Q3 2014 Leju Holdings Ltd Earnings Call

Nov 19, 2014 AM EST
LEJU - Leju Holdings Ltd
Q3 2014 Leju Holdings Ltd Earnings Call
Nov 19, 2014 / 12:00PM GMT 

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Corporate Participants
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   *  Melody Liu
      Leju Holdings Limited - Director - IR
   *  Geoffrey He
      Leju Holdings Limited - CEO
   *  Min Chen
      Leju Holdings Limited - CFO
   *  Xin Zhou
      Leju Holdings Limited - Executive Chairman

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Conference Call Participants
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   *  Jinsong Du
      Credit Suisse - Analyst
   *  Jiong Shao
      Macquarie Research - Analyst
   *  Yong Wang
      JPMorgan - Analyst
   *  Ella Ji
      Oppenheimer - Analyst
   *  George Meng
      Morgan Stanley - Analyst
   *  Sisi Lu
      China Renaissance - Analyst
   *  Tian Hou
      T. H. Capital - Analyst
   *  Gregory Zhao
      Barclays Capital - Analyst
   *  Chen Yang
      CICC - Analyst

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Presentation
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Operator   [1]
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 Hello, and thank you for standing by for Leju's Third Quarter 2014 Earnings Conference Call. At this time, all participants are in listen-only mode. After 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 turn the meeting over to your host for today's conference, Ms. Melody Liu, Leju's Investor Relations Director.

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 Melody Liu,  Leju Holdings Limited - Director - IR   [2]
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 Thank you. Hello, everyone, and welcome to Leju's third quarter 2014 earnings conference call. Today, we will update you regarding our financial results for the third quarter ended September 30, 2014. 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 Web site at ir.leju.com.

 Leading the call today is Mr. Geoffrey He, our CEO who will review operational highlights for the third quarter of 2014. 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 IPO Prospectus 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 includes discussions of unaudited GAAP financial information, as well as some audited 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 or 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. Please go ahead.

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 Geoffrey He,  Leju Holdings Limited - CEO   [3]
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 Good morning and good evening. Thank you everyone for joining us on the call today. We are pleased to report another quarter of solid growth despite extended softer market conditions in the third quarter of 2014.

 While real estate activities remained subdued this quarter, Leju was able to make further progress on both expanding our e-commerce business coverage and building up an integrated mobile marketing ecosystem. That provides us with additional revenue generation potential.

 Our e-commerce business during the quarter grew 63% compared to an already very strong third quarter last year, which is testament to our focused approach to address the e-commerce which emphasizes online plus offline execution, as well as continuous product innovation.

 The end result is our continued expansion in the e-commerce businesses with deepening penetration and our growing number of projects and our overall coverage. Our mobile strategy and product development have also contributed to our leading position in e-commerce. Throughout the third quarter and the subsequent months, we maintained a high level of marketing activity on the Weixin platform through a series of [seen] promotional events, including Weixin Home Promotion, Weixin Home Furnishing Promotion and Weixin verified listing promotion.

 We also broadened our operation partnerships and assigned a strategic partnership with Easy Taxi in mid-October to provide tailored transportation options to homebuyers. Another agreement homebuyers can arrange to have a car pickup -- to have a car picks them up to visit development sales centers with just at the touch of a button on our Weixin mobile sales centers.

 Our mobile marketing events and promotions have attracted significant interest from both developers and the consumers, achieving the marketing effect desired by our developer clients and fulfilling the information and transaction needs of consumers and homebuyers.

 By mid-November of this year, our Weixin gift packs promotions attracted more than 83 million participants and we have successfully attracted nearly 2 million followers on our Weixin accounts and more than 22 million followers on our Weibo accounts.

 By the end of the third quarter, we saw signs of recovery in primary transaction volume in a number of markets as a result of the announced mortgage lending relaxations and enhanced marketing efforts among developers. We expect this trend to continue into the end of the year and hope the stabilization of the real estate market combined with our leadership in real estate outdoor service will deliver additional growth for our shareholders.

 In 2014, the secondary transaction market experienced significant challenges with sharply lower transaction volume. We were also impact by numerous unexpected events and as a result our revenue was below our initial expectations. However, these market dynamics have afforded us an opportunity to expand our national network for listing services. We remain committed to building an online information platform featuring authentic secondary housing information, and we'll continue to work with our partners in the secondary market to promote the long-term development of the industry through further innovations.

 With this goal in mind, we have continued our efforts in developing an upgraded verified listing products. In July, we signed a strategic agreement with over 100 brokerage agencies in 17 cities to promote our verified listing model, which was well received by our brokerage partners and have since made progress in attracting paying secondary agents to our platform. We continue to believe in the long-term growth potential of the secondary market and believe this will become a long-term growth driver for our business as the market matures.

 Now, I will turn the call over to our CFO, Ms. Min Chen, who will review our financial highlights for the third quarter.

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 Min Chen,  Leju Holdings Limited - CFO   [4]
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 Thank you, [Hedong]. Good morning and good evening everyone. We're pleased to report third quarter 2014 results with strong top-line growth and steady profitability. Overall revenues for the third quarter of 2014 grew by 32% year-over-year to $128.3 million.

 Our e-commerce services revenue accounted for around 66% of our total revenues consistent with our strategy and expectations, the 63% year-over-year growth was primarily driven by increases in discount coupons redeemed as we substantially grew our project coverage with the help of our mobile platforms. During the quarter, we saw e-commerce revenue contributions from 57 cities.

 Our online advertising services revenues maintained a 4% growth compared to the same quarter last year and contributed 33% of our total revenues. As mentioned by Hedong earlier, our listing services revenue continued to be impacted this quarter as a result of market changes, lower transaction volume and high agent turnover. Revenues for the third quarter declined by 60% to $2.3 million and contributed about 2% of our total revenues this quarter.

 Non-GAAP income from operations were approximately $38 million representing a 28% year-over-year increase from the same period last year. Non-GAAP net income attributable to Leju shareholders was $31 million representing a 12% year-over-year increase from the same period last year. For the first nine months of 2014, we recorded $324 million in total net revenues representing a 55% increase from the same period of last year. Our e-commerce services revenue grew 118% from the same period of last year to $202 million contributing approximately 62% of total revenues. This year to-date figure already exceeds our e-commerce revenue for the full year of 2013 which totaled $107 million.

 Our online advertising services revenue grew 9% for the first nine months of the year compared to last year to $111 million contributing 34% of total revenues, while our listing services revenue declined 24% to $11 million. Non-GAAP income from operations was $70 million representing a 75% year-over-year increase from the same period last year. Non-GAAP net income attributable to Leju shareholders was $59 million representing a 69% year-over-year increase from the same period last year.

 As of September 30, 2014 our cash and cash equivalents balance was $263 million, our net cash flows from operations for the third quarter was $40 million. At this point, we're revising downward our guidance for the full year of 2014 to $470 million to $490 million from the previous guidance of $500 million to $520 million, primarily due to lower than expected listing services revenues. Our revised guidance represents a revenue growth rate of 40% to 46% approximately from full year of 2013.

 With that, we will now open the floor 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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 The question-and-answer session of this conference call will start in a moment. (Operator Instructions) Your first question comes from the line of Jinsong Du from Credit Suisse. Please go ahead.

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 Jinsong Du,  Credit Suisse - Analyst   [2]
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 So do you think that the current market condition is going to enable you to continue to gain market share or do you think that the competitive landscape right now will probably be more intense competitions, so that you're aiming for just the market penetration driven growth rather than market share gain from other competitors. So, could you comment on that for the current situation your market share situation and also what would be your market situation going forward? And also very quickly could you explain the reason for the Leju's share distribution and cash dividend? Thanks.

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 Geoffrey He,  Leju Holdings Limited - CEO   [3]
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 I think first in the past few quarters, actually we are adding a lot of value-added services to our e-commerce model, which increased our company's -- for us to gain more projects and again welcomed by the developers that's our main strategy. And in the past few quarters, actually we add our mobile strategies, mobile innovation products and financial products to increase the number of our e-commerce projects, that's the first strategy.

 I think the second strategy is that because we are also expanding our e-commerce penetration to more cities, you can see this quarter we actually have run this from 57 cities. So the geographical expansion is also the second growth for our e-commerce business.

 And third is that as you said to the competition landscape, I think the penetration rate especially for the second and third tier cities is still low. So, there is quite a bit room for us to grow. And especially from this quarter, we can see that our competition begin to verify. First is that previously actually the competition model is almost the same, but from this quarter, I think the model has something different. And our advantages about our O2O, a lot of e-commerce projects especially we have the comments from developers they think we can perfectly connect to both online and offline. And we see some models, new models, as they are actually, they have some strong presence offline but there are lack of expertise in online. So I think even if the penetration goes to a high level, we still have the advantage to win the competition.

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 Min Chen,  Leju Holdings Limited - CFO   [4]
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 And Jinsong to your second question about the dividend, actually it is E-House who is distributing the cash and Leju share dividend to the E-House shareholders. So from the Leju management's perspective, we actually see this as an event that will help us to increase our public floats available to investors.

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Operator   [5]
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 Your next question comes from the line of Jiong Shao from Macquarie. Please go ahead.

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 Jiong Shao,  Macquarie Research - Analyst   [6]
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 Firstly, I want to follow-up on the competition question earlier. As you know, your major competitor is transforming its e-commerce business to be closer to the transaction. I was hoping you could expand a bit on how you view the model difference now and could you elaborate a bit on why your model perhaps is better? And my question is really about the outlook for Q4. I think since the government loosened up policies a bit towards end of September or in the middle of September, I was hoping you could comment a bit on what you're seeing from transaction levels in October and November? Thank you.

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 Geoffrey He,  Leju Holdings Limited - CEO   [7]
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 For the first question is that, I think we currently -- actually we cannot comment on our competitor's move whether it's good or not. But the fact is that the model became different. Our model doesn't change, we still provide integrated services from both online and offline and actually we have this brokerage agencies as our service partners. But our competitors actually their models, they are competing with them.

 So from our perspective, we cannot say the model is good or not but we are still watching. This model whether will work on the market. So far we haven't get any solid figures to show if this model will be really competitive to us, that's for the first question.

 And for the second question, I think for us we see that some trend as we said some signals that transaction volume in October and November had some rebound. We hope this trend will be maintained in the coming weeks. But actually this market decides. So we hope. We just have these signals that the market can be maintained in a comparatively high level in the fourth quarter.

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 Jiong Shao,  Macquarie Research - Analyst   [8]
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 Has the rebound been pretty strong or any color you can share in terms of the magnitude of the rebound?

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 Geoffrey He,  Leju Holdings Limited - CEO   [9]
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 [Weij] can give you that, October transaction volume is -- the rebound is actually quite strong. But in the first half of November, actually the rebound is not as strong as in October, but still at quite high level. So we expect maybe this trend will continue through the end of this year.

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Operator   [10]
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 Your next question comes from the line of Yong Wang from JPMorgan. Your line is open. Please go ahead.

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 Yong Wang,  JPMorgan - Analyst   [11]
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 I have two questions. The first one is regarding the mobile marketing service, so in your prepared remarks, you mentioned that the positive feedbacks of your integrated mobile marketing solutions. Just wondering in terms of monetization how much of the marketing service revenue in the quarter is coming from mobile phones and is there any potential cannibalization to their spending on PC?

 And second question is a quick one just on the redemption rates of e-commerce coupons. So on a sequential basis, it improved significantly from I think it's 56% in Q2 to 70% in Q3. Just could you share with us the drivers behind this and how should we think about the trend going forward? Thanks.

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 Geoffrey He,  Leju Holdings Limited - CEO   [12]
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 Okay, the first one is what I should say it is true that we actually gained a significant welcome from both our developer clients and our end-users. They think our mobile products are really innovative and they think it's very effective especially for developers to promote their projects. And our strategy is that we have already begun commercialization of our mobile innovations and we have some revenues from the mobile, our mobile products, either from our mobile Web sites or our mobile applications and also on the Weibo and Weixin products.

 But our strategy is that we currently have several ways to commercialize that. The first one is that we will -- we actually we will independently sell the mobile products, especially the mobile ads on our apps and on our -- we call it mobile Leju Web site.

 The second way is that we have to integrate it, our mobile products into our total advertising solutions to the developers. So the developers actually get a package for both PC and mobile products. Second as I said is that we provide these mobile products to our e-commerce project clients. So that's the three-way we commercialize the mobile products.

 It is now quite hard to very clearly say how much we gain from mobile and how much we gain from PC. I think most of the revenue actually we get from our total package, service package from that. I think that in the future, I hope that we will have some -- we can't clearly divide into, both PC revenue or the mobile revenue.

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 Min Chen,  Leju Holdings Limited - CFO   [13]
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 And Yong on your second question about the redemption rate, as we all know the redemption rate is actually a function of two movements one is obviously the increase this quarter of coupons redeemed, which sends a signal to us. One, there's increased the penetration as we mentioned in terms of number of projects and also secondly from a overall volumes, units sold by developers we also saw, compared to the second quarter sequentially there is a slight increase.

 And the second movement obviously is the denominator. In the third quarter as we mentioned, the relaxation policies came close to the end of the quarter. So from a marketing perspective, the coupons sold number in the third quarter was lower than the second quarter which contributed to the higher redemption rate, but going into the fourth quarter, we do see that coupons sold number to increase.

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Operator   [14]
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 Your next question comes from the line of Ella Ji from Oppenheimer. Please go ahead.

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 Ella Ji,  Oppenheimer - Analyst   [15]
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 I have two questions. The first one is also regarding the competitive landscape. So in recent quarters, there have been some new business models such as [Xondodo] and we know that actually some larger secondary brokerage firms actually have been selling new homes for a while. And so can you talk about the effectiveness of such business model in the past? And if developers are allocating some sales and marketing fees to new channels, how does that impact their sales and marketing budget to other existing channels such as coupon and original market marketing services?

 And then my second question is relating to your SG&A spending, we saw the absolute dollar number decline Q-on-Q this quarter. Can you share some colors? And also relating to that can you talk about the rebate level on a sequential basis? Thank you.

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 Xin Zhou,  Leju Holdings Limited - Executive Chairman   [16]
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 (Spoken in foreign language).

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 Min Chen,  Leju Holdings Limited - CFO   [17]
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 I'll just quickly translate for Xin Zhou about the comparison of the models. Ella, I think your question was about the competition from companies such as Xondodo what Xin Zhou wants to differentiate between the e-commerce models is two points. One is our understanding, our approach of the e-commerce models is very much focused on online to offline and both very important aspect of the e-commerce chain. On the online side, you need to have an Internet portal, a Web site based and attract an audience for Internet users. And then on the offline side, you have the offline transaction services to help complete the transactions. So that completes e-commerce platform whether it's on the PC side or the mobile side, you need to generate your organic traffic to bring the audience to your Web sites first.

 The other model that you mentioned that have gone up lately, Xondodo has a name for them called land commerce, which is the type of companies that are based on existing offline channels but using Internet or ATP as a tool to help them convert the traditional ways of marketing. This is something that's more suited for the traditional E-House primary sales agent business and in fact at the EJ level, at the E-House level, we have a new unit called [Litua] which is exclusively focused on marketing and conversion through the traditional channels, but also using Internet and ATP as a tool.

 As we all know, real estate sales and marketing and conversion is a long product chain. So having the - we, Leju, is very much focused on one step of the long product chain which is the e-commerce, which as we mentioned before is focused on both the Internet and the offline O2O segment.

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 Xin Zhou,  Leju Holdings Limited - Executive Chairman   [18]
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 (interpreted) Once we are clear about the distinction between the two types of models what Leju's approach has always been consistently focused on the marketing and promotion aspects of the real estate services and making sure the information is broadcast to the broad audience and through that to consistently follow and execute a strategy of e-commerce from that aspect.

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 Ella Ji,  Oppenheimer - Analyst   [19]
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 Thank you.

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 Min Chen,  Leju Holdings Limited - CFO   [20]
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 Thanks. And then and I think to your second question about the SG&A, this quarter the SG&A actually as a percentage of overall revenue have decreased, really primarily benefiting from the overall scale of our e-commerce penetration levels as we're working on more projects in each of the cities that we operate e-commerce in - naturally, there is a synergy that we can capitalize from the operations. So that helped us to reduce our SG&A overall.

 And then obviously as mentioned before, the utilization of the mobile platforms further helped us to reduce the overall marketing expenses that were traditional expenses for offline activities, which required more expenses.

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Operator   [21]
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 Your next question comes from the line of George Meng from Morgan Stanley. Please go ahead.

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 George Meng,  Morgan Stanley - Analyst   [22]
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 I have two questions, the first one is related to your e-commerce business. So you talked about the other different business models then apparently your biggest competitor are transforming their e-commerce business model. And I think Xin Zhou, you talked about the close, kind of the closed loop transaction on mobile e-commerce for property or new property that was when, at the time of our deal. I just want to get a update on that initiative. Is there any major progress on the kind of closing in the transaction loop on mobile and also on PC probably?

 And also it's very helpful that you mentioned that the very distinguish between the e-commerce and land commerce are (inaudible) model. But I just wonder from a developer standpoint when they are doing the property marketing, do they really set aside different pools of budget for the marketing or are they basically decide on the effects in these and on ROI of the marketing, that's my first question.

 And then my second question is actually related to your listing business. We understand it's a very small business for you. But we just want to because your biggest competitor is definitely hurt by some of the recent development like the boycott from the agencies. I just wondered, do you think you can use this as a opportunity to gain market share, because apparent this quarter your listing business revenue actually declined I think in comparable or even a little bit more than your bigger competitors. So I just wonder what the trend going forward especially with your verified listings services? Thanks.

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 Geoffrey He,  Leju Holdings Limited - CEO   [23]
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 Xin Zhou will answer your first question. (Spoken in foreign language).

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 Xin Zhou,  Leju Holdings Limited - Executive Chairman   [24]
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 (Spoken in foreign language).

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 Geoffrey He,  Leju Holdings Limited - CEO   [25]
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 Okay. I will just briefly translate Xin Zhou's comments.

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 Xin Zhou,  Leju Holdings Limited - Executive Chairman   [26]
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 (interpreted) That, yes, it is true that for this land commerce operators they have a competitively high cost level of especially offline. There are several ways for them to do the offline, one is to open shops and the second one way is they also they want to buy some traffic from the Internet. So for us, I think we have some advantages because we have the Internet incoming, a lot of platforms and we can have a lot of traffic from online.

 So comparatively, the total operation cost for us will be a bit lower than the offline sees that e-commerce operators. And as to the our major competitor's shift is that -- call it distribution their models is that the currently we think it's just maybe it is just kind of a supplementary source to the business model rather than the mainstream business model.

 George to your question about the listing business, it's definitely an important opportunity for us this year despite the slowdown in the secondary markets, due the transaction decline. In fact as you can see, we are actually using 2014 as a year for us to actually expand our network to a national basis. In 2013, our revenues primarily came from one city which is Beijing, which is also happens to be the largest secondary market, secondary transaction market. In 2014 continuously in March and later in the year, we have launched products including Fang Jin Suo and then also upgraded verified listing models to complement our expansion geographically into around 17 cities to build up our foundation for the national network.

 Our focus is going to be building in informational platform for marketing solutions for secondary listing agents. And again we are consistent about this approach. If other players are transforming or transitioning from an informational platform to transaction or other types of platforms, we still believe that for the Chinese secondary market in near future, a pure informational platform is not only necessary but critical for the information to be disseminated between buyers and sellers and our focus is to promote the verified listing model that we used in Beijing last year to promote the market and development for the, on a national basis.

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 Geoffrey He,  Leju Holdings Limited - CEO   [27]
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 And one addition to Xin Zhou's comments is that we still believe that actually the event happened in the past few quarters. It just means that actually the agencies, brokerage agencies are not satisfied with the pricing model of our secondary listing in business, but not -- actually they need a platform to list their secondary house information. So that is why we have a strong belief that on the market there is a need, a very strong need to have a clear effective secondary house listing platforms.

 So if our competitors, they transform to be a trading agency, then I think that leaves us a space that we will still commit to become China's leading secondary house information platforms. So that is I think -- that's our strategy. And currently, I think as I've said for us it is still a opportunity because previously we only have our business in Beijing and this year we expand to 17 cities. And for these cities, I think we have even better opportunity to accelerate our mature -- business mature speed.

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Operator   [28]
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 Your next question comes from the line of Sisi Lu from China Renaissance. Please go ahead.

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 Sisi Lu,  China Renaissance - Analyst   [29]
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 So actually my question is regarding on the e-commerce project. So I understand that E-House has what the [Hadongli] project. Could you please share with us more color on how well you guys have leveraged the resources and possibly maybe any impact on our cost structure? Thank you.

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 Geoffrey He,  Leju Holdings Limited - CEO   [30]
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 The Hadongli model actually is a cross sale model, previously actually under the EJ Group and also Leju, we actually run the business very independently and we independently go to the developers to sell our different services. But actually, we had to then appoint a part of the wholesale chain. So there is a need especially on the market soft, we strongly feel that the developer have a need is that if we can provide them a wholesale chain services. So that is why we provide them the Hadongli package.

 But under this package, we only cross sell, we actually do not integrate our price package to the developers. So for the developers, they get a package you can chose our e-commerce business service, you can choose our pricing service, you can also EJ's agency services, but they have to pay independently.

 But for the benefits of the developer is that they can get the total solution at one-time from one group. It gives them -- the operational level, they will be much easier to cooperate with us. That's the initiative of our Hadongli model.

 So basically, I think for us is that Hadongli give us more -- for Leju, will give us more chance to get approach to the developers and have more opportunities to have more e-commerce projects and also the advertising opportunities.

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Operator   [31]
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 Your next question comes from the line of Tian Hou from T. H. Capital. Please go ahead.

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 Tian Hou,  T. H. Capital - Analyst   [32]
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 Couple of questions, why is related to your marketing service. So I wonder the marketing service has slowed down. Is that because some kind of cannibalization between your e-commerce business and marketing service or mainly due to the market's weakness? That's number one.

 Number two, as we look at the markets, actually you guys issued a report about the top 70 cities, their transaction, their pricing situation. In terms of rebound, I don't agree there is a rebound, we only see the price decline narrowed but hasn't really seen not decline or even increase. And also if you look at the bank, none of the bank actually applied the 70% rate to the market yet. So you are asking for to buy, you don't give people better deals to buy and the people you envision, the price may continue to drop. So what do you see your ecommerce and also the marketing service?

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 Geoffrey He,  Leju Holdings Limited - CEO   [33]
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 And for your first question is that because I think actually so long as our scale is getting bigger and bigger, so there is some synergy on our total operation. I think that's the key reason for where we see our marketing and services expenses actually the ratio is going down.

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 Min Chen,  Leju Holdings Limited - CFO   [34]
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 Tian actually for the marketing services that you mentioned, if the online advertising segments for us, for the first nine months, it grew 9% which is actually in line with our expectations from the beginning of the year. That's point number one.

 Point number two, to your question about cannibalization, we actually think the steady growth rate or the lower growth rate rather compared to ecommerce is more a shift from the developers in terms of choosing a way to market and promote their projects. If they see the benefit of e-commerce helping them to sell the project, then there is a possibility of them gradually to spend less marketing on online advertising or offline advertising for that matter out of their own budget. So that definitely could also have contributed to the slower growth.

 But as Hedong mentioned at the beginning of the call, with our mobile platform and the integrated systems, we've actually started testing new sources of revenues for mobile marketing and we've actually started monetizing albeit on a small basis for this quarter to complement our traditional banner ad type of online advertising, so that hopefully that answers your first question.

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 Tian Hou,  T. H. Capital - Analyst   [35]
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 Very helpful.

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 Min Chen,  Leju Holdings Limited - CFO   [36]
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 Thank you.

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 Geoffrey He,  Leju Holdings Limited - CEO   [37]
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 And for the second question actually is that you don't agree, it's actually maybe that's the total -- maybe you will see the national statistics maybe show that. But from operational levels, actually we did see that the transaction volume especially in the key cities first tier and the second tier cities they went up in October and November compared to the third quarter, so that is why we say there is a rebound that's that.

 And for our financial services, actually we -- because actually previously that the financial systems didn't get enough support through the homebuyers, so a lot of potential buyers say actually they have the very strong demand to buy the house but their lack of financial aid that is why we introduced our financial fundings or financial aid fundings or services from our group, EJ Group, into our total service package to our e-commerce clients.

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 Tian Hou,  T. H. Capital - Analyst   [38]
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 And Hedong, so one more question follow-up. So you revised the full year guidance down about $30 million, I wonder where does the revision, this $30 million supposed to come from, which line of business?

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 Min Chen,  Leju Holdings Limited - CFO   [39]
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 As we mentioned, Tian, in our press release, the downward revision is really primarily due to the listing services revenue lower than previously expected.

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 Tian Hou,  T. H. Capital - Analyst   [40]
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 Listings only like each quarter only $2 to $3 million?

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 Min Chen,  Leju Holdings Limited - CFO   [41]
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 That's the actual result. But we had higher expectations at the beginning of the year for the 2014 market. But as you know for the first nine months in addition to sharply lower transaction volume for the secondary market, there's also been various events happening in the industry that obviously didn't help the market in improving the transaction volume.

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Operator   [42]
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 Your next question comes from the line of Gregory Zhao from Barclays. Please go ahead.

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 Gregory Zhao,  Barclays Capital - Analyst   [43]
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 I have two follow-up questions. First one is still about the secondary market and actually I am a little confused about that how Company's business current situation. As from my own observation, I think the number of listings on our Web site is pretty stable no matter Beijing or other lower tier cities. But first of all, we see the revenue is a little weak in this quarter. I want to know is there any change of the monetization of business model on the secondary business to drag the revenue down on other regions beside I think that management would comment that we are expanding the market share considering the key competitor is facing some issues in this market. But I think the listing is still quite stable. So I want to know is the market share expansion already happened and we expect so?

 And, the second question is about the e-commerce market competition. And I am not sure if other analysts already asked the question. I want to know the pressure on the pricing of our coupon as the competitor if launching some directives model and they have some cash rebate or some compensation. So have we seen any pressure on the price? Thanks very much.

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 Geoffrey He,  Leju Holdings Limited - CEO   [44]
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 For your first question, actually it's quite simple because as I said the problems of the past few quarter's events is that the pricing model of our competitor. Actually, we have some negative impact on our price also. So that is why you can see the listing, in the number of the listing our work side on the -- keep stable but the revenue went down just simply because we have to reduce some prices to these agents. And the second reason is that previously, our major listing revenue came from only one city that is Beijing so that's why we gave when the price goes down, we get I think quite big impact on that.

 But what I actually say that as we expand to more cities, the revenue from these cities actually are going up but it takes time compared to the price cut in Beijing, it cannot compensate that big price cut. So that is why we see that revenue going down. And also we see that if we have more time, I think we can be more market share from these expanded cities that will help us actually to gain a more big market share overall nationwide to see that. That's for your first question.

 The second question is actually that the competition is not on the price or coupon price. Actually, we see the price coupon price keeps stable or even a little bit higher than the second quarter. The competition is based on how much you like to invest into these marketing activities both online and offline. What kind of service package you provided to the developers. So the competition is not based on the coupon price, but on the service package.

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Operator   [45]
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 Your next question comes from the line of [Chen Yang] from CICC. Please go ahead.

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 Chen Yang,  CICC - Analyst   [46]
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 The first question is actually one of the developers, Fang Jin, did a very successful promotional event on November 11 fetching over $4 billion of contract sales in just one day. So Leju is one of the partners Fang Jin came up with. And so can you share with us how this corporation will start in the first place and how Leju was integrated into the whole campaign?

 My second question is a follow-up on the physical market. So I am just trying to understand what scenario have we factored in when arriving our guidance for Q4 and what are the upside and downside risks to what we are seeing now? Thanks.

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 Geoffrey He,  Leju Holdings Limited - CEO   [47]
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 For the first question, yes, it is true we did quite successful with Fang Jin on the promotion package. I think the most attractive of our package to the Fang Jin is that our mobile products. Actually we provide, we actually integrate all, nearly all our innovative mobile resources and products into this package and this is a group-to-group cooperation.

 Fang Jin Suo actually -- nearly all projects under this group cooperate with us with our all cities actually at one time and also this show the strength of Leju because we have multiple platforms, we have both PC and mobile. So you can see the result is quite successful.

 And actually when I just say is that a lot of other developers, they are also actually looking -- going to us we see if they can go in that way. So that's the, I think, the positiveness of this package.

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 Min Chen,  Leju Holdings Limited - CFO   [48]
------------------------------
 Chen, for your question about the guidance, the assumption behind revision down again is looking one is the -- it's resulting primarily from our outlook changing from the listing services segment and then the -- so with that out of the picture, the remaining two segments actually have been, so the first nine months of the year actually have been performing at or above expectations based on our guidance that were provided at the earlier parts of this year. So the upside -- but as you know the e-commerce products we get to recognize revenue when the developer signs FTA to sell the units. So the recognition of revenue really in part hinges on launching projects for sale.

 So the upside and the downside factors that could affect our year-end and fourth quarter results, it would be the number of projects actually launched for sale.

 In terms of the coupons the pipeline building as Hedong mentioned starting from the end of the third quarter we've actually already seen an increased number of projects that we are working on for the e-commerce products and in terms of the coupons that we are hoping to sell.

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Operator   [49]
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 Your next question comes from the line of Jinsong Du from Credit Suisse. Please go ahead.

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 Jinsong Du,  Credit Suisse - Analyst   [50]
------------------------------
 Just very quickly, do we have -- you have mentioned quite a few positive news with the fourth quarter, so do you really expect this pipeline increase in the fourth quarter to contribute strongly to your first quarter and second quarter next year? And also the basically the distribution of the cross-selling kind of the contract you win as a result of the cross-selling will be the principal for you to basically look at the distribution of revenue between E-House and Leju? Thank you.

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 Geoffrey He,  Leju Holdings Limited - CEO   [51]
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 For the first question, I think is that we do see that the number of product we cooperated and also the coupons we sell in the first quarter still keeps up at high level. So that's the first we see that in the pipeline, and the uncertainty is that how many projects were actually launched for sale by the end of this year. This determines how much revenue is recognized within this quarter. So that's the uncertainty.

 As to your second question is about our Hadongli, actually Hadongli is a cooperation model between Leju and EJ Group. So it's just cross-sell model, it doesn't mean would provide us price package to the developers. We actually charge, price our services very independently, Leju's revenue and EJs revenue. Actually the services they provide are very different.

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 Min Chen,  Leju Holdings Limited - CFO   [52]
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 Jinsong, you can think of it as a menu of options presented to developers at the same time, these are various types of services that E-House as a group offers including the e-commerce and marketing services offered by Leju but each menu item is individually priced and they can pick and choose in any type of combination to help promote their projects. So they are priced differently, they're paid differently -- I mean independently and they are charged independently.

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 Jinsong Du,  Credit Suisse - Analyst   [53]
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 Your outlook for next year?

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 Min Chen,  Leju Holdings Limited - CFO   [54]
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 We're focused on delivering the fourth quarter results, we're probably in a better position to provide you outlook for the next year, next March.

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Operator   [55]
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 We're now approaching the end of the conference call. I will now turn the call over to Leju's Investor Relations Director Ms. Melody Liu for her closing remarks.

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 Melody Liu,  Leju Holdings Limited - Director - IR   [56]
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 Thank you. This concludes today's call. If you have any follow-up questions, please contact us at these numbers or emails provided on our earnings release and on our Web site. Thank you.

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Operator   [57]
------------------------------
 Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.




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