E-House Reports Fourth Quarter and Full Year 2010 Results and Declares Cash Dividend

SHANGHAI, China, March 10, 2011 /PRNewswire-Asia-FirstCall/ -- E-House (China) Holdings Limited ("E-House" or the "Company") (NYSE: EJ), a leading real estate services company in China, today announced its unaudited financial results for the fiscal quarter and full year ended December 31, 2010.

Fourth Quarter 2010 Financial and Operating Highlights

• Total gross floor area ("GFA") of new properties sold increased by 15% year-on-year to 4.2 million square meters. Total value of new properties sold increased by 49% year-on-year to RMB40.6 billion ($6.1 billion)(1).
• Total revenues increased by 7% year-on-year to $125.2 million.
• Non-GAAP(2) income from operations decreased by 22% year-on-year to $36.8 million.
• Non-GAAP net income attributable to E-House shareholders decreased by 39% year-on-year to $20.9 million, or $0.25 per diluted American depositary share ("ADS").

Full Year 2010 Financial and Operating Highlights

• Total GFA of new properties sold was 11.9 million square meters for full year 2010, an increase of 8% from 2009. Total value of new properties sold was RMB106.2 billion ($15.8 billion) for full year 2010, an increase of 22% from 2009.
• Total revenues were $356.5 million for full year 2010, an increase of 19% from 2009, including $66.8 million contributed by CRIC's online segment. The remaining revenues were $289.7 million, an increase of 1% from 2009 on the same basis.
• Non-GAAP net income was $93.9 million for full year 2010, a decrease of 16% from 2009. Non-GAAP net income includes $12.6 million attributable to CRIC's online segment, while the remaining non-GAAP net income decreased by 23% to $81.3 million.
• Non-GAAP net income attributable to E-House shareholders was $65.8 million, or $0.80 per diluted ADS for full year 2010, a decrease of 36% from 2009.

"China's real estate industry experienced a volatile year in 2010," said Mr. Xin Zhou, E-House's executive chairman. "Amid repeated actions by the government to discourage real estate purchases, market transaction volume experienced substantial swings. In light of this environment, E-House was able to achieve higher transaction volume, build up a strong project pipeline and strengthen and establish strategic relationships with many leading developers including Evergrande, Vanke, Star River, Greentown, Country Garden, Glorious Property, Gemdale and COFCO. At the same time, CRIC's information and consulting business continued to grow and solidify its leading position in the industry. CRIC's online business, in its first full year under our management, achieved substantial gains in market share and strong revenue growth."

Mr. Zhou continued, "In late January, the PRC State Council announced further tightening measures aimed at discouraging real estate purchases. These included, among others, mandating all major cities to impose temporary restrictions on the number of residential units that residents and non-residents are allowed to own and purchase and raising the required downpayment for second home purchases to 60%. As of now, various local governments are still in the process of announcing their own implementation rules to comply with the State Council notice. We believe that these measures, coupled with continued tightening of the overall monetary policy by China's central bank, will likely have a substantial and negative impact on real estate market sentiment and transaction volume. Furthermore, such poor sentiment and low transaction volume could last a substantial period of time, given the government's repeatedly stated commitment to curb rapid home price increases."

Mr. Zhou concluded, "Despite the above, we believe E-House is well positioned to take advantage of the market downturn and turn it into a growth opportunity. We have the strongest project pipeline in our history with signed projects totaling more than 100 million square meters. We have established strategic relationships with leading developers, many of whom are committed to achieving volume growth this year through aggressive marketing and attractive pricing. Our information and consulting business is better able to cope with short-term market weakness. Our online business is poised for further gain in market share and revenue growth this year. Despite the current poor market conditions, we remain confident in the long-term growth prospects of China's real estate industry as we believe that income growth and urbanization will continue to fuel strong demand by hundreds of millions of Chinese consumers for real estate purchases."

Mr. Gordon Zang, E-House's acting chief executive officer, said, "For 2011, we will continue to focus on raising our market share in each of the major cities where we have business operations and strengthening strategic cooperation with our leading clients. In addition, a new focus this year is expansion into tier-three cities, as we believe they will become the most important source of growth for the next decade. In each of our regions, we will have a dedicated team of experienced managers in charge of tier-three city expansion, with specific performance targets and associated incentives.  Over the next three years, we aim to cover more than 200 cities in China."

Mr. Li-Lan Cheng, E-House's chief financial officer, said, "In 2010, we achieved higher transaction volume, average selling price and transaction value of new homes sold, but this was offset by a lower average commission rate. For 2011, we aim to continue growth in total transaction volume. However, as the government's restrictive measures are likely to have a bigger impact on transaction volume in tier-one cities, where average selling price is high, and developers may cut prices to spur sales volume, our average selling price may be negatively impacted. Moreover, given that our largest clients have most of their projects in tier-two and tier-three cities, where volume may be less impacted, and that we charge lower commissions to our largest clients, our average commission rate may continue to be under pressure due to a shift in our volume mix as a result of an uneven impact of government measures across regions and different types of projects.  However, we have been proactive in adjusting our compensation and other cost structures in anticipation of the changing environment and are confident that we can maintain a healthy profit margin for our agency business."

Financial Results for the Fourth Quarter and Full Year 2010

Revenues

Fourth quarter total revenues were $125.2 million, an increase of 7% from $117.1 million for the same quarter of 2009. For full year 2010, total revenues were $356.5 million, an increase of 19% from $299.5 million for 2009. Total revenues for full year 2010 included $66.8 million attributable to CRIC's online segment, while the remaining revenues were $289.7 million, an increase of 1% from $285.7 million for full year 2009 on the same basis.

Primary Real Estate Agency Services

Fourth quarter revenues from primary real estate agency services were $59.6 million, a decrease of 9% from $65.2 million for the same quarter of 2009. This decrease was mainly due to a decrease in average commission rate from 1.6% for the fourth quarter of 2009 to 1.0% for the same quarter of 2010, partially offset by a 15% increase in total GFA of new properties sold, contributing to a 49% increase in total transaction value of new properties sold. (See "Selected Operating Data" below for more details on total GFA and transaction value of new properties sold.) For full year 2010, revenues from primary real estate agency services were $173.1 million, a decrease of 5% from $183.2 million for 2009. This decrease was mainly due to a decrease in average commission rate from 1.4% for 2009 to 1.1% for 2010.

Secondary Real Estate Brokerage Services

Fourth quarter revenues from secondary real estate brokerage services were $6.8 million, a decrease of 50% from $13.7 million for the same quarter of 2009. This decrease was mainly due to lower total secondary real estate transaction volume following the announcements of cooling-off measures by the government in September 2010, while the fourth quarter of 2009 had been a period of highly active real estate transactions in anticipation of the year-end expiration of certain tax breaks related to real estate transactions. For full year 2010, revenues from secondary real estate brokerage services were $20.9 million, a decrease of 27% from $28.4 million for 2009. Full year 2010 revenues were negatively impacted by lower secondary real estate transaction volume as a result of government policies to discourage real estate transactions. As of December 31, 2010, E-House had a total of 133 secondary real estate brokerage stores in eight cities in China, compared to 109 stores as of December 31, 2009 and 133 as of September 30, 2010.

Revenues from China Real Estate Information Corporation ("CRIC")

CRIC, a subsidiary of E-House, provides real estate information, consulting and online services in China. Fourth quarter revenues from CRIC were $58.0 million, an increase of 53% from $38.0 million for the same quarter of 2009. This was mainly attributable to (1) a 36% year-on-year increase from $19.5 million to $26.5 million in revenues from real estate information and consulting services, primarily due to an increased number of subscribers to the CRIC database, more demand for CRIC's customized real estate reports and growth in project-based consulting services and (2) an 82% year-on-year increase from $13.8 million to $25.2 million in revenues from CRIC's online segment, mainly due to substantial gains in market share in all major cities after CRIC acquired its online business in October 2009.

For full year 2010, revenues from CRIC were $159.8 million, an increase of 84% from $86.9 million for 2009. Total revenues for full year 2010 included $66.8 million attributable to CRIC's online segment, while the remaining revenues were $93.0 million, an increase of 27% from $73.1 million for the same period of 2009 on the same basis. The increases were primarily due to an increased number of subscribers to the CRIC database and more demand for the Company's customized real estate reports.

Cost of Revenues

Fourth quarter cost of revenues was $35.3 million, an increase of 24% from $28.5 million for the same quarter of 2009, primarily due to higher editorial cost for the Company's online segment in line with the expanded coverage of its website, additional costs associated with CRIC's launch of new real estate channels on Baidu, costs associated with the real estate promotional event service provider acquired in the second quarter of 2010 and salaries for additional sales staff in the primary real estate agency service segment.

For full year 2010, cost of revenues was $104.8 million, an increase of 49% from $70.3 million for 2009. Cost of revenues for full year 2010 included $26.4 million attributable to CRIC's online segment, while the remaining cost of revenues was $78.4 million, an increase of 20% from $65.4 million for full year 2009 on the same basis. The increases were mainly due to higher salaries paid for the Company's sales staff in the primary real estate agency service segment and costs associated with the real estate promotional event service provider the Company acquired in the second quarter of 2010.

Selling, General and Administrative ("SG&A") Expenses

Fourth quarter SG&A expenses were $65.4 million, an increase of 24% from $52.7 million for the same quarter of 2009, primarily due to increases in (1) salary and marketing expenses for the Company's online business associated with additional sales and administrative staff and the launch of real estate channels on Baidu, (2) salary, bonus, travel, administrative and other office expenses associated with the expansion of the real estate information and consulting segment and (3) share-based compensation expenses, partially offset by decreases in bonus accruals for the Company's primary real estate agency service segment.

For full year 2010, SG&A expenses were $198.4 million, an increase of 58% from $125.7 million for 2009. SG&A expenses for full year 2010 included $54.7 million attributable to CRIC's online segment, while the remaining SG&A expenses were $143.7 million, an increase of 26% from $114.3 million in 2009 on the same basis.  This increase was primarily due to increases in (1) salary, commission, bonus and travel expenses associated with CRIC's real estate information and consulting service segment and (2) share-based compensation expenses. These increases were partially offset by a decrease in bonus accruals for the Company's primary real estate agency service segment.

Income from Operations

Fourth quarter income from operations was $24.6 million, a decrease of 35% from $38.0 million for the same quarter of 2009. For full year 2010, income from operations was $53.3 million, a decrease of 50% from $105.6 million for full year 2009. Fourth quarter non-GAAP income from operations was $36.8 million, a decrease of 22% from $47.1 million for the same quarter of 2009. For full year 2010, non-GAAP income from operations was $101.2 million, a decrease of 17% from $121.6 million in 2009. For full year 2010, non-GAAP income from operations included $14.4 million attributable to CRIC's online segment, while the remaining non-GAAP income from operations was $86.8 million, a decrease of 26% from $116.8 million for 2009 on the same basis.

Net Income

Fourth quarter net income was $17.3 million, a decrease of 69% from $55.4 million for the same quarter of 2009. Fourth quarter non-GAAP net income was $28.8 million, a decrease of 33% from $43.0 million for the same quarter of 2009. For full year 2010, net income was $48.7 million, a decrease of 59% from $117.4 million for 2009. Non-GAAP net income for full year 2010 was $93.9 million, a decrease of 16% from $111.6 million in 2009. Non-GAAP net income for full year 2010 included $12.6 million attributable to CRIC's online segment, while the remaining non-GAAP net income was $81.3 million, a decrease of 23% from $105.8 million for 2009 on the same basis.

Net Income Attributable to E-House Shareholders

Fourth quarter net income attributable to E-House shareholders was $12.9 million, or $0.16 per diluted ADS, compared to $39.0 million, or $0.49 per diluted ADS, for the same quarter of 2009. Fourth quarter non-GAAP net income attributable to E-House shareholders was $20.9 million, or $0.25 per diluted ADS, compared to $34.1 million, or $0.42 per diluted ADS, for the same quarter of 2009. For full year 2010, net income attributable to E-House shareholders was $36.2 million, or $0.44 per diluted ADS, compared to $100.3 million, or $1.25 per diluted ADS, for 2009. Non-GAAP net income attributable to E-House shareholders for full year 2010 was $65.8 million, or $0.80 per diluted ADS, a decrease of 36% from $102.0 million, or $1.26 per diluted ADS, for 2009.

Cash Flow

As of December 31, 2010, the Company had a cash balance of $543.8 million. Fourth quarter net cash provided by operating activities was $49.2 million. This amount was mainly attributable to non-GAAP net income of $28.8 million and increases in payroll payable by $12.4 million and income tax and other tax payable by $17.6 million, partially offset by an increase in marketable securities by $15.9 million. For full year 2010, cash flow provided by operating activities was $32.5 million. This amount was mainly attributable to non-GAAP net income of $93.9 million, increases in payroll payable by $6.5 million, income tax and other tax payable by $7.6 million and other payable and current liabilities by $16.5 million, partially offset by increases in customer deposit by $51.0 million, accounts receivable by $27.2 million and marketable securities by $15.9 million.

Business Outlook

The Company estimates that its revenues for the first quarter of 2011 will be in the range of $80 million to $82 million, compared to $71.4 million in the same quarter in 2010. This forecast reflects the Company's current and preliminary view, which is subject to change.

Declaration of Cash Dividend

E-House also announced today that its board of directors has authorized and approved the Company's payment of a cash dividend of $0.25 per ordinary share ($0.25 per ADS). The cash dividend will be payable on or about April 25, 2011 to shareholders of record as of the close of business on April 6, 2011.  Dividends to be paid to the Company's ADS holders through the depositary bank will be subject to the terms of the deposit agreement, including the fees and expenses payable thereunder.

Conference Call Information

E-House's management will host an earnings conference call on March 10, 2011 at 8 a.m. U.S. Eastern Time (9 p.m. Beijing/Hong Kong time).

Dial-in details for the earnings conference call are as follows:

Please dial in 10 minutes before the call is scheduled to begin and provide the passcode to join the call. The passcode is "E-House earnings call."

A replay of the conference call may be accessed by phone at the following number until March 17, 2011:

Additionally, a live and archived webcast will be available at http://ir.ehousechina.com.

About E-House

E-House (China) Holdings Limited ("E-House") (NYSE: EJ) is China's leading real estate services company with a nationwide network covering more than 130 cities. E-House offers a wide range of services to the real estate industry, including primary sales agency, secondary brokerage, information, consulting, advertising, online and investment management services. The real estate information, consulting, advertising and online services are offered through E-House's majority owned subsidiary, China Real Estate Information Corporation (NASDAQ: CRIC). E-House has received numerous awards for its innovative and high-quality services, including "China's Best Company" from the National Association of Real Estate Brokerage and Appraisal Companies and "China Enterprises with the Best Potential" from Forbes. For more information about E-House, please visit http://www.ehousechina.com.

Safe Harbor: Forward-Looking Statements

This announcement contains forward-looking statements. These statements are made under the "safe harbor" provisions of Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates," "may," "intend," "confident," "is currently reviewing," "it is possible," "subject to" and similar statements. Among other things, the Business Outlook section and quotations from management in this press release, as well as E-House's strategic and operational plans, contain forward-looking statements. E-House may also make written or oral forward-looking statements in its reports filed or furnished with the U.S. Securities and Exchange Commission, including on Forms 20-F and 6-K, in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about E-House's beliefs and expectations, are forward-looking statements and are subject to change. Forward-looking statements involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those contained, either expressly or impliedly, in any of the forward-looking statements in this press release. Potential risks and uncertainties include, but are not limited to, a severe or prolonged downturn in the global economy, E-House's susceptibility to fluctuations in the real estate market of China, government measures aimed at China's real estate industry, failure of the real estate services industry in China to develop or mature as quickly as expected, diminution of the value of E-House's brand or image, E-House's inability to successfully execute its strategy of expanding into new geographical markets in China, E-House's failure to manage its growth effectively and efficiently, E-House's failure to successfully execute the business plans for its strategic alliances and other new business initiatives, E-House's loss of its competitive advantage if it fails to maintain and improve its proprietary CRIC system or to prevent disruptions or failure in the system's performance, E-House's failure to compete successfully, fluctuations in E-House's results of operations and cash flows, E-House's reliance on a concentrated number of real estate developers, natural disasters or outbreaks of health epidemics and other risks outlined in E-House's filings with the U.S. Securities and Exchange Commission. All information provided in this press release is current as of the date of this press release, and E-House does not undertake any obligation to update any such information, except as required under applicable law.

About Non-GAAP Financial Measures

To supplement E-House's consolidated financial results presented in accordance with United States Generally Accepted Accounting Principles ("GAAP"), E-House uses in this press release the following non-GAAP financial measures: (1) net income attributable to E-House shareholders, (2) net income, (3) income from operations and (4) net income per diluted ADS, each of which excludes share-based compensation expense, amortization of intangible assets resulting from business acquisitions, gain relating to the acquisition of the Company's online real estate services segment and gain from settlement of pre-existing relationship resulting from business acquisition. The presentation of these non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. For more information on these non-GAAP financial measures, please see the table captioned "Reconciliation of GAAP and non-GAAP Results" set forth at the end of this press release.

E-House believes that these non-GAAP financial measures provide meaningful supplemental information to investors regarding its operating performance by excluding share-based compensation expense and amortization of intangible assets resulting from business acquisitions, which may not be indicative of E-House's operating performance from a cash perspective. These non-GAAP financial measures also facilitate management's internal comparisons to E-House's historical performance and assist its financial and operational decision making. As a result of the acquisition of COHT in the fourth quarter of 2009, E-House has computed its non-GAAP financial measures in this press release by excluding items that previously did not exist or were not material. A limitation of using these non-GAAP financial measures is that share-based compensation expense and amortization of intangible assets resulting from business acquisitions are recurring expenses that will continue to exist in E-House's business for the foreseeable future. Management compensates for these limitations by providing specific information regarding the GAAP amounts excluded from each non-GAAP measure. The accompanying tables have more details on the reconciliation between non-GAAP financial measures and their most comparable GAAP financial measures.

SOURCE E-House (China) Holdings Limited