Fang Announces Fourth Quarter and Fiscal Year 2017 Results

BEIJING, March 29, 2018 /PRNewswire/ -- Fang Holdings Limited (NYSE: SFUN) ("Fang" or "we"), the leading real estate Internet portal in China, today announced its unaudited financial results for fourth quarter and fiscal year ended December 31, 2017.

Fourth Quarter 2017 Highlights

• ŸTotal revenues were $112.2million.
• ŸOperating income was $30.6 million. Non-GAAP operating income was $32.6 million. A description of the adjustments from GAAP to non-GAAP operating income is detailed in the Reconciliation Statement following this press release.
• ŸNet income attributable to Fang's shareholders was $15.2 million. Fully diluted earnings per ADS were $0.03.
• ŸNon-GAAP net income attributable to Fang's shareholders was $15.1 million. Non-GAAP fully diluted earnings per ADS were 0.03. A description of the adjustments from GAAP to non-GAAP net income attributable to Fang's shareholders and fully diluted earnings per ADS is detailed in the Reconciliation Statement following this press release.

"Fang returned to full-year profitable in 2017 after two years of net losses in 2015 and 2016," commented Vincent Mo, Chairman and CEO of Fang. "Although Fang is still in its retransformation back to a platform player, it's clear that we are on the right track going forward."

Fourth Quarter 2017 Results

Revenues

Fang reported total revenues of $112.2 million in the fourth quarter of 2017, a 35.8 % decrease from $174.7 million in the corresponding period of 2016, primarily due to the decline in e-commerce services by $81.4 million. 

Revenue from listing services was $41.8 million in the fourth quarter of 2017, an increase of 8.2% from $38.6 million in the corresponding period of 2016, driven by the increased number of paying members.

Revenue from marketing services was $49.6 million in the fourth quarter of 2017, an increase of 3.4% from $48.0 million in the corresponding period of 2016, primarily driven by the refocus of Fang's effort in the online business.

Revenue from e-commerce services was $8.5 million in the fourth quarter of 2017, a decrease of 90.6% from $89.9 million in the corresponding period of 2016, primarily due to Fang's transformation back to a technology-driven open platform model.

Revenue from Internet financial services was $3.6million in the fourth quarter of 2017, a significant increase from $0.6 million in the corresponding period of 2016, primarily due to the recovery of loan operations and the introduction of collateral loan products.

Revenue from other value-added services was $8.6 million in the fourth quarter of 2017, an increase of 67.5% compared to $5.2 million in the corresponding period of 2016, primarily driven by the growth of data products in the research business. 

Cost of Revenue

Cost of revenue was $29.7 million in the fourth quarter of 2017, a decrease of 66.8% from $89.4 million in the corresponding period of 2016, primarily driven by the closing of the self-owned brokerage stores, deduction of e-commerce staff and cost optimization under the technology-driven open platform model.

Operating Expense

Operating expenses were $51.9 million in the fourth quarter of 2017, a decrease of 44.9% from $94.2 million in the corresponding period of 2016.

Selling expenses were $27.8 million in the fourth quarter of 2017, a decrease of 53.0% from $59.2 million for the corresponding period of 2016, primarily driven by the decrease of advertising and promotion fee, sales commission fee.

General and administrative expenses were $24.3 million in the fourth quarter of 2017, a decrease of 31.1% from $35.3 million for the corresponding period of 2016, primarily due to the deduction of staff cost.

Operating Income

Operating income was $30.6 million in the fourth quarter of 2017, compared to operating loss of $8.9 million in the corresponding period of 2016, primarily attributable to the closing of the self-owned brokerage stores and effective cost control.

Income Tax Expenses

Income tax expenses were $13.1 million in the fourth quarter of 2017, compared to $3.1 million in the corresponding period of 2016.

Net Income and EPS

Net income attributable to Fang's shareholders was $15.2 million in the fourth quarter of 2017, compared to net loss of $10.4 million in the corresponding period of 2016. Earnings per fully-diluted ordinary share and ADS were $0.16 and $0.03 in the fourth quarter of 2017, compared to loss per fully-diluted ordinary share and ADS of $0.11 and $0.02 in the fourth quarter of 2016, respectively.

Adjusted EBITDA

Adjusted EBITDA, defined as non-GAAP net income before income taxes, interest expenses, interest income, depreciation and amortization, was $35.6 million in the fourth quarter of 2017, compared to $2.4 million in the corresponding period of 2016.

Cash

As of December 31, 2017, Fang had cash, cash equivalents, and short-term investments of $507.1 million, compared to $590.5 million as of December 31, 2016. Net cash generated from operating activities was $57.1 million in the fourth quarter of 2017, compared to cash flow generated from operating activities of $85.1 million in the same period of 2016, primarily due to the decrease of cash inflow of loan receivable related to operating activities compared to the fourth quarter of 2016.

Fiscal Year 2017 Results

Revenues

Fang reported total revenues of $444.3 million for 2017, representing a decrease of 51.5% from $916.4 million for 2016, primarily due to the decline in e-commerce services revenue by 489.9 million.

Revenue from marketing services was $149.3 million for 2017, a decrease of 9.8% from $165.4 million for 2016, primarily due to less demand from property developers.

Revenue from e-commerce services was $87.8 million for 2017, a decrease of 84.8% from $577.7 million for 2016, primarily due to Fang's transformation back to a technology-driven open platform model.

Revenue from listing services was $165.4 million for 2017, an increase of 40.0% from $118.1 million for 2016, driven by the increased number of paying members in lower-tier cities.

Revenue from financial services was $12.1 million for 2017, a decrease of 59.3% from $29.6 million for 2016,, primarily due to the reduced loan demand from decreased secondary transaction volumes of Fang's own franchised brokerage services and a strategic shift to a more diversified loan business, which is still at its early stage.

Revenue from other value-added services was $29.8 million for 2017, an increase of 16.6% from $25.6 million for 2016, primarily driven by the growth of data products in the research business.

Cost of Revenue

Cost of revenue was $174.6 million for 2017, a decrease of 74.6% from $687.2 million for 2016, primarily driven by the closing of the self-owned brokerage stores, deduction of e-commerce staff and cost optimization under the technology-driven open platform model.

Operating Expenses

Operating expenses were $232.9 million for 2017, a decrease of 38.8% from $380.7 million for 2016.

Selling expenses were $91.3 million for 2017, a decrease of 60.3% from $229.8 million for 2016, primarily driven by the decrease of advertising and promotion fee, sales commission fee.

General and administrative expenses were $141.1 million for 2017, a decrease of 6.7% from $151.3 million for 2016, primarily due to the deduction of staff cost.

Operating Income

Operating income was $36.8 million for 2017, compared with operating loss of $151.4 million for 2016.

Income Tax Expenses

Income tax expenses were $21.4 million for 2017, compared to $25.0 million for the corresponding period in 2016. The expenses decrease was primarily due to the reversal of previously recorded ASC 740 (FIN 48) tax and interest liability.

Net Loss/Income and EPS

Net income attributable to Fang's shareholders was $16.3 million for 2017, compared to net loss $169.6 million for 2016. Earnings per fully-diluted ordinary share and ADS were $0.18 and $0.04 in 2017, compared to loss per fully-diluted ordinary share and ADS of $1.81 and $0.36 in 2016, respectively.

Adjusted EBITDA

Adjusted EBITDA was $63.6 million for 2017, compared to negative $121.2 million for 2016.

Cash

Cash generated from operating activities was $126.9 million for 2017, compared to net cash generated from operating activities $131.2 million for 2016, primarily due to the decrease of cash inflow of loan receivable related to operating activities compared to 2016.

Business Outlook

Fang estimates its net income for 2018 will range from approximately $100 million to approximately $120 million, representing a year-on-year increase of approximately 388.3% to approximately 485.9%. This forecast reflects Fang's current and preliminary view, which is subject to change.

Conference Call Information

Fang's management team will host a conference call on the same day at 8:00 AM U.S. EST (8:00 PM Beijing/Hong Kong time). The dial-in details for the live conference call are:

A telephone replay of the call will be available after the conclusion of the conference call from 11:00 ET on Mar 29, 2018 through 9:59 ET April 6, 2018. The dial-in details for the telephone replay are:

A live and archived webcast of the conference call will be available on Fang's website at http://ir.fang.com.

About Fang

Fang operates the leading real estate Internet portal in China in terms of the number of page views and visitors to its websites. Through its websites, Fang provides e-commerce, marketing, listing, financial and other value-added services for China's fast-growing real estate and home furnishing and improvement sectors. Its user-friendly websites support active online communities and networks of users seeking information on, and other value-added services for, the real estate and home furnishing and improvement sectors in China. Fang currently maintains about 100 offices to focus on local market needs and its website and database contains real estate related content covering more than 651 cities in China. For more information about Fang, please visit http://ir.fang.com.

Safe Harbor Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995.

These forward-looking statements can be identified by terminology such as "will," "expects," "is expected to," "anticipates," "aim," "future," "intends," "plans," "believes," "are likely to," "estimates," "may," "should" and similar expressions, and include, without limitation, statements regarding Fang's future financial performance, revenue guidance, growth and growth rates, market position and continued business transformation. Such statements are based upon management's current expectations and current market and operating conditions, and relate to events that involve known or unknown risks, uncertainties and other factors, all of which are difficult to predict and many of which are beyond Fang's control, which may cause its actual results, performance or achievements to differ materially from those in the forward-looking statements. Potential risks and uncertainties include, without limitation, the impact of Fang's transformation back to a technology-driven Internet platform and the impact of current and future government policies affecting China's real estate market. Further information regarding these and other risks, uncertainties or factors is included in Fang's filings with the U.S. Securities and Exchange Commission. Fang does not undertake any obligation to update any forward-looking statement as a result of new information, future events or otherwise, except as required under law.

About Non-GAAP Financial Measures

To supplement Fang's consolidated financial results presented in accordance with United States Generally Accepted Accounting Principles ("GAAP"), Fang uses in this press release the following measures defined as non-GAAP financial measures by the United States Securities and Exchange Commission: (1) non-GAAP operating (loss)/income, (2) non-GAAP net (loss)/income and (3) non-GAAP basic and diluted (loss)/earnings per ordinary share and per ADS (4) adjusted EBITDA. The presentation of the non-GAAP financial information 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.

Fang believes that these non-GAAP financial measures provide meaningful supplemental information to investors regarding its operating performance by excluding share-based compensation expenses and the related tax effects, realized gain on available-for-sale security, interest income and expenses, income tax expenses, and depreciation expense for the relevant period, which (1) may not be indicative of Fang's recurring core business operating results or (2) are not expected to result in future cash payments. These non-GAAP financial measures also facilitate management's internal comparisons to Fang's historical performance and assist its financial and operational decision making. A limitation of using these non-GAAP financial measures is that share-based compensation, interest income and expenses, income tax expenses, and depreciation expenses have been and will continue to be a significant recurring expense that will continue to exist in Fang'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 directly comparable GAAP financial measures.

For investor and media inquiries, please contact:

Dr. Hua Lei
CFO 
Phone: +86-10-5631-8661 
Email: leihua@fang.com

Ms. Dana Cheng  
Senior Manager, Investor Relations
Phone: +86-10-5631 8174
Email: chengyu.bj@fang.com 

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