yhoo q110earningspresentation final

8/9/2019 YHOO Q110EarningsPresentation Final

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Q110 Financial HighlightsYahoo! Inc.

4.20.2010


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Note:

The matters discussed in this presentation contain forward-looking statements that involve risks and uncertainties concerningYahoo!s expected financial performance, and expected reimbursements from Microsoft, as well as Yahoo!s strategic andoperational 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 impact of managementand organizational changes; the implementation and results of Yahoo!'s ongoing strategic and cost initiatives; Yahoo!'s ability tocompete with new or existing competitors; reduction in spending by, or loss of, marketing services customers; the demand bycustomers for Yahoo!'s premium services; acceptance by users of new products and services; risks related to joint ventures andthe 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; Yahoo!'s ability to protect its intellectual propertyand the value of its brands; dependence on key personnel; dependence on third parties for technology, services, content, anddistribution; general economic conditions and changes in economic conditions; and transition and implementation risks

associated with our search agreement with Microsoft Corporation. All information in this presentation is as of April 20, 2010.Yahoo! does not intend, and undertakes no duty, to update this information to reflect future events or circumstances. Moreinformation about potential factors that could affect Yahoo!s business and financial results is included under the captions RiskFactors and Managements Discussion and Analysis of Financial Condition and Results of Operations in Yahoo!s AnnualReport on Form 10-K for the fiscal year ended December 31, 2009, which is on file with the Securities and ExchangeCommission (SEC) and available on the SECs web site at www.sec.gov. Additional information will also be set forth in thosesections in Yahoo!s Quarterly Report on Form 10-Q for the quarter ended March 31, 2010, which will be filed with the SEC inthe second quarter of 2010.

Legal Notice


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Quarterly Overview


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Note: Traffic Acquisition Costs (TAC) consists of payments made to Affiliate sites that have integrated our advertising offerings into their website or their other offerings and payments madeto companies that direct consumer and business traffic to the Yahoo! website.

Note: Revenue excluding traffic acquisition costs (Revenue ex-TAC) is a non-GAAP financial measure defined as GAAP revenue less TAC. Please refer to supporting Table 1 for Revenue ex-TAC Calculation by Segment. Throughout this presentation, we have rounded numbers as appropriate.

Quarterly GAAP Revenue & TAC Rate Trends

$1,580 $1,573

27%TAC % of

GAAP Revenue28% 28%

$1,575

27%

$1,732

$1,597

29%


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Quarterly Revenue ex-TAC Trends

Note: Revenue excluding traffic acquisition costs (Revenue ex-TAC) is a non-GAAP financial measure defined as GAAP revenue less TAC. Please refer to supporting Table 1 forRevenue ex-TAC Calculation by Segment.

$1,156 $1,136 $1,131

$1,258

$1,130


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Revenue and Revenue ex-TAC Comparisons

$ in millions Q109 Q409 Q110 Q110

YOY QOQ

Revenues for Groups of SimilarServices

Marketing Services:

Owned and Operated sites(1)

Affiliate sites(2)

Fees

Total Revenue

Revenue ex-TAC

United States

International

Total

$871.8

511.4

196.9

$1,580.0

$897.8

258.5

$1,156.2

$971.3

564.0

196.7

$1,732.0

$927.0

331.5

$1,258.5

$874.8

547.7

174.4

$1,597.0

$842.8

287.6

$1,130.4

0%

7%

(11%)

1%

(6%)

11%

(2%)

(10%)

(3%)

(11%)

(8%)

(9%)

(13%)

(10%)

Note: Revenue excluding traffic acquisition costs (Revenue ex-TAC) is a non-GAAP financial measure defined as GAAP Revenue less TAC. Please refer to supporting Table 1 forRevenue ex-TAC Calculation by Segment.

(1) Refers to Yahoo!s owned and operated (O&O) online properties and services.

(2) Refers to Yahoo!s distribution network of third-party entities who have integrated Yahoo!s advertising offerings into their websites or their other offerings.


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Adjusted GAAP Revenue Growth

Year/Year Growth Q109 Q209 Q309 Q409 Q110

Reported GAAP Revenue Growth

Impact of:

Currency(1)

Acquisitions/Divestitures(2)

Total Impact

(13%)

5%

5%

10%

(13%)

5%

2%

7%

(12%)

3%

2%

5%

(4%)

(2%)

2%

(0%)

1%

(2%)

0%

(2%)

Adjusted Growth Rate (3%) (6%) (7%) (5%) (1%)

(1) The currency impact reflects the impact on year-over-year reported GAAP revenue growth from changes in currency exchange rates.

(2) The acquisitions/divestitures impact reflects the contribution to reported GAAP revenue growth from acquisitions made in the prior 12 months and the loss of revenue related to thesale of Zimbra, Inc. in Q110.


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GAAP Revenue Details

$ in millions Q109 Q209 Q309 Q409 Q110

O&O Search

Year/Year Growth

$399

(3%)

$359

(15%)

$354

(19%)

$370

(15%)

$343

(14%)

O&O Display

Year/Year GrowthAffiliate

Year/Year Growth

$371

(13%)$511

(16%)

$393

(14%)$520

(9%)

$399

(8%)$526

(6%)

$503

(1%)$564

6%

$444

20%$548

7%

O&O Listings & Other Marketing Services

Year/Year Growth

Total Marketing Services

Year/Year Growth

Fees

Year/Year Growth

Total Revenues

Year/Year Growth

$102

(22%)

$106

(21%)

$98

(24%)

$98

(18%)

$88

(14%)

$1,383

(12%)

$197

(20%)

$1,378

(13%)

$195

(8%)

$1,377

(12%)

$198

(11%)

$1,535

(4%)

$197

(7%)

$1,423

3%

$174

(11%)

$1,580

(13%)

$1,573

(13%)

$1,575

(12%)

$1,732

(4%)

$1,597

1%


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Segment Data$ in millions Q109 Q110 Q110

YOY

United States Segment

Revenues

Direct Costs(1)

Contribution by Segment

Segment Contribution Margin(2)

International Segment

Revenues

Direct Costs(1)

Contribution by SegmentSegment Contribution Margin(2)

Combined Segments

Revenues

Direct Costs(1)

Contribution by Combined SegmentsCombined Segment Contribution Margin(2)

$1,187.9

(464.7)

$723.2

61%

$392.1

(214.6)

$177.5

45%

$1,580.0

(679.2)

$900.857%

$1,120.7

(413.4)

$707.3

63%

$476.3

(263.2)

$213.1

45%

$1597.0

(676.7)

$920.358%

(6%)

(11%)

(2%)

N/M

21%

23%

20%

N/M

1%

0%

2%N/M

(1) Direct costs for each segment include TAC, other cost of revenues, and other operating expenses that are directly attributable to the segment such as employee compensationexpense, local sales and marketing expenses, and facilities expenses.

(2) Segment contribution margin is calculated as segment contribution divided by segment revenues.

Note: Please refer to supporting table 6, Supplemental Financial Data.

N/M = Not Meaningful


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Free Cash Flow (FCF) Trends

Note: Free Cash Flow (FCF) is a non-GAAP financial measure defined as cash flow from operating activities (adjusted to include excess tax benefits from stock-based awards), less netcapital expenditures and dividends received. Please refer to supporting Table 2 for Free Cash Flow Calculation.

(1) Microsoft search operating cost reimbursements and transition cost reimbursements were recognized on the income statement but not received as cash in the first quarter of 2010.


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Non-GAAP Net Income Per Share Trends

Note: Non-GAAP Net Income is a non-GAAP financial measure defined as net income (loss) attributable to Yahoo! Inc. excluding certain gains, losses, expenses, and their related tax effects thatwe do not believe are indicative of our ongoing results. All per share amounts are based on fully diluted share counts.

Beginning in Q110, our presentation of Non-GAAP Net income no longer excludes stock-based compensation expense and its related tax effects. For comparison purposes, prior period amountshave been revised to conform to the current presentation.

See Table 3 for Reconciliation of GAAP Net Income Attributable to Yahoo! Inc. and GAAP Net Income Attributable to Yahoo! Inc. Per Share - Diluted to Non-GAAP Net Income and Non-GAAPNet Income Per Share and Table 4 for Reconciliation of GAAP Net Income Attributable to Yahoo! Inc. to Non-GAAP Net Income, with Details on Adjustments.


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Key Operational & Balance Sheet Metrics

$ in millions except where noted Q109 Q209 Q309 Q409 Q110

Cash & Marketable Debt Securities $3,691 $4,197 $4,503 $4,518 $4,244

Accounts Receivable, net

DSO (in days)

$913

52

$907

53

$907

53

$1,003

53

$900

51

Current Deferred Revenue $406 $417 $413 $411 $352

Ending Employees (ones)

Year/Year Growth

Page Views

13,500

5%

13,000

4%

13,200

5%

13,900

3%

14,200

0%

Note: We periodically review and refine our methodology for monitoring, gathering, and counting Page Views to more accurately reflect the total number of Web pages viewed by users on Yahoo!properties. Based on this process, from time to time we update our methodology to exclude from the count of Page Views interactions with our servers that we determine or believe are not theresult of user visits to our Owned and Operated sites.


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Yahoo! and Microsoft Search AllianceQ1 Q2 Q4 2010

Approximately $25M - $30Mper month for direct costs ofrunning Yahoo! Search

Monthly reimbursements will bereduced as algo and paid

search employees move toMicrosoft

Operating Cost

Reimbursements

Transition costs includesales training, customer migration,consulting, legal, retention and othercosts incurred in connection with thetransition of search services to

Microsoft Transition costs and reimbursements

are expected to be nearlyequal in 2Q-4Q10

Transition Costs

Up to $150M of reimbursementsthat Microsoft will pay to Yahoo!over the next two years asspecified in the agreement

Payments relate to specific

transition costs

1Q10 includes reimbursementsfor transition costs that occurredin 2009 and 1Q10

Transition Cost

Reimbursements

Indicativeof long-term

cost savings, notincluding 2010reinvestments

Net $78M $75M - $85M per quarter

$43 MGoing forward shouldnet to approximately

$0


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Business Outlook

(1) Total expenses is calculated as cost of revenues plus total operating expenses.

Note: D&A refers to Depreciation & Amortization (D&A) and SBC refers to Stock-Based Compensation Expense (SBC).

The above business outlook is based on current information and expectations as of April 20, 2010. Yahoo! does not expect, and undertakes no obligation, to updatethis business outlook prior to the release of the Companys next quarterly earnings announcement, notwithstanding subsequent developments; however, Yahoo! mayupdate this business outlook or any portion thereof at any time at its discretion.

Please refer to supporting Table 7 for calculations of total expenses less TAC, and total expenses less TAC, D&A and SBC.

$ in millions Q210

Current Outlook

FY10

Current Outlook

Revenues $1,600-$1,680 -

Traffic Acquisition Costs (TAC) $475-$495 -

Total expenses(1) less TAC $970-$990 $3,850-$3,925

Total expenses(1) lessTAC, D&A, and SBC

$750-$760 $2,970-$3,025

Income from Operations $155-$195 -


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Appendix


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Table 1 Revenue ex-TAC Calculation by SegmentReconciliation of GAAP Revenue to Revenue ex-TAC

$ in millions Q109 Q209 Q309 Q409 Q110

United States

GAAP RevenueTAC

US Revenue ex-TAC

$1,187.9(290.1)

$897.8

$1,152.4(290.5)

$861.9

$1,143.2(294.7)

$848.5

$1,230.9(304.0)

$927.0

$1,120.7(277.8)

$842.8

International

GAAP Revenue

TAC

Intl Revenue ex-TAC

$392.1

(133.7)

$258.5

$420.5

(146.0)

$274.5

$432.2

(149.3)

$283.0

$501.0

(169.5)

$331.5

$476.3

(188.7)

$287.6

Worldwide

GAAP Revenue

TACRevenue ex-TAC

$1,580.0

(423.8)$1,156.2

$1,572.9

(436.6)$1,136.3

$1,575.4

(444.0)$1,131.4

$1,732.0

(473.5)$1,258.5

$1,597.0

(466.5)$1,130.4

Note: Revenue ex-TAC is a non-GAAP financial measure defined as GAAP Revenue less TAC.


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Table 2 - Free Cash Flow CalculationReconciliation of Cash Flow from Operating Activities to FCF

$ in millions Q109 Q209 Q309 Q409 Q110Free Cash Flow

Cash Flow from Operating Activities

Excess Tax Benefits from Stock-Based Awards

Acquisition of Property & Equipment, Net

Dividends Received

Total

$262.3

22.1

(70.5)

-

$214.0

$341.8

45.1

(94.7)

(26.1)

$266.0

$355.1

2.9

(98.9)

(1.5)

$257.7

$351.1

38.4

(169.7)

-

$219.7

$143.6

32.9

(112.5)

-

$63.9

Note: Free Cash Flow (FCF) is a non-GAAP financial measure defined as cash flow from operating activities (adjusted to include excess tax benefits from stock-based awards), less netcapital expenditures and dividends received. The excess tax benefits from stock-based awards, as reported on the statements of cash flows in cash flows from financing activities,represent the reduction in income taxes otherwise payable during the period, attributable to the actual gross tax benefits in excess of the expected tax benefits for optionsexercised/awards released in current and prior periods.


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Table 3 Non-GAAP Net Income Per Share CalculationReconciliation of GAAP Net Income Attributable to Yahoo! Inc. and GAAP Net

Income Attributable to Yahoo! Inc. Common Stockholders Per Share - Diluted toNon-GAAP Net Income and Non-GAAP Net Income Per Share - Diluted

in millions except per share amounts Q109 Q209 Q309 Q409 Q110

GAAP Net Income Attributable to Yahoo! Inc.

Adjustments

Non-GAAP Net Income

GAAP Net Income Attributable to Yahoo! Inc. Common StockholdersPer Share - Diluted

Non-GAAP Net Income Per Share - Diluted

Diluted Shares Outstanding

$117.6

5.6

$123.1

$0.08

$0.09

1,406.5

$141.4

4.0

$145.4

$0.10

$0.10

1,414.3

$186.1

(40.8)

$145.3

$0.13

$0.10

1,424.9

$153.0

47.2

$200.2

$0.11

$0.14

1,417.0

$310.2

(91.4)

$218.8

$0.22

$0.15

1,413.4

Note: All per share amounts are based on fully diluted share counts. Please refer to supporting Table 4 for details on Adjustments.

Beginning in Q110, our presentation of Non-GAAP Net Income no longer excludes stock-based compensation expense and its related tax effects. For comparison purposes, prior periodamounts have been revised to conform to the current presentation.


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Table 5 - Non-GAAP Operating Income CalculationReconciliation of GAAP Operating Income to Non-GAAP Operating Income, with Details onAdjustments

(1) Non-GAAP Net income excludes reimbursements for prior periods. For the three months ended March 31, 2010 Yahoo! accrued $67 million of transition costreimbursements from Microsoft for transition costs incurred by Yahoo! in 2009 and the first quarter of 2010, partially offset by $24 million of transition costsincurred by Yahoo! in the first quarter of 2010. No adjustment is made for the $35 million of search operating cost reimbursements from Microsoft accrued in thefirst quarter of 2010, because the underlying costs were incurred in the same period.

(2) Includes incremental costs for advisors related to Microsoft's proposals to acquire all or a part of the Company, other strategic alternatives, including the Googleagreement, the proxy contest, and related litigation defense.

$ in thousands Q1'09 Q2'09 Q3'09 Q4'09 Q1'10

GAAP Income from operations 100,685$ 75,753$ 91,499$ 118,755$ 188,021$

(a) Transition cost reimbursements from Microsoft, net (1) - - 12,141 32,013 (43,300)

(b) Incremental costs for advisors related to strategic alternatives and related

matters (2)

3,709 2,596 - - -

(c) Restructuring charges, net 4,801 65,002 16,689 40,409 4,412

Non-GAAP Income from operations 109,195$ 143,351$ 120,329$ 191,177$ 149,133$


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Table 6 Supplemental Financial Data

$ in millions Q109 Q110

Revenues by Segment:

United States

International

Total Revenues

Direct costs by segment(1):

United States

International

Global Operating Costs(2)

Restructuring charges, net

Depreciation and amortization

Stock-based compensation

Income from Operations

$1,187.9

392.1

$1,580.0

$464.7

214.6

487.0

4.8

181.6

126.7

$100.7

$1,120.7

476.3

$1,597.0

$413.4

263.2

501.8

4.4

165.2

60.8

$188.0

(1) Direct costs for each segment include TAC, other cost of revenues, and other operating expenses that are directly attributable to the segment such as employee compensationexpense, local sales and marketing expenses, and facilities expenses.

(2) Global operating costs include product development, service engineering and operations, marketing, customer advocacy, general and administrative, and other corporate expensesthat are managed on a global basis and that are not directly attributable to any segment.


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Table 7 Reconciliations

Note: D&A refers to Depreciation & Amortization (D&A) and SBC refers to Stock-Based Compensation Expense (SBC).

(1) We are unable to provide Total Expenses or TAC on a forward-looking basis for the full year.

(2) We expect the sum of D&A and SBC for the full year to be approximately $880-$900 million.The above business outlook for Q210 and FY10 is based on current information and expectations as of April 20, 2010. Yahoo! does not expect, and undertakes no obligation, to

update this business outlook prior to the release of the Companys next quarterly earnings announcement, notwithstanding subsequent developments; however, Yahoo! mayupdate this business outlook or any portion thereof at any time at its discretion.

Q1'10A Q2'10E FY'10E(in millions) (in millions) (in millions)

Total Expenses less TAC:

Total Expenses (GAAP Cost of Revenues + GAAP Total Operating Expenses) $ $1,409 $ 1,445 - 1,485(1)

Less: Traffic Acquisition Costs ("TAC") ($467) (475 - 495)(1)

Total Expenses less TAC $ $942 $ 970 - 990 $ 3,850 - 3,925

Total Expenses less TAC, D&A, and SBC:

Total Expenses (GAAP Cost of Revenues + GAAP Total Operating Expenses) $ $1,409 $ 1,445 - 1,485(1)

Less: Traffic Acquisition Costs ("TAC") ($467) (475 - 495)(1)

Less: Depreciation and Amortization ("D&A") ($165) (160 - 165)(2)

Less: Stock-Based Compensation Expense ("SBC") ($61) (60 - 65)(2)

Total Expenses less TAC, D&A, and SBC $ $716 $ 750 - 760 $ 2,970 - 3,025

yhoo q110earningspresentation final

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