View:
UNITED STATES
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
October 16, 2007
Date of Report (Date of earliest event reported)
Yahoo! Inc.
(Exact name of registrant as specified in its charter)
Delaware 0-28018 77-0398689
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
701 First Ave.
Sunnyvale, California 94089
(Address of principal executive offices, including zip code)
(408) 349-3300
(Registrant's telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 2.02 Results of Operations and Financial Condition
On October 16, 2007, Yahoo! Inc., a Delaware corporation ("Yahoo!")
announced its financial results for the third quarter ended September 30, 2007
and certain other information. A copy of Yahoo!'s press release announcing
these financial results and certain other information is attached hereto as
Exhibit 99.1.
The information in this report, including Exhibit 99.1, shall not be
deemed "filed" for purposes of Section 18 of the Securities Exchange Act of
1934, as amended (the "Exchange Act") or otherwise subject to the liabilities
under that Section and shall not be deemed to be incorporated by reference into
any filing of Yahoo! under the Securities Act of 1933, as amended, or the
Exchange Act.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits.
The following exhibit is furnished with this report on Form 8-K:
99.1 Yahoo! Inc. Press Release dated October 16, 2007.
SIGNATURE
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 hereunto duly authorized.
YAHOO! INC.
By: /s/ Blake Jorgensen
-----------------------------------
Blake Jorgensen
Chief Financial Officer (Principal
Financial Officer)
Date: October 16, 2007
YAHOO! INC.
INDEX TO EXHIBITS
Exhibit Number Description
- -------------- -----------
99.1 Yahoo! Inc. Press Release dated October 16, 2007
Exhibit 99.1
Yahoo! Reports Third Quarter 2007 Financial Results
Revenues - $1,768 Million
Operating Income - $150 Million
Operating Income Before Depreciation, Amortization and Stock-Based
Compensation Expense - $466 Million
SUNNYVALE, Calif.--(BUSINESS WIRE)--Oct. 16, 2007--Yahoo! Inc.
(Nasdaq:YHOO) today reported results for the third quarter ended
September 30, 2007.
"Over the past three months, we conducted a thorough review of our
business and the marketplace. We've made key strategic decisions to
invest in and grow our large communities of users, advertisers, and
publishers. We've also made progress in sharpening our focus and
improving our execution," said Jerry Yang, co-founder and chief
executive officer, Yahoo! Inc. "Moving forward, we are focused on
three big, multi-year objectives: to become the starting point for the
most consumers on the Internet; to be the 'must buy' for the most
advertisers; and to deliver open, industry-leading platforms that
attract the most developers. We are executing against our
transformation and are excited about playing a leadership role in the
large and growing Internet market."
Third Quarter 2007 Financial Results
-- Revenues were $1,768 million for the third quarter of 2007, a
12 percent increase compared to $1,580 million for the same
period of 2006.
-- Marketing services revenues were $1,544 million for the third
quarter of 2007, a 13 percent increase compared to $1,370
million for the same period of 2006.
-- Marketing services revenues from Owned and Operated sites were
$922 million for the third quarter of 2007, a 24 percent
increase compared to $742 million for the same period of 2006.
-- Marketing services revenues from Affiliate sites were $622
million for the third quarter of 2007, a 1 percent decrease
compared to $628 million for the same period of 2006.
-- Fees revenues were $224 million for the third quarter of 2007,
a 7 percent increase compared to $210 million for the same
period of 2006.
-- Revenues excluding traffic acquisition costs ("TAC") were
$1,283 million for the third quarter of 2007, a 14 percent
increase compared to $1,121 million for the same period of
2006.
-- Gross profit for the third quarter of 2007 was $1,027 million,
a 14 percent increase compared to $899 million for the same
period of 2006.
-- Operating income for the third quarter of 2007 was $150
million, a 26 percent decrease compared to $202 million for
the same period of 2006.
-- Operating income before depreciation, amortization and
stock-based compensation expense for the third quarter of 2007
was $466 million, a 2 percent decrease compared to $474
million for the same period of 2006.
-- Cash flow from operating activities for the third quarter of
2007 was $457 million, a 17 percent increase compared to $390
million for the same period of 2006.
-- Free cash flow for the third quarter of 2007 was $310 million,
an 8 percent increase compared to $288 million for the same
period of 2006.
-- Net income for the third quarter of 2007 was $151 million or
$0.11 per diluted share compared to $159 million or $0.11 per
diluted share for the same period of 2006.
-- Non-GAAP net income for the third quarter of 2007 was $238
million or $0.17 per diluted share compared to non-GAAP net
income of $240 million or $0.17 per diluted share for the same
period of 2006.
-- The provision for income taxes for the third quarter of 2007
was $79 million and yielded an effective tax rate of 41
percent. The provision for income taxes for the third quarter
of 2006 was $124 million and yielded an effective tax rate of
49 percent.
-- Explanations of the Company's non-GAAP financial measures and
the related reconciliations to the GAAP financial measures the
Company considers most comparable are included in the
accompanying "Note to Unaudited Condensed Consolidated
Statements of Income," "Reconciliations to Unaudited Condensed
Consolidated Statements of Income," and "Reconciliation of
GAAP Net Income and GAAP Net Income Per Share to Non-GAAP Net
Income and Non-GAAP Net Income Per Share."
"Our strategy is to generate and leverage the most valuable
insights, deploy open platforms, and offer partner-of-choice solutions
that make Yahoo! more relevant and indispensable for our users,
advertisers, publishers, and developers," said Sue Decker, president,
Yahoo! Inc. "During the quarter, we continued to make strides in
sharpening our focus and organizing ourselves to execute against this
strategy. We are prioritizing our resources around the key Yahoo!
starting points that create the most value, and creating strong
differentiation in those products. We are aggressively building out
our open advertising and publishing network, delivering more
integrated and targeted solutions, and pursuing opportunities to
realize added value from both the search and display inventory created
by our massive and growing user base."
Segment Financial Results
-- United States segment revenues for the third quarter of 2007
were $1,195 million, a 13 percent increase compared to $1,054
million for the same period of 2006.
-- International segment revenues for the third quarter of 2007
were $573 million, a 9 percent increase compared to $526
million for the same period of 2006.
-- United States segment operating income before depreciation,
amortization and stock-based compensation expense for the
third quarter of 2007 was $338 million, a 7 percent decrease
compared to $366 million for the same period of 2006.
-- International segment operating income before depreciation,
amortization and stock-based compensation expense for the
third quarter of 2007 was $128 million, an 18 percent increase
compared to $108 million for the same period of 2006.
Cash Flow Information
Free cash flow was $310 million for the third quarter of 2007
compared to $288 million for the same period of 2006. In addition to
free cash flow, Yahoo! generated $40 million from the issuance of
common stock as a result of the exercise of employee stock options.
This was offset by $350 million used for direct stock repurchases and
$320 million used for acquisitions. Cash, cash equivalents and
investments in marketable debt securities were $2,763 million at
September 30, 2007 as compared to $3,152 million at June 30, 2007, a
decrease of $389 million.
"We are pleased with our results this quarter and are continuing
to invest in major growth initiatives that advance our key strategic
objectives," said Blake Jorgensen, chief financial officer, Yahoo!
Inc. "We are encouraged by the early signs of improvement in our
business and believe the strategy we're pursuing and the investments
we're making will position us to capture the significant opportunities
on the horizon and create long-term shareholder value."
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 website at
http://yhoo.client.shareholder.com/results.cfm. In addition, an
archive of the webcast can be accessed through the same link. An audio
replay of the call will be available following the conference call by
calling 888-286-8010 or 617-801-6888, reservation number: 62045407.
About Yahoo!
Yahoo! Inc. is a leading global Internet brand and one of the most
trafficked Internet destinations worldwide. Yahoo! is focused on
powering its communities of users, advertisers, publishers, and
developers by creating indispensable experiences built on trust.
Yahoo! is headquartered in Sunnyvale, California. For more
information, visit pressroom.yahoo.com or the Company's blog, Yodel
Anecdotal.
Owned and Operated sites refer to Yahoo!'s owned and operated
online properties and services. Affiliate sites refer to Yahoo!'s
distribution network of third-party entities who have integrated
Yahoo!'s search and/or display advertising offerings into their
websites.
This press release and its attachments include the
following financial measures defined as non-GAAP financial measures by
the Securities and Exchange Commission: revenues excluding traffic
acquisition costs or TAC, operating income before depreciation,
amortization and stock-based compensation expense, free cash flow, and
non-GAAP net income and non-GAAP net income per share. These measures
may be different from non-GAAP financial measures used by other
companies. The presentation of this financial information is not
intended to be considered in isolation or as a substitute for the
financial information prepared and presented in accordance with
generally accepted accounting principles ("GAAP"). See "Note to
Unaudited Condensed Consolidated Statements of Income,"
"Reconciliations to Unaudited Condensed Consolidated Statements of
Income," and "Reconciliation of GAAP Net Income and GAAP Net Income
Per Share to Non-GAAP Net Income and Non-GAAP Net Income Per Share"
included in this press release for further information regarding these
non-GAAP financial measures.
This press release and its attachments contain forward-looking
statements that involve risks and uncertainties concerning Yahoo!'s
expected financial performance (including without limitation the
statements and information in the Business Outlook section and the
quotations from management in this press release), as well as Yahoo!'s
strategic and operational plans. Actual results may differ materially
from the results predicted and reported results should not be
considered as an indication of future performance. The potential risks
and uncertainties include, among others, the implementation and
results of the Company's ongoing strategic initiatives; the Company's
ability to compete with new or existing competitors; the successful
implementation, and acceptance by advertisers, of the Company's new
search advertising system; reduction in spending by, or loss of,
marketing services customers; the demand by customers for Yahoo!'s
premium services; acceptance by users of new products and services;
risks related to joint ventures and the integration of acquisitions;
risks related to the Company's international operations; failure to
manage growth and diversification; adverse results in litigation,
including intellectual property infringement claims; the Company's
ability to protect its intellectual property and the value of its
brands; dependence on key personnel; dependence on third parties for
technology, services, content and distribution; and general economic
conditions. All information set forth in this press release and its
attachments is as of October 16, 2007. Yahoo! does not intend, and
undertakes no duty, to update this information to reflect future
events or circumstances. More information about potential factors that
could affect the Company's business and financial results is included
under the captions "Risk Factors" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in the
Company's Annual Report on Form 10-K for the year ended December 31,
2006 and the Quarterly Report on Form 10-Q for the quarter ended June
30, 2007 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, 2007, which will be filed with the SEC in
the fourth quarter of 2007.
Yahoo! and the Yahoo! logos are trademarks and/or registered
trademarks of Yahoo! Inc. All other names are trademarks and/or
registered trademarks of their respective owners.
Yahoo! Inc.
Unaudited Condensed Consolidated Statements of Income
(in thousands, except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------- ----------------------
2006 2007 2006 2007
----------- ----------- ---------- -----------
Revenues $1,580,322 $1,767,506 $4,723,231 $5,137,276
Cost of revenues 681,120 740,200 1,984,830 2,136,849
---------- ---------- ---------- ----------
Gross profit 899,202 1,027,306 2,738,401 3,000,427
---------- ---------- ---------- ----------
Operating expenses:
Sales and marketing 331,025 410,936 988,030 1,168,785
Product development 202,079 274,682 628,399 795,268
General and
administrative 130,984 161,511 391,198 449,934
Amortization of
intangibles 32,774 29,985 97,635 82,264
---------- ----------- ---------- ----------
Total operating
expenses 696,862 877,114 2,105,262 2,496,251
---------- ---------- ---------- ----------
Income from operations 202,340 150,192 633,139 504,176
Other income, net 50,268 43,748 121,794 109,935
---------- ---------- ---------- ----------
Income before income
taxes, earnings in
equity interests and
minority interests 252,608 193,940 754,933 614,111
Provision for income
taxes (124,372) (78,653) (350,002) (258,743)
Earnings in equity
interests 30,190 36,546 78,261 97,801
Minority interests in
operations of
consolidated
subsidiaries 103 (547) (474) 1,108
---------- ---------- ---------- ----------
Net income $ 158,529 $ 151,286 $ 482,718 $ 454,277
========== ========== ========== ==========
Net income per share -
diluted $ 0.11 $ 0.11 $ 0.33 $ 0.32
========== ========== ========== ==========
Shares used in per
share calculation -
diluted 1,442,429 1,395,056 1,471,832 1,403,756
========== ========== ========== ==========
Stock-based
compensation expense
was allocated as
follows:
Cost of revenues $ 1,689 $ 2,555 $ 4,956 $ 6,919
Sales and marketing 42,470 70,353 119,826 172,731
Product development 38,260 51,603 112,147 164,354
General and
administrative 39,072 21,029 92,926 70,321
---------- ---------- ---------- ----------
Total stock-based
compensation
expense $ 121,491 $ 145,540 $ 329,855 $ 414,325
========== ========== ========== ==========
- ----------------------------------------------------------------------
Supplemental Financial
Data (See Note)
- ----------------------
Revenues excluding TAC $1,121,467 $1,282,601 $3,331,820 $3,709,443
Operating income
before depreciation,
amortization and
stock-based
compensation expense $ 473,738 $ 466,309 $1,365,528 $1,399,973
Free cash flow $ 287,915 $ 309,562 $ 988,691 $1,006,505
Non-GAAP net income
per share excluding
stock-based
compensation expense $ 0.17 $ 0.17 $ 0.49 $ 0.51
Yahoo! Inc.
Note to Unaudited Condensed Consolidated Statements of Income
This press release and its attachments include the non-GAAP financial
measures of revenues excluding traffic acquisition costs or TAC,
operating income before depreciation, amortization and stock-based
compensation expense, free cash flow, non-GAAP net income and non-
GAAP net income per share, which are reconciled to gross profit,
income from operations, cash flow from operating activities, net
income and net income per share, respectively, which we believe are
the most comparable GAAP measures. We use these non-GAAP financial
measures for internal managerial purposes, when publicly providing
our business outlook, and to facilitate period-to-period comparisons.
We describe limitations specific to each non-GAAP financial measure
below. Management generally compensates for limitations in the use of
non-GAAP financial measures by relying on comparable GAAP financial
measures and providing investors with a reconciliation of the non-
GAAP financial measure to the most directly comparable GAAP financial
measure or measures. Further, management uses non-GAAP financial
measures only in addition to and in conjunction with results
presented in accordance with GAAP. We believe that these non-GAAP
financial measures reflect an additional way of viewing aspects of
our operations that, when viewed with our GAAP results, provide a
more complete understanding of factors and trends affecting our
business. These non-GAAP measures should be considered as a
supplement to, and not as a substitute for, or superior to, gross
profit, income from operations, cash flow from operating activities,
and net income and net income per share calculated in accordance with
GAAP.
Revenues excluding TAC is defined as gross profit plus other cost of
revenues. Under GAAP, both our revenues and cost of revenues include
TAC. In defining revenues excluding TAC as our non-GAAP gross profit
measure, we have removed TAC from both revenues and cost of revenues.
TAC consists of payments made to affiliate sites and payments made to
companies that direct consumer and business traffic to the Yahoo!
website. We present revenues excluding TAC: (1) to provide a metric
for our investors to analyze and value our Company and (2) to provide
investors one of the primary metrics used by the Company for
evaluation and decision-making purposes. We provide revenues
excluding TAC because we believe it is useful to investors in valuing
our Company. One of the ways investors value companies is to apply a
multiple to revenues. Since a significant portion of the GAAP
revenues associated with our sponsored search offerings is paid to
our affiliate sites, we believe investors find it more meaningful to
apply multiples to revenues excluding TAC to assess our value as this
avoids "double counting" revenues that are paid to, and being
reported by, our affiliate sites. Further, management uses revenues
excluding TAC for evaluating the performance of our business, making
operating decisions, budgeting purposes, and as a factor in
determining management compensation. A limitation of revenues
excluding TAC is that it is a measure which we have defined for
internal and investor purposes that may be unique to the Company and
therefore it may not enhance the comparability of our results to
other companies in our industry who have similar business
arrangements but address the impact of TAC differently. Management
compensates for these limitations by also relying on the comparable
GAAP financial measures of revenues, cost of revenues and gross
profit, each of which includes the impact of TAC.
Operating income before depreciation, amortization and stock-based
compensation expense is defined as income from operations before
depreciation, amortization of intangible assets and stock-based
compensation expense (including the compensation of Terry Semel who
served as our chief executive officer through June 18, 2007 and whose
compensation after June 1, 2006 consisted almost entirely of stock-
based compensation). We consider this measure to be an important
indicator of the operational strength of the Company. We exclude
depreciation and amortization because while tangible and intangible
assets support our businesses, we do not believe the related
depreciation and amortization costs are directly attributable to the
operating performance of our business. This measure is used by some
investors when assessing the performance of our Company. In addition,
because of the variety of equity awards used by companies, the
varying methodologies for determining stock-based compensation
expense, and the subjective assumptions involved in those
determinations, we believe excluding stock-based compensation
enhances the ability of management and investors to understand the
impact of stock-based compensation expense on our operating income.
We do not include depreciation, amortization and stock-based
compensation expense in our internal measures or in the measures used
by the Company to formulate our business outlook presented with our
quarterly financial information to investors. A limitation associated
with the non-GAAP measure of operating income before depreciation,
amortization and stock-based compensation expense is that it does not
reflect the periodic costs of certain capitalized tangible and
intangible assets used in generating revenues in our businesses.
Management evaluates the costs of such tangible and intangible assets
through other financial measures such as capital expenditures. A
further limitation associated with this measure is that it does not
include stock-based compensation expense related to the Company's
workforce. Management compensates for these limitations by also
relying on the comparable GAAP financial measure of income from
operations, which includes depreciation, amortization and stock-based
compensation expense.
Free Cash Flow is a non-GAAP measure defined as cash flow from
operating activities (adjusted to include excess tax benefits from
stock-based compensation), less net capital expenditures and
dividends received. We consider free cash flow to be a liquidity
measure which provides useful information to management and investors
about the amount of cash generated by the business after the
acquisition of property and equipment, which can then be used for
strategic opportunities including, among others, investing in the
Company's business, making strategic acquisitions, strengthening the
balance sheet and repurchasing stock. A limitation of free cash flow
is that it does not represent the total increase or decrease in the
cash balance for the period. Management compensates for this
limitation by also relying on the net change in cash and cash
equivalents as presented in the Company's unaudited condensed
consolidated statements of cash flows prepared in accordance with
GAAP which incorporates all cash movements during the period.
Non-GAAP net income is defined as net income excluding certain gains,
losses and expenses and their related tax effects that we do not
believe are indicative of our ongoing operating results and further
adjusted for stock-based compensation expense. Effective January 1,
2006, we adopted Statement of Financial Accounting Standard No. 123
(revised 2004), "Share-Based Payment" ("SFAS 123R"). In our
calculation of non-GAAP net income and non-GAAP net income per share,
we have excluded stock-based compensation expense calculated in
accordance with SFAS 123R and its related tax effects. We consider
non-GAAP net income and non-GAAP net income per share to be
profitability measures which facilitate the forecasting of our
operating results for future periods and allow for the comparison of
our results to historical periods. A limitation of non-GAAP net
income and non-GAAP net income per share is that they do not include
all items that impact our net income and net income per share for the
period. Management compensates for this limitation by also relying on
the comparable GAAP financial measures of net income and net income
per share, both of which include the expense and related tax effects
of the item excluded from non-GAAP net income and non-GAAP net income
per share.
Yahoo! Inc.
Reconciliations to Unaudited Condensed Consolidated Statements of
Income
(in thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------- -----------------------
2006 2007 2006 2007
----------- ----------- ----------- -----------
Revenues for groups of
similar services :
Marketing services:
Owned and Operated
sites $ 741,919 $ 921,908 $2,210,901 $2,631,599
Affiliate sites 628,455 621,693 1,926,572 1,866,653
---------- ---------- ---------- ----------
Marketing services 1,370,374 1,543,601 4,137,473 4,498,252
Fees 209,948 223,905 585,758 639,024
---------- ---------- ---------- ----------
Total revenues $1,580,322 $1,767,506 $4,723,231 $5,137,276
========== ========== ========== ==========
Revenues by segment:
United States $1,054,048 $1,194,911 $3,221,220 $3,414,182
International 526,274 572,595 1,502,011 1,723,094
---------- ---------- ---------- ----------
Total revenues $1,580,322 $1,767,506 $4,723,231 $5,137,276
========== ========== ========== ==========
Cost of revenues:
Traffic acquisition
costs ("TAC") $ 458,855 $ 484,905 $1,391,411 $1,427,833
Other cost of
revenues 222,265 255,295 593,419 709,016
---------- ---------- ---------- ----------
Total cost of
revenues $ 681,120 $ 740,200 $1,984,830 $2,136,849
========== ========== ========== ==========
Revenues excluding
TAC:
Gross profit $ 899,202 $1,027,306 $2,738,401 $3,000,427
Other cost of
revenues 222,265 255,295 593,419 709,016
---------- ---------- ---------- ----------
Revenues excluding
TAC $1,121,467 $1,282,601 $3,331,820 $3,709,443
========== ========== ========== ==========
Revenues excluding TAC
by segment:
United States:
Gross profit $ 654,203 $ 752,541 $2,015,710 $2,206,891
Other cost of
revenues 182,393 209,557 484,055 573,828
---------- ---------- ---------- ----------
Revenues excluding
TAC $ 836,596 $ 962,098 $2,499,765 $2,780,719
========== ========== ========== ==========
International:
Gross profit $ 244,999 $ 274,765 $ 722,691 $ 793,536
Other cost of
revenues 39,872 45,738 109,364 135,188
---------- ---------- ---------- ----------
Revenues excluding
TAC $ 284,871 $ 320,503 $ 832,055 $ 928,724
========== ========== ========== ==========
Operating income
before depreciation,
amortization and
stock-based
compensation expense:
Income from
operations $ 202,340 $ 150,192 $ 633,139 $ 504,176
Depreciation and
amortization 149,907 170,577 402,534 481,472
Stock-based
compensation
expense 121,491 145,540 329,855 414,325
---------- ---------- ---------- ----------
Operating income
before
depreciation,
amortization and
stock-based
compensation
expense $ 473,738 $ 466,309 $1,365,528 $1,399,973
========== ========== ========== ==========
Operating income
before depreciation,
amortization and
stock-based
compensation expense
by segment:
Operating income
before
depreciation,
amortization and
stock-based
compensation
expense - United
States $ 365,550 $ 338,423 $1,041,417 $1,042,278
Operating income
before
depreciation,
amortization and
stock-based
compensation
expense -
International 108,188 127,886 324,111 357,695
---------- ---------- ---------- ----------
Operating income
before
depreciation,
amortization and
stock-based
compensation
expense $ 473,738 $ 466,309 $1,365,528 $1,399,973
========== ========== ========== ==========
United States:
Income from
operations $ 132,300 $ 68,639 $ 417,395 $ 278,363
Depreciation and
amortization 123,163 139,753 326,801 391,399
Stock-based
compensation
expense 110,087 130,031 297,221 372,516
---------- ---------- ---------- ----------
Operating income
before
depreciation,
amortization and
stock-based
compensation
expense - United
States $ 365,550 $ 338,423 $1,041,417 $1,042,278
========== ========== ========== ==========
International:
Income from
operations $ 70,040 $ 81,553 $ 215,744 $ 225,813
Depreciation and
amortization 26,744 30,824 75,733 90,073
Stock-based
compensation
expense 11,404 15,509 32,634 41,809
---------- ---------- ---------- ----------
Operating income
before
depreciation,
amortization and
stock-based
compensation
expense -
International $ 108,188 $ 127,886 $ 324,111 $ 357,695
========== ========== ========== ==========
Free cash flow:
Cash flow from
operating
activities $ 389,654 $ 456,712 $1,204,219 $1,297,015
Acquisition of
property and
equipment, net (240,761) (147,150) (557,586) (409,845)
Dividends received - - (12,908) (15,156)
Excess tax benefits
from stock-based
awards 139,022 - 354,966 134,491
---------- ---------- ---------- ----------
Free cash flow $ 287,915 $ 309,562 $ 988,691 $1,006,505
========== ========== ========== ==========
Yahoo! Inc.
Reconciliation of GAAP Net Income and GAAP Net Income Per Share to
Non-GAAP Net Income and Non-GAAP Net Income Per Share
(in thousands, except per share amounts)
Three Months Ended
September 30,
-----------------------
2006 2007
----------- -----------
GAAP Net income $ 158,529 $ 151,286
========== ==========
(a) Stock-based compensation as measured using
the fair value method under SFAS 123R 121,491 145,540
(b) Reversal of an earn-out accrual (10,000) -
(c) Non-cash gain arising from increased
dilution of our ownership in Alibaba,
resulting in the recognition of a further
gain on the sale of Yahoo! China (14,316) -
(d) To reduce the provision for income taxes
to eliminate a charge related to a
subsidiary restructuring transaction
reported in the three months ended
December 31, 2005. 10,616 -
(e) To adjust the provision for income taxes
to reflect an effective tax rate of 40%
in both the three month periods ended
September 30, 2006 and 2007, and to
reflect the tax impact of items (a)
through (d) in both periods. (26,157) (58,496)
---------- ----------
Non-GAAP Net income excluding stock-based
compensation expense and other items $ 240,163 $ 238,330
========== ==========
GAAP Net income per share - diluted $ 0.11 $ 0.11
========== ==========
Non-GAAP Net income excluding stock-based
compensation expense and other items per
share - diluted $ 0.17 $ 0.17
========== ==========
Shares used in per share calculations -
diluted 1,442,429 1,395,056
========== ==========
Nine Months Ended
September 30,
-----------------------
2006 2007
----------- -----------
GAAP Net income $ 482,718 $ 454,277
========== ==========
(a) Stock-based compensation as measured using
the fair value method under SFAS 123R 329,855 414,325
(b) Reversal of an earn-out accrual (10,000) -
(c) Non-cash gain arising from increased
dilution of our ownership in Alibaba,
resulting in the recognition of a further
gain on the sale of Yahoo! China (14,316) -
(d) To reduce the provision for income taxes
to eliminate a charge related to a
subsidiary restructuring transaction
reported in the three months ended
December 31, 2005. 10,616 -
(e) To adjust the provision for income taxes
to reflect an effective tax rate of 40%
in both the nine months ended September
30, 2006 and 2007, and to reflect the tax
impact of items (a) through (d) in both
periods. (84,803) (156,744)
---------- ----------
Non-GAAP Net income excluding stock-based
compensation expense and other items $ 714,070 $ 711,858
========== ==========
GAAP Net income per share - diluted $ 0.33 $ 0.32
========== ==========
Non-GAAP Net income excluding stock-based
compensation expense and other items per
share - diluted $ 0.49 $ 0.51
========== ==========
Shares used in per share calculations -
diluted 1,471,832 1,403,756
========== ==========
Yahoo! Inc.
Business Outlook
The following business outlook is based on current information and
expectations as of October 16, 2007. Yahoo!'s business outlook as of
today is expected to be available on the Company's Investor Relations
website throughout the current quarter. Yahoo! does not expect, and
undertakes no obligation, to update the business outlook prior to the
release of the Company's next quarterly earnings announcement,
notwithstanding subsequent developments; however, Yahoo! may update
the business outlook or any portion thereof at any time at its
discretion.
Three Months Year
Ending Ending
December 31, December 31,
2007 2007
--------------- ---------------
Revenues excluding TAC(1) outlook (in
millions):
Gross profit $1,055 - $1,165 $4,056 - $4,166
Other cost of revenues 255 - 285 964 - 994
--------------- ---------------
Revenues excluding TAC $1,310 - $1,450 $5,020 - $5,160
=============== ===============
Operating income before depreciation, amortization and stock-based
compensation expense(1) outlook (in millions):
Income from operations $155 - $175 $658 - $678
Depreciation and Amortization 160 - 180 642 - 662
Stock-based compensation expense 165 - 195 580 - 610
--------------- ---------------
Operating income before
depreciation, amortization and
stock-based compensation expense $480 - $550 $1,880 - $1,950
=============== ===============
(1) Refer to Note to Unaudited Condensed Consolidated Statements of
Income.
Yahoo! Inc.
Unaudited Condensed Consolidated Statements of Cash Flows
(in thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------ -------------------------
2006 2007 2006 2007
------------ ----------- ------------ ------------
CASH FLOWS FROM
OPERATING
ACTIVITIES:
Net income $ 158,529 $ 151,286 $ 482,718 $ 454,277
Adjustments to
reconcile net
income to net
cash provided by
operating
activities:
Depreciation 78,529 102,422 217,730 299,933
Amortization of
intangible
assets 71,378 68,155 184,804 181,539
Stock-based
compensation
expense 121,491 145,540 329,855 414,325
Tax benefits
from stock-
based awards 142,729 6,028 370,549 170,683
Excess tax
benefits from
stock-based
awards (139,022) - (354,966) (134,491)
Deferred income
taxes (31,917) (43,746) (95,456) (134,585)
Earnings in
equity
interests (30,190) (36,546) (78,261) (97,801)
Dividends
received - - 12,908 15,156
Minority
interests in
operations of
consolidated
subsidiaries (103) 547 474 (1,108)
Gains from sale
of
investments,
assets and
other, net (13,741) (14,318) (15,811) (12,796)
Changes in
assets and
liabilities,
net of effects
of
acquisitions:
Accounts
receivable,
net 6,575 (49,746) (46,780) (6,381)
Prepaid
expenses and
other (12,289) 73,578 (28,252) 61,059
Accounts
payable 3,232 (19,005) 66,985 12,073
Accrued
expenses and
other
liabilities 50,191 66,648 138,787 50,809
Deferred
revenue (15,738) 5,869 18,935 24,323
----------- ---------- ----------- -----------
Net cash provided
by operating
activities 389,654 456,712 1,204,219 1,297,015
----------- ---------- ----------- -----------
CASH FLOWS FROM
INVESTING
ACTIVITIES:
Acquisition of
property and
equipment, net (240,761) (147,150) (557,586) (409,845)
Purchases of
marketable debt
securities (240,690) (112,004) (889,023) (1,105,043)
Proceeds from
sales and
maturities of
marketable debt
securities 585,532 510,687 1,431,206 1,855,439
Acquisitions, net
of cash acquired (5,971) (319,503) (61,300) (355,514)
Other investing
activities, net 19,120 (85,830) 18,476 (105,744)
----------- ---------- ----------- -----------
Net cash provided
by (used in)
investing
activities 117,230 (153,800) (58,227) (120,707)
----------- ---------- ----------- -----------
CASH FLOWS FROM
FINANCING
ACTIVITIES:
Proceeds from
issuance of
common stock,
net 41,626 40,164 231,451 243,889
Repurchases of
common stock (1,091,931) (350,055) (1,782,140) (1,365,184)
Structured stock
repurchases, net - - (227,705) (250,000)
Excess tax
benefits from
stock-based
awards 139,022 - 354,966 134,491
Other financing
activities, net - (12,167) - (13,927)
----------- ---------- ----------- -----------
Net cash used in
financing
activities (911,283) (322,058) (1,423,428) (1,250,731)
----------- ---------- ----------- -----------
Effect of exchange
rate changes on
cash and cash
equivalents (1,565) 21,284 33,002 32,502
Net change in cash
and cash
equivalents (405,964) 2,138 (244,434) (41,921)
Cash and cash
equivalents,
beginning of
period 1,591,223 1,525,812 1,429,693 1,569,871
----------- ---------- ----------- -----------
Cash and cash
equivalents, end
of period $ 1,185,259 $1,527,950 $ 1,185,259 $ 1,527,950
=========== ========== =========== ===========
Supplemental
schedule of
acquisition-
related
activities:
Cash paid for
acquisitions $ 5,971 $ 338,910 $ 68,977 $ 380,677
Cash acquired in
acquisitions - (19,407) (7,677) (25,163)
----------- ----------- ----------- -----------
$ 5,971 $ 319,503 $ 61,300 $ 355,514
=========== ========== =========== ===========
Common stock,
restricted stock
and stock
options issued
in connection
with
acquisitions
$ - $ 413,901 $ - $ 468,429
=========== ========== =========== ===========
Yahoo! Inc.
Unaudited Condensed Consolidated Balance Sheets
(in thousands)
December 31, September 30,
2006 2007
------------ -------------
ASSETS
Current assets:
Cash and cash equivalents $ 1,569,871 $ 1,527,950
Short-term marketable debt securities 1,031,528 684,197
Accounts receivable, net 930,964 950,027
Prepaid expenses and other current assets 217,779 321,574
----------- ------------
Total current assets 3,750,142 3,483,748
Long-term marketable debt securities 935,886 550,630
Property and equipment, net 1,101,379 1,240,340
Goodwill 2,968,557 3,532,296
Intangible assets, net 405,822 517,356
Other long-term assets 459,988 529,467
Investments in equity interests 1,891,834 1,989,311
----------- ------------
Total assets $ 11,513,608 $ 11,843,148
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 109,130 $ 131,559
Accrued expenses and other current
liabilities 1,046,882 965,860
Deferred revenue 317,982 336,796
Short-term debt - 749,628
----------- ------------
Total current liabilities 1,473,994 2,183,843
Long-term deferred revenue 64,939 59,015
Long-term debt 749,915 -
Other long-term liabilities 36,890 27,750
Deferred and other tax liabilities, net 19,204 281,528
Minority interests in consolidated
subsidiaries 8,056 8,295
Stockholders' equity 9,160,610 9,282,717
----------- ------------
Total liabilities and stockholders' equity $ 11,513,608 $ 11,843,148
=========== ============
CONTACT: Yahoo! Inc.
Kelly Delaney, 408-349-2579 (Media Relations)
kelleyd@yahoo-inc.com
Cathy La Rocca, 408-349-5188 (Investor Relations)
cathy@yahoo-inc.com