Press Release
Yahoo Reports Fourth Quarter and Full Year 2016 Results
"I'm very pleased with our Q4 results and incredibly proud of the team's
execution on our 2016 strategic plan, particularly given the uniquely
eventful past year for
Q4 2015 | Q4 2016 | Full Year 2015 | Full Year 2016 | |||||||||
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As previously announced, beginning in the second quarter of 2016, GAAP
revenue and cost of revenue - TAC are impacted by a required change in
revenue presentation related to the Eleventh Amendment to the Microsoft
Search Agreement ("Change in Revenue Presentation," as discussed below).
For the fourth quarter of 2016, the Change in Revenue Presentation
contributed
Business Updates
- Continued to launch features and improvements across Yahoo Mail mobile apps, achieving an industry-leading 4+ star average rating on both iOS and Android throughout the past year.
-
Added a number of new features to the Yahoo App, including top
contributor highlights, an "explore" feature that groups topics into
categories, and curated lists from our editorial team to showcase the
best of
Yahoo . -
Launched Yahoo Sports "Game of the Day" for the 2016-17 season ofNHL , connecting fans with free live games and in-game highlights; partnered with Twitter to host the live stream of Thursday night NFL games. -
Launched curated watchlists created by industry experts on
Yahoo Finance to help users discover trending topics and new investment opportunities. - Launched Yahoo View on Android, expanding free access to Hulu TV show clips and movie trailers.
- Launched Yahoo Answers Now, a new community-focused app which helps users pose questions and receive answers quickly from members who have relevant experiences and expertise.
- Launched new advertiser features for Yahoo Gemini including native bid alerts and a new native ad format on Yahoo Mail.
- The BrightRoll DSP saw 485% YoY growth in the Platform display business, through the launches of native on 3rd party supply as well as forecasting and reporting improvements.
- The Yahoo Mobile Developer Suite reached a footprint of over 940,000 applications, over 2 billion devices.
-
Over 10M users have now adopted Yahoo Account Key to make signing into
Yahoo products easier than ever before.
Transaction Update
Fourth Quarter and Full Year 2016 Financial Highlights
Mavens Revenue*:
Q4 2015 | Q4 2016 | Full Year 2015 | Full Year 2016 | |||||||||||||
Mavens revenue |
$ |
472 million |
$ |
590 million |
$ |
1,660 million |
$ |
2,010 million |
||||||||
Non-Mavens revenue |
750 million |
824 million |
2,908 million |
2,941 million |
||||||||||||
Total traffic-driven revenue |
$ |
1,222 million |
$ |
1,414 million |
$ |
4,568 million |
$ |
4,951 million |
||||||||
Non-traffic-driven revenue | 51 million | 55 million | 400 million | 218 million | ||||||||||||
GAAP revenue |
$ |
1,273 million |
$ |
1,469 million |
$ |
4,968 million |
$ |
5,169 million |
* The Change in Revenue Presentation contributed
Mavens revenue represented 39 percent and 36 percent of traffic-driven
revenue in the fourth quarter and full year of 2015, respectively, and
increased to 42 percent and 41 percent in the fourth quarter and full
year of 2016, respectively. Excluding the impact of the Change in
Revenue Presentation, Mavens revenue would have been
Mobile Revenue*:
Q4 2015 | Q4 2016 | Full Year 2015 | Full Year 2016 | |||||||||||||
Mobile revenue |
$ |
291 million |
$ |
459 million |
$ |
1,048 million |
$ |
1,494 million |
||||||||
Desktop revenue | 931 million | 955 million | 3,520 million | 3,457 million | ||||||||||||
Total traffic-driven revenue |
$ |
1,222 million |
$ |
1,414 million |
$ |
4,568 million |
$ |
4,951 million |
||||||||
Non-traffic-driven revenue | 51 million | 55 million | 400 million | 218 million | ||||||||||||
GAAP revenue |
$ |
1,273 million |
$ |
1,469 million |
$ |
4,968 million |
$ |
5,169 million |
* The Change in Revenue Presentation contributed
GAAP mobile revenue for the fourth quarter of 2015 and 2016 was
Mobile revenue represented 24 percent and 23 percent of traffic-driven
revenue in the fourth quarter and full year of 2015, respectively, and
increased to 32 percent and 30 percent in the fourth quarter and full
year of 2016. Excluding the impact of the Change in Revenue
Presentation, mobile revenue would have been
Gross mobile revenue for the fourth quarter of 2015 and 2016 was
Search Revenue:
-
GAAP search revenue was
$767 million for the fourth quarter of 2016 compared to$528 million for the fourth quarter of 2015. Excluding the impact of the Change in Revenue Presentation, which contributed$302 million to search revenue in the fourth quarter of 2016, search revenue decreased by 12 percent compared to the fourth quarter of 2015. GAAP search revenue was$2,673 million for the full year of 2016 compared to$2,114 million for the full year of 2015. Excluding the impact of the Change in Revenue Presentation, which contributed$812 million to search revenue for the full year of 2016, search revenue decreased by 12 percent compared to the full year of 2015. -
Gross search revenue was
$821 million for the fourth quarter of 2016, a decrease of 6 percent compared to the fourth quarter of 2015. Gross search revenue was$3,159 million for the full year of 2016, a decrease of 13 percent compared to the prior year. The Change in Revenue Presentation does not impact gross search revenue. -
Cost of revenue - TAC associated with search revenue was
$433 million for the fourth quarter of 2016. Excluding the impact of the Change in Revenue Presentation, which contributed$302 million to cost of revenue - TAC in the fourth quarter of 2016, cost of revenue - TAC associated with search revenue decreased by 7 percent compared to the fourth quarter of 2015. Cost of revenue - TAC associated with search revenue was$1,353 million for the full year of 2016. Excluding the impact of the Change in Revenue Presentation, which contributed$812 million to cost of revenue - TAC in the full year of 2016, cost of revenue - TAC associated with search revenue increased by 16 percent compared to the full year of 2015. - The number of Paid Clicks decreased 21 percent compared to the fourth quarter of 2015.
- Price-per-Click increased 18 percent compared to the fourth quarter of 2015.
Display Revenue:
-
GAAP display revenue was
$573 million for the fourth quarter of 2016, a 5 percent decrease compared to the fourth quarter of 2015. GAAP display revenue was$1,982 million for the full year of 2016, a 5 percent decrease compared to the prior year. -
Cost of revenue - TAC associated with display revenue was
$76 million for the fourth quarter of 2016, a 41 percent decrease compared to the fourth quarter of 2015. Cost of revenue - TAC associated with display revenue was$296 million for the full year of 2016, a 28 percent decrease compared to the full year of 2015. - The number of Ads Sold increased 4 percent compared to the fourth quarter of 2015.
- Price-per-Ad decreased 10 percent compared to the fourth quarter of 2015.
Cash, Cash Equivalents, and
Cash, cash equivalents, and marketable securities were
"I am very pleased with how we executed against our 2016 plan, achieving
GAAP revenue of nearly
Change in Revenue Presentation
As previously announced, pursuant to the Eleventh Amendment to the
Microsoft Search Agreement, the Company completed the transition of its
exclusive sales responsibilities to Microsoft for Microsoft's paid
search services to premium advertisers in
Supplemental Financial and Other Information
Supplemental financial and other information, including user engagement
trends before and after the
Non-GAAP Financial Measures
This press release includes adjusted GAAP revenue and cost of revenue - TAC amounts that exclude the effect of the Change in Revenue Presentation related to the Eleventh Amendment that took place in the second quarter of 2016. We believe providing this additional information to investors is useful because it provides investors with comparable revenue and cost of revenue - TAC measures for comparison to our historical reported financial information.
This press release and its attachments also include the
following additional financial measures defined as non-GAAP financial
measures by the
Gross mobile revenue is GAAP mobile revenue plus the related revenue share with third parties. Gross search revenue is GAAP search revenue plus the related revenue share with third parties. Revenue ex-TAC is GAAP revenue less cost of revenue - TAC. Adjusted EBITDA, non-GAAP income from operations, non-GAAP net earnings, and non-GAAP net earnings per share - diluted, exclude from the most comparable GAAP financial measures certain gains, losses, and expenses that we do not believe are indicative of ongoing results, and exclude stock-based compensation expense. Adjusted EBITDA also excludes taxes, depreciation, amortization of intangible assets, other (expense) income, net (which includes interest, among other items), earnings in equity interests, and net income attributable to noncontrolling interests. Free cash flow is GAAP net cash provided by operating activities (adjusted to include excess tax benefits from stock-based awards), less acquisition of property and equipment, net (i.e., acquisition of property and equipment less proceeds received from disposition of property and equipment) and dividends received from equity investees.
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 Supplemental Financial Data and GAAP to Non-GAAP Reconciliations," "Supplemental Financial Data and GAAP to Non-GAAP Reconciliations" and "GAAP to Non-GAAP Reconciliations."
About
"Ads Sold" consist of display ad impressions for paying advertisers
on
"Affiliates" are third-party entities that have integrated Yahoo's advertising offerings into their websites or other offerings (those websites and other offerings, "Affiliate sites").
"Alibaba Group" means Alibaba Group Holding Limited. In
"Desktop computer" means a desktop or laptop computer, and "desktop revenue" is revenue generated from search and display ads served on Desktop computers and also includes leads, listings, and fees revenue and ecommerce revenue allocated to user activity on Desktop computers.
"Gross mobile revenue," a non-GAAP measure, is GAAP mobile revenue plus the related revenue share with third parties.
"Gross search revenue," a non-GAAP measure, is GAAP search revenue plus the related revenue share with third parties.
"Mavens revenue" is revenue generated from, without duplication: (i)
mobile (as defined below), (ii) video ads and video ad packages, (iii)
native ads, and (iv)
"Microsoft Search Agreement" refers to the Search and Advertising
Services and Sales Agreement between
"Mobile revenue" is revenue generated in connection with user activity on mobile devices, including smartphones and tablets, regardless of whether the device is accessing a mobile-optimized service. Mobile revenue is generated primarily from search and display ads. Mobile revenue also includes leads, listings, and fees revenue and ecommerce revenue allocated to user activity on mobile devices.
"Native revenue" is revenue generated from native ads (search
and display) on
"Net earnings" means net income (loss) attributable to
"Non-Mavens revenue" is revenue generated from search ads and
traditional (i.e., non-native, non-video, non-
"Non-traffic-driven revenue" is revenue not arising from user
activity on
"Paid Clicks" are clicks by end-users on sponsored search listings
(excluding native ads) on
"Price-per-Ad" is defined as display revenue divided by our total number of Ads Sold.
"Price-per-Click" is defined as Search click-driven revenue divided by our total number of Paid Clicks.
"Search click-driven revenue" is gross search revenue excluding search revenue from Yahoo Japan.
"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," "Company," and "we" refer to
"Yahoo Properties" refers to the online properties and services that
We periodically review, refine, and update our methodologies for monitoring, gathering, and counting number of Ads Sold and Paid Clicks, and for calculating Search click-driven revenue, Price-per-Ad, and Price-per-Click. Methodology changes are applied consistently to all periods presented. No changes were made in the currently reported period.
Additional information about how "Ads Sold," "Paid Clicks,"
"Price-per-Ad," "Price-per-Click," and "Search click-driven revenue" are
defined and calculated is included under the caption "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
This press release (including, without limitation, the quotations
from management) contains forward-looking statements concerning
Important Additional Information and Where to Find It.
On
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Unaudited Condensed Consolidated Balance Sheets | ||||||
(in thousands) | ||||||
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2015 |
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2016 |
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ASSETS | ||||||
Current assets: | ||||||
Cash and cash equivalents | $ | 1,631,911 | $ | 1,119,469 | ||
Short-term marketable securities | 4,225,112 | 5,700,925 | ||||
Accounts receivable, net | 1,047,504 | 1,084,267 | ||||
Prepaid expenses and other current assets | 602,792 | 221,499 | ||||
Total current assets | 7,507,319 | 8,126,160 | ||||
Long-term marketable securities | 975,961 | 1,089,707 | ||||
Property and equipment, net | 1,547,323 | 1,209,937 | ||||
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808,114 | 415,809 | ||||
Intangible assets, net | 347,269 | 161,644 | ||||
Other long-term assets and investments | 342,390 | 206,059 | ||||
Investments in Alibaba Group | 31,172,361 | 33,680,879 | ||||
Investments in equity interests | 2,503,229 | 3,192,884 | ||||
Total assets | $ | 45,203,966 | $ | 48,083,079 | ||
LIABILITIES AND EQUITY | ||||||
Current liabilities: | ||||||
Accounts payable | $ | 208,691 | $ | 171,520 | ||
Other accrued expenses and current liabilities | 934,658 | 1,006,676 | ||||
Deferred revenue | 134,031 | 109,228 | ||||
Total current liabilities | 1,277,380 | 1,287,424 | ||||
Convertible notes | 1,233,485 | 1,299,945 | ||||
Long-term deferred revenue | 27,801 | 39,583 | ||||
Other long-term liabilities | 118,689 | 95,597 | ||||
Deferred tax liabilities related to investment in Alibaba Group | 12,611,867 | 13,633,988 | ||||
Deferred and other long-term tax liabilities | 855,324 | 642,466 | ||||
Total liabilities | 16,124,546 | 16,999,003 | ||||
Total |
29,043,537 | 31,049,283 | ||||
Noncontrolling interests | 35,883 | 34,793 | ||||
Total equity | 29,079,420 | 31,084,076 | ||||
Total liabilities and equity | $ | 45,203,966 | $ | 48,083,079 | ||
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Unaudited Condensed Consolidated Statements of Operations | ||||||||||||||||
(in thousands, except per share amounts) | ||||||||||||||||
Three Months Ended | Year Ended | |||||||||||||||
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2015 | 2016 | 2015 | 2016 | |||||||||||||
Revenue (1) | $ | 1,273,393 | $ | 1,469,140 | $ | 4,968,301 | $ | 5,169,135 | ||||||||
Operating expenses: | ||||||||||||||||
Cost of revenue - traffic acquisition costs (1) | 270,916 | 509,000 | 877,514 | 1,650,786 | ||||||||||||
Cost of revenue - other | 316,193 | 261,617 | 1,200,234 | 1,068,108 | ||||||||||||
Sales and marketing | 256,728 | 206,810 | 1,080,718 | 881,521 | ||||||||||||
Product development | 272,463 | 253,754 | 1,177,923 | 1,055,462 | ||||||||||||
General and administrative | 181,733 | 160,189 | 687,804 | 650,708 | ||||||||||||
Amortization of intangibles | 19,365 | 11,566 | 79,042 | 58,302 | ||||||||||||
Asset impairment charge | 2,682 | - | 44,381 | - | ||||||||||||
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4,460,837 | - | 4,460,837 | 394,901 | ||||||||||||
Intangible assets impairment charge | 15,423 | - | 15,423 | 87,335 | ||||||||||||
Gain on sale of patents and land | - | - | (11,100 | ) | (121,559 | ) | ||||||||||
Restructuring charges, net | 7,087 | 2,053 | 104,019 | 88,629 | ||||||||||||
Total operating expenses | 5,803,427 | 1,404,989 | 9,716,795 | 5,814,193 | ||||||||||||
(Loss) income from operations | (4,530,034 | ) | 64,151 | (4,748,494 | ) | (645,058 | ) | |||||||||
Other expense, net | (9,023 | ) | (15,440 | ) | (75,782 | ) | (53,916 | ) | ||||||||
(Loss) income before income taxes and earnings in equity interests | (4,539,057 | ) | 48,711 | (4,824,276 | ) | (698,974 | ) | |||||||||
Benefit for income taxes |
13,985 | 1,492 | 89,598 | 126,228 | ||||||||||||
Earnings in equity interests, net of tax | 92,845 | 113,704 | 383,571 | 363,283 | ||||||||||||
Net (loss) income | (4,432,227 | ) | 163,907 | (4,351,107 | ) | (209,463 | ) | |||||||||
Less: Net income attributable to noncontrolling interests | (2,760 | ) | (1,909 | ) | (7,975 | ) | (4,858 | ) | ||||||||
Net (loss) income attributable to |
$ | (4,434,987 | ) | $ | 161,998 | $ | (4,359,082 | ) | $ | (214,321 | ) | |||||
Net (loss) income attributable to |
$ | (4.70 | ) | $ | 0.17 | $ | (4.64 | ) | $ | (0.23 | ) | |||||
Shares used in per share calculation - diluted | 943,425 | 958,624 | 939,141 | 949,843 | ||||||||||||
Stock-based compensation expense by function: | ||||||||||||||||
Cost of revenue - other | $ | 9,053 | $ | 8,866 | $ | 32,010 | $ | 34,742 | ||||||||
Sales and marketing | 30,002 | 34,042 | 141,418 | 142,301 | ||||||||||||
Product development | 45,010 | 52,269 | 190,454 | 213,451 | ||||||||||||
General and administrative | 21,836 | 27,462 | 93,271 | 101,408 | ||||||||||||
Restructuring charges, net | - | - | 2,705 | 7,374 | ||||||||||||
Supplemental Financial Data: |
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Revenue ex-TAC | $ | 1,002,477 | $ | 960,140 | $ | 4,090,787 | $ | 3,518,349 | ||||||||
Adjusted EBITDA | $ | 214,687 | $ | 324,078 | $ | 951,740 | $ | 872,672 | ||||||||
Free cash flow(2)(3) | $ | 31,502 | $ | 230,620 | $ | (3,010,172 | ) | $ | 1,120,580 | |||||||
(1) | Commencing in the second quarter of 2016, TAC payments related to the Microsoft Search Agreement, which previously would have been recorded as a reduction to revenue, began to be recorded as a cost of revenue due to a required change in revenue presentation. See "Change in Revenue Presentation" in the accompanying press release. | |
(2) |
During the year ended |
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(3) |
During the year ended |
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Unaudited Condensed Consolidated Statements of Cash Flows | ||||||||||||||||
(in thousands) | ||||||||||||||||
Three Months Ended | Year Ended | |||||||||||||||
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2015 | 2016 | 2015 | 2016 | |||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||||||
Net (loss) income | $ | (4,432,227 | ) | $ | 163,907 | $ | (4,351,107 | ) | $ | (209,463 | ) | |||||
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities: |
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Depreciation | 117,354 | 99,017 | 472,894 | 407,341 | ||||||||||||
Amortization of intangible assets | 34,629 | 20,178 | 136,719 | 100,214 | ||||||||||||
Accretion of convertible notes discount | 16,077 | 16,944 | 63,061 | 66,461 | ||||||||||||
Stock-based compensation expense | 105,901 | 122,639 | 459,858 | 499,276 | ||||||||||||
Non-cash asset impairment charge | 2,682 | - | 44,381 | - | ||||||||||||
Non-cash goodwill impairment charge | 4,460,837 | - | 4,460,837 | 394,901 | ||||||||||||
Non-cash intangible assets impairment charge | 15,423 | - | 15,423 | 87,335 | ||||||||||||
Non-cash restructuring charges (reversals) | 3,181 | - | 3,150 | 1,227 | ||||||||||||
Non-cash accretion on marketable debt securities | 8,890 | 2,220 | 47,218 | 25,280 | ||||||||||||
Foreign exchange (gain) loss | (5,961 | ) | 18,618 | 4,376 | (27,428 | ) | ||||||||||
Loss (gain) on sale of assets and other | 180 | (597 | ) | (2,878 | ) | (3,316 | ) | |||||||||
Gain on sale of patents and land | - | - | (11,100 | ) | (121,559 | ) | ||||||||||
(Gain) loss on Hortonworks warrants | (42 | ) | 116 | 19,199 | 50,046 | |||||||||||
Earnings in equity interests | (92,845 | ) | (113,704 | ) | (383,571 | ) | (363,283 | ) | ||||||||
Tax benefits (detriments) from stock-based awards | 18,739 | 14,854 | 41,729 | 6,256 | ||||||||||||
Excess tax benefits from stock-based awards | (24,923 | ) | (16,264 | ) | (58,282 | ) | (18,007 | ) | ||||||||
Deferred income taxes | 10,264 | (48,753 | ) | (42,341 | ) | (224,737 | ) | |||||||||
Dividends received from equity investee | - | - | 142,045 | 156,968 | ||||||||||||
Changes in assets and liabilities, net of effects of acquisitions: | ||||||||||||||||
Accounts receivable | (73,368 | ) | (149,290 | ) | (39,065 | ) | (43,029 | ) | ||||||||
Prepaid expenses and other | 85,954 | 30,248 | 21,842 | 376,351 | ||||||||||||
Accounts payable | (30,323 | ) | 5,533 | (59,965 | ) | (4,550 | ) | |||||||||
Accrued expenses and other liabilities | (84,793 | ) | 92,703 | 109,776 | 105,677 | |||||||||||
Income taxes payable related to sale of Alibaba Group ADSs | - | - | (3,282,293 | ) | - | |||||||||||
Deferred revenue | (3,339 | ) | (3,110 | ) | (195,328 | ) | (13,098 | ) | ||||||||
Net cash provided by (used in) operating activities | 132,290 | 255,259 | (2,383,422 | ) | 1,248,863 | |||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||||||
Acquisition of property and equipment | (125,818 | ) | (41,601 | ) | (554,163 | ) | (239,109 | ) | ||||||||
Proceeds from sales of property and equipment | 107 | 698 | 11,176 | 249,787 | ||||||||||||
Purchases of marketable securities | (1,733,658 | ) | (2,137,201 | ) | (5,206,245 | ) | (7,817,485 | ) | ||||||||
Proceeds from sales of marketable securities | 256,676 | 105,861 | 822,997 | 387,254 | ||||||||||||
Proceeds from maturities of marketable securities | 1,802,208 | 1,592,978 | 6,691,645 | 5,816,713 | ||||||||||||
Acquisitions, net of cash acquired | (1,063 | ) | - | (175,693 | ) | - | ||||||||||
Proceeds from sales of patents | - | - | 29,100 | 1,500 | ||||||||||||
Purchases of intangible assets | (78 | ) | (44 | ) | (4,811 | ) | (2,045 | ) | ||||||||
Proceeds from the settlement of derivative hedge contracts | 26,497 | - | 147,179 | 39,007 | ||||||||||||
Payments for settlement of derivative hedge contracts | (2,223 | ) | (2,705 | ) | (8,817 | ) | (9,717 | ) | ||||||||
Payments for equity investments in privately held companies | - | - | - | (9 | ) | |||||||||||
Other investing activities, net | (53 | ) | (34 | ) | (256 | ) | (161 | ) | ||||||||
Net cash provided by (used in) investing activities | 222,595 | (482,048 | ) | 1,752,112 | (1,574,265 | ) | ||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||||||
Proceeds from issuance of common stock | 6,833 | 2,005 | 59,130 | 17,517 | ||||||||||||
Repurchases of common stock | - | - | (203,771 | ) | - | |||||||||||
Excess tax benefits from stock-based awards | 24,923 | 16,264 | 58,282 | 18,007 | ||||||||||||
Tax withholdings related to net share settlements of restricted stock awards and restricted stock units | (41,670 | ) | (51,611 | ) | (257,731 | ) | (209,053 | ) | ||||||||
Distributions to noncontrolling interests | - | - | (15,847 | ) | (5,948 | ) | ||||||||||
Other financing activities, net | (3,767 | ) | (3,791 | ) | (17,321 | ) | (14,205 | ) | ||||||||
Net cash used in financing activities | (13,681 | ) | (37,133 | ) | (377,258 | ) | (193,682 | ) | ||||||||
Effect of exchange rate changes on cash and cash equivalents | 9,547 | (27,917 | ) | (23,619 | ) | 6,642 | ||||||||||
Net change in cash and cash equivalents | 350,751 | (291,839 | ) | (1,032,187 | ) | (512,442 | ) | |||||||||
Cash and cash equivalents, beginning of period | 1,281,160 | 1,411,308 | 2,664,098 | 1,631,911 | ||||||||||||
Cash and cash equivalents, end of period | $ | 1,631,911 | $ | 1,119,469 | $ | 1,631,911 | $ | 1,119,469 | ||||||||
Note to Supplemental Financial Data and GAAP
to Non-GAAP Reconciliations
This press release includes adjusted revenue and cost of revenue - TAC amounts that exclude the effect of the Change in Revenue Presentation that occurred during the second quarter of 2016. We believe providing this additional information to investors is useful because it provides investors with comparable revenue and cost of revenue - TAC measures for comparison to our historical reported financial information. See "Change in Revenue Presentation" in the accompanying press release.
This press release and its attachments also include the non-GAAP
financial measures of revenue excluding traffic acquisition costs
("revenue ex-TAC"); gross mobile revenue; gross search revenue; adjusted
EBITDA; non-GAAP income from operations; non-GAAP net earnings; non-GAAP
net earnings per diluted share; and free cash flow, which are reconciled
to revenue (in the case of revenue ex-TAC, gross mobile revenue, and
gross search revenue); net loss attributable to
Revenue ex-TAC is a non-GAAP financial measure defined as GAAP revenue
less TAC that has been recorded as a cost of revenue. TAC consists of
payments made to Affiliates, and payments made to companies that direct
consumer and business traffic to
Each of gross mobile revenue and gross search revenue is a non-GAAP
financial measure. Gross mobile revenue is defined as GAAP mobile
revenue plus the related revenue share with third parties. Gross search
revenue is defined as GAAP search revenue plus the related revenue share
with third parties. We present these amounts to provide investors with
additional metrics used by the Company for evaluation and
decision-making purposes and as an indicator of the size of our presence
in the relevant business. To this end, gross mobile revenue and gross
search revenue report the total receipts generated on
Adjusted EBITDA is defined as net income (loss) attributable to
Non-GAAP income from operations is defined as income (loss) from operations excluding certain gains, losses, and expenses that we do not believe are indicative of our ongoing operating results and further adjusted to exclude stock-based compensation expense. Because of the variety of equity awards used by companies, the varying methodologies for determining stock-based compensation expense, and the subjective assumptions involved in those determinations, we believe excluding stock-based compensation expense enhances the ability of management and investors to understand the impact of stock-based compensation expense on income (loss) from operations. 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 (loss) from operations which includes the gains, losses, and expenses that are excluded from non-GAAP income from operations.
Non-GAAP net earnings is defined as net income (loss) attributable to
Free cash flow is a non-GAAP financial measure defined as net cash provided by (used in) operating activities (adjusted to include excess tax benefits from stock-based awards), less acquisition of property and equipment, net (i.e., acquisition of property and equipment less proceeds received from disposition of property and equipment) 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 business operations, after deducting our net payments for acquisitions and dispositions of property and equipment, which cash can then be used for strategic opportunities or other business purposes 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.
|
||||||||||||||||
Supplemental Financial Data and GAAP to Non-GAAP Reconciliations | ||||||||||||||||
(in thousands) | ||||||||||||||||
Three Months Ended | Year Ended | |||||||||||||||
|
|
|||||||||||||||
2015 | 2016 | 2015 | 2016 | |||||||||||||
Revenue for groups of similar services: | ||||||||||||||||
Search (1)(4) | $ | 527,700 | $ | 766,593 | $ | 2,113,848 | $ | 2,673,100 | ||||||||
Display (4) | 604,132 | 572,716 | 2,085,754 | 1,981,535 | ||||||||||||
Other (4) | 141,561 | 129,831 | 768,699 | 514,500 | ||||||||||||
Total revenue | $ | 1,273,393 | $ | 1,469,140 | $ | 4,968,301 | $ | 5,169,135 | ||||||||
Revenue excluding traffic acquisition costs recorded as cost of revenue ("revenue ex-TAC") for groups of similar services: | ||||||||||||||||
GAAP search revenue (1) | $ | 527,700 | $ | 766,593 | $ | 2,113,848 | $ | 2,673,100 | ||||||||
TAC associated with search revenue (1) | (140,596 | ) | (432,761 | ) | (465,485 | ) | (1,352,923 | ) | ||||||||
Search revenue ex-TAC | $ | 387,104 | $ | 333,832 | $ | 1,648,363 | $ | 1,320,177 | ||||||||
GAAP display revenue | $ | 604,132 | $ | 572,716 | $ | 2,085,754 | $ | 1,981,535 | ||||||||
TAC associated with display revenue | (129,756 | ) | (75,975 | ) | (409,590 | ) | (296,201 | ) | ||||||||
Display revenue ex-TAC | $ | 474,376 | $ | 496,741 | $ | 1,676,164 | $ | 1,685,334 | ||||||||
GAAP other revenue | $ | 141,561 | $ | 129,831 | $ | 768,699 | $ | 514,500 | ||||||||
TAC associated with GAAP other revenue | (564 | ) | (264 | ) | (2,439 | ) | (1,662 | ) | ||||||||
Other revenue ex-TAC | $ | 140,997 | $ | 129,567 | $ | 766,260 | $ | 512,838 | ||||||||
Revenue ex-TAC: | ||||||||||||||||
GAAP revenue (1) | $ | 1,273,393 | $ | 1,469,140 | $ | 4,968,301 | $ | 5,169,135 | ||||||||
TAC (1) | (270,916 | ) | (509,000 | ) | (877,514 | ) | (1,650,786 | ) | ||||||||
Revenue ex-TAC | $ | 1,002,477 | $ | 960,140 | $ | 4,090,787 | $ | 3,518,349 | ||||||||
Revenue ex-TAC by segment: | ||||||||||||||||
|
||||||||||||||||
GAAP revenue (1) | $ | 1,012,465 | $ | 1,197,813 | $ | 3,976,770 | 4,172,836 | |||||||||
TAC (1) | (239,393 | ) | (450,318 | ) | (788,725 | ) | (1,463,221 | ) | ||||||||
Revenue ex-TAC | $ | 773,072 | $ | 747,495 | $ | 3,188,045 | $ | 2,709,615 | ||||||||
EMEA: | ||||||||||||||||
GAAP revenue (1) | $ | 97,116 | $ | 119,057 | $ | 343,646 | $ | 397,768 | ||||||||
TAC (1) | (19,885 | ) | (47,760 | ) | (57,284 | ) | (144,547 | ) | ||||||||
Revenue ex-TAC | $ | 77,231 | $ | 71,297 | $ | 286,362 | $ | 253,221 | ||||||||
|
||||||||||||||||
GAAP revenue (1) | $ | 163,812 | $ | 152,270 | $ | 647,885 | $ | 598,531 | ||||||||
TAC (1) | (11,638 | ) | (10,922 | ) | (31,505 | ) | (43,018 | ) | ||||||||
Revenue ex-TAC | $ | 152,174 | $ | 141,348 | $ | 616,380 | $ | 555,513 | ||||||||
Total revenue ex-TAC | $ | 1,002,477 | $ | 960,140 | $ | 4,090,787 | $ | 3,518,349 | ||||||||
Direct costs by segment (5): | ||||||||||||||||
|
$ | 70,796 | $ | 61,667 | $ | 284,875 | $ | 263,010 | ||||||||
EMEA | 31,842 | 4,507 | 95,789 | 51,597 | ||||||||||||
|
46,290 | 47,796 | 196,056 | 185,195 | ||||||||||||
Global operating costs (6) | 639,670 | 538,132 | 2,582,235 | 2,214,842 | ||||||||||||
Gain on sale of patents and land | - | - | (11,100 | ) | (121,559 | ) | ||||||||||
Asset impairment charge | 2,682 | - | 44,381 | - | ||||||||||||
|
4,460,837 | - | 4,460,837 | 394,901 | ||||||||||||
Intangible assets impairment charge | 15,423 | - | 15,423 | 87,335 | ||||||||||||
Restructuring charges, net | 7,087 | 2,053 | 104,019 | 88,629 | ||||||||||||
Depreciation and amortization | 151,983 | 119,195 | 609,613 | 507,555 | ||||||||||||
Stock-based compensation expense | 105,901 | 122,639 | 457,153 | 491,902 | ||||||||||||
(Loss) income from operations |
$ | (4,530,034 | ) | $ | 64,151 | $ | (4,748,494 | ) | $ | (645,058 | ) | |||||
(1) | Commencing in the second quarter of 2016, TAC payments related to the Microsoft Search Agreement, which previously would have been recorded as a reduction to revenue, began to be recorded as cost of revenue - TAC due to a required change in revenue presentation. See "Change in Revenue Presentation" in the accompanying press release. | |
(4) | In the first quarter of 2016, we reclassified certain amounts from other revenue to either display or search revenue. Prior period amounts have been revised to conform to the current presentation. | |
(5) |
Direct costs for each segment include certain cost of revenue -
other and costs associated with the local sales teams. Prior to the
second quarter of 2016, certain account management costs associated
with |
|
(6) |
Global operating costs include product development, marketing,
real estate workplace, general and administrative, account
management costs and other corporate expenses that are managed on a
global basis and that are not directly attributable to any
particular segment. Beginning in the second quarter of 2016, certain
account management costs associated with |
|
|
||||||||||||||||
Supplemental Financial Data and GAAP to Non-GAAP Reconciliations (continued) | ||||||||||||||||
(in thousands) | ||||||||||||||||
Three Months Ended | Year Ended | |||||||||||||||
|
|
|||||||||||||||
2015 | 2016 | 2015 | 2016 | |||||||||||||
Reconciliation of net (loss) income attributable to |
||||||||||||||||
Net (loss) income attributable to |
$ | (4,434,987 | ) | $ | 161,998 | $ | (4,359,082 | ) | $ | (214,321 | ) | |||||
Advisory fees | 808 | 5,634 | 8,808 | 57,061 | ||||||||||||
Security incidents costs | - | 10,406 | - | 10,406 | ||||||||||||
Gain on sale of land | - | - | - | (120,059 | ) | |||||||||||
Depreciation and amortization | 151,983 | 119,195 | 609,613 | 507,555 | ||||||||||||
Stock-based compensation expense | 105,901 | 122,639 | 457,153 | 491,902 | ||||||||||||
Asset impairment charge | 2,682 | - | 44,381 | - | ||||||||||||
|
4,460,837 | - | 4,460,837 | 394,901 | ||||||||||||
Intangible assets impairment charge | 15,423 | - | 15,423 | 87,335 | ||||||||||||
Restructuring charges, net | 7,087 | 2,053 | 104,019 | 88,629 | ||||||||||||
Other expense, net | 9,023 | 15,440 | 75,782 | 53,916 | ||||||||||||
Benefit for income taxes |
(13,985 | ) | (1,492 | ) | (89,598 | ) | (126,228 | ) | ||||||||
Earnings in equity interests | (92,845 | ) | (113,704 | ) | (383,571 | ) | (363,283 | ) | ||||||||
Net income attributable to noncontrolling interests | 2,760 | 1,909 | 7,975 | 4,858 | ||||||||||||
Adjusted EBITDA | $ | 214,687 | $ | 324,078 | $ | 951,740 | $ | 872,672 | ||||||||
Reconciliation of net cash provided by (used in) operating activities to free cash flow: | ||||||||||||||||
Net cash provided by (used in) operating activities | $ | 132,290 | $ | 255,259 | $ | (2,383,422 | ) | $ | 1,248,863 | |||||||
Acquisition of property and equipment, net | (125,711 | ) | (40,903 | ) | (542,987 | ) | 10,678 | |||||||||
Dividends received from equity investee | - | - | (142,045 | ) | (156,968 | ) | ||||||||||
Excess tax benefits from stock-based awards | 24,923 | 16,264 | 58,282 | 18,007 | ||||||||||||
Free cash flow(2)(3) | $ | 31,502 | $ | 230,620 | $ | (3,010,172 | ) | $ | 1,120,580 | |||||||
Reconciliation of GAAP mobile revenue to gross mobile revenue: | ||||||||||||||||
GAAP mobile revenue (1) | $ | 290,686 | $ | 458,752 | $ | 1,047,539 | $ | 1,493,524 | ||||||||
Revenue share with third parties (1) | 158,338 | 36,080 | 631,743 | 260,712 | ||||||||||||
Gross mobile revenue | $ | 449,024 | $ | 494,832 | $ | 1,679,282 | $ | 1,754,236 | ||||||||
Reconciliation of GAAP search revenue to gross search revenue: | ||||||||||||||||
GAAP search revenue (1) | $ | 527,700 | $ | 766,593 | $ | 2,113,848 | $ | 2,673,100 | ||||||||
Revenue share with third parties (1) | 344,345 | 54,475 | 1,527,623 | 486,163 | ||||||||||||
Gross search revenue | $ | 872,045 | $ | 821,068 | $ | 3,641,471 | $ | 3,159,263 | ||||||||
Six Months Ended |
||||||||||||||||
|
||||||||||||||||
2015 |
2016 |
|||||||||||||||
Reconciliation of net (loss) income attributable to |
||||||||||||||||
Net (loss) income attributable to |
(4,358,726 |
) |
324,824 |
|||||||||||||
Advisory fees |
808 |
32,784 |
||||||||||||||
Security incidents costs |
- |
10,406 |
||||||||||||||
Depreciation and amortization |
304,395 |
234,663 |
||||||||||||||
Stock-based compensation expense |
216,327 |
251,531 |
||||||||||||||
Asset impairment charge |
44,381 |
- |
||||||||||||||
|
4,460,837 |
- |
||||||||||||||
Intangible assets impairment charge |
15,423 |
- |
||||||||||||||
Restructuring charges, net |
33,099 |
12,015 |
||||||||||||||
Other expense, net |
32,978 |
21,562 |
||||||||||||||
Benefit for income taxes |
(107,193 |
) |
(107,005 |
) |
||||||||||||
Earnings in equity interests |
(188,040 |
) |
(229,932 |
) |
||||||||||||
Net income attributable to noncontrolling interests |
4,635 |
2,383 |
||||||||||||||
Adjusted EBITDA |
|
$ |
458,924 |
$ |
553,231 |
|||||||||||
(1) | Commencing in the second quarter of 2016, TAC payments related to the Microsoft Search Agreement, which previously would have been recorded as a reduction to revenue, began to be recorded as cost of revenue - TAC due to a required change in revenue presentation. See "Change in Revenue Presentation" in the accompanying press release. | |
(2) |
During the year ended |
|
(3) |
During the year ended |
|
|
||||||||||||
GAAP to Non-GAAP Reconciliations | ||||||||||||
(in thousands, except per share amounts) | ||||||||||||
Three Months Ended | ||||||||||||
|
||||||||||||
2015 | 2016 | |||||||||||
GAAP (loss) income from operations | $ | (4,530,034 | ) | $ | 64,151 | |||||||
(a) | Restructuring charges, net | 7,087 | 2,053 | |||||||||
(b) | Stock-based compensation expense | 105,901 | 122,639 | |||||||||
(c) | Advisory fees | 808 | 5,634 | |||||||||
(d) | Security incidents costs | - | 10,406 | |||||||||
(e) | Asset impairment charge | 2,682 | - | |||||||||
(f) |
|
4,460,837 | - | |||||||||
(g) | Intangible impairment charge | 15,423 | - | |||||||||
Non-GAAP income from operations | $ | 62,704 | $ | 204,883 | ||||||||
GAAP net (loss) income attributable to |
$ | (4,434,987 | ) | $ | 161,998 | |||||||
(a) | Restructuring charges, net | 7,087 | 2,053 | |||||||||
(b) | Stock-based compensation expense | 105,901 | 122,639 | |||||||||
(c) | Advisory fees | 808 | 5,634 | |||||||||
(d) | Security incidents costs | - | 10,406 | |||||||||
(e) | (Gain) loss on Hortonworks warrants | (42 | ) | 116 | ||||||||
(f) | Asset impairment charge | 2,682 | - | |||||||||
(g) |
|
4,460,837 | - | |||||||||
(h) | Intangible impairment charge | 15,423 | - | |||||||||
(i) |
To adjust the provision for income taxes to reflect an effective
tax rate of 35% for both the three months ended |
(32,759 | ) | (67,838 | ) | |||||||
Non-GAAP net earnings | $ | 124,950 | $ | 235,008 | ||||||||
GAAP net (loss) income attributable to |
$ | (4.70 | ) | $ | 0.17 | |||||||
Non-GAAP net earnings per share - diluted | $ | 0.13 | $ | 0.25 | ||||||||
Shares used in non-GAAP per share calculation - diluted | 949,758 | 958,624 | ||||||||||
Year Ended | ||||||||||||
|
||||||||||||
2015 | 2016 | |||||||||||
GAAP loss from operations | $ | (4,748,494 | ) | $ |
(645,058 |
) | ||||||
(a) | Restructuring charges, net | 104,019 | 88,629 | |||||||||
(b) | Stock-based compensation | 457,153 | 491,902 | |||||||||
(c) | Advisory fees | 8,808 | 57,061 | |||||||||
(d) | Security incidents costs | - | 10,406 | |||||||||
(e) | Gain on sale of land | - | (120,059 | ) | ||||||||
(f) |
|
4,460,837 | 394,901 | |||||||||
(g) | Intangible assets impairment charge | 15,423 | 87,335 | |||||||||
(h) | Asset impairment charge | 44,381 | - | |||||||||
Non-GAAP income from operations | $ | 342,127 | $ | 365,117 | ||||||||
GAAP net loss attributable to |
$ | (4,359,082 | ) | $ | (214,321 | ) | ||||||
(a) | Restructuring charges, net | 104,019 | 88,629 | |||||||||
(b) | Stock-based compensation | 457,153 | 491,902 | |||||||||
(c) | Advisory fees | 8,808 | 57,061 | |||||||||
(d) | Security incidents costs | - | 10,406 | |||||||||
(e) | Gain on sale of land | - | (120,059 | ) | ||||||||
(f) |
|
4,460,837 | 394,901 | |||||||||
(g) | Intangible assets impairment charge | 15,423 | 87,335 | |||||||||
(h) | Loss on Hortonworks warrants | 19,199 | 50,046 | |||||||||
(i) | Asset impairment charge | 44,381 | - | |||||||||
(j) |
To adjust the provision for income taxes to reflect an effective
tax rate of 35% for both the years ended |
(189,538 | ) | (252,664 | ) | |||||||
Non-GAAP net earnings | $ | 561,200 | $ | 593,236 | ||||||||
GAAP net loss attributable to |
$ | (4.64 | ) | $ | (0.23 | ) | ||||||
Non-GAAP net earnings per share - diluted | $ | 0.59 | $ | 0.62 | ||||||||
Shares used in non-GAAP per share calculation - diluted | 948,111 | 955,654 | ||||||||||
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