Sina Earnings: Weibo Advertising Helps Sina Sustain Growth Momentum

May 17th, 2017 by Trefis Team
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Sina (NASDAQ:SINA) announced its first quarter earnings on Tuesday, May 16, reporting a 40% annual increase in net revenues to $278 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 10 percentage points to 69% for the quarter – a trend consistent over the last few quarters. Gross margin improvement was largely due to the advertising revenues, as gross margin of the non-advertising segments fell by 2 percentage points to 62%, as shown below.

sina_q1e2

Within the advertising segments, the contribution from key accounts (KAs) and small and medium enterprise (SME) customers was crucial to growth. Key ad revenues were up 79% on a y-o-y basis while revenues from SMEs were up 86% on a y-o-y basis. [2]

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A similar trend was observed last year as well, 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%.

Strong Growth Translates To Significant Increase In Profits

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 a mild 15% increase in non-GAAP operating expenses  to $127 million in the March quarter. As a result, Sina’s non-GAAP operating income was significantly higher than the year-ago period at $64 million, as shown below. This resulted in its non-GAAP net income to increase to $37.6 million from a $2.8 million loss in the March quarter of last year. Correspondingly, Sina reported a non-GAAP diluted earnings per share if 50 cents as compared to a loss of 4 cents per share in the comparable prior year period. sina_q1e3

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Notes:
  1. SINA Reports First Quarter 2017 Financial Results, Sina Press Release, May 2017 [↩]
  2. Sina Q1’17 Earnings Call Transcript, Seeking Alpha, May 2017 [↩]