With all eyes on what Yahoo will do with its $5 billion+ in Alibaba cash, Yahoo today reported its Q3 earnings after the close of trading, with sales of $1.09 billion excluding traffic acquisition costs and non-GAAP earnings per share of $0.52. Revenues including acquisition costs were $1.15 billion. Yahoo’s stock was up 3% in after-hours trading, following this news.
Analysts were expecting on average non-GAAP earnings per share of $0.30 on ex-TAC sales of $1.04 billion, making this a solid beat of estimates.
“We had a good, solid third quarter. We delivered $1.094 billion in revenue ex-TAC and $1.148 billion in GAAP revenue. This represents 1% growth in revenue ex-TAC and 1% growth in GAAP revenue. We achieved this revenue growth through strong growth in our new areas of investment – mobile, social, native and video – despite industry headwinds in some of our large, legacy businesses,” said Marissa Mayer, CEO of Yahoo in the release.
“I am also pleased to report today that our revenue in mobile is now material. In Q3, we saw mobile revenues in excess of $200 million on a GAAP basis. Further, we estimate that our gross revenues in mobile will exceed $1.2 billion in revenue this year. We have invested deeply in mobile and we are seeing those investments pay off. Not only are our mobile products attracting praise and engagement from users and industry awards, they are generating meaningful revenue for Yahoo.”
Display revenue was $447 million for the third quarter of 2014, down 5% compared to $470 million for the third quarter of 2013, but search revenue – $452 million in the quarter – was up 4%. Meanwhile, the number of ads sold increased approximately 24% compared to the third quarter of 2013. Price-per-Ad decreased approximately 24% compared to the third quarter of 2013.
It’s also important to note that the EPS figure includes the Alibaba cash – without the sale, the EPS figure would have been lower – in fact, it would have been a lackluster performance. Search revenues were up, but they’re smaller than ads.
Also worth noting: Yahoo has $12 billion in cash now.
GAAP net earnings per diluted share was $6.70 in the third quarter of 2014 (which included the gain from sale of Alibaba Group shares of $6.27 per diluted share), compared to $0.28 in the third quarter of 2013. Non-GAAP net earnings per diluted share was $0.52 for the third quarter of 2014, compared to $0.34 in the third quarter of 2013.
Yahoo has had a mixed year so far when it has come to its quarterly results. In the last quarter (Q2) the company missed on both sales and earnings. In Q1 it beat analysts’ expectations but was flat in key areas like display ad sales. In Q3 a year ago, Yahoo had earnings per share of $0.33, and sales that were 3.3% higher at $1.08 billion.
That, combined with the cash it has picked up by way of the Alibaba IPO, has led to a lot of conversation about what Yahoo will do next.
The WSJ reported this weekend that today’s earnings could prove to be a crucial moment for the company. Its sources said that CEO Marissa Mayer will use the company’s earnings as a moment to set out her future strategy for the company, specifically in relation to how it proposes to use the Alibaba cash. The sale of part of Yahoo’s shares in the Chinese e-commerce company have netted Yahoo over $5 billion, and that has prompted some of Yahoo’s more vocal investors to demand more direction and change at the company.
Investors like Starboard Value have suggested that a merger with AOL (owner of TechCrunch) could be one move to grow Yahoo’s scale. But the WSJ’s sources say that Mayer will likely take a different route: to focus more on acquisitions that give the company a bigger product push, and more possibilities to generate revenue. That would be in contrast to a large part of Yahoo’s acquisitions up to now, which have been heavy on acquihires to build Yahoo’s talent.
In keeping with that, we have heard from sources that Yahoo has been in talks to acquire BrightRoll for around $700 million, which would make it the latest in a string of acquisitions, and one of the biggest. The news sent Yahoo’s stock up in mid-day trading.
We’ll be dialing into the call to hear whether Yahoo gives out any more details on any of the above.