SINA Reports Q2 2006 Financial Results

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SINA Reports Q2 2006 Financial Results

SHANGHAI, China, Aug. 2 /Xinhua-PRNewswire/ -- SINA Corporation (Nasdaq: SINA), a leading online media company and mobile value-added service (MVAS) provider for China and for the global Chinese communities, today announced its unaudited financial results for the second quarter ended June 30, 2006.

Q2 2006 Highlights

  • Net revenues increased 16% year-over-year to $53.7 million, exceeding the Company's previous guidance of between $47.5 million and 49.5 million.
  • Advertising revenues increased 45% year-over-year to $29.5 million, exceeding the Company's previous guidance of between $26.0 million and $27.0 million.
  • Non-advertising revenues declined 6% year-over-year to $24.2 million, exceeding the Company's previous guidance of between $21.5 million and $22.5 million.
  • GAAP net income was $10.4 million, or $0.18 diluted net income per share.
  • Non-GAAP net income* was $12.3 million, or $0.21 non-GAAP diluted net income per share.
    * Non-GAAP measures are described below and reconciled to the
      corresponding GAAP measures in the section below titled "Reconciliation
      of Non-GAAP to GAAP Results."

"We are very pleased with our outstanding performance for the second quarter. Our advertising revenues for the quarter hit another record high of $29.5 million representing a 33% quarter-over-quarter growth, the highest sequential growth rate ever for advertising revenues in SINA's history. During the quarter, we benefited from the 2006 FIFA World Cup by leveraging the strength of our brand and focusing on creating innovative products and captivating content to cover the event. In addition to a record advertising revenue quarter, SINA's World Cup website set a new record for online media coverage of sports events in China. According to ACNielsen, SINA attracted 57.6 million unique visitors during the World Cup event. These milestones are further validation that our portal strategy is working and that we are taking away market share from our competitors in China's online brand advertising sector," said Charles Chao, CEO of SINA. "On the mobile side, while we beat our internal expectations for the quarter, we anticipate that recently announced operator policy changes in China will create a more challenging and uncertain environment for our mobile business in the coming quarters."

Financial Results

For the second quarter of 2006, SINA reported net revenues of $53.7 million, compared to $46.1 million in the same period last year and $46.7 million last quarter.

Advertising revenues for the second quarter of 2006 totaled $29.5 million, representing a 45% increase from the same period last year and a 33% increase from last quarter. Advertising revenues in the second quarter of 2006 represented 55% of the Company's total revenues, compared to 44% for the same period last year and 47% last quarter.

Non-advertising revenues for the second quarter of 2006 totaled $24.2 million, a 6% decrease from the same period last year and a 1% decrease from last quarter. Revenues from MVAS for the second quarter of 2006 were $22.4 million, representing a decrease of 1% from the same period last year and from last quarter. Second quarter 2005 non-advertising revenues included $0.9 million in revenues from businesses that were disposed in the second half of 2005.

Gross margin for the second quarter of 2006 was 63%, down from 69% for the same period last year and up from 61% last quarter. Advertising gross margin for the second quarter of 2006 was 65%, compared to 68% for the same period last year and 63% in the previous quarter. Advertising gross margin amount in the first and second quarter of 2006 each included the impact of $0.4 million in stock-based compensation from the adoption of Statement of Financial Accounting Standard No. 123 (revised 2004), Share-Based Payment ("SFAS 123R"). The sequential increase in advertising gross margin was due to revenues growing faster than advertising cost of sales.

MVAS gross margin for the second quarter of 2006 was 60%, compared to 67% for the same period last year and 59% last quarter. The year-over-year decline in MVAS gross margin was primarily a result of increased transmission costs paid to mobile operators and increased content costs.

Operating expenses for the second quarter of 2006 totaled $26.4 million, an increase of 30% from the same period last year and an increase of 20% from the previous quarter. Due to the adoption of SFAS 123R, operating expenses in the first and second quarter of 2006 included $1.2 million and $2.7 million in stock-based compensation, respectively. During the second quarter of 2006, the Company granted options to purchase approximately 2.1 million ordinary shares to employees, executives and directors. The sequential increase in stock-based compensation can be mostly attributed to the director options granted, which totaled $1.2 million in the second quarter of 2006 due to immediate vesting. In addition to stock-based compensation, the year-over-year increase in operating expenses was primarily related to increased marketing spending and increased headcount and salaries, while the quarter-over-quarter increase was mainly due to increased marketing expenditures.

For the second quarter of 2006, gain on the sale of a business included a $2.0 million gain from the sale of interests in the joint venture with NC Soft, a Korean online game company.

Net income for the second quarter of 2006 was $10.4 million, compared to $10.0 million in the same period last year and $7.0 million last quarter. Diluted net income per share for the second quarter of 2006 was $0.18, compared to $0.17 in the same period last year and $0.12 last quarter. Non- GAAP net income for the second quarter of 2006 totaled $12.3 million, compared to $12.5 million in the same period last year and $9.6 million in the previous quarter. Non-GAAP diluted net income per share for the second quarter of 2006 was $0.21, compared to $0.21 in the same period last year and $0.16 last quarter.

As of June 30, 2006, SINA's cash, cash equivalents and investments in marketable securities totaled $312.5 million. Cash flow from operating activities for the second quarter of 2006 was $8.1 million.

Other Development

As previously noted in the Company's press release dated July 7, 2006, China Mobile Communication Corporation ("CMCC") recently announced changes to its policies on subscription MVAS, which included extending the trial period and requiring double reminders on new MVAS subscriptions as well as sending SMS reminders to existing monthly subscribers of SMS, MMS and WAP to inform them of their MVAS subscription and fee information. The Company believes that these policy changes will have a significant, negative impact on its MVAS revenues going forward. The Company will continue to monitor and assess the situation as the policies are rolled out individually by CMCC's provincial subsidiaries. For the second quarter of 2006, 42% of the Company's revenues were derived from MVAS, approximately 67% of which related to monthly subscriptions from CMCC users.

Business Outlook

The Company estimates its total revenues for the third quarter of 2006 to be between $51.0 million and $54.0 million, with advertising revenues to be between $31.0 million and $32.0 million and non-advertising revenues to be between $20.0 million and $22.0 million. Stock-based compensation for the third quarter of 2006 is expected to be approximately $2.7 million, which excludes any new shares that may be granted.

Conference Call

SINA will host a conference call at 9:00 p.m. Eastern Time today to present an overview of the Company's financial performance and business operations for the second quarter ended June 30, 2006. The dial-in number for the call is 617-614-3473. The pass code is 26769718. A live Webcast of the call will be available from 9:00 p.m. - 10:00 p.m. ET on Wednesday, August 2, 2006 (9:00 a.m. - 10:00 a.m. Beijing Time on August 3, 2006). The call can be accessed through SINA's corporate web site at http://corp.sina.com. The call will be archived for 12 months on SINA's corporate web site at http://corp.sina.com. A replay of the conference call will be available through August 9, 2006 at midnight eastern time. The dial-in number is 617-801-6888. The pass code for the replay is 73704374.

Non-GAAP Measures

To supplement the unaudited consolidated financial statements presented in accordance with the United States Generally Accepted Accounting Principles ("GAAP"), the Company uses non-GAAP financial measures to evaluate its ongoing operations and for internal planning and forecasting purposes as well as to enhance the investors' overall understanding of the Company's current financial performance and prospects for the future. These non-GAAP measures include non-GAAP income from operations, non-GAAP net income and non-GAAP diluted net income per share. The Company's non-GAAP income from operations excludes, as applicable, stock-based compensation (under SFAS 123R, adopted as of January 1, 2006) and amortization of intangible assets. Non-GAAP net income and non-GAAP diluted net income per share exclude, as applicable, stock-based compensation, amortization of intangibles, amortization of convertible debt issuance cost, gain and loss from the sale of a business and gain and loss on investment.

The Company believes the non-GAAP measures provide useful information to both management and investors by excluding certain expenses, gains and losses (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 our core operating results and business outlook.

In addition, because the Company has historically reported certain non- GAAP results to investors, the Company believes the inclusion of non-GAAP measures provides consistency in our financial reporting. The Company's reference to these measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for, or superior to, GAAP results. Reconciliations of the Company's non-GAAP measures to the nearest GAAP measures are set forth in the section below titled "Reconciliation of Non-GAAP to GAAP Results."

The Company's management believes excluding stock-based compensation from its non-GAAP financial measures of income from operations and net income is useful for itself and investors as such expense is otherwise unrelated to the Company's core operating results and does not impact cash earnings. Non-GAAP measures that exclude stock-based compensation also enhance the comparability of results against prior periods.

The Company's management believes excluding the non-cash amortization expense of intangible assets resulting from business acquisitions from its non-GAAP financial measures of income from operations and net income and excluding the non-cash amortization expense of intangible assets resulting from equity-method investments from its non-GAAP financial measure of net income are useful for itself and investors because they enable a more meaningful comparison of the Company's cash performance between reporting periods. In addition, such charges will not result in cash settlement in the future.

The Company's management believes excluding non-cash amortization expense of issuance cost relating to convertible bonds from its non-GAAP financial measure of net income is useful for itself and investors as such expense does not have any impact on cash earnings.

The Company's management believes excluding gains and losses on the sale of a business from its non-GAAP financial measure of net income is useful for itself and investors because such gains and losses are not indicative of the Company's core operating results.

The Company's management believes excluding gains and losses on investment from its non-GAAP financial measure of net income is useful for itself and investors because the Company does not typically invest in common stock of other companies. Therefore, these charges are otherwise unrelated to the Company's ongoing business operations.

About SINA

SINA Corporation (Nasdaq: SINA) is a leading online media company and value-added information service (VAS) provider for China and for global Chinese communities. With a branded network of localized web sites targeting Greater China and overseas Chinese, SINA provides services through five major business lines including SINA.com (online news and content), SINA Mobile (mobile value-added services), SINA Online (community-based services and games), SINA.net (search and enterprise services) and SINA E-Commerce (online shopping). Together these provide an array of services including region- focused online portals, mobile value-added services, search and directory, interest-based and community-building channels, free and premium email, online games, virtual ISP, classified listings, fee-based services, e-commerce and enterprise e-solutions.

Safe Harbor Statements

This announcement contains forward-looking statements that relate to, among other things, SINA's expected financial performance (as described without limitation in the "Business Outlook" section and in quotations from management in this press release) and SINA's strategic and operational plans. SINA may also make forward-looking statements in the Company's periodic reports to the U.S. Securities and Exchange Commission on Forms 10-K, 10-Q, 8-K, etc., in its annual report to shareholders, in its proxy statements, in its offering circulars and prospectuses, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. SINA assumes no obligation to update the forward-looking statements in this release and elsewhere. Statements that are not historical facts, including statements about the Company's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. Potential risks and uncertainties include, but are not limited to, SINA's historical losses, its limited operating history, the uncertain regulatory landscape in the People's Republic of China, the recent changes by CMCC to its policies for MVAS (as described above in the "Other Development" section), the Company's ability to develop and market other usage-based SMS products, fluctuations in quarterly operating results, the Company's reliance on MVAS and online advertising sales for a majority of its revenues, the Company's reliance on mobile operators in China to provide MVAS, any failure to successfully develop and introduce new products and any failure to successfully integrate acquired businesses. Further information regarding these and other risks is included in SINA's Annual Report on Form 10-K for the year ended December 31, 2005 and its recent quarterly reports on Form 10-Q, as well as in its other filings with the Securities and Exchange Commission.


                               SINA CORPORATION
          UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
              (U.S. Dollar in thousands, except per share data)

                                     Three months ended      Six months ended
                                      June 30,     March 31,     June 30,
                                    2006     2005     2006     2006     2005
    Net revenues:
      Advertising                 $29,454  $20,373  $22,181  $51,635  $37,021
      Non-advertising              24,224   25,757   24,531   48,755   54,957
                                   53,678   46,130   46,712  100,390   91,978
    Cost of revenues (a):
      Advertising                  10,317    6,541    8,298   18,615   12,435
      Non-advertising               9,343    7,794    9,747   19,090   16,834
                                   19,660   14,335   18,045   37,705   29,269
    Gross profit                   34,018   31,795   28,667   62,685   62,709

    Operating expenses:
      Sales and marketing (a)      13,497   10,718   11,805   25,302   22,202
      Product development (a)       4,993    3,520    4,610    9,603    7,222
      General and
       administrative (a)           7,427    5,078    5,157   12,584    9,775
      Amortization of
       intangibles                    469    1,041      468      937    2,082
                                   26,386   20,357   22,040   48,426   41,281
    Income from operations          7,632   11,438    6,627   14,259   21,428

    Non-operating income:
     Interest and other income      2,012    1,564    1,940    3,952    3,096
     Gain (loss) on sale of
      business                      2,006        -     (212)   1,794        -
     Loss on investments, net           -   (1,338)       -        -   (1,282)
     Loss on equity investments      (162)    (858)    (343)    (505)  (1,424)
     Amortization of convertible
      debt issuance cost             (171)    (171)    (171)    (342)    (342)
                                    3,685     (803)   1,214    4,899       48

    Income before income taxes     11,317   10,635    7,841   19,158   21,476
    Provision for income taxes       (878)    (682)    (805)  (1,683)  (1,213)

    Net income                    $10,439  $ 9,953  $ 7,036  $17,475  $20,263


    Basic net income per share    $  0.19  $  0.19  $  0.13  $  0.33  $  0.39
    Diluted net income per share  $  0.18  $  0.17  $  0.12  $  0.30  $  0.35

    Shares used in computing
     basic net income per share    53,554   52,111   53,438   53,496   51,771
    Shares used in computing
     diluted net income per
     share                         58,444   58,783   58,617   58,522   58,642

    Net income used for diluted
     net income per share
     calculation:
    Net income                    $10,439  $ 9,953  $ 7,036  $17,475  $20,263
    Amortization of convertible
     debt issuance cost               171      171      171      342      342
                                  $10,610  $10,124  $ 7,207  $17,817  $20,605


    (a) Stock-based compensation
     included under SFAS 123R was
     as follows:
       Cost of revenues           $   350  $     -  $   350  $   700  $     -
       Sales and marketing            353        -      261      614        -
       Product development            377        -      334      711        -
       General and administrative   1,943        -      571    2,514        -
                                  $ 3,023  $     -  $ 1,516  $ 4,539  $     -



                               SINA CORPORATION
                  RECONCILIATION OF NON-GAAP TO GAAP RESULTS
              (U.S. Dollar in thousands, except per share data)

                                               Three months ended
                                                  June 30, 2006
                                                                    Non-GAAP
                                        Actual     Adjustments       Results

                                                       3,023 (a)
                                                         469 (b)
    Income from operations             $ 7,632       $ 3,492        $11,124

                                                       3,023 (a)
                                                         469 (b)
                                                         171 (c)
                                                      (2,006)(d)
                                                         177 (b)
    Net income                         $10,439       $ 1,834        $12,273

    Diluted net income per share       $  0.18                      $  0.21

    Shares used in computing diluted
     net income per share               58,444                       58,444

    Net income used in computing
     diluted net income per share:
    Net income                         $10,439                      $12,273
    Amortization of convertible debt
    issuance costs                         171                            -
                                       $10,610                      $12,273



                                               Three months ended
                                                  June 30, 2005
                                                                    Non-GAAP
                                        Actual     Adjustments       Results

                                                       1,041 (b)
    Income from operations             $11,438       $ 1,041         $12,479

                                                       1,041 (b)
                                                         171 (c)
                                                       1,338 (e)
    Net income                         $ 9,953       $ 2,550         $12,503

    Diluted net income per share       $  0.17                       $  0.21

    Shares used in computing diluted
     net income per share               58,783                        58,783

    Net income used in computing
     diluted net income per share:
    Net income                         $ 9,953                       $12,503
    Amortization of convertible debt
     issuance costs                        171                             -
                                       $10,124                       $12,503



                                                 Three months ended
                                                   March 31, 2006
                                                                   Non-GAAP
                                           Actual   Adjustments     Results

                                                       1,516 (a)
                                                         468 (b)
    Income from operations                $ 6,627    $ 1,984        $ 8,611

                                                       1,516 (a)
                                                         468 (b)
                                                         171 (c)
                                                         212 (d)
                                                         177 (b)
    Net income                            $ 7,036    $ 2,544        $ 9,580

    Diluted net income per share          $  0.12                   $  0.16

    Shares used in computing diluted
     net income per share                  58,617                    58,617

    Net income used in computing diluted
     net income per share:
    Net income                            $ 7,036                   $ 9,580
    Amortization of convertible debt
     issuance costs                           171                         -
                                          $ 7,207                   $ 9,580



                                                  Six months ended
                                                    June 30, 2006
                                                                    Non-GAAP
                                        Actual     Adjustments       Results

                                                      4,539 (a)
                                                        937 (b)
    Income from operations             $14,259      $ 5,476          $19,735

                                                      4,539 (a)
                                                        937 (b)
                                                        342 (c)
                                                     (1,794)(d)
                                                        354 (b)
    Net income                         $17,475      $ 4,378          $21,853

    Diluted net income per share       $  0.30                       $  0.37

    Shares used in computing diluted
     net income per share               58,522                        58,522

    Net income used in computing
     diluted net income per share:
    Net income                         $17,475                       $21,853
    Amortization of convertible debt
     issuance costs                        342                             -
                                       $17,817                       $21,853



                                                  Six months ended
                                                    June 30, 2005
                                                                    Non-GAAP
                                        Actual     Adjustments       Results

                                                       2,082 (b)
    Income from operations             $21,428       $ 2,082         $23,510

                                                       2,082 (b)
                                                         342 (c)
                                                       1,282 (e)
    Net income                         $20,263       $ 3,706         $23,969

    Diluted net income per share       $  0.35                       $  0.41

    Shares used in computing diluted
     net income per share               58,642                        58,642

    Net income used in computing
     diluted net income per share:
    Net income                         $20,263                       $23,969
    Amortization of convertible debt
     issuance costs                        342                             -
                                       $20,605                       $23,969

    (a) To adjust stock-based compensation charges
    (b) To adjust  amortization of intangible assets
    (c) To adjust amortization of convertible debt issuance cost
    (d) To adjust gain or loss on the sale of a business
    (e) To adjust gain or loss on investment



                               SINA CORPORATION
                        UNAUDITED SEGMENT INFORMATION
                          (U.S. Dollar in thousands)

                                    Three months ended      Six months ended
                                     June 30,     March 31,     June 30,
                                  2006     2005     2006      2006     2005
    Net revenues
      Advertising                $29,454  $20,373  $22,181  $ 51,635  $37,021
      Mobile related              22,448   22,618   22,694    45,142   49,133
      Others                       1,776    3,139    1,837     3,613    5,824
                                 $53,678  $46,130  $46,712  $100,390  $91,978

    Cost of revenues
      Advertising                $10,317  $ 6,541  $ 8,298  $ 18,615  $12,435
      Mobile related               8,925    7,374    9,400    18,325   16,044
      Others                         418      420      347       765      790
                                 $19,660  $14,335  $18,045  $ 37,705  $29,269



                               SINA CORPORATION
               UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
                          (U.S. Dollar in thousands)

                                                  June 30,        December 31,
                                                    2006              2005
    Assets
     Cash, cash equivalents and investments
      in marketable securities                    $312,481          $300,689
     Accounts receivable, net                       44,895            33,940
     Property and equipment, net                    23,248            22,207
     Long-term investments                           2,987             3,977
     Goodwill and intangible assets, net            91,417            92,354
     Other assets                                   12,174            15,554
        Total assets                              $487,202          $468,721

    Liabilities and Shareholders' Equity
     Liabilities                                  $ 42,809          $ 49,099
     Convertible Debt                              100,000           100,000
     Shareholders' equity                          344,393           319,622

        Total liabilities and
         shareholders' equity                     $487,202          $468,721

SOURCE SINA Corporation 08/02/2006 CONTACT: Chen Fu, SINA Corporation, +86-21-62895678, ext. 6089, fuchen@staff.sina.com; Denise Roche, The Ruth Group, +1-646-536-7008, droche@theruthgroup.com Web site: http://www.sina.com