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Edited Transcript of LEJU earnings conference call or presentation 19-Aug-19 11:00am GMT

Q2 2019 Leju Holdings Ltd Earnings Call

Shanghai Aug 21, 2019 (Thomson StreetEvents) -- Edited Transcript of Leju Holdings Ltd earnings conference call or presentation Monday, August 19, 2019 at 11:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Li-Lan Cheng

Leju Holdings Limited - Acting CFO

* Michelle Yuan

Leju Holdings Limited - Deputy CFO

* Yinyu He

Leju Holdings Limited - CEO

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Presentation

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Operator [1]

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Hello and thank you for standing by for Leju Second Quarter 2019 Earnings Conference Call. (Operator Instructions) Please note that today's conference call is being recorded. If you have any objections, you may disconnect at this time. I would 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 ma'am.

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Michelle Yuan, Leju Holdings Limited - Deputy CFO [2]

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Hello, everyone, and welcome to Leju Second Quarter 2019 Earnings Conference Call. Today, we'll update you regarding our financial results for the second quarter ended June 30, 2019. 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 our financial highlights for the second quarter 2019. Mr. Li-Lan Cheng, our acting CFO, will then discuss the financial results in more detail. We will then open the call to questions.

Before we continue, please allow me to review Leju's safe harbor statement. Some of the statements during this conference call are forward-looking statements made under 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 Statements 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, Geoffrey He. He-dong, please go ahead.

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Yinyu He, Leju Holdings Limited - CEO [3]

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Thanks, everyone, for joining us on today's call. We are pleased to say that we achieved solid growth in both revenue and profit in the second quarter of this year. Our e-commerce revenue was close to an all-time high this quarter, benefiting from the implementation of our top-down strategy. Through direct communications with developers' headquarter management, more and more developers have begun to learn the marketing advantage of our e-commerce model and our competitive edge in e-commerce sector.

So far, we have reached strategic agreements with over 80 developers in e-commerce, including over 2/3 of China's top 100 developers, and over 1/3 of these agreements are exclusive. Thanks to this top-down approach, both the number of projects and sales contributing to our e-commerce revenues reached all-time highs on a quarterly basis since the tightening measures that were put in place in late 1960. We also have accumulated a strong project pipeline for the second half of this year.

Meanwhile, we are further expanding our national coverage, especially to more lower-tier cities with the aim to gain broader market awareness and to lay a foundation for the future growth. Our e-commerce project so far have covered more than 200 cities in China.

Our New Media business, also made great progress this quarter. Our content production systems are getting stronger as we are adopting AI account technologies to generate real-time and formative contents. To expand content sources, we have concluded content exchange partnerships with over 200 of China's local mainstream media, including print and TV media, Internet media platforms, radios and magazines.

Our multiple channel networking operating, or MCN, model is getting wider and deeper, covering more mainstream online platforms and attracting more account followers. This model is generating far more traffic for us and have better user-service conversion rates. We believe the MCN media operating strategy will help us to lay a solid foundation for future growth for our online advertising segment.

Our progress across these New Media business, further consolidating our industry media influence and enhancing the competence of developers to deepen their cooperation with us. The other thing, we are further optimizing our operations and management, which help us generate positive cash inflow from operations in the second quarter.

Looking ahead, while the market uncertainty may increase, we will continue our efforts to improve operational efficiency and profitability, while maintaining healthy top line growth.

Now I'll turn the call to our acting CFO, Mr. Li-Lan Cheng, who will review our financial highlights for the quarter.

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Li-Lan Cheng, Leju Holdings Limited - Acting CFO [4]

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Thank you, Geoffrey. Good morning and good evening, everyone. For the second quarter of 2019, we recorded total revenues of $170 million, an increase of 39% from the same quarter of 2018. Our e-commerce services revenues for this quarter increased by 51% to $132.4 million as a result of an increase in the number of discount coupons received, partially offset by a decrease in the average price per discount coupon release. E-commerce service contributed to 78% of our total revenue this quarter.

Our online advertising service revenue for this quarter increased by 8% to $37.2 million as a result of an increase in property developers' demand for online advertising. Online advertising services contributed 22% of our total revenues this quarter.

Our listing services revenue for this quarter decreased by 40% to $0.4 million from the same quarter last year as a result of a decrease in demand from secondary real estate brokers. Our cost of sales was $18.3 million, relatively flat compared to the same quarter last year.

Our selling, general and administrative expenses increased by 48% to $140 million from the same quarter last year. The increase was primarily due to increased marketing expenses related to our e-commerce business.

Income from operations was $12 million for the second quarter of 2019, compared to $10 million for the same quarter of 2018. Net income attributable to Leju shareholders was $9.4 million for the second quarter of 2019, compared to a net loss attributable to Leju's shareholders of $0.9 million for the same quarter of 2018.

Non-GAAP income from operations was $15.7 million for the second quarter of 2019, an increase of 10% from the same quarter of 2018. Non-GAAP net income attributable to Leju shareholders was $12.3 million for the second quarter of 2019, an increase of 388% from the same quarter of 2018.

For the first half of 2019, we recorded $280.4 million in total revenue, a 37% increase from the same period last year. Our e-commerce revenues increased by 48% to $209.2 million for the first half of 2019, as a result of an increase in the number of discount coupons redeemed, partially offset by a decrease in the average price per discount coupon redeemed. E-commerce services contributed 75% of our total revenues for the first half of 2019.

Our online advertising revenues, contributing 25% of total revenue, increased by 14% to $70.3 million for the first half of 2019 due to an increase in property developers' demand for online advertising, while our listing revenues decreased by 49% to $0.9 million as a result of a decrease in secondary real estate brokers' demand for the first half of 2019.

Loss from operations was $7.1 million, a decrease of 67% from the same period of 2018. Net loss attributable to Leju shareholders was $4.1 million for the first half of 2019, a decrease of 81% from the same period last year.

Non-GAAP income from operations was $0.4 million for the first half of 2019, compared to non-GAAP loss from operations of 12.8% -- $12.8 million for the same period last year. Non-GAAP net income attributable to Leju shareholders was $1.8 million for the first half of 2019, compared to non-GAAP net loss attributable to Leju shareholders of $14.7 million for the same period last year.

As of June 30, 2019, our cash and cash equivalents balance was $166.6 million. Our net cash flow generated from operating activities for the second quarter of 2019 was $32.5 million, mainly attributable to non-GAAP net income of $12.6 million, a decrease in customer deposits of $7.1 million, an increase in accrued marketing and advertising expenses and other current liabilities of $9.7 million, an increase in amounts due to related parties of $5.9 million, an increase in advance from customers of $5.6 million, and an increase in income tax payable and other tax payable of $3.3 million, partially offset by an increase in accounts receivables and contract assets of $13.5 million.

Looking ahead, we estimate that our third quarter 2019 total revenues will be approximately between $170 million to $180 million, which represents an increase of approximately 27% to 35% from the same quarter of last year. Please note that this forecast reflects our current and preliminary views, which is subject to change.

This concludes our prepared remarks. We will now turn to our -- turn to the questions. Operator, please go ahead.

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Questions and Answers

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Operator [1]

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(Operator Instructions) As there are no further questions, I would like to hand the conference back to our presenters for any closing remarks.

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Michelle Yuan, Leju Holdings Limited - Deputy CFO [2]

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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 website. Thank you.

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Operator [3]

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