Ladies and gentlemen, thank you for standing by, and welcome to Fangdd Network Group Ltd. First Quarter 2020 Earnings Call. [Operator Instructions] Please note, this event is being recorded. I would now like to hand the conference over to your speaker host today, Mr. Warren Wen, Financial Controller of the company. Please go ahead, sir.

Hi, thank you, operator. Hello, everyone, and thank you all for joining us on today's call. FangDD announced its first quarter 2020 results today and earnings release is now available on the company's IR website. Today, you will hear from our Chairman and co-CEO, Mr. Duan Yi, who will start the call with a review of our progress and the current industry dynamics in the first quarter. He will be followed by our co-CEO, Mr. Zeng Xi, who will address our development strategies in more detail. Afterwards, our CFO, Mr. Pan Jiaorong, will go over our financials before we open the call for questions. Our management team will deliver their remarks in Chinese, and I will provide the English translation. Before we continue, I would like to refer you to our safe harbor statement in our earnings press release, which applies to this call as we will be making forward-looking statements. And please note that we will discuss non-GAAP measurements today, which are not -- which is more thoroughly explained and reconciled to the most comparable measure reported under the generally accepted accounting principle in our earnings release and filings with the SEC. And with that, I will turn the call over to our co-CEO, Mr. Duan Yi. And please go ahead, sir.

[Foreign Language]

[Interpreted] Hello, everyone. Welcome to our earnings call.

[Foreign Language]

[Interpreted] And this is the co-CEO of Fangduoduo and Chairman of the Board, Duan Yi.

[Foreign Language]

[Interpreted] Okay. Let me translate for this. During the first quarter of 2020, the COVID-19 outbreak severely disrupted the economic development, both in China and around the world. In China, this disruption has not only adversely impacted the real estate industry but also reduced the real estate agents' offline business hours to only 1/3 of what -- of that in the same period of 2019. As a result, nearly 80% of all real estate agents in China were unable to work offline and leveraged online platform to manage their business at an increasing rate in this period. And this market channel has brought challenges and opportunities to the independent third-party agent-centric service platforms, such as us, Fangduoduo, and the following key metrics reflect some of the market trends that we experienced in the first quarter. As of March 1 -- 31, 2020, we have grown the number of registered agents on our platform by 35.4% to approximately 1.32 million from approximately 0.97 million as of March 31, 2019. And notably, active agents on our marketplace in the first quarter of 2020 grew by 42.8% year-over-year to 218,400. The number of agents who had completed transaction on our marketplace in the first quarter of 2020 decreased by 51 -- 50.1% year-over-year to 6,700. Our total closed-loop transaction GMV in the first quarter of 2020 decreased by 46.5% year-over-year to RMB 17.9 billion. As a result, our total revenue in the first quarter of 2020 decreased by 58.5% year-over-year to RMB 270 million. And the decrease is largely attributable to the reduced working hour offline of our real estate agents in the first quarter of 2020.

[Foreign Language]

[Interpreted] Okay. Let me translate for this. Before Mr. Duan turn the call over to Mr. Zeng to provide additional information on our strategies and respond to the epidemic and our expectation going forward, I would like to -- Mr. Duan would like to share an update on the current state of the real estate market in China. From a broader perspective, the following macro trends would help to paint a clearer picture of COVID-19's impact on the Chinese real estate market and as well as our development and implementation of business strategies. Based on the data from the National Bureau of Statistics of China and other research institutions, we have reached the following understandings.

[Foreign Language]

[Interpreted] First, the epidemic's impact on offline operations was particularly severe. The epidemic caused a large number of real estate sales office across China, offline shops, to shut their business -- shut down their business during the outbreak. And in fact, all the -- the entire industry that rely on offline interactions, including real estate and other business experienced serious disruptions. According to our research data, less than 30% of the agents could operate offline following -- after the Chinese New Year holiday in the first quarter. In addition, during the first quarter, nearly 80% of all the real estate agents reported significantly less property viewing or touring sessions and less transactions as the result of the COVID-19 outbreak and related traveling restrictions.

[Foreign Language]

[Interpreted] Again, the COVID-19 has also reduced the overall volume of the property transactions. And based on the data from National Bureau of Statistics, real estate industry GDP in the first quarter declined by 6.1% year-over-year. And however, we expect the impact of COVID-19 to be temporarily and largely an effect of delaying the transaction to a later time. After 20 years of development, the real estate market in China has now achieved a balance of sufficient property supply and general demand. So that we have observed -- it is our observation that the first quarter did have a great decline in the sales and the transaction volume. But we have observed at the same time that during the first month of the second quarter, that is April, the recovery of the transaction is much better -- it's better than expected. And we have observed that starting from May, the recovery has returned to a normal and balanced level of normal transaction -- market transaction. So our expectations for the entire year remain optimistic and believe the entire year transaction volume is not going to be impacted significantly.

[Foreign Language]

[Interpreted] Lastly, the COVID-19 outbreak has accelerated the digitalization process of the Chinese real estate market as the real estate developers and the property sellers increasingly rely on online transaction platforms to sell their properties. And additionally, agents and buyers are becoming more accustomed to viewing the properties and conducting negotiations virtually online while agencies are increasingly reliant on various SaaS tools to provide and manage their service and business. As a result, the number of active agents on our marketplace in February of this year increased by 64.4% as compared to the same period of 2019.

[Foreign Language]

[Interpreted] Now Mr. Duan will turn the call to Mr. Zeng, who will provide more detail concerning our results and strategy in the first quarter as well as our expectations for the second quarter.

[Foreign Language]

[Interpreted] In the first quarter, we promptly adjusted our business strategies based on our understanding of the market dynamics and the development of COVID-19 more specifically in order to maximize our competitive advantages as an independent third-party marketplace. Further empowering our agents and bolster our matchmaking efficiency, we focused on upgrading our SaaS solutions. Meanwhile, we remain dedicated to driving product innovation and expanding our foothold in the secondary property market. And in response to the COVID-19 outbreak, we focused on the following 3 key initiatives in the first quarter.

[Foreign Language]

[Interpreted] First, we remain committed to the continued optimization of our SaaS offering by upgrading our product features. During the first quarter, we are -- have also made our SaaS product available to all real estate agents in China free of charge in order to help agents to move their business from offline to online since the beginning of the outbreak. And moreover, we increased our investment in the research and development, specifically for SaaS solutions for the secondary properties segment.

[Foreign Language]

[Interpreted] During the first quarter, we further upgraded our online agency management tools. For example, our Duoduo Cloud Agency app enabled the agency owners to analyze our customer communications, marketing efforts within their own existing connections and to manage their agents more effectively and transparently through analysis of their online broadcast, online acquisition of customers and external costs and the analysis of the call quality so that they can -- the owner of offline agencies can understand more thoroughly on the operation status of the respective agents of their own offline shop.

[Foreign Language]

[Interpreted] We also strengthened our online agency service system by making our online customer support available 24/7. The number of agencies that reached out to us with the inquiry in the first quarter increased by 261% year-over-year. Furthermore, we've developed over 100 online courses covering SaaS tools usage tutorials, online project management and more to help us establish remote SaaS service and improved agency service capabilities. And these courses are tailored for both agencies and owners at different growth stages and help both parties to continuously improve their online business service capabilities.

[Foreign Language]

[Interpreted] Additionally, we also enhanced the SaaS function to assist agents in attracting and converting customers or buyers. We achieved this by enabling agents to share those marketing campaigns or information previously created for their online shops across various online social media platforms and video-sharing platforms, such as WeChat, Weibo, TikTok and Kuaishou. As with this initiative, our agencies generated a record-high of 1.4 million leads during this period.

[Foreign Language]

[Interpreted] And additionally, we strengthened our research and development efforts, especially for the secondary property segment in response to our agencies' needs. For online -- secondary property business, we quickly upgraded our secondary property SaaS modules, like Duoduo Cloud Agency CRM, for example, was designed to help agencies to assess more secondary property listings as well as improve their matchmaking and the operation management efficiencies. And moreover, our [ Duoduo Transaction ], another CRM tool, is able to offer solutions that can assist agencies in managing the transaction process for secondary properties and streamlining their services process and optimize their efficiencies.

[Foreign Language]

[Interpreted] As we further enrich our SaaS offerings and fulfill the operation needs of real estate agencies throughout the COVID-19 outbreak, we continue to increase the thickness -- stickiness of our platform in return. Consequently, our number of active agents grew by 43% year-over-year to 218,000 during this quarter. More specifically, the number of active agents in February of this year increased by 64.4% as compared to the same period of 2019 while the number of active agencies in March of this year drove our all-time record-high for the period and reached to 159,000.

[Foreign Language]

[Interpreted] Secondly, in response to the impact of COVID-19, we upgraded our SaaS products to enable our agency to sell new products more effectively and efficiently and attract more property listings from developers to our platform. For the secondary segment, we launched our preferred agent alliance network and established a secondary property transaction service center, a certified property transaction service center to focus on -- to focus our efforts on the development of innovative business initiatives. And we have provided more product, like car parking spaces services and property decoration services to our agents and agencies on our platform.

[Foreign Language]

[Interpreted] We also launched our online sales office during the Chinese New Year period to better empower our partnering developers. By leveraging our technology capabilities, we enabled potential buyers to arrange via touring, a live streaming property touring and viewing. In addition, we also successfully enabled the service capability of our agencies by strengthening their online business operations, which helped to reduce some of the sales differential experienced by developers during the epidemic. As a result of our online shop services, we increased the total number of the new primary housing property projects in the first quarter by 54.8% year-over-year to 2,400 projects.

[Foreign Language]

[Interpreted] Okay. At the same time, we launched our preferred agent alliance network project to better address the needs of agencies by identifying excellent and outperforming real estate and secondary housing service agencies. In the first quarter, we have more than 1,000 offline shop and more than 10,000 real estate agents who actively joined this alliance network. And we have -- also covering in the first tier cities, like Shanghai and Hangzhou, we have offered our certified secondary transaction -- our property transaction center. And we have -- through our SaaS system, we have control and we have a control on the transactions scenario and we have digitalized both the transaction and the transaction scenario so that we have the opportunity to provide more value-added services through the financial service.

[Foreign Language]

[Interpreted] Our platform focused on providing car parking sales service to our agencies, in particular the exclusive sales service to our agencies. In the first quarter, our exclusive car parking place sales service has a strong foothold on Shanghai, Nanjing, Qingdao, Chengdu, Wuhan and [indiscernible]. In total, there were 7 cities across China. And we have get on listed -- we have get approximately 10,000 car parking spaces across China to the platform. And all these are exclusive sales service available to the agency and agents through our preferred alliance -- agent alliance network project.

[Foreign Language]

[Interpreted] At the same time, our platform also provided the secondary housing decoration service. And this is largely based on our strategy and positioning -- value proposition of brand name secondary house. And this is based on those old and -- old secondary house and provide professional upgrading and renovation to this secondary housing. So therefore, we can help the agencies to realize more transaction and gain more profit. In the first quarter, our platform in Shanghai alone has more than 1,000 real estate agencies and more than a dozen of secondary house owners have joined our secondary housing decoration service project. And we have received a good rating from the agency and both the owners and buyers.

[Foreign Language]

[Interpreted] Against the backdrop of macro uncertainty surrounding the COVID-19 pandemic, we leveraged our agent base and property listing growth engines to maintain our persistent business growth. We call it a flywheel effect. And we continued to optimize our matchmaking algorithms during this pandemic by -- we have provided certain features, like [ guess you like ] and daily recommendation actually to improve the operational efficiencies of the platform. And we were able to better utilize our analysis of both the user and the agency data to further refine our matchmaking efficiencies during this pandemic. And such assets help us to not only fortify our own capability in the facilitation of the real estate transactions but also enable us to augment the efficiency of agent transactions in the period.

[Foreign Language]

[Interpreted] Lastly, let me share an update on our expectations for the second quarter.

[Foreign Language]

[Interpreted] Currently, the global pandemic is still at its [ legs ] and we do not -- we cannot become optimistic for this situation. And the China's traditional real estate sales model will continue to face challenging -- challenges going forward under this situation. Based on the data from EH Consulting, China's total floor area of primary housing sold in April decreased by 25.6% year-over-year but slightly increased by 3.7% compared to March. And the month-over-month increase in April was largely because the transaction was delayed from March and closed in April. So therefore, according to our own data, the total floor area of the primary real estate sold in May decreased by 5.5% year-over-year but increased 11.6% from April. So we believe there is going to be a steady recovery in the months to come.

[Foreign Language]

[Interpreted] The business model as an independent third-party platform is increasingly recognized and appreciated by our agency, in particular during this pandemic moment, where every participant has experienced a difficult moment. Going forward, we will maintain this core commitment and enable agencies to operate effectively through our focus on developing our SaaS tools, refining our agency services and matching algorithm and in innovating -- in innovation on our product offerings.

[Foreign Language]

[Interpreted] Yes. First, we will continue to invest to the optimization of our SaaS infrastructure and the refining of our SaaS product matrix. Specifically, our [ Duoduo Property Sales ] app will enable agencies to operate and manage their business remotely and online. Our Duoduo Cloud Agency CRM tool can affect -- efficiently match agencies with the property listings, enhance the coordination within the agencies and execute multiple operation projects online simultaneously. Our [ Duoduo Transaction ] CRM will assist agencies with secondary property transaction in various stages of their transaction. And we can further provide value-added financial services to the process and digitalizing their agency operations. And we expect the -- in the second quarter, the active agents on our platform will continue to increase both in its size and in its depth.

[Foreign Language]

[Interpreted] Secondly, in terms of operation services, we have established a dedicated service team for our preferred agent alliance network to better serve our top agencies on our platform. This initiative will further increase the loyalty of high-quality agency to our platform. At the same time, we will continue to optimize our platform's ability to provide online agency service in order to improve our request response, efficiency and service quality. And the improvement of our operation services will help attract more new primary housing property listings from our partner developers and more agencies to complete the new property transactions on our platform. In doing so, we will significantly increase our agency base and the property listing. And this is a flywheel effect. And under this flywheel effect, we will be able to strengthen our competitiveness in our market.

[Foreign Language]

[Interpreted] And thirdly, leveraging our SaaS solutions and agent service system, we will continue to introduce innovative business initiative to further empower our agencies' connection and develop our secondary property segment. And we will use this as a new driver for our profit growth.

[Foreign Language]

[Interpreted] With our nationwide coverage of our secondary property transaction, certified property transaction service center, we will be able to launch transaction service to our SaaS system and establish a transaction data collection process for secondary property transactions and in return, gain control over this offline transaction scenario. And in addition, by using our SaaS system connection with the financial institutions of banks and other large financial institutions, we will be able to diversify the revenue stream of our own and our agencies through our various value-added financial service product offerings through our SaaS system.

[Foreign Language]

[Interpreted] Moreover, following the government's guideline for upgrading the urbanization, our platform in the key cities has been rolling out our secondary housing decoration service, and the targeting -- largely targeting the urban area -- within the urban area, those old and small and literally broken secondary housing and target for their upgrading and renovation. We aim to create the first brand name secondary housing business for this platform. Therefore, we will be able to help our agencies to increase the transaction efficiency by renovating and upgrading our secondary housing listings and get more real estate agencies involved and drive more profit growth.

[Foreign Language]

[Interpreted] And our platform will continue to provide our car parking services, exclusive sales service to agencies and targeting the first- and second-tier city car parking space market. We believe there is more than 800 billion of car parking space market in the first- and second-tier cities. So that we can help our agencies, in particular in our preferred agent alliance network to develop their own car parking space sales service revenue and share the profit thereon.

[Foreign Language]

[Interpreted] So we remain confident in our independency and as a third-party platform to our agency network. And we are also confident on our efficiency and our cost effectiveness and our asset-light Internet SaaS model. Therefore, going forward, we expect that these competitive advantages will continue to help us expand our business operation in China's real estate transaction sector. And now based on which I would like to provide an update on our expectations to the second quarter of 2020. Frankly, we are expecting our revenue to be between RMB 660 million and RMB 720 million in the second quarter of 2020. And this forecast, of course, it's based on our current views of the market environment and situation and subject to change.

[Foreign Language]

[Interpreted] And this comes to the end of my speech. And I will turn the call over to our CFO, Mr. Pan Jiaorong, to review our financial results in this quarter.

[Foreign Language]

[Interpreted] Thank you, Mr. Zeng Xi. Now I will provide a closer look into our fourth -- in our first quarter financial results. And before I start, please note that all numbers are in RMB terms, unless otherwise noted.

[Foreign Language]

[Interpreted] Revenue in the first quarter of 2020 decreased by 58.5% to RMB 272.1 million from RMB 656 million in the same period of 2019. The decrease was due to the outbreak of COVID-19 in China and the resulting restraints imposed on agents, which negatively impacted the ability of agents to carry out business during this period. The decrease in the business activities of agents resulted in the decrease in both the number of transactions and the GMV facilitated on the company's marketplace and thus significantly inhibited the company's revenue growth capabilities.

[Foreign Language]

[Interpreted] Cost of revenue in the first quarter of 2020 decreased by 58.3% to RMB 222.7 million from RMB 534.5 million in the same period of 2019, mainly attributable to a decrease in commission fees payable to the agents for the services they have rendered, which was largely in line with the decreased commission income from our transactions.

[Foreign Language]

[Interpreted] Gross profit in the first quarter of 2020 decreased by 59.3% to RMB 49.4 million from RMB 121.5 million in the same period of 2019. Gross margin in the first quarter of 2020 remained stable at approximately 18.2% compared to the same period of 2019.

[Foreign Language]

[Interpreted] Operating expenses in the first quarter of 2020, including share-based compensation expenses of RMB 26.4 million, increased by 62.7% to RMB 189.4 million from RMB 116.4 million in the same period of 2019.

[Foreign Language]

[Interpreted] Now let's take a look at the breakdown of operating expenses for the first quarter of 2020.

[Foreign Language]

[Interpreted] Sales and marketing expenses in the first quarter of 2020 decreased by 77% to RMB 1.4 million from RMB 6.1 million in the same period of 2019. The decrease in sales and marketing expenses were primarily due to the reduction in spending on brand promotion and marketing activities to attract property listing from real estate developers and -- from real estate developers to the company's marketplace.

[Foreign Language]

[Interpreted] Product development expenses in the first quarter of 2020 were RMB 95 million compared to RMB 65.7 million in the same period of 2019. The increase in product development expenses was mainly attributable to share-based compensation expenses of RMB 17.2 million in the first quarter of 2020. The remaining increase of RMB 12.1 million in product development expenses was mainly -- primarily due to higher personnel-related expenses resulting from the increase in average compensation of product development personnel in the first quarter of 2020 as the company sought to enhance its technological infrastructure to attract and retain more agents.

[Foreign Language]

[Interpreted] General and administrative expenses in the first quarter of 2020 were RMB 93.1 million compared to RMB 44.5 million in the same period of 2019. The increase in general and administrative expenses included share-based compensation expense of RMB 9.3 million in the first quarter of 2020. The remaining increase of RMB 39.3 million in general -- G&A expenses was primarily attributable to: first, an increased head count to improve the company's corporate governance and ensure compliance in relation to the company's status as a U.S.-listed company; and the second, and sorry -- and the second, certain listing expenses relating to the listing of the company since the last quarter of 2019; and the third, an increase in the account of provision for doubtful debtors, which was mainly due to the slowdown in settlements with the developers as a result of the COVID-19 outbreak during the quarter. And the increase of the provision is by RMB 32 million.

[Foreign Language]

[Interpreted] Okay. Loss from operations for the first quarter of 2020 was RMB 140 million compared to the income from operation of RMB 5.1 million in the same period of 2019. And non-GAAP loss from operations in the first quarter of 2020 was RMB 113.6 million compared to a non-GAAP income from operation of RMB 5.1 million in the same period of 2019.

[Foreign Language]

[Interpreted] Our net loss in the first quarter of 2020 was RMB 136.4 million compared to the net income of RMB 14.8 million in the same period of 2019. Non-GAAP net loss in the first quarter of 2020 was RMB 110 million compared to non-GAAP net income of RMB 14.8 million in the same period of 2019. And the loss is largely attributable to the following factors: the first, a decrease in the sales volume largely attributable to the outbreak of COVID-19; and the second, in order to support our real estate agencies to resume work, we have additional input -- and we have additional investment to our product offerings; and the third, we have increased our head count on the compliance -- and we have increased the head count to improve the company's corporate governance and ensure compliance in relation to the company's status as a U.S.-listed company; and the last one is there is an increase in the account receivable provision by RMB 32 million, which is -- which was largely due to the slowdown in settlements with the developers as a result of the COVID-19 outbreak during this quarter.

[Foreign Language]

[Interpreted] The basic and diluted loss attributable to the ordinary shareholders per American Depository Share, that is ADS, in the first quarter of 2020 were both RMB 1.75. In comparison, the company's basic and diluted losses attributable to the ordinary shareholders per ADS in the same period of 2019 were both RMB 1.25. Each ADS represents 25 of the company's Class A ordinary shares. And as of March 31, 2020, the company had cash and cash equivalents, restricted cash and short-term investment of RMB 1 billion and short-term bank borrowing of RMB 488 million as well as unutilized banking credit line of RMB 315 million. And for the first quarter of 2020, our net cash used in operating activities was RMB 48.6 million.

[Foreign Language]

[Interpreted] Okay. That concludes our conversation and prepared remarks today. And because this is really -- it takes a lot of time on our prepared remarks today, so if there is any question, welcome to contact our IR for timely sharing of our information. And thank you all. We will provide no Q&A session, operator. And that's it -- this is the end of our telephone conference for today.

Thank you. Ladies and gentlemen, that does conclude your conference for today. Thank you for participating. You may all disconnect now. Thank you. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]