SINA Corporation Posts Another Solid Quarter

SINA Corporation (SINA) announced third-quarter 2016 results Monday after the market closed, and shares of the the Chinese online media company are up 2% in after-hours trading as of this writing. Let's take a closer look at what drove SINA's business this quarter.

SINA's results: The raw numbers

Data source: SINA Corporation. 

What happened with SINA this quarter?

• Based on generally accepted accounting principles (GAAP), SINA's non-operating income included a $133.5 million net gain on the sale of and impairment on investments, as well as a $5.5 million earnings pick-up from equity-method investments. 
• On an adjusted (non-GAAP) basis, revenue grew 21.7% year over year to $272.3 million. Adjusted net income increased 79.1% to $43.7 million, and rose 43.6% on a per-share basis to $0.56.
• Though we don't pay close attention to Wall Street's near-term expectations, analysts' consensus estimates predicted that SINA would turn in lower adjusted revenue of $265.3 million and adjusted earnings of $0.35 per share.
• Online advertising revenue grew 21% year over year to $233.6 million, as a $7.7 million decline in portal ad revenue was more than offset by a $47.8 million increase in Weibo advertising and marketing revenue.
• Weibo's monthly active users in September 2016 increased 34% year over year to 297 million. Average daily active users in September increased 32% to 132 million.
• 89% of Weibo's monthly active users were mobile users.
• 50% of portal advertising revenue came from mobile devices during the quarter, up from 48% last quarter and 44% in Q1.
• Adjusted non-advertising revenue climbed 27.8% year over year to $38.6 million.
• SINA completed a previously announced go-private transaction as a consortium of buyers of Chinese real estate specialist E-House, with SINA contributing $140 million to subscribe newly issued shares. SINA now holds 43% of E-House Holdings Ltd.
• SINA also completed a planned Oct. 14, 2016, distribution of shares of Weibo to SINA shareholders, distributing one Weibo share for every 10 outstanding SINA ordinary shares. As such, SINA's equity stake in Weibo decreased to 50.2%, representing 75% of voting power (down from a stake of 53.5%, or 78% of voting power previously).
• Gross margin expanded 4 percentage points year over year to 67%, driven by higher advertising gross margin, with a higher proportion of revenue coming from small and medium enterprise customers in both the portal and Weibo businesses.
• Cash from operations in Q3 was $256.1 million, while capital expenditures were $2.3 million.
• Ended the quarter with $2.2 billion in cash, equivalents, and short-term investments, and $799.3 million in convertible debt.

What management had to say

SINA CEO Charles Chao stated,

We are delighted to have another solid quarter. SINA portal has further implemented its mobile strategy, with significant growth of mobile traffic from SINA News Application. Mobile monetization for portal has further enhanced, with 50% of the portal advertising revenues coming from mobile devices. With strong growth in user base, revenues, and profitability, Weibo has demonstrated its platform value with the network effect of the content ecosystem and strong monetization capability. We take great pride that Weibo is returning to the center stage of Chinese internet market.

Looking forward

Despite another quarter of relative outperformance, SINA's report didn't include an update to its most recent guidance. For perspective, that guidance was raised last quarter to call for full-year revenue between $950 million and $1 billion, or growth of 9% to 15% over fiscal 2015, and adjusted full-year revenue of $850 million to $950 million. To be fair, though, SINA's quarterly beat wasn't that far ahead of expectations, which explains the market's initial muted positive response right now. But as it stands, I think SINA shareholders should be pleased with the company's position today.