SUNNYVALE, Calif. -- Yahoo! Inc. (NASDAQ: YHOO) today reported results for the quarter ended June 30, 2013.
Q2 2012 Q2 2013
Percent
Change
GAAP revenue $1,218 million $1,135 million (7)%
Revenue ex-TAC $1,081 million $1,071 million (1)%
GAAP income from operations $55 million $137 million 150%
Non-GAAP income from operations $240 million $209 million (13)%
GAAP net earnings per diluted share $0.18 $0.30 68%
Non-GAAP net earnings per diluted share $0.30 $0.35 19%
"I'm encouraged by Yahoo!'s performance in the second quarter. Our business saw continued stability, and we launched more products than ever before, introducing a significant new product almost every week," said Yahoo! CEO Marissa Mayer. "From the new Yahoo! News, the new Yahoo! Sports app, the redesigned Yahoo! search, the new Flickr, the new Yahoo! Mail for tablet, the Yahoo! Weather app, our new Yahoo! app with Summly - this quarter drove tremendous improvements in our product line and our users responded with increased usage and engagement."
GAAP revenue was $1,135 million for the second quarter of 2013, a 7 percent decrease from the second quarter of 2012. Revenue excluding traffic acquisition costs ("revenue ex-TAC") was $1,071 million for the second quarter of 2013, a 1 percent decrease compared to the second quarter of 2012.
Adjusted EBITDA for the second quarter of 2013 was $369 million, a 7 percent decrease compared to the same period of 2012.
GAAP income from operations was $137 million for the second quarter of 2013, a 150 percent increase from the second quarter of 2012 (which reflected a restructuring charge of $129 million ). Non-GAAP income from operations was $209 million for the second quarter of 2013, a 13 percent decrease from the second quarter of 2012.
GAAP net earnings for the second quarter of 2013 was $331 million, a 46 percent increase from the same period of 2012. Non-GAAP net earnings for the second quarter of 2013 was $386 million, a 6 percent increase from the same period of 2012.
GAAP net earnings per diluted share was $0.30 in the second quarter of 2013, compared to $0.18 in the second quarter of 2012. Non-GAAP net earnings per diluted share was $0.35 in the second quarter of 2013, compared to $0.30 in the second quarter of 2012.
Business Highlights
Yahoo! accelerated its pace of innovation in the second quarter, launching nearly a dozen new product experiences for its core daily habits — including re-imagined desktop, mobile and tablet versions of Mail, Weather, Flickr, Search, Sports, News, and Yahoo! for iPhone and Android.
The Company announced two new advertising formats designed to enhance the content experience in a more intuitive and immersive way. Yahoo! Stream Ads offer unobtrusive native ads that are part of a user's Yahoo! news stream. The Company also unveiled a new Yahoo.com Billboard ad, designed to deliver richer content interactions to users and increased effectiveness to advertisers.
Yahoo! is offering additional content as part of its partnerships with leading news and entertainment brands such as ABC News, CNBC, and Condé Nast Entertainment, adding breadth to its existing portfolio of partner content and enhancing Yahoo!'s cross-screen experiences. The Company also announced a partnership between Yahoo! and Broadway Video Entertainment, along with NBC Entertainment, to bring the "Saturday Night Live" archive clips from 1975 to 2013 exclusively to Yahoo!.
During the second quarter, Yahoo! made nine acquisitions to strengthen its products, content offerings, core technology and talent — including Summly, Astrid, Milewise, Loki Studios, Go Poll Go, PlayerScale, Rondee, Ghostbird Software and Tumblr. Tumblr is one of the fastest-growing media networks in the world. Its tremendous popularity and engagement among creators, curators and audiences of all ages brings a significant community of users to the Yahoo! network. The combination of Tumblr and Yahoo! is expected to grow Yahoo!'s audience to more than one billion monthly visitors.
Second Quarter 2013 Financial Highlights
Display:
GAAP display revenue was $472 million for the second quarter of 2013, a 12 percent decrease compared to $535 million for the second quarter of 2012.
Display revenue ex-TAC was $423 million for the second quarter of 2013, an 11 percent decrease compared to $473 million for the second quarter of 2012.
The Number of Ads Sold (excluding Korea ) decreased approximately 2 percent compared to the second quarter of 2012.
Price-per-Ad (excluding Korea ) decreased approximately 12 percent compared to the second quarter of 2012.
Search:
GAAP search revenue was $418 million for the second quarter of 2013, a 9 percent decrease compared to $461 million for the second quarter of 2012.
Search revenue ex-TAC was $403 million for the second quarter of 2013, a 5 percent increase compared to $385 million for the second quarter of 2012.
Paid Clicks (excluding Korea ) increased approximately 21 percent compared to the second quarter of 2012.
Price-per-Click (excluding Korea ) decreased approximately 8 percent compared to the second quarter of 2012.
Cash Balance:
Cash, cash equivalents, and investments in marketable securities were $4.8 billion as of June 30, 2013 compared to $6 billion as of December 31, 2012, a decrease of $1.2 billion.
During the second quarter of 2013, Yahoo! repurchased 25 million shares for $653 million and used a net $1 billion in cash for acquisitions (including a net $970 million to acquire Tumblr). These outflows were offset by $846 million in cash from Alibaba Group to redeem the Alibaba Group Preference Shares. The cash received represents the redemption value and includes the stated value of $800 million plus dividends of $46 million.
"We are happy to announce that as of today we have essentially completed our commitment to return $3.65 billion from our Alibaba Group proceeds to shareholders, repurchasing a total of 190 million shares," said Yahoo! CFO Ken Goldman. "As part of our ongoing commitment to shareholders, we plan to continue to execute against the $5 billion share buyback that was authorized last year, of which approximately $1.9 billion remains. We plan to repurchase shares in open market or privately negotiated transactions."
Live Stream
Yahoo! will live stream a video broadcast of the Company's second quarter 2013 financial results at 2 p.m. Pacific Time / 5 p.m. Eastern Time today. The live stream will be broadcast from Yahoo!'s Sunnyvale studio and will be available exclusively on Yahoo! Finance at http://finance.yahoo.com. The Company will provide its business outlook for the third quarter and full year during the presentation. Supplemental financial information can be accessed through the Company's Investor Relations website at http://investor.yahoo.com. The video webcast will be archived after the event at http://investor.yahoo.com and will be available for 90 days following the broadcast.
Non-GAAP Financial Measures
This press release and its attachments include the following financial measures defined as non-GAAP financial measures by the Securities and Exchange Commission ("SEC"): revenue ex-TAC; adjusted EBITDA; non-GAAP income from operations; non-GAAP net earnings; non-GAAP net earnings per share - diluted; and free cash flow.
Revenue ex-TAC is GAAP revenue less traffic acquisition costs. Adjusted EBITDA, non-GAAP income from operations, non-GAAP net earnings and non-GAAP net earnings per share - diluted, exclude from the most comparable GAAP financial measures certain gains, losses, and expenses that we do not believe are indicative of ongoing results, and exclude stock-based compensation expense. Adjusted EBITDA also excludes taxes, depreciation, amortization of intangible assets, other income, net (which includes interest), earnings in equity interests, and net income attributable to noncontrolling interests. Free cash flow is GAAP net cash provided by operating activities (adjusted to include excess tax benefits from stock-based awards), less acquisition of property and equipment, net and dividends received from equity investees.
These measures may be different than 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"). Explanations of the Company's non-GAAP financial measures and reconciliations of these financial measures to the GAAP financial measures the Company considers most comparable are included in the accompanying "Note to Unaudited Condensed Consolidated Financial Statements," "Supplemental Financial Data and GAAP to Non-GAAP Reconciliations," and "GAAP to Non-GAAP Reconciliations."
About Yahoo!
Yahoo! is focused on making the world's daily habits inspiring and entertaining. By creating highly personalized experiences for our users, we keep people connected to what matters most to them, across devices and around the world. In turn, we create value for advertisers by connecting them with the audiences that build their businesses. Yahoo! is headquartered in Sunnyvale, California, and has offices located throughout the Americas, Asia Pacific (APAC) and the Europe, Middle East and Africa (EMEA) regions. For more information, visit the pressroom (pressroom.yahoo.net) or the Company's blog (yahoo.tumblr.com).
"Affiliates" refers to the third-party entities that have integrated Yahoo!'s advertising offerings into their Websites or other offerings (those Websites and other offerings, "Affiliate sites").
"Alibaba Group" means Alibaba Group Holding Limited.
"Net earnings" means net income attributable to Yahoo! Inc., and "net earnings per diluted share" means net income attributable to Yahoo! Inc. common stockholders per share — diluted.
"Number of Ads Sold" is defined as the total number of ads displayed, or impressions, for paying advertisers on Yahoo! Properties.
"Paid Clicks" are defined as the total number of times an end-user clicks on a sponsored listing on Yahoo! Properties and Affiliate sites for which an advertiser pays on a per click basis.
"Price-per-Ad" is defined as display revenue from Yahoo! Properties divided by our Number of Ads Sold.
"Price-per-Click" is defined as search revenue divided by our Paid Clicks.
Additional information about how "Number of Ads Sold," "Paid Clicks," "Price-per-Ad," and "Price-per-Click" are defined and calculated is included under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2013, which is on file with the SEC and available on the SEC's website at www.sec.gov. Due to the closure of the Korea business in the fourth quarter of 2012, "Number of Ads Sold", "Paid Clicks", "Price-per-Ad", and "Price-per-Click," as presented above, exclude the Korea market for all periods.
"Search Agreement" refers to the Search and Advertising Services and Sales Agreement between Yahoo! and Microsoft Corporation, as amended.
"TAC" refers to traffic acquisition costs.TAC consists of payments to Affiliates and payments made to companies that direct consumer and business traffic to Yahoo! Properties.
"Yahoo! Properties" refers to the online properties and services that Yahoo! provides to users.
This press release contains forward-looking statements concerning Yahoo!'s expected financial performance and Yahoo!'s strategic and operational plans (including, without limitation, the quotation from management). Risks and uncertainties may cause actual results to 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, acceptance by users of new products and services (including, without limitation, products and services for mobile devices and alternative platforms); Yahoo!'s ability to compete with new or existing competitors; reduction in spending by, or loss of, advertising customers; risks associated with the Search Agreement with Microsoft Corporation; risks related to Yahoo!'s regulatory environment; interruptions or delays in the provision of Yahoo!'s services; security breaches; risks related to joint ventures and the integration of acquisitions; risks related to Yahoo!'s international operations; adverse results in litigation; Yahoo!'s ability to protect its intellectual property and the value of its brands; 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 16, 2013. Yahoo! does not intend, and undertakes no duty, to update this information to reflect subsequent 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, 2012 and Quarterly Report on Form 10-Q for the quarter ended March 31, 2013, which are on file with the SEC and available on 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, 2013, which will be filed with the SEC in the third quarter of 2013.
Yahoo!, Flickr and the Yahoo! logos are trademarks and/or registered trademarks of Yahoo! Inc. All other names are trademarks and/or registered trademarks of their respective owners.
Yahoo! Inc.
Unaudited Condensed Consolidated Balance Sheets
(in thousands)
December 31,
June 30,
2012
2013
ASSETS
Current assets:
Cash and cash equivalents $ 2,667,778 $ 1,142,223
Short-term marketable securities 1,516,175 1,486,591
Accounts receivable, net 1,008,448 941,811
Prepaid expenses and other current assets 460,312 887,677
Total current assets 5,652,713 4,458,302
Long-term marketable securities 1,838,425 2,161,814
Alibaba Group Preference Shares 816,261 -
Property and equipment, net 1,685,845 1,579,822
Goodwill 3,826,749 4,582,588
Intangible assets, net 153,973 398,300
Other long-term assets 289,130 171,210
Investments in equity interests 2,840,157 2,874,387
Total assets $ 17,103,253 $ 16,226,423
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $ 184,831 $ 120,028
Accrued expenses and other current liabilities 808,475 763,117
Deferred revenue 296,926 294,968
Total current liabilities 1,290,232 1,178,113
Long-term deferred revenue 407,560 333,229
Capital lease and other long-term liabilities 124,587 125,639
Deferred and other long-term tax liabilities, net 675,271 730,708
Total liabilities 2,497,650 2,367,689
Total Yahoo! Inc. stockholders' equity 14,560,200 13,808,864
Noncontrolling interests 45,403 49,870
Total equity 14,605,603 13,858,734
Total liabilities and equity $ 17,103,253 $ 16,226,423
Yahoo! Inc.
Unaudited Condensed Consolidated Statements of Income
(in thousands, except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
2012 2013 2012 2013
Revenue $ 1,217,794 $ 1,135,244 $ 2,439,027 $ 2,275,612
Operating expenses:
Cost of revenue - traffic acquisition costs 137,025 64,316 281,116 130,384
Cost of revenue - other 278,453 271,262 532,432 549,269
Sales and marketing 272,910 279,738 558,178 536,757
Product development 199,628 236,248 428,106 455,828
General and administrative 136,117 135,039 260,388 268,460
Amortization of intangibles 9,756 8,084 19,809 15,449
Restructuring charges, net 129,092 3,578 134,809 (3,484 )
Total operating expenses 1,162,981 998,265 2,214,838 1,952,663
Income from operations 54,813 136,979 224,189 322,949
Other income, net 20,175 23,606 22,453 40,678
Income before income taxes and earnings in equity interests 74,988 160,585 246,642 363,627
Provision for income taxes (26,523 ) (50,267 ) (82,942 ) (80,003 )
Earnings in equity interests 179,991 224,690 352,234 442,278
Net income 228,456 335,008 515,934 725,902
Less: Net income attributable to noncontrolling interests (1,825 ) (3,858 ) (2,960 ) (4,467 )
Net income attributable to Yahoo! Inc. $ 226,631 $ 331,150 $ 512,974 $ 721,435
Net income attributable to Yahoo! Inc. common stockholders per share - diluted (1) $ 0.18 $ 0.30 $ 0.42 $ 0.65
Shares used in per share calculation - diluted 1,221,719 1,094,694 1,224,102 1,101,395
Stock-based compensation expense by function:
Cost of revenue - other $ 2,614 $ 3,029 $ 5,508 $ 6,607
Sales and marketing 18,981 23,775 40,078 39,820
Product development 17,808 20,537 37,279 28,800
General and administrative 10,168 20,795 22,672 37,514
Restructuring expense reversals, net (3,429 ) - (3,429 ) -
Supplemental Financial Data:
Revenue ex-TAC $ 1,080,769 $ 1,070,928 $ 2,157,911 $ 2,145,228
Adjusted EBITDA $ 397,715 $ 369,182 $ 782,022 $ 754,787
Free cash flow $ 93,390 $ 131,400 $ 289,213 $ 281,308
(1) The impact of outstanding stock awards of entities in which the Company holds equity interests that are accounted for using the equity method reduced the Company's diluted earnings per share by $0.01 for the three months ended June 30, 2012 and the six months ended June 30, 2013.
Yahoo! Inc.
Unaudited Condensed Consolidated Statements of Cash Flows
(in thousands)
Three Months Ended Six Months Ended
June 30, June 30,
2012 2013 2012 2013
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 228,456 $ 335,008 $ 515,934 $ 725,902
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 131,789 141,426 254,539 285,290
Amortization of intangible assets 28,864 19,067 60,209 37,477
Stock-based compensation expense 46,142 68,136 102,108 112,741
Non-cash restructuring charges 38,638 - 38,638 547
Dividend income related to Alibaba Group Preference Shares - (15,475 ) - (35,726 )
Dividends received from equity investees 83,648 123,058 83,648 135,058
Tax benefits from stock-based awards (4,949 ) 188 (3,935 ) 9,725
Excess tax benefits from stock-based awards (8,609 ) (5,706 ) (16,770 ) (18,513 )
Deferred income taxes (14,075 ) (7,839 ) (18,474 ) (27,997 )
Earnings in equity interests (179,991 ) (224,690 ) (352,234 ) (442,278 )
(Gain) loss from sale of investments, assets, and other, net (15,105 ) 1,270 (18,962 ) 13,175
Changes in assets and liabilities, net of effects of acquisitions:
Accounts receivable, net (112,549 ) 657 (9,908 ) 58,510
Prepaid expenses and other 20,448 (119,275 ) 11,018 (99,568 )
Accounts payable 6,728 11,381 (35,714 ) (59,754 )
Accrued expenses and other liabilities 28,233 53,711 (15,755 ) (69,761 )
Deferred revenue (3,108 ) (50,089 ) (22,329 ) (75,318 )
Net cash provided by operating activities 274,560 330,828 572,013 549,510
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment, net (106,131 ) (82,076 ) (215,922 ) (151,657 )
Purchases of marketable securities (469,046 ) (763,009 ) (645,266 ) (2,244,302 )
Proceeds from sales of marketable securities 414,478 1,034,246 548,439 1,458,593
Proceeds from maturities of marketable securities 120,798 279,306 198,498 462,406
Proceeds related to the redemption of Alibaba Group Preference Shares - 800,000 - 800,000
Purchases of intangible assets (1,286 ) (924 ) (3,088 ) (2,052 )
Proceeds from the sale of investments 26,132 - 26,132 -
Acquisitions, net of cash acquired - (1,014,010 ) - (1,024,157 )
Other investing activities, net (2,141 ) (6,961 ) (9,421 ) (3,139 )
Net cash (used in) provided by investing activities (17,196 ) 246,572 (100,628 ) (704,308 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock, net 66,248 61,984 77,871 123,092
Repurchases of common stock (455,507 ) (652,750 ) (526,007 ) (1,427,825 )
Excess tax benefits from stock-based awards 8,609 5,706 16,770 18,513
Tax withholdings related to net share settlements of restricted stock units (6,990 ) (7,448 ) (38,494 ) (51,137 )
Other financing activities, net (1,209 ) (1,373 ) (2,222 ) (2,778 )
Net cash used in financing activities (388,849 ) (593,881 ) (472,082 ) (1,340,135 )
Effect of exchange rate changes on cash and cash equivalents (49,214 ) (15,929 ) (22,424 ) (30,622 )
Net change in cash and cash equivalents (180,699 ) (32,410 ) (23,121 ) (1,525,555 )
Cash and cash equivalents, beginning of period 1,719,968 1,174,633 1,562,390 2,667,778
Cash and cash equivalents, end of period $ 1,539,269 $ 1,142,223 $ 1,539,269 $ 1,142,223
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