Yahoo earnings are out!
Revenue ex-traffic acquisitions costs is $US1.04 billion, which down 3% on a year-over-year basis. It’s short of analyst expectations of $US1.09 billion. EPS is $US0.37, up 5% on a year-over-year basis, but below expectations of $US0.38.
Marissa Mayer is not happy with the results. In the earnings release, she said, “Our top priority is revenue growth and by that measure, we are not satisfied with our Q2 results … we need to work faster to ameliorate the negative trends.”
While search and mobile advertising grew, display advertising on the desktop declined.
However, despite the lack of growth, the stock is up 2% after hours on some good news related to Yahoo’s stake in Alibaba.
In the release, Yahoo says that it will be selling fewer shares of Alibaba during Alibaba’s IPO than investors previously believed. It will only sell 140 million shares, as opposed to 208 million. This means Yahoo will be able to continue to enjoy the upside of Alibaba as it grows.
Further, CFO Ken Goldman says in the release, “We would like to take this opportunity to let our investors know that we are committed to return at least half of the after-tax IPO proceeds to shareholders, in line with our overarching commitment to maximizing shareholder value through prudent capital allocation.”
This is more good news for shareholders since it means they get to enjoy the potential upside to any Alibaba IPO proceeds, and they don’t have to worry about Yahoo blowing all the money on an acquisition. (However, you could argue that investing in Yahoo over, say, a hot startup, isn’t all that smart.)
This will give Mayer and her team more time to fix Yahoo’s core business. Investors are likely to stick around knowing that Yahoo is sitting on a valuable asset in the form of millions of shares of Alibaba.
We’ll be listening to the earnings call, and will live blog it.
In the meanwhile, here are the important canned quotes from the release:
Marissa Mayer: “Our top priority is revenue growth and by that measure, we are not satisfied with our Q2 results. While several areas showed strength, their growth was offset by declines. Yahoo Search, for example, had a strong quarter, growing 6% year-over-year on a revenue ex-TAC basis and 19% year-over-year in search click-driven revenue. Our social, mobile, video and native areas also grew with significant momentum, collectively gaining nearly 90% year-over-year. However, display remains an area of investment and transition. In Q2, we saw display revenue decline, further highlighting the fact that we need to work faster to ameliorate the negative trends. I believe we can and will do better moving forward,” said Yahoo CEO Marissa Mayer. “Overall, I remain confident in Yahoo’s future, our strategy, and our return to long-term growth.”
And here is CFO Ken Goldman on Alibaba:
“We are pleased to announce today that we have entered into an amendment to the share repurchase agreement with Alibaba, reducing the number of shares that Yahoo is required to sell at the IPO from 208 million shares to 140 million shares. In addition, we are aware that there has been much discussion around the allocation of the Alibaba IPO proceeds,” said Ken Goldman, CFO of Yahoo. “We would like to take this opportunity to let our investors know that we are committed to return at least half of the after-tax IPO proceeds to shareholders, in line with our overarching commitment to maximizing shareholder value through prudent capital allocation.”
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