Leju Holdings Limited
Q4 2020 Earnings Call Transcript

Published: 26 Mar 2021

[Operator:]

Hello and thank you for standing by for Leju's Fourth Quarter of 2020 Earnings Conference Call. At this time, all participants are in listen-only mode. After managements prepared remarks, there will be a question-and-answer session. Please note, that today's conference call is being recorded. If you have any objection, you may disconnect at this time. I would now like to turn the meeting over to your host for today's conference Ms. Michelle Yuan, Leju's Deputy CFO.

[Michelle Yuan:]

Hello, everyone, and welcome to Leju's Fourth Quarter 2020 Earnings Conference Call. Today, we'll update you regarding our financial results for the fourth quarter ended December 31, 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.

[Geoffrey He:]

Thanks everyone for joining us on today's call. China's new housing market experienced demand growth in transactions for the full year 2020, and a sharp decline at the beginning of the year due to the COVID-19 epidemic was followed by a substantial recovery later in the year. As developers increasingly recognized the importance of digital marketing, our online advertising services saw strong growth, while our e-commerce services turned in a steady performance. We continue to promote our digital marketing capabilities and develop innovative tools on our online transaction platform in the fourth quarter. Our content production systems are getting stronger as we continue to adopt AI technologies to generate real-time informative content. And our multiple channel networking operating or MCN model is becoming wider and deeper, generating more traffic and a better user service conversion rate. All of these factors will help drive the long-term growth of both our online advertising and e-commerce businesses.

[Li-Lan Cheng:]

Thank you, Geoffrey. Good morning and good evening, everyone. For the fourth quarter of 2020, we recorded total revenues of $230.4 million, a 2% increase from the same quarter of 2019. Our e-commerce services revenues for this quarter decreased by 8% to $170.1 million, as a result of a decrease in the number of discount coupons redeemed and the increase in the average price per discount coupons redeemed. E-commerce services contributed 74% of our total revenues this quarter. Our online advertising services revenues for this quarter increased by 43% to $60.1 million, as a result of an increase in property developers' demand for online advertising. Online advertising services contributed 26% of our total revenues this quarter. Our listing services revenues for this quarter decreased by 19% to $0.2 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 34% to $17.8 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.

[Operator:]

Thank you. First question comes from the line of Marco Rodriguez of Stonegate Capital Market. Please go ahead.

[Marco Rodriguez:]

Hi, everybody. Thank you for taking my questions. I was wondering if maybe you could talk a little bit more about and provide an update on the Alibaba E-House, the Tmall and ETC platform kind of maybe talk about how that has been progressing versus your expectations. And I know you mentioned in your prepared remarks some opportunities that you were looking at in terms of optimizing performance improving management and operational efficiency, if you can kind of provide a little additional color on what those might look like in the coming year that would be helpful. Thank you.

[Geoffrey He:]

Thanks for the questions. For the strategic operation between E-House and Alibaba, I think is -- they are trying to build a new space on the very popular e-commerce platform in China in the real estate industry. And I think this is both for the primary and the secondary house market. For us, I think because the cooperation is not only on the advertising side or the trading side they are trying to -- because of the new platform we see new opportunities for developers to use this new platform to facilitate their digital marketing infrastructure. And based on the digital -- new digital infrastructure, developers can do more digital marketing. And so, we see actually there are two levels of new opportunities. The first one is how to help developers to build up their digital infrastructure on the new platform of Tmall Haofang. And the second is that, after they have the new infrastructure on the Tmall Haofang, how to operate them? I think it's the operating system includes how to advertise their products. How to upload their house on that platform? How to attract potential buyers and even how to close the transaction online? So these two levels we see potential opportunities for Leju. I think Leju is a very strong service provider to Tmall Haofang and this is also very beneficial to Leju to enlarge its business scope.

[Marco Rodriguez:]

Understood. Excuse me. And I believe we spoke about this last quarter, where the online advertising platform that has been created here and you're starting to see some benefits from is obviously attracting developers and with the coronaviruses last year, it made it more important for the developers to use an online platform, given some of the lockdowns and what have you.

[Geoffrey He:]

I think for the business model of Tmall Haofang, I think it is still early for us to talk about it because basically it's the cooperation between our parent company and Alibaba. But for Leju we think that we already see -- actually we are already realizing some benefits from the initial cooperation from the advertising side. And the second step we think that we can also clearly see after advertising there will be some benefits from the trading side. It is a new platform as I said and this platform is different from previous other content-driven platform or a video-driven platform. It is a trading platform. So we think, they will create a lot of new models for developers. And also for developers, they have their own digital infrastructure on this platform. I think they are more active to attract users and to close the transaction on that platform. So, I think a lot of potential opportunities on the trading side. So, basically, it's a bit too early to mention details about the business model. Sorry for that.

[Marco Rodriguez:]

Understood very helpful. No, that's okay that's very helpful. And then two last quick questions for me. Maybe if you can kind of update us on your thoughts for the Chinese real estate market your sort of your expectations going into this fiscal year. And then if you can also kind of paint a picture as far as what sort of major activities and timing that you might have planned for the next let's say six months for your platforms.

[Geoffrey He:]

The first trend is that because of the restriction policies adopted by the government that we think the competitive scope of the developers will significantly change in this year. I think more and more developers will face their marketing change because the off-line channel they took up too many marketing dollars from developers and squeeze profits. So, a lot of developers are thinking how to use digital marketing to change the situation. That's the first trend. The second trend I think a lot of big developers they are going to actually organize their own digital marketing teams to try to compete with the offline channel teams. So, we think from these two trends, the demand for the digital marketing will be increased significantly this year.

[Marco Rodriguez:]

Excellent. And any sort of major activities you might be planning for the next six months or so to drive revenues for you guys?

[Geoffrey He:]

Actually we have -- now we're actually doing the online housing fair. It is ongoing event and covering about 100 cities. And we already have more than 200 -- sorry 2,000 projects online. And we will also do our -- and that's the July 18 -- June 18 festival which was created last year. It is a traditional e-commerce festival, but we use it in the real estate industry. And this is also a very important point for us.

[Marco Rodriguez:]

Excellent. Thank you very much for your time. I really appreciate.

[Geoffrey He:]

Thank you.

[Operator:]

Thank you. We have our next question from the line of Samuel Lau of Blue Lotus. Please go ahead.

[Unidentified Analyst:]

I'll translate in English. So, thank you for taking my question. My question would be in the balance sheet, I see the customer deposit number and the advance from customers number changed quite a bit. Could you help us understand from a business context how the numbers changed? Thank you very much.

[Li-Lan Cheng:]

Okay. This is Li-Lan, I'll answer that question. Yeah, these are two -- actually the name sounds similar. So that's probably the confusing part. Customer deposit here in this item customer means developers that's our developer clients. And this is a deposit we made, we paid to these developers that's why it's on the asset side. So it's -- for some of our e-commerce projects we actually pay an advanced deposit to win the project. And then once we finish they pay us back. So it happens to a small minority of our projects usually involves a large chunk of units. And we see -- when we view the project brings another economics to justify this kind of commitment. Deposit from customers is -- here the customer means our home buyers. So it's a retail individual home buyer. And so this represents amount they pay to participate in our e-commerce activities. They buy the discount coupon but there may be a time gap between when they buy the coupon and when they convert it into a housing purchase contract before we can recognize the revenue. So that's the portion that's called deposit by customers. So these are two very different things and they have different dynamics.

[Unidentified Analyst:]

Thank you. If I may ask on a subsequent one, is there a reason for the change? Because it seems quite startling, quite a bigger change.

[Li-Lan Cheng:]

Well, the customer deposit, it's not surprising for that to fluctuate quite a lot because like I said it's -- in any given year or given quarter it involves a relatively small number of projects. But the individual amount could be pretty big. So you can be -- we're talking about on the order of tens of millions of RMB or even over RMB 100 million for a single project. So when one project starts if we decide to pay or when the amount gets returned that can result in a fairly substantial fluctuation from quarter-to-quarter, whereas deposit from customers usually shouldn't fluctuate that much because there's always a time gap between them paying deposit and converting to purchase. Unless there is a -- in highly unusual cases where a small number of large-scale projects launch a very concentrated marketing campaign and we may have a large number of customers concerting in buying or paying for coupons within a very short period of time. And if it so happens that a quarter ends before they convert, then you may see a fluctuation from quarter-to-quarter, but that's normal with that kind of fluctuation.

[Unidentified Analyst:]

Thank you very much.

[Li-Lan Cheng:]

Well, thank you.

[Operator:]

Thank you. No question as of the moment. And I'd like to hand the conference back to the management. Please go ahead.

[Michelle Yuan:]

This concludes today's call. If you have any follow-up questions, please contact us at the numbers or e-mails provided on our earnings release and on our website. Thank you.

[Operator:]

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