Yahoo! Inc.(NASDAQ: YHOO) today reported results for the quarter ended June 30, 2014 after the market closed and missed on earning as revenues declined on display advertising.
Earning were $270 million, or 26 cents per share, in the 2nd Quarter, down from $331 million, or 30 cents per share, in the same period a year earlier.
Revenue fell 4% to $1.08 billion from $1.14 billion. After subtracting commissions paid to Yahoo’s ad partners, revenue totaled $1.04 million, down 3% from $1.07 billion a year ago.
Analysts were expecting adjusted earnings of 39 cents per share and post-commission revenue totaling $1.09 billion.
However Yahoo shares seemed to be saved by its investment in China’s Alibaba Group, in which it holds a 24% and which is headed for one of the largest IPO’s ever especially when Yahoo announced it will have to sell less shares in the IPO.
Yahoo CEO Marissa Mayer is quoted as saying:
“Our top priority is revenue growth and by that measure, we are not satisfied with our Q2 results. While several areas showed strength, their growth was offset by declines.
Yahoo Search, for example, had a strong quarter, growing 6% year-over-year on a revenue ex-TAC basis and 19% year-over-year in search click-driven revenue.
Our social, mobile, video and native areas also grew with significant momentum, collectively gaining nearly 90% year-over-year.
However, display remains an area of investment and transition.
In Q2, we saw display revenue decline, further highlighting the fact that we need to work faster to ameliorate the negative trends. I believe we can and will do better moving forward.
“Overall, I remain confident in Yahoo’s future, our strategy, and our return to long-term growth.”
Business Highlights
Yahoo requested and Alibaba Group agreed to an amendment to the share repurchase agreement that reduces the maximum number of shares that Yahoo is required to sell in connection with Alibaba’s initial public offering from 208 million shares to 140 million shares.
Yahoo continued to launch new products and improve existing properties in the second quarter, innovating for the daily habits of users around the world. The Company launched the Yahoo Aviate intelligent homescreen; Yahoo News Digest for Android, international and Canadian editions; Yahoo Screen for Android; a new version of Yahoo Mail for iPhone and Android; Flickr for iPhone, iPod Touch, and Android; a new Flickr experience on Apple TV; and three new digital magazines powered by Tumblr: Yahoo Travel, Yahoo Movies, and Yahoo Beauty. Notably, Yahoo’s recently launched News Digest won the Apple Design Award 2014.
Second Quarter 2014 Financial Highlights
Display:
GAAP display revenue was $436 million for the second quarter of 2014, an 8 percent decrease compared to $472 million for the second quarter of 2013.
Display revenue ex-TAC was $394 million for the second quarter of 2014, a 7 percent decrease compared to $423 million for the second quarter of 2013.
The number of Ads Sold increased approximately 24 percent compared to the second quarter of 2013.
Price-per-Ad decreased approximately 24 percent compared to the second quarter of 2013.
Search:
GAAP search revenue was $428 million for the second quarter of 2014, a 2% increase compared to $418 million for the second quarter of 2013 (which included the Microsoft RPS guarantee).
Search revenue ex-TAC was $428 million for the second quarter of 2014, a 6% increase compared to $403 million for the second quarter of 2013 (which included the Microsoft RPS guarantee).
The number of Paid Clicks increased approximately 3% compared to the second quarter of 2013.
Price-per-Click increased approximately 15% compared to the second quarter of 2013.
Cash Balance:
Cash, cash equivalents, and investments in marketable securities were $4.3 billion as of June 30, 2014 compared to $5 billion as of December 31, 2013, a decrease of $0.7 billion.
During the second quarter of 2014, Yahoo repurchased approximately 21 million shares for $719 million.
“We are pleased to announce today that we have entered into an amendment to the share repurchase agreement with Alibaba, reducing the number of shares that Yahoo is required to sell at the IPO from 208 million shares to 140 million shares.
In addition, we are aware that there has been much discussion around the allocation of the Alibaba IPO proceeds,” said Ken Goldman, CFO of Yahoo. “We would like to take this opportunity to let our investors know that we are committed to return at least half of the after-tax IPO proceeds to shareholders, in line with our overarching commitment to maximizing shareholder value through prudent capital allocation.”
