Sina’s Results Continue To Impress Due To Strength In Weibo, Advertising

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Sina (NASDAQ:SINA) announced its second quarter earnings on Wednesday, August 9, reporting a 47% annual increase in net revenues to $359 million. Revenue growth was driven by both the Advertising segment, which includes display ads on Sina and Weibo, and Non-Advertising Revenues, which include value added services on weibo.com. Additionally, Sina’s company-wide gross margin (GAAP) for the quarter improved by 11 percentage points to 74% for the quarter – a trend consistent over the last few quarters. The gross margin improvement was also driven by both the Advertising and Non-Advertising segments, as shown below. A similar trend was observed in the March quarter as well, when Sina reported a 40% revenue growth and a 10 percentage point improvement in its gross margin.

Weibo Key For Growth In Advertising

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Within the advertising segment, Weibo has been instrumental in driving growth for the company, while portal advertising revenues on Sina’s platforms struggled in recent quarters. Weibo’s ad revenues were up by 72% y-o-y to $218 million, while portal advertising revenues (generated from online brand advertising on Sina.com and Sina mobile properties) last year fell by around 1% year-over-year to $78 million.

Revenue Growth Leads To Higher Profits

The company has successfully improved operating efficiency, and its largely fixed operating costs led the company’s cash operating expenses to stay flat over previous year levels. Continuing the trend from recent quarters, Sina reported a modest 26% increase in operating expenses (non-GAAP) to $151 million in the June quarter. Sina’s resulting non-GAAP operating income was over 200% higher than the year-ago period at $115 million, as shown below. However, higher taxes and lower interest income during the quarter led Sina’s net income to increase by around 40% to $53 million for the quarter. Correspondingly, Sina reported a non-GAAP diluted earnings per share of 70 cents, compared to 52 cents per share in the comparable prior year period.

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