Yahoo! Inc kept rolling along in its second quarter, as the internet portal giant posted pro forma net income of $28.3m, or $0.11 per share, topping the $0.08 consensus estimate of analysts surveyed by First Call and meeting Wall Street whisper numbers. In the year-ago period, pro forma net income was $1.5m, or $0.01 per share. Revenue for the quarter jumped 156% year-over-year and 22% sequentially to $115.2m, beating analysts’ estimates of $103m. It also marked the first time the Santa Clara, California- based company broke the $100m barrier in a quarter. Executives were quick to point out, however, that such sequential revenue growth levels are not sustainable.
Including $56.1m in charges related mostly to the acquisition of GeoCities and a $3.0m tax benefit, the actual bottom line for the quarter showed a loss of $15.1m, or $0.07 per share, compared to a loss of $14.2m ($0.08) a year ago, when the company incurred a $15m charge stemming from its acquisition of Viaweb. For the six- month period, net loss was $9.4m on revenue up 169% at $210m, down from a loss of $14.7m last year.
The closing of the June quarter saw Yahoo enjoying substantial growth across its business, with improvements in all of its key metrics. Average daily page views rose to 310 million in June from 235 million in March, while advertisers for the quarter numbered 2,700, up from 2,175 in the prior quarter. The average length of advertising contracts jumped to 166 days from 145 days last quarter and the average spend per customer inched up from $40,000 to $43,000. Yahoo continues to point out that no single customer accounts for more than 10% of advertising revenues. Headcount grew to 1,270 from 920 at the end of the March quarter, including 200 staff from GeoCities and Online Anywhere.
Yahoo claims to have had 80 million unique users worldwide in June, with 30 million outside of the US. The company expects non- US markets to become increasingly significant to its business in the next few years, eventually accounting for 50% of its overall users. With the recent addition of Brazil, Yahoo now has operations in 19 countries. International revenue accounted for 10% of the total in the second quarter.
Yahoo executives told analysts on a conference call that the company’s business plan was clicking on all cylinders as it builds a global branded network that becomes more and more attractive to merchant partners. The motivating idea continues to be the notion that dollars follow eyeballs, according to chief financial officer Gary Valenzuela.
Gross margins remained flat with the first quarter at 86% of revenue, while operating margins were 32%. The company expects to be able to maintain operation margins of 30% to 36% in the long term, but warns that acquisitions could have a negative short- term effect. Along those lines, the purchase of Broadcast.com Inc is still expected to be accretive in 12 months from closing – now expected in two weeks time, a month ahead of schedule – but will likely prove slightly dilutive until then.
On the balance sheet, Yahoo says the recently-completed quarter was its ninth consecutive with positive cash flow, as cash balances increased $61m to $638m on June 30. Deferred revenue also rose to $64m from $38m at the end of the prior quarter.
