Fangdd(DUO) - 2023 Q3 - Quarterly Report

H1 2023 Performance Overview Financial Highlights In H1 2023, FangDD achieved a significant financial turnaround, with revenue slightly increasing by 6.0% year-over-year to RMB153.5 million, shifting from a substantial net loss to a net income of RMB9.4 million H1 2023 Key Financial Metrics (vs. H1 2022) | Financial Metric | H1 2023 (RMB million) | H1 2022 (RMB million) | Change | | :--- | :--- | :--- | :--- | | Revenue | 153.5 | 144.8 | +6.0% | | Net Income/(Loss) | 9.4 | (192.1) | Turnaround to Profit | | Non-GAAP Net Income/(Loss) | 9.4 | (182.9) | Turnaround to Profit | Operating Highlights Operational metrics showed a contraction in H1 2023, with closed-loop agents decreasing by 50.9% and total closed-loop GMV falling by 25.5%, attributed to strategic project selection and business clear-up - The number of closed-loop agents decreased by 50.9% to 4.6 thousand in H1 2023 from 9.4 thousand in H1 2022[3] - Total closed-loop GMV decreased by 25.5% to RMB8.3 billion in H1 2023, down from RMB11.2 billion in the same period of 2022, mainly due to careful selection of new property projects and clearing up the resale property business[3] Management Commentary Chairman and CEO Mr. Xi Zeng highlighted the company's focus on sustainable operations, cash flow security, and profitability, leading to the first profit since H1 2021 and early loan repayment, while exploring property asset service innovations - The company focused on cash flow security and profitability enhancement, achieving profitability for the first time since the first half of 2021[6] - FangDD repaid short-term loans ahead of schedule and is actively exploring transformation opportunities, with a particular emphasis on innovating products related to property asset services[6] Detailed Financial Results Revenue Revenue for H1 2023 increased by 6.0% to RMB153.5 million (US$21.2 million), attributed to supportive PRC government policies for the real estate market - Revenue increased by 6.0% YoY to RMB153.5 million, attributed to supportive government policies for the real estate market[7] Cost of Revenue Cost of revenue decreased by 4.6% to RMB133.7 million (US$18.4 million) in H1 2023, primarily due to business line structure optimization and continuous cost control measures - Cost of revenue decreased by 4.6% YoY to RMB133.7 million, driven by business structure optimization and improved operating efficiency[8] Gross Profit and Gross Margin Gross profit increased substantially by 321.1% to RMB19.8 million (US$2.7 million) for H1 2023, with gross margin expanding significantly to 12.9% from 3.2%, reflecting improved revenue scale and cost optimization Gross Profit and Margin Performance (H1 2023 vs. H1 2022) | Metric | H1 2023 | H1 2022 | Change | | :--- | :--- | :--- | :--- | | Gross Profit (RMB million) | 19.8 | 4.7 | +321.1% | | Gross Margin | 12.9% | 3.2% | +9.7 p.p. | Operating Expenses Total operating expenses for H1 2023 were significantly reduced by 51.5% to RMB88.8 million (US$12.2 million) from RMB182.9 million in H1 2022, driven by substantial cuts across all expense categories - Total operating expenses decreased by 51.5% YoY to RMB88.8 million, with share-based compensation expenses dropping to RMB82 thousand from RMB9.2 million[10] Sales and Marketing Expenses Sales and marketing expenses decreased to RMB1.9 million from RMB8.8 million year-over-year, primarily due to an optimized sales department, reduced marketing activities, and lower sales labor expenditure Product Development Expenses Product development expenses were reduced to RMB17.7 million from RMB39.8 million year-over-year, as the company adopted a more conservative approach to R&D investments, leading to lower personnel-related expenses General and Administrative Expenses General and administrative expenses fell to RMB69.2 million from RMB134.3 million year-over-year, mainly due to decreased impairment provisions for assets and efficiency improvements, including staff reductions Net Income and EPS The company reported a net income of RMB9.4 million (US$1.3 million) for H1 2023, a significant turnaround from a net loss of RMB192.1 million in H1 2022, with basic and diluted net income per ADS at RMB0.26 (US$0.04) Net Income (Loss) Comparison (H1 2023 vs. H1 2022) | Metric | H1 2023 (RMB million) | H1 2022 (RMB million) | | :--- | :--- | :--- | | Net Income/(Loss) | 9.4 | (192.1) | | Non-GAAP Net Income/(Loss) | 9.4 | (182.9) | - Basic and diluted net income per ADS for H1 2023 were both RMB0.26 (US$0.04), compared to a loss of RMB36.08 per ADS in H1 2022[14] Liquidity As of June 30, 2023, FangDD's liquidity included cash, cash equivalents, restricted cash, and short-term investments totaling RMB144.5 million (US$19.9 million), with net cash used in operating activities at RMB160.1 million (US$22.1 million) - As of June 30, 2023, the Company had cash, cash equivalents, restricted cash, and short-term investments of RMB144.5 million (US$19.9 million)[15] - Net cash used in operating activities for H1 2023 was RMB160.1 million (US$22.1 million)[15] Financial Statements Unaudited Condensed Consolidated Balance Sheets As of June 30, 2023, total assets were RMB972.5 million, total liabilities significantly reduced to RMB720.5 million due to loan repayment, and total equity increased to RMB252.0 million Selected Balance Sheet Data (in thousands of RMB) | Account | As of June 30, 2023 | As of Dec 31, 2022 | | :--- | :--- | :--- | | Total current assets | 814,812 | 858,895 | | Total assets | 972,547 | 1,076,679 | | Short-term bank borrowings | - | 72,500 | | Total current liabilities | 688,078 | 949,721 | | Total liabilities | 720,538 | 981,285 | | Total equity | 252,009 | 95,394 | Unaudited Consolidated Statements of Comprehensive Income (Loss) The H1 2023 income statement shows revenue of RMB153.5 million, gross profit of RMB19.8 million, and a net income of RMB9.4 million, a significant turnaround from a RMB192.1 million net loss in H1 2022 Selected Income Statement Data (in thousands of RMB) | Account | For the six months ended June 30, 2023 | For the six months ended June 30, 2022 | | :--- | :--- | :--- | | Revenue | 153,488 | 144,834 | | Gross profit | 19,815 | 4,706 | | Loss from operations | (68,969) | (178,193) | | Net (loss) income | 9,361 | (192,100) | | Net (loss) income attributable to ordinary shareholders | 9,458 | (196,845) | Reconciliation of GAAP and Non-GAAP Results The company reconciles GAAP to non-GAAP results by excluding share-based compensation, showing a non-GAAP net income of RMB9.4 million for H1 2023 compared to a non-GAAP net loss of RMB182.9 million in H1 2022 GAAP to Non-GAAP Net Income Reconciliation (in thousands of RMB) | Metric | For the six months ended June 30, 2023 | For the six months ended June 30, 2022 | | :--- | :--- | :--- | | GAAP net (loss) income | 9,361 | (192,100) | | Share-based compensation expenses | 82 | 9,207 | | Non-GAAP net (loss) income | 9,443 | (182,893) | Supplementary Information Non-GAAP Financial Measures The company uses non-GAAP financial measures, excluding share-based compensation, to provide investors with a clearer view of core operating performance and business trends, while acknowledging their limitations and providing reconciliation - The company presents non-GAAP financial measures by excluding share-based compensation expenses to help investors understand core operating and financial performance[18] Safe Harbor Statement This section contains a standard safe harbor statement, cautioning that forward-looking statements are subject to inherent risks and uncertainties, including economic conditions and competition, with no obligation to update them - The announcement contains forward-looking statements made under the 'safe harbor' provisions of U.S. law, which involve inherent risks and uncertainties that could cause actual results to differ materially[21]