Yahoo! Q3 2013 Results

This quarter Yahoo! released more than 15 significant new product updates, modernizing and increasing user engagement across their digital daily habits. 

In late September, Yahoo! Screen was launched, a new video destination for mobile, tablet and desktop. Yahoo! Screen is home to Yahoo! original programming as well as the Saturday Night Live Archives, NBC Sports, South Park, the Daily Show, the Paul Bearer Report and ARF. 

The company has seen a 100% growth in daily active users over the last quarter and a 50% increase over last season. In late July, Yahoo! launched fantasy mobile apps for Android and iOS complete with native live draft capabilities. For the more engaging experience on mobile, the company has already seen a 50% increase in daily active users for this app over last season.

In Q3, for the first time in eight years, Yahoo! launched a massive upgrade, making it more beautiful, colorful and easier to organize and discover favorite parts of the web, all in one place. 

After years of global traffic decline, Yahoo managed to reverse this negative trend and in June of 2013, it achieved year-over-year growth, effectively erasing the decline from the prior year. 

For core Yahoo!, the page view milestones were another only accomplishment this quarter. In September, Yahoo! announced that they have more than 800 million monthly unique users. This represents a 20% increase in monthly unique users over the past 15 months.

It means that Yahoo! has attracted more than 100 million new monthly users and while with the page views, about surpassing 2011 or 2012, Yahoo! has never before in its history had 800 million monthly unique users on its core network.

Last quarter, Yahoo! recorded a 340 million mobile user number. And today, the company now sees more than 390 million monthly mobile users. This represents nearly 15% growth in the past quarter.

In Q3, Yahoo! received more than 17,000 resumes in a single week. This is up from 12,000 in August, 10,000 in May and 2,000 in January, a more than 8x increase year-to-date.

Yahoo! made eight critical acquisitions in Q3, including Bignoggins, Qwiki, Admovate, Ztelic, Lexity, Rockmelt, IQ Engines and Xobni. The company integrated Bignoggins technology into their widely successful Yahoo! Fantasy App just 24 days after the acquisition.

The capital spending was once again down significantly year-over-year to $78 million a period and $229 million on a year-to-date basis. The nine month spend is down 36% from the same period in 2012. Operating expenses were higher than 3Q as the management forecasted before.

Yahoo! continues to have a very strong balance with nearly $3.2 billion of cash and securities. In this quarter, Yahoo! returned an additional $1.7 billion to shareholders through share buybacks.

This brings their total buyback January 2012 to nearly $5.3 billion with which they repurchased just nearly 250 million shares at an average price of $21.25. Yahoo! generated free-cash flow up $449 million in the third quarter and $530 million year-to-date and have ample liquidity to fund any investment needs.

Guidance:

For the fourth quarter, Yahoo! expects revenue ex-TAC to be in the range of $1.18 billion to $1.22 billion, adjusted EBITDA to be between $400 million and $420 million, and non-GAAP operating income to be between $240 million and $260 million.

Yahoo!’s full year ranges are, revenue ex-TAC to be in the range of $4.4 billion to $4.45 billion, adjusted EBITDA to be between $1.48 billion and $1.5 billion and non-GAAP operating income to be between $840 million to $860 million.

Yahoo! Progress Report

‘Q2 was one of the most productive in the history of Yahoo! We basically reached a pace of launching a new product every week’ – Marissa Mayer, President and CEO

Product Releases and launches in Q2

Yahoo! launched a beautiful weather app for iOS including stunning photos from Flicker. At the end of Q2 Yahoo! Weather was the number one ranked weather app in 23 countries, has held a strong 4.5 star rating in the App Store and received the prestigious Apple Design Award. This product sets the standard for the visual beauty and ease of use that Yahoo! is striving for in all of their products and since launch daily users have increased by 150%.

Yahoo! Mail is also an important driver of business and was a focus in Q2, following December mail launches, and the management optimized Yahoo! Mail for mobile and in Q2, the Yahoo! Mail app for tablets was launched. This beautiful magazine like reading experience has contributed to daily active users being up 120% across Yahoo! mobile mail applications.

Also launched redesigned Yahoo! app for iOS and Android, complete with some integration; as a result of this launch, Yahoo! saw 55% increase in daily active users and a 60% increase in time spent using the application.

At the beginning of May, Yahoo! launched two new monetization products; Yahoo! Stream app and Homepage Billboard. In both cases it is still early but the reception from advertisers has been warm.

In May, Yahoo! delivered the new Flickr, puts photos front and center bringing them to life and beautiful full resolution. Yahoo! also pulled off an engineering marvel giving their Flickr users one terabyte of space each for free. That space for more than half a million photos of original, full resolution, pixel perfect quality. Since the launch, Yahoo! has seen daily photo upload increase by a factor of 3 and occasionally by a factor of 7 across Flickr desktop and mobile.

Yahoo! Sports app was refreshed with more content, faster performance and a more modern design. Yahoo! has already seen 50% growth in daily users from Q1 to Q2 driven by this launch.

Yahoo! introduced a completely redesigned Search Results page; the new design combines beauty with utility. The company placed search results high on the page and were delivering them faster and are doing essentially an experiment each day more than 130 this past quarter to improve the user experience and deliver revenue and that's in addition to the work Microsoft is doing on their end.

In Q2 the company also redesigned Yahoo! News, easier to user and features a personalized news stream. This new design is the first step towards creating a more consistent and modern content experience across Yahoo!.

Partnerships

Yahoo! has strengthened partnerships with major tact players including Apple, Microsoft, Google, Facebook and this quarter Twitter. In Q2, Yahoo! integrated tweets into their homepage newsfeed.

On the media side, Yahoo! extended their partnerships with leading news entertainment brands like ABC News, CNBC and Condé Nast adding breadth to the company’s portfolio of partner content. And also on the content front, the management intends to bring the complete Saturday Night Live archives to Yahoo!, all 38 years. Through a partnership with NBC Entertainment and Broadway Video, Yahoo! will be one of the most comprehensive digital homes for Saturday Night Live content.

People

In Q2 Yahoo! saw a 59% decrease in attrition year-over-year. The management has not only inspired Yahoo! internally, people are applying to work in record numbers. In Yahoo’s peak week, they received nearly 10,000 resumes.

With aggressive hiring and strategic acquisitions, Yahoo! has grown their dedicated mobile team by a factor of six in the past 12 months. Yahoo! has gone from having dozens of engineers to now having hundreds of engineers dedicated to mobile.

Acquisitions

In Q2 alone Yahoo! closed a number of key acquisitions including Summly, Astrid, Go Poll Go, Milewise, Loki Studios, Rondee, Ghostbird Software, PlayerScale and of course Tumblr . ‘These companies bring sophisticated technology and intellectual property to strengthen our product portfolio and they bring great engineering and product talent to Yahoo!’ said Marissa Mayer.

Tumblr

And in May Yahoo! acquired Tumblr. As one of the fastest growing media networks in the world, Tumblr has an incredibly engaged community of younger users to complement Yahoo’s core audience. Since the deal, Tumblr’s growth has seen acceleration with almost a quarter of a million new blogs being set up each day. While Tumblr is now officially part of Yahoo!, the Tumblr team will continue to operate independently. They will continue on their mission to empower creators and curators alike to do what they love, create.

As part of the Yahoo!, Tumblr gains access to its sophisticated personalization technologies to improve serendipity and discovery. Meanwhile, the potential to integrate Tumblr content into Yahoo's product will create more compelling experiences for its users.

Business Outlook and Guidance

Traffic improvement is taking shape, the company also needs to increase its emphasis on monetization and take steps to optimize pricing and improve the sell through rate.

For Q3, Yahoo! expects revenue excluding TAC to be in the range of 1.06 billion to 1.1 billion. Adjusted EBITDA to be between 330 million and 350 million and non- GAAP operating income to be between 165 million and 185 million.

Relative to annual guidance, Yahoo! is adjusting its revenue anticipation modestly with the confident results in the first half of the year. The management is adjusting their EBITDA and operating income expectations down to account for the lower revenue, investments and expenses primarily related to Tumblr. They expect full year revenue excluding TAC to be 4.45 billion to 4.55 billion, adjusted EBITDA to be 1.55 billion to 1.65 billion and non-GAAP operating income to be 900 million to 1.0 billion.