Sotheby's on Monday said year-over-year first-quarter revenue increased 17 percent to $119.6 million.

The international auction house said the first quarter is traditionally a loss period because of the seasonal nature of the art auction market. However, for the first quarter of 2011, ended March 31, it reported a net income of $2.4 million, compared to a net loss of $2.2 million in the prior year.

The company said this improvement is principally due to higher auction commission revenues resulting from a 23 percent increase in net auction sales, partially offset by a decline in auction commission margin from 17.2 percent to 16.4 percent, attributable to the sales mix. During the period, there was an increase in works of art sold in the upper price bands, including a 63 percent increase in the number of works sold over $1 million (from 62 to 101 lots).

“This is one of our best first quarters on record,” said Bill Ruprecht, Sotheby’s president and CEO. “It is all the more impressive given the outstanding first quarter of 2010, which included one work by Giacometti which sold for an unprecedented $104.3 million.

“Sales are up year to date by 31 percent, continuing the positive momentum into the second quarter of 2011,” he continued. “Our Hong Kong sales have been a major contributor, bringing a record total of $447 million, near the high end of the pre-sale estimate and showing the depth and breadth of wealth in that region. And our Impressionist and Modern Art sales last week brought a solid $209.5 million with works that were fairly and conservatively estimated bringing particularly strong prices.”

Competitive pressures to win these high value consignments resulted in lower commission margins as sales approached the peak levels of 2006 – 2008, Sotheby’s said.

The improvement vs. 2010 is partially offset by a $14.7 million, or 16 percent, increase in operating expenses. A portion of this increase ($4.2 million) is attributable to higher dealer cost of sales principally due to $2.6 million in inventory write downs and increased dealer sales revenues.

Total operating expenses, excluding dealer cost of sales, increased $10.5 million, or 11 percent, from the prior period, the company said. First quarter results also benefited from a recovery of $3 million as a result of the resolution of an undisclosed litigation matter. This recovery relates to interest earned on the overdue balance of $2.2 million, $400,000 compensation for lost auction commissions of and $400,000 for the partial reimbursement of legal fees.

Sotheby’s second quarter is off to a strong start. Its Impressionist and Modern Art sales brought in $209.5 million. Top lots included Pablo Picasso’s Femmes lisant (Deux personnages), a portrait of Picasso’s mistress from the 1930s, Marie-Thérèse Walter, which brought in $21.4 million. Other standouts were Alexej von Jawlensky’s Woman with a Green Fan and Paul Gauguin’s sculpture, Jeune tahitienne which brought in $11.3 million each.

Its April sales in Hong Kong took in a total of $447 million, a 75 percent increase from last year’s total of $256 million and the highest total ever for a sales series in Hong Kong. Virtually every day saw records broken, including a record for any work of Contemporary Chinese Art, as well as the highest totals at Sotheby’s Hong Kong for the sale categories of Fine Chinese Paintings, 20th Century Chinese Art, Modern and Contemporary Southeast Asian Paintings, Watches and Wine.

Arts of the Islamic World sales, held last month in London, included part one of the Cary Welch Collection of Islamic and Indian Art. The star sale was one of the most famous illustrated Persian manuscripts ever produced, the Shahnameh of Shah Tahmasp. The work sold for $12.2 million, more than double the pre-sale estimate and the sale brought in a total of $34.2 million, almost four times the pre-sale estimate. The various owner Arts of the Islamic World sale brought in $26.4 million, bringing the series total to $60.6 million, more than double last year’s total.

Sotheby’s Magnificent Jewels sale in New York last month totaled $39.4 million, above the pre-sale high estimate of $35.6 million and the highest total ever for a spring jewelry auction at Sotheby’s New York. Highlighting the sale were wonderful pieces from a private collection that featured romantic diamonds and Cartier designs from the firm’s creative peak that brought $7.9 million, more than double the pre-sale high estimate.