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Edited Transcript of LEJU earnings conference call or presentation 28-May-19 11:00am GMT

Q1 2019 Leju Holdings Ltd Earnings Call

Shanghai May 31, 2019 (Thomson StreetEvents) -- Edited Transcript of Leju Holdings Ltd earnings conference call or presentation Tuesday, May 28, 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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Conference Call Participants

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* Tianxiao Hou

T.H. Capital, LLC - Founder, CEO & Senior Analyst

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Presentation

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Operator [1]

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Hello, thank you for standing by for Leju's First 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 now like to turn the meeting over to our host for today's conference, Ms. Michelle Yuan, Leju's deputy CFO. 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's First Quarter 2019 Earnings Conference Call. Today, we'll update you regarding our financial results for the first quarter ended March 31, 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.

With me on the call today is Mr. Geoffrey He, our CEO, who will review operational highlights for the first 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 read 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 risk 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 unaudited non-GAAP measures to the unaudited most directly comparable GAAP measures. Please note that unless otherwise stated, all figures mentioned in this conference call are in U.S. dollars.

I will now turn the call over to Leju's CEO, Geoffrey He. He-zong, 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 see strong top line growth in both our online advertising and e-commerce sectors for the first quarter. This was in part driven by the increasing demand for marketing ad services from developers as the overall market sentiment improved. It is also a result of our top-down key account strategy, which has played an important role in building up our e-commerce project pipeline and is expected to further consolidate our market leadership in the e-commerce sector.

So far, we have reached the strategic agreements with over 2/3 of the top 100 developers to cooperate on our e-commerce, a large number of which are exclusive. Through these agreements, we are -- we have already seen a strong rise in e-commerce projects and this trend should continue in the coming quarters, assuming no significant change in government policy. We also enhanced our "New Media" strategy in the first quarter, especially on our multichannel networking, or MCN system. We are pushing ahead content exchange partnerships with China's local traditional media outlets. For example, print and TV media, and are delivering our content to China's major online media platforms to bring broader awareness and higher traffic. This type of MCN media operation strategy is quite new in our vertical industry and we believe it will give us a new competitive edge, accelerate growth in our online advertising sector and improve profit margins.

On the internal management side, in the first quarter, we adopted a new management structure to further improve operational efficiency and streamline our cost structure. We will look to further optimize our internal management to meet business development needs as well as profitability growth.

Looking ahead, we will continue to focus on market expansion, product innovation and organizational optimization in order to maximize long-term value for shareholders.

Now I'll turn the call over 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 first quarter 2019, we recorded total revenues of $110.4 million, a 35% increase from the same quarter of 2018. E-commerce services revenues for this quarter increased by 44% to $76.8 million, contributing 69.6% of our total revenues. The growth was a result of an increase in both the number of discount coupons redeemed and in the average price per discount coupon. Online advertising services revenues for this quarter grew by 22% to $33.2 million or 30.1% of our total revenue. We expect an increased demand for online advertising among property developers.

This conservative revenues for the first quarter of 2019 decreased by 56% 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 for this quarter increased by 26% to $23.5 million from the same period last year, primarily due to an increased cost of advertising resources purchased from media platforms.

Our selling, general and administrative expenses increased by 11% to $106 million from the same quarter last year. This increase was primarily due to increased marketing expenses related to our e-commerce business.

Loss from operations was $19.1 million for the first quarter of 2019, a decrease of 39% from the same quarter of 2018. Net loss attributable to Leju shareholders was $13.5 million for the first quarter of 2019, a decrease of 35% from the same quarter of 2018.

Non-GAAP loss from operations was $15.3 million for the first quarter of 2019, a decrease of 43% from the same quarter in 2018. Non-GAAP net loss attributable to Leju shareholders was $10.6 million for the first quarter of 2019, a decrease of 39% from the same quarter of 2018.

As of March 31, 2019, our cash and cash equivalents balance was $137.9 million. Our net cash flows used in operations for the first quarter of 2019 were $11.7 million, mainly attributable to non-GAAP net loss of $10.6 million and an increase in accounts receivable and contract assets of $10.3 million, partially offset by an increase in accounts due to -- amounts due to related parties of $5.2 million, an increase in advance from customers of $2.5 million and a decrease in customer deposits of $1.4 million.

Looking ahead, we estimate that our second quarter 2019 total revenues will be approximately between $150 million to $160 million, which represents an increase of approximately 22% to 30% from the same quarter last year. Please note that this quarter has reflect our current and preliminary view, which is subject to change.

This concludes our prepared remarks. We're now ready to take your questions. Operator, please go ahead.

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Questions and Answers

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Operator [1]

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(Operator Instructions) We have a question from the line of Tian Hou from T.H. Capital.

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Tianxiao Hou, T.H. Capital, LLC - Founder, CEO & Senior Analyst [2]

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Thank you management for picking my question. I have 2 questions. It's much more -- one is a general question, one is related to Leju itself. One is what's the management's view on 2019 the property market in China? And it seems like last year, we had a lot of control and limitation. But this year, it seems like a very tricky situation. So what would -- what do you guys think about that? And also e-commerce, this quarter, growing really nicely. So why is that and what is the chance throughout 2019? That's the 2 questions. Thank you.

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Yinyu He, Leju Holdings Limited - CEO [3]

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Okay, thank you for the question. For the first question is, for this year's property market, we think that the industry will keep stable, including the trading volume and the trading price. The current government strategy is to keep the price stable. Some cities even have set a goal, like annualize will no more than 5% or like that. On the other hand, the government will also take measures if the price goes down. So from both the trading volume and the trading price, we think this year will keep very stable in the small range of the -- may be up and down 5%, a price like that.

As to the e-commerce, so we actually, we already see that apart from some small cities, I think most cities have already seen that because of the increase of the supply of the new apartments, while the demand actually are not getting as quickly as they want. So when we -- especially in the first quarter, we see that the developers, they have more needs to do marketing. Previously, developers, when the government set the price ceilings, they usually sell at the price ceilings. So at that time, they don't need to do more marketing activities but because the consumers actually are willing and with more supply of the new apartments. So when they feel if they do not do more marketing activities, it is quite hard for them to accelerate the sales. So this leaves us the space to do e-commerce, both on the price side and both on the marketing side. Our e-commerce model is based on the discount coupon. So we see that especially in the first and the second-tier cities, more and more projects begin to have such a discount. This give us the opportunity to sell the discount coupons.

So overall, we are quite optimistic for the full year on our e-commerce business because we see, given that the market keeps stable, while the supply of the new apartment is getting up, we think the marketing activities needs from the developers will become more and more. So we are quite optimistic of our e-commerce business. Plus we already see that we actually -- through our top-down strategy -- top-down key account strategy, we already built up a quite strong pipeline of e-commerce projects. So I'm sure you can see that in the first quarter, we are actually -- we achieved a price drop both on advertising and the e-commerce sectors.

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Tianxiao Hou, T.H. Capital, LLC - Founder, CEO & Senior Analyst [4]

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Thank you, very helpful.

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Operator [5]

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(Operator Instructions) We do not have any further questions at the moment. I would like to hand the conference back to our host for any ending remarks.

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Michelle Yuan, Leju Holdings Limited - Deputy CFO [6]

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

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Operator [7]

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Thank you, ma'am. Ladies and gentlemen, that concludes our conference for today. Thank you for your participation. You may all disconnect now. Good day.