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conference date: April 17, 2007 @ 2:00 PM PT
for quarter ending: March 31, 2007 (1st quarter 2007)
Overview: Revenues not strong, earnings down from year-earlier.
Basic data:
Revenues were $1.67 billion, down 2% sequentially from $1.702 billion and up 7% from $1.57 billion in Q1 2006.
Net income was $142 million, down from $160 million in Q1 2006. Non-GAAP net income was put at $234 million or $0.17 per share, essentially flat from year earlier.
Earnings per share (EPS) were $0.10, down 10% from Q1 2006.
Cash and equivalents ended at $3.1 billion.
Guidance:
Q2 2007 ex-TAC revenue of $1.2 to 1.3 billion. Operating cash flow of $440 to $500 million.
Full year 2007 revenue ex-TAC to range from $4.95 to $5.45 billion, up about 15% from 2006. Expect acceleration as the year progresses. 39 to 40% margin. $1.2 to $1.4 range of free cash flow.
Conference Highlights:
Focusing on search monitorization and display advertising. Panama ranking model early results are pleasing. On March 30th completed migration for active advertisers. Already seen increases in relevance and ad performance. Selective launch in Japan yesterday. Expects to see revenue impact this quarter (Q2). Expects to grow at rate of display market this year, but longer term to gain market share. Doing well in job-recruitment market. Agreed today with Ebay to set up checkout program.
Yahoo remains the most visited online site. Q1 had 477 million unique users in the quarter. Social sites are also highly visited. Yahoo Answers has 90 million users and continues to grow. New launches and partnerships in Mobile space in Q1.
Ex-TAC revenue per unique user per month dropped 7% from year-earlier to $0.88.
Free cash flow was $369 million. Partly due to improved collections. $72 million additional from exercise of employee stock options. $595 million spent on stock repurchases.
US revenues were $1.1 billion, international $571 million.
Marketing services revenue was $1.47 billion. Fees revenue $203 million. Revenues excluding traffic acquisition costs (TAC) were $1.18 billion, up 9% from Q1 2006.
Effective tax rate was 45%.
20% growth with top 200 display advertisers. 22% growth in page views; per user page views grew. Monetization, however, was about 7% lower than year-earlier, which was still better than expected due to Panama. Price per click eroded at first with Panama, but reversed to an increase by the end of the quarter. Believes trend will now be significantly upward.
Off-network partner revenue dropped in mid-teen percent. Affiliates will see varying impact of Panama, which gives advertisers more target control.
Q&A:
Impact on display ads from motgage slowdown? Lender advertising activity remains solid. Yahoo has limited exposure to sub-prime lenders.
Newpaper deal revenues? No revenue recognized in Q1 for newspaper deal; not a TAC arrangement. Deferred revenue will appear in Q2.
Off net revenue decline cause? Rising TAC rates.
Relationship between page view and revenues? It is a mix issue, not a pricing issue. Growth in new content areas which are hard to begin to target properly.
Revenue growth of 9% and accelerating? Mostly due to RPS (revenue per search) gains in search. Also cycling through MSN loss.
Top 200 advertisers use premium inventory and are experimenting with social inventory.
Panama phasing has nothing to do with newspaper or Ebay deals; just a lot of customers and a complex thing to do.
Ebay - PayPal product look? Live today. 2500 merchants have icon today. Better than competitor's for merchants.
DoubleClick? Validate's Yahoo's strategy. Up to advertisers on whether to stay with DoubleClick.
RPS? Expects double-digit increases in second half.
Branded advertising? Expects modest diminishing of yields with increased page views.
Search market share? Extraordinarilly important. Has maintained share over the past few years, with gains [of Google] coming at the expense of smaller players. Believes will see increased relevance this year which will increase market share.
Are you going to market the Yahoo brand? Yes, and will focus on mobile and Answers.
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Disclaimer: Our analyst summaries may include both our condensations of statements made by company representatives and our own analysis. They are not covered by any warranty. We cannot guarantee anything said by company representatives is true. We try not to make errors, but it is possible. Before making or terminating an investment you should always verify any factual basis of your decision.
Copyright 2007 William P. Meyers
