Weibo posted unaudited financial results for 23Q4 and 2023. Revenue recovered positive year-on-year growth in 23Q4, and operating profit margins remained stable; overall revenue recovery in 2023 was slow, expenses were properly controlled, and operating profit margins remained stable. Maintain an increase in holdings rating.
Key points to support ratings
Revenue recovered positively year over year in 23Q4, and cash flow performance was healthy in 2023. Weibo 23Q4 net revenue of US$464 million, +3.5% YoY, calculated at a fixed exchange rate (RMB 7.13 = US$1.00, same below); GAAP operating profit of US$119 million, -25.8% YoY, operating margin 26%, YoY -10.2ppts; GAAP net profit to mother of US$83.23 million, or -41.4% YoY; Non-GAAP net profit of US$76.37 million, YoY. 23Q4 Cash inflows from operating activities were US$218 million. Net income in 2023 was $1.76 billion, -4.2% YoY, +1% YoY at a fixed exchange rate; GAAP net profit to mother of $343 million, +300% YoY; Non-GAAP net profit of $451 million, -16.6% YoY. As of December 31, the company's total cash, cash equivalents and short-term investments were US$3.2 billion, and cash inflow from operating activities in 2023 was US$673 million.
The advertising and marketing business is slowly recovering, and the 2024 Olympic Games are expected to stimulate brand marketing. 23Q4 advertising and marketing revenue was US$404 million, +3.4% year over year; of these, advertising revenue from Alibaba reached US$44.89 million, +6.2% year over year. Revenue from value-added services was $59.93 million, +4.3% year over year, mainly due to increased game-related revenue. Advertising revenue in 2023 was US$1.53 billion, -3.9% YoY, mainly adversely affected by the year-on-year depreciation of RMB against the US dollar; revenue from value-added services was US$226 million, -5.8% YoY. According to the performance conference management statement, the hosting of the 2024 Olympic Games is expected to stimulate brand advertising in the food, beverage, and sports footwear industries; the increase in game version distribution will also increase the marketing budget of game advertisers; advertising pressure for traditional cars, beauty and skin care is still high.
Q4 Marketing expenses increased significantly year over year, and the overall operating profit margin remained stable in 2023. 23Q4 non-GAAP gross margin was 78.8%, +2.1 ppts year over year; non-GAAP sales expenses ratio was 29.4%, +2.8 ppts year over year. In 22Q4, due to the failure to achieve the performance situation agreed by the founder of Kamen Technology, the accrued remuneration expenses for the previous period were refunded, resulting in a positive value for the current period; 23Q4 returned to normal, so operating profit declined significantly year-on-year; the 23Q4 non-GAAP R&D and management expenses ratio was 19.1%, which decreased compared to normal quarters other than 22Q4. In 2023, the non-GAAP gross profit margin was 79.2%, which was basically the same; the non-GAAP operating margin was 33.6%, +1.5ppts year over year.
valuations
We expect advertising revenue growth in the second half of 2024 to be better than in the first half of the year, driven by the Olympic Games; revenue recovery in 2023 is slower than we had previously anticipated, and negative exchange rate effects still exist in the first half of 2024. We cut our 2024/25 non-GAAP net profit to US$421/484 million, and we expect the 2026 non-GAAP net profit to be $529 million; corresponding to 2024/25/26 PE is 5.8/5.0/4.6 times. Maintain an increase in holdings rating.
The main risks faced by ratings
Macroeconomic growth declined; advertising fell short of expectations; content regulation exceeded expectations; competition intensified.