Yahoo just announced its Q4 and year-end 2015 financials and provided an update on the company’s business strategy going forward. It also it will reduce its workforce by 15% and exit five of its offices ( Dubai, Mexico City, Buenos Aires, Madrid, and Milan).
By the end of the year, the company expects to have about 9,000 employees and fewer than 1,000 contractors. This, it says, will result in savings in short term operating expense of $400 million annually.
“Today, we’re announcing a strategic plan that we strongly believe will enable us to accelerate Yahoo’s transformation,” said CEO Marissa Mayer. “This is a strong plan calling for bold shifts in products and in resources. We are extremely proud of the billion dollar plus business we have built in mobile, video, native, and social. Our strategic bets in Mavens have enabled us build an entirely new, forward-leaning business of tremendous scale and growth in just three years. The plan announced today builds from that achievement and will dramatically brighten our future and improve our competitiveness, and attractiveness to users, advertisers, and partners.”
“The Board is committed to the turnaround efforts of the management team and supportive of the plan announced today. We have tremendous respect for the thousands of Yahoos who work very hard to make the world a better place,” said Maynard Webb, Yahoo’s Chairman of the Board. “The Board also believes that exploring additional strategic alternatives, in parallel to the execution of the management plan, is in the best interest of our shareholders. Separating our Alibaba stake from our operating business continues to be a primary focus, and our most direct path to value maximization. In addition to continuing work on the reverse spin, which we’ve discussed previously, we will engage on qualified strategic proposals.”
Here’s the four-part “strategic plan” Yahoo has laid out for its business:
For Q4, the company reported revenue of $1.27 billion and EPS of $0.13, beating expectations on revenue and meeting them on earnings.
Here’s the earnings release in its entirety:
SUNNYVALE, Calif.–(BUSINESS WIRE)–
Yahoo! Inc. (YHOO) today reported results for the quarter and full year ended December 31, 2015.
Q4 2014
Q4 2015
Full Year 2014
Full Year 2015
GAAP revenue
$1,253 million
$1,273 million
$4,618 million
$4,968 million
Cost of revenue – TAC
$74 million
$271 million
$218 million
$878 million
Goodwill impairment*
$88 million
$4,461 million
$88 million
$4,461 million
Income (loss) from operations
$32 million
($4,530) million
$143 million
($4,748) million
Non-GAAP income from operations
$256 million
$63 million
$755 million
$342 million
Adjusted EBITDA
$409 million
$215 million
$1,362 million
$952 million
Net earnings
$166 million
($4,435) million
$7,522 million
($4,359) million
GAAP net earnings per diluted share
$0.17
($4.70)
$7.45
($4.64)
Non-GAAP net earnings per diluted share
$0.30
$0.13
$1.57
$0.59
*See further discussion related to goodwill impairment below
“I’m pleased to report that our Q4 performance exceeded guidance across GAAP revenue, revenue ex-TAC, adjusted EBITDA, and non-GAAP Operating Income,” said Marissa Mayer, CEO of Yahoo. “We continue to be encouraged by the performance of our Mavens investments, which in 2015 alone, grew to about a third of our GAAP revenue — $1.6 billion dollars.”
Business Highlights
Search
As part of Yahoo’s efforts to move search toward a more contextual, anticipatory and assistive experience, the Company made the first in a series of ongoing updates to the Yahoo Search app. For iOS in the U.S., the Yahoo Search app experience is now more actionable and guides users to the information they need whether it’s from the Web or their inboxes. Logged in users can now see Web and email results in one place, as the app can now search across email, contacts and calendar to help them find things like package delivery notifications, hotel reservation details and upcoming events, while partnerships with companies like Yelp and OpenTable allow users to take action directly from the search results page.
Communications
Yahoo unveiled the next generation of Yahoo Messenger on mobile for both iOS and Android, the Web and Yahoo Mail on desktop. Built from the ground up, the powerful new platform integrates technology and features from Flickr, Tumblr and Xobni. Built for group and 1:1 messaging, Yahoo Messenger now allows users to unsend and like messages, photos and animated GIFs quickly and easily.
Digital Content
Tumblr further strengthened the way that users communicate and connect over the things they love through threaded instant Messaging available across iOS and Android apps, and on the Web.
Yahoo presented the first free, global live stream of an NFL game to more than 15 million viewers across the globe. This was the first time users were able to enjoy the NFL’s premium content globally without cable, authentication or TV across both Yahoo and Tumblr. More than 30 top brands partnered with Yahoo to kick off this new era of sports programming. The Company delivered the live stream with a rebuffering ratio of less than one percent.
Yahoo, together with launch sponsor Fidelity Investments, introduced “The Final Round,” a live weekday show on Yahoo Finance that offers insight into the most important business news of the day and what’s driving markets, and features interviews with bold-faced names like premiere guest Charles Koch from the field and in the New York studio.
Yahoo debuted Adrian Wojnarowski’s new weekly NBA podcast, The Vertical, with an interview with NBA Commissioner Adam Silver. The podcast debuted in advance of the January launch of Wojnarowski’s new basketball site “The Vertical” on Yahoo Sports. “The Vertical” will feature content from an elite and talented group of reporters and industry insiders.
Fourth Quarter and Full Year 2015 Financial Highlights
Mavens Revenue:
Q4 2014
Q4 2015
Full Year 2014
Full Year 2015
Mavens revenue
$
375 million
$
472 million
$
1,148 million
$
1,660 million
Non-Mavens revenue
751 million
750 million
3,022 million
2,908 million
Total traffic-driven revenue
$
1,126 million
$
1,222 million
$
4,170 million
$
4,568 million
Non-traffic-driven revenue
127 million
51 million
448 million
400 million
GAAP revenue
$
1,253 million
$
1,273 million
$
4,618 million
$
4,968 million
Mavens revenue represented 33 percent and 28 percent of traffic-driven revenue in the fourth quarter and full year of 2014, respectively, and increased to 39 percent and 36 percent in the fourth quarter and full year of 2015, respectively.
Mobile Revenue:
Q4 2014
Q4 2015
Full Year 2014
Full Year 2015
Mobile revenue
$
254 million
$
291 million
$
768 million
$
1,048 million
PC revenue
872 million
931 million
3,402 million
3,520 million
Total traffic-driven revenue
$
1,126 million
$
1,222 million
$
4,170 million
$
4,568 million
Non-traffic-driven revenue
127 million
51 million
448 million
400 million
GAAP revenue
$
1,253 million
$
1,273 million
$
4,618 million
$
4,968 million
Mobile revenue represented 23 percent and 18 percent of traffic-driven revenue in the fourth quarter and full year of 2014, respectively, and increased to 24 percent and 23 percent in the fourth quarter and full year of 2015, respectively.
Gross mobile revenue for the fourth quarter of 2014 and 2015 was $413 million and $449 million, respectively. Gross mobile revenue for the full year of 2014 and 2015 was $1,261 million and $1,679 million, respectively.
Search Revenue:
Gross search revenue was $866 million for the fourth quarter of 2015, a decrease of 7 percent compared to the fourth quarter of 2014. Gross search revenue was $3,612 million for the full year of 2015, an increase of 7 percent compared to the prior year.
GAAP search revenue was $522 million for the fourth quarter of 2015, an increase of 12 percent compared to the fourth quarter of 2014. GAAP search revenue was $2,084 million for the full year of 2015, an increase of 16 percent compared to the prior year.
Cost of revenue – TAC paid to search partners was $141 million for the fourth quarter of 2015, which includes TAC from the Mozilla agreement, compared to $5 million in the fourth quarter of 2014. Cost of revenue – TAC paid to search partners was $465 million for the full year of 2015, which includes TAC from the Mozilla agreement, compared to $9 million in the prior year.
The number of Paid Clicks decreased 10 percent compared to the fourth quarter of 2014.
Price-per-Click increased 3 percent compared to the fourth quarter of 2014.
Display Revenue:
GAAP display revenue was $601 million for the fourth quarter of 2015, a 13 percent increase compared to the fourth quarter of 2014. GAAP display revenue was $2,074 million for the full year of 2015, an 11 percent increase compared to the prior year.
Cost of revenue – TAC paid to display partners was $130 million for the fourth quarter of 2015 compared to $68 million in the fourth quarter of 2014. Cost of revenue – TAC paid to display partners was $410 million for the full year of 2015 compared to $205 million in the prior year.
The number of Ads Sold increased 8 percent compared to the fourth quarter of 2014.
Price-per-Ad increased 6 percent compared to the fourth quarter of 2014.
Goodwill Impairment:
We recorded a $4,461 million non-cash goodwill impairment charge as a result of our annual goodwill impairment test conducted in the fourth quarter of 2015. We concluded that the carrying value of our U.S. & Canada, Europe, Latin America and Tumblr reporting units exceeded their respective estimated fair values. The goodwill impairment resulted from a combination of factors, including decreases in our market capitalization, projected operating results and estimated future cash flows.
Cash, Cash Equivalents, and Marketable Securities:
Cash, cash equivalents, and marketable securities were $6.8 billion as of December 31, 2015 compared to $10.2 billion as of December 31, 2014, a decrease of $3.4 billion. In the first quarter of 2015, the Company satisfied the $3.3 billion income tax liability related to the sale of Alibaba Group ADSs in September 2014.
“We’re encouraged that our fourth quarter results exceeded expectations in all core metrics,” said Ken Goldman, CFO of Yahoo. “As we look forward to executing a more focused strategy for the Company, this is a solid baseline for the actions we’re taking to improve performance in 2016 and beyond.”
Live Stream
Yahoo will live stream a video broadcast of the Company’s fourth quarter and full year 2015 financial results at 2 p.m. Pacific Time/5 p.m. Eastern Time today. The live stream will be broadcast from Yahoo’s Sunnyvale studio and will be available exclusively on Yahoo Finance at finance.yahoo.com. The Company will provide its business outlook for the first quarter of 2016 during the presentation. Supplemental financial information can be accessed through the Company’s Investor Relations website at investor.yahoo.net. The video will be archived after the event at investor.yahoo.net and will be available for 90 days following the broadcast.
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”): gross mobile revenue; gross search revenue; revenue ex-TAC; adjusted EBITDA; non-GAAP income from operations; non-GAAP net earnings; non-GAAP net earnings per share – diluted; and free cash flow.
Gross mobile revenue is GAAP mobile revenue plus the related revenue share with third parties. Gross search revenue is GAAP search revenue plus the related revenue share with third parties. Revenue ex-TAC is GAAP revenue less cost of revenue – TAC. Adjusted EBITDA, non-GAAP income from operations, non-GAAP net earnings, and non-GAAP net earnings per share – diluted, exclude from the most comparable GAAP financial measures certain gains, losses, and expenses that we do not believe are indicative of ongoing results, and exclude stock-based compensation expense. Adjusted EBITDA also excludes taxes, depreciation, amortization of intangible assets, other income (expense), 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 (i.e., acquisition of property and equipment less proceeds received from disposition of property and equipment) and dividends received from equity investees.
These measures may be different than non-GAAP financial measures used by other companies. The presentation of this financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with generally accepted accounting principles (“GAAP”). Explanations of the Company’s non-GAAP financial measures and reconciliations of these financial measures to the GAAP financial measures the Company considers most comparable are included in the accompanying “Note to Unaudited Condensed Consolidated Financial Statements,” and “Supplemental Financial Data and GAAP to Non-GAAP Reconciliations.”
About Yahoo
Yahoo is a guide focused on informing, connecting, and entertaining our users. By creating highly personalized experiences for our users, we keep people connected to what matters most to them, across devices and around the world. In turn, we create value for advertisers by connecting them with the audiences that build their businesses. Yahoo is headquartered in Sunnyvale, California, and has offices located throughout the Americas, Asia Pacific (APAC) and the Europe, Middle East and Africa (EMEA) regions. For more information, visit the pressroom (pressroom.yahoo.net) or the Company’s blog (yahoo.tumblr.com).
“Ads Sold” consist of display ad impressions for paying advertisers on Yahoo Properties and Affiliate sites.
“Affiliates” 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 Group” means Alibaba Group Holding Limited. In September 2014, Alibaba Group completed its initial public offering of American Depositary Shares (“ADS”), in which Yahoo was a selling shareholder.
“Gross mobile revenue” is GAAP mobile revenue plus the related revenue share with third parties.
“Gross search revenue” is GAAP search revenue plus the related revenue share with third parties.
“Mavens revenue” is revenue generated from, without duplication: (i) mobile (as defined below), (ii) video ads and video ad packages, (iii) native ads, and (iv) Tumblr ads and fees.
“Mobile revenue” is revenue generated in connection with user activity on mobile devices, including smartphones and tablets, regardless of whether the device is accessing a mobile-optimized service. Mobile revenue is generated primarily from search and display ads. Mobile revenue also includes leads, listings and fees revenue and ecommerce revenue allocated to user activity on mobile devices.
“Net earnings” means net income (loss) attributable to Yahoo! Inc., and “net earnings per diluted share” means net income (loss) attributable to Yahoo! Inc. common stockholders per share – diluted.
“Non-Mavens revenue” is revenue generated from search ads and traditional (i.e., non-native, non-video, non-Tumblr) display ads served on PCs and also includes leads, listings and fees revenue and ecommerce revenue allocated to user activity on PCs.
“Non-traffic-driven revenue” is revenue not arising from user activity on Yahoo Properties or Affiliate sites, and includes royalty revenue, license fee revenue, amortization under the technology and intellectual property license agreement with Alibaba Group through the third quarter of 2015, and all other revenue that is not traffic-driven.
“Paid Clicks” are clicks by end-users on sponsored search listings (excluding native ads) on Yahoo Properties and Affiliate sites.
“PC” means a desktop computer, and “PC revenue” is revenue generated from search and display ads served on PCs and also includes leads, listings and fees revenue and ecommerce revenue allocated to user activity on PCs.
“Price-per-Ad” is defined as display revenue divided by our total number of Ads Sold.
“Price-per-Click” is defined as Search click-driven revenue divided by our total number of Paid Clicks.
“Search Agreement” refers to the Search and Advertising Services and Sales Agreement between Yahoo and Microsoft Corporation, as amended.
“Search click-driven revenue” is gross search revenue excluding the Microsoft RPS guarantee and search revenue from Yahoo Japan.
“TAC” refers to traffic acquisition costs. TAC consists of payments to Affiliates and payments made to companies that direct consumer and business traffic to Yahoo Properties.
“Yahoo,” “Company,” and “we” refer to Yahoo! Inc. and its consolidated subsidiaries.
“Yahoo Properties” refers to the online properties and services that Yahoo provides to users.
We periodically review, refine and update our methodologies for monitoring, gathering, and counting number of Ads Sold and Paid Clicks, and for calculating Search click-driven revenue, Price-per-Ad, and Price-per-Click.
Additional information about how “Ads Sold,” “Paid Clicks,” “Price-per-Ad,” “Price-per-Click,” and “Search click-driven revenue” are defined and calculated is included under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015, which is on file with the SEC and available on the SEC’s website at www.sec.gov.
This press release contains forward-looking statements concerning Yahoo’s expected financial performance and Yahoo’s strategic and operational plans (including, without limitation, the quotations 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, risks related to acceptance by users of new products and services; risks related to Yahoo’s ability to compete with new or existing competitors; reduction in spending by, or loss of, advertising customers; risks related to Yahoo’s ability to continue to grow its mobile users and revenue; risks related to Yahoo’s ability to continue to grow Mavens revenue; risks related to Yahoo’s ability to provide innovative search experiences and other products and services that differentiate its services and generate significant traffic; risks associated with the Search Agreement with Microsoft Corporation; risks related to acquiring or developing compelling content; risks related to joint ventures and the integration of acquisitions; risks related to possible impairment of goodwill or other assets; risks related to Yahoo’s ability to manage its operating expenses effectively; risks related to Yahoo’s ability to protect its intellectual property and the value of its brands; adverse results in litigation; security breaches; interruptions or delays in the provision of Yahoo’s services; risks related to Yahoo’s regulatory environment; risks related to fluctuations in foreign currency exchange rates; risks related to Yahoo’s international operations; risks related to Yahoo’s ability to recruit and retain key personnel; dependence on third parties for technology, services, content, and distribution; risks related to the calculation of our key operational metrics; and general economic conditions. All information set forth in this press release and its attachments is as of February 2, 2016. Yahoo does not intend, and undertakes no duty, to update this information to reflect subsequent events or circumstances. More information about potential factors that could affect the Company’s business and financial results is included under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014, as amended, and Quarterly Report on Form 10-Q for the quarter ended September 30, 2015, 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, 2015, which will be filed with the SEC in the first quarter of 2016.
Yahoo!, the Yahoo family of marks, Flickr, Xobni, and the associated logos are trademarks and/or registered trademarks of Yahoo! Inc. Tumblr is a registered trademark of Tumblr, Inc. Other names are trademarks and/or registered trademarks of their respective owners.
Yahoo! Inc.
Unaudited Condensed Consolidated Balance Sheets
(in thousands)
December 31,
December 31,
2014
2015
ASSETS
Current assets:
Cash and cash equivalents
$
2,664,098
$
1,631,911
Short-term marketable securities
5,327,412
4,225,112
Accounts receivable, net
1,032,704
1,047,504
Prepaid expenses and other current assets
420,207
602,792
Total current assets
9,444,421
7,507,319
Long-term marketable securities
2,230,892
975,961
Property and equipment, net
1,487,684
1,547,323
Goodwill
5,152,570
808,114
Intangible assets, net
470,842
347,269
Other long-term assets and investments
563,560
342,390
Investments in Alibaba Group
39,867,789
31,172,361
Investments in equity interests
2,489,578
2,503,229
Total assets
$
61,707,336
$
45,203,966
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable
$
238,018
$
208,691
Income taxes payable related to sale of Alibaba Group ADSs
3,282,293
–
Other accrued expenses and current liabilities
657,709
934,658
Deferred revenue
336,963
134,031
Total current liabilities
4,514,983
1,277,380
Convertible notes
1,170,423
1,233,485
Long-term deferred revenue
20,774
27,801
Other long-term liabilities
143,095
118,689
Deferred tax liabilities related to investment in Alibaba Group
16,154,906
12,611,867
Deferred and other long-term tax liabilities
917,563
855,324
Total liabilities
22,921,744
16,124,546
Total Yahoo! Inc. stockholders’ equity
38,741,837
29,043,537
Noncontrolling interests
43,755
35,883
Total equity
38,785,592
29,079,420
Total liabilities and equity
$
61,707,336
$
45,203,966
Yahoo! Inc.
Unaudited Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
Three Months Ended
Year Ended
December 31,
December 31,
2014
2015
2014
2015
Revenue
$
1,253,072
$
1,273,393
$
4,618,133
$
4,968,301
Operating expenses:
Cost of revenue – traffic acquisition costs
73,616
270,916
217,531
877,514
Cost of revenue – other
287,808
316,193
1,169,844
1,200,234
Sales and marketing
261,040
256,728
1,084,438
1,080,718
Product development
304,287
272,463
1,156,386
1,177,923
General and administrative
190,051
181,733
686,272
687,804
Amortization of intangibles
17,924
19,365
66,750
79,042
Gain on sale of patents
(35,094
)
–
(97,894
)
(11,100
)
Asset impairment charge
–
2,682
–
44,381
Goodwill impairment charge
88,414
4,460,837
88,414
4,460,837
Intangibles impairment charge
–
15,423
–
15,423
Restructuring charges, net
32,872
7,087
103,450
104,019
Total operating expenses
1,220,918
5,803,427
4,475,191
9,716,795
Income (loss) from operations
32,154
(4,530,034
)
142,942
(4,748,494
)
Other income (expense), net
87,550
(9,023
)
10,369,439
(75,782
)
Income (loss) before income taxes and earnings in equity interests
119,704
(4,539,057
)
10,512,381
(4,824,276
)
(Provision) benefit for income taxes
(52,340
)
13,985
(4,038,102
)
89,598
Earnings in equity interests
101,917
92,845
1,057,863
383,571
Net income (loss)
169,281
(4,432,227
)
7,532,142
(4,351,107
)
Less: Net income attributable to noncontrolling interests
(2,937
)
(2,760
)
(10,411
)
(7,975
)
Net income (loss) attributable to Yahoo! Inc.
$
166,344
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