FangDD Reports First Half 2024 Unaudited Financial Results

Rhea-AI Summary

FangDD Network Group (NASDAQ: DUO) reported its unaudited financial results for H1 2024. Revenue decreased by 8.8% to RMB140.0 million (US$19.3 million), while net income increased to RMB16.4 million (US$2.3 million). The company's total closed-loop GMV decreased by 24.9% to RMB6.2 billion due to market downturn. Despite challenges, FangDD focused on enhancing operational management, cost control, and developing innovative services. The company's gross profit decreased by 11.9% to RMB17.5 million, with a gross margin of 12.5%. Operating expenses decreased by 3.0% to RMB86.1 million. FangDD maintains a positive outlook, anticipating market stabilization in H2 2024.

Positive

• Net income increased to RMB16.4 million (US$2.3 million) from RMB9.4 million in H1 2023
• Operating expenses decreased by 3.0% to RMB86.1 million
• Sales and marketing expenses significantly reduced due to optimized department structure
• Product development expenses decreased due to a more conservative approach to R&D investments

Negative

• Revenue decreased by 8.8% to RMB140.0 million
• Total closed-loop GMV decreased by 24.9% to RMB6.2 billion
• Gross profit decreased by 11.9% to RMB17.5 million
• Gross margin rate decreased to 12.5% from 12.9% in H1 2023
• General and administrative expenses increased due to higher provisions for asset impairment

Insights

Financial Analyst

FangDD's H1 2024 results reveal a mixed financial picture. Despite an 8.8% revenue decrease to RMB140.0 million, net income increased to RMB16.4 million, up from RMB9.4 million in H1 2023. This improved profitability amidst declining revenue suggests effective cost management and operational efficiency.

The company's gross margin slightly decreased to 12.5%, indicating some pressure on pricing power. However, the significant reduction in operating expenses, particularly in sales and marketing (73% decrease) and product development (32% decrease), demonstrates a strategic shift towards lean operations.

While the 24.9% decrease in GMV is concerning, it aligns with the broader Chinese real estate market downturn. FangDD's ability to maintain profitability in this challenging environment is noteworthy, but investors should monitor the company's ability to grow revenue once market conditions improve.

Real Estate Market Analyst

FangDD's results reflect the ongoing challenges in China's real estate sector. The 19% year-on-year decrease in new property sales area and 25% decrease in sales value reported by the National Bureau of Statistics underscore the market-wide slowdown.

The company's strategy of careful project selection and focus on high gross profit businesses is prudent given the market conditions. However, this approach has led to a significant 24.9% decrease in total closed-loop GMV, which may impact long-term market share.

Looking ahead, the anticipated stabilization in the second half of 2024, with annual sales expected to remain above 10 trillion yuan, suggests a potential bottoming out of the market. FangDD's focus on sustainable operations and revenue diversification could position it well for a market recovery, but the company will need to balance cost control with maintaining its competitive position.

Tech Industry Analyst

As a property technology company, FangDD's performance highlights the challenges and opportunities in the PropTech sector during a real estate downturn. The company's ability to increase net income despite revenue decline suggests effective use of technology for cost optimization and operational efficiency.

The reduction in product development expenses by 32% to RMB12.0 million indicates a more conservative approach to R&D investment. While this may help short-term profitability, it could potentially impact FangDD's long-term competitiveness and innovation capabilities in the PropTech space.

FangDD's focus on developing innovative services and products for revenue diversification is crucial. However, the effectiveness of this strategy in driving growth remains to be seen. The company's ability to leverage technology for market differentiation and value-added services will be key to its future success in a challenging real estate environment.

SHENZHEN, China, Aug. 30, 2024 (GLOBE NEWSWIRE) -- Fangdd Network Group Ltd. (NASDAQ: DUO) (“FangDD” or “the Company”), a customer-oriented property technology company in China, today announced its unaudited financial results for the six months ended June 30, 2024.

First Half 2024 Financial Highlights

• Revenue for the six months ended June 30, 2024 slightly decreased by 8.8% to RMB140.0 million (US$19.3 million) from RMB153.5 million for the same period of 2023.
• Net income for the six months ended June 30, 2024 was RMB16.4 million (US$2.3 million), compared to net income of RMB9.4 million for the same period of 2023.
• Non-GAAP net income¹ for the six months ended June 30, 2024 was RMB16.4 million (US$2.3 million), compared to non-GAAP net income of RMB9.4 million for the same period of 2023.
  

First Half 2024 Operating Highlights

• Total closed-loop GMV² facilitated on the Company’s platform decreased by 24.9% to RMB6.2 billion (US$0.9 billion) for the six months ended June 30, 2024 from RMB8.3 billion for the same period of 2023. This decline in closed-loop GMV was mainly due to the continued downturn in the real estate market and the Company’s careful selection of new property projects for collaboration.
  

Mr. Xi Zeng, Chairman and Chief Executive Officer of FangDD, commented, “According to the National Bureau of Statistics of China, the total area of new property sales in the first half of 2024 decreased by 19% year-on-year and the total value of these sales decreased by 25% year-on-year. This decline in both market volume and value has led to a second bottoming out.” Looking forward to the second half of the year, it is anticipated that with policy support and a reduced high base effect, the real estate market is expected to begin a stabilization process, with annual sales remaining above 10 trillion yuan. In the first half of 2024, the Company prioritized sustainable operations by enhancing operational management and cost control, as well as optimizing and adjusting organizational structures to improve cash flow security and adaptability to market changes. Additionally, by focusing on high gross profit businesses and developing innovative services and products, the Company aims to achieve revenue diversification and stable profitability.

First Half 2024 Financial Results

REVENUE
Revenue for the six months ended June 30, 2024 slightly decreased by 8.8% to RMB140.0 million (US$19.3 million) from RMB153.5 million for the same period of 2023. This decrease was mainly attributed to the majority of real estate buyers maintaining a wait-and-see attitude, resulting in overall transaction volumes in the real estate market remaining low, despite a series of positive policies implemented by the PRC government to promote stable and healthy development of the real estate market.

COST OF REVENUE
Cost of revenue for the six months ended June 30, 2024 slightly decreased by 8.4% to RMB122.5 million (US$16.9 million) from RMB133.7 million for the same period of 2023. This decrease was primarily due to three factors: (i) a corresponding decrease in the cost of revenue due to a decrease in revenue, (ii) the Company’s continuous efforts to adjust and optimize the structure of its business lines, and (iii) the Company’s continuous cost optimization initiatives aimed at improving operational efficiency.

GROSS PROFIT AND GROSS MARGIN
Gross profit for the six months ended June 30, 2024 decreased by 11.9% to RMB17.5 million (US$2.4 million) from RMB19.8 million for the same period of 2023. Gross margin rate for the six months ended June 30, 2024 was 12.5%, compared to 12.9% for the same period of 2023. This decrease was mainly due to the majority of real estate buyers maintaining a wait-and-see attitude, resulting in the overall transaction volumes in the real estate market remaining low, despite a series of positive policies implemented by the PRC government to promote stable and healthy development of the real estate market.

OPERATING EXPENSES
Operating expenses for the six months ended June 30, 2024, which included share-based compensation expenses of RMB10.0 thousand (US$1.4 thousand), decreased by 3.0% to RMB86.1 million (US$11.8 million) from RMB88.8 million for the same period of 2023, which included share-based compensation expenses of RMB82.0 thousand for the same period of 2023.

• Sales and marketing expenses for the six months ended June 30, 2024 decreased to RMB513 thousand (US$71 thousand) from RMB1.9 million for the same period of 2023. This decrease was primarily due to an optimized sales department structure, reduced spending on marketing activities related to new property transaction services, and a reduced scale of sales labor expenditures.

• Product development expenses for the six months ended June 30, 2024 decreased to RMB12.0 million (US$1.6 million) from RMB17.7 million for the same period of 2023. This decrease was attributable to reduced personnel-related expenses following the Company’s decision to adopt a more conservative approach on investments in research and development.
• General and administrative expenses for the six months ended June 30, 2024 increased to RMB73.6 million (US$10.1 million) from RMB69.2 million for the same period of 2023. This slight increase was mainly due to: (i) an increase in provisions for the impairment of certain assets, such as loans to individuals and other accounts receivable of project deposits, and (ii) actions taken by the Company to improve operational efficiency, including the action to reduce expense positions.

NET INCOME

Net income for the six months ended June 30, 2024 was RMB16.4 million (US$2.3 million), compared to net income of RMB9.4 million for the same period of 2023.

Non-GAAP net income for the six months ended June 30, 2024 was RMB16.4 million (US$2.3 million), compared to non-GAAP net income of RMB9.4 million for the same period of 2023.

NET INCOME PER ADS
Basic and diluted net income per American Depositary Share (“ADS”) for the six months ended June 30, 2024 were both RMB4.50 (US$0.62). In comparison, the Company’s basic and diluted net income attributable to ordinary shareholders per ADS for the same period of 2023 were both RMB3.94. Each ADS represents 5,625 of our Class A ordinary shares as of June 30, 2024.

LIQUIDITY
As of June 30, 2024, the Company had cash and cash equivalents, restricted cash, and short-term investments of RMB154.2 million (US$21.2 million). For the six months ended June 30, 2024, net cash used in operating activities was RMB5.9 million (US$807.3 thousand).

Exchange Rate
This press release contains translations of certain Renminbi amounts into U.S. dollars at specified rates solely for the convenience of readers. Unless otherwise noted, all translations from Renminbi to U.S. dollars, in this press release, were made at a rate of RMB7.2672 to US$1.00, the exchange rate set forth in the H.10 statistical release of the Federal Reserve Board on June 28, 2024. The Company makes no representation that the Renminbi or U.S. dollar amounts referred could be converted into U.S. dollar or Renminbi, as the case may be, at any particular rate or at all.

Non-GAAP Financial Measures
To supplement the financial measures prepared in accordance with generally accepted accounting principles in the United States, or GAAP, this press release presents non-GAAP income (loss) from operations, non-GAAP operating margin, non-GAAP net income (loss) and non-GAAP net margin by excluding share-based compensation expenses from income (loss) from operations and net income (loss). The non-GAAP financial measures are not defined under U.S. GAAP and are not presented in accordance with U.S. GAAP. The Company believes these non-GAAP financial measures are important to help investors understand the Company’s operating and financial performance, compare business trends among different reporting periods on a consistent basis and assess the Company’s core operating results, as they exclude certain expenses that are not expected to result in cash payments. Using the above non-GAAP financial measures has certain limitations. Share-based compensation expenses have been and will continue to be incurred in the future and are not reflected in the presentation of the non-GAAP financial measures, but should be considered in the overall evaluation of the Company’s results. These non-GAAP financial measures should be considered in addition to financial measures prepared under GAAP, but should not be considered a substitute for, or superior to, financial measures prepared under GAAP. The Company compensates for these limitations by reconciling these non-GAAP financial measures to the most directly comparable U.S. GAAP measures, which should be considered when evaluating the Company’s performance. Reconciliation of each of these non-GAAP financial measures to the most directly comparable GAAP financial measure is set forth at the end of this release.

About FangDD
Fangdd Network Group Ltd. (Nasdaq: DUO) is a customer-oriented property technology company in China, focusing on providing real estate transaction digitalization services. Through innovative use of mobile internet, cloud, big data, artificial intelligence, among others, FangDD has fundamentally revolutionized the way real estate transaction participants conduct their business through a suite of modular products and solutions powered by SaaS tools, products and technology. For more information, please visit http://ir.fangdd.com.

Safe Harbor Statement
This announcement contains forward-looking statements. These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as “aim,” “anticipate,” “believe,” “estimate,” “expect,” “hope,” “going forward,” “intend,” “ought to,” “plan,” “project,” “potential,” “seek,” “may,” “might,” “can,” “could,” “will,” “would,” “shall,” “should,” “is likely to” and the negative form of these words and other similar expressions. Among other things, statements that are not historical facts, including statements about FangDD’s beliefs and expectations, the business outlook and quotations from management in this announcement, as well as FangDD’s strategic and operational plans, are or contain forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following. The general economic and business conditions in China may deteriorate. The growth of Internet and mobile user population in China might not be as strong as expected. FangDD’s plan to attract new and retain existing real estate agents, expand property listings, develop new products and increase service offerings might not be carried out as expected. FangDD might not be able to implement all of its strategic plans as expected. Competition in China may intensify further. All information provided in this press release is as of the date of this press release and are based on assumptions that the Company believes to be reasonable as of this date, and FangDD undertakes no obligation to update any forward-looking statement, except as required under applicable law.

Investor Relations Contact
FangDD
Ms. Linda Li
Director, Capital Markets Department
Phone: +86-0755-2699-8968
E-mail:ir@fangdd.com

Fangdd Network Group Ltd.
SELECTED UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS DATA
(All amounts in thousands of Renminbi, except for share and per share data)
	As of December 31,			As of June 30,
	2023			2024
Assets
Current assets
Cash and cash equivalents	121,733			125,427
Restricted cash	22,166			16,974
Short-term investments	15,312			11,845
Accounts receivable, net	314,638			260,482
Prepayments and other current assets	126,725			92,273
Inventory	12,503			6,018
Total current assets	613,077			513,019
Total assets	769,901			673,953
LIABILITIES
Current liabilities
Accounts payable	395,432			288,798
Customers’ refundable fees	31,554			31,863
Accrued expenses and other payables	117,556			109,435
Income taxes payable	5,068			5,270
Operating lease liabilities-current	111			1,499
Total current liabilities	549,721			436,865
Total liabilities	578,404			462,557
Total Fangdd Network Group Ltd. shareholders' equity	195,845			213,561
Non-controlling interests	(4,348	)		(2,165	)
Total equity	191,497			211,396
Total liabilities and equity	769,901			673,953

Fangdd Network Group Ltd.
SELECTED UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) DATA
(All amounts in thousands, except for share and per share data)
	For the Six Months Ended June 30,
	2023			2024
Revenue	153,488			139,969
Cost of revenues	(133,673	)		(122,510	)
Gross profit	19,815			17,459
Operating expenses:
Sales and marketing expenses	(1,855	)		(513	)
Product development expenses	(17,725	)		(11,958	)
General and administrative expenses	(69,204	)		(73,613	)
Total operating expenses	(88,784	)		(86,084	)
Loss from operations	(68,969	)		(68,625	)
Net income	9,361			16,411
Net income attributable to minority shareholders	97			974
Net income attributable to ordinary shareholders	9,458			17,385
Net income	9,361			16,411
Other comprehensive income
Foreign currency translation adjustment, net of nil income taxes	1,267			320
Total comprehensive income , net of income taxes	10,628			16,731
Total comprehensive income attributable to minority shareholders	97			974
Total comprehensive income attributable to ordinary shareholders	10,725			17,705
Net income per share
- Basic	0.001			0.001
- Diluted	0.001			0.001
Net income per ADS
- Basic	3.94			4.50
- Diluted	3.94			4.50
Weighted average number of ordinary shares used in computing net income per share, basic and diluted
- Basic	13,937,948,159			20,827,256,643
- Diluted	13,937,948,159			20,827,256,643

Reconciliation of GAAP and Non-GAAP Results
(All amounts in thousands, except for share and per share data)
	For the Six Months
	Ended June 30,
	2023			2024
GAAP loss from operations	(68,969	)		(68,625	)
Share-based compensation expenses	82			10
Non-GAAP loss from operations	(68,887	)		(68,615	)
GAAP net income	9,361			16,411
Share-based compensation expenses	82			10
Non-GAAP net income	9,443			16,421
GAAP operating margin	(44.93	)%		(49.03	)%
Share-based compensation expenses	0.05	%		0.01	%
Non-GAAP operating margin	(44.88	)%		(49.02	)%
GAAP net margin	6.10	%		11.72	%
Share-based compensation expenses	0.05	%		0.01	%
Non-GAAP net margin	6.15	%		11.73	%

___________________

¹ Non-GAAP net income is defined as net income excluding share-based compensation expenses. For more information on these non-GAAP financial measures, please see the section captioned “Non-GAAP Financial Measures” and the tables captioned “Reconciliation of GAAP and Non-GAAP Results” set forth at the end of this release.
² “Closed-loop GMV” refers to the GMV of closed-loop transactions facilitated in the Company’s marketplace during the specified period. Closed-loop transactions refer to property transactions in which the major steps are completed or managed by real estate agents in the Company’s marketplace.

FAQ

What was FangDD's revenue for H1 2024?

FangDD's revenue for H1 2024 was RMB140.0 million (US$19.3 million), representing a decrease of 8.8% compared to H1 2023.

How did FangDD's net income change in H1 2024 compared to H1 2023?

FangDD's net income increased to RMB16.4 million (US$2.3 million) in H1 2024, compared to RMB9.4 million in H1 2023.

What was the total closed-loop GMV for FangDD in H1 2024?

The total closed-loop GMV facilitated on FangDD's platform in H1 2024 was RMB6.2 billion (US$0.9 billion), a 24.9% decrease from H1 2023.

How did FangDD's gross margin change in H1 2024?

FangDD's gross margin rate for H1 2024 was 12.5%, compared to 12.9% for the same period in 2023, showing a slight decrease.