Yahoo! Inc. (NASDAQ: YHOO) today reported results for the
quarter ended September 30, 2016.
"I am pleased with our Q3 results. This quarter, we launched
several new products and showed solid financial performance across
the board; both are a testimony to the tremendous teamwork, focus,
and resilience of our employees," said Marissa Mayer, CEO of Yahoo.
“In addition to our continued efforts to strengthen our business,
we are busy preparing for integration with Verizon. We remain very
confident, not only in the value of our business, but also in the
value Yahoo products bring to our users’ lives. To that end, we
take deep responsibility in protecting our users and the security
of their information. We’re working hard to retain their trust and
are heartened by their continued loyalty as seen in our user
engagement trends."
Q3 2015 Q3 2016 GAAP revenue $1,226 million
$1,305 million
Cost of revenue – TAC
$223 million $448 million Loss from operations $(86) million $(52)
million Non-GAAP income from operations $92 million $114 million
Net earnings $76 million $163 million Adjusted EBITDA $244 million
$229 million GAAP net earnings per diluted share $0.08 $0.17
Non-GAAP net earnings per diluted share $0.15 $0.20
As previously announced, beginning in the second quarter of
2016, GAAP revenue and cost of revenue – TAC are impacted by a
required change in revenue presentation related to the Eleventh
Amendment to the Microsoft Search Agreement (“Change in Revenue
Presentation,” as discussed below). For the third quarter of 2016,
the Change in Revenue Presentation contributed $258 million to each
of GAAP revenue and cost of revenue – TAC. Excluding the impact of
this change, GAAP revenue would have been $1,048 million, a 15
percent decline from the third quarter of 2015, and cost of revenue
– TAC would have been $190 million, a 15 percent decline from the
third quarter of 2015.
Business Updates
- Launched new mobile experiences for
sports fans, including the ability to search and stream Major
League Baseball games directly from within the Yahoo Sports app,
and an updated Yahoo Fantasy app for iOS that makes it easier for
users to navigate and manage multiple teams.
- Introduced Yahoo View, a new community
TV-watching experience on desktop and iPhone, providing users with
access to thousands of episodes through our partnership with
Hulu.
- Launched Yahoo Newsroom for iOS and
Android, creating a vibrant community around news by making it
easier to discover relevant content and participate in
conversations.
- Launched a fast and easy way for users
to send and unsend messages, photos, and gifs on their computers
with the new Yahoo Messenger desktop app for Windows and Mac, and
gave iOS and Android users the ability to send video in one-on-one
and group conversations in the Yahoo Messenger mobile app.
- Launched new and enhanced features on
Tumblr to deliver a more immersive and easily accessible experience
for users to create, discover and share content that they love,
including the redesigned mobile “explore” feature, support for live
photos on the web, and a quick send-a-post feature on Android
phones.
- Streamed live events and shows,
including the 2016 First Presidential Debate, NBA Free Agency Show,
MLB Game of the Day, and the 2016 Concordia Summit with Warren
Buffett.
- Announced that Yahoo Finance has been
chosen again to exclusively host the livestream of Berkshire
Hathaway’s Annual Shareholders Meeting.
- Continued to invest in and grow Yahoo
Esports by launching two new live shows, a partnership with Riot
Games to reach student League of Legend gamers, and a streaming and
content partnership with ESL.
- Partnered to host Twitter’s live stream
of the Thursday night NFL games on Yahoo Sports with a Twitter feed
accompanying the live stream.
- Introduced new capabilities for
advertisers through Yahoo Gemini, including search retargeting for
native ads and expanded features for Gemini’s custom audience
targeting solution that make it easier for marketers to integrate
their own data and increase effectiveness on search and native ad
spend.
- Launched program to monetize
unaffiliated links on Tumblr to create new revenue opportunities
for the platform.
Third Quarter 2016 Financial Highlights
Mavens Revenue*:
Q3 2015 Q3 2016 Mavens revenue $ 422 million $
524 million Non-Mavens revenue 693 million 726 million Total
traffic-driven revenue $1,115 million $1,250 million
Non-traffic-driven revenue 111 million 55 million GAAP revenue
$1,226 million $1,305 million
* The Change in Revenue Presentation contributed $127 million to
Mavens revenue, $131 million to Non-Mavens revenue, and $258
million to traffic-driven revenue in the third quarter of 2016.
Mavens revenue represented 38 percent and 42 percent of
traffic-driven revenue in the third quarter of 2015 and 2016,
respectively. Excluding the impact of the Change in Revenue
Presentation, Mavens revenue would have been $397 million and
represented 40 percent of traffic-driven revenue in the third
quarter of 2016.
Mobile Revenue*:
Q3 2015 Q3 2016 Mobile revenue $ 271 million $
396 million Desktop revenue 844 million 854 million Total
traffic-driven revenue $1,115 million $1,250 million
Non-traffic-driven revenue 111 million 55 million GAAP revenue
$1,226 million $1,305 million
* The Change in Revenue Presentation contributed $127 million to
mobile revenue, $131 million to desktop revenue, and $258 million
to traffic-driven revenue in the third quarter of 2016.
GAAP mobile revenue for the third quarter of 2015 and 2016 was
$271 million and $396 million, respectively.
Mobile revenue represented 24 percent and 32 percent of
traffic-driven revenue in the third quarter of 2015 and 2016,
respectively. Excluding the impact of the Change in Revenue
Presentation, mobile revenue would have been $269 million and
represented 27 percent of traffic-driven revenue in the third
quarter of 2016.
Gross mobile revenue for the third quarter of 2015 and 2016 was
$424 million and $432 million, respectively. The Change in Revenue
Presentation does not impact gross mobile revenue.
Search Revenue:
- GAAP search revenue was $703 million
for the third quarter of 2016 compared to $516 million for the
third quarter of 2015. Excluding the impact of the Change in
Revenue Presentation, which contributed $258 million to search
revenue in the third quarter of 2016, search revenue decreased by
14 percent compared to the third quarter of 2015.
- Gross search revenue was $752 million
for the third quarter of 2016, a decrease of 14 percent compared to
the third quarter of 2015. The Change in Revenue Presentation does
not impact gross search revenue.
- Cost of revenue - TAC associated with
search revenue was $384 million for the third quarter of 2016.
Excluding the impact of the Change in Revenue Presentation, which
contributed $258 million to cost of revenue - TAC in the third
quarter of 2016, cost of revenue – TAC associated with search
revenue increased by 6 percent compared to the third quarter of
2015.
- The number of Paid Clicks decreased 22
percent compared to the third quarter of 2015.
- Price-per-Click increased 9 percent
compared to the third quarter of 2015.
Display Revenue:
- GAAP display revenue was $476 million
for the third quarter of 2016, a 7 percent decrease compared to the
third quarter of 2015.
- Cost of revenue - TAC associated with
display revenue was $63 million for the third quarter of 2016, a 39
percent decrease compared to the third quarter of 2015.
- The number of Ads Sold decreased 5
percent compared to the third quarter of 2015.
- Price-per-Ad increased 1 percent
compared to the third quarter of 2015.
Cash, Cash Equivalents, and Marketable Securities:
- Cash, cash equivalents, and marketable
securities were $7,771 million as of September 30, 2016 compared to
$6,833 million as of December 31, 2015, an increase of $938
million. The increase is primarily attributable to $994 million of
cash from operating activities, which includes $157 million in cash
dividends received from an equity investee during the second
quarter of 2016 and a cash tax refund of $190 million received
during the first quarter of 2016. The Company also received net
cash proceeds of $246 million from the sale of land in Santa Clara
during the second quarter of 2016 and incurred capital expenditures
of $194 million during the nine-month period ended September 30,
2016.
“As we continue to plan for integration, we delivered solid Q3
results with net earnings of $163 million and adjusted EBITDA of
$229 million, above the high end of our guidance range. We
generated strong cash flow through excellent cost and capital
expenditure management, further increasing cash and marketable
securities by over $900 million since 2015 year-end,” said Ken
Goldman, CFO of Yahoo. “Given our Q3 results and our business
outlook for Q4, we are on track to deliver on our 2016 Strategic
Plan commitment to improve our adjusted EBITDA run rate for the
second half of 2016, which equates to increasing our adjusted
EBITDA guidance for the year.”
Change in Revenue Presentation
As previously announced, pursuant to the Eleventh Amendment to
the Microsoft Search Agreement, the Company completed the
transition of its exclusive sales responsibilities to Microsoft for
Microsoft’s paid search services to premium advertisers in the
United States, Canada, and Europe on April 1, 2016 and in its
remaining markets (other than Taiwan and Hong Kong) on June 1,
2016. Following the transition in each respective market, Yahoo is
considered the principal in the sale of traffic to Microsoft and
other customers because Yahoo is the primary obligor in its
arrangements with Microsoft and has discretion in how search
queries from Affiliate sites will be fulfilled and monetized. As a
result, beginning in the second quarter of 2016, amounts paid to
Affiliates under the Microsoft Search Agreement in the transitioned
markets are recorded as cost of revenue - TAC rather than as a
reduction to GAAP revenue, resulting in GAAP revenue from the
Microsoft Search Agreement being reported on a gross rather than
net basis. Taiwan and Hong Kong are not being transitioned, and TAC
in those markets continues to be reported as a reduction to
revenue.
Business Outlook
For the fourth quarter of 2016, we expect:
- GAAP revenue to be in the range of
$1,360 million to $1,400 million;
- Cost of revenue - TAC to be $480
million;
- Revenue ex-TAC to be in the range of
$880 million to $920 million;
- Adjusted EBITDA to be in the range of
$260 million to $300 million; and
- Non-GAAP income from operations to be
in the range of $140 million to $180 million.
For the full year of 2016, we expect:
- GAAP revenue to be in the range of
$5,060 million to $5,100 million;
- Cost of revenue - TAC to be $1,620
million;
- Revenue ex-TAC to be in the range of
$3,440 million to $3,480 million;
- Adjusted EBITDA to be in the range of
$810 million to $850 million; and
- Non-GAAP income from operations to be
in the range of $300 million to $340 million.
Adjusted EBITDA and non-GAAP income from operations included in
our Business Outlook are forward-looking non-GAAP financial
measures. A reconciliation to the comparable forward-looking GAAP
financial measures, net earnings and GAAP income (loss) from
operations, respectively, cannot be provided without unreasonable
effort. See “Non-GAAP Financial Measures” below for additional
information.
Non-GAAP Financial Measures
This press release includes adjusted GAAP revenue and cost of
revenue - TAC amounts that exclude the effect of the Change in
Revenue Presentation during the third quarter of 2016. We believe
providing this additional information to investors is useful
because it provides investors with comparable revenue and cost of
revenue - TAC measures for comparison to our historical reported
financial information.
This press release and its attachments also include the
following additional financial measures defined as non-GAAP
financial measures by the Securities and Exchange Commission
(“SEC”): gross mobile revenue; gross search revenue; revenue
ex-TAC; adjusted EBITDA; non-GAAP income from operations; non-GAAP
net earnings; non-GAAP net earnings per share - diluted; and free
cash flow.
Gross mobile revenue is GAAP mobile revenue plus the related
revenue share with third parties. Gross search revenue is GAAP
search revenue plus the related revenue share with third parties.
Revenue ex-TAC is GAAP revenue less cost of revenue - TAC. Adjusted
EBITDA, non-GAAP income from operations, non-GAAP net earnings, and
non-GAAP net earnings per share - diluted, exclude from the most
comparable GAAP financial measures certain gains, losses, and
expenses that we do not believe are indicative of ongoing results,
and exclude stock-based compensation expense. Adjusted EBITDA
also excludes taxes, depreciation, amortization of intangible
assets, other (expense) income, net (which includes interest, among
other items), earnings in equity interests, and net income
attributable to noncontrolling interests. Free cash flow is GAAP
net cash provided by operating activities (adjusted to include
excess tax benefits from stock-based awards), less acquisition of
property and equipment, net (i.e., acquisition of property and
equipment less proceeds received from disposition of property and
equipment) and dividends received from equity investees.
These measures may be different than non-GAAP financial measures
used by other companies. The presentation of this financial
information is not intended to be considered in isolation or as a
substitute for the financial information prepared and presented in
accordance with generally accepted accounting principles (“GAAP”).
Explanations of the Company’s non-GAAP financial measures and
reconciliations of these financial measures to the GAAP financial
measures the Company considers most comparable are included in the
accompanying “Note to Supplemental Financial Data and GAAP to
Non-GAAP Reconciliations,” “Supplemental Financial Data and GAAP to
Non-GAAP Reconciliations,” “GAAP to Non-GAAP Reconciliations,” and
”Business Outlook.”
Yahoo has not provided a complete reconciliation of its adjusted
EBITDA outlook to the comparable forward-looking GAAP financial
measure, net earnings, because it is unable to provide a
forward-looking estimate of certain reconciling items between net
earnings and adjusted EBITDA, including: restructuring charges;
other expense, net; provision for income taxes; earnings in equity
interests; net income attributable to noncontrolling interests; and
advisory fees. In addition, Yahoo has not provided a complete
reconciliation its non-GAAP income from operations outlook to the
comparable forward-looking GAAP financial measure, GAAP income
(loss) from operations, because it is unable to provide a
forward-looking estimate of restructuring charges and advisory
fees. Certain factors that are materially significant to Yahoo’s
ability to estimate the foregoing items are out of the Company’s
control and/or cannot be reasonably predicted. Accordingly, a
complete reconciliation of our business outlook for adjusted EBITDA
and non-GAAP income from operations to net earnings and GAAP income
(loss) from operations, respectively, is not available without
unreasonable effort.
Supplemental Financial and Other Information
Supplemental financial and other information, including user
engagement trends before and after the September 22, 2016
notification of our security incident, can be accessed through the
Company’s Investor Relations website at investor.yahoo.net.
About Yahoo
Yahoo is a guide to digital information discovery, focused on
informing, connecting, and entertaining users through its search,
communications, and digital content products. By creating highly
personalized experiences, Yahoo helps users discover the
information that matters most to them around the world –– on mobile
or desktop. Yahoo creates value for advertisers with a streamlined,
simple advertising technology stack that leverages Yahoo’s data,
content, and technology to connect advertisers with their target
audiences. Yahoo is headquartered in Sunnyvale, California, and has
offices located throughout the Americas, Asia Pacific (APAC), and
the Europe, Middle East and Africa (EMEA) regions. For more
information, visit the pressroom (pressroom.yahoo.net) or the Company's blog
(yahoo.tumblr.com).
“Ads Sold” consist of display ad impressions for paying
advertisers on Yahoo Properties and Affiliate sites.
“Affiliates” are third-party entities that have integrated
Yahoo’s advertising offerings into their websites or other
offerings (those websites and other offerings, “Affiliate
sites”).
“Alibaba Group” means Alibaba Group Holding Limited. In
September 2014, Alibaba Group completed its initial public offering
of American Depositary Shares (“ADS”), in which Yahoo was a selling
shareholder.
“Desktop computer” means a desktop or laptop computer, and
“desktop revenue” is revenue generated from search and display ads
served on Desktop computers and also includes leads, listings, and
fees revenue and ecommerce revenue allocated to user activity on
Desktop computers.
“Gross mobile revenue,” a non-GAAP measure, is GAAP mobile
revenue plus the related revenue share with third parties.
“Gross search revenue,” a non-GAAP measure, is GAAP search
revenue plus the related revenue share with third parties.
“Mavens revenue” is revenue generated from, without duplication:
(i) mobile (as defined below), (ii) video ads and video ad
packages, (iii) native ads, and (iv) Tumblr and Polyvore ads and
fees.
“Microsoft Search Agreement” refers to the Search and
Advertising Services and Sales Agreement between Yahoo and
Microsoft Corporation, as amended.
“Mobile revenue” is revenue generated in connection with user
activity on mobile devices, including smartphones and tablets,
regardless of whether the device is accessing a mobile-optimized
service. Mobile revenue is generated primarily from search and
display ads. Mobile revenue also includes leads, listings, and fees
revenue and ecommerce revenue allocated to user activity on mobile
devices.
“Native revenue” is revenue generated from native ads (search
and display) on Yahoo Properties as well as third-party partner
publisher sites and mobile apps. Native ads are visually rich, are
positioned as a seamless part of the users' experience, and come in
a variety of formats, like text, image, and video. Yahoo offers
native ads through Yahoo Gemini and BrightRoll.
“Net earnings” means net income (loss) attributable to Yahoo!
Inc., and “net earnings per diluted share” means net income (loss)
attributable to Yahoo! Inc. common stockholders per share –
diluted.
“Non-Mavens revenue” is revenue generated from search ads and
traditional (i.e., non-native, non-video, non-Tumblr, non-Polyvore)
display ads served on Desktop computers and also includes leads,
listings, and fees revenue and ecommerce revenue allocated to user
activity on Desktop computers.
“Non-traffic-driven revenue” is revenue not arising from user
activity on Yahoo Properties or Affiliate sites, and includes
royalty revenue, license fee revenue, amortization under the
technology and intellectual property license agreement with Alibaba
Group through the third quarter of 2015, and all other revenue that
is not traffic-driven.
“Paid Clicks” are clicks by end-users on sponsored search
listings (excluding native ads) on Yahoo Properties and Affiliate
sites.
“Price-per-Ad” is defined as display revenue divided by our
total number of Ads Sold.
“Price-per-Click” is defined as Search click-driven revenue
divided by our total number of Paid Clicks.
“Search click-driven revenue” is gross search revenue excluding
search revenue from Yahoo Japan.
“TAC” refers to traffic acquisition costs. TAC consists of
payments to Affiliates and payments made to companies that direct
consumer and business traffic to Yahoo Properties.
“Yahoo,” “Company,” and “we” refer to Yahoo! Inc. and its
consolidated subsidiaries.
“Yahoo Properties” refers to the online properties and services
that Yahoo provides to users.
We periodically review, refine, and update our methodologies for
monitoring, gathering, and counting number of Ads Sold and Paid
Clicks, and for calculating Search click-driven revenue,
Price-per-Ad, and Price-per-Click. Methodology changes are applied
consistently to all periods presented. No changes were made in the
currently reported period.
Additional information about how “Ads Sold,” “Paid Clicks,”
“Price-per-Ad,” “Price-per-Click,” and “Search click-driven
revenue” are defined and calculated is included under the caption
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" in the Company’s Annual Report on Form 10-K
for the year ended December 31, 2015, as amended, which is on file
with the SEC and available on the SEC's website at www.sec.gov.
This press release (including, without limitation, the
quotations from management and business outlook section) contains
forward-looking statements concerning Yahoo's expected financial
performance and Yahoo's strategic and operational plans and their
projected impact, as well as, Yahoo's announced transaction with
Verizon Communications Inc. (“Verizon”) and recent security
incident. 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.
With respect to the proposed sale of Yahoo’s operating business to
Verizon, risks and uncertainties include, among others, (i) the
inability to consummate the transaction in a timely manner or at
all, due to the inability to obtain or delays in obtaining approval
of Yahoo’s stockholders, necessary regulatory approvals for the
transaction or satisfaction of other conditions to the closing of
the transaction; (ii) the occurrence of any event, change or other
circumstance that could give rise to the termination of the Stock
Purchase Agreement with Verizon; (iii) potential adverse effects on
Yahoo’s partner, advertiser, vendor and customer relationships,
operating results and business generally resulting from the pending
transaction; (iv) the implementation of the transaction which will
require significant time, attention and resources of Yahoo’s senior
management and others within Yahoo, potentially diverting their
attention from other aspects of Yahoo’s business; (v) the costs,
fees, expenses and charges related to or triggered by the
transaction; (vi) potential adverse effects on Yahoo’s business,
properties or operations caused by Yahoo implementing the
transaction; (vii) the anticipated benefits of the transaction to
Yahoo’s stockholders may not be realized; (viii) the initiation or
outcome of legal proceedings or regulatory proceedings against
Yahoo relating to the transaction; and (ix) following the closing
of the transaction, Yahoo will be a publicly traded management
investment company registered under the Investment Company Act of
1940, and will be required to comply with the regulations
thereunder. With respect to security incidents such as the security
incident announced by Yahoo on September 22, 2016, risks include
the unauthorized access to or theft of user data, regulatory
actions, litigation, investigations, remediation costs, costs of
increased security measures, damage to our reputation and brand,
loss of user and partner confidence in the security of our products
and services, and resulting fees, costs and expenses. Additional
potential risks and uncertainties include, among others, risks
related to Yahoo’s ability to continue to attract and maintain
mobile users and grow its mobile revenue; risks related to Yahoo’s
ability to continue to grow Mavens revenue; risks related to
Yahoo’s ability to grow users, user engagement and pageviews; risks
related to growing advertiser engagement; risk of potential
reduction in spending by, or loss of, advertising customers; risks
associated with the Microsoft Search Agreement and the Services
Agreement with Google Inc.; risks related to Yahoo’s ability to
provide innovative search experiences and other products and
services that differentiate its services and generate significant
traffic; risks associated with Yahoo’s ability to manage its
operating expenses effectively and improve profitability; risks
related to acceptance by users of new products and services; risks
related to Yahoo’s ability to compete with new or existing
competitors; dependence on third parties for technology, services,
content, and distribution; risks related to acquiring or developing
compelling content; interruptions or delays in the provision of
Yahoo’s services; adverse results in litigation; risks related to
Yahoo’s ability to recruit and retain key personnel; risks related
to possible impairment of goodwill or other assets; risks related
to Yahoo’s ability to protect its intellectual property and the
value of its brands; risks related to fluctuations in foreign
currency exchange rates; risks related to joint ventures and the
integration of acquisitions; risks related to Yahoo’s regulatory
environment; risks related to Yahoo's international operations;
risks related to the calculation of our key operational metrics;
and general economic conditions. All information set forth in this
press release and its attachments is as of October 18, 2016. Yahoo
does not intend, and undertakes no duty, to update this information
to reflect subsequent events or circumstances. More information
about potential factors that could affect the Company's business
and financial results is included under the captions "Risk Factors"
and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" in the Company's Annual Report on Form
10-K, for the year ended December 31, 2015, as amended, and
Quarterly Report on Form 10-Q for the quarter ended June 30, 2016,
which are on file with the SEC and available on the SEC's website
at www.sec.gov. Additional information
will also be set forth in those sections in Yahoo’s Quarterly
Report on Form 10-Q for the quarter ended September 30, 2016, which
will be filed with the SEC in the fourth quarter of 2016.
Yahoo!, the Yahoo family of marks, BrightRoll, Polyvore, and the
associated logos are trademarks and/or registered trademarks of
Yahoo! Inc. Tumblr is a registered trademark of Tumblr, Inc. Other
names are trademarks and/or registered trademarks of their
respective owners.
Yahoo! Inc. Unaudited Condensed Consolidated
Balance Sheets (in thousands)
December 31,
September 30,
2015
2016
ASSETS Current assets: Cash and cash
equivalents $ 1,631,911 $ 1,411,308
Short-term marketable securities 4,225,112
5,189,207 Accounts receivable, net 1,047,504
945,659 Prepaid expenses and other current assets
602,792 244,782 Total current assets
7,507,319 7,790,956 Long-term marketable
securities 975,961 1,170,962 Property and
equipment, net 1,547,323 1,273,327
Goodwill 808,114 437,609 Intangible assets,
net 347,269 181,998 Other long-term assets and
investments 342,390 218,585 Investments in
Alibaba Group 31,172,361 40,577,385
Investments in equity interests 2,503,229
3,020,804 Total assets $
45,203,966 $ 54,671,626
LIABILITIES AND EQUITY Current liabilities:
Accounts payable $ 208,691 $
168,148 Other accrued expenses and current
liabilities 934,658 984,301 Deferred
revenue 134,031 115,991 Total current
liabilities 1,277,380 1,268,440
Convertible notes 1,233,485 1,283,002
Long-term deferred revenue 27,801 36,609
Other long-term liabilities 118,689 102,283
Deferred tax liabilities related to investment in Alibaba
Group 12,611,867 16,444,038 Deferred and other
long-term tax liabilities 855,324 668,098
Total liabilities 16,124,546 19,802,470
Total Yahoo! Inc. stockholders' equity 29,043,537
34,836,272 Noncontrolling interests 35,883
32,884 Total equity 29,079,420
34,869,156 Total liabilities and equity
$ 45,203,966 $ 54,671,626
Yahoo! Inc. Unaudited Condensed
Consolidated Statements of Operations (in thousands, except
per share amounts)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2015
2016
2015
2016
Revenue (1) $
1,225,673
$
1,305,206
$ 3,694,908 $
3,699,995
Operating expenses: Cost of revenue - traffic
acquisition costs (1) 223,229 447,537
606,598 1,141,786 Cost of revenue - other
302,846 255,421 884,041 806,491
Sales and marketing 274,329 212,654
823,990 674,711 Product development
272,285 243,644 905,460 801,708
General and administrative 151,963 176,713
506,071 490,519 Amortization of intangibles
19,622 11,594 59,677 46,736 Asset
impairment charge 41,699 - 41,699 -
Goodwill impairment charge - - -
394,901 Intangible assets impairment charge -
- - 87,335 Gain on sale of patents and
land - - (11,100 ) (121,559
) Restructuring charges, net 26,012
9,962 96,932 86,576
Total operating expenses 1,311,985
1,357,525 3,913,368 4,409,204
Loss from operations (86,312 )
(52,319 ) (218,460 ) (709,209
) Other expense, net (23,955 )
(6,122 ) (66,759 ) (38,476
) Loss before income taxes and earnings in equity
interests (110,267 ) (58,441 )
(285,219 ) (747,685 ) Benefit
for income taxes 93,208 105,513 75,613
124,736
Earnings in equity interests, net of
tax
95,195 116,228 290,726
249,579 Net income (loss) 78,136
163,300 81,120 (373,370 )
Less: Net income attributable to noncontrolling interests
(1,875 ) (474 ) (5,215 )
(2,949 ) Net income (loss) attributable to
Yahoo! Inc. $ 76,261 $
162,826 $ 75,905 $
(376,319 ) Net income (loss) attributable
to Yahoo! Inc. common stockholders per share - diluted $
0.08 $ 0.17 $ 0.08
$ (0.40 ) Shares used in per
share calculation - diluted 946,934
957,304 944,160 948,524
Stock-based compensation expense by function: Cost
of revenue - other $ 9,748 $ 9,440
$ 22,957 $ 25,876 Sales and
marketing 33,317 36,428 111,416
108,259 Product development 46,461
54,720 145,444 161,182 General and
administrative 20,900 28,304 71,435
73,946 Restructuring charges, net - -
2,705 7,374
Supplemental
Financial Data:
Revenue ex-TAC $ 1,002,444 $
857,669 $ 3,088,310 $ 2,558,209
Adjusted EBITDA $ 244,237 $
229,153 $ 737,053 $ 548,594
Free cash flow(2)(3) $ 18,028
$ 167,119
$ (3,041,674 ) $
889,960 (1)
Commencing in the second quarter of 2016, TAC payments related
to the Microsoft Search Agreement, which previously would have been
recorded as a reduction of revenue, began to be recorded as a cost
of revenue due to a required change in revenue presentation. See
“Change in Revenue Presentation” in the accompanying press
release. (2) During the nine months ended September
30, 2015, the Company satisfied the $3.3 billion income tax
liability related to the sale of Alibaba Group ADSs in September
2014. (3) During the nine months ended September 30,
2016, the Company received net cash proceeds from a sale of land of
$246 million and received a cash tax refund of $190 million
associated with the Company’s claim to carry back its 2015 losses
and tax attributes to earlier taxable years.
Yahoo! Inc. Unaudited Condensed
Consolidated Statements of Cash Flows (in thousands)
Three Months Ended Nine
Months Ended September 30, September 30,
2015 2016 2015 2016
CASH FLOWS FROM OPERATING ACTIVITIES: Net income
(loss) $ 78,136 $ 163,300 $
81,120 $ (373,370 )
Adjustments to reconcile net income
(loss) to net cash provided by (used in) operating
activities:
Depreciation 118,846 95,270 355,540
308,324 Amortization of intangible assets
33,566 20,198 102,090 80,036
Accretion of convertible notes discount 15,867
16,723 46,984 49,517 Stock-based
compensation expense 110,426 128,892
353,957 376,637 Non-cash asset impairment
charge 41,699 - 41,699 -
Non-cash goodwill impairment charge - -
- 394,901 Non-cash intangible assets impairment
charge - - - 87,335 Non-cash
restructuring charges (reversals) 902 (149
) (31 ) 1,227 Non-cash accretion on
marketable debt securities 14,771 4,566
38,328 23,060 Foreign exchange (gain) loss
(10,981 ) (9,613 ) 10,337
(46,046 ) Gain on sale of assets and other
(3,030 ) (888 ) (3,058 )
(2,719 ) Gain on sale of patents and land
- - (11,100 ) (121,559 )
Loss on Hortonworks warrants 12,781 8,493
19,241 49,930 Earnings in equity interests
(95,195 ) (116,228 ) (290,726
) (249,579 ) Tax benefits (detriments) from
stock-based awards 26,607 (10,414 )
22,990 (8,598 ) Excess tax benefits from
stock-based awards (31,509 ) 8,817
(33,359 ) (1,743 ) Deferred income
taxes (39,387 ) (82,441 )
(52,605 ) (175,984 ) Dividends
received from equity investee 375 -
142,045 156,968 Changes in assets and liabilities,
net of effects of acquisitions: Accounts receivable
1,422 48,062 34,303 106,261 Prepaid
expenses and other 25,966 2,681 (64,112
) 346,103 Accounts payable (67,147
) (8,979 ) (29,642 )
(10,083 ) Accrued expenses and other
liabilities (37,641 ) (46,873 )
194,569 12,974 Income taxes payable related to
sale of Alibaba Group ADSs - - (3,282,293
) - Deferred revenue (59,199 )
(3,511 ) (191,989 ) (9,988
) Net cash provided by (used in) operating activities
137,275 217,906 (2,515,712
) 993,604 CASH FLOWS FROM INVESTING
ACTIVITIES: Acquisition of property and equipment
(160,955 ) (43,172 ) (428,345
) (197,508 ) Proceeds from sales of
property and equipment 10,574 1,202 11,069
249,089 Purchases of marketable securities
(1,145,701 ) (1,423,283 )
(3,472,587 ) (5,680,284 ) Proceeds
from sales of marketable securities 92,546
113,432 566,321 281,393 Proceeds from
maturities of marketable securities 1,304,841
1,281,069 4,889,437 4,223,735 Acquisitions,
net of cash acquired (153,339 ) -
(174,630 ) - Proceeds from sales of
patents 9,100 - 29,100 1,500
Purchases of intangible assets (122 )
(36 ) (4,733 ) (2,001 )
Proceeds from the settlement of derivative hedge contracts
55,915 1,192 120,682 39,007 Payments
for settlement of derivative hedge contracts (2,712
) (1,848 ) (6,594 )
(7,012 ) Payments for equity investments in
privately held companies - - - (9
) Other investing activities, net (50 )
(34 ) (203 ) (127 )
Net cash provided by (used in) investing activities
10,097 (71,478 ) 1,529,517
(1,092,217 ) CASH FLOWS FROM
FINANCING ACTIVITIES: Proceeds from issuance of common
stock 5,520 4,588 52,297 15,512
Repurchases of common stock - -
(203,771 ) - Excess tax benefits from
stock-based awards 31,509 (8,817 )
33,359 1,743 Tax withholdings related to net share
settlements of restricted stock awards and restricted stock
units (66,101 ) (66,017 )
(216,061 ) (157,442 ) Distributions
to noncontrolling interests - - (15,847
) (5,948 ) Other financing activities,
net (4,539 ) (2,847 )
(13,554 ) (10,414 ) Net cash used in
financing activities (33,611 ) (73,093
) (363,577 ) (156,549 )
Effect of exchange rate changes on cash and cash equivalents
(20,770 ) 12,569 (33,166 )
34,559 Net change in cash and cash equivalents
92,991 85,904 (1,382,938 )
(220,603 ) Cash and cash equivalents, beginning of
period 1,188,169 1,325,404
2,664,098 1,631,911 Cash and
cash equivalents, end of period $ 1,281,160
$ 1,411,308 $ 1,281,160
$ 1,411,308
Yahoo! Inc.Note to Supplemental
Financial Data and GAAP to Non-GAAP Reconciliations
This press release includes adjusted revenue and cost of revenue
- TAC amounts that exclude the effect of the Change in Revenue
Presentation that occurred during the second quarter of 2016. We
believe providing this additional information to investors is
useful because it provides investors with comparable revenue and
cost of revenue - TAC measures for comparison to our historical
reported financial information. See “Change in Revenue
Presentation” in the accompanying press release.
This press release and its attachments also include the non-GAAP
financial measures of revenue excluding traffic acquisition costs
(“revenue ex-TAC”); gross mobile revenue; gross search revenue;
adjusted EBITDA; non-GAAP income from operations; non-GAAP net
earnings; non-GAAP net earnings per diluted share; and free cash
flow, which are reconciled to revenue (in the case of revenue
ex-TAC, gross mobile revenue, and gross search revenue); net loss
attributable to Yahoo! Inc. (in the case of adjusted EBITDA and
non-GAAP net earnings); loss from operations; net loss attributable
to Yahoo! Inc. common stockholders per share – diluted; and net
cash provided by (used in) operating activities, which we believe
are the most comparable GAAP measures. Yahoo! Inc. (together with
its consolidated subsidiaries, “Yahoo,” the “Company,” or “we”)
uses these non-GAAP financial measures for internal managerial
purposes and to facilitate period-to-period comparisons. We
describe limitations specific to each non-GAAP financial measure
below. Management generally compensates for limitations in the use
of non-GAAP financial measures by relying on comparable GAAP
financial measures and providing investors with a reconciliation of
the non-GAAP financial measure to the most directly comparable GAAP
financial measure or measures. Further, management uses non-GAAP
financial measures only in addition to and in conjunction with
results presented in accordance with GAAP. We believe that these
non-GAAP financial measures reflect additional ways of viewing
aspects of our operations that, when viewed with our GAAP results,
provide a more complete understanding of factors and trends
affecting our business. These non-GAAP measures should be
considered as a supplement to, and not as a substitute for, or
superior to, revenue, net loss attributable to Yahoo! Inc., loss
from operations, net loss attributable to Yahoo! Inc. common
stockholders per share – diluted, and net cash provided by (used
in) operating activities calculated in accordance with GAAP.
Revenue ex-TAC is a non-GAAP financial measure defined as GAAP
revenue less TAC that has been recorded as a cost of revenue. TAC
consists of payments made to Affiliates, and payments made to
companies that direct consumer and business traffic to Yahoo
Properties. TAC is recorded either as a reduction of revenue or as
cost of revenue. We present revenue ex-TAC to provide investors a
metric used by the Company for evaluation and decision-making
purposes and to provide investors with comparable revenue numbers
when comparing to our historical reported financial information. A
limitation of revenue ex-TAC is that it is a measure we defined for
internal and investor purposes that may be unique to the Company,
and therefore it may not enhance the comparability of our results
to those of other companies in our industry who have similar
business arrangements but address the impact of TAC differently.
Management compensates for these limitations by also relying on the
comparable GAAP financial measures of revenue and cost of revenue -
TAC.
Each of gross mobile revenue and gross search revenue is a
non-GAAP financial measure. Gross mobile revenue is defined as GAAP
mobile revenue plus the related revenue share with third parties.
Gross search revenue is defined as GAAP search revenue plus the
related revenue share with third parties. We present these amounts
to provide investors with additional metrics used by the Company
for evaluation and decision-making purposes and as an indicator of
the size of our presence in the relevant business. To this end,
gross mobile revenue and gross search revenue report the total
receipts generated on Yahoo Properties and Affiliate sites by the
specified relevant Yahoo business (i.e., mobile or search), before
any TAC or other revenue share is paid to the Affiliates and before
any revenue share is allocated to Microsoft or other parties. A
limitation of these non-GAAP measures is that they include revenue
that is recognized by one or more third parties and not by Yahoo;
furthermore, they are measures we defined for internal and investor
purposes that may be unique to us, and therefore may not enhance
the comparability of our results to those of other companies in our
industry who have similar business arrangements but address the
impact of TAC and revenue sharing differently. Management
compensates for these limitations by also relying on the comparable
financial measure GAAP revenue.
Adjusted EBITDA is defined as net income (loss) attributable to
Yahoo! Inc. before taxes, depreciation, amortization of intangible
assets, stock-based compensation expense, other (expense) income,
net (which includes interest, among other items), earnings in
equity interests, net income attributable to noncontrolling
interests and other gains, losses, and expenses that we do not
believe are indicative of our ongoing results. We present adjusted
EBITDA because the exclusion of certain gains, losses, and expenses
facilitates comparisons of the operating performance of the Company
on a period to period basis. Adjusted EBITDA has limitations as an
analytical tool and should not be considered in isolation or as a
substitute for results reported under GAAP. These limitations
include: adjusted EBITDA does not reflect tax payments and such
payments reflect a reduction in cash available to us; adjusted
EBITDA does not reflect the periodic costs of certain capitalized
tangible and intangible assets used in generating revenues in our
businesses; adjusted EBITDA does not include stock-based
compensation expense related to the Company’s workforce; adjusted
EBITDA also excludes other (expense) income, net (which includes
interest, among other items), earnings in equity interests, net
income attributable to noncontrolling interests and other gains,
losses, and expenses that we do not believe are indicative of our
ongoing results, and these items may represent a reduction or
increase in cash available to us; and adjusted EBITDA is a measure
that may be unique to the Company, and therefore it may not enhance
the comparability of our results to other companies in our
industry. Management compensates for these limitations by also
relying on the comparable GAAP financial measure of net income
(loss) attributable to Yahoo! Inc., which includes taxes,
depreciation, amortization, stock-based compensation expense, other
(expense) income, net (which includes interest, among other items),
earnings in equity interests, net income attributable to
noncontrolling interests and the other gains, losses and expenses
that are excluded from adjusted EBITDA.
Non-GAAP income from operations is defined as income (loss) from
operations excluding certain gains, losses, and expenses that we do
not believe are indicative of our ongoing operating results and
further adjusted to exclude stock-based compensation
expense. Because of the variety of equity awards used by
companies, the varying methodologies for determining stock-based
compensation expense, and the subjective assumptions involved in
those determinations, we believe excluding stock-based compensation
expense enhances the ability of management and investors to
understand the impact of stock-based compensation expense on income
(loss) from operations. We consider non-GAAP income from operations
to be a profitability measure which facilitates the forecasting of
our operating results for future periods and allows for the
comparison of our results to historical periods. A limitation of
non-GAAP income from operations is that it does not include all
items that impact our income from operations for the period.
Management compensates for this limitation by also relying on the
comparable GAAP financial measure of income (loss) from operations
which includes the gains, losses, and expenses that are excluded
from non-GAAP income from operations.
Non-GAAP net earnings is defined as net income (loss)
attributable to Yahoo! Inc. (which we sometimes refer to as net
earnings) excluding certain gains, losses, expenses, and their
related tax effects that we do not believe are indicative of our
ongoing results and further adjusted to exclude stock-based
compensation expense and its related tax effects. Because of the
variety of equity awards used by companies, the varying
methodologies for determining stock-based compensation expense, and
the subjective assumptions involved in those determinations, we
believe excluding stock-based compensation expense enhances the
ability of management and investors to understand the impact of
stock-based compensation expense on net income and net income per
share. We consider non-GAAP net earnings and non-GAAP net earnings
per diluted share to be profitability measures which facilitate the
forecasting of our results for future periods and allow for the
comparison of our results to historical periods. A limitation of
non-GAAP net earnings and non-GAAP net earnings per diluted share
is that they do not include all items that impact our net income
and net income per diluted share for the period. Management
compensates for this limitation by also relying on the comparable
GAAP financial measures of net income (loss) attributable to Yahoo!
Inc. and net income (loss) attributable to Yahoo! Inc. common
stockholders per share - diluted, both of which include the gains,
losses, expenses and related tax effects that are excluded from
non-GAAP net earnings and non-GAAP net earnings per diluted
share.
Free cash flow is a non-GAAP financial measure defined as net
cash provided by (used in) operating activities (adjusted to
include excess tax benefits from stock-based awards), less
acquisition of property and equipment, net (i.e., acquisition of
property and equipment less proceeds received from disposition of
property and equipment) and dividends received from equity
investees. We consider free cash flow to be a liquidity measure
which provides useful information to management and investors about
the amount of cash generated by business operations, after
deducting our net payments for acquisitions and dispositions of
property and equipment, which cash can then be used for strategic
opportunities or other business purposes including, among others,
investing in the Company's business, making strategic acquisitions,
strengthening the balance sheet, and repurchasing stock. A
limitation of free cash flow is that it does not represent the
total increase or decrease in the cash balance for the period.
Management compensates for this limitation by also relying on the
net change in cash and cash equivalents as presented in the
Company’s unaudited condensed consolidated statements of cash flows
prepared in accordance with GAAP which incorporates all cash
movements during the period.
Yahoo! Inc. Supplemental
Financial Data and GAAP to Non-GAAP Reconciliations (in
thousands) Three Months Ended
Nine Months Ended September 30, September
30, 2015 2016 2015
2016 Revenue for groups of similar services:
Search (1)(4) $ 515,841 $
703,130 $ 1,586,148 $ 1,906,507
Display (4) 511,356 476,263
1,481,622 1,408,818 Other (4)
198,476 125,813 627,138
384,670 Total revenue $
1,225,673
$
1,305,206
$
3,694,908
$ 3,699,995 Revenue excluding
traffic acquisition costs recorded as cost of revenue ("revenue
ex-TAC") for groups of similar services: GAAP search
revenue (1) $ 515,841 $
703,130 $ 1,586,148 $ 1,906,507
TAC associated with search revenue (1)
(119,003 ) (383,820 ) (324,888
) (920,163 ) Search revenue ex-TAC
$ 396,838 $ 319,310
$ 1,261,260 $ 986,344
GAAP display revenue $ 511,356 $
476,263 $ 1,481,622 $ 1,408,818
TAC associated with display revenue (103,718 )
(63,347 ) (279,834 ) (220,225
) Display revenue ex-TAC $ 407,638
$ 412,916 $ 1,201,788
$ 1,188,593 GAAP other
revenue $ 198,476 $ 125,813
$ 627,138 $ 384,670 TAC associated
with GAAP other revenue (508 ) (370
) (1,876 ) (1,398 ) Other
revenue ex-TAC $ 197,968 $
125,443 $ 625,262 $
383,272 Revenue ex-TAC: GAAP
revenue (1) $ 1,225,673 $
1,305,206 $ 3,694,908 $
3,699,995 TAC (1) (223,229 )
(447,537 ) (606,598 ) (1,141,786
) Revenue ex-TAC $ 1,002,444
$ 857,669 $ 3,088,310
$ 2,558,209 Revenue ex-TAC by
segment: Americas: GAAP revenue (1)
$ 987,374 $ 1,058,416 $
2,964,305 $ 2,975,023 TAC (1)
(201,855 ) (394,838 ) (549,332
) (1,012,903 ) Revenue ex-TAC $
785,519 $ 663,578 $
2,414,973 $ 1,962,120
EMEA: GAAP revenue (1) $ 79,614
$ 98,654 $ 246,530 $
278,711 TAC (1) (12,745 )
(41,948 ) (37,399 ) (96,787
) Revenue ex-TAC $ 66,869
$ 56,706 $ 209,131
$ 181,924 Asia Pacific: GAAP
revenue (1) $ 158,685 $
148,136 $ 484,073 $ 446,261
TAC (1) (8,629 ) (10,751
) (19,867 ) (32,096 ) Revenue
ex-TAC $ 150,056 $ 137,385
$ 464,206 $ 414,165
Total revenue ex-TAC
$ 1,002,444 $ 857,669
$ 3,088,310 $ 2,558,209
Direct costs by segment (5):
Americas $ 74,495 $ 63,069
$ 214,079 $ 201,343 EMEA
23,196 7,587 63,947 47,090 Asia
Pacific 47,214 45,607 149,766
137,399 Global operating costs (6)
613,302 539,403 1,942,565 1,676,710
Gain on sale of patents and land - -
(11,100 ) (121,559 ) Asset
impairment charge 41,699 - 41,699 -
Goodwill impairment charge - - -
394,901 Intangible assets impairment charge -
- - 87,335 Restructuring charges, net
26,012 9,962 96,932 86,576
Depreciation and amortization 152,412 115,468
457,630 388,360 Stock-based compensation
expense 110,426 128,892
351,252 369,263 Loss from
operations $ (86,312 ) $
(52,319 ) $ (218,460 ) $
(709,209 ) (1)
Commencing in the second quarter of
2016, TAC payments related to the Microsoft Search Agreement, which
previously would have been recorded as a reduction of revenue,
began to be recorded as cost of revenue - TAC due to a required
change in revenue presentation. See “Change in Revenue
Presentation” in the accompanying press release.
(4) In the first quarter of 2016, we reclassified certain
amounts from other revenue to either display or search revenue.
Prior period amounts have been revised to conform to the current
presentation. (5)
Direct costs for each segment include
certain cost of revenue - other and costs associated with the local
sales teams. Prior to the second quarter of 2016, certain account
management costs associated with Yahoo Properties were managed
locally and included as direct costs for each segment. Prior period
amounts have been revised to conform to the current
presentation.
(6) Global operating costs include product development,
marketing, real estate workplace, general and administrative,
account management costs and other corporate expenses that are
managed on a global basis and that are not directly attributable to
any particular segment. Beginning in the second quarter of 2016,
certain account management costs associated with Yahoo Properties
are managed globally and included as global costs. Prior period
amounts have been revised to conform to the current
presentation. Yahoo! Inc.
Supplemental Financial Data and GAAP to Non-GAAP
Reconciliations (continued) (in thousands)
Three Months Ended
Nine Months Ended
September 30, September 30, 2015
2016 2015 2016 Reconciliation of net
income (loss) attributable to Yahoo! Inc. to adjusted EBITDA:
Net income (loss) attributable to Yahoo! Inc. $
76,261 $ 162,826 $ 75,905
$ (376,319 ) Advisory fees -
27,150 8,000 51,427 Gain on sale of
land - - - (120,059 )
Depreciation and amortization 152,412 115,468
457,630 388,360 Stock-based compensation
expense 110,426 128,892 351,252
369,263 Asset impairment charge 41,699
- 41,699 - Goodwill impairment charge
- - - 394,901 Intangible assets
impairment charge - - - 87,335
Restructuring charges, net 26,012 9,962
96,932 86,576 Other expense, net 23,955
6,122 66,759 38,476 Benefit for income
taxes (93,208 ) (105,513 )
(75,613 ) (124,736 ) Earnings in
equity interests (95,195 ) (116,228
) (290,726 ) (249,579 ) Net
income attributable to noncontrolling interests 1,875
474 5,215 2,949
Adjusted EBITDA $ 244,237 $
229,153 $ 737,053 $
548,594 Reconciliation of net cash provided
by (used in) operating activities to free cash flow: Net
cash provided by (used in) operating activities $
137,275 $ 217,906 $ (2,515,712
) $ 993,604
Acquisition of property and equipment,
net
(150,381 ) (41,970 ) (417,276
) 51,581 Dividends received from equity
investee (375 ) - (142,045 )
(156,968 )
Excess tax benefits from stock-based
awards
31,509 (8,817 ) 33,359
1,743 Free cash flow(2)(3) $
18,028 $ 167,119 $
(3,041,674 ) $ 889,960
Reconciliation of GAAP mobile revenue to gross mobile
revenue: GAAP mobile revenue (1) $
271,413 $ 395,832 $ 756,852
$
1,034,772
Revenue share with third parties (1) 152,728
36,542 473,406 224,632
Gross mobile revenue $ 424,141
$ 432,374 $ 1,230,258
$
1,259,404
Reconciliation of GAAP search revenue to gross
search revenue: GAAP search revenue (1) $
515,841 $ 703,130 $ 1,586,148
$ 1,906,507 Revenue share with third parties
(1) 360,469 49,328
1,183,278 431,688 Gross search
revenue $
876,310
$
752,458
$ 2,769,426 $
2,338,195
(1)
Commencing in the second quarter of
2016, TAC payments related to the Microsoft Search Agreement, which
previously would have been recorded as a reduction of revenue,
began to be recorded as cost of revenue - TAC due to a required
change in revenue presentation. See “Change in Revenue
Presentation” in the accompanying press release.
(2) During the nine months ended September 30, 2015, the
Company satisfied the $3.3 billion income tax liability related to
the sale of Alibaba Group ADSs in September 2014. (3)
During the nine months ended September 30, 2016, the Company
received net cash proceeds from a sale of land of $246 million and
received a cash tax refund of $190 million associated with the
Company’s claim to carry back its 2015 losses and tax attributes to
earlier taxable years. Yahoo! Inc.
GAAP to Non-GAAP Reconciliations (in
thousands, except per share amounts) Three
Months Ended September 30, 2015
2016 GAAP loss from operations $
(86,312 ) $ (52,319 )
(a) Restructuring charges, net 26,012
9,962 (b) Stock-based compensation
expense 110,426 128,892 (c)
Advisory fees - 27,150 (d)
Asset impairment charge 41,699 -
Non-GAAP income from operations $ 91,825
$ 113,685 GAAP net
income attributable to Yahoo! Inc. $ 76,261
$ 162,826 (a) Restructuring charges,
net 26,012 9,962 (b) Stock-based
compensation expense 110,426 128,892
(c) Advisory fees - 27,150
(d) Asset impairment charge 41,699 -
(e) Loss on Hortonworks warrants 12,781
8,493 (f) To adjust the provision for
income taxes to reflect an effective tax rate of 35% for both the
three months ended September 30, 2015 and 2016 (121,436
) (146,133 ) Non-GAAP net
earnings $ 145,743 $ 191,190
GAAP net income attributable to Yahoo! Inc. common
stockholders per share - diluted $ 0.08
$ 0.17 Non-GAAP net earnings per
share - diluted $ 0.15 $
0.20 Shares used in non-GAAP per share
calculation - diluted 946,934 957,304
Nine Months Ended September 30,
2015 2016 GAAP loss from operations
$ (218,460 ) $ (709,209 )
(a) Restructuring charges, net 96,932
86,576 (b) Stock-based compensation
351,252 369,263 (c) Advisory
fees 8,000 51,427 (d) Gain on
sale of land - (120,059 )
(e) Goodwill impairment charge -
394,901 (f) Intangible assets impairment
charge - 87,335 (g) Asset
impairment charge 41,699 -
Non-GAAP income from operations $ 279,423
$ 160,234 GAAP net
income (loss) attributable to Yahoo! Inc. $
75,905 $ (376,319 ) (a)
Restructuring charges, net 96,932 86,576
(b) Stock-based compensation 351,252
369,263 (c) Advisory fees 8,000
51,427 (d) Gain on sale of land
- (120,059 ) (e) Goodwill
impairment charge - 394,901 (f)
Intangible assets impairment charge - 87,335
(g) Loss on Hortonworks warrants 19,241
49,930 (h) Asset impairment charge
41,699 - (i) To adjust the provision
for income taxes to reflect an effective tax rate of 35% for both
the nine months ended September 30, 2015 and 2016
(156,780 ) (184,827 )
Non-GAAP net earnings $ 436,249
$ 358,227 GAAP net income (loss)
attributable to Yahoo! Inc. common stockholders per share -
diluted $ 0.08 $ (0.40
) Non-GAAP net earnings per share - diluted
$ 0.46 $ 0.38
Shares used in non-GAAP per share calculation - diluted
944,160 954,664
Yahoo! Inc.Business Outlook
The following business outlook is based on information and
expectations as of October 18, 2016. Yahoo does not intend, and
undertakes no duty, to update the business outlook to reflect
subsequent events or circumstances; however, Yahoo may update the
business outlook or any portion thereof at any time at its
discretion.
Three Months Fiscal Year
Ending Ending December 31, 2016 December
31, 2016 (in millions) (in millions)
GAAP revenue: $ 1,360 - 1,400 $
5,060 - 5,100
Cost of revenue - TAC:
$ 480 $ 1,620 Revenue
excluding traffic acquisition costs ("Revenue ex-TAC"):
$ 880 - 920 $ 3,440 - 3,480
Adjusted EBITDA:
$ 260 - 300 $ 810 - 850
Non-GAAP income from operations: $ 140 - 180
$ 300 - 340 Reconciliations:
Revenue ex-TAC: GAAP revenue (7)
$ 1,360 - 1,400 $ 5,060 - 5,100
Less: Cost of revenue - TAC
(7)
480 1,620 Revenue ex-TAC $ 880 -
920 $ 3,440 - 3,480 Adjusted EBITDA
(8): Depreciation and amortization $
120 $ 510 Stock-based compensation
$ 120 $ 500 Non-GAAP income
from operations (9): Stock-based
compensation $ 120 $ 500
(7) Includes anticipated impact of the Change in Revenue
Presentation. (8) Yahoo has not reconciled its
adjusted EBITDA outlook to the comparable forward-looking GAAP
financial measure, GAAP net income (loss) attributable to Yahoo!
Inc., because it is unable to provide a forward-looking estimate of
certain reconciling items between GAAP net income (loss)
attributable to Yahoo! Inc. and adjusted EBITDA, including;
restructuring; other expense, net; provision for income taxes;
earnings in equity interests; net income attributable to
noncontrolling interests; and advisory fees. Certain factors that
are materially significant to Yahoo’s ability to estimate these
items are out of the Company’s control and/or cannot be reasonably
predicted. Accordingly, a reconciliation to net earnings is not
available without unreasonable effort. (9) Yahoo has
not reconciled its non-GAAP income from operations outlook to the
comparable forward-looking GAAP financial measure, GAAP income
(loss) from operations, because it is unable to provide a
forward-looking estimate of restructuring charges and advisory
fees. Certain factors that are materially significant to Yahoo’s
ability to estimate such items are out of the Company’s control
and/or cannot be reasonably predicted. Accordingly, a
reconciliation to GAAP income (loss) from operations is not
available without unreasonable effort.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20161018006677/en/
Yahoo! Inc.Media Relations Contact:Suzanne Philion,
408-349-4040media@yahoo-inc.comInvestor Relations
Contact:Joon Huh, 408-349-3382investorrelations@yahoo-inc.com
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