Presentation Title
O c t o b e r 2 0 1 9
1Q20 Results PresentationJune 2020
1
Disclaimer
This presentation has been prepared by Phoenix Tree Holdings Limited (the “Company”) solely for informational purposes. This presentation does not constitute anoffer to sell or an invitation to purchase or subscribe for any securities of the Company for sale in the United States or anywhere else. No part of this presentation
shall form the basis of or be relied upon in connection with any contract or commitment whatsoever. Specifically, these materials do not constitute a “prospectus”within the meaning of the U.S. Securities Act of 1933, as amended, and the regulations enacted thereunder.
This presentation does not contain all relevant information relating to the Company or its securities, particularly with respect to the risks and special considerations
involved with an investment in the securities of the Company. Nothing contained in this presentation shall be relied upon as a promise or representation as to thepast or future performance of the Company. Past performance does not guarantee or predict future performance.
You acknowledge that any assessment of the Company that may be made by you will be independent of this presentation and that you will be solely responsible
for your own assessment of the market and the market position of the Company and that you will conduct your own analysis and be solely responsible for formingyour own view of the potential future performance of the business of the Company.
This presentation contains statements that reflect the Company’s intent, beliefs or current expectations about the future. These statements can be recognized bythe use of words such as “expects,” “plans,” “will,” “estimates,” “projects,” “intends,” or words of similar meaning. Any statement in this presentation that is not a
statement of historical fact is a forward-looking statement and involves known and unknown risks, uncertainties and other factors which may cause the Company'sactual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by such
forward-looking statements. There can be no assurance that the results and events contemplated by the forward looking statements contained herein will in factoccur. None of the future projections, expectations, estimates or prospects in this presentation should be taken as forecasts or promises nor should they be taken as
implying any indication, assurance or guarantee that the assumptions on which such future projections, expectations, estimates or prospects have been prepared
are correct or exhaustive or, in the case of assumptions, fully stated in the presentation. The Company also cautions that forward-looking statements are subject to
numerous assumptions, risks and uncertainties, which change over time and which may be beyond the Company’s control. The Company assumes no duty to and
does not undertake to update any forward-looking statements to reflect actual results, changes in assumptions or changes in factors affecting these statements.
In evaluating its business, the Company uses certain non-GAAP measures as supplemental measures to review and assess its operating and financial performance.
These non-GAAP financial measures have limitations as analytical tools, and when assessing the Company’s operating and financial performances, you should not
consider them in isolation, or as a substitute for any consolidated statement of operations data prepared in accordance with U.S. GAAP. In addition, theCompany’s calculation of these non-GAAP financial measures may be different from the calculation used by other companies, and therefore the comparability ofthese measures may be limited. The reconciliation of those measures to the most comparable GAAP measures is contained within this presentation or available at
our website http://ir.danke.com.
This presentation speaks as of March 31, 2020. Neither the delivery of this presentation nor any further discussions of the Company with any of the recipients shall,under any circumstances, create any implication that there has been no change in the affairs of the Company since that date.
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Danke is one of the largest co-living platforms in
China with the fastest growth1
We are redefining the residential rental market through
technology
Comfortable
yet affordable homes for young people
China’s residential rental market is one of the last
conventional markets to be touched by technology
with
RMB3.0 tn
market size by 20231
Our mission is
to help people
live better
Note:1. According to iResearch
3
Our footprint
Notes:
1. As of March 31, 2020.
2. Represent apartment units that are within the pre-opening period (i.e., the period between the effective date of the lease with the property owners and the date when the relevant
apartment units achieve ready-to-move-in status)
3. Represent apartment units that achieve ready-to-move-in status, including those rented out and to be rented out
Number of apartments – by status
Number of apartments – by city category
2 3
176,746 192,268 213,866 223,753 207,046
108,603 154,105
192,880 214,556 211,984 285,349
346,373
406,746 438,309
419,030
3/31/2019 6/30/2019 9/30/2019 12/31/2019 3/31/2020
Beijing, Shanghai and
Shenzhen
Other cities
(as of period end)
(as of period end)
15,012 5,160 14,835 7,081 3,571
270,337 341,213
391,911 431,228 415,459
285,349
346,373
406,746 438,309
3/31/2019 6/30/2019 9/30/2019 12/31/2019 3/31/2020
Pre-Opening Units Opened Units
419,030
Established operations in 13 cities
with 419,030 apartment units operated1
BeijingBeijing
ShenzhenShenzhen
ShanghaiShanghai
HangzhouHangzhouWuhanWuhan
TianjinTianjin
NanjingNanjing
GuangzhouGuangzhou
ChengduChengduSuzhouSuzhou
WuxiWuxi
Xi’anXi’an
ChongqingChongqing
Beijing
Shenzhen
Shanghai
HangzhouWuhan
Tianjin
Nanjing
Guangzhou
ChengduSuzhou
Wuxi
Xi’an
Chongqing
4
What we offer
o Dormitory-style apartments for employee housing
o Serves corporate clients
o Introduced in November 2018
Danke Apartment
Dream Apartment
Note:1. Offered to Dream Apartment residents only
o Private rooms and entire apartments
o Serves individual residents
o Primary business focus since inception
Value-added Services
24/7 onsite management & security1Wi-Fi
Cleaning Repair & maintenance
Laundry room1
5
Single point-of-contact platform
Supply Demand
0 physical storefront
▪Centralization
▪Standardization
▪Online
Supply Intermediaries Demand
Traditional model “New rental” model
Disruptive “new rental” model solving pain points
on both sides
x Upgrade costsx Maintenance burdenx Inefficient rental processx Vacancy riskx Renter credit risk
x Affordabilityx High search costsx Poor housing conditionsx Counterparty riskx Lack of services
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Big data platform
Elimination of physical storefront
Effective replication and quality control
No reliance on individual
judgement
Centralized, unbiased decision making engine
Efficiency
Comprehensiveness
Accuracy
Replicability
Adaptability
Self-learning
Digital City
System
Intelligent
Pricing
System
Targeted
Sales
System
Intelligent
Renovation
System
…Danke Brain
Deeply-rooted technology DNATechnology powers every step of our business process
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Well positioned to capture enormous market
opportunities
2019E1 2023E1
1 Serviceable addressable market
Residential rental market
in tier 1 and tier 2 cities in China
2 Total addressable market
China’s residential rental market3 Enormous incremental opportunity
Value-added services
RMB
2.0tnRMB
3.0tn
RMB
2.0tn
RMB
1.4tn
Note:1. According to iResearch
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Distribution of unit day status is key to group level
profitability
Unit level loss D&A
Incentives
for
apartment
sourcing Leasing cost
Revenues Leasing cost D&A Incentives
for
apartment
sourcing
Incentives
for
apartment
renting
Cost of
services
Unit level
profit
A rented-out apartment unit
A vacant apartment unit7
Unit level profit for a rented-out unit
Unit level loss for a vacant unit
3
1 2 3 4 5 6
Notes:
1. Defined as revenues divided by rented-out unit days which are defined as the simple sum of the number of days we had held each apartment unit in rented-out status during a
particular period
2. Defined as leasing cost divided by total unit days. Leasing cost represents the sum of rental cost and pre-opening expense. Total unit days are defined as the simple sum of the number of
days we had held each apartment unit during a particular period
3. Defined as D&A divided by total rentable unit days. D&A only applicable for apartment units achieve ready-to-move-in status. Total rentable unit days are defined as the simple sum of
the number of days we had held each apartment unit that has achieved ready-to-move-in status during a particular period
4. Defined as incentives for apartment sourcing divided by total unit days
5. Defined as incentives for apartment renting divided by total rented-out unit days
6. Defined as cost of services divided by total rented-out unit days
7. Defined as apartment units that are not rented-out including pre-opening or to be rented-out
Illustrative daily economics for an apartment unit
Gro
up
leve
l loss m
ak
ing
Gro
up
leve
l pro
fit ma
kin
g
vs
vs
Rapid expansion stage
Developed stage
Illustrative purpose only, solely based on management‘s expectation, no
guarantee of future performance and involving risks and uncertainties, and not
indicative for actual scale or proportion
Illustrative purpose only, solely based on management‘s expectation, no
guarantee of future performance and involving risks and uncertainties, and not
indicative for actual scale or proportion
2
4
9
373
1,138
197
328
2018 2019 1Q2019 1Q2020
1Q20: Solid growth in revenues despite the
challenges of the COVID-19 pandemic
Note:
1. Leasing cost represents the sum of rental cost and pre-opening expense. Leasing cost incurred before an apartment unit achieves ready-to-move-in status is recorded in pre-opening
expense while leasing cost incurred thereafter is recorded in rental cost
▪ Solid revenue growth driven by increase inopened apartment units
▪ Rental cost increased as a result of anincrease in the number of openedapartment units
▪ Pre-opening expense decreased primarilydue to a significantly lower number of pre-opening apartment units. The Companyslowed down the rate of sourcing newapartments in response to the COVID-19outbreak
Depreciation and Amortization
as % of Revenues
▪ D&A cost increased due to an increase inthe number of apartment units renovatedand opened
2,675
7,129
1,194
1,940
2018 2019 1Q2019 1Q2020
81.2%
89.8%
97.8%100.8%
10.1%
3.1%
7.0%
0.5%
2,442
6,624
1,251
1,965
2018 2019 1Q2019 1Q2020
Rental Cost Pre-opening Expense
Revenues
166.5%2018-2019
62.5%1Q2019-1Q2020
Leasing Cost1 Depreciation and Amortization
14.0% 16.0% 16.5% 16.9%
(RMB million) (RMB million, as % of revenues) (RMB million)
10
62 136 13 32 31
8516 30105
171
3742
97
366
577671
295
758
122
251
2018 2019 1Q2019 1Q2020
Other Expenses Incentives for Apartment Sourcing
Payroll Cost Cost of Services
Loss on Disposals of Long-lived Assets
19 66 10 775
209 37
56
176
256
59 68
201
506
120 73
471
1,038
226 204
2018 2019 1Q2019 1Q2020
Advertising Expenses Payroll Cost
Incentives for Apartment Renting Other Expenses
1Q20: Strong control over operating expenses
▪ Other operating expensed increased as a result of: (i) a loss onearly termination of rental agreements due to the earlytermination of certain leases with property owners primarily due tothe COVID-19 pandemic, (ii) an increase in cost of services asmore apartment units were operated, and (iii) an increase inincentives for apartment sourcing as the Company had moreopened apartment units and recorded more amortizedcommissions and lead generation fees for sourcing suchapartments in 1Q2020
Other operating expenses not directly related to operation of our
apartment units as % of revenues2
Notes:
1. See the table entitled “Share-based compensation expenses breakdown” for the amount of SBC expenses allocated hereinto.
2. Including payroll cost and other expenses
3. Including advertising expenses, payroll cost and other expenses
▪ Sales and marketing expenses decreased due to decreases inadvertising expenses, a result of proactive control of costs andexpenses
▪ Partially offset by: (i) an increase in incentives for apartmentrenting, and (ii) an increase in payroll cost as a result of therecognition of the share-based compensation (“SBC”) expensesupon the completion of the Company’s IPO (“IPO”) in January2020
Sales and marketing expenses not directly related to operation of
our apartment units as % of revenues3
Other Operating Expenses Sales and Marketing Expenses
105.6%1Q2019-1Q2020
120.4%2018-2019
9.7%1Q2019-1Q2020
14.8% 11.6% 7.6%15.8%6.3% 4.3% 3.9%4.2%
156.9%2018-2019
(RMB million) (RMB million)
Loss on Early Termination of Rental Agreements
1
1
11
204
527
113
274
2018 2019 1Q2019 1Q2020
111
194
49
61
2018 2019 1Q2019 1Q2020
4.1% 2.7% 1.5%4.1%7.4% 7.3% 6.8%9.4%
1Q20: Strong control over operating expenses
(cont’d)
▪ The increase was primarily due to the recognition of a substantialamount of SBC1 expenses upon the completion of the Company’sIPO in January 2020.
▪ In 1Q2020, RMB140.9 million of SBC expenses was allocated toG&A expenses. Without the effect of SBC expenses, G&A expensesas a % of revenues would decrease by 2.6 percentage points dueto proactive control of costs and expenses and operatingefficiency
▪ The increase was due to SBC expenses, partially offset byproactive cost and expense controls
▪ In 1Q2020, RMB32.3 million of SBC expenses was allocated toTechnology & Product Development expenses. Without the effectof SBC expenses, the above expenses as a % of revenues woulddecrease by 2.6 percentage points due to proactive control ofcosts and expenses
Excluding SBC expenses, general and
administrative expenses as % of revenues
158.8%2018-2019
142.0%1Q2019-1Q2020
Excluding SBC expenses, technology and product
development expenses as % of revenues
74.6%2018-2019
25.6%1Q2019-1Q2020
Notes:
1. SBC expenses: because the exercisability of the share options granted by the Company was conditional upon the completion of its IPO, the Company did not recognize any SBC expenses
related to the share options granted beforehand. Upon the completion of its IPO, the Company immediately recognized a substantial amount of SBC expenses associated with vested
option awards in the first quarter of 2020. See the table entitled “Share-based compensation expenses breakdown” for more information
General and Administrative Expenses Technology and Product Development Expenses
(RMB million) (RMB million)
12
Appendix
13
Condensed Statement of Comprehensive Loss
(RMB’000) 1Q2019 1Q2020
Revenues 1,193,770 1,939,589
Operating expenses:
Rental cost (1,167,613) (1,955,717)
Depreciation and amortization (196,513) (328,264)
Other operating expenses (121,884) (250,578)
Pre-opening expense (83,321) (9,198)
Sales and marketing expenses (225,920) (203,962)
General and administrative expenses (113,109) (273,749)
Technology and product development expenses (48,608) (61,037)
Impairment of long-lived assets – (19,144)
Operating loss (763,198) (1,162,060)
Interest expenses (73,520) (84,729)
Interest income 20,477 10,251
Loss before income taxes (816,241) (1,236,538)
Income tax benefit – 2,167
Net loss (816,241) (1,234,371)
Income/(Loss) attributable to non-controlling interest 59 (4,431)
Net loss attributable to Phoenix Tree Holdings Limited (816,300) (1,229,940)
Accretion and modification of redeemable convertible preferred shares (79,168) (28,692)
Net loss attributable to ordinary shareholders of Phoenix Tree Holdings Limited (895,468) (1,258,632)
Net loss (816,241) (1,234,371)
Other comprehensive loss:
Foreign currency translation adjustment 7,853 140,976
Comprehensive loss (808,388) (1,093,395)
Comprehensive income/(loss) attributable to non-controlling interest 59 (4,431)
Comprehensive loss attributable to ordinary shareholders of Phoenix Tree Holdings Limited (808,447) (1,088,964)
Net loss per share
—Basic and diluted (3.95) (0.87)
Weighted average number of shares outstanding used in computing net loss per share
—Basic and diluted 226,458,958 1,453,806,974
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(RMB’000) As of December 31, 2019 As of March 31, 2020ASSETSCurrent assets
Cash 685,277 826,396 Restricted cash 1,417,245 1,384,255 Accounts receivable, net 2,837 2,984 Advance to landlords 223,146 130,147 Prepayments and other current assets 636,618 625,712
Total current assets 2,965,123 2,969,494 Non-current assets
Restricted cash 1,353,376 2,015,704 Property and equipment, net 3,167,537 2,881,057 Intangible asset, net 152,846 138,128 Goodwill 347,455 347,455 Deposits to landlords 608,475 577,093 Other non-current assets 410,703 371,436
Total non-current assets 6,040,392 6,330,873 Total assets 9,005,515 9,300,367 LIABILITIESCurrent liabilities
Short-term borrowings and current portion of long-term borrowings 4,554,362 4,654,298 Accounts payable 726,455 651,639 Rental payable 553,410 978,020 Advance from residents 976,348 906,061 Amount due to related parties 11,343 46,060 Deposits from residents 605,356 569,772 Accrued expenses and other current liabilities 495,484 544,820
Total current liabilities 7,922,758 8,350,670 Non-current liabilities
Long -term borrowings, excluding current portion 669,250 665,250 Deferred income tax liabilities 7,042 4,875Other non-current liabilities 27,419 6,074
Total non-current liabilities 703,711 676,199 Total liabilities 8,626,469 9,026,869 MEZZANINE EQUITYTotal mezzanine equity 6,106,203 –SHAREHOLDERS’ (DEFICIT)/EQUITY
Ordinary shares 35 248 Additional paid-in capital – 7,122,529Accumulated other comprehensive (loss)/income (57,852) 83,124 Accumulated deficit (5,663,670) (6,922,302)
Total shareholders’ (deficit)/equity attributable to ordinary shareholders (5,721,487) 283,599 Non-controlling interest (5,670) (10,101)
Total shareholders' (deficit)/equity (5,727,157) 273,498 Total liabilities, mezzanine equity and shareholders’ (deficit)/equity 9,005,515 9,300,367
Condensed Balance Sheet
15
Condensed Cash Flow Statement
(RMB’000) 1Q2019 1Q2020
Net cash used in operating activities (633,130) (121,440)
Net cash used in investing activities (641,692) (178,196)
Net cash provided by financing activities 2,475,836 1,017,506
Effect of foreign currency exchange rate changes on cash and restricted cash (71,886) 52,587
Net increase in cash and restricted cash 1,129,128 770,457
Cash and restricted cash at the beginning of the period 2,465,534 3,455,898
Cash and restricted cash at the end of the period 3,594,662 4,226,355
16
Non-GAAP Reconciliation
(RMB’000) 1Q2019 1Q2020
Net Loss (816,241) (1,234,371)
Add:
Depreciation and amortization 196,513 328,264
Interest expenses 73,520 84,729
Income tax benefit – (2,167)
Subtract:
Interest income 20,477 10,251
EBITDA (566,685) (833,796)
Add:
Incentives for apartment sourcing 15,628 30,008
Share-based compensation 1,481 206,301
Impairment of long-lived assets – 19,144
Adjusted EBITDA (549,576) (578,343)
Net Loss (816,241) (1,234,371)
Add:
Incentives for apartment sourcing 15,628 30,008
Share-based compensation 1,481 206,301
Impairment of long-lived assets – 19,144
Adjusted Net Loss (799,132) (978,918)
17
Non-GAAP Reconciliation (Cont’d)
(RMB’000) 1Q2019 1Q2020
Net loss attributable to ordinary shareholders of Phoenix Tree Holdings Limited (895,468) (1,258,632)
Add:
Incentives for apartment sourcing 15,628 30,008
Share-based compensation 1,481 206,301
Impairment of long-lived assets – 19,144
Adjusted net loss attributable to ordinary shareholders of Phoenix Tree Holdings Limited (878,359) (1,003,179)
Adjusted net loss per share
—Basic and diluted (3.88) (0.69)
Weighted average number of shares outstanding used in computing adjusted net loss per share
—Basic and diluted 226,458,958 1,453,806,974
18
Share-based compensation expenses breakdown:
(RMB’000) 1Q2019 1Q2020
Other operating expenses – 14,320
Sales and marketing expenses – 18,771
General and administrative expenses 1,481 140,943
Technology and product development expenses – 32,267
Total 1,481 206,301
Thank you