Q4 2019 Earnings Call
Ladies and gentlemen, today's conference call. This is scheduled to begin shortly visco de standby and thankfully patients.
Today's conference is scheduled to begin shortly please go de standby, it's actually patients.
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Ladies and gentlemen, today's conference is scheduled to begin shortly leaseco D to standby and think a few patients.
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Ladies and gentlemen.
Thank you for.
Welcome.
So the Cienas earnings conference call for the fourth quarter 29 team.
Please.
At this time, but use especially to the only node and after the speakers presentation. There will be a question answer session at to ask a question ingenious I should you need the best Taiwan telephone.
Please be advised that todays conference is being recorded I wouldn't like to had to copies or would you say speaker for today. He said would you say keep the school.
[laughter] upgrade and Hello, everyone. Thank you for your patience will come to see that earnings conference call for the fourth quarter and physical you tend to Nigel just to date, Oh, Gee I C O Charles Charles and you'll see a full body Jones fiscally supposed to be darkest on internet and today to boost to our IR website.
No I need you to see publicly in connection with today's conference call. All discussion today, we'll complete contain forward looking statements, which involved heavily risks and uncertainties that may cause actual results could differ materially from constipation.
It seems the obligation to update forward looking statement, you did call and elsewhere.
A detailed discussion these risks and uncertainties. Please refer to already any report on form 20-F, and other flooding so I see.
In addition, I like to remind you that oh discussions they increase non-GAAP measures, which maybe could sell Cadiz competition I said Oh the items, we use non-GAAP measures to date being a better understanding of Stephens compelled people, putting results and future prospects. Please refer to at least for more detailed information on the reconciliations.
Got to non-GAAP measures.
And the coal we meet discuss non-GAAP measures believable, which.
He methodology used to calculate non-GAAP measures at the syndicate level often mentioned the log we open the lines what we've given the session with that I'd like to the cool open to a sample Bonnie.
[noise]. Thank you Andrew Thank thank you all for joining our conference call today, Let me walk you through the operation on a fund national highlights for the fourth quarter and a physical your 2019 before the detailed financial review I would like to remind you that my prepared remarks would have focused on non-GAAP results and the older compare.
Harrison's are on a year over year basis.
Otherwise noted.
Let's start with an overview of the fourth quarter and the physical your 2019 results seem not to net revenue for the fourth quarter were 590.7, Neely and an increase of 4% or 5% on constant currency basis.
Operating income was 174.9 billion, an increase of 10% or 11% on a constant currency basis.
Net income attributable to see now was 82.7 million an increase of 43 or 45% on constant currency basis, and the diluted EPS was $1.17 cents.
For your 2019 net revenue was 2.15 billion, an increase over 3% or 7% on constant currency basis.
Operating income in 29 team increased to 5% or 9% on constant currency basis to 611.9 <unk>.
Representing an operating margin of 20% for your 2019 net income attributable to see now with 232.6 million and our diluted EPS was threed.
The 26 cents.
Now, let's turn to key financial items scene, that's online advertising revenue for the fourth quarter were 460.9 million and decrease of 5% due to decrease in waypoint, a portal advertising revenue as well as negative currency translation.
Seen a four year online advertising revenue totaled a 1.74 building down 3% were up 1% on a constant currency basis, mainly owing to a declining portal advertising revenue.
Let me provide you with an overview, we bought the operational and financial performance.
Yeah.
19, we're very delighted to see we bought the user community base, surpassing 500 million milestones with and May you, reaching 560 million in December 29, P., adding proximally 54 million users the year over year basis.
Richard de you reached 222 million in December and aware put two quite excited to know even more robust growth engagement matrix such as usage frequency feed it refreshment and a daily video views.
29, <unk>, leveraging our indispensable social media functions and the reading force in network effect, we put deliver strong.
Underperformance was that just a plane to sells into marketing spend.
Okay ample room to invest in new initiatives and opportunities.
Recently in the midst dolphin no vote for all know virus outbreak, we bought demonstrates tremendous value added vacating nationwide prevention broadcasting breaking news connecting individuals and resources as well after raising charity donations.
As Chinas, leading social media platform, we are proud of to contribute to defeating the virus ways with weibos massive reach real time feature and the virus distribution capability.
We're also encouraged by the early traction off Oasis underpinned by synergies with waibel distinct good content life as well as a series of effective operational efforts.
Moving into 2020 with a great user momentum and the positive retention trend seen recently, we expect to step up our promotional activities to drive the penetration of the Oasis so that a broader community could open embraced the platform to share their moments of life.
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Enjoy go away and to discover inspiration idea, which well laid the foundation for future monetization opportunity.
On the monetization front, we bought online advertising revenue for the fourth quarter were 400 of 5.9, only down 3% or 1% constant currency basis.
We bought key accounts business decreased 7% or 6% on constant currency basis primary driver to buy a cutback in barter transaction revenue and that reduction of has handset shipments, which negatively impacted key accounts growth by approximately 6%.
Industry wise the continued its solid growth from the FMCG sector and the luxury brands was offset by a Donald Trump pressure in the entertainment sector, which has faced a regulation happening.
We bought SMB sector was down 2% or 1% costume crazy base as the favorable demand supply dynamics of the perform at the end market continues to weigh on the gross.
Our SMB sector, despite our efforts to navigate through these challenges.
Revenue from Ami backlog grew 20, or 21% constant currency basis back onto the growth trajectory as we bought deep kind of cooperation with Alibaba to drive value for its platform and a partners during the E commerce promotional season.
For full year 29 team, we bought online advertising revenue grew 2% or 6% on constant currency basis.
Key accounts and S., any delivering 12, and a 4% growth respectively on a constant currency basis.
Oh that he account side, we will continue to showcase the unique value proposition and penetrate into a broader customer base, the FMCG sector and the luxury spreads the growth as we refine our social I process to underscore caillois out influence and a compound.
Factor from multiple AD campaigns to further talking to these customers to integrate a brand plus performance marketing demand.
The entertainment industry on a contra under performed in 29 T mainly due to lack luster contest schedule and they tightened the regulation.
The semi side is stable it the stabilization at semi apt and this was a mixed results of the old favorable demand and supply dynamics of the performance end market and initiative to navigate through market challenges.
Although the performance and Mark in 29, King was challenging anyways, we had a chance to take a step back to reorganize our go to market approach drive automatic at placement and launch differentiated products, which we believe what are fundamentally improve our advertising ROI.
And the monetization efficiency in the long.
Turning to portal in 2019 against a tough competitive landscape see not some mobile media property continued to expand user base with the average Diego Sina news App and the scene of finance, app growing, possibly 26% and 80% respectively.
Our year over year basis.
On the flipside portal advertising business saw a downturn trend due to macro challenges and the competition.
<unk> revenue for the fourth quarter was 56.5 middle East a decrease of 16% for your 29 team portal AD revenue was down 25% or 22% constant currency basis, mainly resulted from after such a cut back from SMB customers as.
Well as certain Brett industries, such as automobile and Internet services.
Turning to non advertising, but not at revenue for the fourth quarter walk 129.8, Emily up 51, or 53 constant currency basis. The increase was mainly driven by triple digit growth in scene, that's a fintech business, which generated 75 point.
2 million revenue in the fourth quarter.
Full year 2019, now at revenue were up 32, or 38% constant currency basis, primarily driven by the green momentum off all my current offices facilitation revenue and the to a lesser degree incremental revenue contributor from live broadcasting.
Mr. happenings in the advertising market, where a glut that are already investments in that weve seen type areas to diversify our revenue stream gradually bear fruit with Mike hurdle facilitation than is picking up at the new growth driver.
Beauty of Paul stretching traffic funding source and a brand equity we substantially scaled up our thing toxin is in 29 team delivering 196.3 million revenue up 94% year over year.
Turning to gross margin growth for the fourth quarter was 77% compared to 79% last year advertising gross margin was 82% compared to 83% posture not.
Gross margin for the fourth quarter was 63% up from 56% Osher benefiting from better gross margin profile of seen enough intact for your gross margin was 78% compared to 79% in 2018.
Your advertising gross margin was 81% slight year over year, we're not at a gross margin was 62% compared to 64% Osher.
Now moving on to operating expenses in the fourth quarter operating expenses totaled 282.8 million down 2% year over year full year operating expenses totaled one point.
Zero, six billing down 1% year over year remarkably in a marketing expenses took.
Approximately 28% of CNS revenue down four percentage points from last year, which speaks to weigh both improved a cost efficiency in trying to investments considering the above expectation use user friendly and engagement.
Operating income grew 10% to 174.9 million, representing an operating margin of 30% up from 20% last year, notably the not way ball operating margin turned positive this quarter disappointing to spending and operational leverage from our being taxed goodness.
Full year operating income grew 5% to 611.9 million, representing an operating margin of 28% flat year over year.
Under you under GAAP measure not operating loss for the fourth quarter of 29 team was 208.4 million compared to non operating loss of 12.6 million for the same period last year non operating loss for the fourth quarter of 2019, mainly included one.
177 point email the impairment on company investment he shot tech knowledge.
Which exclude it under <unk> GAAP measure number to a 19.2 million that lost from fair value changes some investments, which is excluded under non-GAAP measure number three a 10.4 million net earnings from equity method investments, which it's a reported one quarter and <unk> number four oh.
15.3 million net interest and other income for your non operating losses totaled a 115.1 million compared to a non operating income of 88.5 million in 2018 non operating loss in 2019, meaning included one.
Hundreds 165.3 monthly net gains from fair value changes on investments, which is excluded under non-GAAP measure number to a 342 million impairment on company to investments, mainly including the aforementioned the impairment on you shot technology, which.
It's good it under non-GAAP measures and the number Street 64.1 million net interest in other income.
Turning to attack under <unk> GAAP measure income tax expenses were 66.6 milling in the fourth quarter compared to 14.3 million last year largely attributable to increase in tax deduction based on preferred threshold tax policy upon approval from relevant authorities.
For your income tax expenses totaled a 146.5 million compared to one of 29.
0.1 building in 2018, non-GAAP income tax expenses in 29 team were 97.4 million compared to 91 million in 2018.
Net income attributable to see not grew 43% to 82.7 million in the fourth quarter or $1.17 cents diluted net income per share for your net income attributable to Sina amounted to 232.6, and we're three dollar 26 cents diluted net income per share.
Now, let me turn onto the balance sheet and cash flow items.
So at December 31st 2019, see nuts cash cash equivalents and short term investments totaled 2.9 billing compared to 2.3 billion as to what December 31st 2018th the increase was mainly due to a net proceeds received from we bought CNN senior note offering and.
It was partially offset by continued it continued investment activities.
The fourth quarter net cash provided by operating activities was 300 written a 1.7 building capital expenditure totaled 8.5, moly and a depreciation and amortization expenses amounted to 11 milling I'm a four year basis net cash provided by operating activity was 740.
For Millie capital expenditures totaled 29.5, moly and the depreciation amortization expenses.
We will point Sixmillion.
Free cash flow totaled a 114.5 million with 609.9 milling contributed from waibel, and a 104 and a point sixmillion now wave or sackman, representing improved cash generating capital capabilities from both sides.
Me briefly summarize the execution of our share repurchase program expired in December 29 team under this program, we have repurchased a 2.2 million shares for approximately 82.1 Neely on December 30, 2019, I'll Board of directors has authorized a new share repurchase.
This program under which the company may repurchase up to U.S. dollar 500 building off its ordinary shares over the next 12 month period.
[noise] heading into 2020, well continue to navigate through the uncertainties from both the demand the supply side, it's off the advertising market and diversified revenue stream in response to the market challenges, we anticipate a near term doest that risk from the evolving situation all the corona.
Virus outbreak in China, which has being significantly impacting business operation affecting advertisers sentiment and the marketing activities as well as weighing I'll think toxin is at this moment, we're not able to estimate the four year financial impact Brata upheld by the us.
Epidemic.
Such we will not provide an annual revenue guidance for physical your 2020 until we have a better visibility into the year with that operator. Please open the call for questions.
Thank you, ladies and gentlemen, I'll begin to question answer session and if you have a question. He says I want to tell the cells and waiting into their names to cancer. The request a please press the pound heskey.
The first question comes on design of a add any out of bank of America. Their niche. Please go ahead.
Good evening, we shot if it wasn't well me I hop off weak questions on the Fintech pieces.
The first one is maybe chose could you.
Talk about your plan to grow the pieces are going forward.
Especially in comes off in the new products and services, they're not chicken meat could you all show all she has some call all on the main Jews Sackman all bad all you have all cleaned up the feed up pieces off what's on both the Oh age poll for.
So Bob deal income level et cetera, and that's finally any like impact all from the color no <unk> opaque on d. off into pieces I think it.
Hi.
Thank you.
And so I will talk about Ah think took business a little bit.
You can see Ah, we had a pretty good quarter in the fourth quarter 2019, or with strong revenue growth and also pretty good profitability and in the fourth quarter.
But to go into the.
The new year, Twentytwenty or single workers and to try to address that's very.
Yeah.
Important here when you treat the decrease and you know the ER.
Right. Okay interest rate, we can charge on my COO role because of the more you know parts and regulations in China and are.
<unk>, you know news and Arcos that's.
Overall Maxim are raised you can charge for my curdle decreased significantly so that will impact our overall revenue growth and also the profitability being a 20 to 20 and I know Trojan horse is Ah you mentioned in your supported the corner wires or.
Ah virus outbreak and I actually had pretty significant impact.
Right No first.
Oh, but it to sort of collection.
For the doing is pure roots and there so.
Were impaired.
Right.
On them I could alone we see quite a pickup in that my bet that right here.
And secondly, or given the uncertainty evolving situation, where also scouting back our long.
In this particular sector because for me show, we have a pretty good control in turn so that kind of pretty off their long.
We had treat them out and given the situation you want to Gamble considered approach.
Only on the money to the was higher qualifications.
In terms of their ability to pay so big data.
So talking about that particular to point that will relate to your second question a menu the profile for my current business.
We actually have a different approach in terms. So we don't know exactly you know so much profile in terms of called user base and income level, but we use more to put the dice, especially that the though we have on social media to.
To treat people the credit reading as well close we used to either so probably data to collaborate on me in terms of where do the profile to make sure that you, though we have the hard coded users.
It works pretty well.
So for right now were going to limit our business.
Well.
Oh problem users mandate Oh wait to.
And to the risk going forward until we see them will create picture.
Going forward and overall, so youre going to see because we'll go back our.
The loan volume and also.
Views interest rate, you're going to see some.
Uh huh.
Some makes it impacts our revenue growth, that's where all the probabilities are being short term and Ah, but in terms of new products products and services I think we're still going to folks Apollo. So my girls business one though.
We do have online payment in or some other thing took business, but the into so.
Venus volume there could be small so that being major focus was to be all on the micro gold business.
On a difference run though.
This year versus last year, we're going to see reduced rate.
I know that's was probably sometimes we will no longer pure before long so that the weekend.
Most people revenues or given the new regulation the Roman.
So I hope to answer your question.
Understood. Thank you.
Thank you. Thank you.
Next question is something I know some this job Jefferies. Please go ahead.
Hi, Ben been determined for taking my questions.
Hello.
My question about advertising season that.
I've seen that Swabbing Sobibor Oh.
Like the.
Trend doing it I can management comment about portal advertising, Oh, yeah, Nate I see how people and.
Hi, Jason had agreed Super Bowl and also how this spending.
And the new trends.
Thank you.
Okay.
Thanks Thomas.
And in terms of the kind of a carbon business and ER again, let's look back and a 29 too.
Yes.
Can see some of the declining boasts a cousin revenues, that's where I guess any revenues I sing [noise] say probably coat.
To be better than the seventies, but overall I think.
It was a very troubling junior.
Mainly because of the competition and also the softening up overall market.
From demand side because of the.
So overall macro economic conditions in China.
And Ah, but if you look at a numbers.
Assemblies working harder Ah man the I've seen because this market was much more competitive with a lot more surprise in the markets and ER given our sites in the performance based SMB business for portal business I think the where that's competitive in this market. So oh goodness was.
Hi, there.
In this sector and.
So overall revenues after the will come down more than 50% I want you to view of basis.
So this it was less than me, but the key I should read through anyway.
Better, especially in the fourth quarter, we actually source and Oh, Yeah, you gross.
In the case sector I mean, the fourth quarter, although the gross with another significant but it was.
Good turning point.
And the where we started this year 2020.
I think a we had a better feeling about a market for overall advertising business for portal in boesky, and a force Emmys I've seen good okay market.
Mainly because I think.
I treat for traffic.
On traffic.
A point of view that the where to grow or.
Traffic as well as though a fast enough and that's true pretty well.
She here and a year to year comparison basis, new stuff grew about 26% in terms of them of users to use on daily basis and.
Finance.
Nothing that's grew by 80%.
Over your basis, and so that was pretty.
Encouraging and I think aware anymore share and.
In terms of them.
More mindshare I'm honored to because as a kid with how are you seeing this market.
And SMS and voice idea, we will have a very low base I think.
Hi, there recently did not do very well and the 29 to one is because the market. The other was because the internal probably has a lot of work to do intend. So let's just trying to know and organize Jos organizational restructuring and that we think we should do a better job and a 20 twond to all real basic football spoke to.
And as Emmys and wet treat bulk up pretty good starts in January but a this was old disrupted by this cool in the virus outbreak and Ah impact I treat into first quarter was quite significant.
Right no, we estimate that probably a 20% oh, 20% drop year over year for a cousin business during the first quarter.
Of course, this evolving figure because.
I don't know, what's going to happen, even watch and depending on how fast people get back to work and everybody focused on their.
Business right now, we don't see us coming very soon so I would say the significant impact in Q1 will last and Ah.
In parallel lost.
In the entire Q1, probably will also impact Q2 business. So right now it's very difficult for us to estimate.
The exactly the outlook for the entire year, but if ER.
Set aside the CRO no virus outbreak and we'll probably see a little bit better.
Hi, being business this year versus Russia.
Thank you Carlos.
Thank you. Thank you, ladies and gentlemen that concludes edge and they session no like that confidence back to me sad to check for closing remarks.
Thank you operator. This concludes our conference call today, Thank you for Chile.
Who seem next quarter.
Oh, Thank you David together that doesn't do they conference for today and thank you for participating Youve discussed.
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