SINA Corp (NASDAQ:SINA) announced its unaudited financial results for the third quarter ended September 30, 2016.
Third Quarter 2016 Highlights
- Net revenues increased 21% year over year to $274.9 million. Non-GAAP net revenues increased 22% year over year to $272.3 million.
- Advertising revenues grew 21% year over year to $233.6 million.
- Income from operations increased 147% year over year to $36.3 million. Operating margin was 13%, up from 6% for the same period last year. Non-GAAP income from operations increased 99% year over year to $56.5 million. Non-GAAP operating margin was 21%, up from 13% for the same period last year.
- Net income attributable to SINA was $146.5 million, or $1.90 diluted net income per share. Non-GAAP net income attributable to SINA was $43.7 million, or $0.56 diluted net income per share.
- Weibo’s monthly active users (“MAUs”) in September 2016 grew 34% year over year to 297 million, 89% of which were mobile users. Average daily active users (“DAUs”) in September 2016 grew 32% year over year to 132 million.
“We are delighted to have another solid quarter.” said Charles Chao, Chairman and CEO of SINA. “SINA portal has further implemented its mobile strategy, with significant growth of mobile traffic from SINA News Application. Mobile monetization for portal has further enhanced, with 50% of the portal advertising revenues coming from mobile devices.” Mr. Chao added.
“With strong growth in user base, revenues and profitability, Weibo has demonstrated its platform value with the network effect of the content ecosystem and strong monetization capability.” said Mr. Chao. “We take great pride that Weibo is returning to the center stage of Chinese Internet market.”
Third Quarter 2016 Financial Results
For the third quarter of 2016, SINA reported net revenues of $274.9 million, compared to $226.3 million for the same period last year. Non-GAAP net revenues for the third quarter of 2016 totaled $272.3 million, compared to $223.7 million for the same period last year.
Online advertising revenues for the third quarter of 2016 were $233.6 million, compared to $193.5 million for the same period last year. The year-over-year growth in online advertising revenues resulted from an increase of $47.8 million in Weibo advertising and marketing revenues, partially offset by a decline of $7.7 million in portal advertising revenues.
Non-advertising revenues for the third quarter of 2016 were $41.2 million, compared to $32.8 million for the same period last year. The year-over-year growth in non-advertising revenues was mainly resulted from an increase of $7.1 million in portal non-advertising revenues. Non-GAAP non-advertising revenues for the third quarter of 2016 were $38.6 million, compared to $30.2 million for the same period last year.
Gross margin for the third quarter of 2016 was 67%, compared to 63% for the same period last year. Advertising gross margin for the third quarter of 2016 was 70%, compared to 64% for the same period last year. The increasing advertising revenue proportion contributed by small and medium enterprises customers in both portal and Weibo business is the key driver that resulted in a higher gross margin for our advertising business. Non-advertising gross margin for the third quarter of 2016 was 54%, compared to 60% for the same period last year. The decrease in non-advertising gross margin was primarily due to increasing proportion of portal non-advertising revenues, which contributed lower gross margin.
Operating expenses for the third quarter of 2016 totaled $148.2 million, compared to $128.6 million for the same period last year. Non-GAAP operating expenses for the third quarter of 2016 totaled $127.9 million, compared to $113.9 million for the same period last year. The year-over-year growth of non-GAAP operating expenses was mainly resulted from an increase of sales and marketing expenditure for portal and Weibo.
Income from operations for the third quarter of 2016 was $36.3 million, compared to $14.7 million for the same period last year. Operating margin was 13%, up from 6% for the same period last year. Non-GAAP income from operations for the third quarter of 2016 was $56.5 million, compared to $28.4 million for the same period last year. Non-GAAP operating margin was 21%, up from 13% for the same period last year.
Non-operating income for the third quarter of 2016 was $143.1 million, compared to a non-operating income of $4.9 million for the same period last year. Non-operating income for the third quarter of 2016 mainly included: (i) a $133.5 million net gain on sale of and impairment on investments, which is excluded under non-GAAP measure; and (ii) a $5.5 million earnings pick-up from equity-method investments, which are accounted for under the equity-method and reported one quarter in arrears, mainly resulted from earnings pick-up from the Company’s investment in E-House.
Net income attributable to SINA for the third quarter of 2016 was $146.5 million, compared to $9.8 million for the same period last year. Diluted net income per share attributable to SINA for the third quarter of 2016 was $1.90, compared to $0.16 for the same period last year. Non-GAAP net income attributable to SINA for the third quarter of 2016 was $43.7 million, compared to $24.4 million for the same period last year. Non-GAAP diluted net income per share attributable to SINA for the third quarter of 2016 was $0.56, compared to $0.39 for the same period last year.
As of September 30, 2016, SINA’s cash, cash equivalents and short-term investments totaled $2.2 billion, at similar level compared with the balance as of December 31, 2015. For the third quarter of 2016, net cash provided by operating activities was $256.1 million, capital expenditures totaled $2.3 million, and depreciation and amortization expenses amounted to $7.3 million.
Completion of E-House Merger
As previously announced on June 19, 2015, SINA joined a consortium along with Mr. Xin Zhou, co-chairman of the board of directors and chief executive officer of E-House (China) Holdings Limited (“E-House”), a leading real estate services company in China, and Mr. Neil Nanpeng Shen, a board member of E-House, to acquire all the outstanding ordinary shares of E-House not already owned by SINA, Mr. Xin Zhou, Mr. Neil Nanpeng Shen or their respective affiliates. Pursuant to a definitive agreement and plan of merger (the “Merger Agreement”) with E-House Holdings Ltd. (“Parent”), on August 12, 2016 (the “Closing Date”), E-House completed its merger and became a wholly-owned subsidiary of Parent. Sina contributed approximately $140.0 million to subscribe newly issued shares of Parent. Immediately following the Closing Date, the Company held 43% of total outstanding shares of Parent and continued to apply equity-method to account for the investment in Parent.
On the Closing Date, SINA, Parent and certain other shareholders of Parent entered into a shareholders agreement, pursuant to which (a) Parent undertakes, among other things, that it shall not, directly or indirectly, dispose any ordinary shares of Leju Holdings Limited (“Leju”), an NYSE-listed company, owned by E-Housewithout the prior written approval of each of Mr. Xin Zhou and SINA; and (b) during the 18-month period following the Closing Date, Parent has an option to repurchase all the equity interest held by SINA in Parent for a consideration consisting of (i) 30% of the total outstanding ordinary shares of Leju at the time of the repurchase, and (ii) certain cash payment. The option was recognized as a liability on the basis of its fair value, and its subsequent changes in fair value was reflected in the fair value change in option liability.
On August 31, 2016, the Company announced its planned distribution of shares of Weibo to SINA shareholders as of the record date of September 12, 2016 on a pro rata basis, or one Weibo Share for each ten outstanding SINA ordinary shares. As of the distribution date of October 14, 2016, the Company has distributed 7,088,116 Class A ordinary shares of Weibo, based on 70,881,168 ordinary shares of SINA outstanding as of the record date. Following the distribution of the Weibo Shares, SINA’s equity stake in Weibo decreased from approximately 53.5% (or approximately 78% by voting power) to approximately 50.2% (or approximately 75% by voting power), which resulted in an increase in the percentage of the non-controlling interests related to Weibo.
Annual General Meeting
On November 4, 2016, the Company held its annual general meeting of shareholders, where the shareholders re-elected Mr. Ter Fung Tsao as director of SINA. The shareholders also approved and ratified the appointment of PricewaterhouseCoopers Zhong Tian LLP as the Company’s independent auditors for the fiscal year ending December 31, 2016.
This release contains the following non-GAAP financial measures: non-GAAP net revenues, non-GAAP non-advertising revenues, non-GAAP advertising and non-advertising gross margin, non-GAAP operating expenses, non-GAAP income (loss) from operations, non-GAAP net income (loss) attributable to SINA and non-GAAP diluted net income (loss) per share attributable to SINA. These non-GAAP financial measures should be considered in addition to, not as a substitute for, measures of the Company’s financial performance prepared in accordance with U.S. GAAP. The Company’s non-GAAP financial measures may be defined differently than similar terms used by other companies. Accordingly, care should be exercised in understanding how the Company defines its non-GAAP financial measures.
The Company’s non-GAAP financial measures exclude recognition of deferred revenues in relation to the equity investment in E-House, stock-based compensation, amortization of intangible assets, adjustment for non-GAAP to GAAP reconciling items on the share of equity method investments, gain/loss on sale of investment/business, deemed disposal and impairment on investment, impairment on goodwill, change in fair value in option liability, amortization of convertible debt issuance cost, income tax effects of above non-GAAP to GAAP reconciling items and adjustments for non-GAAP to GAAP reconciling items for the income (loss) attributable to non-controlling interests. The Company’s management uses these non-GAAP financial measures in their financial and operating decision-making, because management believes these measures reflect the Company’s ongoing business operations in a manner that allows more meaningful period-to-period comparisons. The Company believes that these non-GAAP financial measures provide useful information to investors and others in the following ways: (i) in comparing the Company’s current financial results with the Company’s past financial results in a consistent manner, and (ii) in understanding and evaluating the Company’s current operating performance and future prospects in the same manner as management does, if they so choose. The Company also believes that the non-GAAP financial measures provide useful information to both management and investors by excluding certain expenses, gain/loss and other items (i) that are not expected to result in future cash payments or (ii) that are non-recurring in nature or may not be indicative of the Company’s core operating results and business outlook.
Use of non-GAAP financial measures has limitations. The Company’s non-GAAP financial measures do not include all income and expense items that affect the Company’s operations. They may not be comparable to non-GAAP financial measures used by other companies. Management compensates for these limitations by also considering the Company’s financial results prepared in accordance with U.S. GAAP. Reconciliations of the Company’s non-GAAP measures to the nearest comparable GAAP measures are set forth in the section below titled “Unaudited Reconciliation of Non-GAAP to GAAP Results.” (Original Source)
Shares of Sina closed today at $67.29, down $0.91 or -1.33%. SINA has a 1-year high of $85.24 and a 1-year low of $39.58. The stock’s 50-day moving average is $76.55 and its 200-day moving average is $61.85.
On the ratings front, SINA has been the subject of a number of recent research reports. In a report issued on November 16, Brean Murray Carret analyst Fawne Jiang reiterated a Buy rating on SINA. Separately, on September 29, Jefferies’ Karen Chan reiterated a Buy rating on the stock and has a price target of $95.
According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Fawne Jiang and Karen Chan have a yearly average return of 2.7% and a loss of 1.0% respectively. Jiang has a success rate of 47% and is ranked #874 out of 4227 analysts, while Chan has a success rate of 52% and is ranked #2896.
SINA Corp. engages in the provision of online and mobile media services. It operates through the following segments: Advertising, Mobile Value-Added Services (MVAS), and Other Non-Advertising Information. Its services include MVAS, online video, music streaming, online games, photo sharing, blog, email, classified listings, fee-based services, ecommerce and enterprise services.