Q3 2017 Leju Holdings Ltd Earnings Call
Nov 28, 2017 AM EST
LEJU - Leju Holdings Ltd
Q3 2017 Leju Holdings Ltd Earnings Call
Nov 28, 2017 / 12:00PM GMT
==============================
Corporate Participants
==============================
* Annie Huang
* Li-Lan Cheng
Leju Holdings Limited - Acting CFO
* Yinyu He
Leju Holdings Limited - CEO
==============================
Conference Call Participants
==============================
* Binbin Ding
JP Morgan Chase & Co, Research Division - Analyst
==============================
Presentation
------------------------------
Operator [1]
------------------------------
Hello, and thank you for standing by for Leju's Third Quarter 2017 Earnings Conference Call. (Operator Instructions) Please note that today's conference 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. Annie Huang, Leju's Investor Relations Director. Please go ahead.
------------------------------
Annie Huang, [2]
------------------------------
Hello, everyone, and welcome to Leju's Third Quarter 2017 Earnings Conference Call. Today, we will update you regarding our financial results for the third quarter ended September 30, 2017. 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 third quarter 2017; 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 the safe harbor provisions of Section 21E of the Security 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 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 zong, please go ahead.
------------------------------
Yinyu He, Leju Holdings Limited - CEO [3]
------------------------------
Thanks, everyone, for joining us on the call today.
During this quarter, market conditions did not show significant improvement in major cities we operate. Strictly enforced and extended tightening measures continue to affect market sentiment and pose challenges for our business. As a result, our operations and results were negatively impacted, particularly our e-commerce and secondary home listing services.
However, despite reduced demand for marketing activities from developers, we were encouraged to see a sequential increase in our online advertising revenue as our new suite of big data based targeted advertising products gained popularity among our developer clients.
During this quarter, we continued our investment in product innovation, content optimization and expanded partnerships, which helped to enhance our media influence and brand recognition. We also integrated our marketing, advertising and e-commerce platforms to provide more streamlined services for homebuyer and developers.
During this quarter, we introduced our new marketing product, Zai Xian Xuan Fang, which allows home buyers to select units and confirm their purchase through mobile devices, simplifying the property transaction process.
In the home furnishing market, we formed a strategic partnership with PINGO, a leading home furnishing material and service provider. Through this partnership, we begin to offer cost-competitive one-stop home furnishing solutions to consumers, including design, material purchase and renovation construction.
We believe that strong execution of our strategies, while solidifying our market-leading position in the primary market, has laid a solid foundation for future growth when the market recovers.
Looking ahead, we still further streamline our cost structure to better adapt to the unfavorable market conditions, which may persist in the near term.
Now I would turn the call over to our acting CFO, Mr. Li-Lan Cheng, who will review our financial highlights for the quarter.
------------------------------
Li-Lan Cheng, Leju Holdings Limited - Acting CFO [4]
------------------------------
Thank you, Geoffrey. Good evening, everyone.
For the third quarter of 2017, we had total revenues of $95.2 million, a 48% decrease from the same quarter of 2016 as a result of restrictions placed by local governments.
Our e-commerce services revenues decreased by 57% year-over-year to $61.8 million due to decreases in both the number of discount coupons redeemed and the average price per discount coupon. It contributed approximately 65% of our revenue during this quarter.
Our online advertising services revenues for this quarter declined by 11% to $30 million as a result of a decrease in property developers' online advertising demand. It contributed 31% of our total revenue for this quarter.
Our listing service revenues for the third quarter of 2017 decreased by 42% to $3.4 million from the same quarter last year as a result of decrease in secondary home sales.
Our cost of sales for this quarter increased by 39% to $21.1 million from the same quarter last year due to increased cost of advertising resources purchased.
Our selling, general and administrative expenses decreased by 27% to $103.5 million from the same quarter last year. The decrease was primarily due to decreased marketing expenses and commission expenses related to our e-commerce business.
Non-GAAP loss from operations was $24.9 million for the third quarter of 2017 compared to non-GAAP income from operations of $33.6 million for the same quarter of 2016.
Non-GAAP net loss attributable to Leju shareholders was $19.2 million for the third quarter of 2017 compared to non-GAAP net income attributable to Leju shareholders of $23.1 million for the same quarter of 2016.
For the first 9 months of 2017, we recorded $256.2 million in total revenue, a 44% decrease from the same quarter last year. Our e-commerce revenues decreased by 53% to $163.6 million from the same period last year as a result of decrease in both the number of discount coupons redeemed and average price per discount coupon. It contributed 64% of total revenues for the first 9 months of 2017.
Our online advertising revenues, contributing 31% of the total revenue, decreased by 10% from the same period of last year to $80.5 million due to a decrease in developers' online advertising demand, while our listing revenues decreased by 28% to $12 million as a result of a decrease in secondary home sales for the first 9 months of 2017.
Non-GAAP loss from operations was $104.1 million for the first 9 months of 2017 compared to non-GAAP income from operations of $42.7 million for the same period last year.
Non-GAAP net loss attributable to Leju shareholders was $85.7 million for the first 9 months of 2017 compared to non-GAAP net income attributable to Leju shareholders of $33 million for the same period last year.
As of September 30, 2017, our cash and cash equivalents balance was $209 million. Our net cash flows provided by operations for the third quarter of 2017 were $18.2 million, mainly attributable to an increase in other current liabilities of $30.5 million and an increase in advances from customers and deferred revenue of $8.6 million partially offset by non-GAAP net loss of $19.5 million.
Looking ahead, we estimate that our fourth quarter 2017 total revenues will be approximately between $90 million to $100 million, which represents a decrease of approximately 5% to 14% from the same quarter of last year. Please note that this forecast reflects 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.
==============================
Questions and Answers
------------------------------
Operator [1]
------------------------------
(Operator Instructions) We can now take our first question from Binbin Ding from JPMorgan.
------------------------------
Binbin Ding, JP Morgan Chase & Co, Research Division - Analyst [2]
------------------------------
I have a question on advertising. I guess you may have already started to negotiate the annual budgeting with the developers for the next year, so I'm wondering if you can share some colors on feedbacks from advertisers for the time being? And will they generally increase or reduce their budget on the entire online real estate platform, the online real estate vertical sector, as well as our Leju platform? And what is your overall view regarding the 2018 outlook for the advertising services?
------------------------------
Yinyu He, Leju Holdings Limited - CEO [3]
------------------------------
Okay, yes. Now we're beginning to talk about next year's plan with developers about their plans and also their budgets for the promotion of their projects next year, but it is still at a very early stage. And most developers, actually, they haven't had very clear picture of their next year plans, so it is too early to conclude if they will increase or decrease of their marketing budgets for the next year. But one signal that I can give you is that most developers, they turn cautious about next year's market. So I think there's no obvious signal that they will -- or sharply, will further decrease their marketing budget. There's no such signal. And for Leju's operation, actually, in the past 2 years, actually, we concentrate our strengths to build up our open advertising platform so that developers, when they want to promote their projects, they can use our platform to put ads on multiple mainstream online portals. Including Leju's portal, they can also put ads on like WeChat, like Baidu, multiple platforms. So that is an open platform developed by Leju. So after 2 years' efforts, more and more developers, they begin to know the value; especially our mobile advertising, it is a data-driven business. So I think we have already set up a positive position for our future growth on advertising. Is that okay?
------------------------------
Binbin Ding, JP Morgan Chase & Co, Research Division - Analyst [4]
------------------------------
And my second question is, can you... oh, yes, yes, thank you. And my second question is on the overall developments in the real estate market in the past few months. So can you give us an update on the market in terms of both policy and transaction volume side? And we talked to a few people in the market, I think they generally seem to be more positive in terms of the recovery in the next year, especially in the Tier 1, Tier 2 cities. So what is your view on that? And will that bring any upside to our current forecast on the e-commerce or advertising side?
------------------------------
Yinyu He, Leju Holdings Limited - CEO [5]
------------------------------
Okay. On the policy side, that we didn't see any signal that the government will loosen its restrictions, especially in the first and second-tier cities. But some changes happening that the focus of the government is more -- now more on the price ceiling of one project. And in some cities actually, in this quarter, the local government's actually issuing more sales permits. But the price is still -- they still put a very restrictive price ceiling on these projects. I think in the coming future, I think the government will not loose any restrictions on the price permits. And we also see that consumer sentiment, because of the positive restrictions, has also been changing, that more and more consumers in second and especially in third-tier cities, they begin to think about whether it's a good time to buy the house in -- especially at current point. So I think in next year and the -- plus the government is also promoting the rental side, I think the market is not -- as I said it just before, more and more developers think they will be very cautious on next year's market. But for Leju, as you know, that if the market is too hot or it's too cold, it's not so good for us. But when the market turns to appear that they need some promotion to sell their units, it will be good for us, so we're looking whether it will happen early next year.
------------------------------
Operator [6]
------------------------------
(Operator Instructions) We have no further questions at this time. I would like to turn the call back over to you for any additional or closing remarks.
------------------------------
Annie Huang, [7]
------------------------------
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 or on our website. Thank you.
------------------------------
Operator [8]
------------------------------
This concludes today's call, if you -- thank you for your participation, ladies and gentlemen. You may now disconnect.
------------------------------
Definitions
------------------------------
PRELIMINARY TRANSCRIPT: "Preliminary Transcript" indicates that the
Transcript has been published in near real-time by an experienced
professional transcriber. While the Preliminary Transcript is highly
accurate, it has not been edited to ensure the entire transcription
represents a verbatim report of the call.
EDITED TRANSCRIPT: "Edited Transcript" indicates that a team of professional
editors have listened to the event a second time to confirm that the
content of the call has been transcribed accurately and in full.
------------------------------
Disclaimer
------------------------------
Thomson Reuters reserves the right to make changes to documents, content, or other
information on this web site without obligation to notify any person of
such changes.
In the conference calls upon which Event Transcripts are based, companies
may make projections or other forward-looking statements regarding a variety
of items. Such forward-looking statements are based upon current
expectations and involve risks and uncertainties. Actual results may differ
materially from those stated in any forward-looking statement based on a
number of important factors and risks, which are more specifically
identified in the companies' most recent SEC filings. Although the companies
may indicate and believe that the assumptions underlying the forward-looking
statements are reasonable, any of the assumptions could prove inaccurate or
incorrect and, therefore, there can be no assurance that the results
contemplated in the forward-looking statements will be realized.
THE INFORMATION CONTAINED IN EVENT TRANSCRIPTS IS A TEXTUAL REPRESENTATION
OF THE APPLICABLE COMPANY'S CONFERENCE CALL AND WHILE EFFORTS ARE MADE TO
PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS,
OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE CONFERENCE CALLS.
IN NO WAY DOES THOMSON REUTERS OR THE APPLICABLE COMPANY ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER
DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN
ANY EVENT TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S
CONFERENCE CALL ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE
MAKING ANY INVESTMENT OR OTHER DECISIONS.
------------------------------
Copyright 2018 Thomson Reuters. All Rights Reserved.
------------------------------