SHANGHAI, China, Nov. 13 /Xinhua-PRNewswire/ -- SINA Corporation
(Nasdaq GS: SINA), a leading online media company and mobile value-added service (MVAS) provider serving China and the global Chinese communities, today announced its unaudited financial results for the quarter ended September 30, 2008.
Third Quarter 2008 Highlights
-- Net revenues increased 64% year over year to $105.4 million, exceeding
the Company’s guidance between $100.0 million and $104.0 million.
-- Advertising revenues increased 66% year over year to $76.2 million,
within the Company’s guidance range between $75.0 million and $77.0
million.
-- Non-advertising revenues increased 58% year over year to $29.2 million,
exceeding the Company’s guidance between $25.0 million and $27.0
million.
-- GAAP net income increased 28% year over year to $22.0 million, or $0.36
diluted net income per share.
-- Non-GAAP net income* increased 40% year over year to $26.8 million, or
$0.44 diluted non-GAAP net income per share.
* Non-GAAP measures are described and reconciled to the corresponding GAAP
measures in the section below titled "Reconciliation of Non-GAAP to GAAP
Results."
"I am very pleased to report another record quarter for SINA with our total quarterly revenues surpassing $100 million for the first time in the Company’s history. Our outstanding online media coverage of the Beijing Olympic Games and strong performance in online advertising despite intense competition are further testaments of SINA leadership position in the online media and online brand advertising space in China." said Charles Chao, CEO of SINA. "While the global economic environment in general has significantly deteriorated and the advertising market in post-Olympic China has become increasingly challenging and uncertain, we believe SINA is going to remain competitive in the market given continuing growth of Internet adoption and shift of advertising budget from offline to online."
Financial Results
For the third quarter of 2008, SINA reported net revenues of $105.4 million, compared to $64.3 million in the same period last year and $91.3 million last quarter.
Advertising revenues for the third quarter of 2008 totaled $76.2 million, representing a 66% increase from the same period last year and a 17% increase from last quarter. Advertising revenues in China grew 68% year over year, or 17% quarter over quarter, to $75.2 million for the third quarter of 2008. The growth of the Company’s advertising revenues was driven mainly by the continued shift of brand advertising budget from offline to online media in China as well as the impact of the 2008 Beijing Olympics.
Non-advertising revenues for the third quarter of 2008 totaled $29.2 million, representing a 58% increase from the same period in 2007 and an 11% increase from the previous quarter. For the third quarter of 2008, MVAS revenues grew 63% from the same period last year and 11% from last quarter to $27.1 million. The growth of the Company mobile revenues mostly resulted from the stabilization of operator policies, government regulations and business environment.
Gross margin for the third quarter of 2008 was 57%, down from 62% for the same period last year and last quarter. Advertising gross margin for the third quarter of 2008 was 58%, compared to 64% for the same period last year and last quarter. Non-GAAP advertising gross margin, which excludes stock-based compensation and amortization of intangible assets, for the third quarter of 2008 was 59%, compared to 65% in the same period last year and the previous quarter. The decline in advertising gross margin was mainly due to acquisition costs for Olympic-related contents incurred in the third quarter of 2008.
MVAS gross margin for the third quarter of 2008 was 53%, compared to 56% for the same period last year and 55% last quarter. The decline in MVAS gross margin was primarily due to increased costs related to revenue sharing arrangements.
Operating expenses for the third quarter of 2008 amounted to $40.1 million, an increase of 62% from the same period last year and an increase of 10% from last quarter. For the third quarter of 2008, non-GAAP operating expenses, which excludes stock-based compensation and amortization expense of intangible assets, were $36.9 million, representing an increase of 60% from the same period last year and an increase 10% from the previous quarter. The increase in operating expenses was primarily due to higher marketing expenses associated with the Beijing Olympics and, to a lesser extent, higher sales and engineering related payroll and other personnel costs.
Interest and other income for the third quarter of 2008 was $7.1 million, compared to $3.7 million from the same period last year and $6.7 million from last quarter. Other income for the third quarter of 2008, which mainly comprised of foreign exchange gains resulting from intercompany dividends, was $3.5 million. In the third quarter of 2008, the Company recognized an investment loss of $0.8 million, as a result of taking a controlling interest in a follow-on investment of a web application development firm. In the second quarter of 2008, the Company recorded an investment gain of $3.1 million from selling a minority equity interest in one of its subsidiaries.
For the third quarter of 2008, provision for income taxes was $4.4 million, compared to $1.7 million from the same period last year and $4.2 million from last quarter. The Company made a provision for PRC income taxes for the third quarter of 2008, based on an effective tax rate of 16% for the operations in China.
Net income for the third quarter of 2008 was $22.0 million, an increase of 28% from the same period last year and a decrease of 13% from last quarter. Diluted net income per share for the third quarter of 2008 was $0.36, compared to $0.28 in the same period last year and $0.42 last quarter. Non-GAAP net income for the third quarter of 2008 was $26.8 million, an increase of 40% from the same period last year and an increase of 3% from the previous quarter. Non-GAAP diluted net income per share for the third quarter of 2008 was $0.44, compared to $0.32 in the same period last year and $0.43 last quarter.
As of September 30, 2008, SINA’s cash, cash equivalents and short-term investments amounted to $562.5 million, representing an increase of $123.1 million from a year ago. Cash flow from operating activities for the third quarter of 2008 was $26.9 million, compared to $19.6 million for the same period last year.
Voting Results of the Annual General Meeting of Shareholders
On September 8, 2008, the Company held its annual general meeting of shareholders in Hong Kong. Results of the shareholders’ votes were as follows:
-- All Class III Directors of the Company were re-elected-Director Pehong
Chen (with 40.2 million shares voted for and 2.0 million shares
abstained), Lip-Bu Tan (with 40.1 million shares voted for and 2.1
million abstained) and Yichen Zhang (with 40.2 million shares voted for
and 2.0 million shares abstained).
-- The appointment of PricewaterhouseCoopers Zhong Tian CPAs Limited
Company as the Company’s independent auditors for the fiscal year
ending December 31, 2008 was ratified (with 41.9 million shares voted
for, 0.3 million shares voted against and twenty three thousand shares
abstained).
-- The amendment and restatement of the Company’s Amended and Restated
Articles of Association was not approved (with 21.7 million shares
voted for, 20.5 million voted against and sixty seven thousand shares
abstained).
Business Outlook
The Company estimates its total revenues for the fourth quarter of 2008 to be between $98.0 million and $101.0 million, with advertising revenues to be between $69.0 million and $71.0 million and non-advertising revenues to be between $29.0 million and $30.0 million.
Stock-based compensation for the fourth quarter of 2008 is expected to be approximately $3.8 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 charge, amortization of intangible assets, amortization of convertible debt issuance costs, gain/loss on the sale/purchase of business/investment and gain/loss on the sale of minority interest in subsidiary 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 amortization expense of intangible assets from its non-GAAP financial measures is 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 gain/loss on the sale/purchase of a business/investment and gain/loss on the sale of minority interest in subsidiary from its non-GAAP financial measure of net income is useful for itself and investors because such gains/losses are not indicative of the Company’s core operating results.
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 8:00 p.m. Eastern Time today to present an overview of the Company’s financial performance and business operations for the third quarter of 2008. The dial-in number for the call is +1-866-800-8648 (US) or +1-617-614-2702 (International) and the pass code is 61829912. A live Webcast of the call will be available from 8:00 p.m. - 9:00 p.m. ET on Wednesday, November 12, 2008 (9:00 a.m. - 10:00 a.m. Beijing Time on November 13, 2008). 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 19, 2008 at midnight eastern time. The dial-in number is +1-888-286-8010 (US) or +1-617-801-6888 (International). The pass code for the replay is 50120185.
About SINA
SINA Corporation (Nasdaq GS: SINA) is a leading online media company and value-added information service provider in the People’s Republic of China and for the global Chinese communities. With a branded network of localized web sites targeting Greater China and overseas Chinese, the Company provides services through five major business lines including SINA.com (online news and content), SINA Mobile (MVAS), SINA Community (Web 2.0-based services and games), SINA.net (search and enterprise services) and SINA E-Commerce (online shopping). Together these business lines provide an array of services including region-focused online portals, MVAS, search and directory, interest-based and community-building channels, free and premium email, blog services, audio and video streaming, game community services, classified listings, fee-based services, e-commerce and enterprise e-solutions. The Company generates the majority of its revenues from online advertising and MVAS offerings, and, to a lesser extent, from search and other fee-based services.
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, including how the new EIT will be implemented, 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 20-F for the year ended December 31, 2007 and its other filings with the Securities and Exchange Commission.
SINA CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(U.S. Dollars in thousands, except per share data)
Three months ended Nine months ended
September 30, June 30, September 30,
2008 2007 2008 2008 2007
Net revenues:
Advertising $76,205 $45,830 $64,940 $188,981 $118,796
Non-advertising 29,209 18,519 26,380 79,068 56,642
105,414 64,349 91,320 268,049 175,438
Cost of revenues:
Advertising (a) 32,138 16,614 23,686 74,856 45,449
Non-advertising 13,117 7,851 11,466 34,761 22,501
45,255 24,465 35,152 109,617 67,950
Gross profit 60,159 39,884 56,168 158,432 107,488
Operating expenses:
Sales and marketing (a) 22,264 12,276 21,102 58,363 35,357
Product development (a) 8,693 5,905 7,385 22,092 16,037
General and
administrative (a) 8,709 6,291 7,824 23,944 19,835
Amortization of
intangibles 411 257 258 926 918
40,077 24,729 36,569 105,325 72,147
Income from operations 20,082 15,155 19,599 53,107 35,341
Non-operating income:
Interest and other
income, net 7,089 3,734 6,704 20,013 8,983
Investment gains (loss) (779) -- 3,137 2,358 830
Amortization of
convertible debt
issuance cost -- -- -- -- (342)
6,310 3,734 9,841 22,371 9,471
Income before income taxes 26,392 18,889 29,440 75,478 44,812
Provision for income taxes (4,429) (1,735) (4,245) (12,254) (4,594)
Net income $21,963 $17,154 $25,195 $63,224 $40,218
Basic net income per share $0.39 $0.31 $0.45 $1.13 $0.73
Diluted net income per
share $0.36 $0.28 $0.42 $1.04 $0.68
Shares used in computing
basic
net income per share 55,964 55,304 55,672 55,728 54,892
Shares used in computing
diluted
net income per share 60,639 60,210 60,669 60,535 59,768
Net income used for diluted
net income
per share calculation:
Net income $21,963 $17,154 $25,195 $63,224 $40,218
Amortization of convertible
debt issuance cost -- -- -- -- 342
$21,963 $17,154 $25,195 $63,224 $40,560
(a) Stock-based
compensation included
under SFAS 123R was as
follows:
Cost of revenues -
advertising $834 $341 $854 $2,412 $1,245
Sales and marketing 482 211 617 1,598 884
Product development 428 356 582 1,470 1,241
General and
administrative 1,887 816 1,743 5,249 2,582
SINA CORPORATION
RECONCILIATION OF NON-GAAP TO GAAP RESULTS
(U.S. Dollars in thousands, except per share data)
Three months ended
September 30, 2008
Non-GAAP
Actual Adjustments Results
834 (a)
88 (b)
Gross profit $60,159 $922 $61,081
(2,797)(a)
(411)(b)
Operating expenses $40,077 $(3,208) $36,869
3,631 (a)
499 (b)
Income from operations $20,082 $4,130 $24,212
3,628 (a)
469 (b)
779 (d)
Net income $21,963 $4,876 $26,839
Diluted net income per share $0.36 $0.44
Shares used in computing diluted
net income per share 60,639 60,639
Net income used in computing diluted
net income per share:
Net income $21,963 $26,839
Amortization of convertible debt
issuance costs -- --
$21,963 $26,839
Gross margin - advertising 58% 1% 59%
Three months ended
September 30, 2007
Non-GAAP
Actual Adjustments Results
341 (a)
Gross profit $39,884 $341 $40,225
(1,383)(a)
(257)(b)
Operating expenses $24,729 $(1,640) $23,089
1,724 (a)
257 (b)
Income from operations $15,155 $1,981 $17,136
1,724 (a)
257 (b)
Net income $17,154 $1,981 $19,135
Diluted net income per share $0.28 $0.32
Shares used in computing diluted
net income per share 60,210 60,210
Net income used in computing diluted
net income per share:
Net income $17,154 $19,135
Amortization of convertible debt
issuance costs -- --
$17,154 $19,135
Gross margin - advertising 64% 1% 65%
Three months ended
June 30, 2008
Non-GAAP
Actual Adjustments Results
854 (a)
89 (b)
Gross profit $56,168 $943 $57,111
(2,942)(a)
(258)(b)
Operating expenses $36,569 $(3,200) $33,369
3,796 (a)
347 (b)
Income from operations $19,599 $4,143 $23,742
3,796 (a)
317 (b)
(3,137)(e)
Net income $25,195 $976 $26,171
Diluted net income per share $0.42 $0.43
Shares used in computing diluted
net income per share 60,669 60,669
Net income used in computing diluted
net income per share:
Net income $25,195 $26,171
Amortization of convertible debt
issuance costs -- --
$25,195 $26,171
Gross margin - advertising 64% 1% 65%
Nine months ended
September 30, 2008
Non-GAAP
Actual Adjustments Results
2,412 (a)
177 (b)
Gross profit $158,432 $2,589 $161,021
(8,317)(a)
(926)(b)
Operating expenses $105,325 $(9,243) $96,082
10,729 (a)
1,103 (b)
Income from operations $53,107 $11,832 $64,939
10,726 (a)
1,043 (b)
779 (d)
(3,137)(e)
Net income $63,224 $9,411 $72,635
Diluted net income per share $1.04 $1.20
Shares used in computing diluted
net income per share 60,535 60,535
Net income used in computing diluted
net income per share:
Net income $63,224 $72,635
Amortization of convertible debt
issuance costs -- --
$63,224 $72,635
Gross margin - advertising 60% 2% * 62%
Nine months ended
September 30, 2007
Non-GAAP
Actual Adjustments Results
1,245 (a)
Gross profit $107,488 $1,245 $108,733
(4,707)(a)
(918)(b)
Operating expenses $72,147 $(5,625) $66,522
5,952 (a)
918 (b)
Income from operations $35,341 $6,870 $42,211
5,952 (a)
918 (b)
342 (c)
(830)(d)
Net income $40,218 $6,382 $46,600
Diluted net income per share $0.68 $0.78
Shares used in computing diluted
net income per share 59,768 59,768
Net income used in computing diluted
net income per share:
Net income $40,218 $46,600
Amortization of convertible debt
issuance costs 342 --
$40,560 $46,600
Gross margin - advertising 62% 1% 63%
(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/purchase of business and investments
(e) To adjust gain on the sale of minority interest in subsidiary
* Rounding
SINA CORPORATION
UNAUDITED SEGMENT INFORMATION
(U.S. Dollars in thousands)
Three months ended Nine months ended
September 30, June 30, September 30,
2008 2007 2008 2008 2007
Net revenues
Advertising $76,205 $45,830 $64,940 $188,981 $118,796
Mobile related 27,117 16,601 24,517 73,325 51,854
Others 2,092 1,918 1,863 5,743 4,788
$105,414 $64,349 $91,320 $268,049 $175,438
Cost of revenues
Advertising $32,138 $16,614 $23,686 $74,856 $45,449
Mobile related 12,622 7,328 10,929 33,075 21,228
Others 495 523 537 1,686 1,273
$45,255 $24,465 $35,152 $109,617 $67,950
SINA CORPORATION
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(U.S. Dollars in thousands)
September 30, December 31,
2008 2007
Assets
Current assets:
Cash and cash equivalents $343,488 $271,666
Short-term investments 219,001 206,333
Accounts receivable, net 88,935 56,719
Other current assets 10,420 8,840
Total current assets 661,844 543,558
Property and equipment, net 35,039 26,846
Goodwill and intangible assets, net 95,027 89,358
Other assets 1,358 2,501
Total assets $793,268 $662,263
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable $1,403 $940
Accrued liabilities 81,117 56,931
Income taxes payable 16,747 9,079
Convertible debt 99,000 99,000
Total current liabilities 198,267 165,950
Other long-term liabilities 2,524 1,337
Total liabilities 200,791 167,287
Shareholders’ equity 592,477 494,976
Total liabilities and shareholders’ equity $793,268 $662,263