SUNNYVALE, Calif. -- Yahoo! Inc. (NASDAQ: YHOO) reported results for the fourth quarter and full year ended December 31, 2012.
Q4 2012 Full Year 2012
GAAP revenue $1,346 million $4,987 million
Revenue ex-TAC $1,221 million $4,468 million
GAAP income from operations
$190 million
$566 million
Non-GAAP income from operations $283 million $825 million
GAAP net earnings per diluted share $0.23 $3.28
Non-GAAP net earnings per diluted share $0.32 $1.17
"I'm proud of Yahoo!'s 2012 and fourth quarter results. In 2012, Yahoo!
exhibited revenue growth for the first time in 4 years, with revenue up 2
percent year-over-year," said Yahoo! CEO Marissa Mayer. "During the
quarter we made progress by growing our executive team, signing key
partnerships including those with NBC Sports and CBS Television, and
launching terrific mobile experiences for Yahoo! Mail and Flickr. At the
same time, we achieved tremendous internal transformation in the
culture, energy and execution of the Company."
GAAP revenue was $1,346 million for the fourth quarter of 2012, a 2
percent increase from the fourth quarter of 2011. Revenue excluding
traffic acquisition costs ("revenue ex-TAC") was $1,221 million for the
fourth quarter of 2012, a 4 percent increase compared to the fourth
quarter of 2011. GAAP revenue was $4,987 million for the full year of
2012, flat compared to the prior year. Revenue ex-TAC was $4,468 million
for the full year of 2012, a 2 percent increase from the prior year.
Adjusted EBITDA for the fourth quarter of 2012 was $509 million, an 8
percent increase from the same period of 2011. Adjusted EBITDA was
$1,699 million for the full year of 2012, a 3 percent increase from the
prior year.
GAAP income from operations decreased 22 percent to $190 million in the
fourth quarter of 2012, compared to $242 million in the fourth quarter
of 2011. Non-GAAP income from operations was $283 million in the fourth
quarter of 2012 compared to $259 million in the fourth quarter of 2011.
GAAP income from operations for the full year of 2012 was $566 million,
compared to $800 million for the prior year. Non-GAAP income from
operations was $825 million in both years.
GAAP net earnings for the fourth quarter of 2012 was $272 million, an 8
percent decrease from the same period of 2011. Non-GAAP net earnings for
the fourth quarter of 2012 was $370 million, a 20 percent increase from
the same period of 2011. GAAP net earnings for the full year of 2012
was $3,945 million, compared to $1,049 million for the prior year. For
the full year of 2012, GAAP net earnings included a net gain of $2,755
million related to the sale of Alibaba shares. Non-GAAP net earnings for
the full year of 2012 was $1,407 million, a 35 percent increase from
the prior year.
GAAP net earnings per diluted share was $0.23 in the fourth quarter of
2012, compared to $0.24 in the fourth quarter of 2011. Non-GAAP net
earnings per diluted share was $0.32 in the fourth quarter of 2012,
compared to $0.25 in the fourth quarter of 2011. GAAP net earnings per
diluted share was $3.28 for the full year of 2012, compared to $0.82 for
the prior year. For the full year of 2012, GAAP net earnings included a
net gain of $2,755 million, or $2.29 per diluted share, related to the
sale of Alibaba shares. Non-GAAP net earnings per diluted share was
$1.17 for the full year of 2012, compared to $0.81 for the prior year.
Business Highlights
Yahoo! further strengthened its board of directors, appointing Max
Levchin, a computer scientist, serial entrepreneur and angel investor
with extensive experience building enduring Internet companies.
The Company made significant improvements to two of its core products,
Yahoo! Mail and Flickr. The new Yahoo! Mail is faster, easier to use and
available across the Web and on Windows 8, iPhone/iPod touch and
Android. Yahoo!'s redesigned Flickr app for iPhone and iPod touch makes
it easier to capture, share and discover photos. The new app allows
users to share photos by email, with the Flickr community or via
Facebook, Twitter or Tumblr.
Yahoo! signed distribution and branding deals to strengthen two of its leading media properties.
Yahoo! Sports and NBC Sports announced a partnership to deliver news,
fantasy games, and video coverage of sporting events — combining two of
the most trusted names in sports.
Yahoo! and CBS Television Distribution launched omg! Insider, a
multiplatform entertainment news series that combines the popularity of
CBS Television Distribution's The Insider with the online reach of omg!.
The Company also announced a deal with Wenner Media to further enhance
the content and reach of omg! and Yahoo! Music by joining forces with
the Us Weekly, Rolling Stone, and Men's Journal franchises.
Yahoo! acquired mobile app developers Stamped and OnTheAir, accelerating
the Company's efforts to build a world-class team of mobile engineers,
product managers and designers.
Yahoo! expanded its partnership with Samsung, enabling Samsung SmartTV
users to engage more with their favorite shows and commercials. With the
touch of a remote, connected tablet or phone, Samsung SmartTV viewers
who use Yahoo!'s Connected TV technologies, can easily access content or
offers related to their favorite TV shows or commercials.
Fourth Quarter and Full Year 2012 Financial Highlights
Display
GAAP display revenue was $591 million for the fourth quarter of 2012, a 3
percent decrease compared to $612 million for the fourth quarter of
2011. GAAP display revenue was $2,143 million for the full year of 2012,
a 1 percent decrease compared to $2,160 million for the prior year.
Display revenue ex-TAC was $520 million for the fourth quarter of 2012, a
5 percent decrease compared to $546 million for the fourth quarter of
2011. Display revenue ex-TAC was $1,899 million for the full year of
2012, a 2 percent decrease compared to $1,932 million for the prior
year.
The number of ads sold on core Yahoo! Properties decreased approximately
10 percent compared to the fourth quarter of 2011 and increased
approximately 3 percent compared to the third quarter of 2012.
Price-per-ad on core Yahoo! Properties increased approximately 7 percent
compared to the fourth quarter of 2011 and increased approximately 15
percent compared to the third quarter of 2012.
Search
GAAP search revenue was $482 million for the fourth quarter of 2012, a 4
percent increase compared to $465 million for the fourth quarter of
2011. GAAP search revenue was $1,886 million for the full year of 2012, a
2 percent increase compared to $1,853 million for the prior year.
Search revenue ex-TAC was $427 million for the fourth quarter of 2012, a
14 percent increase compared to $376 million for the fourth quarter of
2011. Search revenue ex-TAC was $1,611 million for the full year of
2012, a 9 percent increase compared to $1,478 million for the prior
year.
Paid clicks, or the number of clicks on sponsored listings on Yahoo!
Properties and Affiliate sites, increased approximately 11 percent
compared to the fourth quarter of 2011 and increased approximately 8
percent compared to the third quarter of 2012.
Price-per-click increased approximately 1 percent compared to the fourth
quarter of 2011 and decreased approximately 2 percent compared to the
third quarter of 2012.
Cash Balance
Cash, cash equivalents, and investments in marketable debt securities
were $6 billion at December 31, 2012 compared to $2.5 billion at
December 31, 2011, an increase of $3.5 billion.
During the fourth quarter of 2012, Yahoo! repurchased 80 million shares
for $1.5 billion. During the year ended December 31, 2012, Yahoo!
repurchased 126 million shares for $2.2 billion.
Conference Call
Yahoo! will host a conference call to discuss fourth quarter and full
year 2012 results at 5 p.m. Eastern Time today. On the conference call,
Yahoo! will also provide its business outlook for the first quarter and
full year of 2013. A live Webcast of the conference call, together with
supplemental financial information, can be accessed through the
Company's Investor Relations Website at
http://investor.yahoo.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 for one week following the conference call by
calling (888) 286-8010 or (617) 801-6888, reservation
number: 30622830.
Non-GAAP Financial Measures
This press release and its attachments include the following financial
measures defined as non-GAAP financial measures by the Securities and
Exchange Commission ("SEC"): revenue ex-TAC; adjusted EBITDA; non-GAAP
income from operations; non-GAAP net earnings; non-GAAP net earnings per
diluted share; and free cash flow.
Revenue ex-TAC is GAAP revenue less traffic acquisition costs. Adjusted
EBITDA, non-GAAP income from operations, non-GAAP net earnings and
non-GAAP earnings per diluted share exclude certain gains, losses, and
expenses that we do not believe are indicative of ongoing results.
Adjusted EBITDA also excludes taxes, depreciation, amortization of
intangible assets, stock-based compensation expense, other income, net
(which includes interest), earnings in equity interests, and net income
attributable to noncontrolling interests. Free cash flow is GAAP net
cash provided by (used in) operating activities (adjusted to include
excess tax benefits from stock-based awards), less acquisition of
property and equipment, net and dividends received from equity
investees.
These measures may be different than non-GAAP financial measures used by
other companies. The presentation of this financial information is not
intended to be considered in isolation or as a substitute for the
financial information prepared and presented in accordance with
generally accepted accounting principles ("GAAP"). Explanations of the
Company's non-GAAP financial measures and reconciliations of these
financial measures to the GAAP financial measures the Company considers
most comparable are included in the accompanying "Note to Unaudited
Condensed Consolidated Financial Statements," "Supplemental Financial
Data and GAAP to Non-GAAP Reconciliations," and "GAAP to Non-GAAP
Reconciliations."
About Yahoo!
Yahoo! is focused on making the world's daily habits inspiring and
entertaining. By creating highly personalized experiences for our users,
we keep people connected to what matters most to them, across devices
and around the globe. In turn, we create value for advertisers by
connecting them with the audiences that build their businesses. Yahoo!
is headquartered in Sunnyvale, Calif., 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 blog (yodel.yahoo.com).
"Affiliates" refers to the third-party entities that have integrated
Yahoo!'s advertising offerings into their Websites or other offerings
(those Websites and other offerings, "Affiliate sites").
"Alibaba" means Alibaba Group Holding Limited.
"Search Agreement" refers to the Search and Advertising Services and
Sales Agreement between Yahoo! and Microsoft Corporation, as amended.
"TAC" refers to traffic acquisition costs.TAC consists of payments to
Affiliates and payments made to companies that direct consumer and
business traffic to Yahoo! Properties.
"Yahoo! Properties" refers to the online properties and services that Yahoo! provides to users.
This press release contains forward-looking statements concerning
Yahoo!'s expected financial performance and Yahoo!'s strategic and
operational plans (including, without limitation, the quotation from
management). Risks and uncertainties may cause actual results to differ
materially from the results predicted, and reported results should not
be considered as an indication of future performance. The potential
risks and uncertainties include, among others, the impact of changes to
our management, organizational structure and strategic business plan;
Yahoo!'s ability to compete with new or existing competitors; reduction
in spending by, or loss of, advertising customers; risks associated with
the Search Agreement with Microsoft Corporation; risks related to
Yahoo!'s regulatory environment; interruptions or delays in the
provision of Yahoo!'s services; security breaches; acceptance by users
of new products and services; risks related to joint ventures and the
integration of acquisitions; risks related to Yahoo!'s international
operations; adverse results in litigation; Yahoo!'s ability to protect
its intellectual property and the value of its brands; dependence on
third parties for technology, services, content, and distribution; and
general economic conditions. All information set forth in this press
release and its attachments is as of January 28, 2013. 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, 2011, as amended, and Quarterly Report on Form 10-Q
for the quarter ended September 30, 2012, which are on file with the SEC
and available on the SEC's website at www.sec.gov. Additional
information will also be set forth in those sections in Yahoo!'s Annual
Report on Form 10-K for the year ended December 31, 2012, which will be
filed with the SEC in the first quarter of 2013.
Yahoo!, the Yahoo! logos, omg! and Flickr 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 Balance Sheets
(in thousands)
December 31, December 31,
2011
2012
ASSETS
Current assets:
Cash and cash equivalents $ 1,562,390 $ 2,667,778
Short-term marketable debt securities 493,189 1,516,175
Accounts receivable, net 1,037,474 1,008,448
Prepaid expenses and other current assets 359,483 460,312
Total current assets 3,452,536 5,652,713
Long-term marketable debt securities 474,338 1,838,425
Alibaba Group Preference Shares - 816,261
Property and equipment, net 1,730,888 1,685,845
Goodwill 3,900,752 3,826,749
Intangible assets, net 254,600 153,973
Other long-term assets 220,628 289,130
Investments in equity interests 4,749,044 2,840,157
Total assets $ 14,782,786 $ 17,103,253
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $ 166,595 $ 184,831
Accrued expenses and other current liabilities 846,044 808,475
Deferred revenue 194,722 296,926
Total current liabilities 1,207,361 1,290,232
Long-term deferred revenue 43,639 407,560
Capital lease and other long-term liabilities 134,905 124,587
Deferred and other long-term tax liabilities, net 815,534 675,271
Total liabilities 2,201,439 2,497,650
Total Yahoo! Inc. stockholders' equity 12,541,067 14,560,200
Noncontrolling interests 40,280 45,403
Total equity 12,581,347 14,605,603
Total liabilities and equity $ 14,782,786 $ 17,103,253
Yahoo! Inc.
Unaudited Condensed Consolidated Statements of Income
(in thousands, except per share amounts)
Three Months Ended Year Ended
December 31, December 31,
2011 2012 2011 2012
Revenue $ 1,324,153 $ 1,345,807 $ 4,984,199 $ 4,986,566
Operating expenses:
Cost of revenue - Traffic acquisition costs 155,453
124,961
603,371 518,906
Cost of revenue - Other 263,609
287,147
983,626 1,101,660
Sales and marketing 289,366 274,122 1,122,193 1,101,572
Product development 235,810 240,417 919,368 885,824
General and administrative 112,614 144,610 497,288 540,247
Amortization of intangibles 8,525 7,926 33,592 35,819
Restructuring charges, net 16,329 76,634 24,420 236,170
Total operating expenses 1,081,706 1,155,817 4,183,858 4,420,198
Income from operations 242,447 189,990 800,341 566,368
Other income, net 9,768 17,730 27,175 4,647,839
Income before income taxes and earnings in equity interests 252,215 207,720 827,516 5,214,207
Provision for income taxes (78,287 ) (83,007 ) (241,767 ) (1,940,043 )
Earnings in equity interests 127,063 148,939 476,920 676,438
Net income 300,991 273,652 1,062,669 3,950,602
Less: Net income attributable to noncontrolling interests (5,419 ) (1,385 ) (13,842 ) (5,123 )
Net income attributable to Yahoo! Inc. $ 295,572 $ 272,267 $ 1,048,827 $ 3,945,479
Net income attributable to Yahoo! Inc. common stockholders per share - diluted $ 0.24 $ 0.23 $ 0.82 $ 3.28
Shares used in per share calculation - diluted 1,241,009 1,168,336 1,282,282 1,202,906
Stock-based compensation expense by function:
Cost of revenue - Other $ 1,010 $ 2,207 $ 3,489 $ 10,078
Sales and marketing 22,291 22,161 65,120 82,115
Product development 25,291 19,955 89,587 74,284
General and administrative 10,255 13,139 45,762 57,888
Restructuring expense accelerations (reversals), net 1,492 - 214 (3,429 )
Supplemental Financial Data:
Revenue ex-TAC $ 1,168,700 $ 1,220,846 $ 4,380,828 $ 4,467,660
Adjusted EBITDA
$ 469,453
$
509,024
$ 1,654,583 $
1,698,839
Free cash flow(1)(2) $ 327,013 $ (2,044,502 ) $ 725,801 $ (834,865 )
(1) The
year ended December 31, 2012 includes a payment of $550 million from
Alibaba in satisfaction of certain future royalty payments under the
existing technology and intellectual property license agreement with
Alibaba.
(2)
The three months and year ended December 31, 2012 include a cash tax
payment of $2.3 billion which is related to the sale of Alibaba shares.
Yahoo! Inc.
Unaudited Condensed Consolidated Statements of Cash Flows
(in thousands)
Three Months Ended Year Ended
December 31, December 31,
2011 2012 2011 2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 300,991 $ 273,652 $ 1,062,669 $ 3,950,602
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 125,693 148,213 530,516 549,235
Amortization of intangible assets 29,939 21,279 117,723 105,366
Stock-based compensation expense, net 60,339 57,462 204,172 220,936
Non-cash restructuring charges 990 69,434 990 109,896
Accrued dividend income related to Alibaba Group Preference Shares
- (20,000 ) - (20,000 )
Tax benefits (detriments) from stock-based awards 23,523 (21,969 ) 33,497 (31,440 )
Excess tax benefits from stock-based awards (25,966 ) (5,093 ) (70,680 ) (35,844 )
Deferred income taxes 1,652 121,968 70,392 (769,320 )
Earnings in equity interests (127,063 ) (148,939 ) (476,920 ) (676,438 )
Dividends received from Yahoo Japan - - 75,391 83,648
Gain related to sale of Alibaba Group shares - - - (4,603,322 )
Gain from sale of investments, assets, and other, net (8,416 ) 6,468 4,405 (11,840 )
Changes in assets and liabilities, net of effects of acquisitions:
Accounts receivable, net (117,992 ) (52,190 ) 38,100 34,752
Prepaid expenses and other 87,441 37,470 97,849 78,529
Accounts payable 27,000 35,204 (316 ) 12,747
Accrued expenses and other liabilities 61,012 (2,373,163 ) (290,070 ) 255,799
Deferred revenue (7,809 ) (49,671 ) (73,912 ) 465,140
Net cash provided by (used in) operating activities (1)(2) 431,334 (1,899,875 ) 1,323,806 (281,554 )
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment, net (130,287 ) (149,720 ) (593,294 ) (505,507 )
Purchases of marketable debt securities (95,232 ) (1,681,467 ) (1,708,530 ) (3,520,327 )
Proceeds from sales of marketable debt securities 441,719 56,968 1,508,948 741,947
Proceeds from maturities of marketable debt securities 89,305 130,750 1,316,197 381,403
Proceeds related to sale of Alibaba shares, net - - - 6,247,728
Purchases of intangible assets (799 ) (711 ) (11,819 ) (3,799 )
Proceeds from the sale of investments - - 21,271 26,132
Acquisitions, net of cash acquired (255,018 ) (5,716 ) (323,830 ) (5,716 )
Other investing activities, net (818 ) 9,604 (6,581 ) 183
Net cash provided by (used in) investing activities 48,870 (1,640,292 ) 202,362 3,362,044
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock, net 49,529 101,951 156,226 218,371
Repurchases of common stock (416,237 ) (1,451,462 ) (1,618,741 ) (2,167,841 )
Excess tax benefits from stock-based awards 25,966 5,093 70,680 35,844
Tax withholdings related to net share settlements of restricted stock awards and restricted stock units
(8,712 ) (12,842 ) (44,761 ) (60,939 )
Other financing activities, net (11,029 ) (1,373 ) (19,362 ) (4,892 )
Net cash used in financing activities (360,483 ) (1,358,633 ) (1,455,958 ) (1,979,457 )
Effect of exchange rate changes on cash and cash equivalents (21,550 ) 6,178 (34,247 ) 4,355
Net change in cash and cash equivalents 98,171 (4,892,622 ) 35,963 1,105,388
Cash and cash equivalents, beginning of period 1,464,219 7,560,400 1,526,427 1,562,390
Cash and cash equivalents, end of period $ 1,562,390 $ 2,667,778 $ 1,562,390 $ 2,667,778
(1) The
year ended December 31, 2012 includes a payment of $550 million from
Alibaba in satisfaction of certain future royalty payments under the
existing technology and intellectual property license agreement with
Alibaba.
(2)
The three months and year ended December 31, 2012 include a cash tax
payment of $2.3 billion which is related to the sale of Alibaba shares.
Yahoo! Inc.
Note to Unaudited Condensed Consolidated Financial Statements
This press release and its attachments include the non-GAAP financial
measures of revenue excluding traffic acquisition costs ("revenue
ex-TAC"); adjusted EBITDA; non-GAAP income from operations; non-GAAP net
earnings; non-GAAP net earnings per diluted share; and free cash flow,
which are reconciled to revenue; net income attributable to Yahoo! Inc.
(in the case of adjusted EBITDA and non-GAAP net earnings); income from
operations; net income attributable to Yahoo! Inc. common stockholders
per share — diluted; and net cash provided by (used in) operating
activities, which we believe are the most comparable GAAP measures. We
use 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 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, revenue,
net income attributable to Yahoo! Inc., income from operations, net
income attributable to Yahoo! Inc. common stockholders per share -
diluted and net cash provided by (used in) operating activities,
calculated in accordance with GAAP.
Revenue ex-TAC is a non-GAAP financial measure defined as GAAP revenue
less TAC. TAC consists of payments made to third-party entities that
have integrated our advertising offerings into their Websites or other
offerings (those Websites and other offerings, "Affiliate sites") and
payments made to companies that direct consumer and business traffic to
Yahoo!'s online properties and services ("Yahoo! Properties"). Based on
the terms of the Search Agreement with Microsoft, Microsoft retains a
revenue share of 12 percent of the net (after TAC) search revenue
generated on Yahoo! Properties and Affiliate sites in transitioned
markets. Yahoo! reports the net revenue it receives under the Search
Agreement as revenue and no longer presents the associated TAC.
Accordingly, for transitioned markets Yahoo! reports GAAP revenue
associated with the Search Agreement on a net (after TAC) basis rather
than a gross basis. For markets that have not yet transitioned, revenue
continues to be recorded on a gross basis, and TAC is recorded as a part
of operating expenses. We present revenue ex-TAC to provide investors a
metric used by the Company for evaluation and decision-making purposes
during the Microsoft transition and to provide investors with comparable
revenue numbers when comparing periods preceding, during and following
the transition period. A limitation of revenue ex-TAC is that it is a
measure which we have defined for internal and investor purposes that
may be unique to the Company, and therefore it may not enhance the
comparability of our results to other companies in our industry who have
similar business arrangements but address the impact of TAC
differently. Management compensates for these limitations by also
relying on the comparable GAAP financial measures of revenue and total
operating expenses, which includes TAC in non-transitioned markets.
Adjusted EBITDA is defined as net income attributable to Yahoo! Inc.
before taxes, depreciation, amortization of intangible assets,
stock-based compensation expense, other income, net (which includes
interest), earnings in equity interests, net income attributable to
noncontrolling interests and other gains, losses, and expenses that we
do not believe are indicative of our ongoing results. Yahoo! presents
adjusted EBITDA because the exclusion of certain gains, losses, and
expenses facilitates comparisons of the operating performance of our
Company on a period to period basis. Adjusted EBITDA has limitations as
an analytical tool and should not be considered in isolation or as a
substitute for results reported under GAAP. These limitations include:
adjusted EBITDA does not reflect tax payments and such payments reflect a
reduction in cash available to us; adjusted EBITDA does not reflect the
periodic costs of certain capitalized tangible and intangible assets
used in generating revenues in our businesses; adjusted EBITDA does not
include stock-based compensation expense related to the Company's
workforce; adjusted EBITDA also excludes other income, net (which
includes interest), earnings in equity interests, net income
attributable to noncontrolling interests and other gains, losses, and
expenses that we do not believe are indicative of our ongoing results,
and these items may represent a reduction or increase in cash available
to us; and adjusted EBITDA is a measure that may be unique to the
Company, and therefore it may not enhance the comparability of our
results to other companies in our industry. Management compensates for
these limitations by also relying on the comparable GAAP financial
measure of net income attributable to Yahoo! Inc., which includes taxes,
depreciation, amortization, stock-based compensation expense, other
income, net (which includes interest), earnings in equity interests, net
income attributable to noncontrolling interests and the other gains,
losses and expenses that are excluded from adjusted EBITDA.
Non-GAAP income from operations is defined as income from operations
excluding certain gains, losses, and expenses that we do not believe are
indicative of our ongoing operating results. We consider non-GAAP
income from operations to be a profitability measure which facilitates
the forecasting of our operating results for future periods and allows
for the comparison of our results to historical periods. A limitation of
non-GAAP income from operations is that it does not include all items
that impact our income from operations for the period. Management
compensates for this limitation by also relying on the comparable GAAP
financial measure of income from operations which includes the gains,
losses, and expenses that are excluded from non-GAAP income from
operations.
Non-GAAP net earnings is defined as net income attributable to Yahoo!
Inc. excluding certain gains, losses, expenses, and their related tax
effects that we do not believe are indicative of our ongoing results. We
consider non-GAAP net earnings and non-GAAP net earnings per diluted
share to be profitability measures which facilitate the forecasting of
our results for future periods and allow for the comparison of our
results to historical periods. A limitation of non-GAAP net earnings and
non-GAAP net earnings per diluted share is that they do not include all
items that impact our net income and net income per diluted share for
the period. Management compensates for this limitation by also relying
on the comparable GAAP financial measures of net income attributable to
Yahoo! Inc. and net income attributable to Yahoo! Inc. common
stockholders per share - diluted, both of which include the gains,
losses, expenses and related tax effects that are excluded from non-GAAP
net earnings and non-GAAP net earnings per diluted share.
Free cash flow is a non-GAAP financial measure defined as net cash
provided by (used in) operating activities (adjusted to include excess
tax benefits from stock-based awards), less acquisition of property and
equipment, net and dividends received from equity investees. We consider
free cash flow to be a liquidity measure which provides useful
information to management and investors about the amount of cash
generated by the business after the acquisition of property and
equipment, which can then be used for strategic opportunities including,
among others, investing in the Company's business, making strategic
acquisitions, strengthening the balance sheet, and repurchasing stock. A
limitation of free cash flow is that it does not represent the total
increase or decrease in the cash balance for the period. Management
compensates for this limitation by also relying on the net change in
cash and cash equivalents as presented in the Company's unaudited
condensed consolidated statements of cash flows prepared in accordance
with GAAP which incorporates all cash movements during the period.
Yahoo! Inc.
Supplemental Financial Data and GAAP to Non-GAAP Reconciliations
(in thousands)
Three Months Ended Year Ended
December 31, December 31,
2011 2012 2011 2012
Revenue for groups of similar services:
Display $ 612,047 $ 590,627 $ 2,160,309 $ 2,142,818
Search 464,530 481,957 1,853,110 1,885,860
Other 247,576 273,223 970,780 957,888
Total revenue $ 1,324,153 $ 1,345,807 $ 4,984,199 $ 4,986,566
Revenue excluding traffic acquisition costs ("revenue ex-TAC") for groups of similar services:
GAAP display revenue $ 612,047 $ 590,627 $ 2,160,309 $ 2,142,818
TAC associated with display revenue (66,426 ) (70,218 ) (227,822 ) (243,557 )
Display revenue ex-TAC $ 545,621 $ 520,409 $ 1,932,487 $ 1,899,261
GAAP search revenue $ 464,530 $ 481,957 $ 1,853,110 $ 1,885,860
TAC associated with search revenue for non-transitioned markets (89,027 ) (54,743 ) (375,409 ) (275,349 )
Search revenue ex-TAC $ 375,503 $ 427,214 $ 1,477,701 $ 1,610,511
Other GAAP revenue $ 247,576 $ 273,223 $ 970,780 $ 957,888
TAC associated with other GAAP revenue - - (140 ) -
Other revenue ex-TAC $ 247,576 $ 273,223 $ 970,640 $ 957,888
Revenue ex-TAC:
GAAP revenue $ 1,324,153 $ 1,345,807 $ 4,984,199 $ 4,986,566
TAC (155,453 ) (124,961 ) (603,371 ) (518,906 )
Revenue ex-TAC $ 1,168,700 $ 1,220,846 $ 4,380,828 $ 4,467,660
Revenue ex-TAC by segment:
Americas :
GAAP revenue $ 884,780 $ 960,118 $ 3,302,989 $ 3,461,633
TAC (45,072 ) (52,357 ) (160,110 ) (182,511 )
Revenue ex-TAC $ 839,708 $ 907,761 $ 3,142,879 $ 3,279,122
EMEA:
GAAP revenue $ 164,238 $ 113,527 $ 629,383 $ 472,061
TAC (54,559 ) (16,982 ) (221,916 ) (114,230 )
Revenue ex-TAC $ 109,679 $ 96,545 $ 407,467 $ 357,831
Asia Pacific :
GAAP revenue $ 275,135 $ 272,162 $ 1,051,827 $ 1,052,872
TAC (55,822 ) (55,622 ) (221,345 ) (222,165 )
Revenue ex-TAC $ 219,313 $ 216,540 $ 830,482 $ 830,707
Total revenue ex-TAC $ 1,168,700 $ 1,220,846 $ 4,380,828 $ 4,467,660
Direct costs by segment (3):
Americas
$
187,467
$
183,236
$
696,103
$
733,316
EMEA
41,615
41,325
165,750
161,990
Asia Pacific
55,361
60,046
225,417
224,114
Global operating costs (4)
414,804
443,272
1,638,975
1,671,958
Restructuring charges, net
16,329
76,634
24,420
236,170
Depreciation and amortization 151,830 168,769 625,864 649,267
Stock-based compensation expense
58,847
57,574
203,958
224,477
Income from operations
$
242,447
$
189,990
$
800,341
$
566,368
Reconciliation of net income attributable to Yahoo! Inc. to adjusted EBITDA:
Net income attributable to Yahoo! Inc.
$
295,572
$
272,267
$
1,048,827
$
3,945,479
Costs associated with the Korea business and its closure (5)
-
99,485
-
99,485
Deal-related costs related to the sale of Alibaba shares
-
-
-
6,500
Depreciation and amortization
151,830
168,769
625,864
649,267
Stock-based compensation expense
58,847
57,574
203,958
224,477
Restructuring charges, net (5)
16,329
(6,794
)
24,420
152,742
Other income, net
(9,768
)
(17,730
)
(27,175
)
(4,647,839
)
Provision for income taxes
78,287
83,007
241,767
1,940,043
Earnings in equity interests
(127,063
)
(148,939
)
(476,920
)
(676,438
)
Net income attributable to noncontrolling interests
5,419
1,385
13,842
5,123
Adjusted EBITDA
$
469,453
$
509,024
$
1,654,583
$
1,698,839
Reconciliation of net cash provided by (used in) operating activities to free cash flow:
Cash provided by (used in) operating activities
$
431,334
$
(1,899,875
)
$
1,323,806
$
(281,554
)
Acquisition of property and equipment, net
(130,287
)
(149,720
)
(593,294
)
(505,507
)
Dividends received from equity investees
-
-
(75,391
)
(83,648 )
Excess tax benefits from stock-based awards
25,966
5,093
70,680
35,844
Free cash flow (1)(2) $ 327,013 $ (2,044,502 ) $ 725,801 $ (834,865 )
(1) The
year ended December 31, 2012 includes a payment of $550 million from
Alibaba in satisfaction of certain future royalty payments under the
existing technology and intellectual property license agreement with
Alibaba.
(2)
The three months and year ended December 31, 2012 include a cash tax
payment of $2.3 billion which is related to the sale of Alibaba shares.
(3) Direct
costs for each segment include cost of revenue (excluding TAC) and
other operating expenses that are directly attributable to the segment
such as employee compensation expense (excluding stock-based
compensation expense), local sales and marketing expenses, and
facilities expenses. Beginning in 2012, marketing and customer advocacy
costs are managed locally and included as direct costs for each segment.
Prior period amounts have been revised to conform to the current
presentation.
(4) Global
operating costs include product development, service engineering and
operations, general and administrative, and other corporate expenses
that are managed on a global basis and that are not directly
attributable to any particular segment. Prior to 2012, marketing and
customer advocacy costs were managed on a global basis and included as
global operating costs. Prior period amounts have been revised to
conform to the current presentation.
(5)
For the three months and year ended December 31, 2012, costs associated
with the Korea business and its closure include $83 million of
restructuring charges.
Yahoo! Inc.
GAAP to Non-GAAP Reconciliations
(in thousands, except per share amounts)
Three Months Ended
December 31,
2011
2012
GAAP Income from operations $ 242,447 $ 189,990
(a)
Costs associated with the Korea business and its closure
- 99,485
(b)
Restructuring charges, net (6)
16,329 (6,794 )
Non-GAAP Income from operations $ 258,776 $ 282,681
GAAP Net income attributable to Yahoo! Inc. $ 295,572 $ 272,267
(a)
Costs associated with the Korea business and its closure
- 99,485
(b)
Restructuring charges, net (6)
16,329 (6,794 )
(c) To
adjust the provision for income taxes to exclude the tax impact of items
(a) and (b) above for the three months ended December 31, 2011 and 2012 (5,192 ) 4,626
Non-GAAP Net earnings
$ 306,709 $ 369,584
GAAP Net income attributable to Yahoo! Inc. common stockholders per share - diluted $ 0.24 $ 0.23
Non-GAAP Net earnings per share - diluted
$ 0.25 $ 0.32
Shares used in per share calculation - diluted 1,241,009 1,168,336
Year Ended
December 31,
2011
2012
GAAP Income from operations $ 800,341 $ 566,368
(a)
Costs associated with the Korea business and its closure
- 99,485
(b)
Restructuring charges, net (6)
24,420 152,742
(c)
Deal-related costs related to the sale of Alibaba shares
- 6,500
Non-GAAP Income from operations $ 824,761 $ 825,095
GAAP Net income attributable to Yahoo! Inc. $ 1,048,827 $ 3,945,479
(a)
Costs associated with the Korea business and its closure
- 99,485
(b)
Restructuring charges, net (6)
24,420 152,742
(c)
Deal-related costs related to the sale of Alibaba shares
- 6,500
(d) Gain related to sale of Alibaba shares - (4,603,322 )
(e) Non-cash
gain related to the dilution of the Company's ownership interest in
Alibaba Group, which is included in earnings in equity interests (25,083 ) -
(f) To
adjust the provision for income taxes to exclude the tax impact of items
(a) through (d) above for the year ended December 31, 2011 and 2012 (7,764 ) 1,805,940
Non-GAAP Net earnings
$ 1,040,400 $ 1,406,824
GAAP Net income attributable to Yahoo! Inc. common stockholders per share - diluted $ 0.82 $ 3.28
Non-GAAP Net earnings per share - diluted
$ 0.81 $ 1.17
Shares used in per share calculation - diluted 1,282,282 1,202,906
(6)
For the three months and year ended December 31, 2012, this amount
excludes the restructuring charges related to the Korea business and its
closure of $83 million, which is included in item (a) above.
