Yahoo hits earnings target, misses on revenue

Yahoo met earnings per share expectations but missed slightly on the revenue side for its second quarter, ended June 30, 2004.

Yahoo met earnings per share expectations but missed slightly on the revenue side for its second quarter, ended June 30, 2004.

Yahoo, which operates one of the world’s largest Web portals and makes money by selling online advertising and Internet services, generated $609.1 million in revenue, excluding traffic acquisition costs (TACs), which Yahoo defines as gross profit before other costs or revenue, Yahoo said Wednesday. The consensus expectation from analysts polled by Thomson First Call was for $609.9 million, according to a Thomson First Call spokesman.

Yahoo’s TACs include payments the company makes to affiliates of its Overture unit, which sells “sponsored search” ads, or ads that are served based on the keywords a user enters when using a search engine. Yahoo acquired Overture in October 2003.

Including TACs, revenue was $832.3 million. Both revenue figures compare with revenue of $321.4 million in 2003’s second quarter.

Yahoo’s net income came in at $112.5 million, or $0.08 earnings per share, meeting analysts’ consensus expectation, the Thomson First Call spokesman said. This compared with net income of $50.8 million, or $0.04 per share, in 2003’s second quarter.

“In Q2, we delivered the best quarter in Yahoo’s history,” Terry Semel, Yahoo’s chairman and CEO, said during a conference call to discuss the results. “The past year has been a period of unprecedented growth, with this our fifth straight quarter of record revenues.”

Semel said Yahoo has an “extremely healthy and diversified business model” and that its two core business, advertising and premium consumer services, are both performing very well. “Yahoo is clearly on the move,” he said.

Semel said the earnings and revenue increases came thanks to Yahoo’s continuing introduction of new products and services and enhancement of existing products and services.

“It’s a win-win equation. With great products and services, we accomplish two things: We provide better choices to our existing consumers, which encourages them to spend more time on Yahoo, using both our free and paid services. Second, these products and services act as a magnet to attract new consumers to our network,” he said. “As this cycle continues, we expand our truly unique and effective advertising platform.”

Semel highlighted several accomplishments in the quarter, including the continued international rollout of Yahoo’s own search technology worldwide, including a search site for Chinese users, the introduction of a revamped Yahoo Messenger instant messaging service and an enhancement to the company’s Web-based e-mail service.

The e-mail enhancements have yielded a “meaningful pickup in new mail registrations,” he said. “What you have seen so far from mail is only the beginning, and our users should expect to see some really cool additions in the next few months.”

“Our product roadmap for the second half of this year is even more dynamic with newer innovations in broadband, wireless, music, search, local, travel, games, personalization and community, so stay tuned,” he said.

He also pointed out a continued increase in users of the Yahoo Web site network. The company ended the quarter with about 300 million unique users, up from 274 million in the preceding quarter and 236 million in 2003’s second quarter.

Of the 300 million users, about 146 million are active registered users, or users who have signed up for at least one Yahoo service, such as e-mail, and who visit the Yahoo network at least once a month. Active registered users are up from 141 million in the preceding quarter and from 116 million in 2003’s second quarter.

Among those active registered users, about 6.4 million pay for at least one Yahoo service. Semel said this is the fastest growing Yahoo user subset, up from 5.8 million in the preceding quarter and 3.5 million in 2003’s second quarter.

Yahoo’s headcount also continued to grow. It ended the quarter at 6,517 employees, up from 5,904 in the preceding quarter and 3,837 in 2003’s second quarter.

Yahoo also continued growing its international revenue at a fast clip. Of the $609.1 million revenue excluding TAC in the quarter, $135 million came from its international units, a 170% increase from 2003’s second quarter. By comparison, the $474.1 million in U.S. revenue was up 75% compared to 2003’s second quarter.

Yahoo raised its guidance for revenue excluding TAC for the fiscal year. It expects between $2.45 billion and $2.53 billion, up from $2.40 billion to $2.52 billion.