Home » Yahoo!’s (YHOO) CEO Marissa Mayer on Q3 2014 Results – Earnings Call Transcript

Yahoo!’s (YHOO) CEO Marissa Mayer on Q3 2014 Results – Earnings Call Transcript

We estimate that we will pay approximately $3.3 billion in cash taxes in the first quarter of 2015 related to these proceeds. Earnings and equity interest grew 71% to $299 million. The increase was primarily driven by one time gains recognized by Alibaba in Q2 relates to its equity investments.

Now let me turn to the balance sheet, at the end of Q3 we had $12.3 billion in cash and marketable securities, equivalent to $9.4 billion for the proceeds of Alibaba IPO. These shares were sold out of our Hong Kong subsidiary. Under U.S. tax law, such gain is fully taxable, regardless of where the cash is domiciled. Cash taxes related to sale are expected to be $3.3 billion and will be paid in Q1 of 2015.

As part of our commitment at least 50% of after tax Alibaba IPO proceeds showed us we have repurchased 1.4 billion of our shares to date. As we move to a class – treatment for Alibaba group our remaining investments now reflected on our balance sheet and mark-to-market at $34 billion as of September 30. The change in cash balance from Q2 to Q3 was primarily driven by strong cash flow — free cash flow of $212 million, the Alibaba proceeds of $9.4 billion, acquisitions net of the cash acquired of $292 million, which was primarily for Flurry, and share repurchase activity of $1.4 billion.

We bought back approximately 8 million shares for $282 million through September. And on September 30th we prepaid $1.1 billion under our ASR. We received additional deliver of 15 million shares under this agreement during the quarter with final settlement occurring in October resulting in repurchasing from an additional 8.5 million shares for a total repurchase of 23.5 million shares under the ASR for net $33 million.

Now let’s me turn over to guidance. As we look to the last quarter of the year and going forward, we are committed to sustainably growing our business. I’m pleased with the sense of urgency that we have operated within Q3 and I expect that our EBITDA levels at a low point and we expect to see improvements with revenue growth in 2015 and beyond.

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Our guidance assumed that we continue to make steady progress in our core business into Q4 with the following assumptions. Post the Alibaba IPO we will recognize remaining portion of the September 2012 one-time TPA payment through September 2015 for approximately $17 million revenue per quarter, but we’ll have no other royalty revenue going forward.

Short-term expenses expect to be approximately flat sequentially as we look for module leverage in Q4. For our Q4 guidance we expect the following; GAAP revenue range of $1.2 to $1.24 billion, revenue ex-TAC in the range of $1.14 to $1.18 billion, EBITDA in the range of $340 million to $380 million, with short-term operating expenses roughly flat at $800 million and non-GAAP operating income in the range of $190 million to $230 million.

Thanks again for your time. In closing we remain committed to building a strong core business creating of returning value to our shareholders and warranting your continue support and trust in our leadership as effective stewards of your company.

With that, Marissa and I would be glad to take your questions and I will go to Bianna.

 

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