SINA Reports First Quarter 2018 Unaudited Financial Results

BEIJING, May 9, 2018 /PRNewswire/ -- SINA Corporation (the "Company" or "SINA") (NASDAQ: SINA), a leading online media company serving China and the global Chinese communities, today announced its unaudited financial results for the first quarter ended March 31, 2018.

"We had a good start to the year 2018." said Charles Chao, Chairman and CEO of SINA. "Weibo delivered robust growth of revenues and profit on the back of greater user scale, stronger platform effect and improved monetization efficiency. Weibo continue to benefit from ad budget shift toward social, mobile and video features which the platform combines." said Mr. Chao. "SINA portal business demonstrated its recovery trend with progress achieved in mobile monetization of SINA media properties." Mr. Chao added.

Adoption of New Revenue Guidance

On January 1, 2018, the Company adopted new revenue guidance ASC Topic 606, "Revenue from Contracts with Customers", using the modified retrospective method applied to those contracts which were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under Topic 606 ('New Basis'), while prior period amounts are not adjusted and continue to be reported in accordance with the Company's historic accounting method under Topic 605 ('Old Basis'). The New Basis requires the presentation of value added tax ('VAT') recognized in revenues from "gross" to "net", which results in equal decrease in revenues and cost of revenues, and recognition of revenues and expenses at fair value for advertising barter transactions ('Barter Transaction').

The Company recorded a net reduction to opening retained earnings of $0.3 million resulting from Barter Transaction as of January 1, 2018 due to the cumulative impact of adopting ASC 606.

Adoption of the standards related to revenue recognition which impacted the Company's current period reported results are as follows:

Three months ended March 31, 2018

Adjustments

Old Basis

ASC 605 1

 VAT

Barter Transaction

New Basis ASC 606 2 

($ In thousands, except for percentage)

Net revenues

456,101

(25,161)

9,812

440,752

  - Portal

96,091

(5,267)

82

90,906

  - Weibo

360,047

(19,894)

9,730

349,883

Cost of revenues

133,868

(25,161)

-

108,707

Operating expenses

246,006

-

12,750

258,756

   - Sales and marketing

126,937

-

12,750

139,687

Income from operations

76,227

-

(2,938)

73,289

Gross margin

70.6%

75.3%

Operating margin

16.7%

16.6%

Note 1. This financial information for the three months ended March 31, 2018 is presented under ASC Topic 605.

Note 2. This financial information for the three months ended March 31, 2018 is presented under ASC Topic 606.

First Quarter 2018 Highlights

  • Both net revenues and non-GAAP net revenues increased 59% year-over-year to $440.8 million and $438.1 million, respectively.
  • Advertising revenues increased 61% year-over-year to $367.1 million.
  • Non-advertising revenues increased 47% year-over-year to $73.7 million. Non-GAAP non-advertising revenues increased 50% year-over-year to $71.1 million.
  • Income from operations increased 63% year-over-year to $73.3 million. Non-GAAP income from operations increased 49% year-over-year to $94.6 million.
  • Net income attributable to SINA was $28.7 million, or $0.38 for diluted net income per share attributable to SINA's ordinary shareholders. Non-GAAP net income attributable to SINA was $35.2 million, or $0.47 for non-GAAP diluted net income per share attributable to SINA's ordinary shareholders.

First Quarter 2018 Financial Results

For the first quarter of 2018, SINA reported net revenues of $440.8 million, an increase of 59% compared to $278.1 million for the same period last year. Non-GAAP net revenues for the first quarter of 2018 were $438.1 million, an increase of 59% compared to $275.5 million for the same period last year.

Advertising revenues for the first quarter of 2018 were $367.1 million, an increase of 61% compared to $228.0 million for the same period last year. The year-over-year growth in advertising revenues was mainly resulted from an increase of $133.7 million, or 79% growth in Weibo advertising and marketing revenues.

Non-advertising revenues for the first quarter of 2018 were $73.7 million, an increase of 47% compared to $50.1 million for the same period last year. Non-GAAP non-advertising revenues for the first quarter of 2018 were $71.1 million, an increase of 50% compared to $47.5 million for the same period last year. The year-over-year growth in non-advertising revenues was mainly driven by the increase of revenues from Weibo gaming and membership service, and revenues derived from SINA fin-tech businesses.

Gross margin for the first quarter of 2018 was 75%, compared to 69% for the same period last year. Advertising gross margin for the first quarter of 2018 was 77%, compared to 70% for the same period last year. Non-advertising gross margin for the first quarter of 2018 was 65%, compared to 62% for the same period last year. The increases in both advertising and non-advertising gross margin were a direct result of the adoption of ASC 606.

Operating expenses for the first quarter of 2018 totaled $258.8 million, compared to $146.5 million for the same period last year. Other than the inclusion of marketing expense related to Barter Transactions under ASC Topic 606 as illustrated above, the increase in operating expenses was primarily due to the increase in sales and marketing expenses incurred for marketing campaigns and step-up of user acquisition costs for Weibo and SINA News application, as well as the increase in product and development expenses in relations to personnel-related costs. Non-GAAP operating expenses for the first quarter of 2018 totaled $237.3 million, compared to $127.4 million for the same period last year.

Income from operations for the first quarter of 2018 was $73.3 million, an increase of 63% compared to $45.0 million for the same period last year. Operating margin was 17%, up from 16% for the same period last year. Non-GAAP income from operations for the first quarter of 2018 was $94.6 million, an increase of 49% compared to $63.7 million for the same period last year. Non-GAAP operating margin was 22%, slightly down from 23% for the same period last year.

Non-operating income for the first quarter of 2018 was $22.6 million, compared to a non-operating income of $30.3 million for the same period last year. Non-operating income for the first quarter of 2018 included (i) a $17.1 million net interest and other income; (ii) a $7.2 million net gain on sale of investments, fair value changes and impairment on investments, which is excluded under non-GAAP measure; and (iii) a $1.8 million loss pick-up from equity-method investments, which is reported one quarter in arrears and is mainly resulted from the loss pick-up related to the Company's investment in Leju Holding Limited ("Leju"). Non-operating income for the first quarter of 2017 included (i) a $15.9 million net gain on sale of and impairment on investments, which is excluded under non-GAAP measure; (ii) a $5.0 million of dividend income from certain investments and an interest income of $6.2 million; and (iii) a $3.1 million earnings pick-up from equity-method investments, which are accounted for under the equity-method and reported one quarter in arrears, and mainly resulted from earnings pick-up from the Company's investment in Tian Ge Interactive Holdings Limited.   

Income tax expenses for the first quarter of 2018 were $18.8 million, compared to $13.8 million for the same period last year. The increase was primarily attributable to higher profitability with a relatively stable tax rates in our PRC operation.

Net income attributable to SINA's ordinary shareholders for the first quarter of 2018 was $28.7 million, compared to $38.5 million for the same period last year. Diluted net income per share attributable to SINA's ordinary shareholders for the first quarter of 2018 was $0.38, compared to $0.52 for the same period last year. Non-GAAP net income attributable to SINA's ordinary shareholders for the first quarter of 2018 was $35.2 million, compared to $37.6 million for the same period last year. Non-GAAP diluted net income per share attributable to SINA's ordinary shareholders for the first quarter of 2018 was $0.47, compared to $0.50 for the same period last year.

As of March 31, 2018, SINA's cash, cash equivalents and short-term investments totaled $3.4 billion, at similar level compared to the cash balance as of December 31, 2017. For the first quarter of 2018, net cash provided by operating activities was $54.9 million, capital expenditures totaled $36.2 million, and depreciation and amortization expenses amounted to $9.5 million.

Non-GAAP Measures

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 from operations, non-GAAP operating margin, non-GAAP net income attributable to SINA's ordinary shareholders and non-GAAP diluted net income per share attributable to SINA's ordinary shareholders. 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 related to the license granted to Leju, 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, deemed disposal, fair value changes and impairment on investment, and income tax effects of above non-GAAP to GAAP reconciling items and adjustment for non-GAAP to GAAP reconciling items for the income attributable to non-controlling interests and amortization of convertible debt issuance cost. 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."

Conference Call

SINA will host a conference call from 8:10 a.m.8:40 a.m. Eastern Time on May 9, 2018 (or 8:10 p.m.8:40 p.m. Beijing Time on May 9, 2018) to present an overview of the Company's financial performance and business operations. A live webcast of the call will be available through the Company's corporate website at http://ir.sina.com. The conference call can be accessed as follows:

US:           

+1 845 675 0438

Hong Kong:

+852 3018 6776

China:         

400 120 0654

International:

+65 6713 5440

Passcode for all regions: 4788917

A replay of the conference call will be available through morning Eastern Time May 17, 2018. The dial-in number is +61 2 9003 4211. The passcode for the replay is 4788917.

About SINA

SINA is a leading online media company serving China and the global Chinese communities. Its digital media network of SINA.com (portal), SINA mobile (mobile portal and mobile apps) and Weibo (social media) enables internet users to access professional media and user generated content in multi-media formats from personal computers and mobile devices and share their interests with friends and acquaintances.

SINA.com offers distinct and targeted professional content on each of its region-specific websites and a full range of complementary offerings. SINA mobile provides news information, professional and entertainment content customized for mobile users through mobile applications and mobile portal site SINA.cn.

Weibo is a leading social media platform for people to create, distribute and discover content. Based on an open platform architecture, Weibo provides unprecedented and simple way for people and organizations to publicly express themselves in real time, interact with others on a massive global platform and stay connected with the world.

Through these properties and other product lines, SINA offer an array of online media and social media services to our users to create a rich canvas for businesses and advertisers to effectively connect and engage with their targeted audiences.

Safe Harbor Statement

This press release contains forward-looking statements that relate to, among other things, SINA's expected financial performance and SINA's strategic and operational plans (as described, without limitation, in quotations from management in this press release). SINA may also make forward-looking statements in the Company's periodic reports to the U.S. Securities and Exchange Commission, in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about the Company's beliefs and expectations, are forward-looking statements. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "confidence," "estimates" and similar statements. SINA assumes no obligation to update the forward-looking statements in this press release and elsewhere. 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 failure to meet internal or external expectations of future performance given the rapidly evolving markets; condition of the global financial and credit market; the uncertain regulatory landscape in China; fluctuations in the Company's quarterly operating results; the Company's reliance on online advertising sales and value-added services for a majority of its revenues; failure to successfully develop, introduce, drive adoption of or monetize new features and products, including portal, Weibo and fin-tech products; failure to enter and develop the small and medium enterprise market by the Company or through cooperation with other parties, such as Alibaba; failure to successfully integrate acquired businesses; risks associated with the Company's investments, including equity pick-up and impairment; and failure to compete successfully against new entrants and established industry competitors. Further information regarding these and other risks is included in SINA's 2017 annual reports on Form 20-F and other filings with the Securities and Exchange Commission.

Contact:

Investor RelationsSINA CorporationPhone: +86 10 5898 3336 Email: ir@staff.sina.com.cn

SINA CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(U.S. Dollars in thousands, except per share data)

Three months ended

March 31,

December 31,

2018

2017

2017

Net revenues(1):

    Advertising

$                   367,081

$                   227,999

$                   424,756

    Non-advertising

73,671

50,066

78,982

440,752

278,065

503,738

Cost of revenues(1)(2):

    Advertising  

83,115

67,668

99,858

    Non-advertising

25,592

18,904

26,812

108,707

86,572

126,670

Gross profit

332,045

191,493

377,068

Operating expenses:

    Sales and marketing (1)(2)

139,687

68,083

143,020

    Product development (2)

85,137

54,420

78,977

    General and administrative (2)

33,932

24,023

26,421

258,756

146,526

248,418

Income from operations

73,289

44,967

128,650

Non-operating income:

   Earning (Loss) from equity method investments, net

(1,772)

3,143

(2,843)

   Gain on sale of investments, fair value changes and      impairment on investments, net (3)

7,226

15,883

(740)

   Interest and other income, net

17,098

11,233

11,244

22,552

30,259

7,661

Income before income taxes

95,841

75,226

136,311

Income tax expense

(18,750)

(13,826)

(17,160)

Net income

77,091

61,400

119,151

   Less: Net income attributable to non-controlling interests

48,397

22,876

73,787

Net income attributable to SINA's ordinary shareholders

$                     28,694

$                     38,524

$                     45,364

Basic net income per share

$                         0.40

$                         0.54

$                         0.63

Diluted net income per share (4)

$                         0.38

$                         0.52

$                         0.60

Shares used in computing basic net income per share

71,440

70,959

71,516

Shares used in computing diluted net income per share

74,036

73,409

74,213

(1)  On January 1, 2018, the Company adopted ASC 606 Revenue from Contracts with Customers using the modified retrospective method,which means that prior periods amount will be reported on a historical basis and amounts for 2018 are reported on the new basis. Under the new accounting standard, the main impact to the Company is that it now reports revenue net of value added tax and recognizes revenues and expenses at fair value for advertising barter transactions.

(2)  Stock-based compensation in each category:

Cost of revenues

$                       2,541

$                       2,230

$                       2,145

Sales and marketing

4,880

4,583

5,370

Product development

7,487

6,990

6,432

General and administrative

7,408

7,387

8,237

(3)  The Company adopted ASU 2016-1, Classification and Measurement of Financial Instrumentsbeginning the first quarter of fiscal year 2018. After the adoption of this new accounting update, the Company will measure long-term investments other than equity method investments at fair value through earnings.  For those investments without readily determinable fair values, the Company will elect to record these investments at cost, less impairment, and plus or minus subsequent adjustments for observable price changes. Changes in the basis of these investments will be reported in current earnings. 

(4)  Net income attributable to SINA's ordinary shareholders is adjusted for diluted shares issued by our subsidiary and equity method investments.

 

SINA CORPORATION

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(U.S. Dollars in thousands)

March 31,

December 31,

2018

2017

Assets

Current assets:

Cash and cash equivalents

$                1,186,509

$               1,990,552

Short-term investments

2,251,930

1,381,991

Restricted cash

197,819

216,151

Accounts receivable, net

321,864

285,681

Prepaid expenses and other current assets

240,915

228,238

      Subtotal

4,199,037

4,102,613

Property and equipment, net

273,460

262,676

Goodwill and intangible assets, net

105,426

104,207

Long-term investments (1)

1,370,652

1,288,816

Other assets

70,892

57,082

Total assets

$                6,019,467

$               5,815,394

Liabilities and Shareholders' Equity

Current liabilities:

Accounts payable

$                   153,884

$                  130,431

Amount due to customers

197,819

216,151

Accrued expenses and other current liabilities

438,358

446,779

Short-term bank loan

93,382

89,309

Convertible debt 

153,085

153,092

Deferred revenues

151,857

134,580

Income taxes payable

123,727

102,458

     Subtotal

1,312,112

1,272,800

Convertible debt

881,018

879,983

Long-term deferred revenues

51,668

54,372

Other long-term liabilities

8,811

8,510

     Total liabilities

2,253,609

2,215,665

Shareholders' equity

SINA shareholders' equity (1) 

2,937,920

2,846,842

Non-controlling interests

827,938

752,887

     Total shareholders' equity 

3,765,858

3,599,729

Total liabilities and shareholders' equity

$                6,019,467

$               5,815,394

(1)The Company adopted ASU 2016-1, Classification and Measurement of Financial Instruments beginning the first quarter of fiscal year 2018. After the adoption of this new accounting update, the Company will measure long-term investments other than equity method investments at fair value through earnings.  For those investments without readily determinable fair values, the Company will elect to record these investments at cost, less impairment, and plus or minus subsequent adjustments for observable price changes. Changes in the basis of these investments will be reported in current earnings. The cumulative impact arising from the adoption was a credit to retained earnings as of January 1, 2018 of $49.0 million.

 

SINA CORPORATION

UNAUDITED ADDITIONAL INFORMATION

(U.S. Dollars in thousands)

Three months ended

March 31,

December 31,

2018

2017

2017

Net revenues

Portal:

Portal Advertising

$                  64,132

$                  59,791

$                  95,319

Other

26,774

20,162

33,842

Subtotal

90,906

79,953

129,161

Weibo:

Advertising and marketing

302,949

169,297

332,305

Weibo VAS

46,934

29,904

45,140

     Subtotal

349,883

199,201

377,445

Elimination

(37)

(1,089)

(2,868)

$                440,752

$                278,065

$                503,738

Cost of revenues

Portal:

Portal Advertising

$                  29,373

$                  27,482

$                  35,647

Other

16,469

12,702

19,180

Subtotal

45,842

40,184

54,827

Weibo

62,902

46,450

72,005

Elimination

(37)

(62)

(162)

$                108,707

$                  86,572

$                126,670

Gross margin

     Portal

50%

50%

58%

     Weibo

82%

77%

81%

75%

69%

75%

 

SINA CORPORATION

UNAUDITED RECONCILIATION OF NON-GAAP TO GAAP RESULTS

(U.S. Dollars in thousands, except per share data)

Three months ended

March 31, 2018

March 31, 2017

December 31, 2017

Non-GAAP

Non-GAAP

Non-GAAP

Actual

Adjustments

Results

Actual

Adjustments

Results

Actual

Adjustments

Results

Advertising revenues

$     367,081

$     367,081

$      227,999

$     227,999

$     424,756

$     424,756

Non-advertising revenues

73,671

(2,609)

 (a) 

71,062

50,066

(2,609)

 (a) 

47,457

78,982

(2,609)

 (a) 

76,373

Net revenues

$     440,752

$              (2,609)

$     438,143

$      278,065

$              (2,609)

$     275,456

$     503,738

$              (2,609)

$     501,129

(2,609)

 (a) 

(2,609)

 (a) 

(2,609)

 (a) 

2,541

 (b) 

2,230

 (b) 

2,145

 (b) 

Gross profit

$     332,045

$                   (68)

$     331,977

$      191,493

$                 (379)

$     191,114

$     377,068

$                 (464)

$     376,604

(19,775)

 (b) 

(18,960)

 (b) 

(20,039)

 (b) 

(1,635)

 (c) 

(155)

 (c) 

(1,535)

 (c) 

Operating expenses

$     258,756

$            (21,410)

$     237,346

$      146,526

$            (19,115)

$     127,411

$     248,418

$            (21,574)

$     226,844

(2,609)

 (a) 

(2,609)

 (a) 

(2,609)

 (a) 

22,316

 (b) 

21,190

 (b) 

22,184

 (b) 

1,635

 (c) 

155

 (c) 

1,535

 (c) 

Income from operations

$       73,289

$             21,342

$       94,631

$        44,967

$             18,736

$       63,703

$     128,650

$             21,110

$     149,760

(2,609)

 (a) 

(2,609)

 (a) 

22,316

 (b) 

(2,609)

 (a) 

22,184

 (b) 

1,635

 (c) 

21,190

 (b) 

1,535

 (c) 

(451)

 (d) 

155

 (c) 

1,503

 (d) 

(7,226)

 (e) 

224

 (d) 

740

(e)

(8,183)

(f)

(15,883)

 (e) 

(9,197)

 (f) 

1,035

 (g) 

(5,494)

 (f) 

690

 (g) 

21

 (h) 

1,472

 (h) 

(253)

 (h) 

Net income attributable to SINA's ordinary shareholders

$       28,694

$               6,538

$       35,232

$        38,524

$                 (945)

$       37,579

$       45,364

$             14,593

$       59,957

Diluted net income per share *

$           0.38

$           0.47

$            0.52

$           0.50

$           0.60

$           0.79

Shares used in computing diluted net income  per share

74,036

-

74,036

73,409

-

73,409

74,213

-

74,213

Gross margin - advertising

77%

1%

78%

70%

1%

71%

76%

1%

77%

Gross margin - non-advertising

65%

-1%

64%

62%

-2%

60%

66%

-1%

65%

Operating margin

17%

5%

22%

16%

7%

23%

26%

4%

30%

(a)  To exclude the recognition of deferred revenue related to the license granted to Leju.

(b)  To exclude stock-based compensation.

(c)  To adjust amortization of intangible assets.

(d)  To exclude the non-GAAP to GAAP reconciling items on the share of equity method investments, net of share of amortization of intangibles not on their books.

(e)  To exclude (gain) loss on sale of investments, (gain) loss on deemed disposal, fair value changes and impairment on investments, net.

(f)  To exclude Non-GAAP to GAAP reconciling items for the income attributable to non-controlling interests.

(g)  To exclude the amortization of convertible debt issuance cost.

(h)  To exclude the provision (benefit) for income tax related to item (c) and (e). Other non-GAAP to GAAP reconciling items have no income tax effect.**

Net income attributable to SINA's ordinary shareholders is adjusted for diluted shares issued by our subsidiary and equity method investments.

**

Most of the reconciliation items were recorded in entities in tax free jurisdictions hence no income tax implications. For impairment on investments, valuation allowances were made for those differences the Company does not expect they can be realized in the foreseeable future. 

UNAUDITED RECONCILIATION OF SINA'S SHARE OF EQUITY INVESTMENTS' NON-GAAP TO GAAP RESULTS*

Three months ended

March 31, 2018

March 31, 2017

December 31, 2017

Actual

Adjustments

Non-GAAP Results

Actual

Adjustments

Non-GAAP Results

Actual

Adjustments

Non-GAAP Results

To exclude stock-based compensation

$                  584

$                  320

$                  881

To exclude amortization of intangible 

  assets resulting from business acquisitions

1,123

102

1,177

To exclude (gain) loss on disposal and impairment on investments, net

1,669

(321)

848

To exclude (gain) loss resulting from the fair value 

  changes in investments, net

(3,339)

39

(1,426)

To exclude tax impacts related 

  to amortization of intangible assets

(178)

(21)

(178)

Earning (Loss) from equity method investments, net

$       (2,082)

$                 (141)

$       (2,223)

$          3,248

$                  119

$         3,367

$       (2,642)

$               1,302

$       (1,340)

Share of amortization of equity investments' 

  intangibles not on their books

224

(224)

-

(125)

125

-

(253)

253

-

Share of tax impacts related to amortization of 

  equity investments' intangibles not on their books

86

(86)

-

20

(20)

-

52

(52)

-

$       (1,772)

$                 (451)

$       (2,223)

$          3,143

$                  224

$         3,367

$       (2,843)

$               1,503

$       (1,340)

* Earning (Loss) from equity method investments is recorded one quarter in arrears.

Cision View original content:http://www.prnewswire.com/news-releases/sina-reports-first-quarter-2018-unaudited-financial-results-300645252.html