Fangdd Network Group Ltd. Q2 FY2020 Earnings Call

Ladies and gentlemen, thank you for standing by, and welcome to FangDD Network Group Limited Second Quarter 2020 Earnings Call. At this time, all participants are in a listen-only mode. After management's prepared remarks, we will have a question-and-answer session. Please note this event is being recorded. I'd now like to hand the conference over to your speaker host today, Mr. Warren Wen, Financial Controller of the company. Please go ahead, sir.

Thank you, operator. Hello everyone, and thank you all for joining us on today's call. The company has announced its second-quarter 2020 results today and 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 the call with a review of our progress, the current industry dynamics, and the details of our development strategies in this quarter. Afterwards, our CFO, Mr. Pan Jiaorong, will go over our financials before we open up the call for questions. Our management team will deliver their remarks in Chinese, and I will provide English translation. Before we continue, I would like to refer you to the safe harbor statement in our earnings press release which applies to this call, as we will be making forward-looking statements. Please also note that we will discuss non-GAAP measurements 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 filings with the SEC. With that, I will now turn the call over to our co-CEO, Mr. Zeng Xi. Please go ahead, sir.

I would like to direct your attention to the safe harbor statement in our earnings press release, which is relevant for this call, as we will be making forward-looking statements. Please also be aware that we will discuss non-GAAP measurements today that are explained in detail and reconciled to the most comparable measures reported under GAAP in our earnings release and SEC filings. Now, I will hand the call over to our co-CEO, Mr. Zeng Xi. Please proceed.

Hello, everyone. This is Zeng Xi, and welcome to our earnings call for the second quarter of 2020.

Hello, everyone. This is Zeng Xi, and welcome to our earnings call for the second quarter of 2020.

Following the outbreak of COVID-19 in the first quarter, the pandemic in China has been effectively brought under control in the second quarter. And since May, the Chinese economy has started to recover.

Hello, everyone. This is Zeng Xi, and welcome to our earnings call for the second quarter of 2020. Following the outbreak of COVID-19 in the first quarter, the pandemic in China has been effectively brought under control in the second quarter. And since May, the Chinese economy has started to recover.

Specifically, the real estate market also started to recover across the board in the second quarter. The recovery has unleashed a backlog of pent-up market demand in April which has driven the growth of the real estate transaction services market as well as the penetration rate of agent services. According to the Frost & Sullivan report, the total realized transaction value facilitated through agents in China is expected to grow at a CAGR of 14.8% till 2023, while the total property transaction value in China is only projected to grow at a CAGR of 9.3%. The increase in penetration of agent services will also expand the real estate transaction service market. The total commission revenue from residential property transactions in China is expected to grow at a CAGR of 22.6%, while the scale of real estate transactions is expected to reach RMB 13.5 trillion.

The foreign language mention highlights that the transaction value driven by agents in China is projected to grow at a compound annual growth rate of 14.8% until 2023, contrasting with the overall property transaction value growth forecast of 9.3%. Additionally, the rise in the use of agent services is anticipated to enhance the real estate transaction service market. Commission revenue from residential property transactions in China is expected to increase at a CAGR of 22.6%, with the total real estate transaction volume expected to hit RMB 13.5 trillion.

With the increasing penetration of agent services, the real estate industry now has more operational platforms and capital funding than before. Meanwhile, the best agents in China are now polarized into two different categories—leading large-scale agencies and small and medium-sized agencies. Based on our observation, over 40% of agencies in first and second-tier cities that we cover are small and medium-sized. In comparison, independent, small and medium-sized agencies account for more than 85% of the real estate agency market in the U.S. Based on this comparison, we expect there to be significant headroom for small and medium-sized agencies to grow in China in terms of quantity and quality. In fact, since the pandemic, smaller agencies have been flourishing into the platform, thanks to their distinct competitive advantages including the flexibility of their business operations, their ability to organize as one cohesive unit, operate aggressively, and the lower cost of running a leaner operation. At the same time, they also have obvious weaknesses such as their inability to digitize their operations with SaaS solutions, lack of brand endorsement to retain customers and limited resources, making them susceptible to market volatility. In light of these characteristics, we continue to enhance our value proposition to small and medium-sized agencies to sharpen their competitive edges while addressing their weaknesses. As a result, we recorded an inflow of small and medium-sized agencies to our platform in the second quarter, which resulted in significant growth in the number of active agents on our platform. During the quarter, small and medium-sized agencies accounted for 85% of our closed-loop transactions, while we continue to serve larger-scale agencies. Such achievement has fortified our position as the largest transaction platform for small and medium-sized agencies in China.

We recorded an inflow of small and medium-sized agencies to our platform in the second quarter, resulting in significant growth in the number of active agents. During this period, these agencies accounted for 85% of our closed-loop transactions, while we also continued to serve larger-scale agencies. This achievement has strengthened our position as the largest transaction platform for small and medium-sized agencies in China.

We remain committed to improving agencies' stickiness to our platform through our SaaS offerings. During this quarter, we continue to make our total property sale solution free for agencies while introducing updates to address the needs of small and medium-sized agencies.

We remain committed to improving agencies' stickiness to our platform through our SaaS offerings. During this quarter, we continue to make our total property sale solution free for agencies while introducing updates to address the needs of small and medium-sized agencies.

First, we updated our total property sales SaaS solution to help small and medium-sized agency owners effectively manage their agents online and improve their efficiency in daily operations and customer acquisitions. The services that our solution offers include customer acquisition ranking of agency's private network as well as data analysis of media promotions, automatic call follow-ups, and online training. This service is providing agency owners with real-time insights into the operation status of their own agents.

Our SaaS solution for real property sales enables small and medium-sized agency owners to efficiently manage their agents online and enhance their everyday operations and customer acquisition efforts. The solution provides services such as customer acquisition ranking for the agency's private network, data analysis for media promotions, automatic call follow-ups, and online training. This service equips agency owners with real-time insights into the operational status of their agents.

Second, we continue to strengthen our total property sales SaaS solution's capability in utilizing agents' private connections and friends' network for marketing. This effort allowed us to effectively distribute our marketing information and materials and integrate WeChat and other social media platform resources to enhance agents' ability to engage and convert their customers. During the second quarter, our online shop generated 1.2 million sales leases per month on average.

We continue to strengthen our total property sales SaaS solution's capability in utilizing agents' private connections and friends' network for marketing. This effort allowed us to effectively distribute our marketing information and materials and integrate WeChat and other social media platform resources to enhance agents' ability to engage and convert their customers. During the second quarter, our online shop generated 1.2 million sales leases per month on average.

Certainly, we also upgraded our SaaS solutions and technology to enable agencies to conduct online resale property business, where the upgrade of our solution is providing online data analysis for business management, cash flow, and agent management for agency owners. In addition, we also rolled out an online transaction module, Duoduo transaction, to digitize the full process of resale property transaction service.

Certainly, we also upgraded our SaaS solutions and technology to enable agencies to conduct online resale property business, where the upgrade of our solution is providing online data analysis for business management, cash flow, and agent management for agency owners. In addition, we also rolled out an online transaction module, Duoduo transaction, to digitize the full process of resale property transaction service.

The optimization of our total property sales SaaS solution helped us to further increase our agency stickiness and loyalty which, in return, magnified our network effect. In addition, by utilizing our SaaS solutions to empower small and medium-sized agencies, we improved their operational efficiencies. The number of registrations on our platform as of June 30, 2020, was 1.42 million, representing an increase of 32% from 1.07 million as of June 30, 2019. Moreover, the number of active agencies on our platform reached 64,000 in the second quarter. The number of active agents on our platform in the second quarter of 2020 was 265,000, representing an increase of 26.9% from 209,500 in the same period of 2019. Notably, the number of agencies on our preferred agent alliance network further increased to 27,900.

As of June 30, 2020, registrations on our platform totaled 1.42 million, which marks a 32% increase from 1.07 million a year earlier. Additionally, during the second quarter, the number of active agencies on our platform grew to 64,000. Furthermore, we had 265,000 active agents in the second quarter of 2020, reflecting a 26.9% rise from 209,500 in the same period of 2019. Importantly, the number of agencies in our preferred agent alliance network rose to 27,900.

Additionally, according to the National Bureau of Statistics, the total volume of real estate transactions in China in 2019 was RMB 120 trillion. Based on the data from Frost & Sullivan, the penetration rate of agent services in the new construction property market in 2018 was 15.3%. Meanwhile, the latest research data from the Freedom Research Institute show that the key 20 cities in China, including all our Tier 1 cities, had agent service penetration rates of more than 40% in 2019. These statistics show that as the penetration rate of agent services increased in new construction property transactions, this market will become a central point of contention for players in the industry. As one of the first agent service platforms with new construction property business in China, we have established a competitive edge on our agency base and developed partnerships. In 2020, due to the impact of the pandemic, agencies are in need of commission fee payment in advance of developers' payment. In light of this demand, we have integrated supply chain financing products, co-developed with banks into our SaaS platform. The integration has started to gain a competitive edge. Also, they are not included in our second-quarter results yet.

In our new construction property business in China, we have established a competitive edge through our agency base and developed partnerships. In 2020, the pandemic impacted agencies, prompting them to require commission fee payments in advance of developers' payments. To address this need, we have integrated supply chain financing products, co-developed with banks, into our SaaS platform. This integration has begun to provide us with a competitive advantage. However, these products are not included in our second-quarter results yet.

We remained focused on the real growth engines of agencies and the listings in the new construction properties. In line with this strategic focus, we continue to attract small and medium-sized agencies while increasing the transaction matchmaking efficiency for agencies on the platform with a better increase in the number of small and medium-sized agencies. We further deepened our collaboration with property developers. This is illustrated by a strategic partnership with the presence of top-tier developers. Our multidimensional product sales strategy adjusts to their pain points of property sales for the property developers and increases our coverage for residential properties. In the second quarter of 2020, the number of new construction property projects, that is the new properties, increased by 24.9% year over year and 22.76% quarter over quarter to 2,918.

We strengthened our collaboration with property developers, highlighted by a strategic partnership that includes leading developers. Our comprehensive product sales strategy addresses their challenges in property sales and expands our reach in residential properties. In the second quarter of 2020, the number of new construction property projects rose by 24.9% year over year and 22.76% quarter over quarter, reaching a total of 2,918.

Facing this market demand for SaaS commission payment service from agencies on our platform, Fangduoduo launched Sohinbao, a line of credit product, based on its nine years of cumulative transaction data and experience in the online management of the closed-loop transactions. This product aims to solve the pain point of constrained credit distributions from banks to small and medium-sized agencies, due to their inability to access funding from banks because of risk perceptions. Our platform enables banks to assess and evaluate historical transactional data, helping agencies receive funding sources through supply chain financing products of banks. This fulfills agencies' needs for fast commission payment in advance of developer payment. As of June 30, 2020, we have collaborated with several major commercial banks to grant credit to our agencies with a total credit line of RMB 2 billion. For the first time ever, we help small and medium-sized agencies receive bank credit.

Our platform enables banks to assess and evaluate historical transactional data, helping agencies receive funding sources through supply chain financing products of banks. This fulfills agencies' needs for fast commission payment in advance of developer payment. As of June 30, 2020, we have collaborated with several major commercial banks to grant credit to our agencies with a total credit line of RMB 2 billion. For the first time ever, we help small and medium-sized agencies receive bank credit.

At the same time, Fangduoduo leverages its transaction service capability to keep developing innovative, value-added services, helping agencies on the platform diversify their business operations while generating new monetization channels for our marketplace. For example, to assist property developers in monetizing their parking space assets with low turnovers, we continue to refine our parking space transaction service to tap into the RMB 800 billion parking space market in China. In the second quarter, Fangduoduo expanded its parking space service to eight additional cities including Wuxi, Changzhou, Fuzhou, and Ningbo. The number of listed parking spaces on our platform increased by 37.8% sequentially to over 13,500, and revenue generated from commission fees on parking space transactions increased by 53% quarter over quarter to RMB 54.62 million.

We continue to refine our parking space transaction service to tap into the RMB 800 billion parking space market in China. In the second quarter, Fangduoduo expanded its parking space service to eight additional cities including Wuxi, Changzhou, Fuzhou, and Ningbo. The number of listed parking spaces on our platform increased by 37.8% sequentially to over 13,500, and revenue generated from commission fees on parking space transactions increased by 53% quarter over quarter to RMB 54.62 million.

Furthermore, to ensure that small and medium-sized agencies have access to standardized resale property transaction services, we integrated financial participants into transaction service centers, either established or authorized by us. This asset streamlines the transaction service for agencies while enabling monetization for post-transaction services. In the second quarter, Fangduoduo's authorized transaction service center network has covered 11 cities with 31 service centers from 14 transaction center brands. This facility provides systematic online administration of the transactional orders for small and medium-sized agencies by monitoring and recording the offline transaction streams, enabling the integration of financial products into the property transactions, thus building monetization channels in serving the post-transaction market.

In the second quarter, Fangduoduo's authorized transaction service center network has expanded to 11 cities with 31 service centers representing 14 transaction center brands. This facility offers systematic online management of transactional orders for small and medium-sized agencies by monitoring and recording offline transaction streams, facilitating the integration of financial products into property transactions, and creating monetization channels for the post-transaction market.

During the 13th National People's Congress in May 2020, the government online facility upgraded the old urban properties as a key focus of the business industry. Following this national government policy, we launched renovation and transaction services designed for old urban property by utilizing and analyzing our massive agency database by upgrading old urban properties with professional renovation services. The initiatives accelerated the transaction turnover and boosted the transaction value of old urban properties. Currently, we have extended this project to eight core commercial areas in Shanghai in collaboration with thousands of agencies on nearly 1000 old urban property listings. We launched renovation and transaction services aimed at old urban properties by leveraging our extensive agency database to enhance these properties with professional renovation services. This initiative has sped up transaction turnover and increased the transaction value of old urban properties. We have now expanded this project to eight key commercial areas in Shanghai, working with thousands of agencies on almost 1000 listings of old urban properties. We have made reference to the open-door business of open-door and effective business office, and we foresee that this new business will become a strong growth point for our business in the coming quarters.

We have made reference to the open-door business of open-door and effective business office, and we foresee that this new business will become a strong growth point for our business in the coming quarters.

As a result of the pandemic, market demand was suspended during the first quarter, while the backlog of pent-up market demand was unleashed in April. The real estate industry began its actual recovery in late May and started to return to its normal transaction levels in June. At the same time, we recorded an all-time high in the number of active agencies on our platform, demonstrating our platform's attractiveness to small and medium-sized agencies.

As a result of the pandemic, market demand was suspended during the first quarter, while the backlog of pent-up market demand was unleashed in April. The real estate industry began its actual recovery in late May and started to return to its normal transaction levels in June. At the same time, we recorded an all-time high in the number of active agencies on our platform, demonstrating our platform's attractiveness to small and medium-sized agencies.

Now we turn to an overview of the third quarter with COVID-19 generally being brought under control in the second quarter of 2020 in China. Agencies have maintained their preferences to conduct their business online. We will capitalize on this trend and expand our agency base with our comprehensive SaaS product offerings while serving larger-scale agencies. We will also focus on upgrading our product offerings that can address the pain points of small and medium-sized agencies. Through financial products from commercial banks, we aim to optimize the service experience for our new construction product agencies in commission payments and empower resale property transactions with more financing liquidity, all in an effort to enhance the overall transaction volume on our platform.

We are committed to providing comprehensive SaaS product offerings while catering to larger-scale agencies. Additionally, we will concentrate on improving our product offerings to tackle the issues faced by small and medium-sized agencies. By collaborating with commercial banks on financial products, we aim to enhance the service experience for our new construction product agencies in terms of commission payments and facilitate resale property transactions with greater financing options, ultimately seeking to increase the overall transaction volume on our platform.

We will also continue to solidify our foothold in the new construction residential property space. Through in-depth collaboration with developers, we will be able to generate more property listings for agencies which will, in turn, boost the number of property listings on our platform for more cities that have access to our services.

We will also continue to solidify our foothold in the new construction residential property space. Through in-depth collaboration with developers, we will be able to generate more property listings for agencies which will, in turn, boost the number of property listings on our platform for more cities that have access to our services.

Meanwhile, we will keep optimizing our innovative products such as Surveycon, a parking space transaction service, and a property renovation and resale service, in addition to exploring the commercial opportunities in products and services for properties that are already available on our platform.

We will continue to enhance our innovative products such as Surveycon, which provides parking space transaction services, along with a property renovation and resale service, while also exploring commercial opportunities for properties currently available on our platform.

Given the competitive nature of agencies and limited resources, offline, self-operated agencies would always have a conflict of interest with the platforms that have their own agents. This is why we have a totally independent market business model to serve property agencies on the platform. We collaborate with the larger-scale agencies in the robust industries while attracting numerous small and medium-sized agencies. Based on our broad and diverse client base, we have established a leading service capability, empowering our agent and client agency users with SaaS solutions.

Rated agencies will often face conflicts of interest with platforms that operate their own agents. This is why we maintain a completely independent market business model to support property agencies on our platform. We work with larger agencies in strong industries while also appealing to many small and medium-sized agencies. With our extensive and varied client base, we have developed a premier service capability, providing our agent and client agency users with SaaS solutions.

Based on this expectation observation, we are currently forecasting our active agency and agent numbers will continue to grow in the coming quarter, and we're currently forecasting our revenue to be between RMB 1.05 billion and RMB 1.15 billion in the third quarter of 2020. This forecast is based on our current view of the market environment which is subject to change.

We are currently forecasting that our active agency and agent numbers will continue to grow in the coming quarter. Our revenue is expected to be between RMB 1.05 billion and RMB 1.15 billion in the third quarter of 2020. This forecast is based on our current view of the market environment, which may change.

This concludes my remarks. I will hand the call to our CFO, Ms. Pan, to review our financial performance in this quarter.

We anticipate that our active agency and agent numbers will keep increasing in the upcoming quarter, and we project our revenue to be between RMB 1.05 billion and RMB 1.15 billion in the third quarter of 2020. This estimate is based on our current outlook of the market conditions, which may change. This concludes my remarks. I will now turn the call over to our CFO, Ms. Pan, to discuss our financial performance in this quarter.

The CFO, Ms. Pan, will provide a closer look into our second-quarter financial results. The revenue in the second quarter of 2020 decreased to RMB 737.7 million. The decrease was due to the outbreak of COVID-19 in China and the resulting constraints imposed on our real estate agents' activity, which negatively impacted the ability of agents to facilitate business in the period. Although we have seen a gradual resumption of real estate agency business activities since April, the COVID-19 pandemic and its impact on the real estate market caused both the number of transactions and GMV facilitated through our marketplace to decrease, both of which significantly impacted our revenue generation capability in the period. Nevertheless, as the outbreak has been gradually brought under control in China, real estate agents' business activity has started to recover in turn. In fact, our revenue in June, a single month, increased by 35.9% year over year to RMB 390 million.

The COVID-19 pandemic and its effect on the real estate market led to a decline in both the number of transactions and the gross merchandise value facilitated through our marketplace, which significantly affected our ability to generate revenue during that time. However, as the situation in China has gradually improved, business activity for real estate agents has begun to recover. In June alone, our revenue rose by 35.9% compared to the same month last year, reaching RMB 390 million.

Cost of revenue in the second quarter of 2020 decreased by 15.1% to RMB 616.7 million from RMB 726 million in the same period of 2019. This decrease was mainly attributable to a decrease in the commission fee payable to agents for the services they rendered, which resulted from both the decreased commission from transaction income and the decreased costs related to various initiatives being offered to the agents during the period to overcome the negative impact of the COVID-19 pandemic.

Cost of revenue in the second quarter of 2020 decreased by 15.1% to RMB 616.7 million from RMB 726 million in the same period of 2019. This decrease was mainly due to a reduction in the commission fee payable to agents for the services they provided, which was a result of both lower commission from transaction income and decreased costs associated with various initiatives offered to the agents during the period to mitigate the negative effects of the COVID-19 pandemic.

Gross profit in the second quarter of 2020 decreased to RMB 121 million, and the gross margin in the second quarter of 2020 was 16.4%.

Gross profit in the second quarter of 2020 decreased to RMB 121 million, and the gross margin in that quarter was 16.4%.

Sales and marketing expenses in the second quarter of 2020 decreased by 86.4% to RMB 2.9 million from RMB 21.3 million in the same period of 2019, primarily due to the reduction in spending on brand promotion and marketing activity to attract proper listings from real estate sellers to our marketplace.

In the second quarter of 2020, profit decreased to RMB 121 million, with a gross margin of 16.4%. Sales and marketing expenses dropped by 86.4% to RMB 2.9 million from RMB 21.3 million in the same period of 2019, mainly because of reduced spending on brand promotion and marketing efforts to attract suitable listings from real estate sellers to our marketplace.

Product development expenses in the second quarter of 2020 were RMB 70.5 million, compared to RMB 79.1 million in the same period of 2019. The decrease in product development expenses was mainly attributable to the company's shift from expanding the team size to optimizing the operating efficiency of its product development team in response to the outbreak of COVID-19, which led to a decrease in personnel-related expenses during this period.

Warren Wen, the CFO, mentioned that product development expenses in the second quarter of 2020 were RMB 70.5 million, down from RMB 79.1 million in the same period of 2019. The reduction in these expenses was primarily due to the company’s transition from growing the team to improving the operational efficiency of its product development team in light of the COVID-19 outbreak, resulting in lower personnel-related costs during this time.

General and administrative expenses in the second quarter of 2020 were RMB 80.5 million, compared to RMB 55.3 million in the same period of 2019. The increase in our general and administrative expenses in this period included an increase of RMB 9.6 million in share-based compensation expenses. The increase was also attributable to our increased headcount and various expenditures to improve our corporate governance and ensure compliance with U.S. SEC rules as a U.S.-listed company, as well as an increase in our account of provisions for doubtful debtors.

General and administrative expenses in 2020 were RMB 80.5 million, an increase from RMB 55.3 million during the same period in 2019. This rise included an increase of RMB 9.6 million in share-based compensation expenses. The growth was also due to a higher headcount and various costs related to enhancing our corporate governance and ensuring compliance with U.S. SEC regulations as a U.S.-listed company, along with an increase in our provisions for doubtful debts.

Net loss in the second quarter of 2020 was RMB 14 million, and excluding share-based payment expenses, the non-GAAP net income in the second quarter of 2020 was RMB 11.9 million.

Net loss in the second quarter of 2020 was RMB 14 million, and excluding share-based payment expenses, the non-GAAP net income in the second quarter of 2020 was RMB 11.9 million.

The basic and diluted net loss per ADS in the second quarter of 2020 were both RMB 0.18, and as of June 30, 2020, we had cash and cash equivalents, restricted cash, and short-term investments of RMB 950.2 million, short-term bank borrowings of RMB 361.9 million, as well as unutilized banking facilities of RMB 297 million. For the second quarter of 2020, net cash used in operating activities was RMB 62.2 million.

The basic and diluted net loss per ADS in the second quarter of 2020 were both RMB 0.18, and as of June 30, 2020, we had cash and cash equivalents, restricted cash, and short-term investments of RMB 950.2 million, short-term bank borrowings of RMB 361.9 million, as well as unutilized banking facilities of RMB 297 million. For the second quarter of 2020, net cash used in operating activities was RMB 62.2 million.

We have also adopted a conservative business strategy during the pandemic. While we continue to expand our business, we reduced our working capital to only a third of the prior-year level. Meanwhile, we have fully utilized our competitive advantage in digitizing real estate transactions to build supply chain financing partnerships with larger financial institutions during the first and second quarters of 2020. This partnership enabled us to leverage our partnered banks' risk management capabilities to reduce our own risk exposure to credit risks and funding costs. In addition, this partnership also allowed us to ensure the continuity of working capital supply on the platform while helping us further strengthen our platform's value proposition to agencies and also increase their loyalty and improve their sense of security while they operate on the platform.

This partnership enabled us to leverage our partnered banks' risk management capabilities to reduce our own risk exposure to credit risks and funding costs. In addition, it allowed us to ensure the continuity of working capital supply on the platform while helping us further strengthen our platform's value proposition to agencies, increasing their loyalty and improving their sense of security while they operate on the platform.

This concludes our prepared remarks for today. Operator, we are now ready to take questions.

Ladies and gentlemen, we will now begin the question-and-answer session. Our first question comes from Wei Xiong from UBS. Please ask your question.

My question is regarding the business developments we've seen in July and August. Could management provide your views on the market outlook for the second half of the year, particularly regarding any changes in the competitive landscape? For instance, have you noticed an increase in competition from other players? If so, what is your strategy to address it? Thank you.

Okay. Let me translate into English. As we mentioned earlier, we reported a non-GAAP net income for the second quarter. We believe we have turned a corner for this quarter, expecting to generate more revenue in the third quarter. In the second quarter, our focus was on providing financing products to make advance payments to agencies regarding development payments, collaborating with various banks and financial institutions to address this. Regarding competitive dynamics, we observe that each competitor has its own strengths. For instance, some banks depend on their management skills, physical locations, and balance sheets to pay commissions to connected agents ahead of developers' payments, resulting in notable revenue growth for them. However, we will continue to rely on our independent platform and development approach. We do not have physical shops or use real estate agents. Our emphasis is on the new construction property market, catering to various tech-enabled small and medium-sized agencies in China. Additionally, we have seen significant growth in our new construction property listings in the second quarter. We believe the key drivers of our platform's growth include connections with various real estate transaction service agencies and agents, property listings, and the introduction of financing products to offer financial opportunities to real estate transaction agents, thereby enhancing their loyalty and sense of security. Therefore, despite the competitive pressure, the market potential is substantial. We will remain focused on developing our independent platform while adhering to our core values and competitive advantages. Our vision and expectations for the third quarter and the latter half of 2020 are on track to be realized.

Okay. Let me translate this. The co-CEO, Mr. Zeng Xi, has further remarks to include in the answer. Our observation also indicates, based on our analysis of the bankers' prospectus and all the SEC filings, it is proven that the new property market size is really enormous. It is proven that our judgment of the new property market and the penetration of real estate agents into the new property market will be very substantial. Therefore, we have a significant room to grow. Upon the listing of a banker, we and the banker will together educate the developer to use channels like us to sell their property. Because of the current strengthened real estate government policy, we believe that if the developer would like to reduce their marketing expenses, using sales channels like us will be the best choice for them. Additionally, we foresee an increase in the take rate for the property sold by us. Furthermore, from the developer side, the developer also wants to have another additional choice for their sales of properties, alongside the bankers. Unlike the bankers, our operational logic is to empower and enable medium- and small-sized agencies. In the second quarter, we saw significant growth in the active agencies on our platform. Therefore, we have strong confidence in the expected growth in our revenue and profit for the third and fourth quarters. That concludes our reply. Thanks.

There's no more question at this time. I'd now like to hand the conference back to today's presenters. Please continue.

If there is no further question then we will conclude our earnings call today. Thanks, everyone.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.