Qihoo Q2 Profit Down On Higher Costs

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8/21/2012 7:34 PM ET

Qihoo 360 Technology Co. Ltd. (QIHU: Quote) Tuesday reported a lower profit in the second quarter, as higher cost to expand service offerings impacted its bottom line, notwithstanding a revenue growth that more-than-doubled.

Second quarter operating costs increased to $56.4 million from $18.7 million last year, as the company recruited more employees and improved its infrastructure to expand its new service offerings.

Gross margin advanced to 90.9 percent from 89.5 percent last year. Operating margin dropped to 13.6 percent from 36.3 percent last year.

Qihoo's total revenues for the quarter surged to $72.8 million from $35.1 million last year. Nine analysts on consensus estimated revenues of $72.64 million for the quarter.

Revenue growth was driven mainly by strong performance at both online advertising and internet value-added services, driven by continued robust user and traffic growth.

Online advertising revenues grew 89.9 percent from last year, while internet value-added service revenues, which mainly comes from web game operations, increased 167.2 percent. Qihoo provides China's most popular web browser and anti-virus software.

Chief Executive Hongyi Zhou said, "We are very pleased to report another strong quarter of triple-digit year-over-year growth in what continues to be a challenging macro environment."

Beijing-based Qihoo's profit for the second quarter dropped to $7.0 million or $0.06 per ADS from $11.1 million or $0.09 per ADS last year.

Excluding share-based compensation expenses, adjusted net income improved to $20.6 million or $0.17 per ADS from $13.2 million or $0.11 per ADS in the year-ago quarter. Analysts polled by Thomson Reuters expected earnings of $0.17 per ADS for the quarter. Analysts' estimates typically exclude special items.

Looking forward to the third quarter, the company expects revenue of $81 million to $82 million. Nine analysts currently estimate revenues of $78.15 million for the third-quarter.

QIHU closed Wednesday's trading at $21.10, up $0.89 or 4.40%, on the Nasdaq. The stock, however, lost $0.75 or 3.55% in after-hours trade.

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by RTT Staff Writer

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