Slashed Costs and Net Loss Improvement for FangDD in 2022 - But Will it be Enough For Struggling Chinese Portal?

March 17, 2023
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The Chinese real estate marketplace and transaction platform company FangDD has reported on its performance for Q4 of 2022. Notable numbers from the struggling company's year included:

  • Revenue for the year decreased 73% to $35.7 million.
  • Net loss for the year decreased by 80% to $34.7 million
  • The number of active agents dropped 62% over the year to 143,700.
  • Transaction value on the company's platform (GMV) decreased by 72% to $3.3 billion.

Like all Chinese real estate marketplace operators, FangDD has been heavily impacted by the huge plunge in sales volumes in the market over the last few years mentioned by company Chairman and CEO, Mr. Xi Zeng in comments accompanying the report:

“In 2022, new property sales decreased by 26.7% year-over-year in China, which represents the largest decline on record, leading to the outbreak of real estate developer liquidity risk. In 2022, the Company continued to control risks and losses to survive the market downturn.

Going forward, the Company will proactively shrink the transaction size on our marketplace for new property business and improve the account-receivable management to control the operation risk caused by developer credit risk outbreak.

The Company plans to strengthen cooperation with high-quality developers and carry out new projects with caution. At the same time, the Company will continue to explore the second growth curve in combination with the Company’s existing strengths and the industry’s new trajectory.”

The Shenzen-based company was brutal in slashing costs over the course of 2022. Sales and marketing expenses were cut by 80%, product development by 61% and admin costs fell by 77% while there was a 73% reduction in the cost of revenue compared to 2021.

Despite trimming the fat, FangDD's gross margin decreased slightly to 10% in 2022, something the company put down to its decision to stop doing business with high-risk developers and the development of new products which have not yet reached scale.

FangDD (not to be confused with Fang.com) does not define itself as a portal and considers Beike rather than portal sites Anjuke and Fang.com to be its biggest rival as more of an end-to-end transaction platform.

FangDD's continuing losses forced the company to raise $21m via a convertible note as recently as January and in August 2022 it was revealed that its mysteriously-sacked former auditor KPMG had called into question its ability to continue as a going concern.

The portal operator's share price dropped below $1 per share for much of 2022 and the company has been warned by the Nasdaq that it must raise its market cap above $5m by April 18th or risk being struck off the index.

FangDD will be hoping that, along with its recently enacted boardroom changes, the latest set of results can generate enough investor confidence to raise its share price above the threshold, satisfy Nasdaq criteria and continue as a going concern.

March 17, 2023
Since March 2020 Edmund's job has been to read about, write about, collect data on, analyse and generally know about real estate marketplaces and the companies that run them. Before that he worked at the aggregator Mitula Group (which became Lifull Connect) for five years.

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