Weibo Corporation (NASDAQ:WB) Q2 2020 Earnings Conference Call - Final Transcript

Sep 28, 2020 • 07:00 am ET

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Weibo Corporation (NASDAQ:WB) Q2 2020 Earnings Conference Call - Final Transcript

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Presentation
Executive
Fei Cao

continued to face headwinds in their business operations, especially for offline merchants. Consequently, we anticipate that it will take time for the overall SME ad spend to rebound to the pre-pandemic level, even though online sectors such as gaming and online education continued to book encouraging growth rate on a year-over-year basis this quarter.

That said, on a sequential basis, SME ad business demonstrated a moderated recovery from the first quarter trough, up 16% quarter-over-quarter. Apart from normal seasonality, we're encouraged to see the gradual rebound from industries like e-commerce and the certain local services as consumption recovered.

On the contrary, ad spend from gaming and online education saw a moderate pullback on a sequential basis has impacted, with users' online time spent normalizing. While the actual recovery pace of advertisers' ad budget is beyond our control, we proactively took the window to revamp our ad bidding system and optimize ad products in the hope of driving broader OCPX adoption for smarter targeting, higher ad placement efficiency and better ad measurement, which ultimately bodes well for us to capture higher ad wallet share amid a competitive landscape of performance ad market in the long run.

Value added service, VAS revenues were $46.8 million in the second quarter, a decrease of 23% or 21% on a constant currency basis, primarily due to decrease of live streaming business and was partially offset by the increase in membership revenues. Turning to costs and expenses. Total costs and expenses for the second quarter was $265.5 million, flat year-over-year. Our operating income in the second quarter was $121.9 million, representing an operating margin of 31% compared to 38% last year.

Turning to income tax and the GAAP measure. Income tax expense for the second quarter was $14.7 million compared to $26.1 million last year. The increase was mainly attributable to a deferred tax charge recognized from fair value change of an investment in the second quarter this year. Net income attributable to Weibo in the second quarter was $114.5 million, representing a net margin of 30% compared to 36% last year.

Turning to our balance sheet and cash flow items. As of June 30, 2020, Weibo's cash, cash equivalents and short-term investments totaled $2.33 billion compared to $2.4 billion as of December 31st, 2019. In the second quarter of 2020, cash provided by operating activities was $121.7 million. Capital expenditures totaled $8.4 million. And the depreciation and amortization expenses amounted to $6.9 million.

Now, let me turn to financial outlook. We anticipate our third quarter 2020 net revenues to decrease by 5% to 7% year-over-year on a constant currency basis. This forecast reflects Weibo's current and preliminary view and is subject to change.

With that, let me now turn the call over to the operator for the Q&A session.