Exhibit 99.1
Yahoo! Reports First Quarter 2005 Financial Results;
Revenues - $1,174 Million, Operating Income - $247 Million,
Operating Income Before Depreciation and Amortization - $345 Million
SUNNYVALE, Calif.--(BUSINESS WIRE)--April 19, 2005--Yahoo! Inc.
(Nasdaq:YHOO) today reported results for the first quarter ended March
31, 2005.
"Yahoo! entered 2005 on a high note, delivering strong growth and
record revenue for the eighth consecutive quarter, further validating
the strength of Yahoo!'s business model," said Terry Semel, chairman
and chief executive officer, Yahoo!. "We are on the cusp of witnessing
a significant increase in engagement of consumers on the Internet and
believe we are best positioned to capitalize on the many opportunities
to which we are exposed."
Consolidated Financial Results
-- Revenues were $1,174 million for the first quarter of 2005, a
55 percent increase compared to $758 million for the same
period of 2004.
-- Marketing services revenue was $1,025 million for the first
quarter of 2005, a 54 percent increase compared to $665
million for the same period of 2004.
-- Fees revenue was $149 million for the first quarter of 2005, a
61 percent increase compared to $93 million for the same
period of 2004.
-- Revenues excluding traffic acquisition costs ("TAC") were $821
million for the first quarter of 2005, a 49 percent increase
compared to $550 million for the same period of 2004.
-- Gross profit for the first quarter of 2005 was $720 million, a
51 percent increase compared to $476 million for the same
period of 2004.
-- Operating income for the first quarter of 2005 was $247
million, an 87 percent increase compared to $132 million for
the same period of 2004.
-- Operating income before depreciation and amortization for the
first quarter of 2005 was $345 million, a 64 percent increase
compared to $211 million for the same period of 2004.
-- Cash flow from operating activities for the first quarter of
2005 was $386 million, a 63 percent increase compared to $236
million for the same period of 2004.
-- Free cash flow for the first quarter of 2005 was $318 million,
a 61 percent increase compared to $197 million for the same
period of 2004.
-- Net income for the first quarter of 2005 was $205 million or
$0.14 per diluted share (including net income of $15 million,
or $0.01 per diluted share, related to the sale of certain
investments and settlements). This compares with net income of
$101 million or $0.07 per diluted share for the same period of
2004.
"In the first quarter, Yahoo! continued to grow its user base and
drive deeper engagement, the core user fundamentals that lead to
favorable financial returns," said Susan Decker, chief financial
officer, Yahoo!. "We continued to increase levels of free cash flow
while investing in the business, demonstrating the leverage in our
operating model, and driving long-term shareholder value."
Segment Financial Results
-- United States revenues for the first quarter of 2005 were $819
million, a 37 percent increase from the $599 million reported
for the same period of 2004.
-- International revenues for the first quarter of 2005 were $355
million, a 124 percent increase from the $159 million reported
for the same period of 2004.
-- United States segment operating income before depreciation and
amortization for the first quarter of 2005 was $270 million, a
41 percent increase from the $191 million reported for the
same period of 2004.
-- International segment operating income before depreciation and
amortization for the first quarter of 2005 was $75 million, a
280 percent increase from the $20 million reported for the
same period of 2004.
Cash Flow Information
Free cash flow of $318 million in the first quarter of 2005 was
the largest contributor to the increase of $110 million in our cash,
cash equivalents and investments in marketable debt securities which
grew from $3,742 million at December 31, 2004 to $3,852 million at
March 31, 2005. In addition, we generated $90 million from the
issuance of common stock as a result of the exercise of employee stock
options. These increases were offset by $165 million used for direct
share repurchases, a net $96 million used in structured stock
repurchase transactions, and $54 million used for acquisitions.
Please refer to the "Note to Unaudited Condensed Consolidated
Statements of Operations" for definitions of certain key financial
measures used here and in the "Business Outlook" attached to this
press release.
Quarterly Conference Call
Yahoo! will host a conference call to discuss first quarter
results at 5:00 p.m. Eastern Time today. A live Webcast of the
conference call, together with supplemental financial information can
be accessed through the Company's Investor Relations Web site at
http://yhoo.client.shareholder.com/earnings.cfm. In addition, an
archive of the Webcast can be accessed through the same link. An audio
replay of the call will be available following the conference call by
calling 877-213-9653 or 630-652-3041, reservation number: 11385612.
About Yahoo!
Yahoo! Inc. is a leading global internet brand and one of the most
trafficked Internet destinations worldwide. Yahoo! seeks to provide
online products and services essential to users' lives, and offers a
full range of tools and marketing solutions for businesses to connect
with Internet users around the world. Yahoo! is headquartered in
Sunnyvale, Calif.
This press release includes the following financial measures
defined as non-GAAP financial measures by the Securities and Exchange
Commission: revenues excluding traffic acquisition costs, operating
income before depreciation and amortization, and free cash flow. These
measures may be different from 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. See "Note to Unaudited
Condensed Consolidated Statements of Operations" and "Reconciliations
to Unaudited Condensed Consolidated Statements of Operations" included
in this press release for further information regarding these non-GAAP
financial measures.
This press release and its attachments contain forward-looking
statements that involve risks and uncertainties concerning Yahoo!'s
expected financial performance (as described without limitation in the
Business Outlook section and quotations from management in this press
release), as well as Yahoo!'s strategic and operational plans. Actual
results may differ materially from the results predicted and reported
results should not be considered as an indication of future
performance. The potential risks and uncertainties include, among
others, the Company's ability to compete with new or existing
competitors; reduction in spending by, or loss of, marketing services
customers; the demand by customers for Yahoo!'s premium services;
acceptance by users of new products and services; risks related to the
integration of recent acquisitions; risks related to the Company's
international operations; failure to manage growth and
diversification; adverse results in litigation, including intellectual
property infringement claims; the Company's ability to protect its
intellectual property and the value of its brands; dependence on key
personnel; dependence on third parties for technology, services,
content and distribution; and general economic conditions. All
information set forth in this release and its attachments is as of
April 19, 2005. Yahoo! undertakes no duty to update this information.
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 fiscal year ended December 31, 2004
which is on file with the SEC and available at 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 March 31, 2005, which will be filed with the SEC in the second
quarter of 2005.
Yahoo! and the Yahoo! logos are trademarks and/or registered
trademarks of Yahoo! Inc. All other names are trademarks and/or
registered trademarks of their respective owners.
Yahoo! Inc.
Unaudited Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
Three Months Ended
March 31,
-----------------------
2004 2005
----------- -----------
Revenues $ 757,786 $1,173,742
Cost of revenues 281,705 453,297
---------- ----------
Gross profit 476,081 720,445
---------- ----------
Operating expenses:
Sales and marketing 166,295 230,519
Product development 76,989 119,349
General and administrative 57,556 73,545
Stock compensation expense (1) 12,572 9,466
Amortization of intangibles 30,512 40,203
---------- ----------
Total operating expenses 343,924 473,082
---------- ----------
Income from operations 132,157 247,363
Other income, net 14,378 49,994
---------- ----------
Income before income taxes, earnings in equity
interests, minority interests 146,535 297,357
Provision for income taxes (64,709) (120,435)
Earnings in equity interests 19,868 29,378
Minority interests in operations of
consolidated subsidiaries (482) (1,740)
---------- ----------
Net income $ 101,212 $ 204,560
========== ==========
Net income per share - diluted $ 0.07 $ 0.14
========== ==========
Shares used in per share calculation - diluted 1,426,548 1,477,811
========== ==========
(1) Stock compensation expense is allocated as follows:
Sales and marketing $ 3,605 $ 1,490
Product development 4,723 3,262
General and administrative 4,244 4,714
---------- ----------
Total stock compensation expense $ 12,572 $ 9,466
========== ==========
- ----------------------------------------------------------------------
Supplemental Financial Data (See Note)
Revenues excluding traffic acquisition costs
("TAC") $ 550,150 $ 820,755
Operating income before depreciation and
amortization $ 210,921 $ 345,062
Free cash flow $ 197,286 $ 317,566
- ----------------------------------------------------------------------
Yahoo! Inc.
Note to Unaudited Condensed Consolidated Statements of Operations
This press release includes the non-GAAP financial measures of
revenues excluding traffic acquisition costs, operating income before
depreciation and amortization, and free cash flow, which are
reconciled to gross profit, income from operations, and cash flow from
operating activities, respectively, which we believe are the most
comparable GAAP measures. We use these non-GAAP financial measures for
internal managerial purposes, when publicly providing business
outlook, and as a means to evaluate period-to-period comparisons.
These non-GAAP financial measures are used in addition to and in
conjunction with results presented in accordance with GAAP. These
non-GAAP financial measures reflect an additional way of viewing
aspects of our operations that, when viewed with our GAAP results and
the accompanying reconciliations to corresponding GAAP financial
measures, 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, gross
profit, income from operations, and cash flow from operating
activities calculated in accordance with generally accepted accounting
principles.
Revenues excluding traffic acquisition costs or TAC is defined as
gross profit plus other cost of revenues. Under GAAP, both our
revenues and cost of revenues include TAC. In defining revenues
excluding TAC as our non-GAAP gross profit measure, we have removed
TAC from both revenues and cost of revenues. TAC consists of payments
made to affiliates that have integrated our sponsored search offerings
into their websites and payments made to companies that direct
consumer and business traffic to the Yahoo! network. We present
revenues excluding TAC: (1) to provide a metric for our investors to
analyze and value our Company and (2) to provide investors one of the
primary metrics used by the Company for evaluation and decision-making
purposes. We provide revenues excluding TAC because we believe it is
useful to investors in valuing our Company. One of the ways investors
value companies is to apply a multiple to revenues. Since a
significant portion of the GAAP revenues associated with our sponsored
search offerings is paid to our third party affiliates, we believe
investors find it more meaningful to apply multiples to revenues
excluding TAC to assess our value as this avoids "double counting"
revenues that are paid to, and being reported by, our third party
affiliates. Further, management uses revenues excluding TAC for
evaluating the performance of our business, making operating
decisions, for budgeting purposes, and as a factor in determining
management compensation. A limitation of revenues excluding 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.
Operating income before depreciation and amortization is defined as
income from operations before depreciation, amortization of intangible
assets and amortization of stock compensation expense. We consider
operating income before depreciation and amortization to be an
important indicator of the operational strength of the Company. This
measure eliminates the effects of depreciation, amortization of
intangible assets and amortization of stock compensation expense from
period to period, which we believe is useful to management and
investors in evaluating the operating performance of the Company, as
depreciation and amortization costs are not directly attributable to
the underlying performance of the Company's business operations. A
limitation associated with this measure is that it does not reflect
the periodic costs of certain capitalized tangible and intangible
assets used in generating revenues in the Company's businesses.
Management evaluates the costs of such tangible and intangible assets
through other financial measures such as capital expenditures. A
further limitation associated with this measure is that it does not
include stock compensation expenses related to our workforce.
Management compensates for this limitation by providing supplemental
information about stock compensation expense on the face of the
consolidated statements of operations.
Free cash flow is defined as cash flow from operating activities less
net capital expenditures. 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.
Yahoo! Inc.
Reconciliations to Unaudited Condensed Consolidated
Statements of Operations
(in thousands)
Three Months Ended
March 31,
-----------------------
2004 2005
----------- -----------
Revenues for groups of similar services (2):
Marketing services $ 665,046 $1,024,796
Fees 92,740 148,946
---------- ----------
Total revenues $ 757,786 $1,173,742
========== ==========
Revenues by segment:
United States $ 599,271 $ 818,726
International 158,515 355,016
---------- ----------
Total revenues $ 757,786 $1,173,742
========== ==========
Cost of revenues:
Traffic acquisition costs ("TAC") $ 207,636 $ 352,987
Other cost of revenues 74,069 100,310
---------- ----------
Total cost of revenues $ 281,705 $ 453,297
========== ==========
Revenues excluding TAC:
Gross profit $ 476,081 $ 720,445
Other cost of revenues 74,069 100,310
---------- ----------
Revenues excluding TAC $ 550,150 $ 820,755
========== ==========
Revenues excluding TAC by segment:
United States:
Gross profit $ 389,108 $ 540,089
Other cost of revenues 62,617 78,803
---------- ----------
Revenues excluding TAC $ 451,725 $ 618,892
========== ==========
International:
Gross profit $ 86,973 $ 180,356
Other cost of revenues 11,452 21,507
---------- ----------
Revenues excluding TAC $ 98,425 $ 201,863
========== ==========
Operating income before depreciation and
amortization:
Income from operations $ 132,157 $ 247,363
Depreciation and amortization 66,192 88,233
Stock compensation expense 12,572 9,466
---------- ----------
Operating income before depreciation and
amortization $ 210,921 $ 345,062
========== ==========
Operating income before depreciation and
amortization by segment:
Operating income before depreciation and
amortization - United States $ 191,254 $ 270,415
Operating income before depreciation and
amortization - International 19,667 74,647
---------- ----------
Operating income before depreciation and
amortization 210,921 345,062
========== ==========
United States:
Income from operations $ 121,289 $ 190,018
Depreciation and amortization 59,300 71,603
Stock compensation expense 10,665 8,794
---------- ----------
Operating income before depreciation and
amortization - United States $ 191,254 $ 270,415
========== ==========
International:
Income from operations $ 10,868 $ 57,345
Depreciation and amortization 6,892 16,630
Stock compensation expense 1,907 672
---------- ----------
Operating income before depreciation and
amortization - International $ 19,667 $ 74,647
========== ==========
Free cash flow:
Cash flow from operating activities $ 235,975 $ 385,715
Acquisition of property and equipment, net (38,689) (68,149)
---------- ----------
Free cash flow $ 197,286 $ 317,566
========== ==========
(2) Yahoo! currently classifies its revenues as either Marketing
Services or Fees. For the quarter ended March 31, 2004, Yahoo!
reclassified previously reported Marketing Services revenues of $4
million as Fees in order to refine its alignment of revenue
sources with these classifications.
Yahoo! Inc.
Business Outlook
Business Outlook
The following business outlook is based on current information and
expectations as of April 19, 2005. Yahoo!'s business outlook as of
today is expected to be available on the Company's Investor Relations
Web site throughout the current quarter. It is currently expected the
outlook will not be updated until the release of Yahoo!'s next
quarterly earnings announcement, notwithstanding subsequent
developments; however, Yahoo! may update the outlook or any portion
thereof at any time.
Three months Year
ending ending
June 30, December 31,
2005 2005
-------------- --------------
Revenues excluding traffic acquisition
costs (3) ("TAC") outlook (in millions):
Gross Profit $748-$778 $3,120-$3,235
Other cost of revenues 107-117 445-480
-------------- --------------
Revenues excluding TAC $855-$895 $3,565-$3,715
============== ==============
Operating income before depreciation and
amortization (3) outlook (in millions):
Income from operations $238-$249 $1,075-$1,120
Depreciation and amortization 92-98 385-405
Stock compensation expense 10-13 40-50
-------------- --------------
Operating income before depreciation and
amortization $340-$360 $1,500-$1,575
============== ==============
(3) Refer to Note to Unaudited Condensed Consolidated Statements of
Operations.
Yahoo! Inc.
Unaudited Condensed Consolidated Statements of Cash Flows
(in thousands)
Three Months Ended
March 31,
------------------------
2004 2005
----------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 101,212 $ 204,560
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 66,192 88,233
Tax benefits from stock options 60,750 107,527
Earnings in equity interests (19,868) (29,378)
Minority interests in operations of
consolidated subsidiaries 482 1,740
Stock compensation expense 12,572 9,466
(Gain)/loss from sale of investments,
assets and other, net (1,273) (14,268)
Changes in assets and liabilities, net of
effects of acquisitions:
Accounts receivable, net 1,189 (30,417)
Prepaid expenses and other (4,410) 19,108
Accounts payable (17,909) (24,626)
Accrued expenses and other liabilities 32,303 45,219
Deferred revenue 4,735 8,551
---------- -----------
Net cash provided by operating activities 235,975 385,715
---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment, net (38,689) (68,149)
Purchases of marketable debt securities (911,515) (1,636,760)
Proceeds from sales and maturities of
marketable debt securities 917,032 1,777,385
Acquisitions, net of cash acquired (43,767) (53,970)
Proceeds from sales of marketable equity
securities 1,351 11,382
Other investing activities, net 9,560 11,318
---------- -----------
Net cash provided by (used in) investing
activities (66,028) 41,206
---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock, net 92,295 90,304
Repurchase of common stock - (164,895)
Structured stock repurchase, net (50,000) (96,202)
Other financing activities, net - 800
---------- -----------
Net cash provided by (used in) financing
activities 42,295 (169,993)
---------- -----------
Effect of exchange rate changes on cash and
cash equivalents 3,040 10,259
Net change in cash and cash equivalents 215,282 267,187
Cash and cash equivalents, beginning of period 415,892 823,723
---------- -----------
Cash and cash equivalents, end of period $ 631,174 $ 1,090,910
========== ===========
Supplemental schedule of investing activities:
Cash paid for acquisitions $ 50,684 $ 53,997
Cash acquired in acquisitions (6,917) (27)
---------- -----------
$ 43,767 $ 53,970
========== ===========
Common stock, restricted stock and stock
options issued in connection with
acquisitions
$ 2,209 $ 37,766
========== ===========
Yahoo! Inc.
Unaudited Condensed Consolidated Balance Sheets
(in thousands)
December 31, March 31,
2004 2005
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents $ 823,723 $1,090,910
Marketable debt securities 1,875,964 1,490,066
Marketable equity securities 812,288 751,291
Accounts receivable, net 479,993 514,497
Prepaid expenses and other current assets 98,507 76,808
---------- ----------
Total current assets 4,090,475 3,923,572
Long-term marketable debt securities 1,042,575 1,270,832
Property and equipment, net 531,696 552,959
Goodwill 2,550,957 2,540,309
Intangible assets, net 480,666 534,893
Other assets 481,832 482,400
---------- ----------
Total assets $9,178,201 $9,304,965
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 48,205 $ 25,870
Accrued expenses and other current
liabilities 853,115 876,696
Deferred revenue 279,387 289,709
---------- ----------
Total current liabilities 1,180,707 1,192,275
Long-term deferred revenue 65,875 65,196
Long-term debt 750,000 750,000
Other long-term liabilities 35,907 38,467
Minority interests in consolidated subsidiaries 44,266 46,849
Stockholders' equity 7,101,446 7,212,178
---------- ----------
Total liabilities and stockholders' equity $9,178,201 $9,304,965
========== ==========
CONTACT: Yahoo! Inc.
Kiersten Hollars, 408-349-3409 (Media Relations)
kiersten@yahoo-inc.com
Cathy La Rocca, 408-349-5188 (Investor Relations)
cathy@yahoo-inc.com
or
Fleishman-Hillard
Ruben Osorio, 415-318-4108 (Media Relations)
osorior@fleishman.com