EJ E-House (China) Holdings Limited American Depositary Share

Company Achieves Revenue and Net Income Growth of 28% Year-Over-Year SHANGHAI, China, Nov. 20 /PRNewswire-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 nine months ended September 30, 2008. Financial Highlights -- Total revenues were $39.3 million for the third quarter of 2008, an increase of 28% from $30.6 million for the same quarter in 2007. -- For the first nine months of 2008, total revenues were $115.5 million, an increase of 63% from $70.7 million for the same period in 2007. -- Net income for the third quarter of 2008 was $10.9 million, an increase of 28% from $8.5 million for the same quarter in 2007. -- For the first nine months of 2008, net income was $31.3 million, an increase of 62% from $19.3 million for the same period in 2007. -- Diluted earnings per ADS were $0.13 for the third quarter of 2008 and $0.39 for the first nine months of 2008, compared to $0.11 and $0.26, respectively, for the same periods in 2007. "During the third quarter, China's real estate industry experienced its most severe downturn in recent history," said Mr. Xin Zhou, E-House's chairman and chief executive officer. "The continued deterioration in sentiment among potential real estate buyers, a slowdown in China's economy and the Beijing Olympic Games all contributed to the sharp decline in both primary and secondary real estate transaction volumes across most of the cities where we operate. The total sales volume of properties sold by E-House also declined compared to the third quarter of 2007, when the market was at its peak. However, we were still able to achieve revenue and profit growth, largely due to our rapidly expanding consulting and information services business." Mr. Zhou added, "Looking ahead to the fourth quarter of 2008, we expect conditions within China's real estate sector to remain challenging. China's economic growth continues to show obvious signs of slowing down and consumer sentiment continues to deteriorate. Available data on real estate transactions in October continue to reveal a sharp decline in volume for most major cities compared to last year. However, the Chinese government recently announced a series of measures aimed at stimulating economic growth and encouraging real estate purchases. These measures include lowering interest rates, reduction of taxes for certain types of real estate transactions and favorable mortgage lending terms for certain types of real estate purchases. While the immediate impact of these measures may be limited, we believe that these measures will clearly help China's economy and the real estate sector over the long term. "Since the October holiday period, many developers with projects in E- House's pipeline launched sales and carried out aggressive promotions in order to generate sales volume and cash flow. This has led to a substantial increase in sales volume for E-House compared to the third quarter. However, following the central bank's announcement in October of the new mortgage lending policy, most commercial banks have still not issued detailed rules to clarify whether and to what extent the favorable lending terms can be extended to a wider range of purchases than what the central bank has already specified. This has caused a temporary halt in the signing of new mortgage loan agreements in many locations while consumers and bank branches wait for clear instructions. Since the definition of a successful sale in many of our agency contracts requires the signing of the mortgage loan agreement, the timing of our revenue recognition for many of our sales in the fourth quarter may be adversely affected. Our total revenues for the fourth quarter will be highly dependent on this factor. "In this challenging environment, E-House's position remains highly unique and favorable. As developers struggle to generate sales volume and streamline their management and cost structure, we thereby continue to gain market share by signing more projects while building an unprecedented project pipeline. Our consulting business also benefits from developers' increased need for better information and market intelligence. Once the industry starts to recover, we will be well positioned to resume robust growth." Mr. Li-Lan Cheng, E-House's chief financial officer, added, "During the third quarter of 2008, we were able to achieve revenue growth largely as a result of strong growth in our consulting business. Income from operations and operating margin for the third quarter of 2008 both declined as compared to the same period in 2007 as our cost base increased more than our revenue. Net income increased and net margin was stable for the third quarter of 2008 compared to the same period in 2007 due to downward adjustment of our effective tax rate following the government's confirmation of the 18% applicable corporate tax rate for our primary agency business in Shanghai, as opposed to the 25% tax rate applicable for most other businesses in China." Mr. Cheng added, "In addition to the uncertainty with our revenues for the fourth quarter as Mr. Zhou stated, we expect our fourth quarter operating and net margins to be lower than the same period in 2007. This is because our fourth quarter revenue is unlikely to increase proportionally as much as our cost base has compared to the same period in 2007, when we recorded very strong revenue growth. In addition, we had a much lower effective tax rate in the fourth quarter of 2007 than what we expect to receive this year." Financial Results for the Third Quarter and First Nine Months of 2008 Revenues Total revenues were $39.3 million for the third quarter of 2008, an increase of 28% from $30.6 million for the same quarter in 2007. For the first nine months of 2008, total revenues were $115.5 million, an increase of 63% from $70.7 million for the same period in 2007. Primary Real Estate Agency Services Revenues from primary real estate agency services were $20.1 million for the third quarter of 2008, a decrease of 22% from $25.7 million for the same quarter in 2007. This decrease was mainly due to reduced overall real estate transaction volume in most of the cities where the Company operates, as a result of slower growth in China's economy and further deterioration of the demand for real estate purchases. These factors contributed to decreases in both the gross floor area ("GFA") and total transaction value of new properties sold by the Company. (See "Selected Operating Data" below for details.) For the first nine months of 2008, revenues from primary real estate agency services were $70.3 million, an increase of 19% from $59.0 million for the same period in 2007. The average commission rate was 2.4% in the first nine months of 2008 compared to 2.3% in the same period of 2007. Secondary Real Estate Brokerage Services Revenues from secondary real estate brokerage services were $1.8 million for the third quarter of 2008, a decrease of 47% from $3.3 million for the same quarter in 2007. This decrease was due to factors similar to those that caused a decrease in revenues from primary real estate agency services. For the first nine months of 2008, revenues from secondary real estate brokerage services were $7.8 million, an increase of 7% from $7.4 million for the same period in 2007. As of September 30, 2008, E-House had a total of 136 secondary real estate brokerage stores in five cities in China, compared to 161 stores as of June 30, 2008, as a result of the Company's decision to close those stores whose leases expired and whose operating performance had been poor. Real Estate Consulting and Information Services Revenues from real estate consulting and information services were $17.2 million for the third quarter of 2008, a substantial increase from $1.7 million for the same quarter in 2007. The increase was primarily due to substantial consulting revenues derived from strategic arrangements the Company entered into with major developers covering multiple cities and projects and an increase in the number and size of consulting projects completed for other developers. The increase also resulted from the completion of a consulting project associated with land transfer for a client. For the first nine months of 2008, revenues from real estate consulting and information services were $36.6 million, a substantial increase from $4.3 million for the same period in 2007. Cost of Revenues Cost of revenues was $8.1 million for the third quarter of 2008, a decrease of 4% from $8.4 million for the same quarter in 2007. The decrease was primarily due to lower commissions paid to the Company's sales staff as a result of lower transaction values for new properties sold and lower project- related advertising and promotion expenses that the Company was contractually obligated to pay for several primary real estate projects. This was partially offset by base salaries and benefits paid to the Company's sales staff, higher costs associated with developing, maintaining and updating the CRIC database system as a result of the expansion of the Company's real estate consulting and information services, and higher operating costs incurred at sales offices. For the first nine months of 2008, cost of revenues was $21.4 million, an increase of 40% from $15.3 million for the same period in 2007. Selling, General and Administrative Expenses Selling, general and administrative expenses were $21.4 million for the third quarter of 2008, an increase of 83% from $11.7 million for the same quarter in 2007. This was primarily due to an increase in staff salaries, bonuses, consulting expenses, rental and travel expenses as a result of hiring additional managerial employees and the expansion of consulting and information services. The increase was also due to higher share-based compensation expenses as a result of share options granted in 2007 and 2008. For the first nine months of 2008, selling, general and administrative expenses were $55.0 million, an increase of 88% from $29.2 million for the same period in 2007. Income from Operations Income from operations was $9.9 million for the third quarter of 2008, a decrease of 7% from $10.5 million for the same quarter in 2007. For the first nine months of 2008, income from operations was $39.1 million, an increase of 49% from $26.2 million for the same period in 2007. Net Income Net income was $10.9 million for the third quarter of 2008, an increase of 28% from $8.5 million for the same quarter in 2007. For the first nine months of 2008, net income was $31.3 million, an increase of 62% from $19.3 million for the same period in 2007. Cash Flow As of September 30, 2008, the Company had a cash balance of $173.1 million. Net cash outflow from operating activities was $43.3 million in the third quarter of 2008. The cash outflow from operating activities was mainly due to an increase in customer deposits by approximately $26.2 million and an increase in accounts receivables by approximately $25.4 million, partially offset by net income of $10.9 million. Business Outlook The Company estimates that its revenues for the fourth quarter of 2008 will be in the range of $36 million to $40 million, representing a decrease of 29% to 21% over the same quarter in 2007. For the full year 2008, the Company estimates that its revenues will be in the range of $152 million to $156 million, representing an increase of 25% to 29% over 2007. This updated annual revenue guidance reflects the Company's expectation that challenging market conditions will persist through the remainder of 2008 due to highly volatile financial and credit markets, the effect of decreased consumer spending within the real estate industry over the near term and uncertainty related to the timing of the Company's revenue recognition in the fourth quarter. Conference Call Information E-House's management will host an earnings conference call at 8:00am on November 20, 2008 U.S. Eastern Standard Time (9:00pm on November 20, 2008 Beijing/Hong Kong time). Dial-in details for the earnings conference call are as follows: US: +1-617-614-4907 Hong Kong: +852-3002-1672 Mainland China: 10-800-130-0399 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 November 27, 2008: International: +1-617-801-6888 Passcode: 51037379 Additionally, a live and archived webcast along with the transcript of the conference call will be available at http://ir.ehousechina.com/ . About E-House E-House (China) Holdings Limited ("E-House") (NYSE:EJ) is a leading real estate services company in China. Since its inception in 2000, E-House has experienced rapid growth and is China's largest real estate agency and consulting services company with a presence in more than 30 cities. E-House provides primary real estate agency services, secondary real estate brokerage services and real estate consulting and information services, and 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. E-House believes it has the largest and most comprehensive real estate database system in China, providing up-to-date and in-depth information covering residential and commercial real estate properties in all major regions in China. 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," "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 with the U.S. Securities and Exchange Commission 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, and such change may be material and may have a material adverse effect on the Company's financial condition and results of operations for one or more prior periods. 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, continued low real estate transaction volume in China, a further slowdown in the growth of China's economy, government measures aimed at cooling off or stimulating China's real estate industry that may adversely and materially affect E-House's business, failure of the real estate services industry in China to develop or mature as quickly as expected, disruptions in the financial markets and other macro-economic challenges currently affecting the economy of the United States and other parts of the world, diminution of the value of E-House's brand or image due to E-House's failure to satisfy customer needs and/or other reasons, E-House's inability to successfully execute its strategy of expanding into new geographical markets in China or its business plans for strategic alliances and other new business initiatives, E-House's failure to manage its growth, E-House's loss of its competitive advantage due to its failure to maintain and improve its proprietary CRIC system and/or other reasons, E-House's reliance on a concentrated number of real estate developers, and other risks outlined in E- House's filings with the U.S. Securities and Exchange Commission. All information provided in this press release and in the attachments is 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. -- Financial Tables to Follow -- E-HOUSE (CHINA) HOLDINGS LIMITED UNAUDITED CONSOLIDATED BALANCE SHEET (In thousands of U.S. dollars) December 31, September 30, 2007 2008 ASSETS Current assets Cash and cash equivalents 101,148 173,120 Restricted cash 3,091 31,631 Customer deposits 123,339 120,403 Notes receivables -- 147 Unbilled accounts receivable, net 55,846 95,626 Accounts receivable, net 11,167 17,116 Properties held for sale 872 1,119 Advance payment for properties -- 8,912 Deferred tax assets 2,684 2,853 Prepaid expenses and other current assets 7,066 13,346 Amounts due from related parties 2,774 1,956 Total current assets 307,987 466,229 Property, plant and equipment, net 6,502 8,430 Intangible assets, net 3,099 2,807 Investment in affiliates -- 12,254 Goodwill 2,549 3,557 Customer deposits, non-current portion 7,887 1,087 Deferred tax assets, non-current portion 447 475 Other non-current assets 1,082 275 Total assets 329,553 495,114 Current liabilities Short-term borrowings 6,845 29,333 Accounts payable 1,557 1,386 Accrued payroll and welfare expenses 12,632 11,215 Income tax payable 17,880 19,192 Other tax payable 5,568 4,458 Amounts due to related parties 2,572 950 Advance from property buyers 3,091 1,217 Other current liabilities 4,365 8,187 Total current liabilities 54,510 75,938 Deferred tax liabilities 751 607 Deferred revenue-non-current portion -- 2,106 Other non-current liabilities 200 200 Total liabilities 55,461 78,851 Minority interest 2,919 3,656 Commitments and contingencies SHAREHOLDERS' EQUITY: Ordinary share ($0.001 par value): 1,000,000,000 and 1,000,000,000 shares authorized, 76,473,759 and 82,473,759 shares issued and outstanding, as of December 31, 2007 and September 30, 2008, respectively 76 82 Additional paid-in capital 209,907 310,170 Retained earnings 54,505 85,822 Accumulated other comprehensive income 6,685 16,533 Total shareholders' equity 271,173 412,607 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 329,553 495,114 E-HOUSE (CHINA) HOLDINGS LIMITED UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands of U.S. dollars, except share data and per share data) Three months ended Nine Months ended September 30, September 30, 2007 2008 2007 2008 Revenues: Primary real estate agency services 25,697 20,145 58,998 70,290 Secondary real estate brokerage services 3,278 1,752 7,368 7,848 Real estate consulting and information services 1,661 17,187 4,301 36,646 Others -- 250 -- 750 30,636 39,334 70,667 115,534 Cost of revenues (8,429) (8,115) (15,313) (21,425) Selling, general and administrative expenses (11,659) (21,362) (29,186) (55,005) Income from operations 10,548 9,857 26,168 39,104 Other income (expense): Interest expenses (151) (775) (500) (1,909) Interest income 1,028 1,704 1,155 2,615 Other income, net 523 935 523 (419) Investment income 14 14 Income before taxes and minority interest 11,948 11,735 27,346 39,405 Income tax expense (3,160) (1,555) (7,233) (8,555) Minority interest (252) 715 (814) 467 Net income 8,536 10,895 19,299 31,317 Earnings per share: Basic 0.11 0.13 0.26 0.39 Diluted 0.11 0.13 0.26 0.39 Shares used in computation: Basic 65,165,717 82,473,759 55,055,239 81,770,462 Diluted 75,274,247 82,715,712 73,653,943 82,129,097 Notes Note 1: The conversion of Renminbi ("RMB") amounts into USD amounts is based on the rate of USD1 = RMB6.8183 on September 30, 2008 and USD1 = RMB6.8377 for the three months ended September 30, 2008. E-HOUSE (CHINA) HOLDINGS LIMITED SELECTED OPERATING DATA Three months ended Nine Months ended September 30, September 30, 2007 2008 2007 2008 Primary real estate agency service Total Gross Floor Area 1,449 998 2,731 2,565 ("GFA") of new properties sold (thousands of square meters) Total value of new properties sold (millions of $) 1,363 1,041 2,591 2,912 For investor and media inquiries please contact: In China Michelle Yuan Manager, Investor Relations E-House (China) Holdings Limited Phone: +86-21-5228-3793 Email: Cathy Li Ogilvy Financial, Beijing Phone: +86-10-8520-6104 Email: In the U.S. Thomas Smith Ogilvy Financial, New York Phone: +1-212-880-5269 Email: DATASOURCE: E-House (China) Holdings Limited CONTACT: In China - Michelle Yuan, Manager, Investor Relations of E-House (China) Holdings Limited, +86-21-5228-3793, or ; Or Cathy Li of Ogilvy Financial, Beijing, +86-10-8520-6104, or ; Or In the U.S. - Thomas Smith of Ogilvy Financial, New York, +1-212-880-5269, or Web site: http://www.ehousechina.com/

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