Yahoo! (YHOO) Misses Q2 EPS by 1c

Yahoo! (NASDAQ: YHOO) reported Q2 EPS of $0.09, $0.01 worse than the analyst estimate of $0.10. Revenue for the quarter came in at $1.31 billion versus the consensus estimate of $1.08 billion.

Business Highlights:

Platforms

• Kept Yahoo Mail one of the highest rated mail apps in both the App Store and Google Play, with major updates for iOS and Android versions, including an unsend feature, contact improvements, and a document preview feature.
• Introduced support for Live Video on Tumblr with YouNow, YouTube, Kanvas and Upclose so that Tumblr can serve as a premier publishing and discovery platform to broadcast, watch and share live videos no matter where they’re created.

Verticals

• Launched updates to Yahoo News, Sports, and Finance on desktop along with new updated Sports and Finance apps for a cleaner, faster more personalized experience.
• Hosted the first-ever live streams of Berkshire Hathaway’s annual shareholders meeting, which had more than 1.8 million views across devices in both English and Mandarin, and Adrian Wojnarowski’s coverage of the NBA Draft, which attracted approximately 3.7 million total views, with an average watch time of 34 minutes per user.

Advertising

• At our NewFront event, announced new video programming along with opportunities for our advertisers, and expanded open viewability measurement to include Yahoo Gemini native video in partnership with Moat, giving marketers more ways to measure their Yahoo Gemini native video campaigns.
• Launched a new content marketing offering, Yahoo Storytellers, and a new mobile offering, Yahoo Tiles, for advertisers.

Non-Core Assets

• Generated additional value for shareholders through the sale of Santa Clara real estate which generated $246 million in net cash proceeds.
• Established Excalibur LLC to explore the divestiture of more than 4,000 non-strategic patents and pending applications.

Search Revenue:

• GAAP search revenue was $711 million for the second quarter of 2016 compared to $528 million for the second quarter of 2015. Excluding the impact of the Change in Revenue Presentation, which contributed $252 million to search revenue in the second quarter of 2016, search revenue decreased by 13 percent compared to the second quarter of 2015.
• Gross search revenue was $765 million for the second quarter of 2016, a decrease of 17 percent compared to the second quarter of 2015. The Change in Revenue Presentation did not impact gross search revenue in the second quarter of 2016.
• Cost of revenue - TAC paid to search Affiliates was $392 million for the second quarter of 2016, a 270 percent increase compared to the second quarter of 2015. Excluding the impact of the Change in Revenue Presentation, which contributed $252 million to Cost of revenue - TAC in the second quarter of 2016, Cost of revenue – TAC paid to search Affiliates increased by 32 percent compared to the second quarter of 2015.
• The number of Paid Clicks decreased 24 percent compared to the second quarter of 2015.
• Price-per-Click increased 8 percent compared to the second quarter of 2015.

Display Revenue:

• GAAP display revenue was $470 million for the second quarter of 2016, a 7 percent decrease compared to the second quarter of 2015.
• Cost of revenue - TAC paid to display Affiliates was $74 million for the second quarter of 2016, a 21 percent decrease compared to the second quarter of 2015.
• The number of Ads Sold increased 9 percent compared to the second quarter of 2015.
• Price-per-Ad decreased 15 percent compared to the second quarter of 2015.

Guidance:

Yahoo! sees FY16 adjusted operating income of $175 - $275 million, up from $150 - $250 million previously. The consensus is at $196 million.

The company also sees Q3 adjusted operating income of $65 - $95 million, with the consensus at $59 million.

For earnings history and earnings-related data on Yahoo! (YHOO) click here.

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