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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT: October 8, 2003
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YAHOO! INC.
(Exact name of registrant as specified in its charter)
0-28018
(Commission File Number)
DELAWARE 77-0398689
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
701 FIRST AVE.
SUNNYVALE, CALIFORNIA 94089
(Address of principal executive offices, with zip code)
(408) 349-3300
(Registrant's telephone number, including area code)
Item 7. Financial Statements and Exhibits.
(c) Exhibits.
99.1 Press release dated October 8, 2003 by Yahoo! Inc.
Item 12.Results of Operations and Financial Condition
This Report on Form 8-K is being filed under the Securities Exchange
Act of 1934, as amended.
On October 8, 2003, Yahoo! Inc., a Delaware corporation ("Yahoo!"),
announced its financial results for the fiscal quarter ended September 30, 2003
and certain other information. A copy of Yahoo!'s press release announcing these
financial results and certain other information is attached as Exhibit 99.1
hereto and incorporated by reference herein.
The press release filed as an exhibit to this report includes "safe
harbor" language pursuant to the Private Securities Litigation Reform Act of
1995, as amended, indicating that certain statements about the Company's
business and other matters contained in the press release are "forward-looking"
rather than "historic." The press release also states that a more thorough
discussion of certain factors which may affect the Company's operating results
is included, among other sections, under the captions "Risk Factors" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 2002 and the Quarterly Report on Form 10-Q for the quarter
ended June 30, 2003, which are on file with the Securities and Exchange
Commission ("SEC") and available at the Securities and Exchange Commission's
website (http://www.sec.gov), and will also be included in the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2003 to
be filed with the Securities and Exchange Commission in the fourth quarter of
2003.
The press release also discloses certain financial measures, such as
revenues excluding traffic acquisition costs ("TAC"), operating income before
depreciation and amortization and free cash flow, that may be considered
non-GAAP financial measures in certain circumstances. Generally, a non-GAAP
financial measure is a numerical measure of a company's performance, financial
position, or cash flows that either excludes or includes amounts that are not
normally excluded or included in the most directly comparable measure calculated
and presented in accordance with generally accepted accounting principles. We
believe these financial measures provide useful information to both management
and investors by excluding certain expenses, gains and losses that may not be
indicative of our core operating results. We believe these financial measures
are useful to investors in allowing for greater transparency to supplemental
information used by management in its financial and operational decision-making.
In addition, we have historically reported similar financial measures to our
investors and believe that the inclusion of comparative numbers provides
consistency in our financial reporting at this time.
The Company believes that financial measures that may be considered
non-GAAP in certain circumstances, including revenues excluding TAC, operating
income before depreciation and amortization and free cash flow are helpful, when
presented in conjunction with the comparable GAAP measures of gross profit,
income from operations, and cash flow from operating activities.
Revenues excluding TAC is defined as gross profit before other cost of
revenues. We believe this measure is useful to management and investors as it is
more comparable to our historical results, as traffic acquisition costs paid to
affiliates of Overture Services, Inc., the Company's recently acquired
wholly-owned subsidiary ("Overture"), are a significant percentage of revenues
generated from Overture's sponsored search services.
Operating income before depreciation and amortization is defined as income
(loss) from operations before depreciation and amortization. We consider
operating income before depreciation and amortization to be an important
indicator of the operational strength of the Company. This measure eliminates
the effects of depreciation and amortization from period to period, which we
believe is useful to management and investors in evaluating the operating
performance of the Company as depreciation and amortization costs are not
directly attributable to the underlying performance of the Company's business
operations. A limitation associated with this measure is that it does not
reflect the periodic costs of certain capitalized tangible and intangible assets
used in generating revenues in the Company's businesses. Management evaluates
the costs of such tangible and intangible assets through other financial
measures such as capital expenditures.
Free cash flow is defined as cash flow from operating activities less
capital expenditures and change in long-term deferred revenue. Change in
long-term deferred revenue represents cash payments received in advance of
revenue recognized related to the Company's agreement with its sponsored search
provider. Free cash flow is considered a liquidity measure and provides useful
information to management and investors about the amount of cash generated after
the acquisition of property and equipment and change in long-term deferred
revenue, 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.
In addition, management refers to these financial measures to facilitate
internal and external comparisons to the Company's historical operating results,
in making operating decisions, for budget planning purposes, and to form the
basis upon which management is compensated. These measures should be considered
in addition to, not as a substitute for, or superior to, gross profit, income
from operations, cash flow from operating activities, or other measures of
financial performance prepared in accordance with generally accepted accounting
principles. The non-GAAP measures included in our press release have been
reconciled to the most directly comparable GAAP measure as is now required under
new SEC rules regarding the use of non-GAAP financial measures.
As used herein, "GAAP" refers to accounting principles generally accepted
in the United States.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
YAHOO! INC.
Date: October 8, 2003 By: /s/ Susan Decker
-----------------------------------
Susan Decker
Executive Vice President, Finance and
Administration, and Chief Financial Officer
YAHOO! INC.
INDEX TO EXHIBITS
Exhibit Number Description
- -------------- -----------
99.1 Press Release dated October 8, 2003.
Exhibit 99.1
Yahoo! Reports Third Quarter 2003 Financial Results;
Company Posts Third Quarter Operating Income of $83 Million,
Operating Income Before Depreciation and Amortization of $117 Million
SUNNYVALE, Calif.--(BUSINESS WIRE)--Oct. 8, 2003--Yahoo! Inc.
(Nasdaq:YHOO) today reported results for the third quarter ended
September 30, 2003. Net revenues for the third quarter totaled $356.8
million, a 43 percent increase over the $248.8 million reported for
the same period in 2002. Operating income for the third quarter of
2003 was $83.5 million, compared to $29.5 million for the same period
of 2002. Operating income before depreciation and amortization for the
third quarter of 2003 was $116.5 million, compared to $59.2 million
for the same period of 2002. Cash flow from operating activities for
the third quarter of 2003 was $135.5 million, compared to $72.3
million for the same period of 2002. Free cash flow for the third
quarter of 2003 was $97.1 million, compared to $59.0 million for the
same period of 2002.
Net revenues for the nine months ended September 30, 2003 totaled
$961.2 million, a 44 percent increase over the $667.3 million reported
for the same period in 2002. Operating income for the nine months
ended September 30, 2003 was $201.2 million, compared to $32.8 million
for the same period of 2002. Operating income before depreciation and
amortization for the nine months ended September 30, 2003 was $297.8
million, compared to $113.0 million for the same period of 2002. Cash
flow from operating activities for the nine months ended September 30,
2003 was $326.3 million, compared to $223.1 million for the same
period of 2002. Free cash flow for the nine months ended September 30,
2003 was $246.6 million, compared to $158.2 million for the same
period of 2002.
"Yahoo!'s record financial performance in the third quarter is the
product of consistent execution against the strategic priorities we
have outlined over the past two years. On a year over year basis, we
saw double digit increases in each of our three line items --
marketing services, fees, and listings -- demonstrating that we
delivered strong, diverse and balanced growth," said Terry Semel,
chairman and chief executive officer, Yahoo!. "As we more fully take
advantage of the revenue potential across our entire business, we
believe we can continue to meet our long-term objective for superior,
consistent and sustainable growth. In this quarter our business grew
stronger and better and we continue to remain optimistic about the
future."
Business Outlook
"We are very pleased with the strength of our third quarter report
card, both in terms of what it says about our current fundamentals and
also with respect to progress on our key longer-term measures of
success. Our client base really says it all: we are supported by
hundreds of blue chip traditional marketers, thousands of small and
medium-sized businesses, and millions of consumers around the world,"
said Susan Decker, chief financial officer, Yahoo!. "All these
elements constitute a strong, diverse, and well-distributed
foundation, which assists us in our longer-term objective to generate
consistent and sustainable growth across our key financial metrics."
Please refer to the "Notes to Unaudited Condensed Consolidated
Statements of Operations" and "Business Outlook" attached to this
press release.
Third Quarter 2003 Financial Highlights
Revenues: In the third quarter of 2003, Yahoo! reported net
revenues of $356.8 million, a 43 percent increase from the same period
in 2002. For the nine months ended September 30, 2003, net revenues
were $961.2 million, a 44 percent increase from the $667.3 million
reported in the same period in 2002.
Marketing services revenues for the third quarter of 2003 totaled
$245.1 million, a 48 percent increase from the same period in 2002.
Marketing services revenues for the nine months ended September 30,
2003 totaled $654.2 million, a 44 percent increase from the same
period in 2002. These increases resulted from a combination of a
strong increase in revenues from Yahoo!'s sponsored search services,
and growth in the balance of Yahoo!'s global marketing services
revenues.
Fees revenues for the third quarter of 2003 totaled $79.4 million,
a 38 percent increase compared to the same period in 2002. Fees
revenues for the nine months ended September 30, 2003 totaled $213.0
million, a 46 percent increase compared to the same period in 2002.
These increases were primarily driven by the growth in paying
relationships for Yahoo!'s premium services, including the SBC Yahoo!
DSL and Dial products, Yahoo! Personals, and our small business and
communications suites of premium services, partially offset by a
decrease in our event webcasting business.
Listings revenues for the third quarter of 2003 totaled $32.4
million, a 26 percent increase compared to the same period in 2002.
Listings revenues for the nine months ended September 30, 2003 totaled
$93.9 million, a 42 percent increase compared to the same period in
2002. These increases were driven primarily by the incremental
contribution of revenue from HotJobs, which was acquired in February
2002, as well as increases in our search and marketplace services
revenues.
Operating income and Operating income before depreciation and
amortization: Operating income for the third quarter of 2003 totaled
$83.5 million, compared to $29.5 million in the same period of 2002.
Operating income before depreciation and amortization for the third
quarter of 2003 totaled $116.5 million, a 97 percent increase compared
to the $59.2 million reported in the same period of 2002. Operating
income margin was 23 percent of net revenues in the third quarter of
2003 compared to 12 percent of net revenues for the same period of
2002. Operating income before depreciation and amortization margin
increased to 33 percent of net revenues in the third quarter of 2003
compared to 24 percent of net revenues in the same period of 2002. The
substantial increase in operating income and operating income before
depreciation and amortization reflects strong growth in net revenues
and only a 25 percent increase in costs on a year over year basis as a
result of our ongoing cost discipline.
Operating income for the nine months ended September 30, 2003
totaled $201.2 million, compared to $32.8 million in the same period
of 2002. Operating income before depreciation and amortization for the
nine months ended September 30, 2003 totaled $297.8 million, a 164
percent increase compared to the $113.0 million reported in the same
period of 2002. Operating income margin was 21 percent of net revenues
for the nine months ended September 30, 2003 compared to 5 percent of
net revenues for the same period of 2002. Operating income before
depreciation and amortization margin increased to 31 percent of net
revenues for the nine months ended September 30, 2003 compared to 17
percent of net revenues in the same period of 2002. The increase in
operating income and operating income before depreciation and
amortization reflects strong growth in net revenues and only a 20
percent increase in costs on a year over year basis.
Cash flow from operating activities and Free cash flow: Cash flow
from operating activities for the third quarter of 2003 totaled $135.5
million, compared to $72.3 million for the same period of 2002. Free
cash flow for the third quarter of 2003 totaled $97.1 million, a 65
percent increase compared to the $59.0 million reported for the same
period of 2002.
Cash flow from operating activities for the nine months ended
September 30, 2003 totaled $326.3 million, compared to $223.1 million
for the same period of 2002. Free cash flow for the nine months ended
September 30, 2003 totaled $246.6 million, a 56 percent increase
compared to the $158.2 million reported for the same period of 2002.
Net Income (Loss): Net income for the third quarter of 2003 was
$65.3 million or $0.10 per diluted share, compared with $28.9 million
or $0.05 per diluted share for the same period of 2002.
Net income for the nine months ended September 30, 2003 was $162.9
million or $0.26 per diluted share, compared with income before the
cumulative effect of accounting change of $60.7 million or $0.10 per
diluted share for the same period of 2002. Net loss was $3.4 million
or $0.01 per diluted share for the nine months ended September 30,
2002, including the charge of $64.1 million for the cumulative effect
of the accounting change for the implementation of Statement of
Financial Accounting Standard No. 142 ("SFAS 142"). SFAS 142, which
the Company adopted January 1, 2002, requires companies to assess the
goodwill recorded from previous acquisitions, and as necessary, record
an impairment charge that does not affect cash or the Company's
operations.
Quarterly Conference Call
Yahoo! will host a conference call to discuss third quarter
results at 5:00 p.m. Eastern Time today. A live Webcast of the
conference call, together with supplemental financial information can
be accessed through the Company's Investor Relations Web site at
http://yhoo.client.shareholder.com/earnings.cfm. In addition, an
archive of the Webcast can be accessed through the same link. An audio
replay of the call will be available following the conference call by
calling 877-213-9653 or 630-652-3041, reservation number: 7802416.
About Yahoo!
Yahoo! Inc. is a leading provider of comprehensive online products
and services to consumers and businesses worldwide. Yahoo! is the No.
1 Internet brand globally and the most trafficked Internet destination
worldwide. Headquartered in Sunnyvale, Calif., Yahoo!'s global network
includes 25 World properties and is available in 13 languages.
This press release includes the financial measures revenues
excluding traffic acquisition costs, operating income before
depreciation and amortization and free cash flow. These measures may
be considered non-GAAP financial measures and may be different from
non-GAAP financial measures used by other companies. The presentation
of this financial information is not intended to be considered in
isolation or as a substitute for the financial information prepared
and presented in accordance with generally accepted accounting
principles. See Note 3 of the Notes to Unaudited Condensed
Consolidated Statements of Operations and reconciliations to GAAP
financial measures included in this press release.
This press release and its attachments contain forward-looking
statements that involve risks and uncertainties concerning Yahoo!'s
expected financial performance (as described without limitation in the
Business Outlook section and quotations from management in this press
release), as well as Yahoo!'s strategic and operational plans. Actual
results may differ materially from the results predicted and reported
results should not be considered as an indication of future
performance. The potential risks and uncertainties include, among
others, decreases or delays in marketing services spending, including
performance of the Company's newly acquired Overture business; the
actual increases in demand by customers for Yahoo!'s premium services;
acceptance of new products and services; general economic conditions;
risks related to the integration of recent acquisitions; the ability
to adjust to changes in personnel, including management changes; and
the dependence on third parties for technology, services, content and
distribution. All information set forth in this release and its
attachments is as of October 8, 2003. Yahoo! undertakes no duty to
update this information. More information about potential factors that
could affect the Company's business and financial results is included
in the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 2002 and Quarterly Report on Form 10-Q for the quarter
ended June 30, 2003, including (without limitation) under the
captions, "Risk Factors" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations," which are on file with
the SEC and available at the SEC's website at www.sec.gov. Additional
information will also be set forth in those sections in Yahoo!'s
Quarterly Report on Form 10-Q for the quarter ended September 30,
2003, which will be filed with the SEC in the fourth quarter of 2003.
Yahoo! Inc.
Unaudited Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------------------
2002 2003 2002 2003
----------------------------------------
Net revenues $248,823 $356,821 $667,280 $961,175
Cost of revenues 41,033 47,287 120,562 137,261
-------- -------- -------- --------
Gross profit 207,790 309,534 546,718 823,914
-------- -------- -------- --------
Operating expenses:
Sales and marketing 109,086 128,846 315,247 364,752
Product development 37,352 48,026 105,296 130,397
General and administrative 25,961 39,653 78,067 102,498
Amortization of intangibles 5,914 9,511 15,288 25,020
-------- -------- -------- --------
Total operating expenses 178,313 226,036 513,898 622,667
-------- -------- -------- --------
Income from operations 29,477 83,498 32,820 201,247
Other income, net(1) 19,535 23,935 71,432 66,529
Minority interests in operations
of consolidated subsidiaries (916) (2,063) (565) (5,097)
-------- -------- -------- --------
Income before income taxes and
cumulative effect of
accounting change 48,096 105,370 103,687 262,679
Provision for income taxes 19,239 40,041 42,961 99,819
-------- -------- -------- --------
Income before cumulative
effect of accounting change 28,857 65,329 60,726 162,860
Cumulative effect of
accounting change - - (64,120) -
-------- -------- -------- --------
Net income (loss) $ 28,857 $ 65,329 $ (3,394) $162,860
======== ======== ======== ========
Net income (loss) per share -
diluted:
Income before cumulative
effect of accounting change $ 0.05 $ 0.10 $ 0.10 $ 0.26
Cumulative effect of
accounting change - - (0.11) -
-------- -------- -------- --------
Net income (loss) per share -
diluted $ 0.05 $ 0.10 $ (0.01) $ 0.26
======== ======== ======== ========
Shares used in per share
calculation - diluted(2) 607,134 637,444 610,899 627,270
======== ======== ======== ========
- ----------------------------------------------------------------------
Supplemental Financial Data(3)
- ------------------------------
Income from operations $ 29,477 $ 83,498 $ 32,820 $201,247
Operating income before
depreciation and
amortization $ 59,228 $116,511 $113,002 $297,836
Cash flow from operating
activities $ 72,265 $135,533 $223,090 $326,284
Free cash flow $ 58,972 $ 97,088 $158,209 $246,566
Yahoo! Inc.
Notes to Unaudited Condensed Consolidated Statements of Operations
(in thousands, except per share amounts and percentages)
(1) Other income, net for the three months ended September 30,
2002 includes $0.7 million of net investment losses and $0.8
million of contract termination fees. Other income, net for the
nine months ended September 30, 2002 includes $2.3 million of net
investment gains and $1.7 million of net proceeds from the
termination of contracts. There were no material comparative
amounts for the three months ended September 30, 2003. Other
income, net for the nine months ended September 30, 2003 includes
approximately $1.6 million of net investment losses, $0.7 million
of proceeds from the termination of a contract, and $0.2 million
of net gains on disposal of assets.
(2) Diluted net loss per share for the nine months ended September 30,
2002 is computed excluding common share equivalents of 16,779
shares, as their effect is anti-dilutive.
(3) The Company believes that financial measures that may be
considered non-GAAP in certain circumstances, including revenues
excluding traffic acquisition costs ("TAC"), operating income
before depreciation and amortization and free cash flow are
helpful, when presented in conjunction with the comparable GAAP
measures of gross profit, income from operations, and cash flow
from operating activities.
Revenues excluding TAC (referred to in our business outlook) is
defined as gross profit before other cost of revenues. We believe
this measure is useful to management and investors as it is more
comparable to our historical results, as traffic acquisition costs
paid to affiliates of Overture Services, Inc., the Company's
recently acquired wholly-owned subsidiary ("Overture"), are a
significant percentage of revenues generated from Overture's
sponsored search services.
Operating income before depreciation and amortization is defined
as income (loss) from operations before depreciation and
amortization. We consider operating income before depreciation and
amortization to be an important indicator of the operational
strength of the Company. This measure eliminates the effects of
depreciation and amortization from period to period, which we
believe is useful to management and investors in evaluating the
operating performance of the Company as depreciation and
amortization costs are not directly attributable to the underlying
performance of the Company's business operations. A limitation
associated with this measure is that it does not reflect the
periodic costs of certain capitalized tangible and intangible
assets used in generating revenues in the Company's businesses.
Management evaluates the costs of such tangible and intangible
assets through other financial measures such as capital
expenditures.
Free cash flow is defined as cash flow from operating activities
less capital expenditures and change in long-term deferred
revenue. Change in long-term deferred revenue represents cash
payments received in advance of revenue recognized related to the
Company's agreement with its sponsored search provider. Free cash
flow is considered a liquidity measure and provides useful
information to management and investors about the amount of cash
generated after the acquisition of property and equipment and
change in long-term deferred revenue, 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.
In addition, management refers to these financial measures to
facilitate internal and external comparisons to the Company's
historical operating results, in making operating decisions, for
budget planning purposes, and to form the basis upon which
management is compensated. These measures should be considered in
addition to, not as a substitute for, or superior to, gross
profit, income from operations, cash flow from operating
activities, or other measures of financial performance prepared in
accordance with generally accepted accounting principles.
Yahoo! Inc.
Reconciliations to Unaudited Condensed Consolidated
Statements of Operations
(in thousands, except percentages)
Three Months Ended Nine Months Ended
September 30, September 30,
-----------------------------------------
2002 2003 2002 2003
-----------------------------------------
Net revenues for groups of similar services:
Marketing services $165,761 $245,072 $ 455,146 $ 654,235
Fees 57,331 79,358 145,940 213,013
Listings 25,731 32,391 66,194 93,927
-------- -------- --------- ---------
Total net revenues $248,823 $356,821 $ 667,280 $ 961,175
======== ======== ========= =========
Net revenues by segment:
United States $210,135 $299,759 $ 564,212 $ 809,650
International 38,688 57,062 103,068 151,525
-------- -------- --------- ---------
Total net revenues $248,823 $356,821 $ 667,280 $ 961,175
======== ======== ========= =========
Operating income before depreciation and amortization reconciliation:
Income from operations $ 29,477 $ 83,498 $ 32,820 $ 201,247
Depreciation and
amortization 29,751 33,013 80,182 96,589
-------- -------- --------- ---------
Operating income before
depreciation and
amortization $ 59,228 $116,511 $ 113,002 $ 297,836
======== ======== ========= =========
Income from operations
margin percentage 12% 23% 5% 21%
Operating income before
depreciation and
amortization margin
percentage 24% 33% 17% 31%
Operating income (loss) before depreciation and amortization by
segment:
Operating income before
depreciation and
amortization - United
States $ 57,621 $106,122 $ 123,004 $ 273,625
Operating income (loss)
before depreciation and
amortization -
International 1,607 10,389 (10,002) 24,211
-------- -------- --------- ---------
Operating income before
depreciation and
amortization $ 59,228 $116,511 $ 113,002 $ 297,836
======== ======== ========= =========
Operating income (loss) before depreciation and amortization by
segment reconciliation:
United States
Income from operations $ 30,751 $ 77,684 $ 51,354 $ 189,156
Depreciation and
amortization 26,870 28,438 71,650 84,469
-------- -------- --------- ---------
Operating income before
depreciation and
amortization - United
States $ 57,621 $106,122 $ 123,004 $ 273,625
======== ======== ========= =========
Income from operations
margin percentage 15% 26% 9% 23%
Operating income before
depreciation and
amortization margin
percentage 27% 35% 22% 34%
International
Income (loss) from
operations $ (1,274) $ 5,814 $ (18,534) $ 12,091
Depreciation and
amortization 2,881 4,575 8,532 12,120
-------- -------- --------- ---------
Operating income (loss)
before depreciation and
amortization -
International $ 1,607 $ 10,389 $ (10,002) $ 24,211
======== ======== ========= =========
Income from operations
margin percentage (3%) 10% (18%) 8%
Operating income before
depreciation and
amortization margin
percentage 4% 18% (10%) 16%
Free cash flow reconciliation:
Cash flow from operating
activities $ 72,265 $135,533 $ 223,090 $ 326,284
Acquisition of property and
equipment, net (13,293) (38,445) (34,881) (79,718)
Change in long-term
deferred revenue - - (30,000) -
-------- -------- --------- ---------
Free cash flow $ 58,972 $ 97,088 $ 158,209 $ 246,566
======== ======== ========= =========
Yahoo! Inc.
Business Outlook
Business Outlook
The following business outlook is based on current information
(including the effect of our acquisition of Overture) and expectations
as of October 8, 2003. Yahoo!'s business outlook as of today is
expected to be available on the Company's Investor Relations Web site
throughout the current quarter. It is currently expected the full
business outlook will not be updated until the release of Yahoo!'s
next quarterly earnings announcement, notwithstanding subsequent
developments; however, Yahoo! may update the full business outlook or
any portion thereof at any time.
Three months Year
ending ending
December 31, December 31,
2003 2003
--------------- ----------------
Revenues excluding traffic acquisition costs(a) ("TAC")
outlook reconciliation (in millions):
Gross Profit $ 395 - $430 $1,219 - $1,254
Other cost of revenues $ 67 - $ 72 $ 204 - $ 209
--------------- ----------------
Revenues excluding TAC $ 462 - $502 $1,423 - $1,463
=============== ================
Operating income before depreciation and amortization outlook
reconciliation (in millions):
Income from operations $ 70 - $ 85 $ 271 - $ 286
Depreciation and amortization $ 60 - $ 65 $ 157 - $ 162
--------------- ----------------
Operating income before depreciation
and amortization $ 130 - $150 $ 428 - $ 448
=============== ================
(a) Refer to Note 3 of Notes to Unaudited Condensed Consolidated
Statements of Operations.
Yahoo! Inc.
Unaudited Consolidated Summary Cash Flow Data
(in thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
-----------------------------------------------
2002 2003 2002 2003
-----------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 28,857 $ 65,329 $ (3,394) $ 162,860
Adjustments to
reconcile net income
(loss) to net cash
provided by
operating activities:
Depreciation and
amortization 29,751 33,013 80,182 96,589
Tax benefits from
stock options 17,687 36,198 38,443 85,843
Cumulative effect
of accounting
change - - 64,120 -
Earnings in equity
interests (5,527) (12,495) (15,327) (32,225)
Minority interests
in operations of
consolidated
subsidiaries 916 2,063 565 5,097
Noncash (gains)
losses and
impairments of
investments 171 113 (2,930) 6,081
Other noncash
charges 2,452 2,156 9,228 5,201
Changes in assets
and liabilities,
net of effects of
acquisitions:
Accounts
receivable, net (17,233) (8,286) (20,759) (31,815)
Prepaid expenses
and other assets 1,098 3,209 24,972 (756)
Accounts payable (1,013) 685 (1,080) 280
Accrued expenses
and other
liabilities 6,018 19,080 (4,595) 18,147
Deferred revenue 9,088 (5,532) 23,665 10,982
Long-term
deferred revenue - - 30,000 -
--------- ---------- --------- -----------
Net cash provided by
operating activities 72,265 135,533 223,090 326,284
--------- ---------- --------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of
property and
equipment, net (13,293) (38,445) (34,881) (79,718)
Purchases of
marketable
securities (254,194) (966,120) (797,231) (1,632,298)
Proceeds from sales
and maturities of
marketable
securities 312,995 390,930 808,740 1,041,429
Acquisitions, net of
cash acquired - - (189,168) (228,318)
Proceeds from
(purchases of) other
investments (7,649) 9,037 (6,962) 2,763
--------- ---------- --------- -----------
Net cash provided by
(used in) investing
activities 37,859 (604,598) (219,502) (896,142)
--------- ---------- --------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from
issuance of debt - - - 733,125
Proceeds from
issuance of common
stock, net 2,916 74,416 38,615 203,027
Repurchase of common
stock (100,000) - (100,000) -
--------- ---------- --------- -----------
Net cash provided by
(used in) financing
activities (97,084) 74,416 (61,385) 936,152
--------- ---------- --------- -----------
Effect of exchange rate
changes on cash and
cash equivalents 2,688 585 4,484 4,252
Net change in cash and
cash equivalents 15,728 (394,064) (53,313) 370,546
Cash and cash
equivalents, beginning
of period 303,591 1,075,582 372,632 310,972
--------- ---------- --------- -----------
Cash and cash
equivalents, end of
period $ 319,319 $ 681,518 $ 319,319 $ 681,518
========= ========== ========= ===========
Yahoo! Inc.
Unaudited Consolidated Summary Balance Sheet Data
(in thousands)
December 31, September 30,
2002 2003
-----------------------------------
ASSETS
Cash and cash equivalents $ 310,972 $ 681,518
Investments in marketable debt
securities 1,223,066 1,804,939
Accounts receivable, net 113,612 151,024
Property and equipment, net 371,272 386,443
Goodwill 415,225 635,488
Intangible assets, net 96,252 121,023
Other assets 259,782 325,270
------------ ------------
Total assets $ 2,790,181 $ 4,105,705
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses $ 276,313 $ 341,070
Deferred revenue 135,501 150,518
Long term debt - 750,000
Long term liabilities 84,540 102,374
------------ ------------
Total liabilities 496,354 1,343,962
------------ ------------
Minority interests in
consolidated subsidiaries 31,557 36,654
Stockholders' equity 2,262,270 2,725,089
------------ ------------
Total liabilities and stockholders'
equity $ 2,790,181 $ 4,105,705
============ ============
Yahoo! Inc.
Unaudited Supplemental Financial Information and Business Metrics
(in thousands, except percentages)
Q1 Q2 Q3 Q4
--------- -------- -------- --------
2002 2002 2002 2002
----------------------------------------
NET REVENUES:
Net revenues for groups of similar services:
Marketing services $ 137,675 $151,710 $165,761 $196,422
Fees 39,546 49,063 57,331 62,001
Listings 15,444 25,019 25,731 27,364
--------- -------- -------- --------
Total net revenues $ 192,665 $225,792 $248,823 $285,787
========= ======== ======== ========
Net revenues for groups of similar services (Trailing Twelve Months):
Marketing services $ 561,673 $566,728 $603,358 $651,568
Fees 130,138 150,865 178,426 207,941
Listings 38,061 55,906 74,407 93,558
--------- -------- -------- --------
Total net revenues $ 729,872 $773,499 $856,191 $953,067
========= ======== ======== ========
Net revenues by segment:
United States $ 166,612 $187,465 $210,135 $242,386
International 26,053 38,327 38,688 43,401
--------- -------- -------- --------
Total net revenues $ 192,665 $225,792 $248,823 $285,787
========= ======== ======== ========
Net revenues by segment (Trailing Twelve Months):
United States $ 613,970 $652,324 $723,094 $806,598
International 115,902 121,175 133,097 146,469
--------- -------- -------- --------
Total net revenues $ 729,872 $773,499 $856,191 $953,067
========= ======== ======== ========
OPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION:
Operating income before depreciation and amortization:
Income (loss) from
operations $ (4,175) $ 7,518 $ 29,477 $ 55,368
Depreciation and
amortization 22,955 27,476 29,751 29,207
--------- -------- -------- --------
Operating income before
depreciation and
amortization $ 18,780 $ 34,994 $ 59,228 $ 84,575
========= ======== ======== ========
Income (loss) from operations
margin percentage (2%) 3% 12% 19%
Operating income before
depreciation and amortization
margin percentage 10% 15% 24% 30%
Operating income (loss) before depreciation and amortization (Trailing
Twelve Months):
Income (loss) from
operations $(129,677) $(48,325) $ 7,514 $ 88,188
Depreciation and
amortization 123,319 118,553 116,223 109,389
--------- -------- -------- --------
Operating income (loss)
before depreciation and
amortization $ (6,358) $ 70,228 $123,737 $197,577
========= ======== ======== ========
Income (loss) from operations
margin percentage (18%) (6%) 1% 9%
Operating income (loss)
before depreciation and
amortization margin
percentage (1%) 9% 14% 21%
Operating income (loss) before depreciation and amortization
by segment:
Operating income before
depreciation and amortization
- United States $ 26,829 $ 38,554 $ 57,621 $ 81,315
Operating income (loss)
before depreciation and
amortization - International (8,049) (3,560) 1,607 3,260
--------- -------- -------- --------
Operating income before
depreciation and
amortization $ 18,780 $ 34,994 $ 59,228 $ 84,575
========= ======== ======== ========
Operating income (loss) before depreciation and amortization by
segment (Trailing Twelve Months):
Operating income before
depreciation and amortization
- United States $ 29,551 $ 97,631 $140,036 $204,319
Operating income (loss)
before depreciation and
amortization - International (35,909) (27,403) (16,299) (6,742)
--------- -------- -------- --------
Operating income (loss)
before depreciation and
amortization $ (6,358) $ 70,228 $123,737 $197,577
========= ======== ======== ========
Operating income (loss) before depreciation and amortization by
segment reconciliation:
United States
Income from operations $ 6,729 $ 13,874 $ 30,751 $ 55,021
Depreciation and
amortization 20,100 24,680 26,870 26,294
--------- -------- -------- --------
Operating income before
depreciation and amortization
- United States $ 26,829 $ 38,554 $ 57,621 $ 81,315
========= ======== ======== ========
Income (loss) from operations
margin percentage 4% 7% 15% 23%
Operating income before
depreciation and amortization
margin percentage 16% 21% 27% 34%
International
Income (loss) from
operations $ (10,904) $ (6,356) $ (1,274) $ 347
Depreciation and
amortization 2,855 2,796 2,881 2,913
--------- -------- -------- --------
Operating income (loss)
before depreciation and
amortization- International $ (8,049) $ (3,560) $ 1,607 $ 3,260
========= ======== ======== ========
Income (loss) from operations
margin percentage (42%) (17%) (3%) 1%
Operating income before
depreciation and amortization
margin percentage (31%) (9%) 4% 8%
Operating income (loss) before depreciation and amortization by
segment reconciliation (Trailing Twelve Months):
United States
Income (loss) from
operations $ (80,217) $ (7,949) $ 35,540 $106,375
Depreciation and
amortization 109,768 105,580 104,496 97,944
--------- -------- -------- --------
Operating income before
depreciation and amortization
- United States $ 29,551 $ 97,631 $140,036 $204,319
========= ======== ======== ========
Income (loss) from operations
margin percentage (13%) (1%) 5% 13%
Operating income before
depreciation and amortization
margin percentage 5% 15% 19% 25%
International
Income (loss) from
operations $ (49,460) $(40,376) $(28,026) $(18,187)
Depreciation and
amortization 13,551 12,973 11,727 11,445
--------- -------- -------- --------
Operating income (loss)
before depreciation and
amortization- International $(35,909) $(27,403) $(16,299) $ (6,742)
========= ======== ======== ========
Income (loss) from operations
margin percentage (43%) (33%) (21%) (12%)
Operating income before
depreciation and amortization
margin percentage (31%) (23%) (12%) (5%)
FREE CASH FLOW:
Free cash flow reconciliation:
Cash flow from operating
activities $ 47,443 $103,382 $ 72,265 $ 79,358
Acquisition of property and
equipment, net (7,287) (14,301) (13,293) (16,672)
Change in long-term deferred
revenue - (30,000) - -
--------- -------- -------- --------
Free cash flow $ 40,156 $ 59,081 $ 58,972 $ 62,686
========= ======== ======== ========
Free cash flow reconciliation (Trailing Twelve Months):
Cash flow from operating
activities $ 83,240 $192,226 $236,073 $302,448
Acquisition of property and
equipment, net (52,043) (52,743) (49,223) (51,553)
Change in long-term deferred
revenue - (30,000) (30,000) (30,000)
--------- -------- -------- --------
Free cash flow $ 31,197 $109,483 $156,850 $220,895
========= ======== ======== ========
Q1 Q2 Q3
---------- ---------- ----------
2003 2003 2003
-----------------------------------
NET REVENUES:
Net revenues for groups of similar services:
Marketing services $ 189,965 $ 219,198 $ 245,072
Fees 63,729 69,926 79,358
Listings 29,254 32,282 32,391
---------- ---------- ----------
Total net revenues $ 282,948 $ 321,406 $ 356,821
========== ========== ==========
Net revenues for groups of similar services (Trailing Twelve Months):
Marketing services $ 703,858 $ 771,346 $ 850,657
Fees 232,124 252,987 275,014
Listings 107,368 114,631 121,291
---------- ---------- ----------
Total net revenues $1,043,350 $1,138,964 $1,246,962
========== ========== ==========
Net revenues by segment:
United States $ 238,546 $ 271,345 $ 299,759
International 44,402 50,061 57,062
---------- ---------- ----------
Total net revenues $ 282,948 $ 321,406 $ 356,821
========== ========== ==========
Net revenues by segment (Trailing Twelve Months):
United States $ 878,532 $ 962,412 $1,052,036
International 164,818 176,552 194,926
---------- ---------- ----------
Total net revenues $1,043,350 $1,138,964 $1,246,962
========== ========== ==========
OPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION:
Operating income before depreciation and amortization:
Income (loss) from
operations $ 54,977 $ 62,772 $ 83,498
Depreciation and
amortization 29,073 34,503 33,013
---------- ---------- ----------
Operating income before
depreciation and
amortization $ 84,050 $ 97,275 $ 116,511
========== ========== ==========
Income (loss) from
operations margin
percentage 19% 20% 23%
Operating income before
depreciation and
amortization margin
percentage 30% 30% 33%
Operating income (loss) before depreciation and amortization
(Trailing Twelve Months):
Income (loss) from
operations $ 147,340 $ 202,594 $ 256,615
Depreciation and
amortization 115,507 122,534 125,796
---------- ---------- ----------
Operating income (loss)
before depreciation and
amortization $ 262,847 $ 325,128 $ 382,411
========== ========== ==========
Income (loss) from
operations margin
percentage 14% 18% 21%
Operating income (loss)
before depreciation and
amortization margin
percentage 25% 29% 31%
Operating income (loss) before depreciation and amortization
by segment:
Operating income before
depreciation and
amortization - United
States $ 76,948 $ 90,555 $ 106,122
Operating income (loss)
before depreciation and
amortization -
International 7,102 6,720 10,389
---------- ---------- ----------
Operating income before
depreciation and
amortization $ 84,050 $ 97,275 $ 116,511
========== ========== ==========
Operating income (loss) before depreciation and amortization by
segment (Trailing Twelve Months):
Operating income before
depreciation and
amortization - United
States $ 254,438 $ 306,439 $ 354,940
Operating income (loss)
before depreciation and
amortization -
International 8,409 18,689 27,471
---------- ---------- ----------
Operating income (loss)
before depreciation and
amortization $ 262,847 $ 325,128 $ 382,411
========== ========== ==========
Operating income (loss) before depreciation and amortization
by segment reconciliation:
United States
Income from operations $ 51,000 $ 60,472 $ 77,684
Depreciation and
amortization 25,948 30,083 28,438
---------- ---------- ----------
Operating income before
depreciation and
amortization - United
States $ 76,948 $ 90,555 $ 106,122
========== ========== ==========
Income (loss) from
operations margin
percentage 21% 22% 26%
Operating income before
depreciation and
amortization margin
percentage 32% 33% 35%
International
Income (loss) from
operations $ 3,977 $ 2,300 $ 5,814
Depreciation and
amortization 3,125 4,420 4,575
---------- ---------- ----------
Operating income (loss)
before depreciation and
amortization -
International $ 7,102 $ 6,720 $ 10,389
========== ========== ==========
Income (loss) from
operations margin
percentage 9% 5% 10%
Operating income before
depreciation and
amortization margin
percentage 16% 13% 18%
Operating income (loss) before depreciation and amortization by
segment reconciliation (Trailing Twelve Months):
United States
Income (loss) from
operations $ 150,646 $ 197,244 $ 244,177
Depreciation and
amortization 103,792 109,195 110,763
---------- ---------- ----------
Operating income before
depreciation and
amortization - United
States $ 254,438 $ 306,439 $ 354,940
========== ========== ==========
Income (loss) from
operations margin
percentage 17% 20% 23%
Operating income before
depreciation and
amortization margin
percentage 29% 32% 34%
International
Income (loss) from
operations $ (3,306) $ 5,350 $ 12,438
Depreciation and
amortization 11,715 13,339 15,033
---------- ---------- ----------
Operating income (loss)
before depreciation and
amortization -
International $ 8,409 $ 18,689 $ 27,471
========== ========== ==========
Income (loss) from
operations margin
percentage (2%) 3% 6%
Operating income before
depreciation and
amortization margin
percentage 5% 11% 14%
FREE CASH FLOW:
Free cash flow reconciliation:
Cash flow from operating
activities $ 98,628 $ 92,123 $ 135,533
Acquisition of property and
equipment, net (20,503) (20,770) (38,445)
Change in long-term deferred
revenue - - -
---------- ---------- ----------
Free cash flow $ 78,125 $ 71,353 $ 97,088
========== ========== ==========
Free cash flow reconciliation (Trailing Twelve Months):
Cash flow from operating
activities $ 353,633 $ 342,374 $ 405,642
Acquisition of property and
equipment, net (64,769) (71,238) (96,390)
Change in long-term deferred
revenue (30,000) - -
---------- ---------- ----------
Free cash flow $ 258,864 $ 271,136 $ 309,252
========== ========== ==========
CONTACT: Yahoo! Inc.
Brian Nelson, 408-349-7329 (Media Relations)
bnelson@yahoo-inc.com
Cathy La Rocca, 408-349-5188 (Investor Relations)
cathy@yahoo-inc.com
or
Fleishman-Hillard
Ruben Osorio, 415-318-4108 (Media Relations)
osorior@fleishman.com