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
"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
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 | ||