Sina Earnings: Advertising From SME Customers, Weibo Help Sustain Growth

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Sina (NASDAQ:SINA) announced its fourth quarter earnings on February 22, reporting a 22% annual increase in net revenues to $313 million. [1] 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 almost 5 percentage points to 70% for the quarter. A higher proportion of advertising revenue across both portal and Weibo businesses was key to improved margins. Within the advertising segments, the contribution from small and medium enterprise (SME) customers was crucial to growth. (Read more: How Crucial Are Small & Mid-Sized Businesses For Sina’s Advertising Business?)

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A similar trend was observed through the year, as Sina generated just over $1 billion in revenues through the year, which was around 17% higher on a y-o-y basis. Top line growth came from both advertising and non-advertising (primarily from Weibo) while the company’s gross margin for the full year stood at 65.6%, almost 4 percentage points higher than previous year levels. This was primarily due to expansion in advertising gross margins, as the gross margin for the non-advertising segment compressed by 170 basis points to 58.4%, as shown below.

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The company has successfully improved operating efficiency, and its largely fixed operational costs led the company’s cash operating expenses to stay flat over previous year levels. Continuing the trend from previous quarters, Sina reported roughly flat operating expenses for the fourth quarter and the full year as a result. Sina’s non-GAAP operating expenses for 2016 stood at $498 million, only about 3% higher than the previous year. As a result, Sina’s non-GAAP operating income was almost 200% higher than the year-ago levels at $179 million. This resulted in its non-GAAP net income increasing by almost 100% to $109 million for the full year.

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Notes:
  1. SINA Reports Fourth Quarter 2016 Financial Results, Sina Press Release, February 2017 []