Yahoo Reports Third Quarter 2013 Results
Yahoo Reports Third Quarter 2013 Results
|Q3 2012||Q3 2013|
|GAAP revenue||$1,202 million||$1,139 million||(5)%|
|Revenue ex-TAC||$1,089 million||$1,081 million||(1)%|
|GAAP income from operations||$152 million||$93 million||(39)%|
|Non-GAAP income from operations||$238 million||$173 million||(27)%|
|GAAP net earnings per diluted share||$2.64||$0.28||(89)%|
|Non-GAAP net earnings per diluted share||$0.39||$0.34||(13)%|
"I'm very pleased with our execution, especially as we've continued to invest in and strengthen our core business," said Yahoo CEO Marissa Mayer. "In Q3, we launched new user experiences across many of our digital daily habits -- Yahoo Screen, My Yahoo, Fantasy Sports, and more. Now with more than 800 million monthly users on Yahoo -- up 20 percent over the past 15 months -- we're achieving meaningful increases in user engagement and traffic."
GAAP revenue was $1,139 million for the third quarter of 2013, a 5 percent decrease from the third quarter of 2012. Revenue excluding traffic acquisition costs ("revenue ex-TAC") was $1,081 million for the third quarter of 2013, a 1 percent decrease compared to the third quarter of 2012.
Adjusted EBITDA for the third quarter of 2013 was $331 million, a 19 percent decrease compared to the same period of 2012.
GAAP income from operations was $93 million for the third quarter of 2013, a 39 percent decrease from the third quarter of 2012 (which reflected a restructuring charge of $25 million). Non-GAAP income from operations was $173 million for the third quarter of 2013, a 27 percent decrease from the third quarter of 2012.
GAAP net earnings for the third quarter of 2013 was $297 million, a 91 percent decrease compared to $3,160 million in the third quarter of 2012 (which included a net gain of $2.8 billion related to the sale of Alibaba Group shares). Non-GAAP net earnings for the third quarter of 2013 was $358 million, a 24 percent decrease from the same period of 2012.
GAAP net earnings per diluted share was $0.28 in the third quarter of 2013, compared to $2.64 in the third quarter of 2012. Non-GAAP net earnings per diluted share was $0.34 in the third quarter of 2013, compared to $0.39 in the third quarter of 2012.
- Yahoo continued its product momentum in the third quarter, launching new experiences for users' daily habits across desktop, mobile and tablets (including Yahoo Screen, Sports, Fantasy Sports, Movies, Music, TV, omg!, Games and Weather), as well as a new camera experience on Flickr for iPhone. The Company introduced a new My Yahoo, allowing users to personalize their homepage with a more modern design. Yahoo also rolled out a new logo to reflect the evolution of the Company's products and experiences after more than 18 years without a major redesign.
- The Company continues to generate business opportunities through streamlined advertising seamlessly integrated with the content experience. In the third quarter, Yahoo expanded Yahoo Stream Ads across Mail and mobile media properties.
- Yahoo began offering more premium content through its partnerships with ABC News and NBC Sports, and launched its Fall Comedy Lineup including eight original web series, the Saturday Night Live clip archive and clips from Viacom's Comedy Central and MTV shows, including The Daily Show with Jon Stewart, The Colbert Report, and more.
- During the third quarter, Yahoo made eight acquisitions to strengthen its products, content offerings, core technology and talent, including Bignoggins, Qwiki, Xobni, Admovate, Ztelic, Lexity, Rockmelt and IQ Engines.
- Yahoo continued to invest in people, recruiting exceptional talent from around the world. The Company hired Ned Brody as Senior Vice President and Head of the Americas, and Dawn Airey as Senior Vice President and Head of EMEA. Yahoo also brought on New York Times journalist and editor Megan Liberman as Editor-in-Chief for Yahoo News. Jeff Bonforte, who joined Yahoo through the Company's acquisition of Xobni, was appointed as Senior Vice President of Communications Products; and Mike Kerns was named Senior Vice President of Homepage and Verticals.
- Yahoo also announced today that it has entered into an amendment to the share repurchase and preference sale agreement with Alibaba Group. The amendment reduces the maximum number of shares of Alibaba Group that Yahoo is required to sell in connection with a qualified initial public offering of Alibaba, from 261.5 million shares to 208 million shares.
Third Quarter 2013 Financial Highlights
- GAAP display revenue was $470 million for the third quarter of 2013, a 7 percent decrease compared to $506 million for the third quarter of 2012.
- Display revenue ex-TAC was $421 million for the third quarter of 2013, a 7 percent decrease compared to $452 million for the third quarter of 2012.
- The Number of Ads Sold (excluding Korea) increased approximately 1 percent compared to the third quarter of 2012.
- Price-per-Ad (excluding Korea) decreased approximately 7 percent compared to the third quarter of 2012.
- GAAP search revenue was $435 million for the third quarter of 2013, an 8 percent decrease compared to $473 million for the third quarter of 2012.
- Search revenue ex-TAC was $426 million for the third quarter of 2013, a 3 percent increase compared to $414 million for the third quarter of 2012.
- Paid Clicks (excluding Korea) increased approximately 21 percent compared to the third quarter of 2012.
- Price-per-Click (excluding Korea) decreased approximately 4 percent compared to the third quarter of 2012.
- Cash, cash equivalents, and investments in marketable securities were $3.2 billion as of September 30, 2013 compared to $6 billion as of December 31, 2012, a decrease of $2.8 billion.
- During the third quarter of 2013, Yahoo repurchased 59 million shares for $1,685 million and used a net $163 million for acquisitions.
"In Q3, we generated free cash flow of $249 million and returned an additional $1.7 billion to shareholders through buybacks," said Ken Goldman, CFO of Yahoo. "As we exit Q3, we are extremely pleased with the strength of our balance sheet, with nearly $3.2 billion in cash and securities, and we are well positioned with ample liquidity to fund our future investments for growth."
Yahoo will live stream a video broadcast of the Company's third 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 fourth quarter and full year during the presentation. Supplemental financial information can be accessed through the Company's Investor Relations website at http://investor.yahoo.net. The video will be archived after the event at http://investor.yahoo.net 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."
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 display ad impressions for paying advertisers on Yahoo Properties.
"Paid Clicks" are defined as the total number of times an end-user clicks on a sponsored search listing on Yahoo Properties and Affiliate sites.
"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.
We periodically review and refine our methodologies for monitoring, gathering, and counting Number of Ads Sold and Paid Clicks, and for calculating Price-per-Ad and Price-per-Click. Commencing this quarter, the impressions and revenue associated with Yahoo's new Stream Ad units are included in our display price and volume metrics (Number of Ads Sold and Price-per-Ad). Further, to provide metrics that are more consistent with our historical revenue trends, the revenue and volume associated with other display advertisements sold on a price-per-click basis have been excluded from our search price and volume metrics (and will continue to be excluded from our display price and volume metrics). Also, the Microsoft RPS guarantee has been excluded from the calculation of Price-per-Click.Prior period amounts have been revised to conform to the current presentation. 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 June 30, 2013, which is on file with the SEC and available on the SEC's website atwww.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 quotations 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; Yahoo's ability to protect its intellectual property and the value of its brands; adverse results in litigation; security breaches; interruptions or delays in the provision of Yahoo's services; risks related to Yahoo's international operations; risks related to joint ventures and the integration of acquisitions; 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 October 15, 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 June 30, 2013, which are on file with the SEC and available on the SEC's website atwww.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 September 30, 2013, which will be filed with the SEC in the fourth quarter of 2013.
Yahoo!, Flickr, omg!, Qwiki, Xobni, Lexity, Rockmelt, IQ Engines, 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.
Unaudited Condensed Consolidated Balance Sheets
|Cash and cash equivalents||$||2,667,778||$||842,428|
|Short-term marketable securities||1,516,175||987,870|
|Accounts receivable, net||1,008,448||844,118|
|Prepaid expenses and other current assets||460,312||891,807|
|Total current assets||5,652,713||3,566,223|
|Long-term marketable securities||1,838,425||1,384,638|
|Alibaba Group Preference Shares||816,261||-|
|Property and equipment, net||1,685,845||1,536,362|
|Intangible assets, net||153,973||427,351|
|Other long-term assets||289,130||165,866|
Investments in equity interests
|LIABILITIES AND EQUITY|
|Accrued expenses and other current liabilities||808,475||776,466|
|Total current liabilities||1,290,232||1,193,123|
|Long-term deferred revenue||407,560||295,970|
|Capital lease and other long-term liabilities||124,587||121,169|
|Deferred and other long-term tax liabilities, net||675,271||749,168|
|Total Yahoo! Inc. stockholders' equity||14,560,200||12,494,111|
|Total liabilities and equity||$||17,103,253||$||14,905,749|
|Unaudited Condensed Consolidated Statements of Income|
|(in thousands, except per share amounts)|
|Three Months Ended||Nine Months Ended|
|September 30,||September 30,|
|Cost of revenue - traffic acquisition costs||112,829||58,464||393,945||188,848|
|Cost of revenue - other||282,081||271,763||814,513||821,032|
|Sales and marketing||269,272||282,562||827,450||819,319|
|General and administrative||135,249||151,304||395,637||419,764|
|Amortization of intangibles||8,084||15,253||27,893||30,702|
|Restructuring charges (reversals), net||24,727||(576||)||159,536||(4,060||)|
|Total operating expenses||1,049,543||1,046,214||3,264,381||2,998,877|
|Income from operations||152,189||92,759||376,378||415,708|
|Other income, net||4,607,656||5,370||4,630,109||46,048|
|Income before income taxes and earnings in equity interests||4,759,845||98,129||5,006,487||461,756|
|Provision for income taxes||(1,774,094||)||(31,891||)||(1,857,036||)||(111,894||)|
|Earnings in equity interests||175,265||232,756||
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