Yahoo meets Q4, full-year earnings expectations

The Internet content and services provider posted revenue of $663.9M

Yahoo Inc. grew its revenue significantly for both its fourth quarter and the full fiscal year and met Wall Street's earnings-per-share expectations for both periods.

The Sunnyvale, Calif.-based provider of Internet content and services posted revenue of $663.9 million for the three-month period ended Dec. 31, 2003, up 132% from the same quarter in 2002, Yahoo announced late yesterday (download PDF).

Net income for the quarter came in at $75 million, or 11 cents per share, meeting the consensus estimate from financial analysts polled by Thomson Financial/First Call. Yahoo posted net income of $46.2 million, or 8 cents per share, in 2002's fourth quarter.

Full-year revenue was $1.62 billion, up 71% over 2002. Full-year net income came in at $237.9 million, or 37 cents per share, also meeting analysts' expectations.

The net income figure for 2003 compares with net income of $106.9 million, or 18 cents per share, for 2002 -- before the cumulative effect of an accounting change to implement the Statement of Financial Accounting Standard No. 142 (SFAS 142). After the change, 2002 net income was $42.8 million, or 7 cents per share.

Yahoo also provided a revenue figure that excludes traffic acquisition costs (TAC), which Yahoo defines as gross profit before other costs of revenue. Namely, it excludes TACs paid to affiliates of Overture Services Inc., which Yahoo acquired on Oct. 7. Pasadena, Calif.-based Overture provides sponsored search services.

Excluding TAC, 2003 fourth-quarter revenue was $511.3 million, exceeding the consensus expectation of $496 million from analysts polled by Thomson Financial/First Call, who had excluded TAC for their forecasts. The 2003 full-year revenue excluding TACs was $1.47 billion. Boston-based Thomson Financial/First Call didn't poll analysts on full-year revenue, a Thomson spokesman said.

Looking ahead, Yahoo expects revenue excluding TACs to be $475 million to $505 million in 2004's first quarter and $2.12 billion to $2.25 billion for all of fiscal 2004, the company said.

Two achievements -- improving its products and services across the board and broadening its advertising platform -- boosted Yahoo's financial performance in 2003, said Terry Semel, the company's chairman and CEO, in a conference call after the results came out.

"In 2003, we spent the majority of our investment dollars making our products better," he said. "We were rewarded with more users, who visited more frequently, consumed more pages and used more services."

This, in turn, attracted advertisers, he said. "These consumer relationships are key to building a powerful and high-impact advertising environment," Semel said. Yahoo's advertising clients range from small and midsize businesses to large corporations.

Yahoo ended 2003 with about 263 million unique users, up 23% from the end of 2002, he said. More than half were active registered users, defined as those who register with Yahoo for services such as e-mail or its community groups.

Registered users consume twice as many services and stay four times longer on the company's network than users who aren't registered, making them good prospects for becoming subscribers to a fee-based Yahoo service, such as Digital Subscriber Line Internet access, small-business services, premium mail service and personal ads, the company has said in the past.

Yahoo ended 2003 with almost 5 million unique paying users, up 122% over the end of 2002. This is the fastest-growing subset of users on the Yahoo network, Semel said.

Copyright © 2004 IDG Communications, Inc.

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