Yahoo! profitable again
Published: 16 Jan 2003 11:02 GMT
Yahoo! reported its third-consecutive quarterly profit, boosted by a 51 percent growth in revenue.
The Web portal reported a fourth-quarter net profit of $46.2m, or 8 cents a share, on sales of $285.8m for the period ending 31 December, 2002. That compares with a net loss of $8.7m, or 2 cents a share, and revenue of $188.9m during the same period in 2001.
"Over the last 12 months, we have executed against a business plan which has taken Yahoo! from a company with tremendous potential to one with multiple strong businesses, from which we believe we can continue to build a sustainable long-term future," Yahoo! chief executive Terry Semel said in a statement.
Wall Street had expected Yahoo to report a profit of 6 cents a share and revenue of $278.6m, according to First Call's consensus of analysts.
The company also reported full-year 2002 revenue of $953.1m. That's a 33 percent increase from 2001 revenue of $717.4m, but short of the $1.1bn Yahoo! generated during the boom year of 2000. Income for the year reached $106.9m, or 18 cents a share, compared with a net loss of $92.8m, or 16 cents a share, in 2001.
Earnings before interest, taxes, depreciation and amortisation (EBITDA) reached $85.3m, up from $11.7m from last year's quarter. Free cash flow also rose to $61.4m from the $6.4m loss in 2001.
Yearly EBITDA hit $206m, compared with a loss of $18.6m in 2001, largely from restructuring and acquisition costs. Free cash flow for 2002 reached $221m, compared with last year's $26.6m loss.
"I think what (Yahoo!'s earnings report) says is they're getting traction in high-margin revenue," said Safa Rashtchy, an equity analyst at US Bancorp Piper Jaffray.
The gains were due to improvements in several businesses, including premium services and a paid-search deal with partner Overture Services. The Web network reported financial results in its three business lines: marketing services, fees and listing, and transactions.
In marketing services, the company's core online advertising business and its high-margin relationship with Overture accounted for $177.5m in revenue, up 31 percent from last year. Much of this growth was attributed to the deal with Overture, which pays Yahoo! every time someone clicks on a commercial search result.
Fees and listing -- the business that encompasses Yahoo's 2.2 million paid subscribers and other areas such as enterprise solutions -- hit $89.4m in revenue for the quarter, up 120 percent from last year. However, Wall Street analysts were concerned about slower-than-expected revenue growth compared with previous quarters. Yahoo! executives attributed the slower growth to a delay in booking revenue from services that launched late into the quarter.
The Web company did not break out revenue from strictly premium services, but it said 70 percent of its fees and listings revenue comes from personals, email forwarding, email storage and Internet access.
In addition, Yahoo's revenue from hosting e-commerce transactions rose 45 percent, to $19m, compared with the same period last year. However, the business grew marginally from the $18.3m reported last quarter.
Jeffrey Fieler, an analyst at Bear Stearns, estimated that Yahoo!'s core online advertising grew 11 percent from last year, despite continued signs of stagnancy in the industry.
"I think that's an extremely encouraging sign, because growth is broadening out in the main component of their revenue," he said.
Fieler calculated that Overture contributed $35m to $40m to the advertising revenue total. Yahoo! executives would not break out the contribution, but insisted that the company's online advertising business was growing and grabbing market share from its competitors beyond the Overture deal.
The shape of things to come
Yahoo! also provided financial guidance for the first quarter of 2003 and for the year in full. In the first quarter, it expects revenue to reach between $225m and $275m and EBITDA to reach between $60m and $70m.
For 2003, Yahoo! raised its revenue expectations to between $1.14bn and $1.21bn. The company expects 2003 EBITDA to fall in a range of $295m to $330m and capital expenditures to come in between $70m and $90m. Depreciation expenses are expected to reach between $95m and $105m.
During a conference call, chief executive Semel said he expects further diversification will allow Yahoo!'s core marketing services business to grow 20 percent in 2003, much of that from its sponsored search deal with Overture.
In addition, he anticipated that the company's current base of 2.2 million unique subscribers would grow by more than 50 percent in 2003.
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