Fang reports its Q4 and fiscal year results for 2018

Fang Holdings Limited, a leading real estate Internet portal in China, has 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 and internet and 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.

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