Yahoo! Inc. (NASDAQ: YHOO) today reported results for the
quarter ended June 30, 2016.
“With the lowest cost structure and headcount in a decade, we
continue to make solid progress against our 2016 plan.
Through disciplined expense management and focused execution,
we delivered Q2 results that met guidance across the board and in
some areas exceeded it,” said Marissa Mayer, CEO of Yahoo.
“In addition to our efforts to improve the operating
business, our board has made great progress on strategic
alternatives. We are relentlessly focused on delivering
shareholder value.”
Q2 2015 Q2 2016 GAAP revenue $1,243 million $1,308
million Cost of revenue -TAC $200 million $466 million Goodwill and
intangibles impairment* $ - million $482 million Loss from
operations $(45) million $(490) million Non-GAAP income from
operations $108 million $39 million Net loss $(22) million $(440)
million Adjusted EBITDA $262 million $172 million GAAP net loss per
diluted share $(0.02) $(0.46) Non-GAAP net earnings per diluted
share $0.16 $0.09
* See further discussion related to goodwill and intangibles
impairment below
Our second quarter GAAP revenue and Cost of revenue – TAC were
impacted by a required change in revenue presentation related to
the Eleventh Amendment to the Microsoft Search Agreement (“Change
in Revenue Presentation,” as discussed below). Specifically, $252
million of GAAP revenue and Cost of revenue – TAC for the second
quarter of 2016 was due to the Change in Revenue Presentation.
Excluding the impact of this change, GAAP revenue would have been
$1,055 million, a 15 percent decline from the second quarter of
2015, and Cost of revenue – TAC would have been $214 million, a 7
percent increase from the second quarter of 2015.
Business Highlights:
Platforms
- Kept Yahoo Mail one of the highest
rated mail apps in both the App Store and Google Play, with major
updates for iOS and Android versions, including an unsend feature,
contact improvements, and a document preview feature.
- Introduced support for Live Video on
Tumblr with YouNow, YouTube, Kanvas and Upclose so that Tumblr can
serve as a premier publishing and discovery platform to broadcast,
watch and share live videos no matter where they’re created.
Verticals
- Launched updates to Yahoo News, Sports,
and Finance on desktop along with new updated Sports and Finance
apps for a cleaner, faster more personalized experience.
- Hosted the first-ever live streams of
Berkshire Hathaway’s annual shareholders meeting, which had more
than 1.8 million views across devices in both English and Mandarin,
and Adrian Wojnarowski’s coverage of the NBA Draft, which attracted
approximately 3.7 million total views, with an average watch time
of 34 minutes per user.
Advertising
- At our NewFront event, announced new
video programming along with opportunities for our advertisers, and
expanded open viewability measurement to include Yahoo Gemini
native video in partnership with Moat, giving marketers more ways
to measure their Yahoo Gemini native video campaigns.
- Launched a new content marketing
offering, Yahoo Storytellers, and a new mobile offering, Yahoo
Tiles, for advertisers.
Non-Core Assets
- Generated additional value for
shareholders through the sale of Santa Clara real estate which
generated $246 million in net cash proceeds.
- Established Excalibur LLC to explore
the divestiture of more than 4,000 non-strategic patents and
pending applications.
Second Quarter 2016 Financial Highlights
Mavens Revenue*:
Q2 2015 Q2 2016 Mavens revenue $ 401 million $ 504
million Non-Mavens revenue 723 million 749 million Total
traffic-driven revenue $1,124 million $1,253 million
Non-traffic-driven revenue 119 million 55 million GAAP revenue
$1,243 million $1,308 million
* The Change in Revenue Presentation contributed $119 million to
Mavens revenue, $133 million to Non-Mavens revenue and $252 million
to traffic-driven revenue in the second quarter of 2016
Mavens revenue represented 36 percent and 40 percent of
traffic-driven revenue in the second quarter of 2015 and 2016,
respectively. Excluding the impact of the Change in Revenue
Presentation, Mavens revenue would have been $385 million and
represented 38 percent of traffic-driven revenue in the second
quarter of 2016.
Mobile Revenue*:
Q2 2015 Q2 2016 Mobile revenue $ 252 million $ 378
million Desktop revenue 872 million 875 million Total
traffic-driven revenue $1,124 million $1,253 million
Non-traffic-driven revenue 119 million 55 million GAAP revenue
$1,243 million $1,308 million
* The Change in Revenue Presentation contributed $119 million to
mobile revenue, $133 million to desktop revenue and $252 million to
traffic-driven revenue in the second quarter of 2016
GAAP mobile revenue for the second quarter of 2015 and 2016 was
$252 million and $378 million, respectively.
Mobile revenue represented 22 percent and 30 percent of
traffic-driven revenue in the second quarter of 2015 and 2016,
respectively. Excluding the impact of the Change in Revenue
Presentation, mobile revenue would have been $259 million and
represented 26 percent of traffic-driven revenue in the second
quarter of 2016.
Gross mobile revenue for the second quarter of 2015 and 2016 was
$415 million and $414 million, respectively. The Change in Revenue
Presentation did not impact gross mobile revenue in the second
quarter of 2016.
Search Revenue:
- GAAP search revenue was $711 million
for the second quarter of 2016 compared to $528 million for the
second quarter of 2015. Excluding the impact of the Change in
Revenue Presentation, which contributed $252 million to search
revenue in the second quarter of 2016, search revenue decreased by
13 percent compared to the second quarter of 2015.
- Gross search revenue was $765 million
for the second quarter of 2016, a decrease of 17 percent compared
to the second quarter of 2015. The Change in Revenue Presentation
did not impact gross search revenue in the second quarter of
2016.
- Cost of revenue - TAC paid to search
Affiliates was $392 million for the second quarter of 2016, a 270
percent increase compared to the second quarter of 2015. Excluding
the impact of the Change in Revenue Presentation, which contributed
$252 million to Cost of revenue - TAC in the second quarter of
2016, Cost of revenue – TAC paid to search Affiliates increased by
32 percent compared to the second quarter of 2015.
- The number of Paid Clicks decreased 24
percent compared to the second quarter of 2015.
- Price-per-Click increased 8 percent
compared to the second quarter of 2015.
Display Revenue:
- GAAP display revenue was $470 million
for the second quarter of 2016, a 7 percent decrease compared to
the second quarter of 2015.
- Cost of revenue - TAC paid to display
Affiliates was $74 million for the second quarter of 2016, a 21
percent decrease compared to the second quarter of 2015.
- The number of Ads Sold increased 9
percent compared to the second quarter of 2015.
- Price-per-Ad decreased 15 percent
compared to the second quarter of 2015.
Goodwill and Intangibles Impairment:
During the second quarter of 2016, we determined that there were
indicators present to suggest that it is more likely than not that
the fair value of the Tumblr reporting unit is less than its
carrying amount. We recorded a non-cash goodwill impairment charge
of $395 million and a non-cash intangibles impairment charge of $87
million related to our Tumblr reporting unit. The goodwill and
intangibles impairment charges resulted from a combination of
factors, including decreases in our projected Tumblr operating
results and estimated future cash flows.
Cash, Cash Equivalents, and Marketable Securities:
- Cash, cash equivalents, and marketable
securities were $7,665 million as of June 30, 2016 compared to
$6,833 million as of December 31, 2015, an increase of $832
million. The increase is primarily attributable to $776 million of
cash from operating activities, which includes $157 million in cash
dividends received from an equity investee and a cash tax refund of
$190 million received during the first quarter of 2016. The Company
also received net cash proceeds of $246 million from the sale of
land in Santa Clara and incurred capital expenditures of $152
million.
"I'm pleased that we crossed the first half of the year showing
progress on our 2016 plan and the guidance we provided. By
continuing to focus on revenue, both GAAP and ex-TAC, and excellent
expenditure management of cost and capital, we reported increased
cash flow and a strong balance sheet through the second quarter as
exemplified by our cash and marketable securities of nearly $7.7
billion," said Ken Goldman, CFO of Yahoo.
Change in Revenue Presentation:
Pursuant to the Eleventh Amendment to the Microsoft Search
Agreement, the Company completed the transition of its exclusive
sales responsibilities to Microsoft for Microsoft’s paid search
services to premium advertisers in the United States, Canada, and
Europe on April 1, 2016 and in its remaining markets (other than
Taiwan and Hong Kong) on June 1, 2016. Following the transition in
each respective market, Yahoo is considered the principal in the
sale of traffic to Microsoft and other customers because Yahoo is
the primary obligor in its arrangements with Microsoft and has
discretion in how search queries from Affiliate sites will be
fulfilled and monetized. As a result, amounts paid to Affiliates
under the Microsoft Search Agreement in the transitioned markets
are recorded as Cost of revenue - TAC rather than as a reduction to
GAAP revenue, resulting in GAAP revenue from the Microsoft Search
Agreement being reported on a gross rather than net basis. Taiwan
and Hong Kong will not be transitioned, and TAC in those markets
will continue to be reported as a reduction to revenue.
Live Stream:
Yahoo will live stream a video broadcast of the Company's second
quarter 2016 financial results at 2:30 p.m. Pacific Time/5:30 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 third quarter and full year of 2016 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 includes adjusted GAAP revenue and cost of
revenue - TAC amounts that exclude the effect of the Change in
Revenue Presentation during the second quarter of 2016. We believe
providing this additional information to investors is useful
because it provides investors with comparable revenue and cost of
revenue -TAC measures for comparison to our historical reported
financial information.
This press release and its attachments also include the
following additional financial measures defined as non-GAAP
financial measures by the Securities and Exchange Commission
(“SEC”): gross mobile revenue; gross search revenue; 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.
Gross mobile revenue is GAAP mobile revenue plus the related
revenue share with third parties. Gross search revenue is GAAP
search revenue plus the related revenue share with third parties.
Revenue ex-TAC is GAAP revenue less cost of revenue - TAC. 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 (expense) income, net (which includes interest, among
other items), 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 (i.e., acquisition of property and
equipment less proceeds received from disposition of property and
equipment) 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 Supplemental Financial Data and GAAP to
Non-GAAP Reconciliations,” “Supplemental Financial Data and GAAP to
Non-GAAP Reconciliations,” and “GAAP to Non-GAAP
Reconciliations.”
About Yahoo:
Yahoo is a guide to digital information discovery, focused on
informing, connecting, and entertaining users through its search,
communications, and digital content products. By creating highly
personalized experiences, Yahoo helps users discover the
information that matters most to them around the world –– on mobile
or desktop. Yahoo creates value for advertisers with a streamlined,
simple advertising technology stack that leverages Yahoo’s data,
content, and technology to connect advertisers with their target
audiences. 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).
“Ads Sold” consist of display ad impressions for paying
advertisers on Yahoo Properties and Affiliate sites.
“Affiliates” are 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. In
September 2014, Alibaba Group completed its initial public offering
of American Depositary Shares (“ADS”), in which Yahoo was a selling
shareholder.
“Desktop computer” means a desktop or laptop computer, and
“desktop revenue” is revenue generated from search and display ads
served on Desktop computers and also includes leads, listings and
fees revenue and ecommerce revenue allocated to user activity on
Desktop computers.
“Gross mobile revenue,” a non-GAAP measure, is GAAP mobile
revenue plus the related revenue share with third parties.
“Gross search revenue,” a non-GAAP measure, is GAAP search
revenue plus the related revenue share with third parties.
“Mavens revenue” is revenue generated from, without duplication:
(i) mobile (as defined below), (ii) video ads and video ad
packages, (iii) native ads, and (iv) Tumblr and Polyvore ads and
fees.
“Microsoft Search Agreement” refers to the Search and
Advertising Services and Sales Agreement between Yahoo and
Microsoft Corporation, as amended.
“Mobile revenue” is revenue generated in connection with user
activity on mobile devices, including smartphones and tablets,
regardless of whether the device is accessing a mobile-optimized
service. Mobile revenue is generated primarily from search and
display ads. Mobile revenue also includes leads, listings and fees
revenue and ecommerce revenue allocated to user activity on mobile
devices.
“Native revenue” is revenue generated from native ads (search
and display) on Yahoo Properties as well as third-party partner
publisher sites and mobile apps. Native ads are visually rich, are
positioned as a seamless part of the users' experience, and come in
a variety of formats, like text, image, and video. Yahoo offers
native ads through Yahoo Gemini and the BrightRoll Demand-Side
Platform (DSP).
“Net earnings” means net income (loss) attributable to Yahoo!
Inc., and “net earnings per diluted share” means net income (loss)
attributable to Yahoo! Inc. common stockholders per share –
diluted.
“Non-Mavens revenue” is revenue generated from search ads and
traditional (i.e., non-native, non-video, non-Tumblr, non-Polyvore)
display ads served on Desktop computers and also includes leads,
listings and fees revenue and ecommerce revenue allocated to user
activity on Desktop computers.
“Non-traffic-driven revenue” is revenue not arising from user
activity on Yahoo Properties or Affiliate sites, and includes
royalty revenue, license fee revenue, amortization under the
technology and intellectual property license agreement with Alibaba
Group through the third quarter of 2015, and all other revenue that
is not traffic-driven.
“Paid Clicks” are clicks by end-users on sponsored search
listings (excluding native ads) on Yahoo Properties and Affiliate
sites.
“Price-per-Ad” is defined as display revenue divided by our
total number of Ads Sold.
“Price-per-Click” is defined as Search click-driven revenue
divided by our total number of Paid Clicks.
“Search click-driven revenue” is gross search revenue excluding
search revenue from Yahoo Japan.
“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,” “Company,” and “we” refer to Yahoo! Inc. and its
consolidated subsidiaries.
“Yahoo Properties” refers to the online properties and services
that Yahoo provides to users.
We periodically review, refine and update our methodologies for
monitoring, gathering, and counting number of Ads Sold and Paid
Clicks, and for calculating Search click-driven revenue,
Price-per-Ad, and Price-per-Click. Methodology changes are applied
consistently to all periods presented. No changes were made in the
currently reported period.
Additional information about how “Ads Sold,” “Paid Clicks,”
“Price-per-Ad,” “Price-per-Click,” and “Search click-driven
revenue” 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 Annual Report on Form 10-K
for the year ended December 31, 2015, which is on file with the SEC
and available on the SEC's website at www.sec.gov.
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) and their projected impact, as well as,
Yahoo's review of strategic alternatives. 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, risks related to Yahoo’s
ability to continue to attract and maintain mobile users and grow
its mobile revenue; risks related to Yahoo’s ability to continue to
grow Mavens revenue; risks related to Yahoo’s ability to grow
users, user engagement and pageviews; risks related to growing
advertiser engagement; risk of potential reduction in spending by,
or loss of, advertising customers; risks associated with the
Microsoft Search Agreement and the Services Agreement with Google
Inc.; risks related to Yahoo’s ability to provide innovative search
experiences and other products and services that differentiate its
services and generate significant traffic; risks associated with
Yahoo’s ability to manage its operating expenses effectively and
improve profitability; risks related to acceptance by users of new
products and services; risks related to Yahoo’s ability to compete
with new or existing competitors; dependence on third parties for
technology, services, content, and distribution; risks related to
acquiring or developing compelling content; security breaches;
interruptions or delays in the provision of Yahoo’s services;
adverse results in litigation; risks related to Yahoo’s ability to
recruit and retain key personnel; risks related to possible
impairment of goodwill or other assets; risks related to Yahoo’s
ability to protect its intellectual property and the value of its
brands; risks related to fluctuations in foreign currency exchange
rates; risks related to joint ventures and the integration of
acquisitions; risks related to Yahoo’s regulatory environment;
risks related to Yahoo's international operations; risks related to
the calculation of our key operational metrics; and general
economic conditions. With respect to Yahoo’s exploration of
strategic alternatives, there is no assurance any transaction will
be consummated, and the process of exploring strategic alternatives
will involve the dedication of significant resources and the
incurrence of significant costs and expenses. All information set
forth in this press release and its attachments is as of July 18,
2016. 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, 2015, as amended, and
Quarterly Report on Form 10-Q for the quarter ended March 31, 2016,
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, 2016, which will be filed with the SEC in
the third quarter of 2016.
Yahoo!, the Yahoo family of marks, and the associated logos are
trademarks and/or registered trademarks of Yahoo! Inc. Tumblr is a
registered trademark of Tumblr, Inc. 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, 2015 2016
ASSETS Current assets: Cash and cash
equivalents $ 1,631,911 $ 1,325,404
Short-term marketable securities 4,225,112
5,055,683 Accounts receivable, net 1,047,504
991,185 Prepaid expenses and other current assets
602,792 224,729 Total current assets
7,507,319 7,597,001 Long-term marketable
securities 975,961 1,284,026 Property and
equipment, net 1,547,323 1,326,242
Goodwill 808,114 431,366 Intangible assets,
net 347,269 202,116 Other long-term assets and
investments 342,390 245,123 Investments in
Alibaba Group 31,172,361 30,504,958
Investments in equity interests 2,503,229
2,623,463 Total assets $
45,203,966 $ 44,214,295
LIABILITIES AND EQUITY Current liabilities:
Accounts payable $ 208,691 $
171,621 Other accrued expenses and current
liabilities 934,658 982,860 Deferred
revenue 134,031 122,026 Total current
liabilities 1,277,380 1,276,507
Convertible notes 1,233,485 1,266,279
Long-term deferred revenue 27,801 33,557
Other long-term liabilities 118,689 125,826
Deferred tax liabilities related to investment in Alibaba
Group 12,611,867 12,339,927 Deferred and other
long-term tax liabilities 855,324 775,895
Total liabilities 16,124,546 15,817,991
Total Yahoo! Inc. stockholders' equity 29,043,537
28,363,894 Noncontrolling interests 35,883
32,410 Total equity 29,079,420
28,396,304 Total liabilities and equity
$ 45,203,966 $ 44,214,295
Yahoo! Inc. Unaudited Condensed Consolidated Statements
of Operations (in thousands, except per share amounts)
Three Months Ended
Six Months Ended
June 30, June 30, 2015 2016 2015
2016
Revenue (3)
$ 1,243,265 $ 1,307,637 $
2,469,235 $ 2,394,789 Operating
expenses:
Cost of revenue - traffic acquisition
costs (3)
200,230 466,486 383,369 694,249 Cost
of revenue - other 295,932 268,483 581,195
551,070 Sales and marketing 274,304
226,024 549,661 462,057 Product
development 306,428 280,035 633,175
558,064 General and administrative 180,595
158,355 354,108 313,806 Amortization of
intangibles 19,982 16,369 40,055
35,142 Goodwill impairment charge -
394,901 - 394,901 Intangibles impairment
charge - 87,335 - 87,335 Gain on
sale of patents and land (9,100) (120,059)
(11,100) (121,559) Restructuring charges, net
19,688 19,384 70,920 76,614 Total
operating expenses 1,288,059 1,797,313
2,601,383 3,051,679 Loss from
operations (44,794) (489,676) (132,148)
(656,890) Other (expense) income, net
(11,741) 15,062 (42,804) (32,354)
Loss before income taxes and earnings in equity
interests (56,535) (474,614) (174,952)
(689,244) (Provision) benefit for income taxes
(58,495) (15,543) (17,595) 19,223
Earnings in equity interests 95,841 51,777
195,531 133,351 Net (loss) income
(19,189) (438,380) 2,984 (536,670)
Less: Net income attributable to noncontrolling
interests (2,365) (1,533) (3,340)
(2,475) Net loss attributable to Yahoo! Inc.
$ (21,554) $ (439,913) $
(356) $ (539,145)
Net loss attributable to Yahoo! Inc.
common stockholders per share - diluted
$ (0.02) $ (0.46) $
(0.00) $ (0.57) Shares used in per
share calculation - diluted 937,569 948,432
936,159 947,076 Stock-based compensation
expense by function: Cost of revenue - other $
7,200 $ 7,910 $ 13,209 $
16,436 Sales and marketing 39,978
38,944 78,099 71,831 Product
development 50,762 58,474 98,983
106,462 General and administrative 27,190
26,636 50,535 45,642 Restructuring charges,
net - - 2,705 7,374
Supplemental
Financial Data:
Revenue ex-TAC $ 1,043,035 $
841,151 $ 2,085,866 $ 1,700,540
Adjusted EBITDA $ 261,703 $
172,369 $ 492,816 $ 319,441
Free cash flow(1)(2) $ (24,780)
$ 425,646 $ (3,059,702)
$ 722,841 (1) During
the six months ended June 30, 2015, the Company satisfied the $3.3
billion income tax liability related to the sale of Alibaba Group
ADSs in September 2014. (2)
During the three and six months ended
June 30, 2016, the Company received net cash proceeds from the sale
of land of $246 million and during the six months ended June 30,
2016, the Company received a cash tax refund of $190 million
associated with the Company’s claim to carry back its 2015 losses
and tax attributes to earlier taxable years.
(3)
Commencing in Q2’16, TAC payments
related to the Microsoft Search Agreement, which previously would
have been recorded as a reduction of revenue, began to be recorded
as a cost of revenue due to a required change in revenue
presentation. See “Change in Revenue Presentation” in the
accompanying press release.
Yahoo! Inc. Unaudited
Condensed Consolidated Statements of Cash Flows (in
thousands) Three Months Ended Six Months
Ended June 30, June 30, 2015 2016
2015 2016 CASH FLOWS FROM OPERATING
ACTIVITIES: Net (loss) income $ (19,189
) $ (438,380 ) $ 2,984
$ (536,670 )
Adjustments to reconcile net (loss)
income to net cash provided by (used in) operating
activities:
Depreciation 119,633 105,677 236,694
213,054 Amortization of intangible assets
34,046 27,550 68,524 59,838
Accretion of convertible notes discount 15,660
16,504 31,117 32,794 Stock-based
compensation expense 125,130 131,964
243,531 247,745 Non-cash goodwill impairment
charge - 394,901 - 394,901
Non-cash intangibles impairment charge -
87,335 - 87,335 Non-cash restructuring
(reversals) charges (74 ) 1,014
(933 ) 1,376 Non-cash accretion on
marketable debt securities 7,545 6,140
23,557 18,494 Foreign exchange loss (gain)
3,085 (29,909 ) 21,318 (36,433
) Gain on sale of assets and other (91
) (1,641 ) (28 ) (1,831
) Gain on sale of patents and land (9,100
) (120,059 ) (11,100 )
(121,559 ) (Gain) loss on Hortonworks warrants
(5,449 ) 2,287 6,460 41,437
Earnings in equity interests (95,841 )
(51,777 ) (195,531 ) (133,351
) Tax (detriments) benefits from stock-based awards
(36,439 ) 624 (3,617 )
1,816 Excess tax benefits from stock-based awards
35,620 (3,034 ) (1,850 )
(10,560 ) Deferred income taxes (30,227
) (55,749 ) (13,218 )
(93,543 ) Dividends received from equity
investee 141,670 156,968 141,670
156,968 Changes in assets and liabilities, net of effects
of acquisitions: Accounts receivable (57,042
) (114,478 ) 32,881 58,199
Prepaid expenses and other (25,833 )
110,639 (90,078 ) 343,422 Accounts
payable 6,892 (3,948 ) 37,505
(1,104 ) Accrued expenses and other
liabilities 165,744 202,155 232,210
59,847 Income taxes payable related to sale of Alibaba
Group ADSs - - (3,282,293 )
- Deferred revenue (67,788 )
(14,853 ) (132,790 ) (6,477
) Net cash provided by (used in) operating activities
307,952 409,930 (2,652,987
) 775,698 CASH FLOWS FROM INVESTING
ACTIVITIES: Acquisition of property and equipment
(155,713 ) (77,937 ) (267,390
) (154,336 ) Proceeds from sales of
property and equipment 271 247,587 495
247,887 Purchases of marketable securities
(1,614,068 ) (2,385,685 )
(2,326,886 ) (4,257,001 ) Proceeds
from sales of marketable securities 301,423
120,587 473,775 167,961 Proceeds from
maturities of marketable securities 1,224,829
1,572,830 3,584,596 2,942,666 Acquisitions,
net of cash acquired 1,782 - (21,291
) - Proceeds from sales of patents -
- 20,000 1,500 Purchases of intangible
assets (3,451 ) (788 )
(4,611 ) (1,965 ) Proceeds from the
settlement of derivative hedge contracts 45,140
1,787 64,767 37,815 Payments for settlement
of derivative hedge contracts (1,731 )
(2,140 ) (3,882 ) (5,164
) Payments for equity investments in privately held
companies - (9 ) - (9
) Other investing activities, net (115
) (35 ) (153 ) (93
) Net cash (used in) provided by investing activities
(201,633 ) (523,803 ) 1,519,420
(1,020,739 ) CASH FLOWS FROM
FINANCING ACTIVITIES: Proceeds from issuance of common
stock 10,588 6,170 46,777 10,924
Repurchases of common stock - -
(203,771 ) - Excess tax benefits from
stock-based awards (35,620 ) 3,034
1,850 10,560 Tax withholdings related to net share
settlements of restricted stock awards and restricted stock
units (52,534 ) (49,286 )
(149,960 ) (91,425 ) Distributions
to noncontrolling interests (15,847 )
(5,948 ) (15,847 ) (5,948
) Other financing activities, net (4,442
) (3,930 ) (9,015 )
(7,567 ) Net cash used in financing activities
(97,855 ) (49,960 ) (329,966
) (83,456 ) Effect of exchange rate
changes on cash and cash equivalents 5,048 9,633
(12,396 ) 21,990 Net change in cash
and cash equivalents 13,512 (154,200 )
(1,475,929 ) (306,507 ) Cash and
cash equivalents, beginning of period 1,174,657
1,479,604 2,664,098 1,631,911
Cash and cash equivalents, end of period
$ 1,188,169 $ 1,325,404
$ 1,188,169 $ 1,325,404
Yahoo! Inc.Note to Supplemental
Financial Data and GAAP to Non-GAAP Reconciliations
This press release includes adjusted GAAP revenue and cost of
revenue - TAC amounts that exclude the effect of the Change in
Revenue Presentation during the second quarter of 2016. We believe
providing this additional information to investors is useful
because it provides investors with comparable revenue and cost of
revenue - TAC measures for comparison to our historical reported
financial information. See “Change in Revenue Presentation” in the
accompanying press release.
This press release and its attachments also include the non-GAAP
financial measures of revenue excluding traffic acquisition costs
(“revenue ex-TAC”); gross mobile revenue; gross search revenue;
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 (in the case of revenue
ex-TAC, gross mobile revenue, and gross search revenue); net loss
attributable to Yahoo! Inc. (in the case of adjusted EBITDA and
non-GAAP net earnings); loss from operations; net loss attributable
to Yahoo! Inc. common stockholders per share – diluted; and net
cash provided by (used in) operating activities, which we believe
are the most comparable GAAP measures. Yahoo! Inc. (together with
its consolidated subsidiaries, “Yahoo,” the “Company,” or “we”)
uses 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 additional ways 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 loss attributable to Yahoo! Inc., loss
from operations, net loss attributable to Yahoo! Inc. common
stockholders per share – diluted, and net cash provided by (used
in) operating activities calculated in accordance with GAAP.
Revenue ex-TAC is a non-GAAP financial measure defined as GAAP
revenue less TAC that has been recorded as a cost of revenue. TAC
consists of payments made to Affiliates, and payments made to
companies that direct consumer and business traffic to Yahoo
Properties. TAC is recorded either as a reduction of revenue or as
cost of revenue. We present revenue ex-TAC to provide investors a
metric used by the Company for evaluation and decision-making
purposes and to provide investors with comparable revenue numbers
when comparing to our historical reported financial information. A
limitation of revenue ex-TAC is that it is a measure we 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 those of 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 cost of
revenue—TAC.
Each of gross mobile revenue and gross search revenue is a
non-GAAP financial measure. Gross mobile revenue is defined as GAAP
mobile revenue plus the related revenue share with third parties.
Gross search revenue is defined as GAAP search revenue plus the
related revenue share with third parties. We present these amounts
to provide investors with additional metrics used by the Company
for evaluation and decision-making purposes and as an indicator of
the size of our presence in the relevant business. To this end,
gross mobile revenue and gross search revenue report the total
receipts generated on Yahoo Properties and Affiliate sites by the
specified relevant Yahoo business (i.e., mobile or search), before
any TAC or other revenue share is paid to the Affiliates and before
any revenue share is allocated to Microsoft or other parties. A
limitation of these non-GAAP measures is that they include revenue
that is recognized by one or more third parties and not by Yahoo;
furthermore, they are measures we defined for internal and investor
purposes that may be unique to us, and therefore may not enhance
the comparability of our results to those of other companies in our
industry who have similar business arrangements but address the
impact of TAC and revenue sharing differently. Management
compensates for these limitations by also relying on the comparable
financial measure GAAP revenue.
Adjusted EBITDA is defined as net income (loss) attributable to
Yahoo! Inc. before taxes, depreciation, amortization of intangible
assets, stock-based compensation expense, other (expense) income,
net (which includes interest, among other items), 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. We present adjusted
EBITDA because the exclusion of certain gains, losses, and expenses
facilitates comparisons of the operating performance of the 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 (expense) income, net (which includes
interest, among other items), 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
(loss) attributable to Yahoo! Inc., which includes taxes,
depreciation, amortization, stock-based compensation expense, other
(expense) income, net (which includes interest, among other items),
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 (loss) 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
(loss) 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 (loss) 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 (loss)
attributable to Yahoo! Inc. (which we sometimes refer to as net
earnings) 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 (loss) attributable to Yahoo!
Inc. and net income (loss) 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 (used in) operating activities (adjusted to
include excess tax benefits from stock-based awards), less
acquisition of property and equipment, net (i.e., acquisition of
property and equipment less proceeds received from disposition of
property and equipment) 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 business operations, after
deducting our net payments for acquisitions and dispositions of
property and equipment, which cash can then be used for strategic
opportunities or other business purposes 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 Six Months Ended
June 30, June 30, 2015 2016 2015
2016 Revenue for groups of similar services:
Search (3)(4)
$ 528,215 $ 711,496 $
1,070,307 $ 1,203,377
Display (4)
503,328 469,537 970,266 932,556
Other (4)
211,722 126,604 428,662
258,856 Total revenue $
1,243,265 $ 1,307,637 $
2,469,235 $ 2,394,789
Revenue excluding traffic acquisition costs recorded as cost of
revenue ("revenue ex-TAC") for groups of similar services:
GAAP search revenue (3)
$ 528,215 $ 711,496 $
1,070,307 $ 1,203,377
TAC associated with search revenue
(3)
(105,876 ) (392,182 ) (205,885
) (536,343 ) Search revenue ex-TAC
$ 422,339 $ 319,314
$ 864,422 $ 667,034
GAAP display revenue $ 503,328 $
469,537 $ 970,266 $ 932,556
TAC associated with display revenue (93,682 )
(73,811 ) (176,116 ) (156,878
) Display revenue ex-TAC $ 409,646
$ 395,726 $ 794,150
$ 775,678 GAAP other
revenue $ 211,722 $ 126,604
$ 428,662 $ 258,856 TAC associated
with GAAP other revenue (672 ) (493
) (1,368 ) (1,028 ) Other
revenue ex-TAC $ 211,050 $
126,111 $ 427,294 $
257,828 Revenue ex-TAC:
GAAP revenue (3)
$ 1,243,265 $ 1,307,637 $
2,469,235 $ 2,394,789
TAC (3)
(200,230 ) (466,486 ) (383,369
) (694,249 ) Revenue ex-TAC $
1,043,035 $ 841,151 $
2,085,866 $ 1,700,540
Revenue ex-TAC by segment: Americas:
GAAP revenue (3)
$ 992,210 $ 1,055,068 $
1,976,931 $ 1,916,607
TAC (3)
(180,822 ) (413,194 ) (347,477
) (618,065 ) Revenue ex-TAC $
811,388 $ 641,874 $
1,629,454 $ 1,298,542
EMEA:
GAAP revenue (3)
$ 85,830 $ 103,134 $
166,916 $ 180,057
TAC (3)
(12,950 ) (42,330 ) (24,654
) (54,839 ) Revenue ex-TAC $
72,880 $ 60,804 $
142,262 $ 125,218 Asia
Pacific:
GAAP revenue (3)
$ 165,225 $ 149,435 $
325,388 $ 298,125
TAC (3)
(6,458 ) (10,962 ) (11,238
) (21,345 ) Revenue ex-TAC $
158,767 $ 138,473 $
314,150 $ 276,780
Total revenue ex-TAC $ 1,043,035
$ 841,151 $ 2,085,866
$ 1,700,540
Direct costs by segment
(5):
Americas $ 78,705 $ 65,766
$ 139,584 $ 138,274 EMEA
20,567 18,894 40,751 39,503 Asia
Pacific 51,820 47,144 102,552
91,792
Global operating costs
(6)
647,340 552,271 1,329,263 1,137,307
Gain on sale of patents and land (9,100 )
(120,059 ) (11,100 ) (121,559
) Goodwill impairment charge - 394,901
- 394,901 Intangibles impairment charge
- 87,335 - 87,335 Restructuring
charges, net 19,688 19,384 70,920
76,614 Depreciation and amortization 153,679
133,227 305,218 272,892 Stock-based
compensation expense 125,130 131,964
240,826 240,371 Loss from
operations $ (44,794 ) $
(489,676 ) $ (132,148 ) $
(656,890 )
(3)
Commencing in Q2’16, TAC payments
related to the Microsoft Search Agreement, which previously would
have been recorded as a reduction of revenue, began to be recorded
as cost of revenue - TAC due to a required change in revenue
presentation. See “Change in Revenue Presentation” in the
accompanying press release.
(4)
In Q1'16, we reclassified certain amounts from other revenue to
either display or search revenue. Prior period amounts have been
revised to conform to the current presentation.
(5)
Direct costs for each segment include certain cost of
revenue-other and costs associated with the local sales teams.
Prior to the second quarter of 2016, certain account management
costs associated with Yahoo Properties were managed locally and
included as direct costs for each segment. Prior period amounts
have been revised to conform to the current presentation.
(6)
Global operating costs include product
development, marketing, real estate workplace, general and
administrative, account management costs, and other corporate
expenses that are managed on a global basis and that are not
directly attributable to any particular segment. Beginning in the
second quarter of 2016, certain account management costs associated
with Yahoo Properties are managed globally and included as global
costs. Prior period amounts have been revised to conform to the
current presentation.
Yahoo! Inc.
Supplemental Financial Data and GAAP to Non-GAAP Reconciliations
(continued) (in thousands) Three Months
Ended Six Months Ended June 30, June 30,
2015 2016 2015 2016
Reconciliation of net loss attributable
to Yahoo! Inc. to adjusted EBITDA:
Net loss attributable to Yahoo! Inc. $ (21,554
) $ (439,913 ) $ (356
) $ (539,145 ) Advisory fees
8,000 15,293 8,000 24,277 Gain on
sale of land - (120,059 ) -
(120,059 ) Depreciation and amortization
153,679 133,227 305,218 272,892
Stock-based compensation expense 125,130
131,964 240,826 240,371 Goodwill impairment
charge - 394,901 - 394,901
Intangibles impairment charge - 87,335
- 87,335 Restructuring charges, net
19,688 19,384 70,920 76,614
Other (expense) income, net
11,741 (15,062 ) 42,804 32,354
Provision for income taxes 58,495 15,543
17,595 (19,223 ) Earnings in equity
interests (95,841 ) (51,777 )
(195,531 ) (133,351 ) Net income
attributable to noncontrolling interests 2,365
1,533 3,340 2,475
Adjusted EBITDA $ 261,703 $
172,369 $ 492,816 $
319,441 Reconciliation of net cash provided
by (used in) operating activities to free cash flow: Net
cash provided by (used in) operating activities $
307,952 $ 409,930 $ (2,652,987
) $ 775,698 Acquisition of property and
equipment, net (155,442 ) 169,650
(266,895 ) 93,551 Dividends received from
equity investee (141,670 ) (156,968
) (141,670 ) (156,968 )
Excess tax benefits from stock-based awards (35,620
) 3,034 1,850 10,560
Free cash flow(1)(2) $ (24,780
) $ 425,646 $ (3,059,702
) $ 722,841 Reconciliation of
GAAP mobile revenue to gross mobile revenue:
GAAP mobile revenue (3)
$ 251,846 $ 377,707 $
485,439 $ 637,899
Revenue share with third parties
(3)
162,801 36,510 320,678
188,090 Gross mobile revenue $
414,647 $ 414,217 $
806,117 $ 825,989
Reconciliation of GAAP search revenue to gross search
revenue:
GAAP search revenue (3)
$ 528,215 $ 711,496 $
1,070,307 $ 1,203,377
Revenue share with third parties
(3)
398,710 53,844 822,809
382,360 Gross search revenue $
926,925 $ 765,340 $
1,893,116 $ 1,585,737
(1) During the six months ended June 30, 2015, the
Company satisfied the $3.3 billion income tax liability related to
the sale of Alibaba Group ADSs in September 2014. (2)
During the three and six months ended
June 30, 2016, the Company received net cash proceeds from the sale
of land of $246 million and during the six months ended June 30,
2016, the Company received a cash tax refund of $190 million
associated with the Company’s claim to carry back its 2015 losses
and tax attributes to earlier taxable years.
(3)
Commencing in Q2’16, TAC payments
related to the Microsoft Search Agreement, which previously would
have been recorded as a reduction of revenue, began to be recorded
as cost of revenue - TAC due to a required change in revenue
presentation. See “Change in Revenue Presentation” in the
accompanying press release.
Yahoo! Inc. GAAP to Non-GAAP
Reconciliations (in thousands, except per share amounts)
Three Months Ended
June 30,
2015 2016 GAAP loss from operations
$ (44,794 ) $ (489,676 )
(a) Restructuring charges, net 19,688
19,384 (b) Stock-based compensation
expense 125,130 131,964 (c)
Advisory fees 8,000 15,293 (d)
Gain on sale of land - (120,059 )
(e) Goodwill impairment charge -
394,901 (f) Intangibles impairment
charge - 87,335 Non-GAAP income
from operations $ 108,024 $
39,142 GAAP net loss attributable to
Yahoo! Inc. $ (21,554 ) $
(439,913 ) (a) Restructuring
charges, net 19,688 19,384 (b)
Stock-based compensation expense 125,130
131,964 (c) Advisory fees 8,000
15,293 (d) Gain on sale of land
- (120,059 ) (e) Goodwill
impairment charge - 394,901 (f)
Intangibles impairment charge - 87,335
(g) (Gain) loss on Hortonworks warrants (5,449
) 2,287 (h) To adjust the provision
for income taxes to reflect an effective tax rate of 35% for both
the three months ended June 30, 2015 and 2016 26,703
(4,229 ) Non-GAAP net earnings
$ 152,518 $ 86,963
GAAP net loss attributable to Yahoo! Inc. common stockholders
per share - diluted $ (0.02 ) $
(0.46 ) Non-GAAP net earnings per share -
diluted $ 0.16 $ 0.09
Shares used in non-GAAP per share calculation -
diluted 947,775 955,349
Six Months Ended
June 30,
2015 2016 GAAP loss from operations
$ (132,148 ) $ (656,890 )
(a) Restructuring charges, net 70,920
76,614 (b) Stock-based compensation
240,826 240,371 (c) Advisory
fees 8,000 24,277 (d) Gain on
sale of land - (120,059 )
(e) Goodwill impairment charge -
394,901 (f) Intangibles impairment
charge - 87,335 Non-GAAP income
from operations $ 187,598 $
46,549 GAAP net loss attributable to
Yahoo! Inc. $ (356 ) $
(539,145 ) (a) Restructuring
charges, net 70,920 76,614 (b)
Stock-based compensation 240,826 240,371
(c) Advisory fees 8,000 24,277
(d) Gain on sale of land -
(120,059 ) (e) Goodwill impairment
charge - 394,901 (f) Intangibles
impairment charge - 87,335 (g)
Loss on Hortonworks warrants 6,460 41,437
(h) To adjust the provision for income taxes to
reflect an effective tax rate of 35% for both the six months ended
June 30, 2015 and 2016 (35,344 ) (38,694
) Non-GAAP net earnings $
290,506 $ 167,037 GAAP
net loss attributable to Yahoo! Inc. common stockholders per share
- diluted $ (0.00 ) $ (0.57
) Non-GAAP net earnings per share - diluted
$ 0.31 $ 0.18
Shares used in non-GAAP per share calculation - diluted
947,877 953,345
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160718006312/en/
Yahoo! Inc.Media Relations Contact:Rebecca Neufeld,
408-349-4040media@yahoo-inc.comInvestor Relations
Contact:Joon Huh,
408-349-3382investorrelations@yahoo-inc.com
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