Fang Holdings Limited (SFUN) Q1 2019 Earnings Call Transcript

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Fang Holdings Limited (NYSE: SFUN)Q1 2019 Earnings CallJun 17, 2019, 5:30 p.m. ET

Contents:

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  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by, and welcome to Q1 2019 Fang Holdings Limited Earnings Conference Call. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. (Operator Instructions) I must advise you that this conference is being recorded today, Monday 17th of June 2019.

I would like to hand the conference over to your first speaker today, Ms. Jessie Yang. Thank you. Please go, ahead.

Jessie Yang -- Director, Investor Relations

Thank you, operator. Hello everyone, and welcome to Fang's First Quarter 2019 Earnings Conference Call. Joining us today to discuss Fang's results are our CEO Mr. Jian Liu; and our Acting CFO, Mr. Zijin Li. After the prepared remarks, our management will answer your questions.

Before we get started, I would like to remind you that during the course of this conference call, we may make forward-looking statements, statements that are not historical facts, including statements about our belief and expectations. Forward-looking statements involve inherent risk and uncertainty. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statements. Fang assumes no obligation to update the forward-looking statements in this conference call and elsewhere. Potential risks and uncertainties include, but are not limited to those outlined in our public filings with the SEC, including our Form 20-F.

Now I would like to walk you through our first quarter 2019 financial, after which Mr. Liu, and Mr. Li, will start the Q&A session. Revenues. Fang reported total revenues of $51.9 million in the first quarter of 2019, a decrease of 19.8% from $64.7 million in the corresponding period of 2018, mainly due to the decline in revenues from listing and e-commerce services.

Revenue from marketing services was $17.2 million in the first quarter of 2019, which was stable compared to $17.3 million in the corresponding period of 2018. Revenue from listing services was $21.4 million in the first quarter of 2019, a decrease of 20.1% from $26.7 million in the corresponding period of 2018. This is caused by a decreased number of paying members of listing services.

Revenue from value-added services was $8.7 million in the first quarter of 2019, an increase of 3.1% from $8.4 million in the corresponding period of 2018. Revenue from financial services was $3.5 million in the first quarter of 2019, a decrease of 30.8% from $5.1 million in the corresponding period of 2018. This is mainly due to the decrease in average loan receivable balances.

Revenue from e-commerce services was $1.1 million in the first quarter of 2019, a decrease of 84.9% from $7.2 million in the corresponding period of 2018. This is primarily due to Fang's transformation back to a technology-driven open platform model. Cost of revenue was $11.5 million in the first quarter of 2019, a decrease of 44.4% from $20.6 million in the corresponding period of 2018, primarily due to optimization in our cost structure.

Operating expenses were $42.2 (ph) million in the first quarter of 2019, a decrease of 11.8% from $48 million in the corresponding period of 2018. Selling expenses were $18.6 million in the first quarter of 2019, an increase of 12.9% from $16.4 million for the corresponding period of 2018, this is primarily driven by an increase in advertising and promotional expenses.

General and administrative expenses were $23.9 million in the first quarter of 2019, a decrease of 24% from $31.5 million for the corresponding period of 2018. This is caused by decrease in bad debts and staff costs. Operating loss was $2 million in the first quarter of 2019, compared to operating loss of $3.9 million in the corresponding period of 2018. This is caused by the decline of operating expenses.

Change in fair value of securities for the first quarter of 2019 was a gain of $32.1 million, compared to a loss of $42.2 million in the corresponding period of 2018 and the fluctuation was due to the increase in market price of investment in equity securities. Income tax expenses were $12.6 million in the first quarter of 2019, compared to income tax benefit of $4.2 million in the corresponding period of 2018.

Net Income attributable to Fang's shareholders was $13.4 million in the first quarter of 2019, compared to net loss of $44.9 million in the corresponding period of 2018. Income per ordinary share and ADS were $0.15 and $0.03 in the first quarter of 2019, compared to loss of $0.51 and $0.10, respectively in the corresponding period of 2018.

Adjusted EBITDA, defined as GAAP net income before share-based compensation, investment income, realized gain on sale available-for-sale securities change in fair value of securities, income taxes, interest expenses, interest income and depreciation and amortization was $6.9 million in the first quarter of 2019 compared to the $7.1 million in the corresponding period of 2018.

As of March 31, 2019, Fang had cash and cash equivalents, restricted cash current and non-current and short-term investments of $477.1 million, compared to $463.6 million as of December 31, 2018.

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.

Thank you very much for joining us today. And we're now open for questions. Operator, please go ahead.

Questions and Answers:

Operator

(Operator Instructions) Your first question comes from the line of Miranda Zhuang from Merrill Lynch. Please ask your question.

Miranda Zhuang -- BofA Merrill Lynch -- Analyst

Thank you, management for taking my questions. I have several questions, and this one is, can management give us some update of the -- that intention to spin-off the core advertising on listing business. Any update on the timeline and the way of doing the spin-off. I think that would be very helpful.

And then the second question is about the property market. Can management give us any color on the current new home and secondary home markets that you are seeing in China, and your outlook for the markets for this year. And then the implication of that to the -- like for example, new home advertising spending, the sentiments on the property developers. And also the number of secondary home agents in China. How do you see the trend for them?

And then my third question would be on the -- can management elaborate on your strategy for the listing and marketing business for FY'19. Any update on the monetization and the CapEx advance? Thank you.

Zijin Li -- Acting Chief Financial Officer

Hi, Miranda. I think it's best for our full -- and our CEO Mr. Liu Jian to answer the question, so I can translate for you.

Jian Liu -- Chief Executive Officer

Hi, Miranda. (Foreign Language) The Fang (ph) spin-off, management expects to be closing on end of this year. But this is purely our management's schedule. It's nothing fixed yet.

(Foreign Language) Due to the central government's policy regarding the real estate markets. This whole concept of the policy is to be the healthiest for living, is not for speculation and also for the different cities, they can have their own tailor-made policies. So in management's point of view, we think the market would be stable in the 2019.

(Foreign Language) Through the government official statistic of public issues, for the first five months in 2019, with -- for the numbers of new projects started or the new basis that's solved in 2019, the number won't be changing much. We think the market is very healthy and stable. So that will help our business to be more healthy growth.

(Foreign language) In the top tier cities, the government used to have discount houses that can be publicly trade in this year, so we think that could boost market a little bit.

(Foreign language) So relative to the market positive outlook, so still -- the competition is still very intense. So they have increasing demand of spending in advertising and publishing themselves for either for the project or for the branding themselves.

(Foreign language) For the second hand market, we think the agents advertising budget is increasing, but since the second hand market advertising is quite competitive for different portals like wide income or (inaudible) like us, so we think the competition is still be very intense.

(Foreign Language) In our company, the traffic is very important for us and is also the main focus in 2019 for us. First of all, we will acquire more traffic by increasing our own content in the platform. The second, we also have plans to acquire more healthy performing third-party.

(Foreign Language) And that'll be all answer to question.

Miranda Zhuang -- BofA Merrill Lynch -- Analyst

Thank you very much.

Operator

(Operator Instructions) There are no further questions at this time. I would like to hand the conference back to the presenters. Please, continue.

Jessie Yang -- Director, Investor Relations

Thank you, operator. And thank you, everyone, again for joining our first quarter earnings call today. We look forward to speaking with you again, our second quarter 2019 call. Thank you.

Operator

Ladies and gentlemen, that does conclude the conference for today. Thank you for participating. You may all disconnect.

Duration: 0 minutes

Call participants:

Jessie Yang -- Director, Investor Relations

Zijin Li -- Acting Chief Financial Officer

Jian Liu -- Chief Executive Officer

Miranda Zhuang -- BofA Merrill Lynch -- Analyst

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