Yahoo!’s (YHOO) CEO Marissa Mayer on Q2 2014 Results – Earnings Call Transcript

Source: Seeking Alpha

 

Yahoo! Inc. (NASDAQ:YHOO)

Q2 2014 Earnings Conference Call

July 15, 2014 17:00 ET

Executives

Mike Santoli – Business Reporter, Yahoo! Finance

Marissa Mayer – Chief Executive Officer

Ken Goldman – Chief Financial Officer

Analysts

Eric Sheridan – UBS

Sachin Khattar – Jefferies

Carlos Kirjner – Sanford Bernstein

Ron Josey – JMP Securities

Justin Post – Merrill Lynch

Peter Stabler – Wells Fargo Securities

Youssef Squali – Cantor Fitzgerald

Operator

Good afternoon and welcome to Yahoo!’s Second Quarter 2014 Earnings Video Webcast. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. As a reminder, this conference call is being recorded. The webcast today will be moderated by our business reporter from Yahoo! Finance, Mike Santoli.

Before getting started, I’d like to remind you that today’s presentation will contain forward-looking statements about our expected financial and operational performance including business and financial strategies, revenue growth, products and ad sales. Actual results might differ materially from our projections. Potential risks factors that could cause these differences are described in our Form 10-Q filed with the SEC on May 8, 2014. All information in this video is as of today, July 15, 2014 and we undertake no duty to update it for subsequent events.

Today’s discussion will include non-GAAP financial measures. Reconciliations of our non-GAAP results to the GAAP results we consider most comparable can be found in our earnings slides, which also contain full versions of the financial charts and graphs you will see in today’s video. We encourage you to review the complete earnings slides in our Investor Relations website at investor.yahoo.com under the Earnings tab.

And with that, let me turn the program over to Mike.

Mike Santoli – Business Reporter, Yahoo! Finance

Welcome to Yahoo!’s second quarter 2014 earnings video webcast. I am Mike Santoli and I will be moderating today’s earnings event. Here with me are Marissa Mayer, Yahoo!’s Chief Executive Officer; and Ken Goldman, Yahoo!’s Chief Financial Officer.

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Today, we bring you prepared remarks from both Marissa and Ken around Yahoo!’s second quarter performance. Later, they will be answering your questions submitted via email. Institutional investors were encouraged to submit questions and we have selected a few questions that were representative of the group.

I’d like to now turn it over to Marissa to discuss Yahoo!’s second quarter business update. Marissa?

Marissa Mayer – Chief Executive Officer

Thanks, Mike and good afternoon everyone. Thank you for joining our Q2 earnings live stream. I want to begin today’s call with some perspective on where we stand in the overall transformation of our business. We have transformed our culture by focusing on our strategy on speed and execution. We have transformed our products divesting in those that are non-strategic and investing in those that can drive long-term growth. Along the way, we have reinvented every single major consumer product at Yahoo! And now we are transforming the ways in which we generate revenue, countering declines with investments in new products, platforms and businesses.

What we know is this transformation is not a singular event. It is a series of events and quarters, some more challenging than others and some more successful than others and it will take time. In the case of Yahoo!, I have stated in the past that we believe a transformation of this size and scale will take multiple years and we continue to believe that is the case today. Even so given our top priority of long-term sustainable growth, we are not satisfied with our results this past quarter.

In Q2, we delivered $1.04 billion in revenue ex-TAC, which is down approximately 3% year-over-year. Looking at the core of our business, search hit $428 million in revenue ex-TAC representing 6% growth year-over-year. On the display side, we saw some specific challenges with $394 million in revenue ex-TAC or roughly 7% decline year-over-year. I will return to the specific revenue analysis around the challenges after our quarterly product update.

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In the past, we have consistently talked about our products in terms of four areas: search, communications, digital magazines and video, all powered by two tremendous platforms, Flickr and Tumblr. We have also discussed our strategy of speed, quick decisions, quick execution, quick implementation. And I want to walk through our progress in Q2 and help connect this strategy to real-time progress in our business.

Let’s start with search. Last quarter, we acquired Aviate as part of our efforts to accelerate mobile search as a contextual personal home screen product for Android users. We are excited about the opportunity to deliver the right information and applications at the very moment of relevance. In late June, we brought Aviate out of beta, receiving an incredible response and rapidly growing users 2.5 times over in the first week alone. And we are seeing our users interact with the new Yahoo! Aviate, an average of 50 times a day making it a truly daily habit.

In terms of search monetization, we continue to make great strides with our Gemini marketplace, the very first unified mobile search and native buying platform in the industry. We are incredibly excited that for the very first time since 2010, we are serving our own mobile search ads in the United States and we continue to see the power of consolidating all mobile advertising into one marketplace. Gemini now represents 50% of Yahoo!’s mobile display revenue in the United States. I am also excited to report that our mobile display and our mobile search revenue each grew more than 100% year-over-year. In Q2, we continue to iterate on our search experience, servicing relevant information like event invitations, upcoming flights, packaged tracking data and more into the search experience. This sort of integration not only improves the user experience, but also brings a unique value proposition to millions of Yahoo! Mail users leveraging our scale and longstanding market position.

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