Yahoo! Inc. (NASDAQ:YHOO) today reported results for the quarter ended
June 30, 2010.
Revenue was $1,601 million for the second quarter of 2010, a two percent
increase from the second quarter of 2009. Income from operations for the
second quarter of 2010 was $175 million, compared to $76 million in the
second quarter of 2009. Excluding restructuring charges of $65 million
in the second quarter of 2009 and $10 million in the second quarter of
2010, income from operations grew 32 percent in the second quarter.
Net income per diluted share for the second quarter of 2010 was $0.15,
compared to $0.10 in the second quarter of 2009.
?We're pleased that we continued to deliver strong operating income and
margin expansion,? said Yahoo! Chief Executive Officer Carol Bartz. ?Our
search fundamentals are improving and we posted another quarter of
healthy display advertising growth.?
Financials at a Glance
Quarterly GAAP Results (in millions, except percentages and per
share amounts)
Q2 2009
Q2 2010
Percent Change
Revenue
$1,573
$1,601
2%
Income from operations
$76
$175
132%
Net income attributable to Yahoo! Inc.
$141
$213
51%
Net income attributable to Yahoo! Inc. common stockholders per share
- diluted
$0.10
$0.15
53%
Business Highlights
Display advertising on Owned and Operated sites continued to perform
well, growing 19 percent in the quarter compared to the second quarter
of 2009.
Operating margin expanded from 4.8 percent in the second quarter of
2009 to 11.0 percent in the second quarter of 2010. Excluding
restructuring charges of $65 million in the second quarter of 2009 and
$10 million in the second quarter of 2010, operating margin expanded
from 8.9 percent to 11.6 percent.
Yahoo! deepened its integration with Facebook through Yahoo! Pulse –
now users can link their Yahoo! and Facebook accounts and view and
share updates with friends across both networks.
Yahoo! launched new Mail and Messenger apps for the Android platform,
as well as HTML-5-based Mail and News sites for the iPhone.
Samsung and Yahoo! extended their strategic global partnership to
distribute Yahoo!'s industry-leading services on millions of Samsung
mobile devices - including those running Samsung bada and Android
platforms.
Yahoo! acquired Associated Content Inc., extending Yahoo's ability to
provide high quality, personally relevant content for the benefit of
its users and advertisers.
Nokia and Yahoo! announced a worldwide strategic alliance, extending
the reach of Yahoo!'s industry-leading online services.
Yahoo! announced that it will bring hit games from social gaming
company Zynga to the Yahoo! network.
Yahoo! acquired Koprol, Indonesia's popular location-based social
network.
Yahoo! expanded its partnership with Sony to increase the number of
countries where Yahoo! TV Widgets are available, enabling Yahoo! to
connect millions of additional consumers on their TVs.
Yahoo! hosted its third annual Hadoop Summit with more than 1,000
developers. Hadoop is an open source technology pioneered by Yahoo!
for big data sets and cloud computing, helping companies get value
from their data and better manage their businesses.
Brad Smith, president and CEO of Intuit, and Patti Hart, CEO of
International Game Technology (IGT), joined Yahoo!'s Board of
Directors.
Blake Irving joined as Chief Product Officer, bringing to Yahoo! large
scale Internet expertise and will lead Yahoo!'s products organization,
which is responsible for the vision, strategy, design and development
of Yahoo!'s global consumer and advertiser product portfolio.
Search Alliance Costs and Reimbursements
Yahoo!'s results for the three months ended June 30, 2010 reflect $86
million in search operating cost reimbursements from Microsoft under our
Search and Advertising Services and Sales Agreement (?Search
Agreement?). This amount is equivalent to the search operating costs
incurred by Yahoo! related to the Search Agreement in the second
quarter. Search operating cost reimbursements are expected to continue
until Yahoo! has fully transitioned to Microsoft's search platform.
Yahoo! views search operating cost reimbursements as an indicator of the
long-term cost savings associated with full implementation of the Search
Agreement. Our business outlook for total expenses reflects these
savings as well as planned reinvestments.
Yahoo!'s results for the three months ended June 30, 2010 also reflect
transition cost reimbursements from Microsoft under the Search
Agreement, which were equivalent to the transition costs of $18 million
incurred by Yahoo! related to the Search Agreement in the second
quarter. Therefore, the net impact of the transition costs and
reimbursements were neutral to total operating expenses in the second
quarter, as expected. In the future, quarterly transition cost
reimbursements are expected to continue to be roughly equivalent to
quarterly transition costs.
Second Quarter 2010 Revenue Results
Marketing services revenue increased four percent and fees revenue
decreased 16 percent, compared to the second quarter of 2009.
Marketing services revenue increased one percent and fees revenue
decreased seven percent, compared to the first quarter of 2010.
Marketing services revenue from Owned and Operated sites of $881
million increased three percent compared to $858 million for the same
period of 2009. This was primarily driven by a 19 percent increase in
display advertising revenue, partially offset by an eight percent
decline in search advertising revenue.
Marketing services revenue from Affiliate sites were $557 million, a
seven percent increase compared to $520 million for the same period of
2009.
Second Quarter 2010 Cash Flow and Cash Balance
Cash flow from operating activities was $347 million, a two percent
increase compared to $342 million for the same period of 2009.
Free cash flow was $127 million, a 52 percent decrease compared to
$266 million for the same period of 2009.
Cash, cash equivalents, and investments in marketable debt securities
were $3,799 million at June 30, 2010 compared to $4,518 million at
December 31, 2009, a decline of $719 million. During the second
quarter of 2010, Yahoo! repurchased 32 million shares for $496 million.
Business Outlook
Revenue for the third quarter of 2010 is expected to be in the range of
$1,570 million to $1,650 million. Income from operations for the third
quarter of 2010 is expected to be in the range of $160 million to $200
million. Total expenses (cost of revenue plus total operating expenses)
for the third quarter of 2010 is expected to be in the range of $1,410
million to $1,450 million. Total expenses less traffic acquisition costs
(?TAC?) for the third quarter of 2010 is expected to be in the range of
$945 million to $965 million. Total expenses less TAC, depreciation and
amortization (?D&A?), and stock-based compensation expense (?SBC?) for
the third quarter of 2010 is expected to be in the range of $735 million
to $745 million.
Conference Call
Yahoo! will host a conference call to discuss second quarter 2010
results at 5 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 for one week
following the conference call by calling (888) 286-8010 or (617)
801-6888, reservation number: 38398529.
Note Regarding 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?): free cash flow, total expenses less TAC,
total expenses less TAC, D&A, and SBC, non-GAAP net income, and non-GAAP
net income per diluted share. 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 Statements of
Income,? ?Reconciliation of cash flow from operating activities to free
cash flow,? ?GAAP to Non-GAAP Reconciliations,? and ?Business Outlook?.
About Yahoo!
Yahoo! attracts hundreds of millions of users every month through its
innovative technology and engaging content and services, making it one
of the most trafficked Internet destinations and a world class online
media company. Yahoo!'s vision is to be the center of people's online
lives by delivering personally relevant, meaningful Internet
experiences. Yahoo! is headquartered in Sunnyvale, California. For more
information, visit http://pressroom.yahoo.com
or the company's blog, Yodel Anecdotal (http://yodel.yahoo.com).
?Owned and Operated sites? refers to Yahoo!'s owned and operated
online properties and services.
?Affiliate sites? refers to Yahoo!'s distribution network of
third-party entities who have integrated Yahoo!'s advertising offerings
into their websites or their other offerings.
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 impact of management and
organizational changes; the implementation and results of Yahoo!'s
ongoing strategic and cost initiatives; Yahoo!'s ability to compete with
new or existing competitors; 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 Yahoo!'s international operations; failure to manage
growth and diversification; adverse results in litigation, including
intellectual property infringement claims; Yahoo!'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; general economic conditions and changes in
economic conditions; and transition and implementation risks associated
with our search agreement with Microsoft Corporation. All information
set forth in this press release and its attachments is as of July 20,
2010. Yahoo! does not intend, and undertakes no duty, to update this
information to reflect subsequent events or circumstance; however,
Yahoo! may update its business outlook or any portion thereof at any
time in its discretion. 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,
2009, and Quarterly Report on Form 10-Q for the quarter ended March 31,
2010, 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,
2010, which will be filed with the SEC in the third quarter of 2010.
Yahoo! 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 Statements of Income
(in thousands, except per share amounts)
Three Months Ended
Six Months Ended
June 30,
June 30,
2009
2010
2009
2010
Revenue
$
1,572,897
$
1,601,379
$
3,152,939
$
3,198,339
Cost of revenue
712,453
682,722
1,413,190
1,389,104
Gross profit
860,444
918,657
1,739,749
1,809,235
Operating expenses:
Sales and marketing
280,386
331,468
601,498
645,006
Product development
291,398
268,552
597,441
534,629
General and administrative
138,652
125,333
275,649
235,761
Amortization of intangibles
9,253
7,880
18,920
15,982
Restructuring charges, net
65,002
10,052
69,803
14,464
Total operating expenses
784,691
743,285
1,563,311
1,445,842
Income from operations
75,753
175,372
176,438
363,393
Other income, net
72,010
12,588
76,970
98,916
Income before income taxes and earnings in equity interests
147,763
187,960
253,408
462,309
Provision for income taxes
(68,879
)
(68,524
)
(104,763
)
(117,968
)
Earnings in equity interests
64,156
96,707
113,090
184,081
Net income
143,040
216,143
261,735
528,422
Less: Net income attributable to noncontrolling interests
(1,653
)
(2,822
)
(2,790
)
(4,910
)
Net income attributable to Yahoo! Inc.
$
141,387
$
213,321
$
258,945
$
523,512
Net income attributable to Yahoo! Inc. common stockholders per
share - diluted
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