Ladies and gentlemen, thank you for standing by and welcome to Fangdd Network Group Limited First Quarter 2021 Earnings Call. At this time, all participants are in a listen-only mode. After the management’s prepared remarks, we will have a question-and-answer session. Please note that this event is being recorded. Now, I’d like to hand the conference over to your speaker host today, Ms. Linda Li, the company’s Director of Capital Markets. Thank you. Please go ahead, Linda.

Thank you, Operator. Hello, everyone, and thank you for all joining us on today’s call. The company has announced its first quarter 2021 financial results today. Our earnings release is now available on the company’s IR website. Today, you will hear from our co-CEO, Mr. Zeng Xi, who will start a call with our overview of the current industry dynamics and details of our development strategies in the quarter. Afterwards, our CFO, Mr. Pan Jiaorong, will go over the financials before we open up the call for questions. Our management team will deliver their remarks in Chinese, and I will provide English translations. Before we continue, we would like to refer you to our Safe Harbor statement in our earnings call release – earnings press release. Please apply this call as we will be making forward-looking statements. Please also note that we will discuss non-GAAP measures today, which are more thoroughly explained and reconciled to the most comparable measures reported under the generally accepted accounting principles in our earnings release and filing with the SEC. With that, I will now turn the call over to our co-CEO, Mr. Zeng Xi. Please go ahead, sir.

[Foreign language] Let me translate this part. Hello, everyone, and welcome to our first quarter 2021 earnings call. I would like to start off the call with a real – review of the real estate market in the quarter where we observed a series of changes and opportunities. First, the scale of the new construction properties is massive and has maintained its growth. Under the guidelines of the three red lines policy, real estate developers are increasing focus on improving their turnover rates and utilizing various channels to reduce their inventories. According to the National Bureau of Statistics, the feel of China’s commercial housing sales reached RMB17.4 trillion in 2020, up by 8.7% year-over-year. Meanwhile, scale of the new construction property market continues to grow. Looking ahead, the top line growth rates for average sales in 2021 is 11.85% according to a group of 44 developers, which is still quite a high level. Under the guidelines of the three red lines policy, developers are focused – they are focused more on enhancing their ability to navigate various market channels in order to reduce their inventories and further accelerate – and accelerate their turnover rates. Second, the regulations implemented along restrictions – purchase restrictions and the sales restrictions, as well as centralized land sales, which have led to a rapid decline in developers’ profit margins. As of adopt, developers’ home demands now including loaning their market expenses and reducing their reliance on distribution channels. According to the win date, the real estate industry’s overall net profit margin in 2020 was 9.85%, down by 1.9 – a full 9 percentage points to the prior-year period. Meanwhile, in the industry’s net profit margins continued to decline in 2020 to reach its lowest level since 2015. Introduced in the first quarter, the Ministry of…

[Foreign language] Thank you. I will provide a closer look into our first quarter financial results. Before I begin, please note that all the numbers are in RMB terms, unless otherwise stated. Revenue in the first quarter of 2021 increased by 6.9% to RMB291 million from RMB272.1 million in the same period of 2020. During the quarter, we continue to optimize our revenue mix and prioritize that generation of revenue from value-added services and the new business initiatives such as our SaaS solution for various platform participants. At the same time, in response to market complications, we are actively exploring digital supply chain financial and products to fulfill the market demand for advanced conversion payments. Cost of revenue for the first quarter or 2021 increased by 15.7% to RMB 257.7 million from RMB272.2 million in the fiscal year of 2020. This increase was due to a highly commissioned fee payable to agents from the services they rendered, resulting from the increase in commissions from transactions. In addition, we also recorded an increased cost related to the various SaaS solutions that we offer to market participants in the first quarter or 2021 to further diversify our revenue – our future revenue streams. Gross profit in the fourth quarter of 2021 decreased by 32.6% to RMB33.3 million from RMB49.4 million in the same period of 2020. The gross margin in the first quarter of 2021 decreased to 11.4% from 18.2% in the same period of 2020. Our sequential basis gross margin in the first quarter of 2021 increased by three percentage points. Going forward, we will continue to focus on developing SaaS solutions and improving our efficiencies to advance our growth margins. Operating expenses in the fourth quarter of 2021 decreased by 25.9% to RMB140.3 million, which includes – included share-based compensation…

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Your first question comes from the line of Lisa Thompson from Zacks Investment. Please go ahead.

Hello. Congratulations on a good quarter.

Thank you, Lisa.

I’d like to ask a little bit – I would like to ask about – you talked about getting supply chain financing, how far off would that be to put that in place and how much of an improvement do you think that would make to your current business?

Okay. Let us introduce your questions to our managers. [Foreign language] Pan Jiaorong will give you the answer to your questions. Thank you, Lisa.

[Foreign language] Last year, cooperation with the banks of supply chain’s financial, we have cooperated with about seven banks and it’s about RMB2 billion. And we will go – sorry?

Go ahead. No, go ahead.

Yes. That’s the answer from our CFO. Is that clear for you?

So, you have it in place now and you’re already using it with seven banks? Or is that something new? [Foreign language]

[Foreign language] Okay. It is also expanding your cooperative initiative in the form of cooperation including the ATS form. So, we still try to find some new ways to do this of supply chain financial.

And how much do you think that will help business? Will it have a big impact or not so much? [Foreign language]

[Foreign language] Okay. In the short term, the anchors over these large companies who have forced the market to expand to the public advanced commission payments increased commission rates and stimulated a price war with the agents and their agencies. For the long-term use, the company’s own funds for other advanced commission payments will boost its closed-loop transactions of new transactions, a transaction – new construction properties. However, considering that damage from commission repayments and low AR of the payments, the company will focus on its supply chain financial product. This goes back a combined to its combination of the risk control at developments. This will all have high-quality brand developers, and the high-quality projects will use this product. I think it will give a better impact to our business. But we have to do a great job on the risk control.

Okay. Thank you. About the second quarter, I expect we should expect increasing gross margins. But are you also going to be spending, or will the net loss decrease from Q1? [Foreign language]

[Foreign language] In the second quarter, we will adapt a proportion of the revenue in our business constructor. Like SaaS, we began to generate revenue for the second – for the resale property and constructions business, we also grew rapidly. For the new construction business, we are also pursuing efficiencies. Like we mentioned in the ER and in the script, gross profit will be raised. The company’s profitability will go up.

Okay. That’s good to know. Given what you know now, what do you think the revenue level for the quarter would have to be, to be at breakeven? And what gross margin does that assume?

Hi, Lisa. Sorry, we didn’t get quite fully your question. Could you ask that again, please? Thank you.

Okay. Given what you know now, what quarterly revenues would you need to breakeven, and what gross margin assumption is that? [Foreign language]

[Foreign language] It’s not quite convenient to answer that as – that will take the forecast now. But proportion of the SaaS solutions and the second – resale property constructions of our business, their gross profit is relatively high. So we can allot that in the future. Our gross margin will be increased, and the revenue will go better. [Foreign language] Increasing investing in the staff and the high margin investment in the resale of construction business, I think this is a big market and that is a window of the digitalization. So, we’re seeing in the future after we’ve more investing this to rapidly increase business, we feel – we will enjoy a better earning in the future.

Okay. As far as the SaaS business, do you feel already that it’s going to be successful or if there’s still some risk that customers won’t be interested? [Foreign language]

[Foreign language] We believe that in the new construction business, the market has entered a fierce competition and the market scale will enter a bottleneck period, and developer built its own digitalization – digitalize the channel. But we will insist to our gross profit and gross margin, and distribution efficiencies. And we invite them all in the SaaS solution where we invest, the skills of R&D and market-oriented production. But innovation is still uncertain, but we still have confidence about the field. In the ratio of construction business, from the cultivation period to the growth has stayed from the cultivated period to growth period. The urban renovation and the city renovation has also into a state of both income and profit growth. So, we think that is the answer for your questions.

Great. Thank you. That’s all my questions. Thank you so much.

Thank you, Lisa.

Thank you. [Operator Instructions] All right. As there are no further questions, so with that, ladies and gentlemen, we will conclude our conference for today. Thank you participating. You may all disconnect.