Yahoo! Reports First Quarter 2001 Financial Results
Company Posts $180.2 Million in Revenue and $7.6 Million in Pro-Forma Net Income
SANTA CLARA, Calif.--(BUSINESS WIRE)--April 11, 2001--Yahoo! Inc. (Nasdaq:YHOO - news) today reported net revenues totaling $180,215,000 for the first quarter ended March 31, 2001, compared to net revenues of $230,807,000 for the first quarter of 2000. Pro-forma net income for the quarter ended March 31, 2001 was $7,643,000 or $0.01 per share diluted(1). This compares to pro-forma net income of $60,506,000 or $0.10 per share diluted for the comparable period in the previous year(1). Including pro-forma items, net loss for the first quarter ended March 31, 2001 was $11,486,000 or $0.02 per share diluted, compared to net income of $67,599,000 or $0.11 per share diluted reported in the comparable period of the previous year.
To balance Yahoo!'s investment in its growth areas with the desire to modify its near-term business plan to reflect the current economic and capital market slowdown, the company conducted a comprehensive operational review during the quarter. ``The principle that guided our decisions was the determination of where we needed to invest to take advantage of future opportunities and ensure that we deliver long-term value to consumers, customers, employees and stockholders without compromising the quality of our service,'' said Tim Koogle, Yahoo!'s chairman and CEO. ``While we streamline our business over the second quarter to become more efficient and align our costs with the current market environment, we remain steadily focused on developing and delivering the essential services that will result in Yahoo! becoming the Internet's leading global consumer and business services company.''
As part of the adjustments to manage expenses, the company plans to take several measures to ensure that the company has the operating and financial flexibility to deliver long-term value. These measures include a reduction of its 3,510 employees by approximately 12 percent; the discontinuation or reallocation of some secondary services on Yahoo!'s network of properties; a decrease in discretionary marketing, distribution and promotional expenses; outsourcing of some operations; and centralization of some businesses across the global organization. ``We made some decisions that were difficult, but which ultimately balance the investment in our growth areas with the adjustments to our near-term business plan to better position Yahoo! for long-term growth,'' Koogle said.
Global Consumer Audience and Traffic Growth
The global network of Yahoo!® properties and essential services continues to be the most popular Web destination worldwide and is accessed by the largest audience of loyal online consumers (Nielsen//NetRatings, January 2001). Both audience and page view numbers grew significantly during the quarter with total unique users reaching 192 million during March, up from 145 million in March 2000. A record 67 million active registered members logged onto Yahoo! during March 2001, a 60 percent increase from 42 million in March 2000.
The company's traffic increased to more than 1.1 billion page views per day on average during March 2001, increasing more than 22 percent from page views served during December 2000. Yahoo! Japan and Yahoo! Europe's traffic, which is included in these page view totals, increased from December 2000 to more than 144 million and 59 million page views per day on average in March, respectively. In addition, Yahoo! is ranked No. 1 among the top Internet sites in average combined time spent by home and work users in the United States, who spent an average of one hour and 36 minutes on Yahoo!'s network in February 2001 (Nielsen//NetRatings).
Premium Services
Yahoo! continues to execute upon its strategy to deliver value-added premium services to businesses and consumers and continues to experience adoption of these services. Yahoo! recently announced a relationship with Duet, the online digital music subscription service created by the world's two largest music companies, Universal Music Group and Sony Music Entertainment, to promote and present Duet's U.S. service to Yahoo!'s 100 million North American members. The service is scheduled to go live this summer. Yahoo! also introduced the Yahoo! Finance Real-Time Package which delivers real-time, streamed stock quotes, news and analysis to desktops and wireless devices for $9.95 each month.
``As evidenced by the significant increases in our audience and traffic figures, Yahoo! continues to be a leader when it comes to attracting and retaining online consumers. Yahoo! users stay longer and consume more services than users of any other network on the Web,'' said Jeff Mallett, Yahoo!'s president and chief operating officer. ``The loyalty of our users is one of our strongest core assets, and their acceptance of the premium services we have rolled out is a key component to our overall strategy. As we remain focused on building the Internet's leading consumer and business services company, the increase in active registered users demonstrates our unique ability to convert visitors into members.''
Business and Enterprise Services
Yahoo!'s business and enterprise services initiative continued to make great strides during the quarter with new customers and signed agreements. Yahoo! and SAP recently announced an agreement to develop a joint enterprise portal that will be marketed directly to both companies' current and prospective customers, as well as through their respective sales channels. Through this agreement, Yahoo! will gain access to the desktops of SAP's customers which represents approximately six million users. Yahoo! now has 22 major corporate clients licensed to make Corporate Yahoo! available to nearly 850,000 employees, customers and business partners. New customers include Enron, Exodus Communications, SmartForce, and the State of Delaware through Yahoo!'s alliance with Accenture.
Yahoo! Broadcast Services signed key new service agreements with a number of clients, including Exodus Communications, Compaq Computer, Nortel Networks, Ralston Purina and Texas Instruments. Additionally, implementation of Yahoo! Webcast Studio, a Webcast production platform that streamlines delivery of rich, interactive events, has helped fine-tune the efficiency and broadcast quality of streaming events.
Interactive Marketing and Merchant Services
Although the general advertising market in the first quarter was impacted by a decline in spending across all types of media, Yahoo! continued to customize and deliver interactive, targeted measurable marketing programs for top-tier advertisers and merchants.
Yahoo! served 3,145 advertisers and merchants during the first quarter, including 1,385 clients outside the United States. New accounts and major traditional brands served in the first quarter include Kia Motors America, Restoration Hardware and Miller Brewing Company.
Yahoo! continued to prove the value of its integrated marketing programs, with 92 percent of the company's top 200 advertisers in the fourth quarter 2000 continuing programs in the first quarter 2001.
Average contract length of Yahoo!'s entire client base increased to 285 days, up from 252 days in December 2000.
Forrester Research named Yahoo!'s users the most valuable shopping audience and Consumer Reports named Yahoo! the ``best shopping aggregator'' (March 2001).
Yahoo! enabled approximately $1.4 billion in commerce transactions, maintaining steady growth from the fourth quarter 2000, which is traditionally stronger for retailers.
Management Update
As part of its focus to add bench strength to its current management team, Yahoo! appointed a number of new executives during the quarter. Key hires included Greg Coleman as executive vice president of North American operations, David Graves as senior vice president of Media and Leisure, Jim Brock as senior vice president of Major Initiatives, and Jim Lewandowski as vice president of Business and Enterprise Sales. Other significant management hires include Yahoo! Auctions vice president and general manager, Norman Hullinger; George Williams, vice president and general manager of Yahoo! Finance; and Tiana Wimmer, general manager of Yahoo! Direct Marketing.
In addition, Yahoo! said it is very encouraged by the progress it is making on its CEO search and by the high level of interest from strong, qualified candidates with diverse backgrounds.
In a separate announcement today, Yahoo! said its senior vice president of international operations, Heather Killen, will leave the company in mid-June. The company has retained Egon Zehnder International, the Switzerland-based executive search firm, and Killen will work closely with the Yahoo! senior management team to recruit her successor and manage the transition.
Business Outlook
``We are optimistic about Yahoo!'s long-term outlook given the value of our powerful network of properties and services, the strength of our brand, the quality of our talented employees, and our large base of active global members,'' said Susan Decker, Yahoo!'s chief financial officer and senior vice president of Finance and Administration. ``The health of our balance sheet and our corporate commitment to responsibly drive our business to at least breakeven, and despite near-term challenges will allow us to emerge from this economic downturn stronger and focused on monetizing our large and growing user base.''
The company expects revenues for the second quarter 2001 to be between $165 and $185 million. For the full year 2001, business segments for advertising/commerce and business services are expected to represent approximately 80 percent and 20 percent, respectively, of total revenue. For the full year 2001, Yahoo!'s expense budgets are based on revenues coming in at a range of $700 to $775 million.
Yahoo! expects pro-forma earnings before interest, depreciation and amortization (EBITDA) for the second quarter 2001 to range from a $10 million loss to breakeven. The company also expects pro-forma earnings per share (EPS) for the second quarter 2001 to be approximately breakeven. For the full year 2001, pro-forma EBITDA are expected to be between breakeven and $50 million. The company expects pro-forma EPS in the range of $0.02 to $0.06 for the full year 2001.
The company expects capital expenditures to be approximately $35 to $45 million in the second quarter 2001 and $135 to $145 million for the full year 2001. Charges related to amortization are expected to be approximately $16 million in the second quarter and $55 to $60 million for the full 2001 year. Yahoo! also expects depreciation to be approximately $18 to $19 million in the second quarter and $75 to $80 million for fiscal year 2001. As a result of the plan to reduce operating costs, Yahoo! estimates it will record restructuring-related charges in the range of $40 to $60 million in the second quarter 2001. Pro-forma tax rate for the company is expected to be 48 percent for the full year 2001.
The Business Outlook for the company will be available on the company's Investor Relations Web site throughout the current quarter. It is currently expected the Business Outlook will not be updated until the release of Yahoo!'s next quarterly earnings announcement; however, Yahoo! reserves the right to update its Business Outlook at any time for any reason.
Quarterly Conference Call
Yahoo! will host a conference call today to discuss first quarter results at 5:00 p.m. Eastern Time. A live Webcast of the conference call can be accessed at webevents.broadcast.com. In addition, a replay of the call will be available for 48 hours following the conference call and can be accessed through the ``Conference Calls'' area of the company's Investor Relations Web site at www.yahoo.com/info/investor, or by calling 800/633-8284, reservation No. 16498856.
About Yahoo!
Yahoo! Inc. is a global Internet communications, commerce and media company that offers a comprehensive branded network of services to more than 192 million individuals each month worldwide. As the first online navigational guide to the Web, www.yahoo.com is the leading guide in terms of traffic, advertising, household and business user reach. Yahoo! is the No. 1 Internet brand globally and reaches the largest audience worldwide. The company also provides online business and enterprise services designed to enhance the productivity and Web presence of Yahoo!'s clients. These services include Corporate Yahoo!, a popular customized enterprise portal solution; audio and video streaming; store hosting and management; and Web site tools and services. The company's global Web network includes 24 World properties. Yahoo! has offices in Europe, the Asia Pacific, Latin America, Canada and the United States, and is headquartered in Santa Clara, Calif.
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 release), as well as Yahoo!'s strategic and operational plans and planned expense reductions, including any related restructuring charges. 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 slower spending environment for advertising sales, including the lack of access to capital to fund early stage companies; the actual increases in demand by customers for Yahoo!'s premium and corporate services; the ability to successfully change the customer mix among Yahoo!'s advertising customers; general economic conditions; the ability to adjust to changes in personnel, including management changes; and the dependence on third parties for technology, content and distribution. All information set forth in this release and its attachments is as of April 11, 2001, and 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 in the company's Annual Report on Form 10-K for the fiscal year ended Dec. 31, 2000, including (without limitation) under the captions, ``Risk Factors'' and ``Management's Discussion and Analysis of Financial Condition and Results of Operations,'' which is on file with the Securities and Exchange Commission. Additional information will also be set forth in those sections in Yahoo!'s quarterly report on Form 10-Q for the three-month period ended March 31, 2001, which will be filed with the Securities and Exchange Commission in the near future.
Note to Editors: Yahoo!, Corporate Yahoo!, and the Yahoo! logos are trademarks and/or registered trademarks of Yahoo! Inc. All other names are trademarks and/or registered trademarks of their respective owners.
(1) Pro-forma net income and net income per share calculations for all 2001 and 2000 periods exclude acquisition-related charges, amortization of intangibles and stock compensation, employer payroll taxes on gains realized by employees from non-qualified stock option exercises, derivative and impairment losses from certain assets, income related to a contract termination fee, and/or gains or losses from the exchanges or sales of certain equity investments.
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