SUNNYVALE, Calif.–(BUSINESS WIRE)–
Yahoo! Inc. (YHOO) today reported results for the quarter ended September 30, 2014.
|Q3 2013||Q3 2014||
|GAAP revenue||$1,139 million||$1,148 million||1%|
|Revenue ex-TAC||$1,081 million||$1,094 million||1%|
|GAAP income from operations||
|Non-GAAP income from operations||$173 million||$156 million||(10)%|
|GAAP net earnings per diluted share||$0.28||$6.70||N/M|
|Non-GAAP net earnings per diluted share||$0.34||$0.52||
N/M – Not meaningful
“We had a good, solid third quarter. We delivered $1.094 billion in revenue ex-TAC and $1.148 billion in GAAP revenue. This represents 1% growth in revenue ex-TAC and 1% growth in GAAP revenue. We achieved this revenue growth through strong growth in our new areas of investment – mobile, social, native and video – despite industry headwinds in some of our large, legacy businesses,” said Marissa Mayer, CEO of Yahoo. “I am also pleased to report today that our revenue in mobile is now material. In Q3, we saw mobile revenues in excess of $200 million on a GAAP basis. Further, we estimate that our gross revenues in mobile will exceed $1.2 billion in revenue this year. We have invested deeply in mobile and we are seeing those investments pay off. Not only are our mobile products attracting praise and engagement from users and industry awards, they are generating meaningful revenue for Yahoo.”
GAAP revenue was $1,148 million for the third quarter of 2014, a 1 percent increase from the third quarter of 2013. Revenue excluding traffic acquisition costs (“revenue ex-TAC”) was $1,094 million for the third quarter of 2014, a 1 percent increase compared to the third quarter of 2013.
GAAP income from operations was $42 million for the third quarter of 2014, a 55 percent decrease from the third quarter of 2013. Non-GAAP income from operations was $156 million for the third quarter of 2014, a 10 percent decrease from the third quarter of 2013.
Adjusted EBITDA for the third quarter of 2014 was $306 million, an 8 percent decrease compared to the third quarter of 2013.
GAAP net earnings for the third quarter of 2014 was $6.8 billion (which included a gain from sale of Alibaba Group Holding Limited (“Alibaba Group”) shares of $6.3 billion, net of tax), compared to $297 million in the third quarter of 2013. Non-GAAP net earnings for the third quarter of 2014 was $543 million, compared to $358 million in the third quarter of 2013.
GAAP net earnings per diluted share was $6.70 in the third quarter of 2014 (which included the gain from sale of Alibaba Group shares of $6.27 per diluted share), compared to $0.28 in the third quarter of 2013. Non-GAAP net earnings per diluted share was $0.52 for the third quarter of 2014, compared to $0.34 in the third quarter of 2013.
- Yahoo completed the acquisition of Flurry, a mobile data analytics company that optimizes mobile experiences for developers, marketers, and consumers. Yahoo and Flurry’s combined scale is expected to create more personalized and inspiring app experiences for users, and enable more effective mobile advertising solutions for brands seeking to reach audiences and gain unique cross-device insights.
- Yahoo continued to launch new products and improve on existing ones in the third quarter, innovating for the daily habits of users around the world. The Company launched the new Yahoo Finance app, Yahoo News Digest app and Yahoo Mail app for iPad, support for Digital Magazines for Android and iOS, and new navigation for Yahoo Answers, and also made Aviate available in eight languages on Android devices.
- As football season kicked off this quarter, Yahoo announced a partnership with Samsung Smart TV to provide viewers with the Yahoo Fantasy Football TV experience, and launched NFL Now on Yahoo across devices including desktop, iPhone and iPad.
- Top names in music, fashion, entertainment and finance continued to partner with Yahoo in the third quarter of 2014. Taylor Swift and Prince both provided exclusive content to Yahoo in advance of their album releases. Yahoo Digital Magazines launched Yahoo Style with editor-in-chief Joe Zee, previously from ELLE Magazine. The Company also announced four additional new well-known editors-in-chief: Michelle Promaulayko for Yahoo Health, Kerry Diamond for Yahoo Food, Kristen Baldwin for Yahoo TV and Katie Brown for the recently launched Yahoo DIY. Yahoo Finance also launched Yahoo Finance Contributors with a roster of new high-profile industry experts including the Najarian brothers.
- Yahoo launched new ways for the Company to work with publishing partners. Yahoo announced Yahoo Recommends which brings Yahoo’s content personalization technology and native ads to publishers across the web, launching on high-quality publisher sites CBSi, VOX Media and Hearst.
- Yahoo added important technical talent to the team with Mike Kail joining as CIO and SVP, Infrastructure to lead IT and data center operations for the Company.
Third Quarter 2014 Financial Highlights
- GAAP display revenue was $447 million for the third quarter of 2014, a 5 percent decrease compared to $470 million for the third quarter of 2013.
- Display revenue ex-TAC was $396 million for the third quarter of 2014, a 6 percent decrease compared to $421 million for the third quarter of 2013.
- The number of Ads Sold increased approximately 24 percent compared to the third quarter of 2013.
- Price-per-Ad decreased approximately 24 percent compared to the third quarter of 2013.
- GAAP search revenue was $452 million for the third quarter of 2014, a 4 percent increase compared to $435 million for the third quarter of 2013.
- Search revenue ex-TAC was $450 million for the third quarter of 2014, a 6 percent increase compared to $426 million for the third quarter of 2013.
- The number of Paid Clicks was flat compared to the third quarter of 2013.
- Price-per-Click increased approximately 17 percent compared to the third quarter of 2013.
Cash, Cash Equivalents, and Marketable Securities:
- Cash, cash equivalents, and marketable securities (excluding Investment in Alibaba Group equity securities) were $12 billion as of September 30, 2014 compared to $5 billion as of December 31, 2013, an increase of $7 billion. Yahoo estimates that it will pay approximately $3.3 billion in cash taxes in the first quarter of 2015 related to the sale of Alibaba Group shares.
- During the third quarter of 2014, Yahoo repurchased approximately 8 million shares of its common stock for $282 million.
- In September 2014, the Company also entered into an accelerated share repurchase agreement with a financial institution to repurchase shares of its common stock. Under the agreement, the Company prepaid $1.1 billion and approximately 15 million shares were initially delivered to the Company on September 30, 2014 and are included in treasury stock. Final settlement occurred on October 17, 2014 resulting in a total of approximately 23.5 million shares repurchased for $933 million. The Company received a return of cash for the remaining amount not settled in shares of $167 million. The accelerated share repurchase agreement was entered into pursuant to the Company’s existing share repurchase program.
- As of September 30, 2014, the Company had 979 million shares outstanding.
“We are pleased with our performance this quarter, demonstrating results that met or exceeded guidance on key metrics. We ended the quarter with over $12 billion in cash and marketable securities following the sale of 140 million shares of Alibaba stock in the IPO, which resulted in $9.4 billion in pre-tax proceeds,” said Ken Goldman, CFO of Yahoo. “In Q3 and Q4 to date, we have bought back approximately $1.6 billion of our stock. Of this amount, we have returned $1.4 billion to shareholders as a part of our commitment to return at least half of the after-tax IPO proceeds. We are hopeful that we will finish the year strong, and we believe that the Company is well positioned for improved performance in 2015.”
Yahoo will live stream a video broadcast of the Company’s third quarter 2014 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 finance.yahoo.com. The Company will provide its business outlook for the fourth quarter during the presentation. Supplemental financial information can be accessed through the Company’s Investor Relations website at investor.yahoo.net. The video will be archived after the event at 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.”