Yahoo! Reports First Quarter 2005 Financial Results; Gross Profits Up 51 Percent
Revenues - $1,174 Million, Operating Income - $247 Million, Operating Income Before Depreciation and Amortization - $345 Million
SUNNYVALE, Calif. April 19, 2005 - Yahoo! Inc. (Nasdaq: YHOO) today reported results for the first quarter ended March 31, 2005.
Yahoo! entered 2005 on a high note, delivering strong growth and record revenue for the eighth consecutive quarter, further validating the strength of Yahoo!s business model, said Terry Semel, chairman and chief executive officer, Yahoo!. We are on the cusp of witnessing a significant increase in engagement of consumers on the Internet and believe we are best positioned to capitalize on the many opportunities to which we are exposed.
Consolidated Financial Results
Revenues were $1,174 million for the first quarter of 2005, a 55 percent increase compared to $758 million for the same period of 2004.
o Marketing services revenue was $1,025 million for the first quarter of 2005, a 54 percent increase compared to $665 million for the same period of 2004.
o Fees revenue was $149 million for the first quarter of 2005, a 61 percent increase compared to $93 million for the same period of 2004.
Revenues excluding traffic acquisition costs (TAC) were $821 million for the first quarter of 2005, a 49 percent increase compared to $550 million for the same period of 2004.
Gross profit for the first quarter of 2005 was $720 million, a 51 percent increase compared to $476 million for the same period of 2004.
Operating income for the first quarter of 2005 was $247 million, an 87 percent increase compared to $132 million for the same period of 2004.
Operating income before depreciation and amortization for the first quarter of 2005 was $345 million, a 64 percent increase compared to $211 million for the same period of 2004.
Cash flow from operating activities for the first quarter of 2005 was $386 million, a 63 percent increase compared to $236 million for the same period of 2004.
Free cash flow for the first quarter of 2005 was $318 million, a 61 percent increase compared to $197 million for the same period of 2004.
Net income for the first quarter of 2005 was $205 million or $0.14 per diluted share (including net income of $15 million, or $0.01 per diluted share, related to the sale of certain investments and settlements). This compares with net income of $101 million or $0.07 per diluted share for the same period of 2004.
In the first quarter, Yahoo! continued to grow its user base and drive deeper engagement, the core user fundamentals that lead to favorable financial returns, said Susan Decker, chief financial officer, Yahoo!. We continued to increase levels of free cash flow while investing in the business, demonstrating the leverage in our operating model, and driving long-term shareholder value.
Segment Financial Results
United States revenues for the first quarter of 2005 were $819 million, a 37 percent increase from the $599 million reported for the same period of 2004.
International revenues for the first quarter of 2005 were $355 million, a 124 percent increase from the $159 million reported for the same period of 2004.
United States segment operating income before depreciation and amortization for the first quarter of 2005 was $270 million, a 41 percent increase from the $191 million reported for the same period of 2004.
International segment operating income before depreciation and amortization for the first quarter of 2005 was $75 million, a 280 percent increase from the $20 million reported for the same period of 2004.
Cash Flow Information
Free cash flow of $318 million in the first quarter of 2005 was the largest contributor to the increase of $110 million in our cash, cash equivalents and investments in marketable debt securities which grew from $3,742 million at December 31, 2004 to $3,852 million at March 31, 2005. In addition, we generated $90 million from the issuance of common stock as a result of the exercise of employee stock options. These increases were offset by $165 million used for direct share repurchases, a net $96 million used in structured stock repurchase transactions, and $54 million used for acquisitions.
Please refer to the Note to Unaudited Condensed Consolidated Statements of Operations for definitions of certain key financial measures used here and in the Business Outlook attached to this press release.
About Yahoo!
Yahoo! Inc. is a leading global internet brand and one of the most trafficked Internet destinations worldwide. Yahoo! seeks to provide online products and services essential to users lives, and offers a full range of tools and marketing solutions for businesses to connect with Internet users around the world. Yahoo! is headquartered in Sunnyvale, Calif.
This press release includes the following financial measures defined as non-GAAP financial measures by the Securities and Exchange Commission: revenues excluding traffic acquisition costs, operating income before depreciation and amortization, and free cash flow. 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. See Note to Unaudited Condensed Consolidated Statements of Operations and Reconciliations to Unaudited Condensed Consolidated Statements of Operations 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 (as described without limitation in the Business Outlook section and 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 Companys ability to compete with new or existing competitors; 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 the integration of recent acquisitions; risks related to the Companys international operations; failure to manage growth and diversification; adverse results in litigation, including intellectual property infringement claims; the Companys 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 release and its attachments is as of April 19, 2005. Yahoo! undertakes no duty to update this information. 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 fiscal year ended December 31, 2004 which is 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 March 31, 2005, which will be filed with the SEC in the second quarter of 2005.
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