Exhibit 99.1
Yahoo! Reports Fourth Quarter and Full Year 2006 Financial Results
Full Year Revenues -- $6,426 Million
Full Year Operating Income -- $941 Million
Full Year Operating Income Before Depreciation, Amortization and
Stock-Based Compensation Expense -- $1,906 Million
SUNNYVALE, Calif.--(BUSINESS WIRE)--Jan. 23, 2007--Yahoo! Inc.
(Nasdaq:YHOO) today reported results for the fourth quarter and full year ended
December 31, 2006.
"I am pleased with the progress Yahoo! made in the fourth quarter. We
successfully addressed many of the challenges we faced in the third quarter and
made aggressive moves to deliver on a number of strategic goals that we set
forth for the organization," said Terry Semel, chairman and CEO of Yahoo!. "I am
confident that our new structure and concentrated focus on Yahoo!'s key
priorities puts us in the best position to take advantage of the many
opportunities that we see ahead for 2007 and beyond."
Fourth Quarter 2006 Financial Results
-- Revenues were $1,702 million for the fourth quarter of 2006, a 13
percent increase compared to $1,501 million for the same period of
2005.
-- Marketing services revenue was $1,490 million for the fourth quarter
of 2006, a 13 percent increase compared to $1,315 million for the same
period of 2005.
-- Fees revenue was $213 million for the fourth quarter of 2006, a 15
percent increase compared to $186 million for the same period of 2005.
-- Revenues excluding traffic acquisition costs ("TAC") were $1,228
million for the fourth quarter of 2006, a 15 percent increase compared
to $1,068 million for the same period of 2005.
-- Gross profit for the fourth quarter of 2006 was $1,012 million, a 12
percent increase compared to $906 million for the same period of 2005.
-- Operating income for the fourth quarter of 2006 was $308 million
(including $95 million for stock-based compensation expense recorded
under the fair value method), a 6 percent decrease compared to $329
million (including $19 million for stock-based compensation expense
recorded under the intrinsic value method) for the same period of
2005.
-- Operating income before depreciation, amortization and stock-based
compensation expense for the fourth quarter of 2006 was $540 million,
an 18 percent increase compared to $459 million for the same period of
2005.
-- Cash flow from operating activities for the fourth quarter of 2006 was
$167 million, a 65 percent decrease compared to $481 million for the
same period of 2005.
-- Free cash flow for the fourth quarter of 2006 was $278 million, a 16
percent decrease compared to $330 million for the same period of 2005.
-- Net income for the fourth quarter of 2006 was $269 million or $0.19
per diluted share (including $56 million of stock-based compensation
expense, net of tax, recorded under the fair value method) compared to
$683 million or $0.46 per diluted share (including $11 million of
stock-based compensation expense, net of tax, recorded under the
intrinsic value method) for the same period of 2005.
-- Non-GAAP net income for the fourth quarter of 2006 was $229 million or
$0.16 per diluted share (including $56 million of stock-based
compensation expense, net of tax, recorded under the fair value method
and excluding $29 million in certain tax adjustments), compared to
non-GAAP net income of $191 million or $0.13 per diluted share
(including $67 million of stock-based compensation expense, net of
tax, recorded under the fair value method, excluding $11 million of
stock-based compensation expense, net of tax, recorded under the
intrinsic value method and excluding $188 million of gains on the sale
of certain investments, net of tax adjustments) for the same period of
2005.
-- Non-GAAP net income for the fourth quarter of 2006 was $297 million or
$0.21 per diluted share (excluding $56 million of stock-based
compensation expense, net of tax, recorded under the fair value method
and excluding $29 million in certain tax adjustments), compared to
non-GAAP net income of $258 million or $0.17 per diluted share
(excluding $11 million of stock-based compensation expense, net of
tax, and excluding $188 million of gains on the sale of certain
investments, net of tax adjustments) for the same period of 2005.
-- The provision for income taxes for the fourth quarter of 2006 was $108
million and yielded an effective tax rate of 31 percent. The provision
for income taxes for the fourth quarter of 2005 was $18 million, and
yielded an effective tax rate of 3 percent as a result of a tax
benefit related to a subsidiary restructuring transaction completed in
that quarter.
-- Explanations of the Company's non-GAAP financial measures and the
related reconciliations to the GAAP financial measures the Company
considers most comparable are included in the accompanying "Note to
Unaudited Condensed Consolidated Statements of Income",
"Reconciliations to Unaudited Condensed Consolidated Statements of
Income" and "Reconciliation of GAAP Net Income and GAAP Net Income Per
Share to Non-GAAP Net Income and Non-GAAP Net Income Per Share".
"We generated very solid growth and profitability in the fourth quarter and
full year 2006, putting the company in a strong financial position and looking
forward, we are very optimistic about the potential of our search monetization
initiative to improve the value of search for Yahoo! and our partners," said
Susan Decker, chief financial officer, Yahoo!. "For 2007, we are organized to
maximize value for Yahoo!'s key customer groups -- audiences, advertisers and
publishers -- by delivering engaging products and effective solutions for
consumers and marketers, both on and off the Yahoo! network."
Full Year 2006 Financial Results
-- Revenues were $6,426 million for 2006, a 22 percent increase compared
to $5,258 million for 2005.
-- Marketing services revenue was $5,627 million for 2006, a 22 percent
increase compared to $4,594 million for 2005.
-- Fees revenue was $798 million for 2006, a 20 percent increase compared
to $664 million for 2005.
-- Revenues excluding TAC were $4,560 million for 2006, a 23 percent
increase compared to $3,696 million for 2005.
-- Gross profit for 2006 was $3,750 million, a 19 percent increase
compared to $3,161 million for 2005.
-- Operating income for 2006 was $941 million (including $425 million for
stock-based compensation expense recorded under the fair value
method), a 15 percent decrease compared to $1,108 million (including
$52 million for stock-based compensation expense recorded under the
intrinsic value method) for 2005.
-- Operating income before depreciation, amortization and stock-based
compensation expense for 2006 was $1,906 million, a 22 percent
increase compared to $1,557 million for 2005.
-- Cash flow from operating activities for 2006 was $1,372 million, a 20
percent decrease compared to $1,711 million for 2005.
-- Free cash flow for 2006 was $1,267 million (including $112 million for
a previously disclosed land purchase), a 2 percent decrease compared
to $1,292 million for 2005.
-- Net income for 2006 was $751 million or $0.52 per diluted share
(including $280 million of stock-based compensation expense, net of
tax, recorded under the fair value method) compared to $1,896 million
or $1.28 per diluted share (including $32 million of stock-based
compensation expense, net of tax, recorded under the intrinsic value
method) for 2005.
-- Non-GAAP net income for 2006 was $723 million or $0.50 per diluted
share (including $280 million of stock-based compensation expense, net
of tax, recorded under the fair value method, excluding certain
investment and other gains of $14 million, net of tax, and excluding
$11 million in certain tax adjustments), compared to non-GAAP net
income of $647 million or $0.43 per diluted share (including $239
million of stock-based compensation expense, net of tax, recorded
under the fair value method, excluding $32 million of stock-based
compensation expense, net of tax, recorded under the intrinsic value
method and excluding $771 million of gains on the sale of certain
investments, net of tax adjustments) for 2005.
-- Non-GAAP net income for 2006 was $1,011 million or $0.69 per diluted
share (excluding $280 million of stock-based compensation expense, net
of tax, recorded under the fair value method, excluding certain
investment and other gains of $14 million, net of tax, and excluding
$11 million in certain tax adjustments), compared to non-GAAP net
income of $886 million or $0.60 per diluted share (excluding $32
million of stock-based compensation expense, net of tax, and excluding
$771 million of gains on the sale of certain investments, net of tax
adjustments) for 2005.
-- The provision for income taxes for 2006 was $458 million and yielded
an effective tax rate of 42 percent. The provision for income taxes
for 2005 was $768 million and yielded an effective tax rate of 30
percent as a result of a tax benefit related to a subsidiary
restructuring transaction completed in the fourth quarter of 2005.
-- Explanations of the Company's non-GAAP financial measures and the
related reconciliations to the GAAP financial measures the Company
considers most comparable are included in the accompanying "Note to
Unaudited Condensed Consolidated Statements of Income",
"Reconciliations to Unaudited Condensed Consolidated Statements of
Income" and "Reconciliation of GAAP Net Income and GAAP Net Income Per
Share to Non-GAAP Net Income and Non-GAAP Net Income Per Share".
Segment Financial Results
Fourth Quarter 2006
-- United States revenues for the fourth quarter of 2006 were $1,145
million, an 8 percent increase compared to $1,056 million for the same
period of 2005.
-- International revenues for the fourth quarter of 2006 were $558
million, a 25 percent increase compared to $445 million for the same
period of 2005.
-- United States segment operating income before depreciation,
amortization and stock-based compensation expense for the fourth
quarter of 2006 was $410 million, a 17 percent increase compared to
$352 million for the same period of 2005.
-- International segment operating income before depreciation,
amortization and stock-based compensation expense for the fourth
quarter of 2006 was $130 million, a 22 percent increase compared to
$107 million for the same period of 2005.
Full Year 2006
-- United States revenues for the year ended December 31, 2006 were
$4,366 million, a 19 percent increase compared to $3,668 million for
2005.
-- International revenues for the year ended December 31, 2006 were
$2,060 million, a 30 percent increase compared to $1,590 million for
2005.
-- United States segment operating income before depreciation,
amortization and stock-based compensation expense for the year ended
December 31, 2006 was $1,452 million, a 19 percent increase compared
to $1,220 million for 2005.
-- International segment operating income before depreciation,
amortization and stock-based compensation expense for the year ended
December 31, 2006 was $454 million, a 34 percent increase compared to
$338 million for 2005.
Cash Flow Information
Free cash flow was $278 million in the fourth quarter of 2006 compared to
$330 million for the same period of 2005. In addition to free cash flow, Yahoo!
generated $87 million from the issuance of common stock as a result of the
exercise of employee stock options, offset by $81 million used for acquisitions.
Cash, cash equivalents and investments in marketable debt securities were $3,537
million at December 31, 2006 as compared to $3,230 million at September 30,
2006, an increase of $307 million.
Free cash flow was $1,267 million for the year ended December 31, 2006
compared to $1,292 million for 2005. In addition to free cash flow, Yahoo!
generated $318 million from the issuance of common stock as a result of the
exercise of employee stock options, offset by $1,782 million used for direct
stock repurchases, a net $228 million used in structured stock repurchase
transactions, and $142 million used for acquisitions. Cash, cash equivalents and
investments in marketable debt securities were $3,537 million at December 31,
2006 as compared to $4,000 million at December 31, 2005, a decrease of $463
million.
Please refer to the "Note to Unaudited Condensed Consolidated Statements of
Income" for definitions of certain key non-GAAP 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 fourth 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 888-286-8010 or 617-801-6888, reservation number: 52560471
About Yahoo!
Yahoo! Inc. is a leading global Internet brand and one of the most
trafficked Internet destinations worldwide. Yahoo!'s mission is to connect
people to their passions, their communities, and the world's knowledge. Yahoo!
is headquartered in Sunnyvale, California.
This press release and its attachments include the following financial
measures defined as non-GAAP financial measures by the Securities and Exchange
Commission: revenues excluding traffic acquisition costs or TAC, operating
income before depreciation, amortization and stock-based compensation expense,
free cash flow, and non-GAAP net income and non-GAAP net income per share. 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 Income",
"Reconciliations to Unaudited Condensed Consolidated Statements of Income" and
"Reconciliation of GAAP Net Income and GAAP Net Income Per Share to Non-GAAP Net
Income and Non-GAAP Net Income Per Share" 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 (including without limitation the statements and information in the
Business Outlook section and the 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 successful implementation, and
acceptance by advertisers, of the Company's new search advertising system, the
Company's ability to compete with new or existing competitors; the
implementation and results of the Company's announced reorganization; 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 joint ventures and 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 January 23, 2007. Yahoo! does not intend, and
undertakes no duty, to update this information to reflect future 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, 2005 and the Quarterly Report on Form 10-Q for the quarter
ended September 30, 2006, 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 Annual Report on Form 10-K for the year ended
December 31, 2006, which will be filed with the SEC in the first quarter of
2007.
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 Income
(in thousands, except per share amounts)
Three Months Ended Year Ended
December 31, December 31,
----------------------- -----------------------
2005 2006 2005 2006
----------- ----------- ----------- -----------
Revenues $1,501,000 $1,702,448 $5,257,668 $6,425,679
Cost of revenues (1) 594,738 690,893 2,096,201 2,675,723
----------- ----------- ----------- -----------
Gross profit 906,262 1,011,555 3,161,467 3,749,956
----------- ---------- ----------- -----------
Operating expenses:
Sales and marketing
(2) 286,031 334,229 1,033,947 1,322,259
Product development
(2) 169,198 204,748 569,527 833,147
General and
administrative (2) 93,524 137,600 341,073 528,798
Amortization of
intangibles (1) 28,561 27,151 109,195 124,786
----------- ----------- ----------- -----------
Total operating
expenses 577,314 703,728 2,053,742 2,808,990
----------- ----------- ----------- -----------
Income from operations 328,948 307,827 1,107,725 940,966
Other income, net 340,132 35,240 1,435,857 157,034
----------- ----------- ----------- -----------
Income before income
taxes, earnings in
equity interests and
minority interests 669,080 343,067 2,543,582 1,098,000
Provision for income
taxes (17,729) (108,009) (767,816) (458,011)
Earnings in equity
interests 33,597 33,853 128,244 112,114
Minority interests in
operations of
consolidated
subsidiaries (1,740) (238) (7,780) (712)
----------- ----------- ----------- -----------
Net income $ 683,208 $ 268,673 $1,896,230 $ 751,391
=========== =========== =========== ===========
Net income per share -
diluted $ 0.46 $ 0.19 $ 1.28 $ 0.52
=========== =========== =========== ===========
Shares used in per
share calculation -
diluted 1,496,942 1,419,143 1,485,591 1,457,686
=========== =========== =========== ===========
(2) Stock-based
compensation expense
was allocated as
follows:
Cost of revenues $ - $ 1,665 $ - $ 6,621
Sales and marketing 3,421 35,258 8,698 155,084
Product development 8,570 32,660 22,390 144,807
General and
administrative 6,542 25,492 21,383 118,418
----------- ----------- ----------- -----------
Total stock-based
compensation
expense $ 18,533 $ 95,075 $ 52,471 $ 424,930
=========== =========== =========== ===========
- ----------------------------------------------------------------------
Supplemental Financial
Data (See Note)
- ----------------------
Revenues excluding TAC $1,067,949 $1,227,935 $3,695,931 $4,559,755
Operating income
before depreciation,
amortization and
stock-based
compensation expense $ 458,714 $ 540,389 $1,557,338 $1,905,917
Free cash flow $ 329,702 $ 277,959 $1,291,779 $1,266,650
Non-GAAP net income
per diluted share
including fair value
stock-based
compensation expense
and excluding other
items $ 0.13 $ 0.16 $ 0.43 $ 0.50
Non-GAAP net income
per diluted share
excluding stock-based
compensation expense
and other items $ 0.17 $ 0.21 $ 0.60 $ 0.69
- ----------------------------------------------------------------------
(1) Yahoo! has changed its classification of amortization expense
related to developed technology and patents acquired through
acquisitions. Amortization expense of $22 million and $64 million
for the three months and year ended December 31, 2005,
respectively, has been reclassified to cost of revenues from
operating expenses.
(2) Prior to January 1, 2006, Yahoo! accounted for stock-based
compensation under Accounting Principles Board, Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB 25"). In
accordance with APB 25, Yahoo! historically used the intrinsic
value method to account for stock-based compensation expense. As
of January 1, 2006, Yahoo! accounts for stock-based compensation
expense under the fair value method in accordance with Statement
of Financial Accounting Standards No. 123R, "Share-Based Payment"
("SFAS 123R"). As Yahoo! adopted the modified prospective
transition method, results for prior periods have not been
restated under the fair value method for GAAP purposes. Yahoo! is
presenting non-GAAP net income and non-GAAP net income per
diluted share financial measures which include stock-based
compensation expense calculated under the fair value method and
exclude other items, for all periods presented. Yahoo! is also
presenting non-GAAP net income and non-GAAP net income per
diluted share financial measures which exclude stock-based
compensation expense and other items for all periods presented.
Yahoo! Inc.
Note to Unaudited Condensed Consolidated Statements of Income
This press release and its attachments include the non-GAAP financial
measures of revenues excluding traffic acquisition costs or TAC,
operating income before depreciation, amortization and stock-based
compensation expense, free cash flow and non-GAAP net income and non-
GAAP net income per share, which are reconciled to gross profit,
income from operations, cash flow from operating activities, and net
income and net income per share, respectively, which we believe are
the most comparable GAAP measures. We use these non-GAAP financial
measures for internal managerial purposes, when publicly providing
our business outlook, and to facilitate period-to-period comparisons.
We describe limitations specific to each non-GAAP financial measure
below. Management generally compensates for limitations in the use of
non-GAAP financial measures by relying on comparable GAAP financial
measures and providing investors with a reconciliation of the non-
GAAP financial measure to the most directly comparable GAAP financial
measure or measures. Further, management uses non-GAAP financial
measures only in addition to and in conjunction with results
presented in accordance with GAAP. We believe that these non-GAAP
financial measures reflect an additional way of viewing aspects of
our operations that, when viewed with our GAAP results, provide a
more complete understanding of factors and trends affecting our
business. These non-GAAP measures should be considered as a
supplement to, and not as a substitute for, or superior to, gross
profit, income from operations, cash flow from operating activities,
and net income and net income per share calculated in accordance with
generally accepted accounting principles.
Revenues excluding 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, 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. Management
compensates for these limitations by also relying on the comparable
GAAP financial measures of revenues, cost of revenues and gross
profit, each of which includes TAC.
Operating income before depreciation, amortization and stock-based
compensation expense is defined as income from operations before
depreciation, amortization of intangible assets and stock-based
compensation expense (including the compensation of our Chief
Executive Officer, which currently consists solely of stock-based
compensation). We consider this measure to be an important indicator
of the operational strength of the Company. We exclude depreciation
and amortization because while tangible and intangible assets support
our businesses, we do not believe the related depreciation and
amortization costs are directly attributable to the operating
performance of our business. This measure is used by some investors
when assessing the performance of our Company. In addition, 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 enhances the ability of
management and investors to understand the impact of stock-based
compensation expense on our operating income. We do not include
depreciation, amortization and stock-based compensation expense in
our internal measures or in the measures used by the Company to
formulate our business outlook presented with our quarterly financial
information to investors. A limitation associated with this non-GAAP
measure, operating income before depreciation, amortization and
stock-based compensation expense, is that it does not reflect the
periodic costs of certain capitalized tangible and intangible assets
used in generating revenues in our 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-based
compensation expense related to the Company's workforce. Management
compensates for these limitations by also relying on the comparable
GAAP financial measure of income from operations, which includes
depreciation, amortization and stock-based compensation expense.
Free cash flow is defined as cash flow from operating activities, less
net capital expenditures and dividends received and including the
excess tax benefits from stock-based compensation. We consider free
cash flow to be a liquidity measure which provides useful information
to management and investors about the amount of cash generated by the
business after the acquisition of property and equipment, which can
then be used for strategic opportunities including, among others,
investing in the Company's business, making strategic acquisitions,
strengthening the balance sheet and repurchasing stock. A limitation
of free cash flow is that it does not represent the total increase or
decrease in the cash balance for the period. Management compensates
for this limitation by also relying on the net change in cash and
cash equivalents as presented in the Company's unaudited condensed
consolidated statements of cash flows prepared in accordance with
GAAP which incorporates all cash movements during the period.
Non-GAAP net income is defined as net income excluding certain gains,
losses and expenses and their related tax effects that we do not
believe are indicative of our ongoing operating results and further
adjusted for stock-based compensation expense under two different
methods. Effective January 1, 2006, we adopted SFAS 123R under the
modified prospective transition method and therefore have recorded
stock-based compensation expense under the fair value method for the
three months and year ended December 31, 2006. Prior to January 1,
2006, including the three months and year ended December 31, 2005, we
recorded stock-based compensation expense under the intrinsic value
method. We have included two non-GAAP measures for non-GAAP net
income and non-GAAP net income per share. In one calculation of non-
GAAP net income and non-GAAP net income per share, we have excluded
stock-based compensation expense in addition to certain gains, losses
and expenses and their related tax effects. In the alternative
calculation of non-GAAP net income and non-GAAP net income per share,
we have included stock-based compensation expense calculated under
the fair value method (as previously disclosed) for the three months
and year ended December 31, 2005, in addition to excluding certain
gains, losses and expenses and their related tax effects, so that
both presented periods include stock-based compensation expense under
the fair value method. We consider non-GAAP net income and non-GAAP
net income per share to be profitability measures which facilitate
the forecasting of our operating results for future periods and allow
for the comparison of our results to historical periods. A limitation
of non-GAAP net income and non-GAAP net income per share is that they
do not include all items that impact our net income and net income
per share for the period. Management compensates for this limitation
by also relying on the comparable GAAP financial measures of net
income and net income per share, both of which include the gains,
losses, expenses and related tax effects that are excluded from non-
GAAP net income and non-GAAP net income per share.
Yahoo! Inc.
Reconciliations to Unaudited Condensed Consolidated Statements of
Income
(in thousands)
Three Months Ended Year Ended
December 31, December 31,
----------------------- ------------------------
2005 2006 2005 2006
----------- ----------- ----------- -----------
Revenues for groups
of similar services:
Marketing services $1,315,303 $1,489,734 $4,593,972 $5,627,207
Fees 185,697 212,714 663,696 798,472
----------- ----------- ----------- ------------
Total revenues $1,501,000 $1,702,448 $5,257,668 $6,425,679
=========== =========== =========== ============
Revenues by segment:
United States $1,056,406 $1,144,702 $3,667,509 $4,365,922
International 444,594 557,746 1,590,159 2,059,757
----------- ----------- ----------- ------------
Total revenues $1,501,000 $1,702,448 $5,257,668 $6,425,679
=========== =========== =========== ============
Cost of revenues:
Traffic
acquisition costs
("TAC") $ 433,051 $ 474,513 $1,561,737 $1,865,924
Other cost of
revenues 161,687 216,380 534,464 809,799
----------- ----------- ----------- ------------
Total cost of
revenues $ 594,738 $ 690,893 $2,096,201 $2,675,723
=========== =========== =========== ============
Revenues excluding
TAC:
Gross profit $ 906,262 $1,011,555 $3,161,467 $3,749,956
Other cost of
revenues 161,687 216,380 534,464 809,799
----------- ----------- ----------- ------------
Revenues excluding
TAC $1,067,949 $1,227,935 $3,695,931 $4,559,755
=========== =========== =========== ============
Revenues excluding
TAC by segment:
United States:
Gross profit $ 675,652 $ 746,119 $2,363,218 $2,761,829
Other cost of
revenues 132,885 175,786 427,873 659,841
----------- ----------- ----------- ------------
Revenues excluding
TAC $ 808,537 $ 921,905 $2,791,091 $3,421,670
=========== =========== =========== ============
International:
Gross profit $ 230,610 $ 265,436 $ 798,249 $ 988,127
Other cost of
revenues 28,802 40,594 106,591 149,958
----------- ----------- ----------- ------------
Revenues excluding
TAC $ 259,412 $ 306,030 $ 904,840 $1,138,085
=========== =========== =========== ============
Operating income
before depreciation,
amortization and
stock-based
compensation
expense:
Income from
operations $ 328,948 $ 307,827 $1,107,725 $ 940,966
Depreciation and
amortization 111,233 137,487 397,142 540,021
Stock-based
compensation
expense 18,533 95,075 52,471 424,930
----------- ----------- ----------- ------------
Operating income
before
depreciation,
amortization and
stock-based
compensation
expense $ 458,714 $ 540,389 $1,557,338 $1,905,917
=========== =========== =========== ============
Operating income
before depreciation,
amortization and
stock-based
compensation expense
by segment:
Operating income
before
depreciation,
amortization and
stock-based
compensation
expense - United
States $ 351,849 $ 410,239 $1,219,539 $1,451,656
Operating income
before
depreciation,
amortization and
stock-based
compensation
expense -
International 106,865 130,150 337,799 454,261
----------- ----------- ----------- ------------
Operating income
before
depreciation,
amortization and
stock-based
compensation
expense $ 458,714 $ 540,389 $1,557,338 $1,905,917
=========== =========== =========== ============
United States:
Income from
operations $ 242,594 $ 215,500 $ 844,622 $ 632,895
Depreciation and
amortization 91,552 110,279 325,159 437,080
Stock-based
compensation
expense 17,703 84,460 49,758 381,681
----------- ----------- ----------- ------------
Operating income
before
depreciation,
amortization and
stock-based
compensation
expense - United
States $ 351,849 $ 410,239 $1,219,539 $1,451,656
=========== =========== =========== ============
International:
Income from
operations $ 86,354 $ 92,327 $ 263,103 $ 308,071
Depreciation and
amortization 19,681 27,208 71,983 102,941
Stock-based
compensation
expense 830 10,615 2,713 43,249
----------- ----------- ----------- ------------
Operating income
before
depreciation,
amortization and
stock-based
compensation
expense -
International $ 106,865 $ 130,150 $ 337,799 $ 454,261
=========== =========== =========== ============
Free cash flow:
Cash flow from
operating
activities $ 481,342 $ 167,357 $1,711,383 $1,371,576
Acquisition of
property and
equipment, net (151,640) (131,550) (408,934) (689,136)
Dividends received - - (10,670) (12,908)
Excess tax
benefits from
stock-based
compensation - 242,152 - 597,118
----------- ----------- ----------- ------------
Free cash flow $ 329,702 $ 277,959 $1,291,779 $1,266,650
=========== =========== =========== ============
Yahoo! Inc.
Reconciliation of GAAP Net Income and GAAP Net Income Per Share to
Non-GAAP Net Income and Non-GAAP Net Income per share - including
stock-based compensation expense
(in thousands, except per share amounts)
Three Months Ended Year Ended
December 31, December 31,
----------------------- -----------------------
2005 2006 2005 2006
----------- ----------- ----------- -----------
GAAP Net income $ 683,208 $ 268,673 $1,896,230 $ 751,391
=========== =========== =========== ===========
(a) To include fair
value stock-based
compensation
expense, using
the fair value
method under
Statement of
Financial
Accounting
Standards No.123,
"Accounting for
Stock-Based
Compensation,"
("SFAS 123"), as
previously
disclosed and
exclude recorded
stock-based
compensation,
using the
intrinsic value
method under APB
25 of the three
and twelve months
ended December
31, 2005 (84,044) - (320,900) -
(b) (Gains)/Losses on
the sale of
certain
investments and
settlements 28,177 - (973,613) -
(c) Reversal of an
earn-out accrual - - - (10,000)
(d) Non-cash gain
arising from
increased
dilution of our
ownership in
Alibaba,
resulting in the
recognition of a
further gain on
the sale of
Yahoo! China (337,965) - (337,965) (14,316)
(e) To adjust the
provision for
income taxes to
eliminate tax
charges and
credits related
to tax
adjustments
recorded in the
current period - (28,690) - (11,341)
(f) To adjust the
provision for
income taxes to
reflect an
effective tax
rate of
approximately 42
percent in 2005
and approximately
43 percent in
2006 and to
reflect tax
impact of items
(a) - (d) (98,228) (10,820) 382,750 7,668
----------- ----------- ----------- -----------
Non-GAAP Net income
including stock-based
compensation expense $ 191,148 $ 229,163 $ 646,502 $ 723,402
=========== =========== =========== ===========
Net income per share -
diluted $ 0.46 $ 0.19 $ 1.28 $ 0.52
=========== =========== =========== ===========
Non-GAAP Net income
including stock-based
compensation expense
per share - diluted $ 0.13 $ 0.16 $ 0.43 $ 0.50
=========== =========== =========== ===========
Shares used in per
share calculation -
diluted 1,496,942 1,419,143 1,485,591 1,457,686
=========== =========== =========== ===========
(g) Adjust number of
shares used in
diluted share
count for the
impact of
applying SFAS 123 994 - 3,076 -
Shares used in Non-
GAAP per share
calculation - diluted 1,497,936 1,419,143 1,488,667 1,457,686
=========== =========== =========== ===========
Yahoo! Inc.
Reconciliation of GAAP Net Income and GAAP Net Income Per Share to
Non-GAAP Net Income and Non-GAAP Net Income per share - excluding
stock-based compensation expense
(in thousands, except per share amounts)
Three Months Ended Year Ended
December 31, December 31,
----------------------- -----------------------
2005 2006 2005 2006
----------- ----------- ----------- -----------
GAAP Net income $ 683,208 $ 268,673 $1,896,230 $ 751,391
=========== =========== =========== ===========
(a) Stock-based
compensation as
measured using
the intrinsic
value method
under APB 25 18,533 - 52,471 -
(b) Stock-based
compensation as
measured using
the fair value
method under SFAS
123R - 95,075 - 424,930
(c) (Gains)/Losses on
the sale of
certain
investments and
settlements 28,177 - (973,613) -
(d) Reversal of an
earn-out accrual - - - (10,000)
(e) Non-cash gain
arising from
increased
dilution of our
ownership in
Alibaba,
resulting in the
recognition of a
further gain on
the sale of
Yahoo! China (337,965) - (337,965) (14,316)
(f) To adjust the
provision for
income taxes to
eliminate tax
charges and
credits related
to tax
adjustments
recorded in the
current period - (28,690) - (11,341)
(g) To adjust the
provision for
income taxes to
reflect an
effective tax
rate of
approximately 40
percent and to
reflect tax
impact of items
(a) - (e) (134,160) (38,558) 248,787 (130,094)
----------- ----------- ----------- -----------
Non-GAAP Net income
excluding stock-based
compensation expense $ 257,793 $ 296,500 $ 885,910 $1,010,570
=========== =========== =========== ===========
GAAP Net income per
share - diluted $ 0.46 $ 0.19 $ 1.28 $ 0.52
=========== =========== =========== ===========
Non-GAAP Net income
excluding stock-based
compensation expense
per share - diluted $ 0.17 $ 0.21 $ 0.60 $ 0.69
=========== =========== =========== ===========
Shares used in per
share calculations -
diluted 1,496,942 1,419,143 1,485,591 1,457,686
=========== =========== =========== ===========
Yahoo! Inc.
Business Outlook
Business Outlook
The following business outlook is based on current information and
expectations as of January 23, 2007. Yahoo!'s business outlook as of
today is expected to be available on the Company's Investor Relations
website throughout the current quarter. Yahoo! does not expect, and
undertakes no obligation, to update the business outlook prior to the
release of the Company's next quarterly earnings announcement,
notwithstanding subsequent developments; however, Yahoo! may update
the business outlook or any portion thereof at any time at its
discretion.
Three Months Year
Ending Ending
March 31, December 31,
2007 2007
---------------- ----------------
Revenues excluding TAC (3) outlook
(in millions):
Gross profit $900 - $980 $3,960 - $4,340
Other cost of revenues 220 - 250 990 - 1,110
---------------- ----------------
Revenues excluding TAC $1,120 - $1,230 $4,950 - $5,450
================ ================
Operating income before
depreciation, amortization and
stock-based compensation expense
(3) outlook (in millions):
Income from operations $138 - $163 $810 - $920
Depreciation and Amortization 140 - 160 615 - 695
Stock-based compensation expense 142 - 157 525 - 585
---------------- ----------------
Operating income before
depreciation, amortization and
stock-based compensation expense $420 - $480 $1,950 - $2,200
================ ================
(3) Refer to Note to Unaudited
Condensed Consolidated
Statements of Income.
Yahoo! Inc.
Unaudited Condensed Consolidated Statements of Cash Flows
(in thousands)
Three Months Ended Year Ended
December 31, December 31,
------------------------ -------------------------
2005 2006 2005 2006
------------ ----------- ------------ ------------
CASH FLOWS FROM
OPERATING
ACTIVITIES:
Net income $ 683,208 $ 268,673 $ 1,896,230 $ 751,391
Adjustments to
reconcile net
income to net
cash provided by
operating
activities:
Depreciation 60,820 84,431 224,065 302,161
Amortization of
intangible
assets 50,413 53,056 173,077 237,860
Stock-based
compensation
expense 18,533 95,075 52,471 424,930
Tax benefits
from stock-
based
compensation 35,782 255,460 759,530 626,009
Excess tax
benefits from
stock-based
compensation - (242,152) - (597,118)
Earnings in
equity
interests (33,597) (33,853) (128,244) (112,114)
Dividends
received - - 10,670 12,908
Minority
interests in
operations of
consolidated
subsidiaries 1,740 238 7,780 712
(Gain)/loss
from sale of
investments,
assets and
other, net (301,573) 686 (1,278,311) (15,125)
Changes in
assets and
liabilities,
net of effects
of
acquisitions:
Accounts
receivable,
net (143,466) (138,416) (272,387) (185,196)
Prepaid
expenses,
current and
long-term
deferred
taxes and
other (43,080) (161,639) (35,344) (285,347)
Accounts
payable 36,928 (36,572) 31,574 30,413
Accrued
expenses and
other
liabilities 100,716 37,126 212,112 175,913
Deferred
revenue 14,918 (14,756) 58,160 4,179
------------ ----------- ------------ ------------
Net cash provided
by operating
activities 481,342 167,357 1,711,383 1,371,576
------------ ----------- ------------ ------------
CASH FLOWS FROM
INVESTING
ACTIVITIES:
Acquisition of
property and
equipment, net (151,640) (131,550) (408,934) (689,136)
Purchases of
marketable debt
securities (391,383) (439,492) (7,023,802) (1,328,515)
Proceeds from
sales and
maturities of
marketable debt
securities 552,453 520,117 7,341,974 1,951,323
Acquisitions, net
of cash acquired (1,570,701) (80,972) (1,698,164) (142,272)
Proceeds from
sales of
marketable
equity
securities - - 1,006,142 -
Other investing
activities, net (116) (3,557) (39,146) 14,919
------------ ----------- ------------ ------------
Net cash used in
investing
activities (1,561,387) (135,454) (821,930) (193,681)
------------ ----------- ------------ ------------
CASH FLOWS FROM
FINANCING
ACTIVITIES:
Proceeds from
issuance of
common stock,
net 369,056 86,652 746,807 318,103
Repurchases of
common stock (14,383) - (387,735) (1,782,140)
Structured stock
repurchases, net 141,296 - (611,421) (227,705)
Excess tax
benefits from
stock-based
compensation - 242,152 - 597,118
Other financing
activities, net - - 1,749 -
------------ ----------- ------------ ------------
Net cash provided
by (used in)
financing
activities 495,969 328,804 (250,600) (1,094,624)
------------ ----------- ------------ ------------
Effect of exchange
rate changes on
cash and cash
equivalents (13,234) 23,905 (32,883) 56,907
Net change in cash
and cash
equivalents (597,310) 384,612 605,970 140,178
Cash and cash
equivalents,
beginning of
period 2,027,003 1,185,259 823,723 1,429,693
------------ ----------- ------------ ------------
Cash and cash
equivalents, end
of period $ 1,429,693 $1,569,871 $ 1,429,693 $ 1,569,871
============ =========== ============ ============
Supplemental
schedule of
acquisition-
related
activities:
Supplemental
noncash financing
activity:
Cash paid for
acquisitions $ 1,572,306 $ 81,882 $ 1,700,898 $ 150,859
Cash acquired in
acquisitions (1,605) (910) (2,734) (8,587)
------------ ----------- ------------ ------------
$ 1,570,701 $ 80,972 $ 1,698,164 $ 142,272
============ =========== ============ ============
Common stock,
restricted stock
and stock options
issued in
connection with
acquisitions $ 392 $ 3,256 $ 44,773 $ 3,256
============ =========== ============ ============
Yahoo! Inc.
Unaudited Condensed Consolidated Balance Sheets
(in thousands)
December 31, December 31,
2005 2006
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 1,429,693 $ 1,569,871
Marketable debt securities 1,131,141 1,031,528
Accounts receivable, net 721,723 930,964
Prepaid expenses and other current assets 166,976 217,779
------------ ------------
Total current assets 3,449,533 3,750,142
Long-term marketable debt securities 1,439,014 935,886
Property and equipment, net 697,522 1,101,379
Goodwill 2,895,557 2,992,103
Intangible assets, net 534,615 405,822
Other long-term assets 57,192 459,988
Investments in equity interests 1,758,401 1,891,834
------------ ------------
Total assets $10,831,834 $11,537,154
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 70,291 $ 109,130
Accrued expenses and other current
liabilities 827,589 1,048,229
Deferred revenue 306,172 317,982
------------ ------------
Total current liabilities 1,204,052 1,475,341
Long-term deferred revenue 67,792 64,939
Long-term debt 749,995 749,915
Other long-term liabilities 243,580 50,501
Minority interests in consolidated
subsidiaries - 8,056
Stockholders' equity 8,566,415 9,188,402
------------ ------------
Total liabilities and stockholders' equity $10,831,834 $11,537,154
============ ============
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, 415-345-4734 (Media Relations)
kim@outcastpr.com