Company Posts Revenues of $907 Million, Operating Income of $172 Million, Operating Income Before Depreciation and Amortization of $260 Million.
Yahoo reported results for the third quarter ended September 30, 2004.
“Yahoo! began to demonstrate the next stage in the Company’s evolution in the third quarter, and in doing so recorded its sixth consecutive quarter of record revenue,” said Terry Semel, chairman and chief executive officer, Yahoo!. “We accelerated the pace at which new products and services were developed, which in-turn helped increase the level of user engagement across the Yahoo! network. Our engaged audience enables us to deliver an unmatched set of advertising opportunities, providing deeper value to our marketers, and supporting the mantra that great products are the key to a great business.”
— Revenues were $907 million for the third quarter of 2004, a 154 percent increase compared to $357 million for the same period of 2003.
— Revenues excluding traffic acquisition costs (“TAC”) were $655 million for the third quarter of 2004, an 84 percent increase compared to the $357 million for the same period of 2003.
— Gross profit for the third quarter of 2004 was $574 million, an 86 percent increase compared to $310 million for the same period of 2003.
— Operating income for the third quarter of 2004 was $172 million, an increase of 106 percent compared to $83 million for the same period of 2003.
— Operating income before depreciation and amortization for the third quarter of 2004 was $260 million, a 122 percent increase compared to $117 million for the same period of 2003.
— Cash flow from operating activities for the third quarter of 2004 was $267 million, an increase of 97 percent compared to $136 million for the same period of 2003.
— Free cash flow for the third quarter of 2004 was $202 million, a 108 percent increase over the $97 million reported for the same period of 2003.
— Net income for the third quarter of 2004 was $253 million or $0.17 per diluted share (including a net impact of $129 million, or $0.09 per share, related to the sale of an investment and the associated tax benefit resulting from fully reserved capital losses becoming realizable). Excluding this gain, net income for the third quarter was $124 million, or $0.09 per diluted share. This compares with net income of $65 million or $0.05 per diluted share for the same period of 2003.
— The provision for income taxes of $67 million yielded an effective tax rate of 21% for the third quarter of 2004 as a result of the previously described tax benefit associated with the capital loss carryforwards. The provision for income taxes in the same period of 2003 was $40 million, and yielded an effective tax rate of 38%.
“Yahoo! generated its highest-ever level of free cash flow in the third quarter, more than doubling the amount generated one year ago,” said Susan Decker, chief financial officer, Yahoo!. “We believe that long-term free cash flow generation is the most important factor driving shareholder value and we are very pleased with both its magnitude in this quarter and the strong foundation on which it is based, positioning us well for sustained growth.”
Third Quarter 2004 Financial Highlights
Marketing services revenue for the third quarter of 2004 totaled $765 million, a 212 percent increase from the $245 million reported in the same period in 2003. Listings revenue for the third quarter of 2004 totaled $37 million, a 15 percent increase compared to the $32 million reported in the same period in 2003. The year over year increases in marketing services and listings revenues resulted from growth in Yahoo!’s organic revenue and incremental revenue associated with acquisitions completed during the past year. Fees revenue for the third quarter of 2004 totaled $104 million, a 31 percent increase compared to the $79 million reported in the same period in 2003. The year over year increase in fees revenues was primarily driven by the growth in the number of paying relationships for Yahoo!’s premium services, which were approximately 7.6 million at September 30, 2004 compared to approximately 4.2 million at September 30, 2003.
United States revenues in the third quarter of 2004 were $655 million, an increase of $355 million, or 118 percent, compared to the same period in 2003. International revenues in the third quarter of 2004 were $252 million, an increase of $195 million, or 341 percent, compared to the same period in 2003.
United States segment operating income before depreciation and amortization in the third quarter of 2004 was $223 million, an increase of $117 million, or 109 percent, compared to the same period of 2003. International segment operating income before depreciation and amortization in the third quarter of 2004 was $36 million, an increase of $26 million, or 251 percent, compared to the same period in 2003. These increases were primarily a result of the increase in US and International revenues and continued efforts to control discretionary spending during the period.
Free cash flow was $202 million in the third quarter of 2004 and was the largest contributor to the increase of $425 million in our cash, cash equivalents and investments in marketable debt securities. Our cash, cash equivalents and investments in marketable debt securities grew from approximately $2,646 million at June 30, 2004 to $3,072 million at September 30, 2004. Together with free cash flow, this increase is a result of $106 million of cash generated from the issuance of common stock as a result of the exercise of employee stock options and $191 million in net proceeds from the sale of an investment, offset by a net $46 million used in structured stock repurchase transactions and $28 million used for other investing activities, including acquisitions.
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