was $11.7 million for the third quarter of 2020, an increase of 5% from the same quarter of 2019. Non-GAAP income from operations was $16.6 million for the third quarter of 2020 compared to $19.5 million for the same quarter of 2019. Non-GAAP net income attributable to Leju shareholders was $14.7 million for the third quarter of 2020, an increase of 4% from the same quarter of 2019.

[Operator:]

We have the first question from the line of Marco Rodriguez from Stonegate Capital. Please go ahead.

[Marco Rodriguez:]

Hello, everybody. Thank you for taking my questions. I was wondering if you could talk a little bit more about the two new platforms or relationships you have here the Double 11 – excuse me, the Tmall Housing platform as well as the Alibaba Suning partnership that you have, can you just provide a little bit more detail in terms of how those platforms performed versus your expectations? And then if you could also if possible discuss the impact you saw from revenues for those two new relationships?

[Geoffrey He:]

Okay, thank you for your question. First, the relationship between Leju and Tmall or Alibaba is based on our partnership from our affiliate company, E-House and Alibaba and actually the aim of the partnership is to build up an online to offline system, new trading system. That is why we actually launched, ETC, we call it, it’s real estate transaction cooperation mechanism to involve all parties during the real estate transactions. I think the first step for us from the partnership is the Double 11 activities. As you know, Tmall is quite sophisticated e-commerce platform. But usually it’s for the fast consumer product, while the real estate projects, it’s quite big, big commodity and we try to test the consumer habits on that from the effects of the Double 11 activities actually we received very positive feedback from the consumers’ side. There are a lot of people actually – they are quite interesting in the commodities, which is the houses we have put on the Tmall shops. Second one is that there do many a lot of people they asked questions about houses they look for at the Tmall stores and also they raised a lot of questions where previously we cannot get from our platforms. The third one is that we try to connect online in – how to say online users, which are interesting in certain projects to offline showing rooms. We are trying the mechanism how to introduce these online people, consumers to the offline trading that we took to have them get involved in that offline trading activities. I think it’s just the first step we do receive the very positive feedback from consumers. On the other hand is we received very strong positive feedback from our clients which is the developers. They are very interested in the huge audience of Alibaba and they are trying to test if they found this huge traffic, they can find out quite intensive house interest which can be involved in the further transactions. So, from both sides, I laid a very solid foundation to the success of our Double 11 activities. I think this is only the first one, first step. From Double 11, we are continuing to do the Double 12 activities and we are actually a doing a new mechanism to see if the team or platform can both play advertising platform and transaction platforms. We will try to develop some innovative transaction tools or transactional systems based on the Tmall to further push ahead digitalization of the real estate industry. From the revenue side, I think it does a great job and I think it will contribute to our first quarter revenue advertising – online advertising revenue significantly.

[Marco Rodriguez:]

Thank you. That was very helpful. And do you have any data that relates to the traffic that you are driving with the Tmall platform?

[Geoffrey He:]

I think we have released a post about our Double 11 activities, but we combine the four platforms, actually at the Tmall and the Suning and the Leju and the E-House. We all together, we – sorry, give me one minute I give you the number. Hold on. We actually received the unique visitors from activities, that’s the 47.5 million unique visitors and the total page view traffic is about 289 million.

[Marco Rodriguez:]

Excellent. Thank you. And can you maybe compare and contrast the Double 12 promotions that you will be launching here in Q4, how do those sort of compare to the Double 11?

[Geoffrey He:]

I think a lot of developers previous – because of the Double 11 coverage is very wide and some developers actually they are still interested in continuing to do Double 12 and some developers actually because they already see strong traffic, but they need actual transactions. So, I think the scale of the Double 12 maybe a little bit smaller than the Double 11. However, the inferential because we – during the period of Double 12, we also do a lot of inferential activities, which concludes our Leju financial forums and also lot of live broadcasting activities. So the inference of the Double 12 should be greater than the Double 11.

[Marco Rodriguez:]

Got it. And last quick question if I might, could you maybe just update us on what you are seeing in terms of just real estate activity and as that also relates to any sort of increases in regulations? Thank you.

[Geoffrey He:]

I think the regulation also the – I said that the market of the real estate in the next 1 year, I think keeping stable will be the mainstream. There will be not big up and downs, I think in the next year. However, we already see that the differences between different developers, you know that three deadlines, the new regulators released three deadlines set for the developers. So some aggressive developers will be cautious, they will decrease their investment in buying land so the tenure of the transaction will go down. However, some healthy developers say which give us – which they say, will receive good opportunities just buy more or less at reasonable prices. So, the structure of the rest of the industries is changing. For us, I think from this year, I think aggressively pushing ahead digitalization of the promotion from offline to online. So, a lot of developers already realized the value, how to increase the inputs of their online promotions and also they received great pressure from the offline costs, mainly the distributional costs from one of our competitors. So, I think the digitalization is a very good opportunity in the next year for online developers.

[Marco Rodriguez:]

Great, thank you so much for your time. I really appreciate it.

[Geoffrey He:]

Thank you.

[Operator:]

Thank you. We have the next question from the line of Eric Wen from Blue Lotus. Please go ahead.

[Eric Wen:]

Hello, good evening, management. Congratulations on the strong guidance. I have two questions. First question is can you comment on the breakdown of your guidance, including advertising and e-commerce that contribute to your guidance?

[Geoffrey He:]

Our guidance?

[Eric Wen:]

Yes. And my second question is your competitor has reported very strong numbers of third-party agents revenue growth, I wonder if you can elaborate on your competitive strategy in and how it will enhance its competitiveness in the coming year? Thanks.

[Geoffrey He:]

For your first question, I think the breakdowns will be likely 30 – around 30% will be from the online advertising and 70% will be e-commerce, that’s around that, that from our revenue guidance. For the second one is that actually is not integrated with Leju. So I am not prepared to answer this question. However, I would note to that is that I think the offline business, especially that the distribution business is reaching a point that puts a great pressure on the developers’ cost structure. Most developers actually they are talking about the distributional cost, which takes most of their product profits. They are also thinking about that. While they also asking us is that – is there really any online can provide real buyers to them so that they can recognize as their online buyers. So, I think this is a great task, also a great opportunity for us. From captive side, I think we do believe that almost everybody going into the offline showrooms must have online experience before. So, our task is how to catch these online people and get them recognized by the offline sales of the developers so that I think the cost structure of developers can be reasonably changed.

[Eric Wen:]

Okay, thanks very much. Very helpful.

[Operator:]

Thank you. As there are no further questions, I would like to hand the call back to your presenters for any closing remarks.

[Michelle Yuan:]

This concludes this call. If you have any follow-up questions, please contact us at the number or e-mail provided on our earnings release and on our website. Thank you.

[Operator:]

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