Questions? +1 (202) 335-3939 Login
Trusted News Since 1995
A service for technology industry professionals · Friday, March 29, 2024 · 699,691,444 Articles · 3+ Million Readers

Yahoo Reports Third Quarter 2013 Results

SUNNYVALE, Calif. -- Yahoo! Inc. (NASDAQ: YHOO) today reported results for the quarter ended September 30, 2013.

                           
      Q3 2012     Q3 2013    

Percent Change

       
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.

Business Highlights

  • 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

Display:

  • 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.

Search:

  • 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 Balance:

  • 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."

Live Stream

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."

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 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 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 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 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 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.

         

Yahoo! Inc.

       

Unaudited Condensed Consolidated Balance Sheets

       

(in thousands)

       
                       
                       
   

 

December 31,

   

 

September 30,

       
   

 

2012

   

 

2013

       
                       
ASSETS                      
Current assets:                      
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        
Goodwill     3,826,749       4,704,859        
Intangible assets, net     153,973       427,351        
Other long-term assets     289,130       165,866        

Investments in equity interests

    2,840,157       3,120,450        
                       
Total assets   $ 17,103,253     $ 14,905,749        
                       
                       
LIABILITIES AND EQUITY                      
Current liabilities:                      
Accounts payable   $ 184,831     $ 123,042        
Accrued expenses and other current liabilities     808,475       776,466        
Deferred revenue     296,926       293,615        
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 liabilities     2,497,650       2,359,430        
                       
Total Yahoo! Inc. stockholders' equity     14,560,200       12,494,111        
Noncontrolling interests     45,403       52,208        
Total equity     14,605,603       12,546,319        
                       
Total liabilities and equity   $ 17,103,253     $ 14,905,749        
                       

 

Yahoo! Inc.        
Unaudited Condensed Consolidated Statements of Income        
(in thousands, except per share amounts)        
                                   
                                   
      Three Months Ended       Nine Months Ended        
      September 30,       September 30,        
      2012     2013       2012     2013        
                                   
                                   
Revenue   $ 1,201,732     $ 1,138,973       $ 3,640,759     $ 3,414,585          
                                   
Operating expenses:                                  
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          
Product development     217,301       267,444         645,407       723,272          
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         527,499       675,034          
                                   
Net income     3,161,016       298,994         3,676,950       1,024,896          
                                   
Less: Net income attributable to noncontrolling interests     (778 )     (2,338 )       (3,738 )     (6,805 )        
                                   
Net income attributable to Yahoo! Inc.   $ 3,160,238     $ 296,656       $ 3,673,212     $ 1,018,091          
                                   
Net income attributable to Yahoo! Inc. common stockholders per share - diluted (1)   $ 2.64     $ 0.28       $ 3.02     $ 0.93          
                                   
Shares used in per share calculation - diluted     1,195,085       1,041,698         1,214,430       1,081,495          
                                   
Stock-based compensation expense by function:                                  
Cost of revenue - other   $ 2,363     $ 2,608       $ 7,871     $ 9,215          
Sales and marketing     19,876       29,175         59,954       68,995          
Product development     17,050       28,702         54,329       57,502          
General and administrative     22,077       20,241         44,749       57,755          
Restructuring expense reversals, net     -       -         (3,429 )     -          
                                   
                                   

Supplemental Financial Data:

                                 
Revenue ex-TAC   $ 1,088,903     $ 1,080,509       $ 3,246,814     $ 3,225,737          
Adjusted EBITDA   $ 407,793     $ 331,125       $ 1,189,815     $ 1,085,912          
Free cash flow (2)   $ 920,424     $ 249,037       $ 1,209,637     $ 530,345          
                                   
             

(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 nine months ended September 30, 2013.

       

(2)

 

The three and nine months ended September 30, 2012 include a payment of $550 million from Alibaba Group related to a technology and intellectual property license agreement.

       

 

Yahoo! Inc.        
Unaudited Condensed Consolidated Statements of Cash Flows        
(in thousands)        
         
         
      Three Months Ended       Nine Months Ended        
      September 30,       September 30,        
      2012     2013       2012     2013        
                                   
CASH FLOWS FROM OPERATING ACTIVITIES:                                  
Net income   $ 3,161,016     $ 298,994       $ 3,676,950     $ 1,024,896          

Adjustments to reconcile net income to net cash provided by operating activities:

                                 
Depreciation     146,483       127,356         401,022       412,646          
Amortization of intangible assets     23,878       30,888         84,087       68,365          
Stock-based compensation expense     61,366       80,726         163,474       193,467          
Non-cash restructuring charges     1,824       -         40,462       547          
Dividend income related to Alibaba Group Preference Shares     -       -         -       (35,726 )        
Dividends received from equity investees     -       -         83,648       135,058          
Tax benefits from stock-based awards     (5,536 )     24,169         (9,471 )     33,894          
Excess tax benefits from stock-based awards     (13,981 )     (28,680 )       (30,751 )     (47,193 )        
Deferred income taxes     (872,814 )     (46,984 )       (891,288 )     (74,981 )        
Earnings in equity interests     (175,265 )     (232,756 )       (527,499 )     (675,034 )        
Gain related to sale of Alibaba Group shares     (4,603,322 )     -         (4,603,322 )     -          
(Gain) loss from sale of investments, assets, and other, net     654       6,819         (18,308 )     19,994          
Changes in assets and liabilities, net of effects of acquisitions:                                  
Accounts receivable, net     96,850       102,949         86,942       161,459          
Prepaid expenses and other     30,041       20,936         41,059       (17,738 )        
Accounts payable     13,257       5,411         (22,457 )     (54,343 )        
Accrued expenses and other liabilities     2,644,717       (53,051 )       2,628,962       (183,706 )        
Deferred revenue     537,140       (38,767 )       514,811       (114,085 )        
Net cash provided by operating activities (2)     1,046,308       298,010         1,618,321       847,520          
                                   
CASH FLOWS FROM INVESTING ACTIVITIES:                                  
Acquisition of property and equipment, net     (139,865 )     (77,653 )       (355,787 )     (229,310 )        
Purchases of marketable securities     (1,193,594 )     (3,000 )       (1,838,860 )     (2,247,302 )        
Proceeds from sales of marketable securities     136,540       1,183,955         684,979       2,642,548          
Proceeds from maturities of marketable securities     52,155       95,159         250,653       557,565          
Proceeds related to the sale of Alibaba shares, net     6,247,728       -         6,247,728       -          
Proceeds related to the redemption of Alibaba Group Preference Shares     -       -         -       800,000          
Purchases of intangible assets     -       (238 )       (3,088 )     (2,290 )        
Proceeds from the sale of investments     -       -         26,132       -          
Acquisitions, net of cash acquired     -       (163,072 )       -       (1,187,229 )        
Other investing activities, net     -       (7,906 )       (9,421 )     (11,045 )        
Net cash provided by investing activities     5,102,964       1,027,245         5,002,336       322,937          
                                   
CASH FLOWS FROM FINANCING ACTIVITIES:                                  
Proceeds from issuance of common stock, net     38,549       80,325         116,420       203,417          
Repurchases of common stock     (190,372 )     (1,685,293 )       (716,379 )     (3,113,118 )        
Excess tax benefits from stock-based awards     13,981       28,680         30,751       47,193          
Tax withholdings related to net share settlements of restricted stock units     (9,603 )     (55,040 )       (48,097 )     (106,177 )        
Proceeds from credit facility     -       150,000         -       150,000          
Repayment of credit facility     -       (150,150 )       -       (150,150 )        
Other financing activities, net     (1,297 )     (2,935 )       (3,519 )     (5,713 )        
Net cash used in financing activities     (148,742 )     (1,634,413 )       (620,824 )     (2,974,548 )        
                                   
Effect of exchange rate changes on cash and cash equivalents     20,601       9,363         (1,823 )     (21,259 )        
                                   
Net change in cash and cash equivalents     6,021,131       (299,795 )       5,998,010       (1,825,350 )        
Cash and cash equivalents, beginning of period     1,539,269       1,142,223         1,562,390       2,667,778          
                                   
Cash and cash equivalents, end of period   $ 7,560,400     $ 842,428       $ 7,560,400     $ 842,428          
             

(2)

 

The three and nine months ended September 30, 2012 include a payment of $550 million from Alibaba Group related to a technology and intellectual property license agreement.

       

 

Yahoo! Inc. Note to Unaudited Condensed Consolidated Financial Statements

This press release and its attachments include the non-GAAP financial measures of revenue excluding traffic acquisition costs ("revenue ex-TAC"); adjusted EBITDA; non-GAAP income from operations; non-GAAP net earnings; non-GAAP net earnings per diluted share; and free cash flow, which are reconciled to revenue; net income attributable to Yahoo! Inc. (in the case of adjusted EBITDA and non-GAAP net earnings); income from operations; net income attributable to Yahoo! Inc. common stockholders per share — diluted; and net cash provided by operating activities, which we believe are the most comparable GAAP measures. We use these non-GAAP financial measures for internal managerial purposes and to facilitate period-to-period comparisons. We describe limitations specific to each non-GAAP financial measure below. Management generally compensates for limitations in the use of non-GAAP financial measures by relying on comparable GAAP financial measures and providing investors with a reconciliation of the non-GAAP financial measure to the most directly comparable GAAP financial measure or measures. Further, management uses non-GAAP financial measures only in addition to and in conjunction with results presented in accordance with GAAP. We believe that these non-GAAP financial measures reflect an additional way of viewing aspects of our operations that, when viewed with our GAAP results, provide a more complete understanding of factors and trends affecting our business. These non-GAAP measures should be considered as a supplement to, and not as a substitute for, or superior to, revenue, net income attributable to Yahoo! Inc., income from operations, net income attributable to Yahoo! Inc. common stockholders per share — diluted, and net cash provided by operating activities calculated in accordance with GAAP.

Revenue ex-TAC is a non-GAAP financial measure defined as GAAP revenue less TAC. TAC consists of payments made to third-party entities that have integrated our advertising offerings into their Websites or other offerings (those Websites and other offerings, "Affiliate sites") and payments made to companies that direct consumer and business traffic to Yahoo's online properties and services ("Yahoo Properties"). Based on the terms of the Search Agreement with Microsoft, Microsoft retains a revenue share of 12 percent of the net (after TAC) search revenue generated on Yahoo Properties and Affiliate sites in transitioned markets. Yahoo reports the net revenue it receives under the Search Agreement as revenue and no longer presents the associated TAC. Accordingly, for transitioned markets Yahoo reports GAAP revenue associated with the Search Agreement on a net (after TAC) basis rather than a gross basis. For markets that have not yet transitioned, revenue continues to be recorded on a gross basis, and TAC is recorded as a part of operating expenses. We present revenue ex-TAC to provide investors a metric used by the Company for evaluation and decision-making purposes during the Microsoft transition and to provide investors with comparable revenue numbers when comparing periods preceding, during and following the transition period. A limitation of revenue ex-TAC is that it is a measure which we have defined for internal and investor purposes that may be unique to the Company, and therefore it may not enhance the comparability of our results to other companies in our industry who have similar business arrangements but address the impact of TAC differently. Management compensates for these limitations by also relying on the comparable GAAP financial measures of revenue and total operating expenses, which includes TAC in non-transitioned markets.

Adjusted EBITDA is defined as net income attributable to Yahoo! Inc. before taxes, depreciation, amortization of intangible assets, stock-based compensation expense, other income, net (which includes interest), earnings in equity interests, net income attributable to noncontrolling interests and other gains, losses, and expenses that we do not believe are indicative of our ongoing results. Yahoo presents adjusted EBITDA because the exclusion of certain gains, losses, and expenses facilitates comparisons of the operating performance of our Company on a period to period basis. Adjusted EBITDA has limitations as an analytical tool and should not be considered in isolation or as a substitute for results reported under GAAP. These limitations include: adjusted EBITDA does not reflect tax payments and such payments reflect a reduction in cash available to us; adjusted EBITDA does not reflect the periodic costs of certain capitalized tangible and intangible assets used in generating revenues in our businesses; adjusted EBITDA does not include stock-based compensation expense related to the Company's workforce; adjusted EBITDA also excludes other income, net (which includes interest), earnings in equity interests, net income attributable to noncontrolling interests and other gains, losses, and expenses that we do not believe are indicative of our ongoing results, and these items may represent a reduction or increase in cash available to us; and adjusted EBITDA is a measure that may be unique to the Company, and therefore it may not enhance the comparability of our results to other companies in our industry. Management compensates for these limitations by also relying on the comparable GAAP financial measure of net income attributable to Yahoo! Inc., which includes taxes, depreciation, amortization, stock-based compensation expense, other income, net (which includes interest), earnings in equity interests, net income attributable to noncontrolling interests and the other gains, losses and expenses that are excluded from adjusted EBITDA.

Non-GAAP income from operations is defined as income from operations excluding certain gains, losses, and expenses that we do not believe are indicative of our ongoing operating results and further adjusted to exclude stock-based compensation expense. Because of the variety of equity awards used by companies, the varying methodologies for determining stock-based compensation expense, and the subjective assumptions involved in those determinations, we believe excluding stock-based compensation expense enhances the ability of management and investors to understand the impact of stock-based compensation expense on income from operations. We consider non-GAAP income from operations to be a profitability measure which facilitates the forecasting of our operating results for future periods and allows for the comparison of our results to historical periods. A limitation of non-GAAP income from operations is that it does not include all items that impact our income from operations for the period. Management compensates for this limitation by also relying on the comparable GAAP financial measure of income from operations which includes the gains, losses, and expenses that are excluded from non-GAAP income from operations.

Non-GAAP net earnings is defined as net income attributable to Yahoo! Inc. excluding certain gains, losses, expenses, and their related tax effects that we do not believe are indicative of our ongoing results and further adjusted to exclude stock-based compensation expense and its related tax effects. Because of the variety of equity awards used by companies, the varying methodologies for determining stock-based compensation expense, and the subjective assumptions involved in those determinations, we believe excluding stock-based compensation expense enhances the ability of management and investors to understand the impact of stock-based compensation expense on net income and net income per share. We consider non-GAAP net earnings and non-GAAP net earnings per diluted share to be profitability measures which facilitate the forecasting of our results for future periods and allow for the comparison of our results to historical periods. A limitation of non-GAAP net earnings and non-GAAP net earnings per diluted share is that they do not include all items that impact our net income and net income per diluted share for the period. Management compensates for this limitation by also relying on the comparable GAAP financial measures of net income attributable to Yahoo! Inc. and net income attributable to Yahoo! Inc. common stockholders per share - diluted, both of which include the gains, losses, expenses and related tax effects that are excluded from non-GAAP net earnings and non-GAAP net earnings per diluted share.

Free cash flow is a non-GAAP financial measure defined as 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. We consider free cash flow to be a liquidity measure which provides useful information to management and investors about the amount of cash generated by the business after the acquisition of property and equipment, which can then be used for strategic opportunities including, among others, investing in the Company's business, making strategic acquisitions, strengthening the balance sheet, and repurchasing stock. A limitation of free cash flow is that it does not represent the total increase or decrease in the cash balance for the period. Management compensates for this limitation by also relying on the net change in cash and cash equivalents as presented in the Company's unaudited condensed consolidated statements of cash flows prepared in accordance with GAAP which incorporates all cash movements during the period.

Yahoo! Inc.        
Supplemental Financial Data and GAAP to Non-GAAP Reconciliations        
(in thousands)        
         
      Three Months Ended       Nine Months Ended        
      September 30,       September 30,        
      2012     2013       2012     2013        
Revenue for groups of similar services:                                  
Display   $ 506,002     $ 469,932       $ 1,552,191     $ 1,396,745          
Search     472,537       435,192         1,403,903       1,278,081          
Other     223,193       233,849         684,665       739,759          
Total revenue   $ 1,201,732     $

1,138,973

 

    $ 3,640,759     $ 3,414,585          
         
Revenue excluding traffic acquisition costs ("revenue ex-TAC") for groups of similar services:              
GAAP display revenue   $ 506,002     $ 469,932       $ 1,552,191     $ 1,396,745          
TAC associated with display revenue     (54,361 )     (48,617 )       (173,339 )     (150,274 )        
Display revenue ex-TAC   $ 451,641     $ 421,315       $ 1,378,852     $ 1,246,471          
                                   
GAAP search revenue   $ 472,537     $ 435,192       $ 1,403,903     $ 1,278,081          
TAC associated with search revenue for non-transitioned markets     (58,468 )     (9,100 )       (220,606 )     (40,088 )        
Search revenue ex-TAC   $ 414,069     $ 426,092       $ 1,183,297     $ 1,237,993          
                                   
Other GAAP revenue   $ 223,193     $ 233,849       $ 684,665     $ 739,759          
TAC associated with other GAAP revenue     -       (747 )       -       1,514          
Other revenue ex-TAC   $ 223,193     $ 233,102       $ 684,665     $ 741,273          
                                   
Revenue ex-TAC:                                  
GAAP revenue   $ 1,201,732     $ 1,138,973       $ 3,640,759     $ 3,414,585          
TAC     (112,829 )     (58,464 )       (393,945 )     (188,848 )        
Revenue ex-TAC   $ 1,088,903     $ 1,080,509       $ 3,246,814     $ 3,225,737          
                                   
Revenue ex-TAC by segment:                                  
Americas:                                  
GAAP revenue   $ 843,731     $ 850,935       $ 2,501,515     $ 2,521,667          
TAC     (41,289 )     (36,435 )       (130,154 )     (111,077 )        
Revenue ex-TAC   $ 802,442     $ 814,500       $ 2,371,361     $ 2,410,590          
                                   
EMEA:                                  
GAAP revenue   $ 96,473     $ 89,156       $ 358,534     $ 281,367          
TAC     (17,399 )     (9,929 )       (97,248 )     (32,837 )        
Revenue ex-TAC   $ 79,074     $ 79,227       $ 261,286     $ 248,530          
                                   
Asia Pacific:                                  
GAAP revenue   $ 261,528     $ 198,882       $ 780,710     $ 611,551          
TAC     (54,141 )     (12,100 )       (166,543 )     (44,934 )        
Revenue ex-TAC   $ 207,387     $ 186,782       $ 614,167     $ 566,617          
                                   
Total revenue ex-TAC   $ 1,088,903     $ 1,080,509       $ 3,246,814     $ 3,225,737          
                                   
Direct costs by segment (3):                                  
Americas   $ 189,345     $ 171,285       $ 550,080     $ 513,677          
EMEA     39,167       39,922         120,665       119,766          
Asia Pacific     56,329       47,583         164,068       152,264          
Global operating costs (4)     396,269       490,594         1,228,686       1,354,118          
Restructuring charges (reversals), net     24,727       (576 )       159,536       (4,060 )        
Depreciation and amortization     169,511       158,216         480,498       480,797          
Stock-based compensation expense     61,366       80,726         166,903       193,467          
Income from operations   $ 152,189     $ 92,759       $ 376,378     $ 415,708          
                                   
Reconciliation of net income attributable to Yahoo! Inc. to adjusted EBITDA:                                  
Net income attributable to Yahoo! Inc.   $ 3,160,238     $ 296,656       $ 3,673,212     $ 1,018,091          
Deal costs related to the sale of Alibaba Group shares     -       -         6,500       -          
Depreciation and amortization     169,511       158,216         480,498       480,797          
Stock-based compensation expense     61,366       80,726         166,903       193,467          
Restructuring charges (reversals), net     24,727       (576 )       159,536       (4,060 )        
Other income, net     (4,607,656 )     (5,370 )       (4,630,109 )     (46,048 )        
Provision for income taxes     1,774,094       31,891         1,857,036       111,894          
Earnings in equity interests     (175,265 )     (232,756 )       (527,499 )     (675,034 )        
Net income attributable to noncontrolling interests     778       2,338         3,738       6,805          
Adjusted EBITDA   $ 407,793     $ 331,125       $ 1,189,815     $ 1,085,912          
                                   
Reconciliation of net cash provided by operating activities to free cash flow:                                  
Net cash provided by operating activities   $ 1,046,308     $ 298,010       $ 1,618,321     $ 847,520          
Acquisition of property and equipment, net     (139,865 )     (77,653 )       (355,787 )     (229,310 )        
Dividends received from equity investees     -       -         (83,648 )     (135,058 )        
Excess tax benefits from stock-based awards     13,981       28,680         30,751       47,193          
Free cash flow (2)   $ 920,424     $ 249,037       $ 1,209,637     $ 530,345          
             

(2)

 

The three and nine months ended September 30, 2012 include a payment of $550 million from Alibaba Group related to a technology and intellectual property license agreement.

       

(3)

 

Direct costs for each segment include cost of revenue (excluding TAC) and other operating expenses that are directly attributable to the segment such as employee compensation expense (excluding stock-based compensation expense), local sales and marketing expenses, and facilities expenses.

       

(4)

 

Global operating costs include product development, service engineering and operations, general and administrative, and other corporate expenses that are managed on a global basis and that are not directly attributable to any particular segment.

       

 

Yahoo! Inc.        
GAAP to Non-GAAP Reconciliations        
(in thousands, except per share amounts)        
         
         
          Three Months Ended        
          September 30,        
          2012       2013        
                           
GAAP income from operations   $ 152,189       $ 92,759          
                           
(a)   Restructuring charges (reversals), net     24,727         (576 )        
                           
(b)   Stock-based compensation expense     61,366         80,726          
                           
Non-GAAP income from operations (5)   $ 238,282       $ 172,909          
                           
                           
GAAP net income attributable to Yahoo! Inc.   $ 3,160,238       $ 296,656          
                           
(a)   Restructuring charges (reversals), net     24,727         (576 )        
                           
(b)   Stock-based compensation expense     61,366         80,726          
                           
(c)   Gain related to sale of Alibaba Group shares     (4,603,322 )       -          
                           
(d)  

To adjust the provision for income taxes to exclude the tax impact of items (a) through (c) above for the three months ended September 30, 2012 and 2013

    1,827,093         (18,354 )        
Non-GAAP net earnings (6)   $ 470,102       $ 358,452          
                           
GAAP net income attributable to Yahoo! Inc. common stockholders per share - diluted   $ 2.64       $ 0.28          
                           
Non-GAAP net earnings per share - diluted (6)   $ 0.39       $ 0.34          
                           
Shares used in per share calculation - diluted     1,195,085         1,041,698          
                           
          Nine Months Ended        
          September 30,        
          2012       2013        
                           
GAAP income from operations   $ 376,378       $ 415,708          
                           
(a)   Restructuring charges (reversals), net     159,536         (4,060 )        
                           
(b)   Stock-based compensation expense     166,903         193,467          
                           
(c)   Deal costs related to the sale of Alibaba Group shares     6,500         -          
                           
Non-GAAP income from operations (5)   $ 709,317       $ 605,115          
                           
                           
GAAP net income attributable to Yahoo! Inc.   $ 3,673,212       $ 1,018,091          
                           
(a)   Restructuring charges (reversals), net     159,536         (4,060 )        
                           
(b)   Stock-based compensation expense     166,903         193,467          
                           
(c)   Deal costs related to the sale of Alibaba Group shares     6,500         -          
                           
(d)   Gain related to sale of Alibaba Group shares     (4,603,322 )       -          
                           
(e)  

To adjust the provision for income taxes to exclude the tax impact of items (a) through (d) above for the nine months ended September 30, 2012 and 2013

    1,763,437         (42,995 )        
                           
                           
Non-GAAP net earnings (6)   $ 1,166,266       $ 1,164,503          
                           
GAAP net income attributable to Yahoo! Inc. common stockholders per share - diluted (1)   $ 3.02       $ 0.93          
                           
Non-GAAP net earnings per share - diluted (1) (6)   $ 0.96       $ 1.07          
                           
Shares used in per share calculation - diluted     1,214,430         1,081,495          
             

(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 nine months ended September 30, 2013.

       

(5)

 

Commencing in 2013, non-GAAP income from operations excludes stock-based compensation expense. Prior period amounts have been revised to conform to the current presentation.

       

(6)

 

Commencing in 2013, non-GAAP net earnings and non-GAAP net earnings per share - diluted exclude stock-based compensation expense and its related tax effects. Prior period amounts have been revised to conform to the current presentation.

       

 

 

Powered by EIN Presswire
Distribution channels: World & Regional


EIN Presswire does not exercise editorial control over third-party content provided, uploaded, published, or distributed by users of EIN Presswire. We are a distributor, not a publisher, of 3rd party content. Such content may contain the views, opinions, statements, offers, and other material of the respective users, suppliers, participants, or authors.

Submit your press release