Exhibit 99.1
Yahoo! Reports Second Quarter 2005 Financial Results;
Revenues - $1,253 Million, Operating Income - $261 Million,
Operating Income Before Depreciation and Amortization - $368 Million
SUNNYVALE, Calif.--(BUSINESS WIRE)--July 19, 2005--Yahoo! Inc.
(Nasdaq:YHOO) today reported results for the second quarter ended June 30, 2005.
"Yahoo! continued to see solid growth in the second quarter as a result of
our strength in both search marketing and brand advertising, increased
engagement from our large, global audience, and our ability to execute and
perform according to plan," said Terry Semel, chairman and chief executive
officer, Yahoo!. "We have a healthy business model that we believe will enable
us to take advantage of future growth opportunities and we remain dedicated to
providing our users with the very best services on the Internet."
Consolidated Financial Results
-- Revenues were $1,253 million for the second quarter of 2005, a 51
percent increase compared to $832 million for the same period of 2004.
-- Marketing services revenue was $1,094 million for the second quarter
of 2005, a 51 percent increase compared to $723 million for the same
period of 2004.
-- Fees revenue was $159 million for the second quarter of 2005, a 45
percent increase compared to $109 million for the same period of 2004.
-- Revenues excluding traffic acquisition costs ("TAC") were $875 million
for the second quarter of 2005, a 44 percent increase compared to $609
million for the same period of 2004.
-- Gross profit for the second quarter of 2005 was $767 million, a 43
percent increase compared to $535 million for the same period of 2004.
-- Operating income for the second quarter of 2005 was $261 million, a 75
percent increase compared to $149 million for the same period of 2004.
-- Operating income before depreciation and amortization for the second
quarter of 2005 was $368 million, a 57 percent increase compared to
$234 million for the same period of 2004.
-- Cash flow from operating activities for the second quarter of 2005 was
$404 million, a 62 percent increase compared to $250 million for the
same period of 2004.
-- Free cash flow for the second quarter of 2005 was $300 million, a 55
percent increase compared to $194 million for the same period of 2004.
-- Net income for the second quarter of 2005 was $755 million or $0.51
per diluted share (including net income of $563 million, or $0.38 per
diluted share, related to the sale of an investment). This compares
with net income of $113 million or $0.08 per diluted share for the
same period of 2004.
"We are very pleased with our second quarter results as they clearly
underscore two fundamental business model strengths: excellent growth and great
balance," said Susan Decker, chief financial officer, Yahoo!. "We see this as a
terrific combination leading to the quarter's strong organic revenue growth,
robust profitability, and substantial free cash flow."
Segment Financial Results
-- United States revenues for the second quarter of 2005 were $870
million, a 39 percent increase from the $624 million reported for the
same period of 2004.
-- International revenues for the second quarter of 2005 were $383
million, an 84 percent increase from the $208 million reported for the
same period of 2004.
-- United States segment operating income before depreciation and
amortization for the second quarter of 2005 was $291 million, a 47
percent increase from the $198 million reported for the same period of
2004.
-- International segment operating income before depreciation and
amortization for the second quarter of 2005 was $77 million, a 116
percent increase from the $36 million reported for the same period of
2004.
Cash Flow Information
Free cash flow was $300 million in the second quarter of 2005 compared to
$194 million for the same period of 2004. Cash, cash equivalents and investments
in marketable debt securities grew by $1,073 million from $3,852 million at
March 31, 2005 to $4,925 million at June 30, 2005. In addition to free cash flow
of $300 million, Yahoo! generated $212 million from the issuance of common stock
as a result of the exercise of employee stock options, and $959 million in
proceeds from sales of marketable equity securities. These increases were offset
by a net $264 million used in structured stock repurchase transactions, and $122
million used for acquisitions and investing activities.
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 second 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 website 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: 11995938.
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, California.
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 July 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 year ended
December 31, 2004 and the Quarterly Report on Form 10-Q for the quarter ended
March 31, 2005 which are 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 June 30, 2005,
which will be filed with the SEC in the third 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 Six Months Ended
June 30, June 30,
----------------------- -----------------------
2004 2005 2004 2005
----------- ----------- ----------- -----------
Revenues $ 832,299 $ 1,252,997 $ 1,590,085 $ 2,426,739
Cost of revenues 297,383 485,898 579,088 939,195
----------- ----------- ----------- -----------
Gross profit 534,916 767,099 1,010,997 1,487,544
----------- ----------- ----------- -----------
Operating expenses:
Sales and marketing 191,875 246,406 358,170 476,925
Product development 87,140 125,544 164,129 244,893
General and
administrative 63,159 81,430 120,715 154,975
Stock compensation
expense (1) 7,140 10,948 19,712 20,414
Amortization of
intangibles 36,108 41,414 66,620 81,617
----------- ----------- ----------- -----------
Total operating
expenses 385,422 505,742 729,346 978,824
----------- ----------- ----------- -----------
Income from operations 149,494 261,357 281,651 508,720
Other income, net 13,179 979,736 27,557 1,029,730
----------- ----------- ----------- -----------
Income before income
taxes, earnings in
equity interests,
minority interests 162,673 1,241,093 309,208 1,538,450
Provision for income
taxes (72,517) (515,855) (137,226) (636,290)
Earnings in equity
interests 24,108 33,105 43,976 62,483
Minority interests in
operations of
consolidated
subsidiaries (1,752) (3,654) (2,234) (5,394)
----------- ----------- ----------- -----------
Net income $ 112,512 $ 754,689 $ 213,724 $ 959,249
=========== =========== =========== ===========
Net income per share -
diluted $ 0.08 $ 0.51 $ 0.15 $ 0.65
=========== =========== =========== ===========
Shares used in per
share calculation -
diluted 1,449,707 1,484,200 1,438,128 1,481,114
=========== =========== =========== ===========
(1) Stock compensation expense is allocated as follows:
Sales and marketing $ 2,376 $ 1,509 $ 5,981 $ 2,999
Product development 2,548 3,741 7,271 7,003
General and
administrative 2,216 5,698 6,460 10,412
----------- ----------- ----------- -----------
Total stock
compensation
expense $ 7,140 $ 10,948 $ 19,712 $ 20,414
=========== =========== =========== ===========
- ----------------------------------------------------------------------
Supplemental Financial Data (See Note)
- ---------------------------
Revenues excluding
traffic acquisition
costs ("TAC") $ 609,141 $ 875,112 $ 1,159,291 $ 1,695,867
Operating income
before depreciation
and amortization $ 234,062 $ 368,440 $ 444,983 $ 713,502
Free cash flow $ 194,003 $ 299,874 $ 391,289 $ 617,440
- ----------------------------------------------------------------------
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! website. 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
including the tax benefit from stock options, less net capital
expenditures and dividends received. 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 Six Months Ended
June 30, June 30,
-----------------------------------------------
2004 2005 2004 2005
----------- ----------- ----------- -----------
Revenues for groups of similar services (2):
Marketing services $ 722,705 $ 1,094,301 $ 1,387,751 $ 2,119,097
Fees 109,594 158,696 202,334 307,642
----------- ----------- ----------- -----------
Total revenues $ 832,299 $ 1,252,997 $ 1,590,085 $ 2,426,739
=========== =========== =========== ===========
Revenues by segment:
United States $ 624,161 $ 869,517 $ 1,223,432 $ 1,688,243
International 208,138 383,480 366,653 738,496
----------- ----------- ----------- -----------
Total revenues $ 832,299 $ 1,252,997 $ 1,590,085 $ 2,426,739
=========== =========== =========== ===========
Cost of revenues:
Traffic acquisition
costs ("TAC") $ 223,158 $ 377,885 $ 430,794 $ 730,872
Other cost of
revenues 74,225 108,013 148,294 208,323
----------- ----------- ----------- -----------
Total cost of
revenues $ 297,383 $ 485,898 $ 579,088 $ 939,195
=========== =========== =========== ===========
Revenues excluding TAC:
Gross profit $ 534,916 $ 767,099 $ 1,010,997 $ 1,487,544
Other cost of
revenues 74,225 108,013 148,294 208,323
----------- ----------- ----------- -----------
Revenues excluding
TAC $ 609,141 $ 875,112 $ 1,159,291 $ 1,695,867
=========== =========== =========== ===========
Revenues excluding TAC by segment:
United States:
Gross profit $ 413,788 $ 575,460 $ 802,896 $ 1,115,549
Other cost of
revenues 60,304 84,585 122,921 163,388
----------- ----------- ----------- -----------
Revenues excluding
TAC $ 474,092 $ 660,045 $ 925,817 $ 1,278,937
=========== =========== =========== ===========
International:
Gross profit $ 121,128 $ 191,639 $ 208,101 $ 371,995
Other cost of
revenues 13,921 23,428 25,373 44,935
----------- ----------- ----------- -----------
Revenues excluding
TAC $ 135,049 $ 215,067 $ 233,474 $ 416,930
=========== =========== =========== ===========
Operating income before depreciation and amortization:
Income from
operations $ 149,494 $ 261,357 $ 281,651 $ 508,720
Depreciation and
amortization 77,428 96,135 143,620 184,368
Stock compensation
expense 7,140 10,948 19,712 20,414
----------- ----------- ----------- -----------
Operating income
before depreciation
and amortization $ 234,062 $ 368,440 $ 444,983 $ 713,502
=========== =========== =========== ===========
Operating income before depreciation and amortization by segment:
Operating income
before depreciation
and amortization -
United States $ 198,365 $ 291,244 $ 389,619 $ 561,659
Operating income
before depreciation
and amortization -
International 35,697 77,196 55,364 151,843
----------- ----------- ----------- -----------
Operating income
before depreciation
and amortization $ 234,062 $ 368,440 $ 444,983 $ 713,502
=========== =========== =========== ===========
United States:
Income from
operations $ 128,556 $ 202,275 $ 249,845 $ 392,293
Depreciation and
amortization 63,711 78,591 123,011 150,194
Stock compensation
expense 6,098 10,378 16,763 19,172
----------- ----------- ----------- -----------
Operating income
before depreciation
and amortization -
United States $ 198,365 $ 291,244 $ 389,619 $ 561,659
=========== =========== =========== ===========
International:
Income from
operations $ 20,938 $ 59,082 $ 31,806 $ 116,427
Depreciation and
amortization 13,717 17,544 20,609 34,174
Stock compensation
expense 1,042 570 2,949 1,242
----------- ----------- ----------- -----------
Operating income
before depreciation
and amortization -
International $ 35,697 $ 77,196 $ 55,364 $ 151,843
=========== =========== =========== ===========
Free cash flow:
Cash flow from
operating
activities $ 249,702 $ 404,195 $ 485,677 $ 789,910
Acquisition of
property and
equipment, net (55,699) (93,651) (94,388) (161,800)
Dividends received - (10,670) - (10,670)
----------- ----------- ----------- -----------
Free cash flow $ 194,003 $ 299,874 $ 391,289 $ 617,440
=========== =========== =========== ===========
(2) Yahoo! currently classifies its revenues as either Marketing
Services or Fees. For the three and six months ended June 30,
2004, Yahoo! reclassified previously reported Marketing Services
revenues of $6 million and $10 million, respectively, 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 July 19, 2005. Yahoo!'s business outlook as of
today is expected to be available on the Company's Investor Relations
website 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
ending Year ending
September 30, December 31,
2005 2005
--------------- -----------------
Revenues excluding traffic
acquisition costs (3) ("TAC")
outlook (in millions):
Gross profit $768-$808 $3,150-$3,225
Other cost of revenues 112-122 450-475
--------------- -----------------
Revenues excluding TAC $880-$930 $3,600-$3,700
=============== =================
Operating income before depreciation
and amortization (3) outlook
(in millions):
Income from operations $235-$252 $1,075-$1,105
Depreciation and amortization 105-115 400-420
Stock compensation expense 10-13 40-50
--------------- -----------------
Operating income before
depreciation and amortization $350-$380 $1,515-$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 Six Months Ended
June 30, June 30,
----------------------------------------------
2004 2005 2004 2005
----------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 112,512 $ 754,689 $ 213,724 $ 959,249
Adjustments to
reconcile net income
to net cash provided
by operating
activities:
Depreciation and
amortization 77,428 96,135 143,620 184,368
Tax benefits from
stock options 60,371 495,041 121,121 602,568
Earnings in equity
interests (24,108) (33,105) (43,976) (62,483)
Dividends received - 10,670 - 10,670
Minority interests
in operations of
consolidated
subsidiaries 1,752 3,654 2,234 5,394
Stock compensation
expense 7,140 10,948 19,712 20,414
(Gain)/loss from
sale of
investments, assets
and other, net 10,889 (937,998) 9,616 (952,266)
Changes in assets
and liabilities,
net of effects of
acquisitions:
Accounts
receivable, net (37,011) (47,740) (35,822) (78,157)
Prepaid expenses
and other 4,992 (8,868) 582 10,240
Accounts payable 4,316 10,433 (13,593) (14,193)
Accrued expenses
and other
liabilities 19,566 34,597 51,869 79,816
Deferred revenue 11,855 15,739 16,590 24,290
--------- ----------- ----------- -----------
Net cash provided by
operating activities 249,702 404,195 485,677 789,910
--------- ----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of
property and
equipment, net (55,699) (93,651) (94,388) (161,800)
Purchases of
marketable debt
securities (550,422) (3,838,067) (1,461,937) (5,474,827)
Proceeds from sales
and maturities of
marketable debt
securities 552,635 3,597,080 1,469,667 5,374,465
Acquisitions, net of
cash acquired (530,110) (72,404) (573,877) (126,374)
Proceeds from sales of
marketable equity
securities - 958,914 1,351 970,296
Other investing
activities, net 5,577 (49,913) 15,137 (38,595)
--------- ----------- ----------- -----------
Net cash provided by
(used in) investing
activities (578,019) 501,959 (644,047) 543,165
--------- ----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance
of common stock, net 225,383 212,420 317,678 302,724
Repurchases of common
stock - - - (164,895)
Structured stock
repurchases, net - (263,729) (50,000) (359,931)
Other financing
activities, net - - - 800
--------- ----------- ----------- -----------
Net cash provided by
(used in) financing
activities 225,383 (51,309) 267,678 (221,302)
--------- ----------- ----------- -----------
Effect of exchange rate
changes on cash and
cash equivalents 13 (25,332) 3,053 (15,073)
Net change in cash and
cash equivalents (102,921) 829,513 112,361 1,096,700
Cash and cash
equivalents, beginning
of period 631,174 1,090,910 415,892 823,723
--------- ----------- ----------- -----------
Cash and cash
equivalents, end of
period $ 528,253 $ 1,920,423 $ 528,253 $ 1,920,423
========= =========== =========== ===========
Supplemental schedule of
acquisition-related
activities:
Cash paid for
acquisitions $ 568,927 $ 73,455 619,611 $ 127,452
Cash acquired in
acquisitions (38,817) (1,051) (45,734) (1,078)
--------- ----------- ----------- -----------
$ 530,110 $ 72,404 $ 573,877 $ 126,374
========= =========== =========== ===========
Common stock,
restricted stock and
stock options issued
in connection with
acquisitions $ - $ 6,615 $ 2,209 $ 44,381
========= =========== =========== ===========
Yahoo! Inc.
Unaudited Condensed Consolidated Balance Sheets
(in thousands)
December 31, June 30,
2004 2005
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents $ 823,723 $ 1,920,423
Marketable debt securities 1,875,964 1,474,101
Marketable equity securities 812,288 -
Accounts receivable, net 479,993 548,408
Prepaid expenses and other current assets 98,507 157,918
----------- -----------
Total current assets 4,090,475 4,100,850
Long-term marketable debt securities 1,042,575 1,530,149
Property and equipment, net 531,696 589,373
Goodwill 2,550,957 2,563,597
Intangible assets, net 480,666 491,494
Other assets 481,832 396,904
----------- -----------
Total assets $ 9,178,201 $ 9,672,367
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 48,205 $ 30,909
Accrued expenses and other current
liabilities 853,115 709,394
Deferred revenue 279,387 304,287
----------- -----------
Total current liabilities 1,180,707 1,044,590
Long-term deferred revenue 65,875 64,584
Long-term debt 750,000 750,000
Other long-term liabilities 35,907 81,237
Minority interests in consolidated
subsidiaries 44,266 50,354
Stockholders' equity 7,101,446 7,681,602
----------- -----------
Total liabilities and stockholders' equity $ 9,178,201 $ 9,672,367
=========== ===========
CONTACT: Yahoo! Inc.
Kelly Delaney, 408-349-2579 (Media Relations)
kellyd@yahoo-inc.com
Cathy La Rocca, 408-349-5188 (Investor Relations)
cathy@yahoo-inc.com
or
OutCast Communications
Kim Milosevich, 415-392-8282 (Media Relations)
kim@outcastpr.com