Fang Announces Fourth Quarter And Fiscal Year 2018 Results

BEIJING, April 26, 2019 /PRNewswire/ -- Fang Holdings Limited (NYSE: SFUN) ("Fang" or "we"), a leading real estate Internet portal in China, today announced its unaudited financial results for the fourth quarter and fiscal year ended December 31, 2018.

Fourth Quarter 2018 Highlights

• Total revenues were $82.2 million.
• Operating income was $11.9 million. Non-GAAP operating income was $ 13.7 million. A description of the adjustments from GAAP to non-GAAP operating income is detailed in the table captioned "Reconciliation of GAAP and Non-GAAP Results" following this press release.
• Net loss attributable to Fang's shareholders was $48.2 million, which was primarily due to the change in fair value of equity securities of $34.4 million, and the income tax expense of $9.5 million related to the effect of change in fair value of equity securities. Loss per ADS was $0.11.
• Non-GAAP net loss attributable to Fang's shareholders was $9.1 million. Non-GAAP fully diluted loss per ADS were $0.02. A description of the adjustments from GAAP net loss to non-GAAP net loss attributable to Fang's shareholders and fully diluted income per ADS is detailed in the table captioned "Reconciliation of GAAP and Non-GAAP Results" following this press release.
• Adjusted EBITDA was $19.3 million. A description of the adjustments from GAAP net loss to Adjusted EBITDA is detailed in the table captioned "Reconciliation of GAAP and Non-GAAP Results" following this press release.

Fiscal Year 2018 Highlights

• Total revenues were $303.0 million.
• Operating income was $39.9 million. Non-GAAP operating income was $ 54.0 million. A description of the adjustments from GAAP to non-GAAP operating income is detailed in the table captioned "Reconciliation of GAAP and Non-GAAP Results" following this press release.
• Net loss attributable to Fang's shareholders was $117.3 million, which was primarily due to the change in fair value of equity securities of $168.7 million, and the income tax benefits of $22.0 million related to the effect of change in fair value of equity securities and the reversal of previously recorded ASC 740 (FIN 48) income tax and interest liability. Loss per ADS was $0.26.
• Non-GAAP net income attributable to Fang's shareholders was $29.2 million. Non-GAAP fully diluted benefits per ADS were $0.07. A description of the adjustments from GAAP net loss to non-GAAP net income attributable to Fang's shareholders and fully diluted income per ADS is detailed in the table captioned "Reconciliation of GAAP and Non-GAAP Results" following this press release.
• Adjusted EBITDA was $81.7 million. A description of the adjustments from GAAP net loss to Adjusted EBITDA is detailed in the table captioned "Reconciliation of GAAP and Non-GAAP Results" following this press release.

"Fang is continuing its restructuring by focusing more on its data and analytics business, internet advertising and listing services," commented Vincent Mo, Chairman of Fang. "The spin-off of China Index Holdings is underway and Fang is also exploring a separation of its core internet advertising and listing services for an independent listing."

Fourth Quarter 2018 Results

Revenues

Fang reported total revenues of $82.2 million in the fourth quarter of 2018, a decrease of 26.8% from $112.2 million in the corresponding period of 2017, mainly due to the decline in revenues from listing and e-commerce services.   

Revenue from marketing services was $41.5 million in the fourth quarter of 2018, a decrease of 16.3% from $49.6 million in the corresponding period of 2017, primarily due to a slowdown in the real estate market and the continued impacts of tightening policies.

Revenue from listing services was $24.4 million in the fourth quarter of 2018, a decrease of 41.6% from $41.8 million in the corresponding period of 2017, caused by the decreased number of paying members.

Revenue from value-added services was $11.1 million in the fourth quarter of 2018, an increase of 28.5% from $8.6 million in the corresponding period of 2017, driven by the increased demand for our database and research services.

Revenue from Financial services was $2.4 million in the fourth quarter of 2018, a decrease of 35.3% from $3.6 million in the corresponding period of 2017.

Revenue from e-commerce services was $2.8 million in the fourth quarter of 2018, a decrease of 67.1% from $8.5 million in the corresponding period of 2017, primarily due to Fang's transformation back to a technology-driven open platform model.

Cost of Revenue

Cost of revenue was $12.4 million in the fourth quarter of 2018, a decrease of 58.1% from $29.7 million in the corresponding period of 2017, primarily due to optimization in our cost structure.

Operating Expenses

Operating expenses were $57.9 million in the fourth quarter of 2018, an increase of 24.4% from $46.5 million in the corresponding period of 2017.

Selling expenses were $13.8 million in the fourth quarter of 2018, a decrease of 50.2% from $27.8 million for the corresponding period of 2017, primarily driven by a decrease in advertising and promotional expenses and deduction of staff cost.

General and administrative expenses were $43.8 million in the fourth quarter of 2018, an increase of 131.5% from $18.9 million for the corresponding period of 2017, primarily due to an increase in bad debts.

Operating Income

Operating income was $11.9 million in the fourth quarter of 2018, compared to $36.0 million in the corresponding period of 2017, caused by the decline in revenue from listing and e-commerce services and increase in bad debts.

Investment Income

Change in fair value of securities included in investment income for the fourth quarter of 2018 was a loss of $34.4 million. The amount represents changes in fair value of securities in accordance with FASB ASU 2016-01, which became effective on January 1, 2018.

Income Tax Expenses

Income tax expenses were $27.5 million in the fourth quarter of 2018, compared to income tax expenses of $13.1 million in the corresponding period of 2017.

Net Income/Loss and EPS

Net loss attributable to Fang's shareholders was $48.2 million in the fourth quarter of 2018, compared to net income of $20.6 million in the corresponding period of 2017. Loss per ordinary share and ADS were $0.54 and $0.11 in the fourth quarter of 2018, compared to net income per fully-diluted ordinary share and ADS of $0.23 and $0.04, respectively, in the corresponding period of 2017.

Adjusted EBITDA

Adjusted EBITDA, defined as GAAP net income before share-based compensation, investment income, change in fair value of securities, income taxes, interest expenses, interest income and depreciation, was $19.3 million in the fourth quarter of 2018, compared to the $41.0 million in the corresponding period of 2017.

Cash

As of December 31, 2018, Fang had cash and cash equivalents, restricted cash (current and non-current) and short-term investments of $463.6 million, compared to $547.1 million as of December 31, 2017.  

Fiscal Year 2018 Results

Revenues

Fang reported total revenues of $303.0 million for 2018, representing a decrease of 31.8% from $444.3 million for 2017, mainly due to the decline in revenues from e-commerce and listing services.

Revenue from marketing services was $119.7 million for 2018, a decrease of 19.8% from $149.3 million for 2017, primarily due to slowdown in the real estate market and the continued impacts of tightening policies.

Revenue from listing services was $113.5 million for 2018, a decrease of 31.3% from $165.4 million for 2017, caused by a decreased number of paying members.

Revenue from other value-added services was $36.4 million for 2018, an increase of 22.0% from $29.8 million for 2017, primarily driven by the increase demand for our database and research services.

Revenue from financial services was $18.1 million for 2018, an increase of 49.8% from $12.1 million for 2017, driven by increased average balance of loans receivable.

Revenue from e-commerce services was $15.4 million for 2018, a decrease of 82.5% from $87.8 million for 2017, primarily due to Fang's transformation back to a technology-driven open platform model.

Cost of Revenue

Cost of revenue was $58.6 million for 2018, a decrease of 66.5% from $174.6 million for 2017, 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 $204.5 million for 2018, a decrease of 10.1% from $227.5 million for 2017.

Selling expenses were $69.5 million for 2018, a decrease of 23.8% from $91.3 million for 2017, primarily due to the decrease of advertising and promotion fee and deduction of staff cost.

General and administrative expenses were $138.2 million for 2018, an increase of 1.9% from $135.7 million for 2017.

Operating Income

Operating income was $39.9 million for 2018, compared with operating income of $42.2 million for 2017.

Investment Income

Change in fair value of securities included in investment income for the fiscal year was a loss of $168.7 million. The amount represents changes in fair value of securities in accordance with FASB ASU 2016-01, which became effective on January 1, 2018.

Income Tax Expenses

Income tax benefits were $11.9 million for 2018, compared to Income tax expenses of $21.4 million for the corresponding period in 2017, primarily due to the reversal of previously recorded ASC 740 (FIN 48) tax and interest liability.

Net Loss/Income and EPS

Net loss attributable to Fang's shareholders was $117.3 million for 2018, compared to net income of $21.7 million for 2017. Loss per fully-diluted ordinary share and ADS were $1.31 and $0.26 in 2018, compared to net income per fully-diluted ordinary share and ADS of $0.24 and $0.05 in 2017, respectively.

Adjusted EBITDA

Adjusted EBITDA, defined as GAAP net income before share-based compensation, investment income, change in fair value of securities, income taxes, interest expenses, interest income and depreciation, was $81.7 million for 2018, compared to $68.9 million for 2017.

Cash

As of December 31, 2018, Fang had cash and cash equivalents, restricted cash (current and non-current) and short-term investments of $463.6 million, compared to $547.1 million as of December 31, 2017.

Business Outlook

Based on current operations and market conditions, Fang's non-GAAP net income is expected to be profitable for the fiscal year ending December 31, 2019. These estimates represent management's current and preliminary view, which are subject to change.

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, (3) non-GAAP basic and diluted (loss)/earnings per ordinary share and per ADS, and (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 measures help identify underlying trends in Fang's business that could otherwise be distorted by the effect of the change in fair value of equity securities, and the expenses and gains that Fang includes in income from operations and net income. Fang believes that these non-GAAP measures provide useful information about its operating results, enhance the overall understanding of its past performance and future prospects and allow for greater visibility with respect to key metrics used by Fang's management in its financial and operational decision-making. A limitation of using these non-GAAP financial measures is that share-based compensation, investment income, interest income and expenses, income tax expenses, and depreciation expenses have been and will continue to be a significant recurring item 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.

New accounting pronouncements

The new revenue recognition standard (ASU No. 2014-09 'Revenue from Contracts with Customers') was released in 2014 and becomes effective for Fang with effect from January 1, 2018. Fang has elected to adopt the new standard (ASC 606 - 'Revenue from Contracts with Customers') using cumulative effect method for all contracts that are not completed contracts at the date of initial application. Under this transition method, the new standard is applied from January 1, 2018 without restatement of comparative period amounts. The cumulative effect of initially applying the new standard is reflected as an adjustment to opening retained earnings as of January 1, 2018 in the amount of $2.9 million.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, which is an amendment which addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. This guidance includes the requirement that equity investments that do not result in consolidation and are not accounted for under the equity method be measured at fair value with changes in the fair value recognized in net income. An entity may choose to measure equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment.  Fang adopted this standard from the quarter beginning January 1, 2018, and Fang recognized a cumulative-effect adjustment to retained earnings of $163.8 million as of January 1, 2018 for the after-tax unrealized gains of available-for-sale equity securities previously recognized in accumulated other comprehensive income.

Conference Call Information

Fang's management team will host a conference call on the same day at 7:30 AM U.S. EST (7:30 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 10:30 ET on April 26, 2019 through 9:59 ET May 3, 2019. 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 a 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 primarily 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 65 offices to focus on local market needs and its website and database contains real estate related content covering 657 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.

For investor and media inquiries, please contact:

Mr. Zijin Li
Acting CFO 
Phone: +86-10-5631 8805 
Email: lizijin.bj@fang.com

Ms. Jessie Yang 
Investor Relations Director
Phone: +86-10-5631 8805 
Email: jessieyang@fang.com  

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