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Edited Transcript of SFUN earnings conference call or presentation 17-Jun-19 12:00pm GMT

Q1 2019 Fang Holdings Ltd Earnings Call

Beijing Jun 21, 2019 (Thomson StreetEvents) -- Edited Transcript of Fang Holdings Ltd earnings conference call or presentation Monday, June 17, 2019 at 12:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Jessie Yang

Fang Holdings Limited - Director of IR

* Jian Liu

Fang Holdings Limited - President & CEO

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Conference Call Participants

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* Xiaomeng Zhuang

BofA Merrill Lynch, Research Division - Associate

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Presentation

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Operator [1]

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Ladies and gentlemen, thank you for standing by, and welcome to Q1 2019 Fang Holdings Limited Earnings Conference Call. (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.

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Jessie Yang, Fang Holdings Limited - Director of IR [2]

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Thank you, operator. Hello, everyone, and welcome to Fang's First Quarter 2019 Earnings Conference Call. Joining us today to discuss Fang's results 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 beliefs and expectations. Forward-looking statements involve inherent risks 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 financials, 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 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 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 a 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 a 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 a 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 a 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 $7.1 million in the corresponding period of 2018.

As of March 31, 2019, Fang had cash and cash equivalents, restricted cash, current and noncurrent 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.

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Questions and Answers

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Operator [1]

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

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Xiaomeng Zhuang, BofA Merrill Lynch, Research Division - Associate [2]

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I have several questions, and this one is can management give us some update of the intention to spin-off the core advertising on listing business? Any update on the timeline and the way of doing a spin-off? I think that will be very helpful. And then the second question is about the property markets. Can management give us any color on the current new home and secondary home markets that you're 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?

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Unidentified Company Representative, [3]

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Miranda, I think it's best for all to let our CEO Mr. Jian Liu to answer the questions so that I can translate for you.

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Jian Liu, Fang Holdings Limited - President & CEO [4]

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Miranda. (foreign language)

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Unidentified Company Representative, [5]

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[Interpreted] The France spin-off, management expects to be closing on end of this year, but it is purely our management's schedule. It's nothing fixed yet.

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Jian Liu, Fang Holdings Limited - President & CEO [6]

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(foreign language)

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Unidentified Company Representative, [7]

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[Interpreted] 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 politics. So in management's point of view, we think the market would be stable in 2019.

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Jian Liu, Fang Holdings Limited - President & CEO [8]

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(foreign language)

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Unidentified Company Representative, [9]

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[Interpreted] Through the government official statistic of public issues, for the first 5 months in 2019, 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.

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Jian Liu, Fang Holdings Limited - President & CEO [10]

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(foreign language)

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Unidentified Company Representative, [11]

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[Interpreted] 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.

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Jian Liu, Fang Holdings Limited - President & CEO [12]

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(foreign language)

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Unidentified Company Representative, [13]

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[Interpreted] So relative market for the developers, 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.

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Jian Liu, Fang Holdings Limited - President & CEO [14]

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(foreign language)

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Unidentified Company Representative, [15]

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[Interpreted] For the secondhand market, we think the agents' advertising budget is increasing, but since the secondhand market advertising is quite competitive for different portals like (inaudible) like us, so we think the competition is still be very tense.

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Jian Liu, Fang Holdings Limited - President & CEO [16]

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(foreign language)

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Unidentified Company Representative, [17]

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[Interpreted] 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.

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Jian Liu, Fang Holdings Limited - President & CEO [18]

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(foreign language)

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Unidentified Company Representative, [19]

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[Interpreted] And that'll be all answer to question.

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Operator [20]

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

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Jessie Yang, Fang Holdings Limited - Director of IR [21]

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

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Operator [22]

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

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]