Yahoo, Inc. (YHOO) Misses Q2 EPS by 1c; Display Revs Fell 7%

(Updated - July 15, 2014 4:10 PM EDT)

Yahoo, Inc. (NASDAQ: YHOO) reported Q2 EPS of $0.37, $0.01 worse than the analyst estimate of $0.38. Revenue for the quarter came in at $1.04 billion versus the consensus estimate of $1.09 billion.

Yahoo requested and Alibaba Group agreed to an amendment to the share repurchase agreement that reduces the maximum number of shares that Yahoo is required to sell in connection with Alibaba’s initial public offering from 208 million shares to 140 million shares.

"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."

Second Quarter 2014 Financial Highlights

Display:

• GAAP display revenue was $436 million for the second quarter of 2014, an 8 percent decrease compared to $472 million for the second quarter of 2013.
• Display revenue ex-TAC was $394 million for the second quarter of 2014, a 7 percent decrease compared to $423 million for the second quarter of 2013.
• The number of Ads Sold increased approximately 24 percent compared to the second quarter of 2013.
• Price-per-Ad decreased approximately 24 percent compared to the second quarter of 2013.

Search:

• GAAP search revenue was $428 million for the second quarter of 2014, a 2 percent increase compared to $418 million for the second quarter of 2013 (which included the Microsoft RPS guarantee).
• Search revenue ex-TAC was $428 million for the second quarter of 2014, a 6 percent increase compared to $403 million for the second quarter of 2013 (which included the Microsoft RPS guarantee).
• The number of Paid Clicks increased approximately 3 percent compared to the second quarter of 2013.
• Price-per-Click increased approximately 15 percent compared to the second quarter of 2013.

Cash Balance:

• Cash, cash equivalents, and investments in marketable securities were $4.3 billion as of June 30, 2014 compared to $5 billion as of December 31, 2013, a decrease of $0.7 billion.
• During the second quarter of 2014, Yahoo repurchased approximately 21 million shares for $719 million.

“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.”

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

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