Yahoo on Tuesday reported its second quarter earnings, beating Wall Street’s earnings expectations of $0.23 per share on $1.096 billion in revenue. The firm posted earnings of $0.27 per share on sales that narrowly missed analysts’ consensus at $1.08 billion. Yahoo’s search revenue came in at $461 million, down 1% year-over-year, while display revenue was up 2% year-over-year to $535 million. Yahoo’s earnings come one day after the company announced that former Google executive Marissa Mayer was its new CEO and president. “In the second quarter, non-GAAP earnings per share exceeded consensus and both display and search revenue ex-TAC showed modest growth,” said Tim Morse, chief financial officer. “We also moved aggressively with new strategic agreements with Alibaba and Facebook and announced several new partnerships including CNBC, Clear Channel and Spotify.” Yahoo’s press release follows below.
Yahoo! Reports Second Quarter 2012 Results
$190 Million Operating Income, Excluding Restructuring and Other Charges, Exceeds Midpoint of Business Outlook
$0.27 EPS, Excluding Restructuring and Other Charges, Grows 47% Year-Over-YearSUNNYVALE, Calif.–(BUSINESS WIRE)–Yahoo! Inc. (NASDAQ:YHOO) today reported results for the quarter ended June 30, 2012.
“Note to Unaudited Condensed Consolidated Statements of Income”
Revenue excluding traffic acquisition costs (“Revenue ex-TAC”) was $1,081 million for the second quarter of 2012, flat compared to the second quarter of 2011. GAAP revenue was $1,218 million for the second quarter of 2012, a 1 percent decrease from the second quarter of 2011.
Non-GAAP income from operations of $190 million in the second quarter of 2012 was flat compared to $191 million in the second quarter of 2011. Non-GAAP income from operations excludes restructuring charges and deal-related expenses of less than $1 million in the second quarter of 2011 and $136 million in the second quarter of 2012. On a GAAP basis, income from operations decreased 71 percent to $55 million in the second quarter of 2012, compared to $191 million in the second quarter of 2011.
In the second quarter of 2012, non-GAAP net earnings per diluted share increased 47 percent year over year to $0.27. Non-GAAP net earnings per diluted share excludes restructuring charges and deal-related expenses of less than $1 million in the second quarter of 2011 and $136 million, as well as the related tax impact of $36 million, in the second quarter of 2012. On a GAAP basis, net earnings per diluted share was $0.18 in the second quarter of 2012.
Financials at a Glance Quarterly Results (in millions, except percentages and per share amounts) Q2 2011 Q2 2012 Percent Change Revenue ex-TAC $1,076 $1,081 0% GAAP revenue $1,229 $1,218 (1)% Non-GAAP income from operations $191 $190 0% Income from operations $191 $55 (71)% Non-GAAP net earnings per diluted share $0.18 $0.27 47% Net earnings per diluted share $0.18 $0.18 2% “In the second quarter, non-GAAP earnings per share exceeded consensus and both display and search revenue ex-TAC showed modest growth,” said Tim Morse, chief financial officer. “We also moved aggressively with new strategic agreements with Alibaba and Facebook and announced several new partnerships including CNBC, Clear Channel and Spotify.”
Business Highlights
- Yahoo! named Marissa Mayer chief executive officer.
- Fred Amoroso was named chairman of Yahoo!’s board of directors and Daniel S. Loeb, Harry J. Wilson, and Michael J. Wolf joined the Yahoo! board.
- Yahoo! and Alibaba Group Holding Limited (“Alibaba”) announced a definitive agreement for a staged and comprehensive value realization plan for Yahoo!’s stake in Alibaba. The first step is the repurchase by Alibaba of up to one-half of Yahoo!’s stake, or approximately 20 percent of Alibaba’s fully-diluted shares.
- In July 2012, Yahoo! and Facebook announced definitive agreements that launch a new advertising partnership, extend and expand distribution arrangements, and settle all pending patent claims between the companies.
- Yahoo! launched Axis, a new experience that re-imagines how consumers search and browse on the web. Axis offers the only search experience that allows consumers to enter their search, see and interact with visual results, all without ever leaving the page they are on. Axis seamlessly integrates with consumers’ favorite desktop browser and automatically connects the online experiences across multiple devices.
- Yahoo! launched Genome from Yahoo!, an online advertising solution that combines Yahoo! data with interclick’s third party data and advertisers’ first party data along with a premium media footprint to provide marketers with one of the most complete, custom audience solutions in the industry.
- Yahoo! and CNBC announced a strategic content, programming and distribution alliance that will dramatically expand CNBC’s online reach and presence and provide a broadcast platform for Yahoo! Finance’s original content and contributors. CNBC becomes the premier content source for Yahoo! Finance in the U.S. and later this year, the two companies plan to co-create a new slate of co-branded, original videos which will appear on Yahoo! Finance and CNBC.com.
- Yahoo! and Clear Channel announced a cross-platform content distribution and promotion agreement. The multi-faceted relationship involves the distribution and cross-promotion of premium content in addition to a live concert series to the unparalleled combined audience of the Yahoo! Media Network and Clear Channel Media and Entertainment U.S. listeners across 150 markets, plus their websites and the audience of iHeartRadio, Clear Channel’s industry-leading digital radio service.
- Yahoo! and Spotify announced a global content distribution and promotion agreement that will enable Yahoo! to integrate and promote Spotify’s on demand music service on Yahoo!’s Media Network. Yahoo! will also create an app for Spotify’s platform featuring Yahoo! original entertainment content.
- Yahoo! extended its exclusive online agreement with Eurosport to host and operate the co-branded Yahoo! Eurosport site in key markets. By partnering with the #1 pan-European television sports network, Yahoo! will continue to bring exclusive, high quality sports content online to drive user engagement and provide premium content.
Second Quarter 2012 Revenue Highlights
- Display revenue ex-TAC was $473 million, a 1 percent increase compared to $467 million for the second quarter of 2011.
- GAAP display revenue was $535 million, a 2 percent increase compared to $524 million for the second quarter of 2011.
- Search revenue ex-TAC was $385 million, a 4 percent increase compared to $371 million for the second quarter of 2011.
- GAAP search revenue was $461 million, a 1 percent decrease compared to $467 million for the second quarter of 2011.
Cash Flow and Cash Balance
- Cash flow from operating activities for the second quarter of 2012 was $275 million, a 17 percent decrease compared to $331 million for the same period of 2011. Cash flow from operating activities was $572 million for the six months ended June 30, 2012, a 7 percent increase compared to $536 million for the same period of 2011.
- Free cash flow was $93 million for the second quarter of 2012, a 2 percent decrease compared to $96 million for the same period of 2011. Free cash flow was $289 million for the six months ended June 30, 2012, a 90 percent increase compared to $152 million for the same period of 2011.
- Cash, cash equivalents, and investments in marketable debt securities were $2,401 million at June 30, 2012 compared to $2,530 million at December 31, 2011, a decrease of $129 million.
- During the second quarter of 2012, Yahoo! repurchased 30 million shares for $456 million.
Conference Call
Yahoo! will host a conference call to discuss second quarter 2012 results at 5 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://investor.yahoo.com/results.cfm. In addition, an archive of the Webcast can be accessed through the same link. An audio replay of the call will be available for one week following the conference call by calling (888) 286-8010 or (617) 801-6888, reservation number: 98876440.
Note Regarding Non-GAAP Financial Measures
This press release and its attachments include the following financial measures defined as non-GAAP financial measures by the Securities and Exchange Commission (“SEC”): revenue ex-TAC; free cash flow; non-GAAP income from operations; non-GAAP net income; and non-GAAP net income per diluted share. These measures may be different than 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 (“GAAP”). Explanations of the Company’s non-GAAP financial measures and reconciliations of these financial measures to the GAAP financial measures the Company considers most comparable are included in the accompanying “Note to Unaudited Condensed Consolidated Statements of Income,” “Supplemental Financial Data,” and “GAAP to Non-GAAP Reconciliations.”
About Yahoo!
Yahoo! is a technology-powered media company, creating deeply personal digital experiences that keep more than half a billion people connected to what matters most to them, across devices and around the globe. Yahoo!’s unique combination of Science + Art + Scale connects advertisers to the consumers who build their businesses. Yahoo! is headquartered in Sunnyvale, California. For more information, visit the pressroom (pressroom.yahoo.net) or the company’s blog, Yodel Anecdotal (yodel.yahoo.com).
“Affiliates” refers to the third-party entities that have integrated Yahoo!’s advertising offerings into their Websites or other offerings (those Websites and other offerings, “Affiliate sites”).
“Search Agreement” refers to the Search and Advertising Services and Sales Agreement between Yahoo! and Microsoft Corporation, as amended.
“TAC” refers to traffic acquisition costs. TAC consists of payments to Affiliates and payments made to companies that direct consumer and business traffic to Yahoo! Properties.
“Yahoo! Properties” refers to the online properties and services that Yahoo! provides to users.
This press release contains forward-looking statements concerning Yahoo!’s expected financial performance, as well as Yahoo!’s strategic and operational plans. Risks and uncertainties may cause actual results to 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 impact of management and organizational changes; the implementation and results of Yahoo!’s ongoing strategic and cost initiatives; Yahoo!’s ability to compete with new or existing competitors; reduction in spending by, or loss of, advertising customers; risks related to Yahoo!’s regulatory environment; interruptions or delays in the provision of Yahoo!’s services; security breaches; acceptance by users of new products and services; risks related to joint ventures and the integration of acquisitions; risks related to Yahoo!’s international operations; failure to manage growth and diversification; adverse results in litigation, including intellectual property infringement claims and derivative and class actions; Yahoo!’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; general economic conditions and changes in economic conditions; transition and implementation risks associated with the Search Agreement with Microsoft Corporation; and risks that the benefits of the agreement Yahoo! entered into with Alibaba regarding Yahoo!’s stake in Alibaba or the Framework Agreement Yahoo! entered into with Alibaba, Softbank Corporation and certain other parties regarding Alipay may not be realized. All information set forth in this press release and its attachments is as of July 17, 2012. Yahoo! does not intend, and undertakes no duty, to update this information to reflect subsequent 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, 2011, as amended, and Quarterly Report on Form 10-Q for the quarter ended March 31, 2012, which are on file with the SEC and available on 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 June 30, 2012, which will be filed with the SEC in the third quarter of 2012.
Yahoo!, the Yahoo! logos, Axis and Genome are trademarks and/or registered trademarks of Yahoo! Inc. All other names are trademarks and/or registered trademarks of their respective owners.
Yahoo! Inc. Unaudited Condensed Consolidated Statements of Income (in thousands, except per share amounts) Three Months Ended Six Months Ended June 30, June 30, 2011 2012 2011 2012 Revenue $ 1,229,024 $ 1,217,794 $ 2,443,381 $ 2,439,027 Operating expenses: Cost of revenue – Traffic acquisition costs 152,896 137,025 302,927 281,116 Cost of revenue – Other 231,388 278,453 481,014 532,432 Sales and marketing 280,159 272,910 542,308 558,178 Product development 233,045 199,628 454,328 428,106 General and administrative 131,822 136,117 254,720 260,388 Amortization of intangibles 8,582 9,756 16,632 19,809 Restructuring charges, net 237 129,092 10,812 134,809 Total operating expenses 1,038,129 1,162,981 2,062,741 2,214,838 Income from operations 190,895 54,813 380,640 224,189 Other (expense) income, net (5,666 ) 20,175 (639 ) 22,453 Income before income taxes and earnings in equity interests 185,229 74,988 380,001 246,642 Provision for income taxes (55,629 ) (26,523 ) (107,749 ) (82,942 ) Earnings in equity interests 108,902 179,991 191,082 352,234 Net income 238,502 228,456 463,334 515,934 Less: Net income attributable to noncontrolling interests (1,530 ) (1,825 ) (3,370 ) (2,960 ) Net income attributable to Yahoo! Inc. $ 236,972 $ 226,631 $ 459,964 $ 512,974 Net income attributable to Yahoo! Inc. common stockholders per share – diluted (1) $ 0.18 $ 0.18 $ 0.35 $ 0.42 Shares used in per share calculation – diluted 1,308,359 1,221,719 1,314,272 1,224,102 Stock-based compensation expense by function: Cost of revenue – Other $ 875 $ 2,614 $ 1,523 $ 5,508 Sales and marketing 19,373 18,981 26,070 40,078 Product development 25,531 17,808 43,203 37,279 General and administrative 13,269 10,168 23,368 22,672 Restructuring expense reversals, net (526 ) (3,429 ) (1,278 ) (3,429 ) Supplemental Financial Data: Revenue ex-TAC $ 1,076,128 $ 1,080,769 $ 2,140,454 $ 2,157,911 Free cash flow $ 95,601 $ 93,390 $ 152,076 $ 289,213
(1) The impact of outstanding stock awards of entities in which the Company holds equity interests that are accounted for using the equity method reduced the Company’s diluted earnings per share by $0.01 for the three months ended June 30, 2012.
Yahoo! Inc.
Note to Unaudited Condensed Consolidated Statements of IncomeThis press release and its attachments include the non-GAAP financial measures of revenue excluding traffic acquisition costs (“revenue ex-TAC”), free cash flow, non-GAAP income from operations, non-GAAP net income, and non-GAAP net income per diluted share, which are reconciled to revenue, cash flow from operating activities, income from operations, net income attributable to Yahoo! Inc., and net income attributable to Yahoo! Inc. common stockholders per share – diluted, which we believe are the most comparable GAAP measures. We use these non-GAAP financial measures for internal managerial purposes and to facilitate period-to-period comparisons. We describe limitations specific to each non-GAAP financial measure below. Management generally compensates for limitations in the use of non-GAAP financial measures by relying on comparable GAAP financial measures and providing investors with a reconciliation of the non-GAAP financial measure to the most directly comparable GAAP financial measure or measures. Further, management uses non-GAAP financial measures only in addition to and in conjunction with results presented in accordance with GAAP. We believe that these non-GAAP financial measures reflect an additional way of viewing aspects of our operations that, when viewed with our GAAP results, provide a more complete understanding of factors and trends affecting our business and operating costs. These non-GAAP measures should be considered as a supplement to, and not as a substitute for, or superior to, revenue, cash flow from operating activities, income from operations, net income attributable to Yahoo! Inc., and net income attributable to Yahoo! Inc. common stockholders per share – diluted calculated in accordance with GAAP.
Revenue ex-TAC is a non-GAAP financial measure defined as GAAP revenue less TAC. TAC consists of payments made to third-party entities that have integrated our advertising offerings into their Websites or other offerings (those Websites and other offerings, “Affiliate sites”) and payments made to companies that direct consumer and business traffic to Yahoo!’s online properties and services (“Yahoo! Properties”). Based on the terms of the Search Agreement with Microsoft, Microsoft retains a revenue share of 12 percent of the net (after TAC) search revenue generated on Yahoo! Properties and Affiliate sites in transitioned markets. Yahoo! reports the net revenue it receives under the Search Agreement as revenue and no longer presents the associated TAC. Accordingly, for transitioned markets Yahoo! reports GAAP revenue associated with the Search Agreement on a net (after TAC) basis rather than a gross basis. For markets that have not yet transitioned, revenue continues to be recorded on a gross basis, and TAC is recorded as a part of operating expenses. We present revenue ex-TAC to provide investors a metric used by the Company for evaluation and decision-making purposes during the Microsoft transition and to provide investors with comparable revenue numbers when comparing periods preceding, during and following the transition period. A limitation of revenue ex-TAC is that it is a measure which we have defined for internal and investor purposes that may be unique to the Company, and therefore it may not enhance the comparability of our results to other companies in our industry who have similar business arrangements but address the impact of TAC differently. Management compensates for these limitations by also relying on the comparable GAAP financial measures of revenue and total operating expenses, which includes TAC in non-transitioned markets.
Free cash flow is a non-GAAP financial measure defined as cash flow from operating activities (adjusted to include excess tax benefits from stock-based awards), less acquisition of property and equipment, net and dividends received from equity investees. We consider free cash flow to be a liquidity measure which provides useful information to management and investors about the amount of cash generated by the business after the acquisition of property and equipment, which can then be used for strategic opportunities including, among others, investing in the Company’s business, making strategic acquisitions, strengthening the balance sheet, and repurchasing stock. A limitation of free cash flow is that it does not represent the total increase or decrease in the cash balance for the period. Management compensates for this limitation by also relying on the net change in cash and cash equivalents as presented in the Company’s unaudited condensed consolidated statements of cash flows prepared in accordance with GAAP which incorporates all cash movements during the period.
Non-GAAP income from operations is defined as income from operations excluding certain gains, losses, and expenses that we do not believe are indicative of our ongoing operating results. We consider non-GAAP income from operations to be a profitability measure which facilitates the forecasting of our operating results for future periods and allows for the comparison of our results to historical periods. A limitation of non-GAAP income from operations is that it does not include all items that impact our income from operations for the period. Management compensates for this limitation by also relying on the comparable GAAP financial measure of income from operations which includes the gains, losses, and expenses that are excluded from non-GAAP income from operations.
Non-GAAP net income is defined as net income attributable to Yahoo! Inc. excluding certain gains, losses, expenses, and their related tax effects that we do not believe are indicative of our ongoing results. We consider non-GAAP net income and non-GAAP net income per diluted share to be profitability measures which facilitate the forecasting of our results for future periods and allow for the comparison of our results to historical periods. A limitation of non-GAAP net income and non-GAAP net income per diluted share is that they do not include all items that impact our net income and net income per diluted share for the period. Management compensates for this limitation by also relying on the comparable GAAP financial measures of net income attributable to Yahoo! Inc. and net income attributable to Yahoo! Inc. common stockholders per share – diluted, both of which include the gains, losses, expenses and related tax effects that are excluded from non-GAAP net income and non-GAAP net income per diluted share.
Yahoo! Inc. Supplemental Financial Data (in thousands) Three Months Ended Six Months Ended June 30, June 30, 2011 2012 2011 2012 Revenue for groups of similar services: Display $ 523,537 $ 534,972 $ 1,046,160 $ 1,046,189 Search 466,674 460,969 921,795 931,366 Other 238,813 221,853 475,426 461,472 Total revenue $ 1,229,024 $ 1,217,794 $ 2,443,381 $ 2,439,027 Revenue excluding traffic acquisition costs (“revenue ex-TAC”) for groups of similar services: GAAP display revenue $ 523,537 $ 534,972 $ 1,046,160 $ 1,046,189 TAC associated with display revenue (56,890 ) (61,552 ) (108,739 ) (118,978 ) Display revenue ex-TAC $ 466,647 $ 473,420 $ 937,421 $ 927,211 GAAP search revenue $ 466,674 $ 460,969 $ 921,795 $ 931,366 TAC associated with search revenue for non-transitioned markets (95,866 ) (75,473 ) (194,048 ) (162,138 ) Search revenue ex-TAC $ 370,808 $ 385,496 $ 727,747 $ 769,228 Other GAAP revenue $ 238,813 $ 221,853 $ 475,426 $ 461,472 TAC associated with other GAAP revenue (140 ) – (140 ) – Other revenue ex-TAC $ 238,673 $ 221,853 $ 475,286 $ 461,472 Revenue ex-TAC: GAAP revenue $ 1,229,024 $ 1,217,794 $ 2,443,381 $ 2,439,027 TAC (152,896 ) (137,025 ) (302,927 ) (281,116 ) Revenue ex-TAC $ 1,076,128 $ 1,080,769 $ 2,140,454 $ 2,157,911 Revenue ex-TAC by segment: Americas: GAAP revenue $ 808,038 $ 821,751 $ 1,626,969 $ 1,657,784 TAC (39,404 ) (45,910 ) (77,545 ) (88,865 ) Revenue ex-TAC $ 768,634 $ 775,841 $ 1,549,424 $ 1,568,919 EMEA: GAAP revenue $ 162,601 $ 128,099 $ 316,651 $ 262,061 TAC (57,648 ) (34,187 ) (115,160 ) (79,849 ) Revenue ex-TAC $ 104,953 $ 93,912 $ 201,491 $ 182,212 Asia Pacific: GAAP revenue $ 258,385 $ 267,944 $ 499,761 $ 519,182 TAC (55,844 ) (56,928 ) (110,222 ) (112,402 ) Revenue ex-TAC $ 202,541 $ 211,016 $ 389,539 $ 406,780 Total revenue ex-TAC $ 1,076,128 $ 1,080,769 $ 2,140,454 $ 2,157,911 Direct costs by segment (2): Americas $ 171,042 $ 181,510 $ 333,940 $ 360,735 EMEA 42,768 41,277 81,374 81,498 Asia Pacific 57,728 56,248 109,050 107,739 Global operating costs (3)(4) 393,037 410,519 808,663 832,417 Restructuring charges, net 237 129,092 10,812 134,809 Depreciation and amortization 161,373 157,739 321,811 310,987 Stock-based compensation expense 59,048 49,571 94,164 105,537 Income from operations $ 190,895 $ 54,813 $ 380,640 $ 224,189 Reconciliation of cash flow from operating activities to free cash flow: Cash flow from operating activities $ 330,620 $ 274,560 $ 536,306 $ 572,013 Acquisition of property and equipment, net (171,515 ) (106,131 ) (339,064 ) (215,922 ) Dividends received from equity investees (75,391 ) (83,648 ) (75,391 ) (83,648 ) Excess tax benefits from stock-based awards 11,887 8,609 30,225 16,770 Free cash flow $ 95,601 $ 93,390 $ 152,076 $ 289,213
(2) Direct costs for each segment include cost of revenue (excluding TAC) and other operating expenses that are directly attributable to the segment such as employee compensation expense (excluding stock-based compensation expense), local sales and marketing expenses, and facilities expenses. Beginning in 2012, marketing and customer advocacy costs are managed locally and included as direct costs for each segment. Prior period amounts have been revised to conform to the current presentation. (3) Global operating costs include product development, service engineering and operations, general and administrative, and other corporate expenses that are managed on a global basis and that are not directly attributable to any particular segment. Prior to 2012, marketing and customer advocacy costs were managed on a global basis and included as global operating costs. Prior period amounts have been revised to conform to the current presentation. (4) The net cost reimbursements from Microsoft are primarily included in global operating costs.
Yahoo! Inc. GAAP to Non-GAAP Reconciliations (in thousands, except per share amounts) Three Months Ended June 30, 2011 2012 GAAP Income from operations $ 190,895 $ 54,813 (a) Restructuring charges, net 237 129,092 (b) Deal-related expenses (5) – 6,500 Non-GAAP Income from operations $ 191,132 $ 190,405 GAAP Net income attributable to Yahoo! Inc. $ 236,972 $ 226,631 (a) Restructuring charges, net 237 129,092 (b) Deal-related expenses (5) – 6,500 (c) To adjust the provision for income taxes to exclude the tax impact of items (a) and (b) above for the three months ended June 30, 2011 and 2012 (75 ) (35,674 ) Non-GAAP Net income $ 237,134 $ 326,549 GAAP Net income attributable to Yahoo! Inc. common stockholders per share – diluted (1) $ 0.18 $ 0.18 Non-GAAP Net income per share – diluted $ 0.18 $ 0.27 Shares used in per share calculation – diluted 1,308,359 1,221,719 Six Months Ended June 30, 2011 2012 GAAP Income from operations $ 380,640 $ 224,189 (a) Restructuring charges, net 10,812 134,809 (b) Deal-related expenses (5) – 6,500 Non-GAAP Income from operations $ 391,452 $ 365,498 GAAP Net income attributable to Yahoo! Inc. $ 459,964 $ 512,974 (a) Restructuring charges, net 10,812 134,809 (b) Deal-related expenses (5) – 6,500 (c) To adjust the provision for income taxes to exclude the tax impact of items (a) and (b) above for the six months ended June 30, 2011 and 2012 (3,437 ) (37,721 ) Non-GAAP Net income $ 467,339 $ 616,562 GAAP Net income attributable to Yahoo! Inc. common stockholders per share – diluted $ 0.35 $ 0.42 Non-GAAP Net income per share – diluted (6) $ 0.35 $ 0.50 Shares used in per share calculation – diluted 1,314,272 1,224,102
(1) The impact of outstanding stock awards of entities in which the Company holds equity interests that are accounted for using the equity method reduced the Company’s diluted earnings per share by $0.01 for the three months ended June 30, 2012. (5) Deal-related expenses relate to, among other matters, the agreement Yahoo! entered into with Alibaba regarding Yahoo!’s stake in Alibaba. (6) The impact of outstanding stock awards of entities in which the Company holds equity interests that are accounted for using the equity method reduced the Company’s non-GAAP diluted earnings per share by $0.01 for the six months ended June 30, 2011.
Yahoo! Inc. Unaudited Condensed Consolidated Statements of Cash Flows (in thousands) Three Months Ended Six Months Ended June 30, June 30, 2011 2012 2011 2012 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 238,502 $ 228,456 $ 463,334 $ 515,934 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 136,724 131,789 275,901 254,539 Amortization of intangible assets 29,492 28,864 58,993 60,209 Stock-based compensation expense, net 58,522 46,142 92,886 102,108 Non-cash restructuring charges – 38,638 – 38,638 Tax benefits from stock-based awards (125 ) (4,949 ) 12,483 (3,935 ) Excess tax benefits from stock-based awards (11,887 ) (8,609 ) (30,225 ) (16,770 ) Deferred income taxes 23,250 (14,075 ) 45,831 (18,474 ) Earnings in equity interests (108,902 ) (179,991 ) (191,082 ) (352,234 ) Dividends received from equity investee 75,391 83,648 75,391 83,648 Gain from sale of investments, assets, and other, net 14,577 (19,995 ) 22,792 (24,507 ) Changes in assets and liabilities, net of effects of acquisitions: Accounts receivable, net (19,875 ) (112,549 ) 86,692 (9,908 ) Prepaid expenses and other (6,584 ) 33,381 53,293 111,242 Accounts payable 21,041 6,728 (10,821 ) (35,714 ) Accrued expenses and other liabilities (109,522 ) 20,190 (386,044 ) (110,434 ) Deferred revenue (9,984 ) (3,108 ) (33,118 ) (22,329 ) Net cash provided by operating activities 330,620 274,560 536,306 572,013 CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of property and equipment, net (171,515 ) (106,131 ) (339,064 ) (215,922 ) Purchases of marketable debt securities (508,547 ) (469,046 ) (1,124,596 ) (645,266 ) Proceeds from sales of marketable debt securities 443,681 414,478 882,229 548,439 Proceeds from maturities of marketable debt securities 294,755 120,798 657,916 198,498 Proceeds from the sale of investments – 26,132 – 26,132 Purchases of intangible assets (7,618 ) (1,286 ) (10,960 ) (3,088 ) Acquisitions, net of cash acquired (37,022 ) – (68,812 ) – Other investing activities, net – (2,141 ) 149 (9,421 ) Net cash provided by (used in) investing activities 13,734 (17,196 ) (3,138 ) (100,628 ) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock, net 75,839 66,248 98,547 77,871 Repurchases of common stock (471,651 ) (455,507 ) (609,019 ) (526,007 ) Excess tax benefits from stock-based awards 11,887 8,609 30,225 16,770 Tax withholdings related to net share settlements of restricted stock awards and restricted stock units (7,366 ) (6,990 ) (33,669 ) (38,494 ) Other financing activities, net (6,799 ) (1,209 ) (7,521 ) (2,222 ) Net cash used in financing activities (398,090 ) (388,849 ) (521,437 ) (472,082 ) Effect of exchange rate changes on cash and cash equivalents 15,396 (49,214 ) 42,679 (22,424 ) Net change in cash and cash equivalents (38,340 ) (180,699 ) 54,410 (23,121 ) Cash and cash equivalents, beginning of period 1,619,177 1,719,968 1,526,427 1,562,390 Cash and cash equivalents, end of period $ 1,580,837 $ 1,539,269 $ 1,580,837 $ 1,539,269
Yahoo! Inc. Unaudited Condensed Consolidated Balance Sheets (in thousands) December 31, June 30, 2011 2012 ASSETS Current assets: Cash and cash equivalents $ 1,562,390 $ 1,539,269 Short-term marketable debt securities 493,189 371,204 Accounts receivable, net 1,037,474 1,040,893 Prepaid expenses and other current assets 359,483 318,932 Total current assets 3,452,536 3,270,298 Long-term marketable debt securities 474,338 490,570 Property and equipment, net 1,730,888 1,663,665 Goodwill 3,900,752 3,887,360 Intangible assets, net 254,600 196,729 Other long-term assets 220,628 209,669 Investments in equity interests 4,749,044 4,939,938 Total assets $ 14,782,786 $ 14,658,229 LIABILITIES AND EQUITY Current liabilities: Accounts payable $ 166,595 $ 132,105 Accrued expenses and other current liabilities 846,044 768,080 Deferred revenue 194,722 176,960 Total current liabilities 1,207,361 1,077,145 Long-term deferred revenue 43,639 38,757 Capital lease and other long-term liabilities 134,905 130,149 Deferred and other long-term tax liabilities, net 815,534 895,941 Total liabilities 2,201,439 2,141,992 Total Yahoo! Inc. stockholders’ equity 12,541,067 12,472,997 Noncontrolling interests 40,280 43,240 Total equity 12,581,347 12,516,237 Total liabilities and equity $ 14,782,786 $ 14,658,229
