Leju Holdings Limited
Q1 2015 Earnings Call Transcript

Published: 19 May 2015

[Operator:]

Hello and thank you for standing by for Leju's First Quarter 2015 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the management's prepared remarks, there will be a question-and-answer session. Please note that today's conference call is being recorded. If you have any objections, you may disconnect at this time. I would now like to hand the conference over to your host for today, Ms. Melody Liu, Leju's Investor Relations Director. Please go ahead, ma'am.

[Melody Liu:]

Thank you. Hello, everyone, and welcome to Leju's first quarter 2015 earnings conference call. Today, we will update you regarding our financial results for the first quarter ended March 31, 2015. If you would like a copy of the earnings press release or would like to sign-up for our email 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 first quarter of 2015. Ms. Min Chen, our CFO will then discuss the financial results in more detail. We will then open the call to questions at which time our Executive Chairman, Mr. Xin Zhou, will be available. Before we continue, please allow me to read you Leju's Safe Harbor statement. Some of the statements during this conference call are forward-looking statements made under the Safe Harbor provisions of Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations. Potential risks and uncertainties include, but are not limited to those outlined in our public filings with the SEC. You are encouraged to review the Forward-Looking Statement section of our Annual Report filed with the SEC for additional information concerning factors that could cause those differences. Leju does not undertake any obligation to publicly update any forward-looking statements whether as a result of new information, future events or otherwise except as required by applicable law. Our earnings press release and this call include discussions of unaudited GAAP financial information, as well as some unaudited non-GAAP financial measures. Our press release contains a reconciliation of the unaudited non-GAAP measures to the unaudited most directly comparable GAAP measures. Please note that unless otherwise stated all figures mentioned during this conference call are in U.S. dollars. I will now turn the call over to Leju's CEO, Mr. Geoffrey He. Please go ahead.

[Geoffrey He:]

Good morning and good evening, everyone. Thanks for joining us on the call today. We are pleased to report another quarter of revenue growth for our business. First quarter are generally seasonally slow for us for Chinese real estate industry and as this year, Chinese New Year Holiday, also in February which is later than usual. As a result, sales and marketing trends generally fall to at lower stop in the first quarter which also impact our client's results. During this period we continue to face competitive pressure which we have come to expect since last year. Starting from late March, we noticed significant improvements in market sentiment and transaction volumes, roughly driven and qualify recently announced rules and credit policies. We are encouraged to see the product insurance continue into the second quarter. I'm pleased to report that Leju [ph] continue to require our O2O platform; the primary, secondary and home furnishing markets. We have launched out our platforms for primary housing services, media, e-commerce, membership services and brokerage connectivity areas. The will allow our success to mobilize more potential, promotion in the marketing channels for new projects and should reach a broader home buyer rates. Our mobile media platform as I said is close to 30 million followers and Top 100 Breaking News report as account nearly 10 million views by Leju users. We also joined hands with Qianggongzhang [ph] to offer homebuyers more financial proximities to our product, which further enhanced our e-commerce offering. Our secondary business, we expanded our information platform into 17 cities nationally last year and are pleased to see grow in all market. While market conditions start jerking pricing, we now have a record number of listings and the paying agents are at home, which positions us well to take advantage of the recovery in the secondary market, transaction wide [ph], which is an active practice this year. And now we are focused for our this year is to further grow our home furnishing business and we zeroed in on the contractors who are the vehicle points in the home furnishing services officially launched at Qianggongzhang platform in January this year. Last year we had over 1,100 contractors on platform and since official launch we grew the number to over 10,000 contractors in 50 cities. This result speak to the power of our unique model that connects consumers directly to our contractors in largely in home furnishing markets. We are confident that home furnishing markets in Qianggongzhang platform will prove to be another long term growth driver for us. Now I will turn the call over to our CFO, Ms. Min Chen, who will review our financial highlights for the quarter.

[Min Chen:]

Thank you. Good morning and good evening everyone. For the first quarter of 2015 we reported total revenues of $93.4 million representing an increase of 19% over the same quarter last year. Our e-commerce services revenue was $67.1 million, approximately 72% of our total revenue for the quarter, and a 35% growth from the first quarter in 2014. The increase was primarily driven by increases in the average prices of coupons redeemed despite a lower number of coupon redemption due to the lower market activity. During the quarter we generated e-commerce revenues from 58 cities. Our online advertising services revenues of this quarter was $22.5 million, 8% lower than the first quarter of 2014, the decline was mainly due to lower advertising volume from the lower sales and activities in the primary housing market. Our listing services revenue for the first quarter was $3.8 million, 9% lower than the same period last year. The lower revenue was primarily driven by lower prices we charged for listing starting from mid-last year despite an increase as He mentioned in the number of listings and agents on our platform this quarter. First quarter non-GAAP loss from operations was approximately $358,000 for the first quarter while non-GAAP net income attributable to Leju shareholders was approximately $1 million. As of March 31, 2015, our cash and cash equivalents balance was approximately $287 million. Our net cash flow used in operations for the quarter was $24.2 million, mainly consisting of an increase in customer deposit of $15.3 million, and a decrease in accrued payroll and welfare. We reiterate our annual total revenue guidance range of $600 million to $622 million. As previously provided on our 2014 annual results conference call, please note this forecast reflects our current and preliminary view which is subject to change. That concludes our prepared remarks. We're now ready to take your questions. Operator, please go ahead.

[Operator:]

[Operator Instructions] Your first question comes from the line of Hillman Chan from Macquarie. Please go ahead.

[Hillman Chan:]

Thank you, management for taking my question. My first question is about your home furnishing business, Qianggongzhang, can management talk about the business model of this website? And also the addressable market in home furnishing in the mid-term and all sorts of revenue contributions we'll be expecting, whether I know this year and next year? Thank you.

[Geoffrey He:]

Thank you for your question. I think home furnishing markets are focused this year, and Qianggongzhang, actually we have experienced this model, it's down as an experiment two years ago and the bottom line [ph]. So this year we actually in January will have long term brand. And from current status we can see that we see very positive feedback from most contractors and users and the consumers. So we expect this will speed up very fast during the coming quarters. Our major focus now is how to grow this platform to add more contractors and have more consumers to find there and get this on our website and close the deals. It's not about – currently, our focus is how to generate further revenue from that. I think maybe in a few quarters later we will think about that. Our focus is now is how to grow the platform at this point [ph].

[Hillman Chan:]

Okay, got it. And my second question is about the competition in the e-commerce business. As some of our competitors, they joined hands together and one of our close competitors switched the focus to more on the transaction side, how should we think about the competition and also how does that translate to your margins pressure this year? And – thank you.

[Geoffrey He:]

Thank you for the question. I think the completion on the e-commerce market is still quite clear, and – actually it's not happened this year, it happened one year after another player is on this market. Our strategy is still how to enrich our offerings to the developers, until last weekend have more e-commerce targets, and of course we – as you can see that market, we have lot of major product in the coming – in the past few quarters that we provided the mobile solutions and we provide a lot of new operating's like financial services, and also we are – and we've said, we are doing back mobile platform to connect agencies, both these agencies to sell the new homes. And I think officially this quarter we also launched our membership services, I think all of the innovative product and services we further enriched the offerings we provide the market [ph] so as to increase towards the demand which was up. I think the competition there, we cannot walk out and I think so long as we can still be innovate new products and new offerings, we can still win markets.

[Hillman Chan:]

Okay, thank you. I'll get back into the queue.

[Operator:]

Thank you. Your next question comes from the line of Yong Wang from JP Morgan. Please go ahead.

[Yong Wang:]

Hi, thank you very much for taking my question, and congratulations on a solid quarter. I have two questions. The first one is related to the overall property market. So given the improvements of property market into Q2, have you noticed any behavioral change of the developers in terms of their sales and marketing spending? Is this the case that improving marketing environment developers may spend less on sales and marketing or they tend to spend more to drive higher volume growth? So just – how should we look at the dynamics between the market condition and developers spending, that's my first question. And secondly, just – could you give us a quick update on the revenue mix of your e-commerce business, particularly [indiscernible]. Thanks.

[Geoffrey He:]

Thank you for the questions. And, first is market addressing, and we – as I said previously, market – we see important signals that the market is recovering and this trend still continues and we expect that that trend will still be continued maybe in the coming quarters. Because from the government angle we can see that actually more positive policies may come, and for the consumer side, their sentiment may change, they already see that the government doesn't provide more restricted policies rather than the government will give us more supported policies. So I think that currently the market is still at a balance that both suppliers and the developers, also a positive ones this market. So we expect this trend will continue. For your second question I think we continue to further penetrate our e-commerce models into second tier and the third tier cities. So from operating level you can see our revenue from the first tier cities is about 56% and the second tier cities is 37% and third tier is about 7%. Is that okay? Hello?

[Operator:]

Thank you. Your next question comes from the line of Jinsong Du from Credit Suisse. Please go ahead.

[Jinsong Du:]

Hi, this is Jinsong. I don't remember whether this has been asked previously or not, I'd like to know a bit more about the new home furnishing business, Qianggongzhang, it seems to be doing very well since its launch. And I'd just like to know what's your forecast on this revenue versus next year and also what kind of initial investments we are talking about for this new businesses, so as a result what will be the impact of this new businesses investment in places net earnings this year, and those are when will this new business start to become profitable? So that's the first question. Secondly, if you can elaborate a bit more about your second quarter numbers because it seems to be that high expectations on the second quarter numbers because of the recent improvement in the other market. So if you can quantify – maybe the growth in the second quarter that will be great. Thank you.

[Geoffrey He:]

For the second question, for the surplus that's the first quarter, yes, well you can see just the Qianggongzhang model is very efficient actually on the market and both end users and contractors see benefits from this model and we – as you know maybe in China, 80% of decoration contract actually signed on the streets for this contractors and the 20% will exclude our decoration companies [ph], and we – our Qianggongzhang platform actually provided us reliable system for the end users to choose the contractor online, and also for those deals, previously decoration companies, we can save the costs for both, the end users and the contractors. So this is very efficient model and our current focus as I said is how to grow this model as big as we can. Current, our investments, mainly it's about the labor cost and the promotion cost because we expand – we have a plan to expand this model to a 100 cities, currently we have 50 cities. So current investment both, mainly under promotion and the labor costs, we will try to balance this investment because for the revenue side I think we don't actually make any revenue so the deals of this current decoration deals, we don't have any revenue, we will try to get revenues from that value added services from these deals and we have a plan to provide value added services in the coming quarters. So it's still quite worry to forecast the whole picture revenue will be in the coming quarters. I think we will have a full balance off that investment and the future revenue.

[Jinsong Du:]

Yes, but could you qualify what will be the total investment or the heat from the bottom line, for example, for this year, what's your planned amount to invest because for the – for your parent company in-house, you gave a guidance in the range of investment for the next two years, I don't know whether you have given similar guidance for challenge on, at least for this year in terms of quoting investments that you've budgeted?

[Geoffrey He:]

Jinsong, on the question – currently, we actually, we cannot quantify this investment because we will see that – because that's impertinent for the labor cost that we want to expand from 50 to 100 cities but it really depends on if we can sign proper people here, and also the market components – decoration market in this city. So it's quite tough for us to predict how many cities will finally be set up in the coming quarter, although we have a straight plan. And the second uncertainty about the promotion, the promotion mainly includes both online promotion and offline promotion. Currently, our investment mainly speak about the offline promotions but in future we will think about the online promotions but it really depends on how fast our catalog will grow and how many cities will come in. So, I'm sorry we cannot quantify these investments at current point.

[Jinsong Du:]

I understand. [Cross Talks]. For the city entrance, when you enter a city, what would be the initial set up cost of the city?

[Geoffrey He:]

We need to first set up a local team, first we need to set up a local team, which means we – first we need to find a proper head of this team. The second, we also have the city operation partners. So this will depend on if we can find this partner, so these two happen in certainties.

[Jinsong Du:]

Alright. Could you elaborate a bit more on the second quarter? Thank you.

[Geoffrey He:]

For the second quarter, I think – obviously, we can see that the e-commerce revenue enough [ph] because of the look down of the market. So the e-commerce revenue will still be – actually we are quite positive on the glance [ph] on that, and for the listing, I think we are still very positive because we have laid a very solid foundation on that but as given that the smaller member compel a total revenue, I think that will be a positive but minor contribution. And for the home installation furnishing market, as we said, we are still at the stage of the investment.

[Jinsong Du:]

Alright, thank you.

[Operator:]

Thank you. Your next question comes from the line of Gregory Zhao from Barclays. Please go ahead.

[Gregory Zhao:]

Hi, thank you for taking my question. Congratulations on the solid quarter. I have two questions. First one is about our advertising services, so just wanted to have more deeper understanding of our current advertising business, so we see a slight decline on a year-over-year basis, so is it because of a decrease of the ongoing primary home projects or just a decrease of advertising – average selling price, have we seen some significant advertising body shift from the traditional media format into the performance based ad format? And also I want to know with the current advertising revenue contribution from our mobile aps and mobile browsers. The second question is also follow-up question about the competitive landscape – so it seems that our competitors aggressively expanding into the – from online to offline, actually every sectors likes the primary market, the secondary market, as well as home furnishing market using the Swiss [ph] model and our parent company also expanding into offline for some local services. So I just want to guess some source from the management about such kind of online to offline business and do you think in the future where we also get into such kind of online to offline business model? Thank you very much.

[Geoffrey He:]

Thank you. For the follow-up question is that, firstly, the decrease of present revenue in the first quarter, beneficiaries [ph] and seasonality because of the very late spring festival this year, actually most developers actually shop in the day promotion in the first quarter, that's a very big reason. And the second big reason is that because we are further catching the new markets on the e-commerce sector. If we have more e-commerce product that means that will minor have mannered entrance of our advertising revenue? So we still expect that our revenue from the primary sector will keep stable in the coming quarters. And as you said in our home furnishing – our Qianggongzhang platform will have any interest on our home furnishing advertising, actually we see that if we have a very strong Qianggongzhang platform that will be positive for us to further increase our home furnishing advertising because our clients are mostly the big branded home debt furnishing clients. If we have a platform that has lot of end users and contractors for them, it's still a very effective entailing platform. So we see that our Qianggongzhang platform will further enhance our advertising revenue from the home furnishing markets. As you said the mobile sector, we – in the past few quarters we already see a very positive growth trends on our mobile advertising revenue. Currently, about 10% of our advertising revenue already coming from our mobile sector, those from our [ph] sector and the second from the IPP and also our recorded mobile – it's a browse page website. For the second question, as we said that we think on the markets that a real online to offline e-commerce solution provider – Leju I think is in a very unique position because we have very rich online resources in the radiant online product plus our expertise offline. And currently, a lot of competitors actually, they are coming from offline. They now offline but there are lack of online resources. So the problem for them I think is how to tap these online resources and have a closed circle service or closed circle solution provider to the developers which I think is also our advantage to win this market. So we actually see – we work on the completion of this market which will further actually increase the penetration of e-commerce model for the developers, and I think our solution will be a very unique position to win the deal from developers.

[Gregory Zhao:]

Okay, thank you very much.

[Geoffrey He:]

Thank you.

[Operator:]

Thank you. Your next question comes from the line of Nathan Snyder from CLSA. Please go ahead.

[Nathan Snyder:]

Thank you. Just had a quick question on the core business going back and looking at the e-commerce business for a second, can you talk a little bit around the reason for the revenue increase on a per coupon basis despite the decline in sales in a little bit about what you're thinking about in terms of e-commerce coupon sales for this year?

[Min Chen:]

Hi, Nathan this is Min. The main increase in AFP is primarily from the distribution of our coupon redeem. This quarter we saw a number from units sole perspective, we actually saw a higher increase in the first tier cities which obviously have recommended higher AFPs per coupon, so that – as Greg mentioned earlier, our e-commerce revenue contribution from first tier cities this quarter was about 56%, and that was so far the highest, if by several percentage points the highest contribution from first tier cities. So your first tier cities coupon sell price definitely contributed to the e-commerce revenue increase. And then for the second quarter, as Greg mentioned, with the markets ticking up, we are seeing encouraging trends in terms of coupons sold and developer launching projects and therefore leading to coupons redeemed. And we're seeing a much more – slightly more evenly distributed pattern going into the second quarter as a whole market on a national basis recovers.

[Nathan Snyder:]

Great, Min, that's extremely helpful. And can I just follow-up on one other question which was the mobile revenue contribution. Can you just define how you actually define that to 10% of revenue coming from mobile, can you talk about exactly what that means?

[Geoffrey He:]

Actually we have two major types, first is the display at accounts on our APP, that's the display at revenue. The second is wishing activity revenue, like lucky floor; usually developers would pay us some money to do these mobile activities on the wishing accounts. So mainly two parts of that.

[Nathan Snyder:]

And so to confirm what that means is that developers will pay in addition, your upselling that mobile package in addition to the PC package, is that right?

[Min Chen:]

Right.

[Geoffrey He:]

That's correct.

[Nathan Snyder:]

Thank you.

[Min Chen:]

I mean I think that's where we are – Nathan, I think that's where we're very unique, as Greg had mentioned, our mobile platform isn't just limited to display at – we've been able to develop a lot of rather unique and innovative products, the duration based mobile activities is one such example where close to meet age [ph] or 6A developer can launch an activity promoting their project and that's something that's never been done before on the market, so developers were actually very attractive to that. And because the threshold period of times, it gets very concentrated eye balls from the consumer, so that's contributed greatly to our mobile revenue.

[Geoffrey He:]

Yes, we call it interactive promotion.

[Nathan Snyder:]

That makes sense, thank you.

[Operator:]

Thank you. Your next question comes from the line of Nora Zhang from Merrill Lynch. Please go ahead.

[Nora Zhang:]

Good evening, management, thank you for taking my questions. I have a question regarding your membership program, I noted that Leju would refine an assistant to help each member to purchase a house and also give out rebate. This launching you to recruit more sales people for this membership program and thus Leju bear the rebates or the developers? I also have a follow-up question. Thank you.

[Geoffrey He:]

Okay, for the 91 Membership, it's a new project we launched this quarter. The first to focus was this membership is because we have to identify the people that are coming from – previously we had a lot of people that were looking housing permission on our website and then they go offline to the developers and they will be actually lost by these offline agencies, and they were named as their clients. So the 91 Membership actually gives us opportunities that we entitle these people at our – it's our audience, it's our clients that are brought to the developers. So that we can clearly identify which people are coming from Leju, which people are coming from your offline channels. So that's the first reason we launched that. The second reason, of course, we – previously we also had one membership persistent for the military [ph], and this is an updated version of that. 91 Membership Club, actually we provide this kind of rights for these people who pay us the R$9.1 to have this membership. I think given that it's more a number of this membership fee, and people are more willing to join this club to have this six exclusive rights. So since we also had our attracters to the developers because we have new people that are looking for new houses, so that's the second reason.

[Nora Zhang:]

So my question is, in the mix [ph] we recruit more sales people particularly for these membership program and those who need to give out rebates for the transaction?

[Geoffrey He:]

No, we will not increase more sales because of this program, and this program actually is our operational team, they – actually before they are also doing this, but because they are not actually focused on this membership, now we just give them a more focused project.

[Nora Zhang:]

Thank you. I have another question. So in your last quarter you talked about the biggest competition is increasing and those pressure on the margins because the acquisition cost for sales rate [ph] has increased. As we see the property market recovery, do we expect the acquisition cost for sales Leju go down in the coming quarters?

[Geoffrey He:]

Actually a lot of people are asking that, everybody is saying market competition has increased, what I just say if the market competition is already very fierce but if we do not seize at the level of the fear if coming out. For our first is that this year we do not see new competitors, all these companies are already there, so this is the first one. The second one is, as I said, a lot of new players, new companies, actually they don't have online resources, they only have offline resources. And for quite a lot here and when more and more develop cooperate with them, they will find their weakness. So actually from this year we already see that after comparison a lot of developers go back to us saying you are the best in the market.

[Min Chen:]

So I think Nora, some markets recovers, a number of the players would still be competing for projects with us. And like last year when there were new proposals of new pictures being presented to the developers, that was tendency for them to try something new and see if it works but at the same time – so that pressure, that competition remained especially when the market recovered, I think more and more of these players are becoming more active to win projects but at the same time like we've said, we're also seeing developers who work with other operators are now able to make the comparison on effect, on results, and then coming back to us. So I think there is going to be competition, there is going to be demand on a marketing expertise and marketing investment to make sure that we're able to help our developer clients on the projects but at the same time on a long term perspective we're seeing positive trends in developers recognizing our unique value offered.

[Nora Zhang:]

Alright, thank you. It's very helpful.

[Operator:]

Thank you. Your next question comes from the line of Elly Chen [ph] from Oppenheimer. Please go ahead.

[Unidentified Analyst:]

Good evening, I have a couple of questions. First, relating to your e-commerce business, I understand that you are not doing the direct to sales model at this point but do you have plans to maybe increase the headcount per each project so as to help with the conversion rate? And could you share with us what's your current headcount put each sales project? And my second question is relating to your margins outlook for this year, in first quarter I think SG&A as a percentage of revenue continues to increase, not sure if this is due to the weak seasonality or is it because you're seeing a higher commission rebate ratio, e-commerce model, and also given that you are entering the home furnishing platform business. Could you just comment on the overall margin outlook for this year? Thank you.

[Min Chen:]

Hi, I think in terms of increasing tech time for the sales people or increasing number of people for projects, currently that's not something that we're planning to do. As the way that we approach the e-commerce project is to be able to get efficiency from the team that we have set up in each city, so from overall perspective, while we are seeing slight increases in our overall company level headcount, it's just natural growth from the sale of the company and our increases has happened primarily in the IT area. So the local teams operating on the ground level are – have enough capacity to be working on multiple projects and that's part of our model and our operating model should be able to leverage the expertise of these people and share – to be able to upgrade [ph] synergy. Having said that I think from number overall margin perspective, the first quarter margin as we've mentioned to a number of investors and analysts, first quarter because of the seasonality, the first quarter numbers are not going to be very representative for the full year. However, I think the overall SG&A as we compete with other operators winning projects and as we continue to find new or develop new products to offer the marketing solutions to our clients, the SG&A overall line item will remain relatively high percentage of our overall revenue margin. So we do think overall for the – like we said before, for 2015 the margin compared to the last couple of years will – we will see some pressure. Operator?

[Operator:]

Thank you. Your next question comes from the line of Tian Hou from T.H. Capital. Please go ahead.

[Tian Hou:]

Hi, management, I have a question related to the secondary housing market. So you guys are much more focusing on primary home sales and but now I think secondary home market is gradually take off and I wonder what's the company's ply in that front? That is the first question.

[Geoffrey He:]

Okay, actually we concentrate a lot of efforts on the secondary market and our focus, our strategy is because we already laid a very solid foundation in these 17 cities, so the top priority is to expand the business in these 17 cities. And our verified housing model already proved to be a very good position on these market and a lot of revenue cities [ph] at our – a number of housing items and also the paid agencies number also increased very positively. So I think the top priority for us is to how to consolidate this model in these 17 cities, so that's the first model, the first strategy. The second strategy is we are thinking about having more mobile resources to this model, we have to launch our ad version and we are also upgrading our APP and also upgraded our reach [ph]. So for these upgrades, we will further enhance our company elements on verified housing model. For market competition I'm seeing because of the crash of the daily [ph] terminal model, I think that leaves us – the market space for us to relook – we will insist to be prelude information – we will be not involved in any upfront trading throughout our secondary market. So given in this market I think we still are quite positive to see the revenue growth from the secondary market.

[Tian Hou:]

That's very helpful. The second question is, what's your expansion plan this year and how many cities do you plan to go into by the end of 2015?

[Geoffrey He:]

I think we do have a plan to further expand our cities in terms of secondary investing business but we are still observing the market and I think we are also thinking about strategies or the ways how do we expand – how to enter these cities. So we were thinking about maybe using some new ways to do that or we will do our current model, current operation model – we are still thinking about that.

[Tian Hou:]

Okay, that's all my questions. Thank you. Min, what's your answer?

[Min Chen:]

I was just going to say in other words, in terms of what we like to do is increase our presence in the number of cities, so there are different ways of doing it whether directly off read it or what would local partners to have presence in this new cities that we want to enter into work, we will take it on a case by case basis when we evaluate the city.

[Tian Hou:]

That makes sense. Thank you.

[Operator:]

Thank you. Your next question comes from the line of Jinsong Du from Credit Suisse. Please go ahead.

[Jinsong Du:]

Hi, thanks for taking my follow-up question. I just wanted to clarify Min on your comment on the margins this year. The comments you made just were quite similar to the comments about margins you made during the full year earnings call in March but that is – I would say, quite vague in a sense if you could give us some guidance, how to think about the margin pressure, last year your non-GAAP in that margin was close to 20%. So same margin pressure this year we should think about in the range of 15% to 20% or 10% to 15% or even lower, especially since that has now as about this new home furnishing business which Mr. He said is at the current moment is very difficult to gauge how much you're going to spend, to invest in this new business this year. So with that in mind, what's your – I would say most comfortable range of non-GAAP net margin this year?

[Min Chen:]

I think from on the home furnishing business if you look at our strategy of entering these cities, it's basically finding a city manager and an operating partner and then paying its labor and all of the contractors that we're adding on that platform it's not going to be sort of heavy investment items because they signed up and we're basically providing a platform connecting the contractors to the customers. So even though at this point we are evaluating new cities to enter into out of 200 or so cities that we could potentially look into, I think one criteria close to evaluate is obviously, whether we can find the right partner. And the right partner or the operator means that whether we – it's somebody we want on our platform on our company, so that – with home furnishing, the new Qianggongzhang platform, the investment while it's hard to estimate, I guess we can say that it's not going to be a huge investment item for this year at least, in both the big cost in terms of labor, as well as the promotional cost. On the promotion cost as well, I think as we gain momentum with the platform, the promotion have to actually give out becomes less than that. So the initial promotion period is at the very beginning. So overall, you know very well that we don't provide sort of quarter guidance or even margin guidance but our perspective I think given e-commerce remains our largest revenue contributor and e-commerce is the one – is the product where we see the closest connection between online and offline and while this as marketing cost offline is essential to us being able to successfully compete at e-commerce products, I think as we grow our e-commerce platform and revenue, we do expect the market expenses for e-commerce business to increase proportionately. So from that perspective, I think we're saying last couple of years there is – we've been able to maintain a pretty healthy net margin but this year we definitely won't see downward pressure. It's hard for me to really give you a range, I think we will look at what we have on hand in terms of number of project, and the geographic coverage in these cities and how much resources we have developed into to be able to consider to the final number.

[Jinsong Du:]

Alright, I got it. Thank you.

[Operator:]

Thank you. We are now approaching the end of the conference. I will now turn the call over to Leju's Investor Relations Director, Ms. Melody Liu for her closing remarks. Please go ahead, ma'am.

[Melody Liu:]

Thank you. This concludes today's call. If you have any follow-up questions, please contact us at the number or email provided on our earnings release and on our IR website. Thank you. Have a good day.

[Operator:]

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.