Logo of jester cap with thought bubble.

Image source: The Motley Fool.

Fang Holdings Limited (NYSE:SFUN)
Q3 2019 Earnings Call
Nov 18, 2019, 7:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by, and welcome to Quarter Three 2019 Fang Holdings Limited Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to Ms. Jessie Yang. Please go ahead.

Jessie Yang -- Investor Relations Director

Thank you, Operator. Hi, everyone, and welcome to Fang Holdings Third Quarter 2019 Earnings Conference Call. Joining us today to discuss Fang's results are CEO, Mr. Jian Liu and 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 risk and uncertainties. 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 third quarter 2019 financials, after which, Mr. Liu and Mr. Li will answer your questions for the Q&A session.

Fang reported total revenues of $67.6 million in the third quarter of 2019, an increase of 11.8% from $60.4 million in the corresponding period of 2018, mainly due to the increase in revenues from marketing and leads generation services. Revenue from marketing services was $30 million in the third quarter of 2019, an increase of 16.1% from $25.8 million in the corresponding period of 2018 driven by Fang's efforts in customer development.

Revenue from listing services was $19.4 million in the third quarter of 2019, a decrease of 3.7% from $20.2 million in the corresponding period of 2018. Revenue from leads generation services was $14.1 million in the third quarter of 2019, an increase of 181% from $5 million in the corresponding period of 2018, driven by the increased effectiveness of the service and customer development.

Revenue from financial services was $1.7 million in the third quarter of 2019, a decrease of 69.7% from $5.6 million in the corresponding period of 2018, due to a decrease in average loan receivable balances. Cost of revenue was $5.7 million in the third quarter of 2019, a decrease of 59.3% from $14.0 million in the corresponding period of 2018, primarily due to optimization in cost structure.

Operating expenses were $35.1 million in the third quarter of 2019, a decrease of 3.2% from $36.3 million in the corresponding period of 2018, mainly due to the decrease in staff costs. Selling expenses were $14.8 million in the third quarter of 2019, a decrease of 10.7% from $16.6 million in the corresponding period of 2018. General and administrative expenses were $21.7 million in the third quarter of 2019, a decrease of 7.1% from $23.4 million in the corresponding period of 2018.

Operating income from continuing operations was $26.7 million in the third quarter of 2019, an increase of 164.8% from $10.1 million in the corresponding period of 2018. Change in fair value of securities for the third quarter of 2019 was a loss of $26.1 million, compared to a loss of $10.9 million in the corresponding period of 2018, mainly due to the fluctuation in market price of investments in equity securities.

Income tax benefits were $0.1 million in the third quarter of 2019, a decrease of 97.8% compared to income tax benefits of $5.4 million in the corresponding period of 2018. Net income was $0.7 million in the third quarter of 2019, a decrease of 92.8% compared to net income of $10.2 million in the corresponding period of 2018.

Based on current operations and market conditions, Fang's management remains confident that net income is expected to be positive for the fiscal year ending December 31st, 2019. This estimate represents management's current and preliminary view, which is subject to change.

Thank you, everyone, for joining the call today. We're now open for questions. Operator, please go ahead.

Questions and Answers:

Operator

[Operator instructions] We have the first question comes from the line of Miranda Zhuang from Bank of America. Please ask your question.

Miranda Zhuang -- Bank of America Merrill Lynch -- Analyst

Thanks, management, for taking my questions. So, I have the first question regarding the online marketing service industry. So, can management give us any color on how is the property developers' ad spending trending in second half of this year? And what's your expectation for next year? My second question is about the -- so can management walk us through the initiatives that you have taken to drive the growth momentum for your marketing services and also for your leads generation services? Thank you.

Jessie Yang -- Investor Relations Director

Miranda, could you repeat your question again in Chinese please?

Miranda Zhuang -- Bank of America Merrill Lynch -- Analyst

Oh, Sure, sure. [Foreign Speech]

Jian Liu -- Chief Executive Officer

Okay. [Foreign Speech]

Jessie Yang -- Investor Relations Director

Okay, so I'll translate. So the first question was about marketing and the advertising market for real estate developers and how they are spending their spending patterns and the responses as developers have been very cautious in spending Okay, so I'll translate. So the first question was about marketing and the advertising market for real estate developers and how they are spending -- their spending patterns. And the response is, as developers have been very cautious of their spending, and this is related to the pace of sales and the real estate market in general and they would choose the most effective and cost effective means to promote themselves and their projects and Fang remains the preferred channel whether or not advertisers have an increase or decrease in their spending and this is why our marketing has increased for the third quarter.

Jian Liu -- Chief Executive Officer

[Foreign Speech]

Jessie Yang -- Investor Relations Director

So, for marketing and lead generation growth, because Fang is the preferred channel for advertisers and real estate developers, we have updated on our technology and applications including live-stream video, which are -- and videos which are very popular in today's 5G environment and we remain the leader in these applications and these marketing tools. And that's why real estate developers have preferred to spend their spending dollars with us.

And in terms of marketing, in the past, we've had a closer relationship to real estate developers and now we are approaching the real estate brokers directly by providing them with fast tools and services to increase the effectiveness and results for them.

Zijin Li -- Acting Chief Financial Officer

[Foreign Speech]

Jessie Yang -- Investor Relations Director

So, in terms of -- so the previous section was about marketing and advertising revenue and now we will talk about lead generation revenue and clients have increased their demand for accurate lead generation. So part of our increase in revenue is meeting this market demand. Now we're using technology in our product and new methods to profile the needs of our clients and better match them with the needs of their clients and this not only increases effectiveness for them, but it also increases the effectiveness of our own products and helps us to improve our own platform to better service our clients as well as to meet their clients' needs.

Jian Liu -- Chief Executive Officer

Okay. thank you.

Jessie Yang -- Investor Relations Director

Thank you.

Miranda Zhuang -- Bank of America Merrill Lynch -- Analyst

[Foreign Speech] So I have one follow-up question. So yes, we have seen that live broadcasting has been trending very fast in China, especially in the e-commerce space. So just curious how, will Fang monetize only live broadcasting on the new home space? And also, the other question is about, is there any update for the potential spin-off for the core business?

Jian Liu -- Chief Executive Officer

[Foreign Speech]

Jessie Yang -- Investor Relations Director

So in terms of the question about live broadcasting and it's usage in real estate at the moment it's very suitable for the internet environment as well as the habits of our clients, because you can directly engage with customers online and this increases the effectiveness of the advertising. And real estate is not very much like e-commerce where it's not as direct as e-commerce and so this new application in real estate increases the effectiveness of advertising. However, we are exploring possibilities to see if it's possible to also increase the direct effect as it was, for example in e-commerce position [Phonetic].

Jian Liu -- Chief Executive Officer

Okay. [Foreign Speech]

Jessie Yang -- Investor Relations Director

So the spin-off is still in the process. So because of that we won't talk too much about it, because it's still in the process that hasn't you know public.

Jian Liu -- Chief Executive Officer

Not public, OK, thank you.

Miranda Zhuang -- Bank of America Merrill Lynch -- Analyst

Okay, I see. Thank you. Thank you.

Operator

Thank you. [Operator Instructions] The next question comes from the line of Suzi Hao [Phonetic] from 86Research. Please ask your question. Suzi Hao [Phonetic], your line is open.

Suzi Hao -- 86Research -- Analyst

Hello, management. Congratulations on the good results. I have a question about the new home products you mentioned previously. We noticed that your competitors like Sohu [Phonetic] also have some new product about new home. So I would like to ask, what do you think of the competitive landscape in the future? Thank you.

Jian Liu -- Chief Executive Officer

[Foreign Speech]

Jessie Yang -- Investor Relations Director

So to answer the question about new home products, particularly Baidu bar, it could be their channels corporation products and is one of their business decision. The market is a bit complicated, especially in real estate sales at the moment. And so there are also sales that combines new and resale markets and whether when can it maintain high profits is questionable. However, for us, we will focus on our core businesses of internet marketing, listing and lead generation services.

Jian Liu -- Chief Executive Officer

[Foreign Speech]

Jessie Yang -- Investor Relations Director

Still, Fang remains an open platform. And currently in our industry it's very popular for brokers to combine new and resale homes, including for companies like and [Indecipherable] other real estate broker agencies. Our platform is more diverse and more effective and we focused on internet online methods and not offline methods at the moment.

Jian Liu -- Chief Executive Officer

Thank you.

Suzi Hao -- 86Research -- Analyst

Great, thank you. Management. Thank you.

Operator

Thank you [operator Instructions]. Next, we have the follow-up question from the line of Suzi Hao [Phonetic] from 86Research. Please proceed.

Suzi Hao -- 86Research -- Analyst

Hello. Management, maybe I have the follow-up question on the new home industry. Could you share any -- could you please share as the outlook for the new home industry in China for the next three to five years? You mentioned that new home industry situation is relative computer-heavy previously? Thank you.

Jian Liu -- Chief Executive Officer

[Foreign Speech]

Jessie Yang -- Investor Relations Director

So three to five years is a rather long-term outlook and our understanding of the new home market is that it will always exist. And the next year, for example, we see the market to be more stable from both a real estate developer's perspective as well as land crushing [Phonetic] and financing etc.

Also from a macro policy perspective, including financial policies, it's also a very good short environments where the policies want the market to be growing stably. It will not be very -- a frozen margin with no sales, but it will also not be very fast growing, a hot markets. Also homebuyers has become more matured, from not understanding the market very well to having a very mature understanding of the market and these are a few perspectives that we are all hoping to see.

From a service provider's perspective such as Fang, we are more and more focused on our products and services and the application and use of data and technology to increase the efficiency in this market and to bring better services to the real estate market and a whole. And this is overall, a sign of a mature market. Thank you.

Jian Liu -- Chief Executive Officer

[Foreign Speech]

Jessie Yang -- Investor Relations Director

So, and based on these trends, developers with high debt will basically slowly exit the market, either through M&A or they would just exit by themselves. And this is also another view that we have.

Jian Liu -- Chief Executive Officer

Thank you.

Suzi Hao -- 86Research -- Analyst

Very helpful, thank you, management.

Operator

Thank you. [Operator Instructions] There are no further questions at this time, I would now like to hand the conference back to Jessie, please continue.

Jessie Yang -- Investor Relations Director

Thank you, and thanks again to everyone for joining the call today. We look forward to speaking with you soon for our fourth quarter 2019 earnings call. Thank you.

Operator

[Operator Closing Remarks]

Duration: 32 minutes

Call participants:

Jessie Yang -- Investor Relations Director

Jian Liu -- Chief Executive Officer

Zijin Li -- Acting Chief Financial Officer

Miranda Zhuang -- Bank of America Merrill Lynch -- Analyst

Suzi Hao -- 86Research -- Analyst

More SFUN analysis

All earnings call transcripts

AlphaStreet Logo