Company Update (NASDAQ:YHOO): Yahoo! Inc. Reports Fourth Quarter and Full Year 2015 Results


YHOO

Yahoo! Inc. (NASDAQ:YHOO)  reported results for the quarter and full year ended December 31, 2015.

“I’m pleased to report that our Q4 performance exceeded guidance across GAAP revenue, revenue ex-TAC, adjusted EBITDA, and non-GAAP Operating Income,” said Marissa Mayer, CEO of Yahoo. “We continue to be encouraged by the performance of our Mavens investments, which in 2015 alone, grew to about a third of our GAAP revenue — $1.6 billion dollars.”

Business Highlights

Search

  • As part of Yahoo’s efforts to move search toward a more contextual, anticipatory and assistive experience, the Company made the first in a series of ongoing updates to the Yahoo Search app. For iOS in the U.S., the Yahoo Search app experience is now more actionable and guides users to the information they need whether it’s from the Web or their inboxes. Logged in users can now see Web and email results in one place, as the app can now search across email, contacts and calendar to help them find things like package delivery notifications, hotel reservation details and upcoming events, while partnerships with companies like Yelp and OpenTable allow users to take action directly from the search results page.

Communications

  • Yahoo unveiled the next generation of Yahoo Messenger on mobile for both iOS and Android, the Web and Yahoo Mail on desktop. Built from the ground up, the powerful new platform integrates technology and features from Flickr, Tumblr and Xobni. Built for group and 1:1 messaging, Yahoo Messenger now allows users to unsend and like messages, photos and animated GIFs quickly and easily.

Digital Content

  • Tumblr further strengthened the way that users communicate and connect over the things they love through threaded instant Messaging available across iOS and Android apps, and on the Web.
  • Yahoo presented the first free, global live stream of an NFL game to more than 15 million viewers across the globe. This was the first time users were able to enjoy the NFL’s premium content globally without cable, authentication or TV across both Yahoo andTumblr. More than 30 top brands partnered with Yahoo to kick off this new era of sports programming. The Company delivered the live stream with a rebuffering ratio of less than one percent.
  • Yahoo, together with launch sponsor Fidelity Investments, introduced “The Final Round,” a live weekday show on Yahoo Finance that offers insight into the most important business news of the day and what’s driving markets, and features interviews with bold-faced names like premiere guest Charles Koch from the field and in the New York studio.
  • Yahoo debuted Adrian Wojnarowski’s new weekly NBA podcast, The Vertical, with an interview with NBA Commissioner Adam Silver. The podcast debuted in advance of the January launch of Wojnarowski’s new basketball site “The Vertical” on Yahoo Sports. “The Vertical” will feature content from an elite and talented group of reporters and industry insiders.

Fourth Quarter and Full Year 2015 Financial Highlights

Mavens Revenue:

                         
      Q4 2014     Q4 2015     Full Year 2014     Full Year 2015
Mavens revenue   $ 375 million   $ 472 million   $ 1,148 million   $ 1,660 million
Non-Mavens revenue     751 million     750 million     3,022 million     2,908 million
Total traffic-driven revenue   $ 1,126 million   $ 1,222 million   $ 4,170 million   $ 4,568 million
Non-traffic-driven revenue     127 million     51 million     448 million     400 million
GAAP revenue   $ 1,253 million   $ 1,273 million   $ 4,618 million   $ 4,968 million

Mavens revenue represented 33 percent and 28 percent of traffic-driven revenue in the fourth quarter and full year of 2014, respectively, and increased to 39 percent and 36 percent in the fourth quarter and full year of 2015, respectively.

Mobile Revenue:

                       
      Q4 2014     Q4 2015     Full Year 2014     Full Year 2015
Mobile revenue   $ 254 million   $ 291 million   $ 768 million   $ 1,048 million
PC revenue     872 million     931 million     3,402 million     3,520 million
Total traffic-driven revenue   $ 1,126 million   $ 1,222 million   $ 4,170 million   $ 4,568 million
Non-traffic-driven revenue     127 million     51 million     448 million     400 million
GAAP revenue   $ 1,253 million   $ 1,273 million   $ 4,618 million   $ 4,968 million

Mobile revenue represented 23 percent and 18 percent of traffic-driven revenue in the fourth quarter and full year of 2014, respectively, and increased to 24 percent and 23 percent in the fourth quarter and full year of 2015, respectively.

Gross mobile revenue for the fourth quarter of 2014 and 2015 was $413 million and $449 million, respectively. Gross mobile revenue for the full year of 2014 and 2015 was $1,261 million and $1,679 million, respectively.

Search Revenue:

  • Gross search revenue was $866 million for the fourth quarter of 2015, a decrease of 7 percent compared to the fourth quarter of 2014. Gross search revenue was $3,612 millionfor the full year of 2015, an increase of 7 percent compared to the prior year.
  • GAAP search revenue was $522 million for the fourth quarter of 2015, an increase of 12 percent compared to the fourth quarter of 2014. GAAP search revenue was $2,084 millionfor the full year of 2015, an increase of 16 percent compared to the prior year.
  • Cost of revenue – TAC paid to search partners was $141 million for the fourth quarter of 2015, which includes TAC from the Mozilla agreement, compared to $5 million in the fourth quarter of 2014. Cost of revenue – TAC paid to search partners was $465 million for the full year of 2015, which includes TAC from the Mozilla agreement, compared to $9 million in the prior year.
  • The number of Paid Clicks decreased 10 percent compared to the fourth quarter of 2014.
  • Price-per-Click increased 3 percent compared to the fourth quarter of 2014.

Display Revenue:

  • GAAP display revenue was $601 million for the fourth quarter of 2015, a 13 percent increase compared to the fourth quarter of 2014. GAAP display revenue was $2,074 million for the full year of 2015, an 11 percent increase compared to the prior year.
  • Cost of revenue – TAC paid to display partners was $130 million for the fourth quarter of 2015 compared to $68 million in the fourth quarter of 2014. Cost of revenue – TAC paid to display partners was $410 million for the full year of 2015 compared to $205 million in the prior year.
  • The number of Ads Sold increased 8 percent compared to the fourth quarter of 2014.
  • Price-per-Ad increased 6 percent compared to the fourth quarter of 2014.

Goodwill Impairment:

We recorded a $4,461 million non-cash goodwill impairment charge as a result of our annual goodwill impairment test conducted in the fourth quarter of 2015. We concluded that the carrying value of our U.S. & Canada, Europe, Latin America and Tumblr reporting units exceeded their respective estimated fair values. The goodwill impairment resulted from a combination of factors, including decreases in our market capitalization, projected operating results and estimated future cash flows.

Cash, Cash Equivalents, and Marketable Securities:

  • Cash, cash equivalents, and marketable securities were $6.8 billion as of December 31, 2015 compared to $10.2 billion as of December 31, 2014, a decrease of $3.4 billion. In the first quarter of 2015, the Company satisfied the $3.3 billion income tax liability related to the sale of Alibaba Group ADSs in September 2014.

“We’re encouraged that our fourth quarter results exceeded expectations in all core metrics,” said Ken Goldman, CFO of Yahoo. “As we look forward to executing a more focused strategy for the Company, this is a solid baseline for the actions we’re taking to improve performance in 2016 and beyond.” (Original Source)

Shares of Yahoo are trading a bit lower in after-hours trading. YHOO has a 1-year high of $46.17 and a 1-year low of $27.20. The stock’s 50-day moving average is $31.42 and its 200-day moving average is $33.10.

On the ratings front, Yahoo has been the subject of a number of recent research reports. In a report released yesterday, Suntrust Robinson Humphrey analyst Robert Peck maintained a Buy rating on YHOO, with a price target of $40, which represents a potential upside of 36.4% from where the stock is currently trading. Separately, on the same day, Cantor Fitzgerald’s Youssef Squali reiterated a Buy rating on the stock and has a price target of $51.

According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Robert Peck and Youssef Squali have a total average return of 3.3% and 14.3% respectively. Peck has a success rate of 48.0% and is ranked #620 out of 3632 analysts, while Squali has a success rate of 58.4% and is ranked #20.

Overall, 6 research analysts have assigned a Hold rating and 7 research analysts have given a Buy rating to the stock. When considering if perhaps the stock is under or overvalued, the average price target is $40.80 which is 39.2% above where the stock opened today.

Yahoo! Inc is a technology company. It offers search, content and communication on mobile phone, tablet or desktop.