SHANGHAI, China, Nov. 3 /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 quarter ended September 30,
2006.
Q3 2006 Highlights
- Net revenues increased 13% year-over-year to $56.1 million, exceeding
the Company's previous guidance of between $51.0 million and $54.0
million.
- Advertising revenues increased 42% year-over-year to $32.7 million,
exceeding the Company's previous guidance of between $31.0 million and
$32.0 million.
- Non-advertising revenues declined 12% year-over-year to $23.4 million,
exceeding the Company's previous guidance of between $20.0 million and
$22.0 million.
- GAAP net income was $10.7 million, or $0.19 diluted net income per
share.
- Non-GAAP net income* was $14.6 million, or $0.25 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 another record revenue quarter for our
advertising business, which grew 46% year over year in China and 42%
worldwide. Our ability to leverage our brand strength, lead with broader and
more superior content offerings and create innovative products has enabled us
to grow our advertising business above 40% for the first nine months of 2006,
compared to last year." said Charles Chao, CEO of SINA. "On the mobile side,
despite a much tougher operating environment, our team also showed solid
execution as we managed to limit the decline of our MVAS revenues to 3%
sequentially."
Financial Results
For the third quarter of 2006, SINA reported net revenues of $56.1
million, compared to $49.6 million in the same period last year and $53.7
million last quarter.
Advertising revenues for the third quarter of 2006 totaled $32.7 million,
representing a 42% increase from the same period last year and an 11%
increase from last quarter. The growth in advertising revenues came
primarily from the acquisition of new customers and, to a lesser extent,
higher spending per advertiser. Advertising revenues in the third quarter of
2006 represented 58% of the Company's total revenues, up from 46% for the
same period last year and 55% for last quarter.
Non-advertising revenues for the third quarter of 2006 totaled $23.4
million, a 12% decrease from the same period last year and a 4% decrease from
last quarter. Revenues from MVAS for the third quarter of 2006 were $21.8
million, representing a decline of 10% from the same period last year and a
decline of 3% from last quarter. MVAS revenues for the third quarter of 2006
were higher than the Company's original estimate primarily due to certain IVR
promotions and initiatives with China Unicom. The Company expects the MVAS
industry in China to continue to face a challenging and uncertain environment
and, thus, expects further decline in its MVAS revenues in the future.
Gross margin for the third quarter of 2006 was 64%, down from 68% for the
same period last year and up from 63% for last quarter. The advertising
gross margin for the third quarter of 2006 was 65%, compared to 68% for the
same period last year and 65% in the previous quarter. Advertising gross
margin in the second and third quarters of 2006 included the impact of $0.4
million and $0.6 million in stock-based compensation, respectively, resulting
from the adoption of Statement of Financial Accounting Standard No. 123
(revised 2004) "Share-Based Payment" ("SFAS 123R") starting January 1, 2006.
Non-GAAP advertising gross margin for the third quarter of 2006 was 67%,
compared to 66% in the previous quarter.
MVAS gross margin for the third quarter of 2006 was 62%, compared to 66%
for the same period last year and 60% last quarter. The year-over-year
decline in MVAS gross margin was primarily a result of increased content
costs and transmission costs paid to mobile operators.
Operating expenses for the third quarter of 2006 amounted to $25.6
million. Non-GAAP operating expenses for the third quarter of 2006 were
$23.0 million, a decline of 3% from the same period last year and a decline
of 1% from the previous quarter. The decreases were mainly a result of lower
marketing spending in the third quarter of 2006, partially offset by higher
payroll-related expenditures and bad debt expenses. Compared to the previous
quarter, bad debt expenses increased by $1.0 million primarily as a result of
aging receivables from the mobile business.
Net income for the third quarter of 2006 was $10.7 million. Non-GAAP net
income for the third quarter of 2006 was $14.6 million, an increase of 46%
from the same period last year and 19% from the previous quarter. Non-GAAP
diluted net income per share for the third quarter of 2006 was $0.25,
compared to $0.17 in the same period last year and $0.21 last quarter.
As of September 30, 2006, SINA's cash, cash equivalents and investments
in marketable securities amounted to $345.3 million as compared to $312.5
million as of June 30, 2006. Cash flow from operating activities for the
third quarter of 2006 was $27.7 million.
Business Outlook
The Company estimates its total revenues for the fourth quarter of 2006
to be between $53.0 million and $56.0 million, with advertising revenues to
be between $34.0 million and $35.0 million and non-advertising revenues to be
between $19.0 million and $21.0 million. Stock-based compensation for the
fourth quarter of 2006 is expected to be approximately $2.4 million, which
excludes any new shares that may be granted.
Conference Call
SINA will host a conference call at 8:00 p.m. Eastern Time today to
present an overview of the Company's financial performance and business
operations for the third quarter ended September 30, 2006. The dial-in number
for the call is 617-847-3007. The pass code is 68414515. A live Webcast of
the call will be available from 8:00 p.m. - 9:00 p.m. ET on Thursday,
November 2, 2006 (9:00 a.m. - 10:00 a.m. Beijing Time on November 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 November 9, 2006 at midnight eastern time. The dial-
in number is 617-801-6888. The pass code for the replay is 99922654.
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 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 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 its 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 the
reporting of the Company's financial results.
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 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. 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 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.
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 China Mobile to its policies for MVAS (as described in the
Company's press release dated July 7, 2006), 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 Nine months ended
September 30, June 30, September 30,
2006 2005 2006 2006 2005
Net revenues:
Advertising $32,697 $22,968 $29,454 $84,332 $59,989
Non-advertising 23,362 26,656 24,224 72,117 81,613
56,059 49,624 53,678 156,449 141,602
Cost of revenues:
Advertising (a) 11,333 7,410 10,317 29,948 19,845
Non-advertising 8,715 8,670 9,343 27,805 25,504
20,048 16,080 19,660 57,753 45,349
Gross profit 36,011 33,544 34,018 98,696 96,253
Operating expenses:
Sales and marketing (a) 12,210 15,735 13,497 37,512 37,937
Product development (a) 5,082 3,816 4,993 14,685 11,038
General and
administrative (a) 7,832 4,210 7,427 20,416 13,985
Amortization of
intangibles 468 602 469 1,405 2,684
25,592 24,363 26,386 74,018 65,644
Income from operations 10,419 9,181 7,632 24,678 30,609
Non-operating income:
Interest and other income 2,156 1,698 2,012 6,108 4,794
Gain (loss) on sale of
business and investments,
net (134) 1,487 2,006 1,660 1,487
Loss on investments, net (270) (1,458) - (270) (2,740)
Loss on equity investments (185) (996) (162) (690) (2,420)
Amortization of
convertible debt issuance
cost (172) (172) (171) (514) (514)
1,395 559 3,685 6,294 607
Income before income taxes 11,814 9,740 11,317 30,972 31,216
Provision for income taxes (1,095) (647) (878) (2,778) (1,860)
Net income $10,719 $9,093 $10,439 $28,194 $29,356
Basic net income per share $0.20 $0.17 $0.19 $0.53 $0.56
Diluted net income per share $0.19 $0.16 $0.18 $0.49 $0.51
Shares used in computing
basic net income per share 53,690 53,099 53,554 53,561 52,214
Shares used in computing
diluted net income per share 58,419 58,774 58,444 58,484 58,680
Net income used for diluted
net income per share
calculation:
Net income $10,719 $9,093 $10,439 $28,194 $29,356
Amortization of convertible
debt issuance cost 172 172 171 514 514
$10,891 $9,265 $10,610 $28,708 $29,870
(a) Stock-based compensation
included under SFAS 123R was
as follows:
Cost of revenues -
advertising $568 $- $350 $1,268 $-
Sales and marketing 531 - 353 1,145 -
Product development 606 - 377 1,317 -
General and administrative 1,001 - 1,943 3,515 -
$2,706 $- $3,023 $7,245 $-
SINA CORPORATION
RECONCILIATION OF NON-GAAP TO GAAP RESULTS
(U.S. Dollar in thousands, except per share data)
Three months ended Three months ended
September 30, 2006 September 30, 2005
Non-GAAP Non-GAAP
Actual Adjustments Results Actual Adjustments Results
568(a)
Gross profit $36,011 $568 $36,579 $33,544 $- $33,544
(2,138)(a)
(468)(b)
Operating (602)(b)
expenses $25,592 $(2,606) $22,986 $24,363 $(602) $23,761
2,706(a)
468(b)
Income from 602(b)
operations $10,419 $3,174 $13,593 $9,181 $602 $9,783
2,706(a)
468(b) 602(b)
172(c) 172(c)
134(d) (1,487)(d)
270(e) 1,458(e)
145(b) 191(b)
Net income $10,719 $3,895 $14,614 $9,093 $936 $10,029
Diluted net
income per
share $0.19 $0.25 $0.16 $0.17
Shares used
in
computing
diluted
net income
per share 58,419 58,419 58,774 58,774
Net income
used in
computing
diluted
net income
per share:
Net income $10,719 $14,614 $9,093 $10,029
Amortization
of
convertible
debt
issuance
costs 172 - 172 -
$10,891 $14,614 $9,265 $10,029
Gross margin -
advertising 65% 2% 67% 68% 0% 68%
Three months ended
June 30, 2006
Non-GAAP
Actual Adjustments Results
350 (a)
Gross profit $34,018 $350 $34,368
(2,673)(a)
(469)(b)
Operating expenses $26,386 $(3,142) $23,244
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
Gross margin - advertising 65% 1% 66%
Nine months ended Nine months ended
September 30, 2006 September 30, 2005
Non-GAAP Non-GAAP
Actual Adjustments Results Actual Adjustments Results
1,268(a)
Gross profit $98,696 $1,268 $99,964 $96,253 $- $96,253
(5,977)(a)
(1,405)(b)
Operating (2,684)(b)
expenses $74,018 $(7,382) $66,636 $65,644 $(2,684) $62,960
7,245(a)
1,405(b)
Income from 2,684 (b)
operations $24,678 $8,650 $33,328 $30,609 $2,684 $33,293
7,245(a)
1,405(b) 2,684(b)
514(c) 514(c)
(1,660)(d) (1,487)(d)
270(e) 2,740(e)
499(b) 191(b)
Net income $28,194 $8,273 $36,467 $29,356 $4,642 $33,998
Diluted net
income per
share $0.49 $0.62 $0.51 $0.58
Shares used
in computing
diluted
net income
per share 58,484 58,484 58,680 58,680
Net income
used in
computing
diluted
net income
per share:
Net income $28,194 $36,467 $29,356 $33,998
Amortization
of
convertible
debt
issuance
costs 514 - 514 -
$28,708 $36,467 $29,870 $33,998
Gross margin -
advertising 64% 2% 66% 67% 0% 67%
(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, net
(e) To adjust loss on investments, net
SINA CORPORATION
UNAUDITED SEGMENT INFORMATION
(U.S. Dollar in thousands)
Three months ended Nine months ended
September 30, June 30, September 30,
2006 2005 2006 2006 2005
Net revenues
Advertising $32,697 $22,968 $29,454 $84,332 $59,989
Mobile related 21,811 24,134 22,448 66,953 73,267
Others 1,551 2,522 1,776 5,164 8,346
$56,059 $49,624 $53,678 $156,449 $141,602
Cost of revenues
Advertising $11,333 $7,410 $10,317 $29,948 $19,845
Mobile related 8,313 8,279 8,925 26,638 24,323
Others 402 391 418 1,167 1,181
$20,048 $16,080 $19,660 $57,753 $45,349
SINA CORPORATION
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(U.S. Dollar in thousands)
September 30, December 31,
2006 2005
Assets
Cash, cash equivalents and
investments in marketable securities $345,343 $300,689
Accounts receivable, net 42,064 33,940
Property and equipment, net 23,230 22,207
Long-term investments 1,616 3,977
Goodwill and intangible assets, net 90,949 92,354
Other assets 11,815 15,554
Total assets $515,017 $468,721
Liabilities and Shareholders' Equity
Liabilities $49,416 $49,099
Convertible Debt 100,000 100,000
Shareholders' equity 365,601 319,622
Total liabilities and
shareholders' equity $515,017 $468,721
