Company Posts Full Year Revenues of $3,575 Million, Operating Income of $689 Million, Operating Income Before Depreciation and Amortization of $1,032 Million
SUNNYVALE, Calif. January 18, 2005 - Yahoo! Inc. (Nasdaq: YHOO) today reported results for the fourth quarter and full year ended December 31, 2004.
Yahoo! moved at an impressive pace in the fourth quarter, capping another record year for the Company. Our users were more engaged in 2004 than ever before because of Yahoo!s relentless focus on delivering the most innovative products and services on the Internet, said Terry Semel, chairman and chief executive officer, Yahoo!. Yahoo! also benefited from the growing acceptance of online advertising with marketers who recognize its effectiveness and are therefore increasingly using this platform to reach their consumers.
Revenues were $1,078 million for the fourth quarter of 2004, a 62 percent increase compared to $664 million for the same period of 2003.
Revenues excluding traffic acquisition costs (TAC) were $785 million for the fourth quarter of 2004, a 54 percent increase compared to $511 million for the same period of 2003. Gross profit for the fourth quarter of 2004 was $691 million, a 56 percent increase compared to $443 million for the same period of 2003.
Operating income for the fourth quarter of 2004 was $235 million, a 149 percent increase compared to $94 million for the same period of 2003.
Operating income before depreciation and amortization for the fourth quarter of 2004 was $327 million, an 84 percent increase compared to $178 million for the same period of 2003.
Cash flow from operating activities for the fourth quarter of 2004 was $337 million, a 231 percent increase compared to $102 million for the same period of 2003.
Free cash flow for the fourth quarter of 2004 was $251 million, a 172 percent increase compared to $92 million for the same period of 2003.
Net income for the fourth quarter of 2004 was $373 million or $0.25 per diluted share (including a net impact of $185 million, or $0.13 per diluted share, related to the sale of an investment). Excluding this gain, net income for the fourth quarter was $187 million, or $0.13 per diluted share. This compares with net income of $75 million or $0.05 per diluted share for the same period of 2003.
Yahoo!s strong fourth quarter performance completes our third consecutive year of delivering strong organic revenue growth, expanding operating margins, and generating substantial free cash flow said Susan Decker, chief financial officer, Yahoo!. We are attracting more and more users to Yahoo!s network of services and driving their usage deeper with more relevant products and services. This deeper usage is the real magic behind the surpassing of our financial objectives.
Revenues for the year ended December 31, 2004 were $3,575 million, a 120 percent increase compared to $1,625 million for 2003.
Revenues excluding TAC for 2004 were $2,600 million, a 77 percent increase compared to $1,473 million for 2003.
Gross profit for 2004 was $2,276 million, an 80 percent increase compared to $1,267 million for 2003.
Operating income for 2004 was $689 million, a 133 percent increase compared to $296 million for 2003.
Operating income before depreciation and amortization for 2004 was $1,032 million, a 116 percent increase compared to $477 million for 2003.
Cash flow from operating activities for 2004 was $1,090 million, a 155 percent increase compared to $428 million for 2003.
Free cash flow for 2004 was $844 million, a 149 percent increase compared to $339 million for 2003.
Net income for 2004 was $840 million or $0.58 per diluted share (including a net impact of $314 million, or $0.22 per diluted 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 2004 was $526 million, or $0.36 per diluted share. This compares with net income of $238 million or $0.18 per diluted share for 2003.
The provision for income taxes of $438 million yielded an effective tax rate of 37% for 2004 as a result of the previously described tax benefit associated with the capital loss carryforwards. The provision for income taxes for 2003 was $147 million, and yielded an effective tax rate of 43%.
Fourth Quarter and Year Ended 2004 Financial Highlights
Marketing services revenue for the fourth quarter of 2004 totaled $911 million, a 67 percent increase from the $545 million reported for the same period of 2003. Marketing services revenue for the year ended December 31, 2004 totaled $3,002 million, a 150 percent increase from the $1,200 million reported for 2003. Listings revenue for the fourth quarter of 2004 totaled $38 million, a 15 percent increase compared to the $33 million reported for the same period of 2003. Listings revenue for the year ended December 31, 2004 totaled $147 million, a 16 percent increase compared to the $127 million reported for 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 fourth quarter of 2004 totaled $129 million, a 52 percent increase compared to the $85 million reported for the same period of 2003. Fees revenue for the year ended December 31, 2004 totaled $426 million, a 43 percent increase compared to the $298 million reported for 2003. The year over year increases in fees revenues were primarily driven by the growth in the number of paying relationships for Yahoo!'s premium services, which were approximately 8.4 million at December 31, 2004 compared to approximately 4.9 million at December 31, 2003.
United States revenues for the fourth quarter of 2004 were $775 million, a 42 percent increase from the $546 million reported for the same period of 2003. United States revenues for the year ended December 31, 2004 were $2,653 million, a 96 percent increase from the $1,355 million reported for 2003. International revenues for the fourth quarter of 2004 were $303 million, a 156 percent increase from the $118 million reported for the same period of 2003. International revenues for the year ended December 31, 2004 were $921 million, a 241 percent increase from the $270 million reported for 2003.
United States segment operating income before depreciation and amortization in the fourth quarter of 2004 was $278 million, a 68 percent increase from the $166 million reported for the same period of 2003. United States segment operating income before depreciation and amortization for the year ended December 31, 2004 was $891 million, a 102 percent increase from the $441 million reported for 2003. International segment operating income before depreciation and amortization in the fourth quarter of 2004 was $49 million, a 315 percent increase from the $12 million for the same period of 2003. International segment operating income before depreciation and amortization for the year ended December 31, 2004 was $141 million, a 291 percent increase from the $36 million reported for 2003. These increases were primarily a result of the increases in United States and International revenues and continued efforts to control discretionary spending.
Free cash flow was $251 million in the fourth quarter of 2004 and $844 million for the year ended December 31, 2004. Free cash flow was the largest contributor to the increase of $1,176 million in our cash, cash equivalents and investments in marketable debt securities which grew from approximately $2,566 million at December 31, 2003 to $3,742 million at December 31, 2004. Other contributors to the increase were $651 million of cash generated from the issuance of common stock as a result of the exercise of employee stock options, and $503 million in proceeds from sales of marketable equity securities, offset by a net $70 million used in structured stock repurchase transactions and $756 million used for acquisitions.
Please refer to the Note to Unaudited Condensed Consolidated Statements of Operations for definition of these key financial measures and Business Outlook attached to this press release.
Quarterly Conference Call
Yahoo! will host a conference call to discuss fourth quarter results at 5:00 p.m. Eastern Time today. A live Webcast of the conference call, together with supplemental financial information can be accessed through the Company's Investor Relations Web site at http://yhoo.client.shareholder.com/earnings.cfm. In addition, an archive of the Webcast can be accessed through the same link. An audio replay of the call will be available following the conference call by calling 877-213-9653 or 630-652-3041, reservation number: 10575210.
About Yahoo!
Yahoo! Inc. is the No. 1 Internet brand globally and the most trafficked Internet destination worldwide. Yahoo! provides online products and services essential to consumers 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, decreases or delays in marketing services spending, the demand by customers for Yahoo!'s premium services; acceptance of new products and services; the Companys ability to compete with new or existing competitors; general economic conditions; risks related to the integration of recent acquisitions; 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; and the dependence on third parties for technology, services, content and distribution. All information set forth in this release and its attachments is as of January 18, 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, 2003 and the Quarterly Report on Form 10-Q for the quarter ended September 30, 2004, which are 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 Annual Report on Form 10-K for the year ended December 31, 2004, which will be filed with the SEC in the first quarter of 2005.
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