Chinese Internet portal Sina.com's (SINA) unaudited financial results for the quarter ended June 30, 2007 show net revenues increased 11% year-on-year to US$59.8 million.
"Our second quarter results continue to demonstrate our strength in our core online advertising business. Despite comparison to a high revenue base in the same period last year, which included a record-breaking FIFA World Cup coverage, we managed to grow our online advertising business by 40% or more year over year for the fifth consecutive quarter." said Charles Chao, CEO of SINA. "On the operational side, while we continued to focus on improving our products and services, we have also forged strategic partnerships with industry heavyweights, like Google and China Telecom, to enhance our users' experience."
The company estimates its total revenues for the third quarter of 2007 to be between US$63.0 million and US$65.0 million.
Advertising revenues for the second quarter of 2007 totaled US$41.2 million, representing a 40% increase from the same period last year and a 30% increase from last quarter. Advertising revenues in China grew 40% year over year or 30% quarter over quarter to US$40.3 million for the second quarter of 2007. Advertising revenues in the second quarter of 2007 represented 69% of total revenues, up from 55% in the same period last year and 62% in the previous quarter.
Non-advertising revenues for the second quarter of 2007 totaled US$18.6 million, a 23% decrease from the same period in 2006 and a 5% decrease from the previous quarter.
MVAS revenues for the second quarter of 2007 were US$17.0 million, declining 24% from the same period last year and 7% from last quarter. The year over year decline can be mostly attributed to the changes in mobile operators' policies over the past year. The quarter over quarter decline was mostly related to the decline of revenues from interactive voice response which decreased 39% sequentially to US$2.1 million as a result of reduced promotional efforts.
Other non-advertising revenues, mainly search and other fee-based revenues, were US$1.6 million for the second quarter of 2007, representing a decline of 10% from the same period last year and an increase of 27% from last quarter. The sequential increase was mostly due to an increase in search revenues, only a small portion of which is related to the Google arrangement.
Gross margin for the second quarter of 2007 was 62%, compared to 63% in the same period last year and 59% in the last quarter. Advertising gross margin for the second quarter of 2007 was 62%, compared to 65% in the same period last year and 58% in the previous quarter.
Advertising gross margin in the second quarter of 2007 included stock-based compensation, which was equivalent to 1% of advertising revenues. Excluding this item, advertising gross margin in the second quarter of 2007 was 63%, compared to 66% in the same period last year and 59% in the previous quarter. The year over year decline in advertising gross margin was mainly due to higher content, web production and bandwidth costs.
The sequential increase in advertising gross margin was due to revenues growing faster than advertising cost of sales. MVAS gross margin for the second quarter of 2007 was 61%, compared to 60% in the same period last year and last quarter.
Operating expenses for the second quarter of 2007 totaled US$24.5 million, a decline of 7% from the same period last year and an increase of 7% from last quarter. Non-GAAP operating expenses for the second quarter of 2007, which exclude stock-based compensation and amortization expense of intangible assets, was US$22.6 million, representing a decline of 3% from the same period last year and an increase of 9% from last quarter. The year over year decline was mainly due to lower marketing spending, particularly related to MVAS promotions, offset by higher expenses related to payroll, depreciation and bad debt as well as the impact of renminbi appreciation on spending in China. The quarter over quarter increase in operating expenses was primarily due to higher payroll-related costs as well as increased travel and entertainment expenses.
Non-operating income for the second quarter of 2007 included a gain of US$0.8 million from the sale of an investment, while non-operating income for the second quarter of 2006 included a US$2.0 million gain from the sale of the Company's interest in a joint venture.
Net income for the second quarter of 2007 was US$14.5 million, compared to US$10.4 million in the same period last year and US$8.6 million last quarter. Diluted net income per share for the second quarter of 2007 was US$0.25, compared to US$0.18 in the same period last year and US$0.15 last quarter. Non- GAAP net income for the second quarter of 2007 totaled US$16.1 million, compared to US$12.3 million in the same period last year and US$11.4 million in the previous quarter. Non-GAAP diluted net income per share for the second quarter of 2007 was US$0.27, compared to US$0.21 in the same period last year and US$0.19 last quarter.
As of June 30, 2007, Sina's cash, cash equivalents and short-term investments totaled US$415.2 million, compared to US$312.5 million and US$382.7 million as of June 30, 2006 and March 31, 2007, respectively. Cash flow from operating activities for the second quarter of 2007 was US$20.9 million, compared to US$8.1 million for the same period last year and US$16.6 million last quarter.
