Yahoo Stumbles Over Display Revenue and Outlook



Shares of Yahoo (NASDAQ:YHOO) closed Tuesday’s regular session up 4.28 percent at $38.22, but fell as much as 5.5 percent in post-market trading after the Internet technology company reported fourth-quarter and full-year results. Although revenue was consistent with expectations and earnings beat the Street, display ad revenue and income from operations both declined.

Fourth-quarter GAAP revenue fell 6 percent on the year to $1.27 billion while revenue excluding traffic-acquisition costs fell 2 percent on the year to $1.2 billion, in-line with expectations. GAAP net earnings increased 40 percent on the year to 33 cents per share, while non-GAAP net earnings increased 31 percent to 46 cents per share, beating the mean analyst estimate of 38 cents per share.

Full-year GAAP revenue also fell 6 percent to $4.68 billion and revenue excluding TAC fell 1 percent to $4.43 billion, once again in line with the mean analyst estimate of $4.43 billion. GAAP net earnings for the year fell 62 percent to $1.26 per share, while adjusted (non-GAAP) net earnings increased 16 percent to $1.52 per share, beating the mean analyst estimate of $1.46 per share.

The killer, which drove shares down in post-market trading, was this: fourth-quarter display revenue fell 6 percent on the year to $553 million, while full-year display revenue fell 9 percent to $1.95 billion; fourth-quarter display revenue excluding TAC fell 6 percent on the year to $491 million, and full-year display revenue excluding TAC fell 9 percent to $1.74 billion. Excluding Yahoo’s Korea unit, the number of ads sold increased about 3 percent on the year in the fourth-quarter, and the price per ad decreased about 7 percent.

GAAP search revenue decreased, falling 4 percent on the year in the fourth-quarter to $464 million — but search revenue excluding TAC was actually up 8 percent on the year at $461 million (up 6 percent for the full year at $1.7 billion), as paid clicks increased about 17 percent while the price per click fell about 3 percent.

“I’m encouraged by Yahoo’s performance in Q4 and 2013 overall,” commented CEO Marissa Mayer in the earnings release. “We saw continued stability in the business, and our investments allowed us to bring beautiful products to our users and establish a strong foundation for revenue growth. We are extremely heartened by the year-over-year traffic increase we experienced in 2013, an early sign of return on our investments and the acquisitions we’ve made.”

According to comScore, Yahoo received 195.16 million unique U.S. desktop visitors in December, volume that represents about 87.1 percent of the total U.S. desktop Internet audience of 224 million. Yahoo beat out second-place Google (NASDAQ:GOOG), which received 192.3 million unique U.S. visitors, Microsoft (NASDAQ:MSFT), which received 175.3 million unique U.S. visitors, and Facebook (NASDAQ:FB), which received 140.8 million unique U.S. visitors.

Yahoo has taken the top web-traffic spot from Google with increased frequency, but the company is still working to recoup its position in the pantheon of Internet and technology companies. Analysts are expecting just 2.2 percent revenue growth next year and earnings growth of about 13 percent. For the fiscal first-quarter, analysts are looking for revenue growth of about 0.8 percent on the year to $1.08 billion, and earnings growth of about 7.9 percent to 41 cents per share. Yahoo itself forecast fiscal first-quarter EBITA in a range between $290 million and $330 million, an outlook which implies narrower margins.

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