Full Year Revenues - $6,426 Million
Full Year Operating Income - $941 Million
Full Year Operating Income Before Depreciation, Amortization and Stock-Based Compensation Expense - $1,906 Million
Yahoo! Inc. (Nasdaq: YHOO) today reported results for the fourth quarter and full year ended December 31, 2006. "I am pleased with the progress Yahoo! made in the fourth quarter. We successfully addressed many of the challenges we faced in the third quarter and made aggressive moves to deliver on a number of strategic goals that we set forth for the organization," said Terry Semel, chairman and CEO of Yahoo!. "I am confident that our new structure and concentrated focus on Yahoo!?s key priorities puts us in the best position to take advantage of the many opportunities that we see ahead for 2007 and beyond."
Fourth Quarter 2006 Financial Results
? Revenues were $1,702 million for the fourth quarter of 2006, a 13 percent increase compared to $1,501 million for the same period of 2005.
o Marketing services revenue was $1,490 million for the fourth quarter of 2006, a 13 percent
increase compared to $1,315 million for the same period of 2005.
o Fees revenue was $213 million for the fourth quarter of 2006, a 15 percent increase compared to
$186 million for the same period of 2005.
? Revenues excluding traffic acquisition costs ("TAC") were $1,228 million for the fourth quarter of 2006, a 15 percent increase compared to $1,068 million for the same period of 2005.
? Gross profit for the fourth quarter of 2006 was $1,012 million, a 12 percent increase compared to $906 million for the same period of 2005.
? Operating income for the fourth quarter of 2006 was $308 million (including $95 million for stock-based compensation expense recorded under the fair value method), a 6 percent decrease compared to $329 million (including $19 million for stock-based compensation expense recorded under the intrinsic value method) for the same period of 2005.
? Operating income before depreciation, amortization and stock-based compensation expense for the
fourth quarter of 2006 was $540 million, an 18 percent increase compared to $459 million for the same period of 2005.
? Cash flow from operating activities for the fourth quarter of 2006 was $167 million, a 65 percent decrease compared to $481 million for the same period of 2005.
? Free cash flow for the fourth quarter of 2006 was $278 million, a 16 percent decrease compared to $330 million for the same period of 2005.
? Net income for the fourth quarter of 2006 was $269 million or $0.19 per diluted share (including $56 million of stock-based compensation expense, net of tax, recorded under the fair value method)
compared to $683 million or $0.46 per diluted share (including $11 million of stock-based compensation expense, net of tax, recorded under the intrinsic value method) for the same period of 2005.
? Non-GAAP net income for the fourth quarter of 2006 was $229 million or $0.16 per diluted share
(including $56 million of stock-based compensation expense, net of tax, recorded under the fair value method and excluding $29 million in certain tax adjustments), compared to non-GAAP net income of $191 million or $0.13 per diluted share (including $67 million of stock-based compensation expense, net of tax, recorded under the fair value method, excluding $11 million of stock-based compensation expense, net of tax, recorded under the intrinsic value method and excluding $188 million of gains on the sale of certain investments, net of tax adjustments) for the same period of 2005.
? Non-GAAP net income for the fourth quarter of 2006 was $297 million or $0.21 per diluted share
(excluding $56 million of stock-based compensation expense, net of tax, recorded under the fair value method and excluding $29 million in certain tax adjustments), compared to non-GAAP net income of $258 million or $0.17 per diluted share (excluding $11 million of stock-based compensation expense, net of tax, and excluding $188 million of gains on the sale of certain investments, net of tax adjustments) for the same period of 2005.
? The provision for income taxes for the fourth quarter of 2006 was $108 million and yielded an effective tax rate of 31 percent. The provision for income taxes for the fourth quarter of 2005 was $18 million, and yielded an effective tax rate of 3 percent as a result of a tax benefit related to a subsidiary restructuring transaction completed in that quarter.
? 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".
"We generated very solid growth and profitability in the fourth quarter and full year 2006, putting the company in a strong financial position and looking forward, we are very optimistic about the potential of our search monetization initiative to improve the value of search for Yahoo! and our partners," said Susan Decker, chief financial officer, Yahoo!. "For 2007, we are organized to maximize value for Yahoo!?s key customer groups ? audiences, advertisers and publishers ? by delivering engaging products and effective solutions for consumers and marketers, both on and off the Yahoo! network."
Full Year 2006 Financial Results
? Revenues were $6,426 million for 2006, a 22 percent increase compared to $5,258 million for 2005.
o Marketing services revenue was $5,627 million for 2006, a 22 percent increase compared to
$4,594 million for 2005.
o Fees revenue was $798 million for 2006, a 20 percent increase compared to $664 million for
2005.
? Revenues excluding TAC were $4,560 million for 2006, a 23 percent increase compared to $3,696
million for 2005.
? Gross profit for 2006 was $3,750 million, a 19 percent increase compared to $3,161 million for 2005.
? Operating income for 2006 was $941 million (including $425 million for stock-based compensation
expense recorded under the fair value method), a 15 percent decrease compared to $1,108 million
(including $52 million for stock-based compensation expense recorded under the intrinsic value method) for 2005.
? Operating income before depreciation, amortization and stock-based compensation expense for 2006
was $1,906 million, a 22 percent increase compared to $1,557 million for 2005.
? Cash flow from operating activities for 2006 was $1,372 million, a 20 percent decrease compared to
$1,711 million for 2005.
? Free cash flow for 2006 was $1,267 million (including $112 million for a previously disclosed land
purchase), a 2 percent decrease compared to $1,292 million for 2005.
? Net income for 2006 was $751 million or $0.52 per diluted share (including $280 million of stock-based compensation expense, net of tax, recorded under the fair value method) compared to $1,896 million or $1.28 per diluted share (including $32 million of stock-based compensation expense, net of tax, recorded under the intrinsic value method) for 2005.
? Non-GAAP net income for 2006 was $723 million or $0.50 per diluted share (including $280 million of stock-based compensation expense, net of tax, recorded under the fair value method, excluding certain investment and other gains of $14 million, net of tax, and excluding $11 million in certain tax adjustments), compared to non-GAAP net income of $647 million or $0.43 per diluted share (including $239 million of stock-based compensation expense, net of tax, recorded under the fair value method, excluding $32 million of stock-based compensation expense, net of tax, recorded under the intrinsic value method and excluding $771 million of gains on the sale of certain investments, net of tax adjustments) for 2005.
? Non-GAAP net income for 2006 was $1,011 million or $0.69 per diluted share (excluding $280 million of stock-based compensation expense, net of tax, recorded under the fair value method, excluding certain investment and other gains of $14 million, net of tax, and excluding $11 million in certain tax adjustments), compared to non-GAAP net income of $886 million or $0.60 per diluted share (excluding $32 million of stock-based compensation expense, net of tax, and excluding $771 million of gains on the sale of certain investments, net of tax adjustments) for 2005.
? The provision for income taxes for 2006 was $458 million and yielded an effective tax rate of 42 percent. The provision for income taxes for 2005 was $768 million and yielded an effective tax rate of 30 percent as a result of a tax benefit related to a subsidiary restructuring transaction completed in the fourth quarter of 2005.
? 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".
Segment Financial Results
Fourth Quarter 2006
? United States revenues for the fourth quarter of 2006 were $1,145 million, an 8 percent increase compared to $1,056 million for the same period of 2005.
? International revenues for the fourth quarter of 2006 were $558 million, a 25 percent increase compared to $445 million for the same period of 2005.
? United States segment operating income before depreciation, amortization and stock-based compensation expense for the fourth quarter of 2006 was $410 million, a 17 percent increase compared to $352 million for the same period of 2005.
? International segment operating income before depreciation, amortization and stock-based compensation expense for the fourth quarter of 2006 was $130 million, a 22 percent increase compared to $107 million for the same period of 2005.
Full Year 2006
? United States revenues for the year ended December 31, 2006 were $4,366 million, a 19 percent increase compared to $3,668 million for 2005.
? International revenues for the year ended December 31, 2006 were $2,060 million, a 30 percent increase compared to $1,590 million for 2005.
? United States segment operating income before depreciation, amortization and stock-based compensation expense for the year ended December 31, 2006 was $1,452 million, a 19 percent increase compared to $1,220 million for 2005.
? International segment operating income before depreciation, amortization and stock-based compensation expense for the year ended December 31, 2006 was $454 million, a 34 percent increase compared to $338 million for 2005.
Cash Flow Information
Free cash flow was $278 million in the fourth quarter of 2006 compared to $330 million for the same period of 2005. In addition to free cash flow, Yahoo! generated $87 million from the issuance of common stock as a result of the exercise of employee stock options, offset by $81 million used for acquisitions. Cash, cash equivalents and investments in marketable debt securities were $3,537 million at December 31, 2006 as compared to $3,230 million at September 30, 2006, an increase of $307 million.
Free cash flow was $1,267 million for the year ended December 31, 2006 compared to $1,292 million for 2005. In addition to free cash flow, Yahoo! generated $318 million from the issuance of common stock as a result of the exercise of employee stock options, offset by $1,782 million used for direct stock repurchases, a net $228 million used in structured stock repurchase transactions, and $142 million used for acquisitions.
Cash, cash equivalents and investments in marketable debt securities were $3,537 million at December 31, 2006 as compared to $4,000 million at December 31, 2005, a decrease of $463 million.
Please refer to the "Note to Unaudited Condensed Consolidated Statements of Income" for definitions of certain key non-GAAP financial measures used here and in the "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 website 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 888-286-8010 or 617-801-6888, reservation number: 52560471
About Yahoo!
Yahoo! Inc. is a leading global Internet brand and one of the most trafficked Internet destinations
worldwide. Yahoo!?s mission is to connect people to their passions, their communities, and the world?s knowledge. Yahoo! is headquartered in Sunnyvale, California.
This press release and its attachments include the following financial measures defined as non-GAAP
financial measures by the Securities and Exchange Commission: revenues excluding traffic acquisition costs or TAC, operating income before depreciation, amortization and stock-based compensation expense, free cash flow, and non-GAAP net income and non-GAAP net income per share. 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 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" 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 (including without limitation the statements and information in the Business Outlook section and the 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 successful implementation, and acceptance by advertisers, of the Company?s new search advertising system, the Company?s ability to compete with new or existing competitors; the implementation and results of the Company's announced reorganization; 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 joint ventures and the integration of recent acquisitions; risks related to the Company?s international operations; failure to manage growth and diversification; adverse results in litigation, including intellectual property infringement claims; the Company?s 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 January 23, 2007.
Yahoo! does not intend, and undertakes no duty, to update this information to reflect future events or circumstances. 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 year ended December 31, 2005 and the Quarterly Report on Form 10-Q for the quarter ended September 30, 2006, 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, 2006, which will be filed with the SEC in the first quarter of 2007.
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.
