SUNNYVALE, Calif.--(BUSINESS WIRE)--Yahoo! Inc. (NASDAQ:YHOO) today reported results for the quarter and full year ended December 31, 2014.
"I’m pleased to report that our performance in Q4 and in 2014 continues to show stability in our core business," said Marissa Mayer, CEO of Yahoo. "Our mobile strategy and focus has transformed Yahoo and yielded significant results. In Q4, we saw $254 million in mobile revenue, up 23% quarter-over-quarter. Across all of 2014, we saw gross mobile revenue of $1.26 billion and GAAP mobile revenue of $768 million. Our investment businesses - mobile, video, native, and social - collectively delivered more than $1.1 billion in GAAP revenue, up 95% year-over-year. These growth drivers have really focused our investments and energy on the future of digital advertising."
| Q4 2013 | Q4 2014 | Full Year 2013 | Full Year 2014 | |||||||||
| GAAP revenue | $1,266 million | $1,253 million | $4,680 million | $4,618 million | ||||||||
| Revenue ex-TAC | $1,200 million | $1,179 million | $4,426 million | $4,401 million | ||||||||
| GAAP income from operations | $174 million | $32 million | $590 million | $143 million | ||||||||
| Non-GAAP income from operations | $330 million | $256 million | $935 million | $755 million | ||||||||
| Adjusted EBITDA | $478 million | $409 million | $1,564 million | $1,362 million | ||||||||
| Net earnings | $348 million | $166 million | $1,366 million | $7,522 million | ||||||||
| GAAP net earnings per diluted share | $0.33 | $0.17 | $1.26 | $7.45 | ||||||||
| Non-GAAP net earnings per diluted share | $0.46 | $0.30 | $1.52 | $1.57 | ||||||||
Business Highlights
- Yahoo closed the acquisition of BrightRoll, the leading programmatic video advertising platform in the U.S. Through the acquisition of BrightRoll, Yahoo is now the largest video advertising platform in the U.S.
- The Company entered into a five-year global partnership with Mozilla to make Yahoo the default search experience on Mozilla’s Firefox browser across mobile and desktop. This is the most significant partnership for Yahoo in five years.
- The Company announced that U.S. advertisers with managed accounts can use Yahoo Gemini to promote their apps across Yahoo Properties and Affiliate sites. Yahoo also expanded the cross-screen capabilities of video advertising for advertisers by integrating in-app inventory from Flurry’s Marketplace.
- Yahoo launched many new features on its core applications, including: stationery designs on Yahoo Mail in partnership with Paperless Post, search within Yahoo Aviate, a new app for Flickr on the iPad, and enhanced features in the Yahoo and Yahoo Mail apps on iOS and Android.
- Yahoo recruited impressive sales talent in the fourth quarter and early 2015, hiring Lisa Utzschneider, Senior Vice President, Sales, Americas; Kathy Kayse as Vice President, Sales Strategy and Solutions; and Kevin Gentzel, Vice President of Advertising Sales.
"We are proud of our accomplishments to date on capital allocation and the returns they have produced for our shareholders,” said Ken Goldman, CFO of Yahoo. “Since the beginning of Q2 2012, our significant buyback activity has seen us repurchase 354 million shares, totaling $9.7 billion to date and representing about a 29% gross reduction in our initial share base. At an average price of $27.44, this has been highly accretive for our shareholders. Following the planned tax-free spin-off of the remaining stake in Alibaba, which we also announced today, we will have returned a total of nearly $50 billion in value to our shareholders to date.”
Fourth Quarter and Full Year 2014 Financial Highlights
Transformative Investments:
- Our Transformative Investments comprise mobile, video, native and social. These offerings generated more than $380 million and $1.1 billion of GAAP revenue for the fourth quarter and full year of 2014, respectively.
- Gross mobile revenue for the fourth quarter and full year of 2014 was approximately $413 million and $1,261 million, respectively.
- GAAP mobile revenue for the fourth quarter and full year of 2014 was approximately $254 million and $768 million, respectively.
Reported Revenues:
Search:
- GAAP search revenue was $467 million for the fourth quarter, an increase of 1 percent compared to the fourth quarter of 2013. GAAP search revenue was $1,793 million for the full year of 2014, a 3 percent increase compared to $1,742 million for the prior year.
- Search revenue ex-TAC of $462 million for the fourth quarter of 2014 was flat compared to the fourth quarter of 2013. Search revenue ex-TAC was $1,784 million for the full year of 2014, a 5 percent increase compared to $1,699 million for the prior year.
- Gross search revenue was $932 million for the fourth quarter of 2014, an increase of 14 percent compared to the fourth quarter of 2013. Gross search revenue was $3,382 million for the full year of 2014, an increase of 14 percent compared to the prior year. Gross search revenue was not previously reported.
- The number of Paid Clicks increased approximately 10 percent compared to the fourth quarter of 2013.
- Price-per-Click increased approximately 7 percent compared to the fourth quarter of 2013.
Display:
- GAAP display revenue was $532 million for the fourth quarter of 2014, a 4 percent decrease compared to $553 million for the fourth quarter of 2013. GAAP display revenue was $1,868 million for the full year of 2014, a 4 percent decrease compared to $1,950 million for the prior year.
- Display revenue ex-TAC was $464 million for the fourth quarter of 2014, a 5 percent decrease compared to $491 million for the fourth quarter of 2013. Display revenue ex-TAC was $1,663 million for the full year of 2014, a 4 percent decrease compared to $1,737 million for the prior year.
- The number of Ads Sold increased approximately 17 percent compared to the fourth quarter of 2013.
- Price-per-Ad decreased approximately 20 percent compared to the fourth quarter of 2013.
Cash, Cash Equivalents, and Marketable Securities:
- Cash, cash equivalents, and marketable securities were $10 billion as of December 31, 2014 compared to $5 billion as of December 31, 2013, an increase of $5 billion.
- During the fourth quarter and year ended December 31, 2014, Yahoo repurchased approximately 22 million and approximately 62 million shares, respectively, for $980 million and $2.4 billion, respectively.
- During 2014, the Company also entered into two accelerated share repurchase agreements that resulted in the repurchase of approximately 40 million shares for $1.7 billion. The accelerated share repurchase agreements were entered into pursuant to the Company’s existing share repurchase program.
Live Stream
Yahoo will live stream a video broadcast of the Company's fourth quarter and full year 2014 financial results at 2 p.m. Pacific Time/5 p.m. Eastern Time today. The live stream will be broadcast from Yahoo’s Sunnyvale studio and will be available exclusively on Yahoo Finance at finance.yahoo.com. The Company will provide its business outlook for the first quarter during the presentation. Supplemental financial information can be accessed through the Company’s Investor Relations website at investor.yahoo.net. The video will be archived after the event at investor.yahoo.net and will be available for 90 days following the broadcast.
Non-GAAP Financial Measures
This press release and its attachments include the following financial measures defined as non-GAAP financial measures by the Securities and Exchange Commission (“SEC”): gross mobile revenue; gross search revenue; revenue ex-TAC; adjusted EBITDA; non-GAAP income from operations; non-GAAP net earnings; non-GAAP net earnings per share - diluted; and free cash flow.
Gross mobile revenue is GAAP mobile revenue plus the related revenue share with third parties. Gross search revenue is GAAP search revenue plus the related revenue share with third parties. Revenue ex-TAC is GAAP revenue less traffic acquisition costs. Adjusted EBITDA, non-GAAP income from operations, non-GAAP net earnings and non-GAAP net earnings per share - diluted, exclude from the most comparable GAAP financial measures certain gains, losses, and expenses that we do not believe are indicative of ongoing results, and exclude stock-based compensation expense. Adjusted EBITDA also excludes taxes, depreciation, amortization of intangible assets, other income, net (which includes interest), earnings in equity interests, and net income attributable to noncontrolling interests. Free cash flow is GAAP net cash provided by operating activities (adjusted to include excess tax benefits from stock-based awards), less acquisition of property and equipment, net and dividends received from equity investees.
These measures may be different than non-GAAP financial measures used by other companies. The presentation of this financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with generally accepted accounting principles (“GAAP”). Explanations of the Company’s non-GAAP financial measures and reconciliations of these financial measures to the GAAP financial measures the Company considers most comparable are included in the accompanying “Note to Unaudited Condensed Consolidated Financial Statements,” “Supplemental Financial Data and GAAP to Non-GAAP Reconciliations,” and “GAAP to Non-GAAP Reconciliations.”
About Yahoo
Yahoo is a guide focused on making users' daily habits inspiring and entertaining. By creating highly personalized experiences for our users, we keep people connected to what matters most to them, across devices and around the world. In turn, we create value for advertisers by connecting them with the audiences that build their businesses. Yahoo is headquartered in Sunnyvale, California, and has offices located throughout the Americas, Asia Pacific (APAC) and the Europe, Middle East and Africa (EMEA) regions. For more information, visit the pressroom (pressroom.yahoo.net) or the Company's blog (yahoo.tumblr.com).
“Yahoo”, “Company” and “we” refers to Yahoo! Inc. and its consolidated subsidiaries.
“Affiliates” refers to the third-party entities that have integrated Yahoo’s advertising offerings into their Websites or other offerings (those Websites and other offerings, “Affiliate sites”).
“Alibaba Group” means Alibaba Group Holding Limited.
“Net earnings” means net income attributable to Yahoo! Inc., and “net earnings per diluted share” means net income attributable to Yahoo! Inc. common stockholders per share – diluted.
“Ads Sold” consist of display ad impressions for paying advertisers on Yahoo Properties.
“Paid Clicks” are clicks by end-users on sponsored search listings (excluding native ads) on Yahoo Properties and Affiliate sites.
“Price-per-Ad” is defined as display revenue from Yahoo Properties divided by our total number of Ads Sold.
“Price-per-Click” is defined as Search click-driven revenue divided by our total number of Paid Clicks.
“Search click-driven revenue” is gross search revenue excluding the Microsoft RPS guarantee and search revenue from Yahoo Japan.
“Gross search revenue” is GAAP search revenue plus the related revenue share with third parties.
We periodically review, refine and update our methodologies for monitoring, gathering, and counting number of Ads Sold and Paid Clicks, and for calculating Search click-driven revenue, Price-per-Ad and Price-per-Click.
Additional information about how “Ads Sold,” “Paid Clicks,” “Price-per-Ad,” “Price-per-Click” and “Search click-driven revenue” are defined and calculated is included under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2014, which is on file with the SEC and available on the SEC's website at www.sec.gov.
“Search Agreement” refers to the Search and Advertising Services and Sales Agreement between Yahoo and Microsoft Corporation, as amended.
“TAC” refers to traffic acquisition costs. TAC consists of payments to Affiliates and payments made to companies that direct consumer and business traffic to Yahoo Properties.
“Yahoo Properties” refers to the online properties and services that Yahoo provides to users.
This press release contains forward-looking statements concerning Yahoo's expected financial performance and Yahoo's strategic and operational plans (including, without limitation, the quotations from management). Risks and uncertainties may cause actual results to differ materially from the results predicted, and reported results should not be considered as an indication of future performance. The potential risks and uncertainties include, among others, acceptance by users of new products and services (including, without limitation, products and services for mobile devices and alternative platforms); Yahoo's ability to compete with new or existing competitors; reduction in spending by, or loss of, advertising customers; risks associated with the Search Agreement with Microsoft Corporation; risks related to acquiring or developing compelling content; risks related to joint ventures and the integration of acquisitions; risks related to possible impairment of goodwill or other assets; risks related to fluctuations in foreign currency exchange rates; risks related to Yahoo’s regulatory environment; Yahoo’s ability to protect its intellectual property and the value of its brands; adverse results in litigation; security breaches; interruptions or delays in the provision of Yahoo’s services; risks related to Yahoo's international operations; risks related to the calculation of our key operational metrics; dependence on third parties for technology, services, content, and distribution; and general economic conditions. All information set forth in this press release and its attachments is as of January 27, 2015. Yahoo does not intend, and undertakes no duty, to update this information to reflect subsequent events or circumstances. More information about potential factors that could affect the Company's business and financial results is included under the captions "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Annual Report on Form 10-K for the year ended December 31, 2013, as amended, and Quarterly Report on Form 10-Q for the quarter ended September 30, 2014, which are on file with the SEC and available on the SEC's website at www.sec.gov. Additional information will also be set forth in those sections in Yahoo’s Annual Report on Form 10-K for the year ended December 31, 2014, which will be filed with the SEC in the first quarter of 2015.
Yahoo!, Yahoo Finance, BrightRoll, Yahoo Gemini, Flurry, Aviate, Yahoo Mail, Flickr, Yahoo Parenting, Yahoo DIY, Yahoo Makers, and the Yahoo logos are trademarks and/or registered trademarks of Yahoo! Inc. Tumblr is a registered trademark of Tumblr, Inc. All other names are trademarks and/or registered trademarks of their respective owners.
| Yahoo! Inc. | ||||||
| Unaudited Condensed Consolidated Balance Sheets | ||||||
| (in thousands) | ||||||
| December 31, | December 31, | |||||
| 2013 | 2014 | |||||
| ASSETS | ||||||
| Current assets: | ||||||
| Cash and cash equivalents | $ | 2,077,590 | $ | 3,173,864 | ||
| Short-term marketable securities | 1,330,304 | 4,821,464 | ||||
| Accounts receivable, net | 979,559 | 1,032,704 | ||||
| Prepaid expenses and other current assets | 638,404 | 671,075 | ||||
| Total current assets | 5,025,857 | 9,699,107 | ||||
| Long-term marketable securities | 1,589,500 | 2,230,892 | ||||
| Property and equipment, net | 1,488,518 | 1,487,684 | ||||
| Goodwill | 4,679,648 | 5,163,654 | ||||
| Intangible assets, net | 417,808 | 470,842 | ||||
| Other long-term assets and investments | 177,281 | 550,798 | ||||
| Investment in Alibaba Group | - | 39,867,789 | ||||
| Investments in equity interests | 3,426,347 | 2,489,578 | ||||
| Total assets | $ | 16,804,959 | $ | 61,960,344 | ||
| LIABILITIES AND EQUITY | ||||||
| Current liabilities: | ||||||
| Accounts payable | $ | 138,031 | $ | 238,018 | ||
| Income taxes payable related to sale of Alibaba Group ADSs | - | 3,282,293 | ||||
| Accrued expenses and other current liabilities | 907,782 | 671,307 | ||||
| Deferred revenue | 294,499 | 336,963 | ||||
| Total current liabilities | 1,340,312 | 4,528,581 | ||||
| Convertible notes | 1,110,585 | 1,170,423 | ||||
| Long-term deferred revenue | 258,904 | 20,774 | ||||
| Capital lease and other long-term liabilities | 116,605 | 143,095 | ||||
| Deferred tax liabilities related to investment in Alibaba Group | - | 16,154,906 | ||||
| Deferred and other long-term tax liabilities, net | 847,956 | 1,156,973 | ||||
| Total liabilities | 3,674,362 | 23,174,752 | ||||
| Total Yahoo! Inc. stockholders' equity | 13,074,909 | 38,741,837 | ||||
| Noncontrolling interests | 55,688 | 43,755 | ||||
| Total equity | 13,130,597 | 38,785,592 | ||||
| Total liabilities and equity | $ | 16,804,959 | $ | 61,960,344 | ||
| Yahoo! Inc. | ||||||||||||||||
| Unaudited Condensed Consolidated Statements of Income | ||||||||||||||||
| (in thousands, except per share amounts) | ||||||||||||||||
| Three Months Ended | Year Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2013 | 2014 | 2013 | 2014 | |||||||||||||
| Revenue | $ | 1,265,795 | $ | 1,253,072 | $ | 4,680,380 | $ | 4,618,133 | ||||||||
| Operating expenses: | ||||||||||||||||
| Cost of revenue - traffic acquisition costs | 65,594 | 73,616 | 254,442 | 217,531 | ||||||||||||
| Cost of revenue - other | 273,906 | 261,971 | 1,094,938 | 1,080,783 | ||||||||||||
| Sales and marketing | 311,501 | 301,987 | 1,130,820 | 1,234,268 | ||||||||||||
| Product development | 275,265 | 316,231 | 1,008,487 | 1,207,146 | ||||||||||||
| General and administrative | 149,791 | 162,997 | 569,555 | 574,743 | ||||||||||||
| Amortization of intangibles | 14,139 | 17,924 | 44,841 | 66,750 | ||||||||||||
| Gains on sales of patents | (70,000 | ) | (35,094 | ) | (79,950 | ) | (97,894 | ) | ||||||||
| Goodwill impairment charge | 63,555 | 88,414 | 63,555 | 88,414 | ||||||||||||
| Restructuring charges, net | 7,826 | 32,872 | 3,766 | 103,450 | ||||||||||||
| Total operating expenses | 1,091,577 | 1,220,918 | 4,090,454 | 4,475,191 | ||||||||||||
| Income from operations | 174,218 | 32,154 | 589,926 | 142,942 | ||||||||||||
| Other (expense) income, net | (2,691 | ) | 87,550 | 43,357 | 10,369,439 | |||||||||||
| Income before income taxes and earnings in equity interests | 171,527 | 119,704 | 633,283 | 10,512,381 | ||||||||||||
| Provision for income taxes | (41,498 | ) | (52,340 | ) | (153,392 | ) | (4,038,102 | ) | ||||||||
| Earnings in equity interests | 221,641 | 101,917 | 896,675 | 1,057,863 | ||||||||||||
| Net income | 351,670 | 169,281 | 1,376,566 | 7,532,142 | ||||||||||||
| Less: Net income attributable to noncontrolling interests | (3,480 | ) | (2,937 | ) | (10,285 | ) | (10,411 | ) | ||||||||
| Net income attributable to Yahoo! Inc. | $ | 348,190 | $ | 166,344 | $ | 1,366,281 | $ | 7,521,731 | ||||||||
| Net income attributable to Yahoo! Inc. common stockholders per share - diluted (1) | $ | 0.33 | $ | 0.17 | $ | 1.26 | $ | 7.45 | ||||||||
| Shares used in per share calculation - diluted | 1,038,754 | 962,626 | 1,070,811 | 1,004,108 | ||||||||||||
| Stock-based compensation expense by function: | ||||||||||||||||
| Cost of revenue - other | $ | 6,330 | $ | 4,470 | $ | 15,545 | $ | 33,560 | ||||||||
| Sales and marketing | 32,857 | 34,070 | 101,852 | 154,372 | ||||||||||||
| Product development | 25,894 | 44,839 | 83,396 | 139,056 | ||||||||||||
| General and administrative | 19,672 | 19,373 | 77,427 | 93,186 | ||||||||||||
|
Supplemental Financial Data: |
||||||||||||||||
| Revenue ex-TAC | $ | 1,200,201 | $ | 1,179,456 | $ | 4,425,938 | $ | 4,400,602 | ||||||||
| Adjusted EBITDA | $ | 478,333 | $ | 409,222 | $ | 1,564,245 | $ | 1,361,548 | ||||||||
| Free cash flow | $ | 266,069 | $ | 78,343 | $ | 786,465 | $ | 590,450 | ||||||||
| (1) | The impact of outstanding stock awards of entities in which the Company holds equity interests that are accounted for using the equity method reduced the Company's diluted earnings per share by $0.01 for the three months ended December 31, 2013 and $0.02 and $0.04 for the years ended December 31, 2013 and 2014, respectively. | |
| Yahoo! Inc. | ||||||||||||||||||
| Unaudited Condensed Consolidated Statements of Cash Flows | ||||||||||||||||||
| (in thousands) | ||||||||||||||||||
| Three Months Ended | Year Ended | |||||||||||||||||
| December 31, | December 31, | |||||||||||||||||
| 2013 | 2014 | 2013 | 2014 | |||||||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||||||||
| Net income | $ | 351,670 | $ | 169,281 | $ | 1,376,566 | $ | 7,532,142 | ||||||||||
|
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||||||||||||
| Depreciation | 119,839 | 118,454 | 532,485 | 475,031 | ||||||||||||||
| Amortization of intangible assets | 28,153 | 34,576 | 96,518 | 131,537 | ||||||||||||||
| Accretion of convertible notes discount | 4,846 | 15,255 | 4,846 | 59,838 | ||||||||||||||
| Stock-based compensation expense | 84,753 | 102,752 | 278,220 | 420,174 | ||||||||||||||
| Non-cash goodwill impairment charge | 63,555 | 88,414 | 63,555 | 88,414 | ||||||||||||||
| Non-cash restructuring charges (reversals) | - | 3,637 | 547 | (3,394 | ) | |||||||||||||
| Losses from sale of investments, assets, and other, net | 2,403 | 7,623 | 22,397 | 35,473 | ||||||||||||||
| Gain on sale of Alibaba Group ADSs | - | - | - | (10,319,437 | ) | |||||||||||||
| Gains on sales of patents | (70,000 | ) | (35,094 | ) | (79,950 | ) | (97,894 | ) | ||||||||||
| Gain on Hortonworks warrants | - | (98,062 | ) | - | (98,062 | ) | ||||||||||||
| Earnings in equity interests | (221,641 | ) | (101,917 | ) | (896,675 | ) | (1,057,863 | ) | ||||||||||
| Dividend income related to Alibaba Group Preference Shares | - | - | (35,726 | ) | - | |||||||||||||
| Tax benefits from stock-based awards | 15,167 | 34,649 | 49,061 | 145,711 | ||||||||||||||
| Excess tax benefits from stock-based awards | (17,214 | ) | (35,190 | ) | (64,407 | ) | (149,582 | ) | ||||||||||
| Deferred income taxes | (9,321 | ) | 68,458 | (84,302 | ) | 465,873 | ||||||||||||
| Dividends received from equity investees | - | - | 135,058 | 83,685 | ||||||||||||||
| Changes in assets and liabilities, net of effects of acquisitions: | ||||||||||||||||||
| Accounts receivable, net | (135,260 | ) | (113,370 | ) | 26,199 | 29,278 | ||||||||||||
| Prepaid expenses and other | 45,138 | (99,659 | ) | 27,401 | (78,601 | ) | ||||||||||||
| Accounts payable | 46,579 | 14,475 | (7,764 | ) | 14,165 | |||||||||||||
| Accrued expenses and other liabilities | 84,853 | 12,821 | (98,853 | ) | 132,839 | |||||||||||||
| Income taxes payable related to sale of Alibaba Group ADSs | - | - | - | 3,282,293 | ||||||||||||||
| Deferred revenue | (35,844 | ) | (76,070 | ) | (149,929 | ) | (194,920 | ) | ||||||||||
| Net cash provided by operating activities | 357,676 | 111,033 | 1,195,247 | 896,700 | ||||||||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||||||||
| Acquisition of property and equipment, net | (108,821 | ) | (67,880 | ) | (338,131 | ) | (372,147 | ) | ||||||||||
| Purchases of marketable securities | (975,888 | ) | (5,821,556 | ) | (3,223,190 | ) | (7,384,144 | ) | ||||||||||
| Proceeds from sales of marketable securities | 229,286 | 587,924 | 2,871,834 | 2,269,659 | ||||||||||||||
| Proceeds from maturities of marketable securities | 191,350 | 76,740 | 748,915 | 945,696 | ||||||||||||||
| Proceeds from sale of Alibaba Group ADSs, net of underwriting discounts, commissions, and fees | - | - | - | 9,404,974 | ||||||||||||||
| Proceeds related to the redemption of Alibaba Group Preference Shares | - | - | 800,000 | - | ||||||||||||||
| Purchases of intangible assets | (210 | ) | (178 | ) | (2,500 | ) | (2,658 | ) | ||||||||||
| Proceeds from settlement of derivative hedge contracts | 306,207 | 68,417 | 312,266 | 254,496 | ||||||||||||||
| Payments for settlement of derivative hedge contracts | (11,051 | ) | (236 | ) | (22,708 | ) | (5,454 | ) | ||||||||||
| Acquisitions, net of cash acquired | (60,315 | ) | (545,199 | ) | (1,247,544 | ) | (859,036 | ) | ||||||||||
| Payments for investments in privately held companies | - | (14,000 | ) | (4,226 | ) | (74,399 | ) | |||||||||||
| Proceeds from sales of patents | 70,000 | 23,500 | 79,950 | 86,300 | ||||||||||||||
| Other investing activities, net | 3,335 | 3,391 | 2,113 | 4,630 | ||||||||||||||
| Net cash (used in) provided by investing activities | (356,107 | ) | (5,689,077 | ) | (23,221 | ) | 4,267,917 | |||||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||||||||
| Proceeds from issuance of common stock | 149,850 | 60,461 | 353,267 | 308,029 | ||||||||||||||
| Repurchases of common stock | (231,278 | ) | (1,612,995 | ) | (3,344,396 | ) | (4,163,227 | ) | ||||||||||
| Proceeds from issuance of convertible notes | 1,412,344 | - | 1,412,344 | - | ||||||||||||||
| Payments for note hedges | (205,706 | ) | - | (205,706 | ) | - | ||||||||||||
| Proceeds from issuance of warrants | 124,775 | - | 124,775 | - | ||||||||||||||
| Excess tax benefits from stock-based awards | 17,214 | 35,190 | 64,407 | 149,582 | ||||||||||||||
| Tax withholdings related to net share settlements of restricted stock units | (33,638 | ) | (54,454 | ) | (139,815 | ) | (280,879 | ) | ||||||||||
| Proceeds from credit facility borrowings | - | - | 150,000 | - | ||||||||||||||
| Repayment of credit facility borrowings | - | - | (150,000 | ) | - | |||||||||||||
| Distributions to noncontrolling interests | - | - | - | (22,344 | ) | |||||||||||||
| Other financing activities, net | (2,897 | ) | (4,387 | ) | (8,760 | ) | (13,627 | ) | ||||||||||
| Net cash provided by (used in) financing activities | 1,230,664 | (1,576,185 | ) | (1,743,884 | ) | (4,022,466 | ) | |||||||||||
| Effect of exchange rate changes on cash and cash equivalents | 2,929 | (17,192 | ) | (18,330 | ) | (45,877 | ) | |||||||||||
| Net change in cash and cash equivalents | 1,235,162 | (7,171,421 | ) | (590,188 | ) | 1,096,274 | ||||||||||||
| Cash and cash equivalents, beginning of period | 842,428 | 10,345,285 | 2,667,778 | 2,077,590 | ||||||||||||||
| Cash and cash equivalents, end of period | $ | 2,077,590 | $ | 3,173,864 | $ | 2,077,590 | $ | 3,173,864 | ||||||||||
Yahoo! Inc.
Note to Unaudited Condensed Consolidated
Financial Statements
This press release and its attachments include the non-GAAP financial measures of gross mobile revenue; gross search revenue; revenue excluding traffic acquisition costs (“revenue ex-TAC”); adjusted EBITDA; non-GAAP income from operations; non-GAAP net earnings; non-GAAP net earnings per diluted share; and free cash flow, which are reconciled to revenue (in the case of gross mobile revenue, gross search revenue and revenue ex-TAC); net income attributable to Yahoo! Inc. (in the case of adjusted EBITDA and non-GAAP net earnings); income from operations; net income attributable to Yahoo! Inc. common stockholders per share – diluted; and net cash provided by operating activities, which we believe are the most comparable GAAP measures. Yahoo! Inc. (together with its consolidated subsidiaries, “Yahoo,” the “Company,” or “we”) uses these non-GAAP financial measures for internal managerial purposes and to facilitate period-to-period comparisons. We describe limitations specific to each non-GAAP financial measure below. Management generally compensates for limitations in the use of non-GAAP financial measures by relying on comparable GAAP financial measures and providing investors with a reconciliation of the non-GAAP financial measure to the most directly comparable GAAP financial measure or measures. Further, management uses non-GAAP financial measures only in addition to and in conjunction with results presented in accordance with GAAP. We believe that these non-GAAP financial measures reflect additional ways of viewing aspects of our operations that, when viewed with our GAAP results, provide a more complete understanding of factors and trends affecting our business. These non-GAAP measures should be considered as a supplement to, and not as a substitute for, or superior to, revenue, net income attributable to Yahoo! Inc., income from operations, net income attributable to Yahoo! Inc. common stockholders per share – diluted, and net cash provided by operating activities calculated in accordance with GAAP.
Each of gross mobile revenue and gross search revenue is a non-GAAP financial measure. Gross mobile revenue is defined as GAAP mobile revenue plus the related revenue share with third parties. Gross search revenue is defined as GAAP search revenue plus the related revenue share with third parties. We present these amounts to provide investors with additional metrics used by the Company for evaluation and decision-making purposes and as an indicator of the size of our presence in the relevant business. To this end, gross mobile revenue and gross search revenue report the total receipts generated on Yahoo Properties and Affiliate sites by the specified relevant Yahoo business (i.e., mobile or search), before any TAC or other revenue share is paid to the Affiliates and before any revenue share is allocated to Microsoft or other parties. A limitation of these non-GAAP measures is that they include revenue that is recognized by a third party and not by Yahoo; furthermore, they are measures which we have defined for internal and investor purposes that may be unique to us, and therefore 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 and revenue sharing differently. Management compensates for these limitations by also relying on the comparable financial measure GAAP revenue.
Revenue ex-TAC is a non-GAAP financial measure defined as GAAP revenue less TAC. TAC consists of payments made to Affiliates and payments made to companies that direct consumer and business traffic to Yahoo Properties. Based on the terms of the Search Agreement with Microsoft, Microsoft retains a revenue share of 12 percent of the net (after TAC) search revenue generated on Yahoo Properties and Affiliate sites in transitioned markets. Yahoo reports the net revenue it receives under the Search Agreement as revenue and no longer presents the associated TAC as an expense. Accordingly, for the current period Yahoo reports GAAP revenue associated with the Search Agreement on a net (after TAC) basis rather than a gross basis. For the 2013 comparison periods, revenue from markets that had not yet transitioned to Microsoft’s platform was recorded on a gross basis, and the associated TAC was recorded as a part of operating expenses. We present revenue ex-TAC to provide investors a metric used by the Company for evaluation and decision-making purposes and to provide investors with comparable revenue numbers when comparing periods preceding, during and following the transition period. A limitation of revenue ex-TAC is that it is a measure which we have defined for internal and investor purposes that may be unique to the Company, and therefore it may not enhance the comparability of our results to other companies in our industry who have similar business arrangements but address the impact of TAC differently. Management compensates for these limitations by also relying on the comparable GAAP financial measures of revenue and total operating expenses, which includes TAC in non-transitioned markets.
Adjusted EBITDA is defined as net income attributable to Yahoo! Inc. before taxes, depreciation, amortization of intangible assets, stock-based compensation expense, other income, net (which includes interest), earnings in equity interests, net income attributable to noncontrolling interests and other gains, losses, and expenses that we do not believe are indicative of our ongoing results. We present adjusted EBITDA because the exclusion of certain gains, losses, and expenses facilitates comparisons of the operating performance of the Company on a period to period basis. Adjusted EBITDA has limitations as an analytical tool and should not be considered in isolation or as a substitute for results reported under GAAP. These limitations include: adjusted EBITDA does not reflect tax payments and such payments reflect a reduction in cash available to us; adjusted EBITDA does not reflect the periodic costs of certain capitalized tangible and intangible assets used in generating revenues in our businesses; adjusted EBITDA does not include stock-based compensation expense related to the Company’s workforce; adjusted EBITDA also excludes other income, net (which includes interest), earnings in equity interests, net income attributable to noncontrolling interests and other gains, losses, and expenses that we do not believe are indicative of our ongoing results, and these items may represent a reduction or increase in cash available to us; and adjusted EBITDA is a measure that may be unique to the Company, and therefore it may not enhance the comparability of our results to other companies in our industry. Management compensates for these limitations by also relying on the comparable GAAP financial measure of net income attributable to Yahoo! Inc., which includes taxes, depreciation, amortization, stock-based compensation expense, other income, net (which includes interest), earnings in equity interests, net income attributable to noncontrolling interests and the other gains, losses and expenses that are excluded from adjusted EBITDA.
Non-GAAP income from operations is defined as income from operations excluding certain gains, losses, and expenses that we do not believe are indicative of our ongoing operating results and further adjusted to exclude stock-based compensation expense. Because of the variety of equity awards used by companies, the varying methodologies for determining stock-based compensation expense, and the subjective assumptions involved in those determinations, we believe excluding stock-based compensation expense enhances the ability of management and investors to understand the impact of stock-based compensation expense on income from operations. We consider non-GAAP income from operations to be a profitability measure which facilitates the forecasting of our operating results for future periods and allows for the comparison of our results to historical periods. A limitation of non-GAAP income from operations is that it does not include all items that impact our income from operations for the period. Management compensates for this limitation by also relying on the comparable GAAP financial measure of income from operations which includes the gains, losses, and expenses that are excluded from non-GAAP income from operations.
Non-GAAP net earnings is defined as net income attributable to Yahoo! Inc. excluding certain gains, losses, expenses, and their related tax effects that we do not believe are indicative of our ongoing results and further adjusted to exclude stock-based compensation expense and its related tax effects. Because of the variety of equity awards used by companies, the varying methodologies for determining stock-based compensation expense, and the subjective assumptions involved in those determinations, we believe excluding stock-based compensation expense enhances the ability of management and investors to understand the impact of stock-based compensation expense on net income and net income per share. We consider non-GAAP net earnings and non-GAAP net earnings per diluted share to be profitability measures which facilitate the forecasting of our results for future periods and allow for the comparison of our results to historical periods. A limitation of non-GAAP net earnings and non-GAAP net earnings per diluted share is that they do not include all items that impact our net income and net income per diluted share for the period. Management compensates for this limitation by also relying on the comparable GAAP financial measures of net income attributable to Yahoo! Inc. and net income attributable to Yahoo! Inc. common stockholders per share - diluted, both of which include the gains, losses, expenses and related tax effects that are excluded from non-GAAP net earnings and non-GAAP net earnings per diluted share.
Free cash flow is a non-GAAP financial measure defined as net cash provided by operating activities (adjusted to include excess tax benefits from stock-based awards), less acquisition of property and equipment, net and dividends received from equity investees. We consider free cash flow to be a liquidity measure which provides useful information to management and investors about the amount of cash generated by the business after the acquisition of property and equipment, which can then be used for strategic opportunities including, among others, investing in the Company's business, making strategic acquisitions, strengthening the balance sheet, and repurchasing stock. A limitation of free cash flow is that it does not represent the total increase or decrease in the cash balance for the period. Management compensates for this limitation by also relying on the net change in cash and cash equivalents as presented in the Company’s unaudited condensed consolidated statements of cash flows prepared in accordance with GAAP which incorporates all cash movements during the period.
| Yahoo! Inc. | ||||||||||||||||
| Supplemental Financial Data and GAAP to Non-GAAP Reconciliations | ||||||||||||||||
| (in thousands) | ||||||||||||||||
| Three Months Ended | Year Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2013 | 2014 | 2013 | 2014 | |||||||||||||
| Revenue for groups of similar services: | ||||||||||||||||
| Search | $ | 463,710 | $ | 467,321 | $ | 1,741,791 | $ | 1,792,861 | ||||||||
| Display | 553,085 | 531,778 | 1,949,830 | 1,868,035 | ||||||||||||
| Other | 249,000 | 253,973 | 988,759 | 957,237 | ||||||||||||
| Total revenue | $ | 1,265,795 | $ | 1,253,072 | $ | 4,680,380 | $ | 4,618,133 | ||||||||
| Revenue excluding traffic acquisition costs ("revenue ex-TAC") for groups of similar services: | ||||||||||||||||
| GAAP search revenue | $ | 463,710 | $ | 467,321 | $ | 1,741,791 | $ | 1,792,861 | ||||||||
| TAC associated with search revenue | (2,345 | ) | (5,096 | ) | (42,433 | ) | (9,279 | ) | ||||||||
| Search revenue ex-TAC | $ | 461,365 | $ | 462,225 | $ | 1,699,358 | $ | 1,783,582 | ||||||||
| GAAP display revenue | $ | 553,085 | $ | 531,778 | $ | 1,949,830 | $ | 1,868,035 | ||||||||
| TAC associated with display revenue | (62,388 | ) | (67,772 | ) | (212,662 | ) | (204,928 | ) | ||||||||
| Display revenue ex-TAC | $ | 490,697 | $ | 464,006 | $ | 1,737,168 | $ | 1,663,107 | ||||||||
| Other GAAP revenue | $ | 249,000 | $ | 253,973 | $ | 988,759 | $ | 957,237 | ||||||||
| TAC associated with other GAAP revenue | (861 | ) | (748 | ) | 653 | (3,324 | ) | |||||||||
| Other revenue ex-TAC | $ | 248,139 | $ | 253,225 | $ | 989,412 | $ | 953,913 | ||||||||
| Revenue ex-TAC: | ||||||||||||||||
| GAAP revenue | $ | 1,265,795 | $ | 1,253,072 | $ | 4,680,380 | $ | 4,618,133 | ||||||||
| TAC | (65,594 | ) | (73,616 | ) | (254,442 | ) | (217,531 | ) | ||||||||
| Revenue ex-TAC | $ | 1,200,201 | $ | 1,179,456 | $ | 4,425,938 | $ | 4,400,602 | ||||||||
| Revenue ex-TAC by segment: | ||||||||||||||||
| Americas: | ||||||||||||||||
| GAAP revenue | $ | 959,835 | $ | 972,092 | $ | 3,481,502 | $ | 3,517,861 | ||||||||
| TAC | (47,897 | ) | (59,548 | ) | (158,974 | ) | (166,545 | ) | ||||||||
| Revenue ex-TAC | $ | 911,938 | $ | 912,544 | $ | 3,322,528 | $ | 3,351,316 | ||||||||
| EMEA: | ||||||||||||||||
| GAAP revenue | $ | 103,819 | $ | 96,358 | $ | 385,186 | $ | 374,833 | ||||||||
| TAC | (10,078 | ) | (9,482 | ) | (42,915 | ) | (36,867 | ) | ||||||||
| Revenue ex-TAC | $ | 93,741 | $ | 86,876 | $ | 342,271 | $ | 337,966 | ||||||||
| Asia Pacific: | ||||||||||||||||
| GAAP revenue | $ | 202,141 | $ | 184,622 | $ | 813,692 | $ | 725,439 | ||||||||
| TAC | (7,619 | ) | (4,586 | ) | (52,553 | ) | (14,119 | ) | ||||||||
| Revenue ex-TAC | $ | 194,522 | $ | 180,036 | $ | 761,139 | $ | 711,320 | ||||||||
| Total revenue ex-TAC | $ | 1,200,201 | $ | 1,179,456 | $ | 4,425,938 | $ | 4,400,602 | ||||||||
| Direct costs by segment (2): | ||||||||||||||||
| Americas | $ | 50,373 | $ | 50,438 | $ | 194,394 | $ | 199,612 | ||||||||
| EMEA | 24,481 | 20,752 | 88,534 | 86,225 | ||||||||||||
| Asia Pacific | 48,852 | 49,959 | 196,832 | 198,806 | ||||||||||||
| Global operating costs (3) | 668,162 | 684,179 | 2,461,883 | 2,652,305 | ||||||||||||
| Restructuring charges, net | 7,826 | 32,872 | 3,766 | 103,450 | ||||||||||||
| Depreciation and amortization | 147,981 | 153,030 | 628,778 | 606,568 | ||||||||||||
| Gains on sales of patents | (70,000 | ) | (35,094 | ) | (79,950 | ) | (97,894 | ) | ||||||||
| Goodwill impairment charge | 63,555 | 88,414 | 63,555 | 88,414 | ||||||||||||
| Stock-based compensation expense | 84,753 | 102,752 | 278,220 | 420,174 | ||||||||||||
| Income from operations | $ | 174,218 | $ | 32,154 | $ | 589,926 | $ | 142,942 | ||||||||
| (2) | Direct costs for each segment include certain cost of revenue-other and costs associated with the local sales teams. Prior to the fourth quarter of 2014, marketing, media, costs associated with Yahoo Properties and ad operation costs were managed locally and included as direct costs for each segment. Prior period amounts have been revised to conform to the current presentation. | |
| (3) | Global operating costs include product development, marketing, real estate workplace, general and administrative, and other corporate expenses that are managed on a global basis and that are not directly attributable to any particular segment. Beginning in the fourth quarter of 2014, marketing, media, costs associated with Yahoo Properties and other ad operation costs are managed globally and included as global costs. Prior period amounts have been revised to conform to the current presentation. | |
| Yahoo! Inc. | ||||||||||||||||
| Supplemental Financial Data and GAAP to Non-GAAP Reconciliations (continued) | ||||||||||||||||
| (in thousands) | ||||||||||||||||
| Three Months Ended | Year Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2013 | 2014 | 2013 | 2014 | |||||||||||||
| Reconciliation of net income attributable to Yahoo! Inc. to adjusted EBITDA: | ||||||||||||||||
| Net income attributable to Yahoo! Inc. | $ | 348,190 | $ | 166,344 | $ | 1,366,281 | $ | 7,521,731 | ||||||||
| Depreciation and amortization | 147,981 | 153,030 | 628,778 | 606,568 | ||||||||||||
| Stock-based compensation expense | 84,753 | 102,752 | 278,220 | 420,174 | ||||||||||||
| Goodwill impairment charge | 63,555 | 88,414 | 63,555 | 88,414 | ||||||||||||
| Restructuring charges, net | 7,826 | 32,872 | 3,766 | 103,450 | ||||||||||||
| Other income (expense), net | 2,691 | (87,550 | ) | (43,357 | ) | (10,369,439 | ) | |||||||||
| Provision for income taxes | 41,498 | 52,340 | 153,392 | 4,038,102 | ||||||||||||
| Earnings in equity interests | (221,641 | ) | (101,917 | ) | (896,675 | ) | (1,057,863 | ) | ||||||||
| Net income attributable to noncontrolling interests | 3,480 | 2,937 | 10,285 | 10,411 | ||||||||||||
| Adjusted EBITDA | $ | 478,333 | $ | 409,222 | $ | 1,564,245 | $ | 1,361,548 | ||||||||
| Reconciliation of net cash provided by operating activities to free cash flow: | ||||||||||||||||
| Net cash provided by operating activities | $ | 357,676 | $ | 111,033 | $ | 1,195,247 | $ | 896,700 | ||||||||
| Acquisition of property and equipment, net | (108,821 | ) | (67,880 | ) | (338,131 | ) | (372,147 | ) | ||||||||
| Dividends received from equity investees | - | - | (135,058 | ) | (83,685 | ) | ||||||||||
| Excess tax benefits from stock-based awards | 17,214 | 35,190 | 64,407 | 149,582 | ||||||||||||
| Free cash flow | $ | 266,069 | $ | 78,343 | $ | 786,465 | $ | 590,450 | ||||||||
| Three Months Ended | Three Months Ended | Year Ended | Year Ended | |||||||||||||
| December 31, | December 31, | December 31, | December 31, | |||||||||||||
| 2013 | 2014 | 2013 | 2014 | |||||||||||||
| Reconciliation of GAAP mobile revenue to gross mobile revenue: | ||||||||||||||||
| GAAP mobile revenue | $ | 253,755 | $ | 768,009 | ||||||||||||
| Revenue share with third parties | 158,840 | 492,908 | ||||||||||||||
| Gross mobile revenue | $ | 412,595 | $ | 1,260,917 | ||||||||||||
| Reconciliation of GAAP search revenue to gross search revenue: | ||||||||||||||||
| GAAP search revenue | $ | 463,710 | $ | 467,321 | $ | 1,741,791 | $ | 1,792,861 | ||||||||
| Revenue share with third parties | 353,796 | 464,758 | 1,231,086 | 1,588,753 | ||||||||||||
| Gross search revenue | $ | 817,506 | $ | 932,079 | $ | 2,972,877 | $ | 3,381,614 | ||||||||
| Yahoo! Inc. | |||||||||
| GAAP to Non-GAAP Reconciliations | |||||||||
| (in thousands, except per share amounts) | |||||||||
| Three Months Ended | |||||||||
| December 31, | |||||||||
| 2013 | 2014 | ||||||||
| GAAP income from operations | $ | 174,218 | $ | 32,154 | |||||
| (a) | Restructuring charges, net | 7,826 | 32,872 | ||||||
| (b) | Stock-based compensation expense | 84,753 | 102,752 | ||||||
| (c) | Goodwill impairment charge | 63,555 | 88,414 | ||||||
| Non-GAAP income from operations | $ | 330,352 | $ | 256,192 | |||||
| GAAP net income attributable to Yahoo! Inc. | $ | 348,190 | $ | 166,344 | |||||
| (a) | Restructuring charges, net | 7,826 | 32,872 | ||||||
| (b) | Stock-based compensation expense | 84,753 | 102,752 | ||||||
| (c) | Goodwill impairment charge | 63,555 | 88,414 | ||||||
| (d) |
Gain on Hortonworks warrants |
- | (98,062 | ) | |||||
| (e) | To adjust the provision for income taxes to exclude the tax impact of items (a) through (d) above for the three months ended December 31, 2013 and 2014 | (22,389 | ) | 1,124 | |||||
| Non-GAAP net earnings | $ | 481,935 | $ | 293,444 | |||||
| GAAP net income attributable to Yahoo! Inc. common stockholders per share - diluted (1) | $ | 0.33 | $ | 0.17 | |||||
| Non-GAAP net earnings per share - diluted (4) | $ | 0.46 | $ | 0.30 | |||||
| Shares used in per share calculation - diluted | 1,038,754 | 962,626 | |||||||
| Year Ended | |||||||||
| December 31, | |||||||||
| 2013 | 2014 | ||||||||
| GAAP income from operations | $ | 589,926 | $ | 142,942 | |||||
| (a) | Restructuring charges, net | 3,766 | 103,450 | ||||||
| (b) | Stock-based compensation expense | 278,220 | 420,174 | ||||||
| (c) | Goodwill impairment charge | 63,555 | 88,414 | ||||||
| Non-GAAP income from operations | $ | 935,467 | $ | 754,980 | |||||
| GAAP net income attributable to Yahoo! Inc. | $ | 1,366,281 | $ | 7,521,731 | |||||
| (a) | Restructuring charges, net | 3,766 | 103,450 | ||||||
| (b) | Stock-based compensation expense | 278,220 | 420,174 | ||||||
| (c) | Goodwill impairment charge | 63,555 | 88,414 | ||||||
| (d) |
Gain on Hortonworks warrants |
- | (98,062 | ) | |||||
| (e) | Gain related to sale of Alibaba Group ADSs | - | (10,319,437 | ) | |||||
| (f) | To adjust the provision for income taxes to exclude the tax impact of items (a) through (e) above for the year ended December 31, 2013 and 2014 | (65,384 | ) | 3,903,951 | |||||
| Non-GAAP net earnings | $ | 1,646,438 | $ | 1,620,221 | |||||
| GAAP net income attributable to Yahoo! Inc. common stockholders per share - diluted (1) | $ | 1.26 | $ | 7.45 | |||||
| Non-GAAP net earnings per share - diluted (4) | $ | 1.52 | $ | 1.57 | |||||
| Shares used in per share calculation - diluted | 1,070,811 | 1,004,108 | |||||||
| (1) | The impact of outstanding stock awards of entities in which the Company holds equity interests that are accounted for using the equity method reduced the Company's diluted earnings per share by $0.01 for the three months ended December 31, 2013 and $0.02 and $0.04 for the years ended December 31, 2013 and 2014, respectively. | |
| (4) | The impact of outstanding stock awards of entities in which the Company holds equity interests that are accounted for using the equity method reduced the Company's non-GAAP diluted earnings per share by $0.02 and $0.04 for the year ended December 31, 2013 and 2014, respectively. |