This summary is based on the fourth quarter fiscal 2008 earnings call conducted by Yahoo Inc! (YHOO) on 27 January, 2009.
Management:
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CEO: Carol Bartz
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CFO: Blake Jorgensen
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Co-founder and Chief Yahoo: Jerry Yang
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IR: Marta Nicols
Key Investors Issues
- Revenues of $1.81 billion were down 1% from $1.83 billion in 2007.
- Net loss was $303 million or 22 cents per diluted share compared to net income of $206 million or 15 cents per diluted share for the same period of 2007.
Full Year Highlights:
- Revenues were $7.21 billion, a 3% increase compared to $6.97 billion for 2007.
- Net income of $424 million or 29 cents per diluted share, was down 36% from $660 million or 47 cents per diluted share for 2007.
Fourth Quarter Highlights
The firm delivered revenues of $1.81 billion, down 1% compared to $1.83 billion in 2007 as worldwide owned and operated search revenue grew 11%, and the US stood out as a bright spot with 18% growth.
- US queries were up more than 10% and RPS grew in the mid-single digits while international search revenue was down, but closer to flat, on a constant currency basis.
- Worldwide owned and operated display revenue declined 2%, continuing the deceleration seen since the third quarter of 2008, when the softer economic environment began to impact revenues.
- The affiliate business declined approximately 4%, as it continued its efforts to improve affiliate network quality and listings revenue was down 4% as a result of the sale of Kelkoo, which occurred in late November.
Tight expense management enabled Yahoo to deliver $542 million of adjusted operating cash flow for the quarter, which exceeded the midpoint of the outlook.
- The firm ended the year with approximately 13,600 employees, down over 1,600 from the end of the prior quarter and such cost initiatives will result in over $400 million of annual run rate cash cost savings.
- Net loss was $303 million or 22 cents per diluted share compared to net income of $206 million or 15 cents per diluted share for the same period of 2007.
- The firm ended the year with $3.5 billion of cash and marketable securities.
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Marketing services business revenue was $1.6 billion as owned and operated search revenue grew due to increases in both volume and RPS in the US market.
- During the period, the US web search share has stabilized according to comScore, demonstrating that the search product investments made over the last couple of years are paying off.
- Owned and operated display revenue softened further, declining 2% and both US and international display revenues were down, though international would have shown positive growth on a constant currency basis.
- The affiliate business was down as the firm continues to push network quality initiatives to improve ROI for advertisers.
Fees revenue for the quarter declined 12%, principally as a result of the ongoing transition of the broadband partnerships to an ad revenue sharing model.
- US GAAP revenue increased 2% and revenue ex-TAC decreased about 1% while international GAAP revenue decreased 10% and revenue ex-TAC decreased 5%.
- The firm recorded $108 million in restructuring charges for severance, facilities and other restructuring costs, offset by an $18 million credit related to the reversal of stock-based compensation expense as a result of the workforce reduction.
- Yahoo recorded $488 million non-cash goodwill impairment charge related to the international segment.
Strategic Insights:
- The company has made strong progress on a number of innovations for users and advertisers, including developing major new platforms like APT from Yahoo!, which is simplifying the process of buying and selling display advertising.
- YOS will enable more seamless development and more social user experiences; launching multiple new innovations in search, including Search Assist, SearchMonkey and BOSS; allowing user votes to influence the content shown on sites with Yahoo! Buzz.
- Yahoo! grew its share of user engagement and time spent online.
- With advertisers cutting and consolidating budgets, and seeking greater efficiency and visibility in a tough macro climate, the ability to deliver better return on marketing dollars is driving growth with several large advertisers.
- Yahoo has been introducing new features and capabilities to search at a faster pace over the last year, and in late 2008 Yahoo! query share began to stabilize.
First Quarter 2009 Outlook:
- Revenue is expected to be in the range of $1.525 billion to $1.725 billion.
- Operating cash flow is to be in the range of $365 million to $415 million.
Key questions and answers from the fourth quarter earnings call conducted by Yahoo Inc! (YHOO) on 27 January, 2009.
