omniture

SINA Reports First Quarter 2007 Financial Results

2007-05-15 12:02 759

SHANGHAI, China, May 15 /Xinhua-PRNewswire-FirstCall/ -- 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 quarter ended March 31,

2007.

First Quarter 2007 Highlights

-- Net revenues increased 10% year over year to $51.3 million, exceeding

the Company's guidance of between $48.0 million and $50.0 million.

-- Advertising revenues increased 43% year over year to $31.8 million,

within the upper range of the Company's guidance of between $31.0

million and $32.0 million.

-- Non-advertising revenues decreased 20% year over year to $19.5

million, exceeding the Company's guidance of between $17.0 million and

$18.0 million.

-- GAAP net income was $8.6 million or $0.15 diluted net income per

share, compared to $7.0 million or $0.12 diluted net income per share

in the same period last year.

-- Non-GAAP net income* was $11.4 million or $0.19 diluted non-GAAP net

income per share, compared to $9.6 million or $0.16 diluted non-GAAP

net income per share in the same period last year.

*Non-GAAP measures are described below and reconciled to the corresponding

GAAP measures in the section below entitled "Reconciliation of Non-GAAP to

GAAP Results."

"We are very pleased with another quarter of solid financial and

operational performance. Our online advertising revenues in the first quarter

continue to be strong with our advertising revenues in China having grown 45%

or more year over year for the fourth consecutive quarter," said Charles Chao,

CEO of SINA. "On the operational front, we believe that we have made

measurable gains in transforming SINA into a multimedia content platform with

strong user participation and sticky interactive community."

Financial Results

For the first quarter of 2007, SINA reported total revenues of $51.3

million, compared to $46.7 million in the same period in fiscal 2006 and $56.4

million for the fourth quarter of 2006.

Advertising revenues for the first quarter of 2007 totaled $31.8 million,

representing a 43% increase from the same period last year and an 11% decrease

from last quarter. Advertising revenues in China grew 45% year over year to

$30.9 million for the first quarter of 2007. The quarter over quarter

decrease in advertising revenues was mainly due to seasonality, as the first

quarter historically has been the Company's weakest quarter for advertising

revenues. Advertising revenues in the first quarter of 2007 represented 62%

of total revenues, up from 47% in the same period last year.

Non-advertising revenues for the first quarter of 2007 totaled $19.5

million, a 20% decrease from the same period in 2006 and a 6% decrease from

the previous quarter.

MVAS revenues for the first quarter of 2007 were $18.2 million, declining

20% from the same period last year and declining 5% from last quarter.

Revenues from interactive voice response ("IVR") declined 32% quarter over

quarter to $3.5 million. During the first quarter of 2007, the Company began

placing less emphasis on promoting IVR due to an increase in operator costs

for IVR. As a result of switching from the Company's proprietary IVR platform

to China Mobile's IVR platform, operator costs for IVR increased from 15% to

30%. SMS revenues decreased 1% sequentially to $10.6 million, while revenues

from 2.5G products, including multimedia messaging service ("MMS"), wireless

application protocol ("WAP") and Kjava, increased 32% quarter over quarter to

$3.2 million.

Other non-advertising revenues, mainly search and other fee-based

revenues, were $1.3 million for the first quarter of 2007, representing a

decline of 31% from the same period last year and 7% from last quarter. The

decline in other non-advertising revenues was mainly due to the continued

phasing out of the prior search business.

Gross margin for the first quarter of 2007 was 59%, down from 61% in the

same period last year and 62% in the last quarter. Advertising gross margin

for the first quarter of 2007 was 58%, compared to 63% in the same period last

year and 65% in the previous quarter. Advertising gross margin in the first

quarter of 2007 included stock-based compensation, which was equivalent to 1%

of advertising revenues. Excluding this item, advertising gross margin in the

first quarter of 2007 was 59%, compared to 64% in the same period last year

and 66% in the previous quarter. The decrease in advertising gross margin was

mainly due to the increase in bandwidth cost to support the roll-out of SINA

Podcasting and other Web 2.0 products. Other factors contributing to the year

over year decline in advertising gross margin included increased content and

web production costs. On a sequential basis, a lower revenue base in the

first quarter of 2007 also contributed to the decline in advertising gross

margin. MVAS gross margin for the first quarter of 2007 was 60%, compared to

59% in the same period last year and 61% last quarter.

Operating expenses for the first quarter of 2007 totaled $22.9 million, an

increase of 4% from the same period last year and a decline of 7% from last

quarter. Non-GAAP operating expenses for the first quarter of 2007, which

exclude stock-based compensation and amortization expense of intangible

assets, was $20.8 million, representing a 2% increase from the same period

last year and a decline of 7% from last quarter. The year over year increase

in operating expenses primarily relates to the appreciation of RMB against the

dollar and higher bad debt expenses, partially offset by a decrease in

payroll-related costs and marketing expenses. The quarter over quarter

decrease in operating expenses was primarily due to lower commissions and

other payroll-related costs and lower travel and entertainment expenses,

partially offset by higher bad debt expenses.

Net income for the first quarter of 2007 was $8.6 million or $0.15 diluted

net income per share, compared to $7.0 million or $0.12 diluted net income per

share for the same period last year. Non-GAAP net income for the first

quarter of 2007 was $11.4 million or $0.19 diluted non-GAAP net income per

share, compared to $9.6 million or $0.16 diluted non-GAAP net income per share

for the same period last year.

As of March 31, 2007, SINA's cash, cash equivalents and investments in

marketable securities totaled $382.7 million, compared to $304.4 million and

$362.8 million as of March 31, 2006 and December 31, 2006, respectively. Cash

flow from operating activities for the first quarter of 2007 was $16.6

million, compared to $12.5 million for the same period last year and $14.9

million last quarter.

Business Outlook

The Company estimates its total revenues for the second quarter of 2007 to

be between $58.0 million and $60.0 million, with advertising revenues to be

between $40.0 million and $41.0 million and non-advertising revenues to be

between $18.0 million and $19.0 million. Stock-based compensation for the

second quarter of 2007 is expected to be approximately $2.0 million, which

excludes any new shares that may be granted.

Non-GAAP Measures

This release contains non-GAAP financial measures. These non-GAAP

financial measures, which are used as measures of the Company's performance,

should be considered in addition to, not as a substitute for, measures of the

Company's financial performance prepared in accordance with United States

Generally Accepted Accounting Principles ("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.

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." These non-GAAP measures include non-GAAP gross profit, non-

GAAP operating expenses, non-GAAP income from operations, non-GAAP net income,

non-GAAP diluted net income per share and non-GAAP advertising gross margin.

The Company's management uses non-GAAP financial measures to gain an

understanding of the Company's comparative operating performance (when

comparing such results with previous periods or forecasts) and future

prospects. The Company's non-GAAP financial measures exclude certain special

items, including stock-based compensation charges, write off of prepaid

license fees, amortization of intangible assets, amortization of convertible

debt issuance cost, gain and loss on the sale of business and investments, and

gain and loss on investments, from its internal financial statements for

purposes of its internal budgets. Non-GAAP financial measures are used by the

Company's management in their financial and operating decision-making, because

management believes they reflect the Company's ongoing business in a manner

that allows meaningful period-to-period comparisons. The Company's management

believes that these non-GAAP financial measures provide useful information to

investors and others in the following ways: 1) in understanding and

evaluating the Company's current operating performance and future prospects in

the same manner as management does, if they so choose, and 2) in comparing in

a consistent manner the Company's current financial results with the Company's

past financial results. The Company's management further believes the non-

GAAP financial 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 its core operating results and business

outlook.

The Company's management believes excluding stock-based compensation from

its non-GAAP financial measures is useful for itself and investors as such

expense will not result in future cash payment and is otherwise unrelated to

the Company's core operating results.

The Company's management believes excluding the non-cash write off of

prepaid license fees from its non-GAAP financial measures is useful for itself

and investors as such expense does not impact cash earnings and is not

indicative of the Company's core operating results and business outlook.

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 operating expenses, 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 and investments 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.

The non-GAAP financial measures have limitations. They do not include all

items of income and expense that affect the Company's operations.

Specifically, these non-GAAP financial measures are not prepared in accordance

with GAAP, may not be comparable to non-GAAP financial measures used by other

companies and, with respect to the non-GAAP financial measures that exclude

certain items under GAAP, do not reflect any benefit that such items may

confer to the Company. Management compensates for these limitations by also

considering the Company's financial results as determined in accordance with

GAAP.

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 first quarter of 2007. The dial-in number for the call is

+1-617-801-9702. The pass code is 83904692. A live Webcast of the call will

be available from 9:00 p.m. - 10:00 p.m. ET on Monday, May 14, 2007 (9:00 a.m.

- 10:00 a.m. Beijing Time on May 15, 2007). 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 May 21, 2007 at midnight

eastern time. The dial-in number is +1-617-801-6888. The pass code for the

replay is 90143641.

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 Community (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 Statement

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, 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

limited operating history, the uncertain regulatory landscape in the People's

Republic of China, the changes by mobile operators in China to their policies

for MVAS, the Company's ability to develop and market other MVAS products,

fluctuations in quarterly operating results, the Company's reliance on online

advertising sales and MVAS 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, 2006 and its other filings with the Securities and

Exchange Commission.

Contact:

Cathy Peng

SINA Corporation

Phone: 8610-82628888 x 3112

E-mail: ir@staff.sina.com.cn

Denise Roche

The Ruth Group

Phone: (646) 536-7008

Email: droche@theruthgroup.com

SINA CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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

Three months ended

March 31, December 31,

2007 2006 2006

Net revenues:

Advertising $31,767 $22,181 $35,735

Non-advertising 19,513 24,531 20,670

51,280 46,712 56,405

Cost of revenues:

Advertising (a) 13,342 8,298 12,581

Non-advertising 7,514 9,747 9,076

20,856 18,045 21,657

Gross profit 30,424 28,667 34,748

Operating expenses:

Sales and marketing (a) 11,064 11,805 12,460

Product development (a) 4,799 4,610 4,888

General and administrative (a) 6,657 5,157 6,756

Amortization of intangibles 403 468 415

22,923 22,040 24,519

Income from operations 7,501 6,627 10,229

Non-operating income:

Interest and other income, net 2,660 1,940 2,441

Gain (loss) on sale of

business and investments, net - (212) 373

Gain on investment in Tidetime

Sun, net - - 123

Loss on equity investments - (343) -

Amortization of convertible

debt issuance cost (171) (171) (171)

2,489 1,214 2,766

Income before income taxes 9,990 7,841 12,995

Provision for income taxes (1,382) (805) (1,273)

Net income $8,608 $7,036 $11,722

Basic net income per share $0.16 $0.13 $0.22

Diluted net income per share $0.15 $0.12 $0.20

Shares used in computing basic

net income per share 54,488 53,438 54,103

Shares used in computing diluted

net income per share 59,264 58,617 58,780

Net income used for diluted net

income per share calculation:

Net income $8,608 $7,036 $11,722

Amortization of convertible debt

issuance cost 171 171 171

$8,779 $7,207 $11,893

(a) Stock-based compensation included under SFAS 123R was as follows:

Cost of revenues - advertising $463 $350 $475

Sales and marketing 392 261 366

Product development 485 334 491

General and administrative 836 571 897

SINA CORPORATION RECONCILIATION OF NON-GAAP TO GAAP RESULTS

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

Three months ended

March 31, 2007

Non-GAAP

Actual Adjustments Results

463 (a)

Gross profit $30,424 $463 $30,887

(1,713)(a)

(403)(b)

Operating expenses $22,923 $(2,116) $20,807

2,176 (a)

403 (b)

Income from operations $7,501 $2,579 $10,080

2,176 (a)

403 (b)

171 (c)

Net income $8,608 $2,750 $11,358

Diluted net income per share $0.15 $0.19

Shares used in computing diluted

net income per share 59,264 59,264

Net income used in computing

diluted net income per share:

Net income $8,608 $11,358

Amortization of convertible debt

issuance costs 171 -

$8,779 $11,358

Gross margin - advertising 58 % 1 % 59 %

Three months ended

March 31, 2006

Non-GAAP

Actual Adjustments Results

350 (a)

Gross profit $28,667 $350 $29,017

(1,166)(a)

(468)(b)

Operating expenses $22,040 $(1,634) $20,406

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

Gross margin - advertising 63 % 1 % 64 %

Three months ended

December 31, 2006

Non-GAAP

Actual Adjustments Results

475(a)

1,113(f)

Gross profit $34,748 $1,588 $36,336

(1,754)(a)

(415)(b)

Operating expenses $24,519 $(2,169) $22,350

2,229 (a)

1,113 (f)

415 (b)

Income from operations $10,229 $3,757 $13,986

2,229 (a)

1,113 (f)

415 (b)

171 (c)

(373)(d)

(123)(e)

Net income $11,722 $3,432 $15,154

Diluted net income per share $0.20 $0.26

Shares used in computing diluted

net income per share 58,780 58,780

Net income used in computing

diluted net income per share:

Net income $11,722 $15,154

Amortization of convertible debt

issuance costs 171 -

$11,893 $15,154

Gross margin - advertising 65 % 1 % 66 %

(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) loss on the sale of business and investments

(e) To adjust gain on investment in Tidetime Sun

(f) To adjust a write-off of game license

SINA CORPORATION

UNAUDITED SEGMENT INFORMATION

(U.S. Dollar in thousands)

Three months ended

March 31, December 31,

2007 2006 2006

Net revenues

Advertising $31,767 $22,181 $35,735

Mobile related 18,246 22,694 19,304

Others 1,267 1,837 1,366

$51,280 $46,712 $56,405

Cost of revenues

Advertising $13,342 $8,298 $12,581

Mobile related 7,287 9,400 7,617

Others 227 347 1,459

$20,856 $18,045 $21,657

SINA CORPORATION

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(U.S. Dollar in thousands)

March 31, December 31,

2007 2006

Assets

Current assets:

Cash and cash equivalents $181,043 $163,177

Investments in marketable

securities 201,624 199,574

Accounts receivable, net 41,544 45,031

Other current assets 7,893 10,330

Total current assets 432,104 418,112

Property and equipment, net 28,893 27,101

Long-term investments 1,170 1,170

Goodwill and intangible assets, net 90,131 90,534

Other assets 1,545 1,892

Total assets $553,843 $538,809

Liabilities and Shareholders' Equity

Current liabilities:

Accounts payable $2,516 $1,614

Accrued liabilities 40,280 41,993

Income taxes payable 3,913 7,389

Convertible debt 100,000 100,000

Total current liabilities 146,709 150,996

Other long-term liabilities 1,141 -

Total liabilities 147,850 150,996

Shareholders' equity 405,993 387,813

Total liabilities and shareholders' equity $553,843 $538,809

Source: SINA Corporation
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