SINA Corporation (SINA - Analyst Report) reported second-quarter 2015 loss of 19 cents per share, much wider than the Zacks Consensus Estimate of a loss of 4 cents.

The bottom line includes stock-based compensation ($2.7 million) but excludes net one-time items ($37.4 million) in the second quarter.

Quarter Details

Revenues increased 14% year over year to $213.6 million and surpassed management’s guided range of $162.0 to $167.0 million. Revenues also beat the Zacks Consensus Estimate of $200 million. Adjusted revenues were $211 million, up 14% from the year-ago quarter.

Advertising revenues increased 13% from the year-ago quarter to $176.3 million. Non-GAAP non-advertising revenues were $34.7 million, up 21.3% year over year.

Margins

Gross margin increased to 60% from 59% in the year-ago quarter. This increase was mainly due to a higher revenue base and a significant jump in advertising and non-advertising gross margin. The increase was primarily due to favorable product mix of higher margin Weibo advertising and value-added services.

Non-GAAP operating expenses in the second quarter of 2015 totaled $120.1 million compared with $116.9 million in the same period last year, primarily due to lower sales and marketing expenditures, which were partially offset by higher personnel costs.

SINA reported GAAP net income of $11.7 million or 19 cents per share compared with net income of $16.6 million or 25 cents per share in the year-ago quarter. Including stock-based compensation but excluding one-time items, net income was $4.2 million or 6 cents as against a loss of $3.7 million or 6 cents per share.

Balance Sheet

SINA exited the second quarter with cash, cash equivalents and short-term investments of $1.9 billion compared with $1.81 billion at the end of the first quarter. Cash provided by operating activities in the second quarter was $121.4 million. Capital expenditures totaled $12.8 million in the second quarter

Share Repurchase

As of May 31, 2015, the company had repurchased approximately 8.1 million shares for $311 million under the new $500 million share repurchase program initiated in Apr 2015.

Our Take

We believe that SINA remains a premier company based on its strong product pipeline, continuous investments in product development and marketing and a robust user base for its e-commerce and Weibo offerings.

However, the recent licensing issue with the Chinese government is a major headwind, which will negatively impact brand revenues in the near term. Although the investments in mobile and video are long-term positives, they will hurt profitability for the rest of 2015.

Moreover, Weibo is expected to face stiff competition from the likes of WeChat in China, which will hurt user base. Nevertheless, we believe that Weibo’s monetization ability will be a major driving factor for SINA amid increasing competition from the likes of Sohu.com Inc. (SOHU - Analyst Report), NetEase (NTES- Snapshot Report) and Youku Tudou (YOKU - Snapshot Report) in the video and brand advertising market.

Currently, SINA has a Zacks Rank #3 (Hold).