Yahoo! Inc. (Nasdaq: YHOO) today reported results for the third quarter ended September 30, 2007.
„Over the past three months, we conducted a thorough review of our business and the marketplace. We’ve made key strategic decisions to invest in and grow our large communities of users, advertisers, and publishers. We’ve also made progress in sharpening our focus and improving our execution,” said Jerry Yang, co-founder and chief executive officer, Yahoo! Inc. “Moving forward, we are focused on three big, multi-year objectives: to become the starting point for the most consumers on the Internet; to be the ‘must buy’ for the most advertisers; and to deliver open, industry-leading platforms that attract the most developers. We are executing against our transformation and are excited about playing a leadership role in the large and growing Internet market.”
Third Quarter 2007 Financial Results
• Revenues were $1,768 million for the third quarter of 2007, a 12 percent increase compared to $1,580 million for the same period of 2006.
• Marketing services revenues were $1,544 million for the third quarter of 2007, a 13 percent increase compared to $1,370 million for the same period of 2006.
o Marketing services revenues from Owned and Operated sites were $922 million for the third quarter of 2007, a 24 percent increase compared to $742 million for the same period of 2006.
o Marketing services revenues from Affiliate sites were $622 million for the third quarter of 2007, a 1 percent decrease compared to $628 million for the same period of 2006.
• Fees revenues were $224 million for the third quarter of 2007, a 7 percent increase compared to $210 million for the same period of 2006.
• Revenues excluding traffic acquisition costs (“TAC”) were $1,283 million for the third quarter of 2007, a 14 percent increase compared to $1,121 million for the same period of 2006.
• Gross profit for the third quarter of 2007 was $1,027 million, a 14 percent increase compared to $899 million for the same period of 2006.
• Operating income for the third quarter of 2007 was $150 million, a 26 percent decrease compared to $202 million for the same period of 2006.
• Operating income before depreciation, amortization and stock-based compensation expense for the third quarter of 2007 was $466 million, a 2 percent decrease compared to $474 million for the same period of 2006.
• Cash flow from operating activities for the third quarter of 2007 was $457 million, a 17 percent increase compared to $390 million for the same period of 2006.
• Free cash flow for the third quarter of 2007 was $310 million, an 8 percent increase compared to $288 million for the same period of 2006.
• Net income for the third quarter of 2007 was $151 million or $0.11 per diluted share compared to $159 million or $0.11 per diluted share for the same period of 2006.
• Non-GAAP net income for the third quarter of 2007 was $238 million or $0.17 per diluted share compared to non-GAAP net income of $240 million or $0.17 per diluted share for the same period of 2006.
• The provision for income taxes for the third quarter of 2007 was $79 million and yielded an effective tax rate of 41 percent. The provision for income taxes for the third quarter of 2006 was $124 million and yielded an effective tax rate of 49 percent.
• Explanations of the Company’s non-GAAP financial measures and the related reconciliations to the GAAP financial measures the Company considers most comparable are included in the accompanying “Note to Unaudited Condensed Consolidated Statements of Income,” “Reconciliations to Unaudited Condensed Consolidated Statements of Income,” and “Reconciliation of GAAP Net Income and GAAP Net Income Per Share to Non-GAAP Net Income and Non-GAAP Net Income Per Share.”
„Our strategy is to generate and leverage the most valuable insights, deploy open platforms, and offer partnerof-choice solutions that make Yahoo! more relevant and indispensable for our users, advertisers, publishers, and developers,“ said Sue Decker, president, Yahoo! Inc. “During the quarter, we continued to make strides in sharpening our focus and organizing ourselves to execute against this strategy. We are prioritizing our resources around the key Yahoo! starting points that create the most value, and creating strong differentiation in those products. We are aggressively building out our open advertising and publishing network, delivering more integrated and targeted solutions, and pursuing opportunities to realize added value from both the search and display inventory created by our massive and growing user base.“
Segment Financial Results
• United States segment revenues for the third quarter of 2007 were $1,195 million, a 13 percent increase compared to $1,054 million for the same period of 2006.
• International segment revenues for the third quarter of 2007 were $573 million, a 9 percent increase compared to $526 million for the same period of 2006.
• United States segment operating income before depreciation, amortization and stock-based compensation expense for the third quarter of 2007 was $338 million, a 7 percent decrease compared to $366 million for the same period of 2006.
• International segment operating income before depreciation, amortization and stock-based compensation expense for the third quarter of 2007 was $128 million, an 18 percent increase compared to $108 million for the same period of 2006.
Cash Flow Information
Free cash flow was $310 million for the third quarter of 2007 compared to $288 million for the same period of 2006. In addition to free cash flow, Yahoo! generated $40 million from the issuance of common stock as a result of the exercise of employee stock options. This was offset by $350 million used for direct stock repurchases and $320 million used for acquisitions. Cash, cash equivalents and investments in marketable debt securities were $2,763 million at September 30, 2007 as compared to $3,152 million at June 30, 2007, a decrease of $389 million.
„We are pleased with our results this quarter and are continuing to invest in major growth initiatives that advance our key strategic objectives,” said Blake Jorgensen, chief financial officer, Yahoo! Inc. „We are encouraged by the early signs of improvement in our business and believe the strategy we’re pursuing and the investments we’re making will position us to capture the significant opportunities on the horizon and create long-term shareholder value.“
Quarterly Conference Call
Yahoo! will host a conference call to discuss third quarter results at 5:00 p.m. Eastern Time today. A live webcast of the conference call, together with supplemental financial information, can be accessed through the Company’s Investor Relations website at http://yhoo.client.shareholder.com/results.cfm. In addition, an archive of the webcast can be accessed through the same link. An audio replay of the call will be available following the conference call by calling 888-286-8010 or 617-801-6888, reservation number: 62045407.
About Yahoo!
Yahoo! Inc. is a leading global Internet brand and one of the most trafficked Internet destinations worldwide. Yahoo!’s mission is to connect people to their passions, their communities, and the world’s knowledge. Yahoo! is headquartered in Sunnyvale, California.
Affiliate sites refer to Yahoo!’s distribution network of third-party entities who have integrated Yahoo!’s search and/or display advertising offerings into their websites.
This press release and its attachments include the following financial measures defined as non-GAAP financial measures by the Securities and Exchange Commission: revenues excluding traffic acquisition costs or TAC, operating income before depreciation, amortization and stock-based compensation expense, free cash flow, and non-GAAP net income and non-GAAP net income per share. These measures may be different from non-GAAP financial measures used by other companies. The presentation of this financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with generally accepted accounting principles (“GAAP”). See “Note to Unaudited Condensed Consolidated Statements of Income,” “Reconciliations to Unaudited Condensed Consolidated Statements of Income,” and “Reconciliation of GAAP Net Income and GAAP Net Income Per Share to Non-GAAP Net Income and Non-GAAP Net Income Per Share” included in this press release for further information regarding these non-GAAP financial measures. This press release and its attachments contain forward-looking statements that involve risks and uncertainties concerning Yahoo!’s expected financial performance (including without limitation the statements and information in the Business Outlook section and the quotations from management in this press release), as well as Yahoo!’s strategic and operational plans. Actual results may differ materially from the results predicted and reported results should not be considered as an indication of future performance. The potential risks and uncertainties include, among others, the successful implementation, and acceptance by advertisers, of the Company’s new search advertising system; the Company’s ability to compete with new or existing competitors; the implementation and results of the Company’s ongoing strategic initiatives; reduction in spending by, or loss of, marketing services customers; the demand by customers for Yahoo!’s premium services; acceptance by users of new products and services; risks related to joint ventures and the integration of acquisitions; risks related to the Company’s international operations; failure to manage growth and diversification; adverse results in litigation, including intellectual property infringement claims; the Company’s ability to protect its intellectual property and the value of its brands; dependence on key personnel; dependence on third parties for technology, services, content and distribution; and general
economic conditions. All information set forth in this press release and its attachments is as of July 17, 2007. Yahoo! does not intend, and undertakes no duty, to update this information to reflect future events or circumstances. More information about potential factors that could affect the Company’s business and financial results is included under the captions „Risk Factors“ and „Management’s Discussion and Analysis of Financial Condition and Results of Operations“ in the Company’s Annual Report on Form 10-K for the year ended December 31, 2006 and the Quarterly Report on Form 10-Q for the quarter ended March 31, 2007, which are on file with the SEC and available at the SEC’s website at www.sec.gov. Additional information will also be set forth in those sections in Yahoo!’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007, which will be filed with the SEC in the third quarter of 2007.
