Smaaz’s Blog

Yahoo! Reports Second Quarter 2007 Financial Results

July 19th, 2007

Yahoo! reported results for the second quarter ended June 30, 2007, earlier this week.

“I am focused on doing everything we need to do to strengthen our business, capture long-term growth opportunities and create increased value for our shareholders,” said Jerry Yang, co-founder and chief executive officer, Yahoo! Inc. “By sharpening our focus, speeding execution, building our technology and talent, and investing in key growth areas, we can put Yahoo! on a clear path to fulfill its potential as an Internet leader.”

Second Quarter 2007 Financial Results

• Revenues were $1,698 million for the second quarter of 2007, an 8 percent increase compared to $1,576 million for the same period of 2006.

• Marketing services revenues were $1,486 million for the second quarter of 2007, a 7 percent increase compared to $1,386 million for the same period of 2006.

• Marketing services revenues from Owned and Operated sites were $887 million for the second quarter of 2007, an 18 percent increase compared to $752 million for the same period of 2006.

• Marketing services revenues from Affiliate sites were $599 million for the second quarter of 2007, a 5 percent decrease compared to $634 million for the same period of 2006.

• Fees revenues were $212 million for the second quarter of 2007, a 12 percent increase compared to $190 million for the same period of 2006.

• Revenues excluding traffic acquisition costs (”TAC”) were $1,244 million for the second quarter of 2007, an 11 percent increase compared to $1,123 million for the same period of 2006.

• Gross profit for the second quarter of 2007 was $1,015 million, a 9 percent increase compared to $930 million for the same period of 2006.

• Operating income for the second quarter of 2007 was $185 million, a 19 percent decrease compared to $230 million for the same period of 2006.

• Operating income before depreciation, amortization and stock-based compensation expense for the second quarter of 2007 was $474 million, a 4 percent increase compared to $457 million for the same period of 2006.

• Cash flow from operating activities for the second quarter of 2007 was $406 million, a 6 percent decrease compared to $430 million for the same period of 2006.

• Free cash flow for the second quarter of 2007 was $328 million, an 8 percent decrease compared to $358 million for the same period of 2006.

• Net income for the second quarter of 2007 was $161 million or $0.11 per diluted share compared to $164 million or $0.11 per diluted share for the same period of 2006.

• Non-GAAP net income for the second quarter of 2007 was $238 million or $0.17 per diluted share compared to non-GAAP net income of $241 million or $0.16 per diluted share for the same period of 2006.

• The provision for income taxes for the second quarter of 2007 was $88 million and yielded an effective tax rate of 41 percent. The provision for income taxes for the second quarter of 2006 was $123 million and yielded an effective tax rate of 46 percent.

• Explanations of the Company’s non-GAAP financial measures and the related reconciliations to the GAAP financial measures the Company considers most comparable are included in the accompanying “Note to Unaudited Condensed Consolidated Statements of Income,” “Reconciliations to Unaudited Condensed Consolidated Statements of Income,” and “Reconciliation of GAAP Net Income and GAAP Net Income Per Share to Non-GAAP Net Income and Non-GAAP Net Income Per Share.”

“Over the last several months, we have made considerable progress driving much tighter focus within our core operations to drive growth. This will take time and continued investment, but we are operating with a great sense of urgency,” said Susan Decker, president, Yahoo! Inc. “In order to create meaningful value for shareholders and to drive growth in the future, we will aggressively look at all opportunities to allocate our capital and talent in the most effective ways.”

Segment Financial Results

• United States segment revenues for the second quarter of 2007 were $1,119 million, a 5 percent increase compared to $1,070 million for the same period of 2006.

• International segment revenues for the second quarter of 2007 were $579 million, a 15 percent increase compared to $506 million for the same period of 2006.

• United States segment operating income before depreciation, amortization and stock-based compensation expense for the second quarter of 2007 was $362 million, a 6 percent increase compared to $341 million for the same period of 2006.

• International segment operating income before depreciation, amortization and stock-based compensation expense for the second quarter of 2007 was $111 million, a 4 percent decrease compared to $116 million for the same period of 2006.

Cash Flow Information

Free cash flow was $328 million for the second quarter of 2007 compared to $358 million for the same period of 2006. In addition to free cash flow, Yahoo! generated $132 million from the issuance of common stock as a result of the exercise of employee stock options. This was offset by $418 million used for direct stock repurchases and $24 million used for acquisitions. Cash, cash equivalents and investments in marketable debt securities were $3,152 million at June 30, 2007 as compared to $3,128 million at March 31, 2007, an increase of $24 million.

“While Yahoo! delivered another quarter of revenue growth, profitability and most importantly, strong free cash flow, we are committed to making continued improvements across all of our financial metrics,” said Blake Jorgensen, chief financial officer, Yahoo! Inc. “Though there is hard work ahead, I believe the potential for this great company is enormous, and I look forward to partnering with Jerry and Sue to help take Yahoo! into its next phase of growth.”

Entry Filed under: Yahoo!