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Yahoo (YHOO) Q1 Earnings & Revenues Up Y/Y, Verizon Deal On
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Yahoo! Inc.’s first-quarter 2017 earnings and revenues grew year over year.
Shares moved negligibly higher as investors are actually looking forward to the sale of the company rather than its earnings.
In the last one year, the stock outperformed the Zacks Internet Services industry. It gained 31.4% compared with the industry’s gain of 6.2%.
Marissa Mayer stated that the integration plan is on track and is expected to be completed in June. Notably, Yahoo was forced to make a billion dollar discount in the purchase agreement in the wake of the data breach disclosures. Verizon will now buy Yahoo’s core Internet business at a discount of $350 million for $4.48 billion. The revised deal comes after Yahoo made public two major data breaches after the original $4.8 billion deal was announced in Jul 2016.
The newly negotiated deal will make Altaba, the new entity formed after the acquisition, responsible for all costs stemming from shareholder lawsuits and a regulatory inquiry by the Securities and Exchange Commission. However, Verizon and Altaba will split costs from all other hack-related lawsuits and government investigations.
Verizon will receive Yahoo’s owned and operated assets (search engine, communications platforms and digital content), advertising products (Flurry, Brightroll and Gemini), social assets (Tumblr, Flickr, and Polyvore) and remaining real estate. Yahoo will retain its stake in Alibaba (BABA - Free Report) and Yahoo Japan Corp., minority investments, Excalibur patent portfolio, and cash and convertibles.
Yahoo reported GAAP revenues of $1.327 billion, up 22.1% year over year but down 9.7% sequentially. Traffic acquisition cost (TAC) was up 116.7% year over year but down 3.1% sequentially. Excluding these costs, net revenue (revenue ex-TAC) was down 3.1% year over year and 15.2% sequentially.
Search revenues (ex-TAC) were down 12.4% year over year and 7.9% sequentially. The key metrics were a disappointment in the first quarter, with paid clicks dropping 12% year over year. Price per click (PPC) however grew 10%.
Display revenues (ex-TAC) grew 4.8% year over year but were down 24.8% sequentially. The number of ads sold increased 2% from the year-ago quarter with price per ad (PPA) remaining flat.
Mavens (mobile, video, native, social) grew 35.6% year over year but decreased 11.5% from the previous quarter.
Mobile growth is extremely important because of the increasing use of mobile devices to connect to the Internet. Traffic-driven mobile revenues amounted to $412 million in the first quarter, up a massive 58.5% year over year but down 11.4% sequentially.
Other (fees, listings and leads) revenues were down 4.3% year over year and 2.6% sequentially.
Display, Search and Other platforms represented 48%, 37% and 15% of Yahoo’s fourth-quarter ex-TAC revenues, respectively.
By geography: Yahoo generated around 78.1% of revenues on an ex-TAC basis from the Americas (down 2.2% from Mar 2016 but flat sequentially), around 6.7% came from the EMEA region (down 11.9% year over year and 10.4% sequentially) and 15.2% from the Asia/Pacific (down 5.9% year over year but up 3.4% sequentially).
Margins
Yahoo generated gross margin of 43.5% in the first quarter, down 958 basis points (bps) year over year and 407 bps sequentially.
The company’s operating margin of -4.4% was poorer than the previous quarter’s 5.6%.
Net Income
Including the special items and the amount given out to non-controlling interests, Yahoo’s GAAP net income was $99.4 million (10 cents per share) against net loss of $99.2 million (loss of 10 cents per share) in the March quarter of last year.
Balance Sheet
Yahoo’s cash and short-term investments balance was $6.9 billion at quarter-end, down $8 million from the previous quarter. The company generated $214.5 million of cash from operations, of which $61.6 million was spent on capex.
Guidance
Yahoo did not provide any guidance for the second quarter of 2017.
Square and Lam Research’s projected long-term earnings per share growth is 22.5% and 12.3%, respectively.
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Image: Bigstock
Yahoo (YHOO) Q1 Earnings & Revenues Up Y/Y, Verizon Deal On
Yahoo! Inc.’s first-quarter 2017 earnings and revenues grew year over year.
Shares moved negligibly higher as investors are actually looking forward to the sale of the company rather than its earnings.
In the last one year, the stock outperformed the Zacks Internet Services industry. It gained 31.4% compared with the industry’s gain of 6.2%.
Marissa Mayer stated that the integration plan is on track and is expected to be completed in June. Notably, Yahoo was forced to make a billion dollar discount in the purchase agreement in the wake of the data breach disclosures. Verizon will now buy Yahoo’s core Internet business at a discount of $350 million for $4.48 billion. The revised deal comes after Yahoo made public two major data breaches after the original $4.8 billion deal was announced in Jul 2016.
The newly negotiated deal will make Altaba, the new entity formed after the acquisition, responsible for all costs stemming from shareholder lawsuits and a regulatory inquiry by the Securities and Exchange Commission. However, Verizon and Altaba will split costs from all other hack-related lawsuits and government investigations.
Verizon will receive Yahoo’s owned and operated assets (search engine, communications platforms and digital content), advertising products (Flurry, Brightroll and Gemini), social assets (Tumblr, Flickr, and Polyvore) and remaining real estate. Yahoo will retain its stake in Alibaba (BABA - Free Report) and Yahoo Japan Corp., minority investments, Excalibur patent portfolio, and cash and convertibles.
Yahoo! Inc. Price, Consensus and EPS Surprise
Yahoo! Inc. Price, Consensus and EPS Surprise | Yahoo! Inc. Quote
Let’s check out the numbers
Revenues
Yahoo reported GAAP revenues of $1.327 billion, up 22.1% year over year but down 9.7% sequentially. Traffic acquisition cost (TAC) was up 116.7% year over year but down 3.1% sequentially. Excluding these costs, net revenue (revenue ex-TAC) was down 3.1% year over year and 15.2% sequentially.
Search revenues (ex-TAC) were down 12.4% year over year and 7.9% sequentially. The key metrics were a disappointment in the first quarter, with paid clicks dropping 12% year over year. Price per click (PPC) however grew 10%.
Display revenues (ex-TAC) grew 4.8% year over year but were down 24.8% sequentially. The number of ads sold increased 2% from the year-ago quarter with price per ad (PPA) remaining flat.
Mavens (mobile, video, native, social) grew 35.6% year over year but decreased 11.5% from the previous quarter.
Mobile growth is extremely important because of the increasing use of mobile devices to connect to the Internet. Traffic-driven mobile revenues amounted to $412 million in the first quarter, up a massive 58.5% year over year but down 11.4% sequentially.
Other (fees, listings and leads) revenues were down 4.3% year over year and 2.6% sequentially.
Display, Search and Other platforms represented 48%, 37% and 15% of Yahoo’s fourth-quarter ex-TAC revenues, respectively.
By geography: Yahoo generated around 78.1% of revenues on an ex-TAC basis from the Americas (down 2.2% from Mar 2016 but flat sequentially), around 6.7% came from the EMEA region (down 11.9% year over year and 10.4% sequentially) and 15.2% from the Asia/Pacific (down 5.9% year over year but up 3.4% sequentially).
Margins
Yahoo generated gross margin of 43.5% in the first quarter, down 958 basis points (bps) year over year and 407 bps sequentially.
The company’s operating margin of -4.4% was poorer than the previous quarter’s 5.6%.
Net Income
Including the special items and the amount given out to non-controlling interests, Yahoo’s GAAP net income was $99.4 million (10 cents per share) against net loss of $99.2 million (loss of 10 cents per share) in the March quarter of last year.
Balance Sheet
Yahoo’s cash and short-term investments balance was $6.9 billion at quarter-end, down $8 million from the previous quarter. The company generated $214.5 million of cash from operations, of which $61.6 million was spent on capex.
Guidance
Yahoo did not provide any guidance for the second quarter of 2017.
Zacks Rank and Stocks to Consider
Currently, Yahoo has a Zacks Rank #3 (Hold). Better-ranked stocks in the broader technology sector include Square, Inc. (SQ - Free Report) and Lam Research Corporation (LRCX - Free Report) , each carrying a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Square and Lam Research’s projected long-term earnings per share growth is 22.5% and 12.3%, respectively.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
See This Ticker Free >>