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CompanyName:Yahoo!IncCompanyTicker:YHOOSector:T echnologyIndustry:Internet
EventDescription:Q42015EarningsCallMarketCapasofEventDate:27.92BPriceasofEventDate:29.06
©2014TheStreet,Inc.Al l R ightsReserved Page1of22
Yahoo(YHOO)EarningsReport:Q42015ConferenceCallTranscriptThefollowingYahooconferencecalltookplaceonFebruary2,2016,05:00PMET.Thisisatranscriptofthatearningscall:
CompanyPart icipants
ShibaniJoshi;Yahoo;ModeratorMarissaMayer;Yahoo;CEOKenGoldman;Yahoo;CFO
OtherPart icipants
HeathTerry;GoldmanSachs;AnalystMarkMahaney;RBC;AnalystBrianNowak;MorganStanley;AnalystEricSheridan;UBS;AnalystAnthonyDiClemente;NomuraSecurities;AnalystMarkMay;Citigroup;AnalystJustinPost;BofAMerrillLynch;AnalystRonJosey;JMPSecurities;AnalystBenSchachter;MacquarieResearch;AnalystYoussefSquali;CantorFitzgerald;AnalystStephenJu;CreditSuisse;Analyst
MANAGEMENTDISCUSSIONSECTION
Operator :
Goodafternoon.WelcometoYahoo!'sfourth-quarterandfull-year2015earningsvideowebcast.
(OperatorInstructions)
Asareminder,thisconferencecallisbeingrecorded.
ThewebcasttodaywillbemoderatedbyShibaniJoshi.
Beforegettingstarted,Iwanttoremindyoutoday'spresentationwillcontainforward-lookingstatementsaboutYahoo!'sstrategicplanandlong-termfinancialmodel,includingprojectedfinancialperformanceandplannedoperationalimprovements,restructuringsandcostcontrols,aswellasstatementsaboutourBoard'sstrategicreviewprocess,andtheseparationofourremainingstakeinAlibabaGroupfromtheoperatingbusiness.
Actualresultsmightdiffermateriallyfromourprojections.Potentialrisksthatcouldcausethesedifferencesaredescribedinourpressreleasesissuedthisafternoon,therelatedslidepresentationonourInvestorRelationswebsite,andourForm10-QfiledwiththeSEConNovember5,2015.
Allinformationinthisvideoisasoftoday,February2,2016,andweundertakenodutytoupdateitforsubsequentevents.
CompanyName:Yahoo!IncCompanyTicker:YHOOSector:T echnologyIndustry:Internet
EventDescription:Q42015EarningsCallMarketCapasofEventDate:27.92BPriceasofEventDate:29.06
©2014TheStreet,Inc.Al l R ightsReserved Page2of22
Today'sdiscussionwillincludenon-GAAPfinancialmeasures.Reconciliationsofournon-GAAPresultstotheGAAPresultsweconsidermostcomparablecanbefoundinourearningsslides,whichalsocontainfullversionsofthefinancialchartsandgraphsyou'llseeintoday'svideo.WeencourageyoutoreviewthecompleteslidepresentationsinourInvestorRelationswebsiteatinvestor.Yahoo.com,underearnings.
Withthat,letmeturntheprogramovertoShibani.
ShibaniJoshi(Moderator):
WelcometoYahoo!'sfourthquarterandfull-year2015earningsvideowebcast.
I'mShibaniJoshi,andI'llbemoderatingtoday'searningsevent.HerewithmeareMarissaMayer,Yahoo!'sChiefExecutiveOfficer;andKenGoldman,Yahoo!'sChiefFinancialOfficer.
Today,we'llbringyoupreparedremarksfrombothMarissaandKenaroundYahoo!'sfourthquarterandfull-yearperformance.Later,theywillbeansweringyourquestionsaswell.
Now,I'dliketoturnitovertoMarissa.
MarissaMayer (CEO):
Goodafternoon.Welcometoourearningslivestream,hostedonYahoo!Finance.
Today,I'llshareanoverviewofourQ4andoverall2015performance.
Then,aswecommittedtoonourlastearningscall,KenandIwilldiscussourplanforamorefocusedYahoo!in2016andbeyond,withdetailsonhowweplantoconcentrateourefforts,improveexecution,andfurtherengageourusersandadvertisers.
Let'sbeginwithQ4highlights.
I'mpleasedtoreportthatourQ4performanceexceededguidanceacrossGAAPrevenue,revenueex-TAC,adjustedEBITDA,andnon-GAAPoperatingincome.InQ4,wedelivered$1.273billionofGAAPrevenue,whichwas6%aboveourguidancerange.Intermsofrevenueex-TACwedeliveredjustover$1billionofrevenueinthequarter,approximately4%aboveourguidancerange,andwedelivered$215millionofadjustedEBITDA,7%aboveourguidancerange.
TheseresultswereenabledbyourGemininativeproduct,whichcontinuedtoexceedexpectations,andbystrengthinprogrammaticads,whichshowedsoliddemandinQ4.I'dliketorecognizeourglobalsalesteam.They'veworkedtirelesslytodelivergreatreturnoninvestmenttoourclients,andinturn,todelivertheseresults.
Lookingat2015intotal,ourGAAPrevenuewasjustunder$5billion,up8%yearoveryear.IcontinuetobepleasedtoseetoplineGAAPrevenuegrowthatthisstageofourtransformation.OurdisplayGAAPgrowththisyearwaspropelledlargelybygrowthinnativeandvideo,withtheadditionofBrightRoll,offsetbythedragoflegacydisplay.SearchGAAPgrewyearoveryearaswell,withtheadditionofourMozillapartnership.Onanex-TACbasis,revenuewas$4.091billion,down7%yearoveryear,drivenbypartnerpayments.Overall,whilewegrewGAAPrevenue,wedidnotgrowex-TACrevenue,asweplanned.
Inowwanttotalkabitaboutwhereweareinourturnaround.Yahoo!todayisafarstronger,moremodernCompany,thantheoneIjoined3.5yearsago.We'vetripledourmobileaudiencetomorethan600millionmonthlyusers,improvedmanypartnerships,streamlinedourdatacenters,hiredincredibletechnicaltalent,andinvestedwiselytomeetfutureneeds.
CompanyName:Yahoo!IncCompanyTicker:YHOOSector:T echnologyIndustry:Internet
EventDescription:Q42015EarningsCallMarketCapasofEventDate:27.92BPriceasofEventDate:29.06
©2014TheStreet,Inc.Al l R ightsReserved Page3of22
Atthesametimewehaveshiftedresourcestowardsgrowth-orientedbusinessesandmarketsbyclosing22officesandsunsettingmorethan120productsandfeatures.Asaresult,in2015alone,aboutathirdofourrevenuewascompletelynewrevenue,withover$1.6billionattributabletoMavens,Mobile,Video,Native,andSocial.I'dliketotalkaboutthebalanceofnewrevenueversuslegacyforamoment,aswellassomeofthestrategicdecisionswe'vemade.
Inaturnaround,youmustliterallyturnarounddecliningrevenue,andgetittogrow.Therearetwowaystodothat:byreturningcurrentbusinesslinestogrowth,orbyaddingnewbusinesslinesthatgrow.WhenIarrivedatYahoo!Ireviewedallofthelinesofbusiness.Eachonewasindecline,andhadbeenforyears.Worse,wedependedheavilyuponbanneradsanddesktopusers,bothofwhichweredeclining,inlinewithindustrytrends.
Thatwasthebadnews.Itmeantweweresittingon$5billionofdeterioratingrevenue,withessentiallynoclearpathtogrowth.Weneededtoturnthataround,thatdecliningrevenue,withnewbusinesses,notexistingones,andweneededsomethingthatwasgoingtobebigenoughandgrowfastenoughtomattertoa$5billionbusiness.
Thenextdecisionyouhavetomakeinaturnaroundisdoyoucompletelycutdeterioratingrevenuelines,soyoucanshowsignificantgrowthfaster,ordoyoutryandstemthedeclinessoyouhavethestability,butknowthattheheadwindswilllastlonger,asthelegacyrevenuecontinuestodeteriorate?Wechosethelatter.Giventhesizeofourrevenueanduserbase,wereallydidn'thaveachoice.
Sotopicturetheturnaround,weknewwehadalargebutdecliningbaseofrevenue.Weknewitwouldbeirresponsibletowalkawayfromlargestreamsofrevenueandprofitsprematurely,andweknewwehadtoinventnewbusinessesthatwereextremelyfastgrowing,andlargeenoughtobematerial.Basically,ourturnaroundwouldlookasshownhere.Thiswouldhavemeantthatwewouldhavehadsomeamountoftimewhererevenuewasflattodown.
However,duringthatperiod,themake-upoftherevenuewouldchangedramatically.Asananalogy,itcouldbedescribedasatectonicshift,wheretheplatesshiftbeneathyourfeetintermsofrevenuecomposition,butyoustayatroughlythesameelevationintermsoftotalrevenue.However,oncethenewbusinesshasbecomelargeenough,you'llsee--begintoseetherevenuefromthosenewbusinessesoverpowerthelegacyfromtheold,andshowgrowth.
Let'slookathowthishasactuallyplayedoutforYahoo!.Inourcase,thelegacyrevenueisbannerads,andtosomeeachtentdesktopsearch.Wehavequantifiedtheheadwindsasattimesmorethan$100millionperquarter.Inotherwords,closeto$0.5billionperyear.
ThenewbusinessesareourMavensandasnotedearlier,theygeneratedmorethan$1.6billioninGAAPrevenuelastyear.Thisisessentiallyfromzero.Mavensasarevenuesourcedidn'texistatallin2011,andwasnascentin2012.Andifyoulookatouractualscombinedwithourprojectedoutlook,itfollowsthispattern.
Thatsaid,ifyoulookatourMavensbusinessesalone,itlookslikethis.Youcanseehowimpressivethegrowthis.It'sanincrediblyfastgrowinglineofbusiness,growingat45%in2015yearoveryear.
Nowlet'sturntothestrategicplanthatsupportsourforwardprojections.Today,weareannouncingastrongsetofactionsthatbringYahoo!intothefuture.We'llbedoublingdowninareasandmarketsofgreateststrength,sowecangrowfaster.
Ourplancoversfourcoreareas.Thefirstistoplaytoourstrengthstogrowuserengagement,particularlyonmobile.We'llchannelallofoureffortstowardstheproductsandmarketsthatmattermosttoengagedusers,distinguishuscompetitively,anddrivegrowth.Thisfocuswillletusescalatethepaceofinnovation
CompanyName:Yahoo!IncCompanyTicker:YHOOSector:T echnologyIndustry:Internet
EventDescription:Q42015EarningsCallMarketCapasofEventDate:27.92BPriceasofEventDate:29.06
©2014TheStreet,Inc.Al l R ightsReserved Page4of22
tomakeourbestproductsevenbetter,faster.
Second,wewillcontinuetodriveMavensrevenuegrowthbyinvestinginmobile,video,native,andsocial,throughinitiativesthatimproveadvertisersatisfactionandsales.Atthesametime,wewillcontinuetostabilizeandslowthedeclinesinourlegacyrevenue.Third,wewillsimplifythebusinesstoimproveexecution.Throughproductsunsetsanddivestitures,wewillcontinuetopruneourportfolio,sothatourprioritiesandvalueareclearertousers,advertisers,partners,andshareholders.
Andfinally,asaresultofthesechanges,wemustefficientlyalignourresourcestoourpriorities,andsizethebusinessaccordingly.Webelievethesechangeswillimproveourcourse,andinfluenceapositivetrajectoryonourearnings.Let'sgointomoredepthoneachofthese.
OurvisionforYahoo!isn'tchanging,andisrootedinourbeginningsasDaveandJerry'sguidetotheWorldWideWeb.Toconsumers,wewanttobeknownfordiscovery.Weareaguidetodigitalinformationdiscovery.Weinform,connect,andentertainthemwithoursearch,communications,anddigitalcontentproducts.
Search,communications,anddigitalcontentformathreeleggedstoolforYahoo!.Searchisobviouslyessentialtodiscovery,andthelucrativenatureofsearchmakesitveryimportanttoouroverallbusiness.Communicationsdrivesfrequency,ourmostengagedandmostfrequentvisitorshaveYahoo!Mail.Communicationsiseasilythebiggestdriverofengagementonournetwork.Andfinally,digitalcontentisourdifferentiation.PeoplecometoYahoo!becauseofourdistinctvoicethroughoriginalcontent,aggregation,andpersonalization.
Theanalogyofthethree-leggedstoolholdstrue,becauseifyouremoveanyoneofthethreelegs,thesystemandthebusinessworkslesswell.Removesearchandyouloseakeyelementofdiscovery,andalsoareallylucrativepieceofthebusiness.RemoveMail,andyouloseengagementandthefrequencyofuse.Removedigitalcontent,andyouremoveourdifferentiation.Thereasonpeopleturntousoverothermailandsearchproviders.Together,thethreeofthemformatruedigitalnetwork,andmakeYahoo!Yahoo!.
OntheB2Bside,we'realsoanadvertising-drivenbusiness,dedicatedtohelpingourclientsbuildandgrowtheirbusinessesthroughprecisetargeting,andsuperiorreturnoninvestment.In2016,Yahoo!'sportfoliowillintenselyfocusontheproductsthatdrivethemostsubstantialportionofourusers,revenue,andmarketopportunity.Yahoo!isallaboutdiscovery.
We'llbefocusedonthreeglobalplatforms,search,mail,andTumblr;andfourcoreverticals.News,sports,finance,andlifestyleinourprioritymarkets.ThosemarketsbeingUS,Canada,UK,Germany,HongKongandTaiwan.
Toprioritizethesemarkets,we'reshiftingourfocusawayfromprovidinglocalproductsformostofEuropeandLatinAmerica,andgoingforward,Yahoo!willbedefinedbytwocoreadvertiserofferings,GeminiandBrightRoll.Geminicombinessearchandnativeadsforsuperiorresults,whileBrightRollisbeingexpandedtoofferprogrammaticbuyingandsellingforvideo,display,andnativeadvertising.
Ourtotaluserpopulationexceeds1billionmonthlyusers.Whilewehaveoneofthelargestaudiencesontheweb,2016isaboutgrowinghowmucheachuserusesYahoo!.Inotherwords,engagement,andwewantthatengagementtogrow,particularlyonmobile.Wemustcreatemoreuseful,relevantproductstogrowourpageviews,drivemorelogged-inusers,andgrowourdailyactiveusers,orDAUs.
Ourproductstrategiesaredesignedtofostergrowthintheseareas.Let'sstartwiththefirstlegofthestool,search.SearchiskeytoYahoo!'suserpropositionofdiscovery.Asthemobilesearchmarketcontinuestoexpand,andasuserbehaviorshiftsmoretowardscontextualsearchqueries,weseemobile
CompanyName:Yahoo!IncCompanyTicker:YHOOSector:T echnologyIndustry:Internet
EventDescription:Q42015EarningsCallMarketCapasofEventDate:27.92BPriceasofEventDate:29.06
©2014TheStreet,Inc.Al l R ightsReserved Page5of22
searchasthebiggestopportunity.
Asaresult,we'reshiftingourfocustowardforward-leaningmobilesearchinvestments,andthinkingthroughhowsearchshouldchange.InQ4,welaunchedaninitialupdatetoourYahoo!searchapplication,thebeginningofacompletereimaginationofmobilesearch.GivenourstrategicrelationshipswithcarriersandOEMs,andthewealthofdatawithinYahoo!Mailthatcanhelpuspersonalizeourresultsbetter,we'repositionedtosucceedhere.Overall,whilethisshifthasandwillcontinuetorequiregreatprioritizationinternally,webelievethemobilesearchopportunitywillhelpdrivesustainable,long-termgrowthanddifferentiation.
Turningtocommunications.Mailisasubstantialdriverofengagementacrossourentireproductportfolio.In2016,we'reinvestingresourcesinspeed,stabilityandfeaturesthatcandrivegrowthonourbrandedproducts.We'llcontinuetolaunchfeaturesthatdifferentiateYahoo!Mailforconsumers,andimprovetheirabilitytoshare,searchandconnect.
WewantYahoo!Mailtobetheabsolutebestplacetosendandreceiveyoure-mail.InQ4,welaunchedtheabilityforuserstointegratetheirAOL,OutlookandGmailaccounts,andwe'vealreadyseenmillionsofnewaccountsconnected.AndwiththeQ4launchofourredesignedMessengerproduct,nowintegratedintoYahoo!Mail,we'redeepeningengagementevenfurther.Usersarerespondingverypositively.We'veachievedanimpressive4.5starratingonboththeAppStoreandGooglePlay,andwe'vereachedrecordDAUsacrossourMailapplicationsinQ4.
Finallylookingatdigitalcontent,therearereallytwoareas,TumblrandourverticalsthatYahoo!hasalwaysbeenstrongin.News,sports,finance,andlifestyles.Theseareareasinwhichwe'realreadystrong,andwherewewillinvestforengagementgrowth.Byengagingusersasbothconsumersandcreatorsofcontent,theyaremorelikelytoremainonournetwork.
WithmorethanhalfofTumblrusersnowonmobile,we'redevelopingfeaturestoacceleratethemobileexperience,includingnewmobilecreationtools,in-streamrecommendations,andpushnotifications.Thenumberofmobilefollowershasmorethandoubledsincelistyear,whenweconsiderittobe--whichweconsidertobeastrongindicatorofuserretentionandengagement.We'realsoseeingincrediblenewtractioninuser-to-userengagementwiththelaunchofTumblrmessaginginQ4,thatnowseesmillionsofmessagessenteachday.
ByfocusingonareaswhereYahoo!isstronganddifferentiated,wecanpropelourexecutiontoanewlevel.Focusingonjustfourareas:news,sports,finance,andlifestyles,wecannotonlyprovidegreatcontent,butalsogreattoolsandservicesintheseareas.Tools,likefinanceportfolios,orYahoo!'sFantasySportsfuelourengagement,andhelpusdevelopadeeperinteractionwiththeuser,andkeepsthemcomingback.Justlastweek,welaunchedexcitingchangestoboththeYahoo!AppandYahoo.com,makingiteveneasierthaneverforuserstofind,consumeandengagearoundnews,content,andvideostailoredtotheirinterests.
Alsoin2016,we'llberollingoutnewfeaturesacrossoursportsandfinanceappsthatmakeengagingwithsportsscores,players,andstocksmuchmorecompelling.We'llalsofurtherintegratePolyvoreintothelifestylevertical,tobringtogetherincrediblecontentwithactionable,shoppableutilities.Withthesesevenproducts,Yahoo!willbetterguidediscoveryforconsumersgoingforward.Search,MailandTumblrwillserveasglobalplatformstoourworldwideaudience,andourcoreverticalsofnews,sports,finance,andlifestylewillbemorefocusedinourprioritygrowthMarkets.Together,theseproductswillplaytoourstrengthsanddeliveradeeplyintegratedanddifferentiatedexperienceacrossYahoo!'sentirenetwork.
Revenuegrowthremainsthemostimportantindicatorofprogressinourtransformation.Overthepastfewyears,we'veexperiencedstrongheadwindsfromlegacydisplay,astheindustryshiftsawayfromad
CompanyName:Yahoo!IncCompanyTicker:YHOOSector:T echnologyIndustry:Internet
EventDescription:Q42015EarningsCallMarketCapasofEventDate:27.92BPriceasofEventDate:29.06
©2014TheStreet,Inc.Al l R ightsReserved Page6of22
formatssuchasbannerads.Inaddition,therecurringnon-advertisingbasedTIPLAroyaltyrevenuefromAlibabahasnowexpired.Astheserevenuestreamscometoaclose,weexpectabsoluterevenuetofacepressure,butwewillachieveabaselinemorereflectiveofthestrongperformanceandgrowthpotentialofourcoreproducts.
Asweseektodrivelong-termsustainablerevenuegrowth,ourplaninvolvescontinuedinvestmentinMavenstocounter-balancelegacydeclineswithaparticularemphasisonmobile.WithMavensrevenueatover$1.6billionfortheyear,mobileisthelargestcontributor,addingover$1billion,ornearlyaquarterofourtrafficdrivenrevenue.Onvideo,wedelivered$375millionofGAAPrevenuein2015,up64%yearoveryear.Ournativeadbusinesscontinuestogrowsharply,withnativedisplaydeliveringover$0.5billionofGAAPrevenuefortheyear.Andassocialcontinuestobealongtermstrategicplayforus,we'repleasedtoseemobileDAUsonTumblrup34%yearoveryear.
Atthesametime,we'recontinuingtothoughtfullymonetizeTumblr'sgrowingaudience.Lookingahead,wecontinuetobolsterourMavensinvestmentsandexpecttogrowdoubledigitsthisyear,reachingatleast$1.8billioninMavensGAAPrevenuein2016.UnderpinningthatcontinuegrowthwillbetheMinMavens,mobile,especiallywiththemobileindustryadspendestimatedtonearlydoubleby2018.WiththesharperfocusongrowingDAUsacrossoursevenconsumerproducts,weexpectengagementgrowth,combinedwithimprovedmonetization,willultimatelydrivelongtermsustainablerevenuegrowth.
Inadditiontothemonetizationofourownproducts,we'resyndicatingourexcellentmobiletools,withourmobiledevelopersuite,whichcontinuestoseegreattraction.BuoyedbyouracquisitionofFlurry,wenowservenearly0.25milliondevelopers,reachingnearly800,000appsacrossmorethan2billiondeviceswith10billionsessionseveryday.Thesestaggeringnumbersalsomeanrealrevenue.Yahoo!AppPublishing,whichallowsdeveloperstomonetizetheirappsnowcontributesroughlyhalfofourGemininativerevenue.
Advertisersareincreasinglyembracingprogrammatictechnologyforitsoptimalperformance,pricing,andcontrol.Inlinewiththistrendourglobalsalesteamhasbeentrainingandscalingfromtraditionalpremium-focusedsalestoperformanceandprogrammaticofferings.Aspartofthisplan,wearestreamliningoursalessupportandoperationsteams,andsimplifyingourinternationalorganizationtofocusonfeweradproducts,byrefiningourgo-to-marketstrategy,andreducingthenumberofclienttouchpoints,weexpecttoimprovecustomersatisfaction.We'veseenthebenefitsofthisinQ4,withbetterthanexpectedresults.Inall,theseeffortsareexpectedtodrivesustainablegrowthgoingforward.
AllsoundstrategiesclarifywhataCompanywillandwillnotdo.Yahoo!cannotwintheheartsandmindsofusersandadvertiserswithacomplexfragmentedportfolioofproductsandassets,especiallyifsomenolongermeetouraggressivegrowthgoals,ordistractfromgrowthproducts.AsimplifiedYahoo!willyieldbetterfocus,execution,andultimatelyincreasedshareholdervalue.
Since2012,we'veinvestedinaseriesofbetsacrossdifferentproductareasandmarkets.Inanindustryfueledbyinnovation,continuedexperimentationiscriticalforgrowth.whilesomeinvestmentshavebecomeessentialtoYahoo!'stransformation,othershavenot.We'vetakenanhonestlookatthosebets,andhavechosentoreprioritizemanyresourcestowardsmoreprovenareasofgrowth.
Tothatend,inQ4,weclosedYahoo!Screenandshiftedwayfromoriginalscriptedcontent.In2016,someofourdigitalmagazineswillhavetheircontentconsolidatedunderoneofourfourcoreverticals,whileotherswillbeshutdown.Wealsoexitlegacyproducts,includingYahoo!GamesandSmartTV.Whilewewillcontinuetosupportahandfulofhigher-marginhigherengagementlegacyproductslikeFlickr,AnswersandGroups,wewilldosowithamoreefficientmodelthatrequiressignificantlylowerinvestment.
CompanyName:Yahoo!IncCompanyTicker:YHOOSector:T echnologyIndustry:Internet
EventDescription:Q42015EarningsCallMarketCapasofEventDate:27.92BPriceasofEventDate:29.06
©2014TheStreet,Inc.Al l R ightsReserved Page7of22
Inadditiontoourclarifiedproductportfolio,we'vebeguntoexploredivestingnon-strategicassetsofvalue.Asanexample,theseeffortsincludetheresponsiblemonetizationofnon-strategicpatents,thesaleofvaluablerealestate,andothernon-coreandnon-strategicassets.Intotal,weestimatethattheseeffortscouldgeneratesignificantcash,inexcessof$1billion.Insum,webelieveasimplifiedYahoo!willincreaseshareholdervalueoverthelongterm.
Havingfewerproductsalsomeanswecanimprovethoseproductsfaster,andincreaseprofitabilityandfocus.Withthisplan,wewillalsoexecuteonadditionaleffortstosavemoneyandoperatemoreeffectivelyandefficiently.OurnewvisionfortheCompanyrequireseachandeveryemployeetoworkonareasthatplaytoourstrengthsanddrivetheCompanyforward.
We'vealreadymadesignificantstridesinmanagingheadcountandachievingqualityandstabilitywithfeweremployees.Ourworkforceis34%smallertodaythanitwasin2012,afterreducingheadcountfromaround17,000totalemployees,roughly14,200employeesand2,800contractors,to10,400employeesand860contractorsattheendof2015.Throughoutthistime,we'vealsoclosed22offices.Wevalueeveryonewho'sdedicatedthemselvestoYahoo!andmadecontributionshere.Thechangesinouremployeefootprinttodatehavenotbeeneasy,butthey'vebeennecessarytopositiontheCompanyforastrongerfuture.
Tothatend,aswe'vealreadysharedwithouremployees,weplantoreduceourworkforcebyroughly15%.Inaddition,wewillbeexitingfiveofouroffices:Dubai,MexicoCity,BuenosAires,Madrid,andMilan.AmajorityofthesechangeswilltakeplaceinQ1,butbytheendof2016weanticipatewewillhaveapproximately9,000employees,andlessthan1,000contractors.Thisrepresentsaworkforcethatisroughly42%smallerthanitwasin2012,andwillcontributetoatotalrealizedsavingsinshort-termoperatingexpenseofapproximately$400millionannually.Thisdecisionisnotonewe'vetakenlightly,andwewillmakeeveryefforttotreataffectedemployeeswiththoughtfulness,transparency,andcompassion.
Ontheissueofcost,IwantedtotakeamomenttodiscusssomeblatantfalsehoodsthathavebeencirculatinginthepressabouttheCompany'sspending.Ihavefoundtheseuntruthstobeupsetting,andI'msureourinvestorshaveaswell.Andwhilewedonothavetimeontoday'scalltoaddressalloftheinaccurateinformation,Iwanttotouchonafew.
Forexample,therehavebeenreportsofa$7millionholidayparty,anda$450millionspendonfoodoverthepastfewyearsoftheCompany.Bothnumbersareexaggeratedbymorethanafactorofthree.Ourholidaypartiesgloballycostapproximately$150perinvitedattendee.Ourfoodprogramisextremelywell-runandallofouremployeeperksarestandardforourindustry,inlinewithothercompaniesinourarea,andgenerallyrunlessexpensivelyherethanelsewhere.
There'sbeendiscussionofmillionsofdollarsspentonfreesmartphones.Thenotionoffreeimpliestheseweregiventoemployees.ThesephonesremainpropertyoftheCompany,muchlikethedesks,chairsandcomputersweissuetoemployees.
Further,asisobviousfromthiscall,mobileisahugepartofourstrategy.Wecouldnothavebuilt$1billionmobileadvertisingbusiness,oneofthelargestintheworld,ifthepeoplebuildingitdidnotusethetools,platforms,andproductsweexpectouruserstouse.Therearemanymoreexamplesofuntruthsandmischaracterizations.
Wecan'ttouchonallofthem,howeverpleaseknowthatweareverythoughtfulabouthowwespendCompanyresources,andwewillcontinuetobe.WestronglybelievethatourstrategicplanwillcreatethebestversionofYahoo!forourusers,advertisers,employeesandshareholders.Asweimplementthesechanges,2016willverymuchbeatransitionyear,withrevenuesandearningsexpectedtodecline,
CompanyName:Yahoo!IncCompanyTicker:YHOOSector:T echnologyIndustry:Internet
EventDescription:Q42015EarningsCallMarketCapasofEventDate:27.92BPriceasofEventDate:29.06
©2014TheStreet,Inc.Al l R ightsReserved Page8of22
returningtomodestbutacceleratinggrowthin2017and2018.
Insum,weexpectour2016strategicplantodeliverthefollowingvalue:Betteruserandadvertiserproductquality,withgrowthindailyactiveusersacrossourthreeglobalplatforms,includingSearch,Mail,andTumblr,andfourcoreverticalutilities:news,sports,financeandlifestyleinourprioritymarkets;continuingMavensgrowthwhileontracktouse$1.8billionin2016;GAAPrevenueimpactofproductandregionalexitsofapproximately$100million;improvedprofitability,withanadjustedEBITDArunrateofmorethan$1billionbythesecondhalfof2016;andannualoperatingexpensereductionofover$400millionbytheendof2016;andoverallsimplificationofYahoo!'sbusinessthroughnon-strategicassetdivestitures,generatinginexcessof$1billionincash.
Beforemovingonfromtheplan,IwanttosaythatI'veneverbelievedmoreinthisCompany.Inthepeople,intheproducts,andintheinherentvalueofwhatwedo.Tobeclear,thisisastrongplanandaboldplan,andoneweareembarkingonwiththefullsupportoftheBoard.Weareveryproudofthenew$1billionMavensbusiness,$1.6billioninGAAPrevenuetobeexact,thatwehavebuiltfromessentiallyzeroinjustthreeyears.Today'sannouncementsbuildfromthatachievement,andwilldramaticallybrightenourfutureandimproveourcompetitivenessandattractivenesstousers,advertisersandpartners.ThisplansetsouttomakeYahoo!theverybestversionofitself,andI'mconfidentintheCompany'sabilitytosuccessfullyexecuteit.
Turningnowtocapitalallocation.WeunderstandtheimportanceofpotentialvaluemaximizationthatcouldberealizedbyseparatingourAlibabastakefromouroperatingbusiness.Forthisreason,theBoardandmanagementarealignedthatexploringadditionalstrategicalternatives,inparalleltotheexecutionofourplan,isinthebestinterestofourshareholders.
PerourannouncementsinDecember,wehavebeenfocusedonandevaluatingareversespintransaction,wherebyYahoo!'soperatingbusinessandequityholdingsinYahoo!Japanwillbeseparatedintoanewoperatingentity.Inadditiontocontinuingtheworkonthereversespin,theBoardwillalsoengagewithotherqualifiedstrategicproposals.
BoththeBoardandmanagementfeelpursuingthesestrategicalternativesinparalleliscomplimentarytoexecutingtheplan.Wearededicatedtobeinggoodstewardsofcapital,anddeliveringshareholdervalue.Withthat,thankyouforyourcontinuedconfidenceinYahoo!,andI'llnowturnitovertoKentotalkabitmoreaboutQ4,andour2016plan.
KenGoldman (CFO):
Thanks,Marissa.Thankstoallofyouforjoiningustoday.
Today,IwillreviewourQ4andfull-year2015financialresults.Inshort,we'reencouragedhatourfourth-quarterresultsexceededexpectationsinmanyofourcoremetrics.
Wehadgoodoverallrevenuegrowthin2015,up8%over2014,includingsignificantcontributionfromMavensrevenue,whichasMarissasaid,grewtoover$1.6billion.Additionally,wehavemadeprogressinmultipleinitiativestostrengthenthebusinessanddriveefficiencies.Iwillprovidegreaterdetailonourstrategicplanandourlong-termfinancialmodel,soyou'llbeabletoseewhereourbusinessisgoing,andhowweplantodelivervaluetoourshareholders.Lastly,Iwilldiscussouroutlookforthecomingquarterandfullyear,aswepositionYahoo!forsustainableandprofitablegrowth.
First,somefactsaboutourperformanceandprogressonmultiplefronts.Q4GAAPrevenuewas$1.273billion,andrevenueex-TACwas$1.02billion.Bothaboveourguidancerange,aswesawbetterthanexpectedperformanceinournativeandprogrammaticdisplaybusinesses.
CompanyName:Yahoo!IncCompanyTicker:YHOOSector:T echnologyIndustry:Internet
EventDescription:Q42015EarningsCallMarketCapasofEventDate:27.92BPriceasofEventDate:29.06
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Forthefullyear2015,GAAPrevenuegrew8%yearoveryearto$4.968billion,asweincreasedpartnershiprevenueandexecutedonourMavensinvestments.ThishelpedoffsetheadwindsfromthelegacybusinessesandthelossofTIPLAamortization.Revenueex-TACwas$4.091billion,andMavensdelivered$1.660billionGAAPrevenueforthefullyear,growingby45%over2014,andnowrepresenting36%oftraffic-drivenrevenue,versus28%intheprioryear.
OurQ4revenueperformanceledtoabetterthanexpectedadjustedEBITDAof$215million,asourbusinesstransitionisleadingtogreaterefficiencies.Asaresultoftheseefforts,ourfull-timeemployeebasedeclinedbyapproximately3.25endingat10,400,andreflectayearoveryearreductionof2,100or17%,eventhoughwecontinuetosubstantiallyinvestinthegrowthbusinesses.Non-GAAPEPSwas$0.13forQ4,and$0.59forthefullyear.Endingdilutedsharecountfortheperiodwas952million.
Withourstrategicplanannouncementtoday,wearefurtherreshapingtheCompany,andexpecttorealizecostefficienciesthatwillbereflectedinourfinancialresultsthroughoutthenextyearandbeyond.Ournewdriversofgrowtharestrengthening,buildingonanumberofinvestmentsandacquisitionsthathavehelpedustodrivethegrowthtrajectoryofthenewYahoo!.OurMavensstrategy,somehaveworkedwellandsomehaveyetto,butareexpectedtobearfruit.Wecontinuetoobjectivelyandclinicallyevaluatehowwewouldinvestintheseandotherinvestmentsinthisrapidly-evolvingtechnologylandscape.
Today,wearegoingtobeprovidingadditionaldetailrelatedtoourplantofurtherreshapetheCompany,realizecostefficiencies,andgrowthebusinessbasedonourcorestrengths.Aswegothroughourfourthquarterandfullyear2015resultsingreatdetail,asseenonslides11and12,Iwillfocusdiscussionaroundnon-GAAPresults,whichexcludesstock-basedcompensation,restructuringcharges,andotherexpensesandcharges.Andrelatedtaximpactsfromalloftheseitems.
Non-GAAPresultsalsoexcludeanon-cashgoodwillimpairmentof$4.5billionasaresultofourannualgoodwillimpairmenttestperformedasofOctober31.Iwillprovidemoredetailaroundthislaterinthecall.YoucanfindcompletereconciliationsbetweenGAAPandnon-GAAPresultsinourearningsslidesonourInvestorRelationswebsite.
InQ4,GAAPrevenuewas$1.273billion,up2%yearoveryear,or4%excludingtheimpactofforeignexchange.Full-year2015GAAPrevenuewas$4.968billion,up8%yearoveryear.SearchGAAPrevenuegrew16%yearoveryear,whileDisplaygrew11%.Trafficacquisitioncostswere$271million,up$197millioncomparedtotheprioryear,primarilyduetoourMozillapartnership,Geminisearch,andgrowthinourdisplaynetworks,includingvideo.
Revenueex-TACwas$1.002billionforQ4,andasInoted,$4.091billionfortheyear.Andtakingcloserlookatsearch,GAAPsearchrevenuewas$522millioninQ4,up12%yearoveryear.Searchrevenueex-TACdeclined8%yearoveryearduetoclick-drivenrevenuedeclineof7%,andincreasingTACpayments.Ourglobalpaidclicksdeclined10%yearoveryearinQ4,aswedidseedeclinesinaffiliatedYahoo!traffic,offsetbygrowthfromstrategicpartnerslikeMozillaandOracle.KeydriversofthedeclinewerevolumedeclineintheUSacrosstheaffiliatesandYahoo!search,andinvestmentintoGermany.
PPCgrew3%,mainlyduetomixshifttowardhighermonetizingregions.Wecontinuetomakegoodprogressinourinternalsearchefforts,andinGemini,andseeconsistentPPCsacrossourplatforms.OuroverallinvestmentinGeminiwassimilartoQ3,andinlinewithourplans.WeexpectthatourfirstverticalstostarttoreachtheirRPMtargetsinfirstquarter,andweexpecttoreachoverallbreakeveninthesecondhalfof2016.
Now,movingtodisplay.Wesawacontinuationofgrowthtrendsfromthepriortwoquarters.GAAPdisplayrevenuewas$601million,up13%yearoveryear,asaresultofourgrowingnativeandvideobusinesses.
CompanyName:Yahoo!IncCompanyTicker:YHOOSector:T echnologyIndustry:Internet
EventDescription:Q42015EarningsCallMarketCapasofEventDate:27.92BPriceasofEventDate:29.06
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Displayadsgrew8%yearoveryear,drivenprimarilybyacontinuednativegrowthinternationally,andthroughournetworkofmobileapps.
PPAincreased6%yearoveryear,drivenbythegrowthofourvideoformatsandmarketplaces.Wealsosawencouragingincreasesinourpremiumprogrammaticsegments,helpingtoreducethedragfromthelegacyformats.Displayrevenueex-TACgrew2%yearoveryear,or5%excludingimpactofforeignexchange.
LetmenowprovidedetailsonourMavensinvestmentbusinesses.OurMavensGAAPrevenuegrew26%revenueyearoveryearinQ4.Mavensnowcontributes39%toourtraffic-drivenrevenue,whichwasup33%intheprioryear.
Videoexperiencedanothergoodandsolidquarterofyearoveryeargrowth,withmanyexcitinghighlights,suchasasuccessfulglobalstreamoftheNFLgame,andadvertiserscannowbuyourfastgrowingnativevideoadperformanceonourBrightRollplatform.MobileGAAPrevenuegrew15%yearoveryear,andwecontinuetoseeournativeadsbuildscalethroughsyndicationpartners,suchasBleacherReportandCheetah.Thiswilloffsetsomedecelerationofmobilesearchvolumes.
Ournativedisplayrevenueacrossalldevicesreachedapproximately$160millionaquarter,drivenbyvolumegrowthinternationallyandthroughsyndication.
ForTumblr,ourpriorityremainsusergrowth,andwehavebeenpleasedwiththeprogressmadeinengagement,withover80%ofdailyusersonmobile.In2015,weexperiencedaslowerrampinmonetizationthanweinitiallyexpected,andcoupledwiththesalesrealignment,thebusinessdidnotdeliverat$100millionrevenuegoalfortheyear.
Movingforward,theteamhasasolidplaninplace,andwecontinuetobelievethatTumblr'scompellingcontentandattractivedemographicswillbeasignificantlong-termdriverofouroverallMavensandCompanygrowth.Forrevenuedetailbyregionpleaserefertoslide10.Trendsareconsistentwiththepriorquarters.
Nowletmemovetoexpenses.Non-GAAPtotaloperatingexpenseswere$940millionforthequarter,whichisup2%versusprioryear.Depreciationandamortizationremainsconsistentwiththepastseveralquarters,atapproximately$150million.Ournon-GAAPcashexpensesinthefullquartercameinat$788million,whichwasup2%yearoveryear.
Excludingthe$35millionbenefitfrompatentsalesinprioryear,wesawadeclineofapproximately2%yearoveryear,aswecontinuedtocarefullydriveoperatingefficienciesfortheCompany.SequentiallyforQ3,wedidseeone-offincreasesinnon-headcountrelatedcostsrelatedtothequarter,whichincludedNFLcontentcosts,someadditionallegalcosts,andaccrualsforaccountsreceivablereserves.
EBITDAwas$250millioninQ4,withamarginof21%basedonrevenueex-TAC.AdjustedEBITDAforthefullyearwas$952millionaswemadeinvestmentsinTACtosupportourgrowthinpartnershipinitiativesacrosssearch,communicationsanddigitalcontent.Non-GAAPoperatingincomewas$63millionandfullyearnon-GAAPoperatingincomewas$342million.
Now,letmeturnquicklytothebalancesheet.Iwouldfirstliketocoverourgoodwillimpairmentcharge.Wetestgoodwillannuallyatthereportingunitlevel.Duringthefirststep,wedeterminedtheestimatedfairvalueofeachreportingunit,usingtheincomeandmarketapproaches,bylookingatfuturecashflowsandcurrentmarketcomparables.
Asaresult,weconcludethecarryingvalueofseveralreportingunitsexceedtheirrespectiveestimatedfairvalues,resultingfromacombinationoffactors,includingasustaineddecreaseinourmarket
CompanyName:Yahoo!IncCompanyTicker:YHOOSector:T echnologyIndustry:Internet
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capitalizationinthefourthquarter,andlowerprojectedcashflowsfromthe2016planningprocess,aswellastheoveralldecreasesinpublicmarketvaluationsfortechnologycompanies.
Oursecondstepwasperformedtomeasuretheimpairment.Thisresultedinimpairmentchargesforthefollowingreportingunits:$3.7billionforUSandCanada,$530millionforEurope,$230millionforTumblr,and$8millionforLatinAmerica.Goodwillimpairmenttestingisdoneonanaggregatebasisbyreportingunit.Assuch,$2billionofgoodwilloriginatedfromacquisitionspriorto2007,$1.3billionfromacquisitionsfrom2008through2011,and$1.2billionfromacquisitionssince2012.
Lookingbackthroughthebalancesheet,ourAlibabainvestmentwas$31billiononthebalancesheetreflectingtheAlibabasharepriceattheendofQ4,asthisismarkedtomarket.AttheendofQ4,wehad$6.8billionincashandmarketablesecuritiesor$5.5billionnetofourconvertibleandotherdebt.Freecashflowforthequarterwas$32million,includingCapEx,whichincludedCapExspendingof$126millionrelatedtoourproductsinMail,SearchandMavensinvestments.Freecashflowforthefullyear,adjustedforthesettlementof$3.3billionintaxesrelatedtotheAlibabaIPOinQ1wasapproximately$270million.
Letmenowmovethediscussiontofinancialdetailsaboutourstrategicplanandthatincorporatesourviewsforfull-year2016andalonger-termfinancialmodel.Earlier,Marissaoutlinedourstrategygoingforward.Weanticipatethatstrategywillresultinabusinessthatdeliverssustainablelongtermrevenuegrowth,enhancedprofitabilityinexcessof25%EBITDAmargins,andsignificantfreecashflowgeneration.
Togettothatpoint,ourstrategicplanincludesspecificchangestoourproductportfolioandgeographicfootprint.Ourdecisionstoexitordeemphasizecertainareasofourbusinesswillhaveanear-termrevenueimpact,butarenecessaryincreatinganimprovedCompanywithafoundationforfuturegrowthandprofitability.WewillnarrowourfocusonkeyprioritiesofMavensandMobileSearchmonetizationasweallocateresourcesandaligneffortsin2016.
Toillustratesomeofthechangesfortheyearindetail,letmewalkthrougharevenuebridgeforhowwethinkaboutfull-yeartargets.Whenstartingwith2015GAAPrevenue,wefactorinrevenuechangesrisingfromthelossofTIPLAamortizationofapproximately$200million;strategicexitimpactofapproximately$100million,as(inaudible)planofconsolidatingourdigitalmagazinesandrightsizingouroperationalfootprint;approximately$200milliondeclinefromtheplatformshiftinoursearchbusiness,reflectingthevolumetrendsweexperiencedinourdesktopandtheshiftingofresourcestowardsthefourleadingareasofmobilesearch.Theongoingheadwindsfromourlegacydisplayandleadslistingfeesbusinesswillbeadragonthebusinessofapproximately$175million.
WeexpectthatourinitiativesinMavensareasacrossmobile,search,native,social,andvideowillcontinuetodrivegrowthintheaggregateofapproximately$200million.
Allofthesefactorsresultinafull-year2016GAAPrevenueexpectationof$4.4billionto$4.6billion.Aswerealignthebusiness,wewillalsoinvestinourcoreareasofsearch,communications,anddigitalcontent,todriveourlong-termengagementandrevenuegrowth.
Thecombinationofourexits,efficiencyprogramsandinvestmentsshouldallowustooperateaheadcountofapproximately9,000bytheendof2016,ornearly15%belowtoday'slevel.
Todothis,wewillbedrivingbusinesstransformation,changingourapproachtodoingthingsinafewselectareas.Forexample,increasingoursalesefficiencybygettingtherightbalancebetweendirectsellingcostsandsalessupportcosts,rationalizingourregionalapproachandfootprint,clarifyingwhereweofferthefullbreadthofourglobalproducts,andG&A,thoughwehavemadeprogressoverthelastyear,westillhaveanopportunitytorightsizethroughbest-in-classbenchmarks.Andintechnology,wewillmoretightlyaligncostsofcoretechnologyplatformswiththeproductsandbusinesseswearefocusingongoingforward.
CompanyName:Yahoo!IncCompanyTicker:YHOOSector:T echnologyIndustry:Internet
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Thiswillresultinsavingsof$400millionapproximatelyin2016,withafocusonexpensesthatcanbereducedintheshort-termratherthanfixedcostssuchasfacilities,datacentersandcontentexpense,thatwilltakeadditionaltimetoaddress.Withthoseactionsweaimtoachieveanon-GAAPcashexpenserunrateof$2.4billionto$2.6billionafter2016.Whilerevenueswilldeclineinitially,EBITDAmarginwillimproveasweremovebothvariableandfixedcostsastheyearprogresses.
Weexpectfull-yearadjustedEBITDAtobeintherangeof$700millionto$800millionfor2016.Exitingtheyearhowever,withthesecond-halfannualizedrunrateofapproximately$1billion.Aswethinkaboutlongertermtargets,weplantodrivetowardssustainablemarketgrowthrates,withanEBITDAmargininexcessof25%.Goingthroughmanyofthesechangesinthistransitionyear,wewillbeamorefinanciallyfitCompanywithimprovingmarginsandgrowthovertime.
RegardingourseparationofAlibaba,wecontinuetoworkthroughthebusinessandregulatoryissuesnecessarytoeffectuateareversespin-offaswellasotherstrategicoptions.TheBoardandmanagementteam,workingwithouradvisors,arecommittedtoensuringaseparationoftheAlibabaassetsasexpeditiouslyandthoughtfullyaspossible.Wearefullyalignedwithourshareholdersinourdesiretomaximizevalueforthisinvestment.
Spinoffsinvolvedintheseparationofoperatingbusinessesareinherentlycomplexandlengthyprocesses,andthereareanumberofstepsandconsiderations.Asyoucanseeonslide9ofourearningsdeck,theseincludeseparationplanning,SECmatterssuchasfilings,auditedfinancialsandreview,convertiblenoteconsideration,ourcompliancewithouragreementsregardingYahoo!Japan,ourlikelystockholdervote,andotherkeysteps,suchasthenegotiationofthird-partyconsents.Yahoo!willseparateitsglobaloperatingbusinessanditsJapanesejointventure,Yahoo!Japan,fromtheremainingentity,whichwewillretaintheAlibabastake.
Thereversespinraisedanumberofissuesnotraisedintheforwardspinwepursuedlastyear,someofwhicharenotwithinourcontrol.Weestimateditwilltake9to12monthstocomplete.Regardingfuturefurthershareholdervaluecreation,Marissamentionedthatwehaveidentifiedopportunitiesacrossrealestate,patentsandothernon-coreassets.
Wewillcontinuetoexecuteonalltypesofvaluecreationprograms,providingadditionalcapital,andduringourtenure,wehaverepurchasedover$9billionandreduceddilutedsharecountbyover20%.Withtheremainingauthorizationof$2.7billionforsharerepurchases,wewillbeprudentaroundtimingofreturningcapitaltoexcesscash.Overtime,wewillhaveabalancedapproachinreturningcashtoshareholders.
Insummary,thisstrategyandfinancialplanbuildsonatrackrecordwehaveincreatingnewstreamsofrevenue,whilecontinuingtodriveefficienciesinthebusinessandmanageplatformshifts,toassessupforthenextphaseoftransformation.Now,letmecoverourguidancefortheupcomingquarter,whichwillreflectmanyoftheplanneddriversIhavepreviouslydiscussed.ForourGAAPrevenue,wehavenowannualizedourMozillapartnershipandBrightRollacquisition.InvestmentsinexcesswillhaveminimalrevenueimpactinQ1,TIPLAwillcontinuetobeayear-over-yearheadwindofapproximately$69million.
ForTAC,growthwillmoderatenowthatwehaveannualizedMozillaandBrightRoll.WeexpectgrowthdrivenbytheGeminiplatformacrosssearchandnativeadvertising.ForQ1guidance,weexpectthefollowing.GAAPrevenueintherangeof$1.05billionto$1.09billion,TACofapproximately$230million,revenueex-TACintherangeof$820millionto$860million,adjustedEBITDAintherangeof$100millionto$120million,andnon-GAAPoperatingincomeintherangeofnegative$50milliontonegative$30million.
Forthefullyearguidance,weexpectthefollowing:GAAPrevenueintherangeof$4.4billionto4.6
CompanyName:Yahoo!IncCompanyTicker:YHOOSector:T echnologyIndustry:Internet
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billion,TACofapproximately$1billion,revenueex-TACintherangeof$3.4billionto$3.6billion,andadjustedEBITDAintherangeof$700millionto$800million.Non-GAAPoperatingincomeintherangeof$150millionto$250million.
Inclosing,thisguidanceandourlong-termtargetsreflectamorefocusedstrategyforthecompany,andactionswe'retakingtoimproveperformancein2016andbeyond.
Withthat,MarissaandIwouldliketotakeyourquestions.
Shibani?
QUESTIONS&ANSWERS
ShibaniJoshi(Moderator):
(OperatorInstructions)
HeathTerryofGoldmanSachs.
HeathT erry(Analyst-GoldmanSachs):
Great,thanks.Marissa,asyoumovetoexecuteonthisstrategicplan,whatareyourpriorities,intermsofmaintainingtalentversuscontinuingtoacquire,tobringnewtalentintotheCompany?HowaggressivedoyoufeellikeyoucanbefromanM&Astandpoint,particularlytotakeadvantageofsomeoftheopportunitiesthatmightbecreatedbyatighterventurefundingenvironmentoutthere?
MarissaMayer (CEO):
Well,asIhavetalkedaboutinthepast,techisanincrediblyacquisitiveindustry.AndwhenIfirstarrivedatYahoo!,Ifeltitwasveryimportanttodomanysmalltalentacquisitions,intermsofreallybringingnewtalent,newideas,moreentrepreneurialspiritintothebusiness.
We'vedoneagoodjobofbringingthattalenthere,andwehavealotofentrepreneurialspirithereintheCompany,andsowewillcontinuetohire,andwewillcontinuetoacquire.Inthecaseofexceptionaltalent,Ifeeltheneedisslightlylessacutenow,becausewehavereallyexcellentteamshelmingeachoftheseareas,thatIhavealotofconfidencein.
ShibaniJoshi(Moderator):
MarkMahaneywithRBCCapitalMarkets.
MarkMahaney(Analyst-RBC):
Iwanttoaskyouahighlevelquestionaboutmobilesearch.Itdoesseemlikeit'sacrosstheindustryatabitofaninflectionpoint.Couldyoustepbackalittlebitandexplainwhat'shappening?Therewasaconcern,atleastinfinancialcircles,thatmobilesearchwouldbedilutive,itwouldslowdownthegrowth,therewouldbetransitions.Butitseemslikethat'sacceleratingacrosstheindustry,soifyouthinkaboutthetopleveldriversofmobilesearchandwhynow?Thanksalot.
MarissaMayer (CEO):
Sure,Iappreciatethequestion.It'sacomplicatedone,becausethere'smobilesearchasitexiststoday,andthenthere'swhatmobilesearchmightbecomeinthefuture.OneofthethingsthatweareseeingisthatPPCsonmobileareundermorepressurethantheyareindesktop,andinlargepartthat'sbecause,forexample,e-commercetransactions,etcetera,aremoredifficultfromthemobilewebonasmartphone.Thatsaidwedoseebenefitsandopportunitiestodonewkindsofadvertising,forexample,app
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marketing,etcetera,inourmobileweboffering.
Butevenmoresowewouldlovetoseesearchevolveintoamoreapp-orientedformatwherewithintheFlurrysoftwaredevelopmentkit,orthroughstandaloneapplications,we'reabletodriveareallyrichapp-basedexperienceforsearch.Andsearchinthatcontextprobablybehavesmuchdifferentlythanwebsearchdoes.Websearchwillalwaysbereallyuseful,butthatsaid,whatyouneedonyourphone,whenyou'reonthego,undertimepressure,youneedtoactuallybesearchingoveralotmorepersonalinformation.
Youalsoneedtohaveabetterunderstandingofwhatappspeoplehaveontheirphone,etcetera.Soforexample,Imaywant,ifI'msomewhereandsayindowntownSanFrancisco,at6:00onaSaturdaynightit'susefultobeabletosayokayuseYelp,useOpenTabletoactuallybookareservationandbeingabletoknowwhatapplicationsyouhaveonyourphone,deeplinktothem,andreallyprovideagreatguidance.ThisisreallywhereYahoo!'smissionaroundbeingtheguidecomesintoplay.
It'ssomethingthat'squitedifferentanditwillmonetizedifferently,theuserandactionwillbedifferent,andwereallythinkthatmobilesearchneedsamuchdeeperreimagination.SoIwouldsaythatalotofthetrendsthathavebeendiscussedmorebroadlyaretrueintermsofmobileweb-basedsearch.Thatsaid,wedothinkthatapp-basedsearch,andthepersonalassistantworkthat'shappeningacrosstheindustryreallytakesmobilesearchinanewdirection,andwethinkthosereimaginationsareonlygoingtobecomemoreintense.
ShibaniJoshi(Moderator):
BrianNowakwithMorganStanley.
BrianNowak(Analyst-MorganStanley):
Greatthanksfortakingmyquestions.Ihavetwo.Ontheassetandpatentdivestitures,Ithinkinthepressrelease,youmentionedthepotentialfor$1billionto$3billionbytheendoftheyear.Couldyoujusthelpusunderstandtheswingfactorbetween$1billionand$billionandarethosenettaxnumbers?
Andthensecondquestionisalsounfortunatelyontaxes.Ken,canyouhelpusunderstandthepotentialtaxliabilityonthespinofthecorebusiness?Thanks.
KenGoldman (CFO):
Yes,Icantakeacouple.Intermsofthe--wearetalkingaboutpre-taxnumbers,thereisawiderange,andfranklyit'sawiderangerelativetowhatwethinkwecandointermsofmonetizingourpatentsthatwelookedat,intermsofhowwethinkaboutsaleofsomeofthepropertywehave,whichwetalkedaboutandhasbeenrumoredinthepresssomeofthethingswe'redoingthere.
Andthree,intermsofwereferredtoinsomeofthenon-corebusinesses,intermsofwhatwemightnotdothere.Soitisawiderangeandwe'vegottensomeestimatesintermsofwhatwecandoonpatents,someestimatesofwhatwecandoonsomeofthelandideaswehave,aswellassomethoughtsandsomeofthenon-coreassetsthatwethinkwecanmonetizeovertime.
Intermsof,Idon'twanttogothroughtheexactnumbersontax.Obviouslywecoulddoareversespinthatwouldbebasicallytaxfree,morelikelyitwillbetaxable,soweunderstandthat.Wedohavesomebasisforourcorebusiness,aswellasbasisforYahoo!Japan,butI'drathernotgothroughthosenumbers,becausetheyarestillbeingtunedalittlebit,intermsofrightnowforpublicprocess.
ShibaniJoshi(Moderator):
CompanyName:Yahoo!IncCompanyTicker:YHOOSector:T echnologyIndustry:Internet
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EricSheridanatUBS.
EricSheridan (Analyst-UBS):
Thanksfortakingthequestions.Maybetwoquickonrevenues.Whenwelookedatslidenumber5inthepresentation,IthinkoneofthethingsI'mtryingtograspisonthelegacybusinessreacceleratinginsomeoftheoutyears,whenyoustarttolapsomeoftheimpactsyoucalleddownonslide7.Wanttoknowwhat'sdrivingthatinsidethelegacybusiness?
Andnumbertwo,ontheMavensforecastyouprovidedfor2016,thatwasprobablylowerthanwewouldhavethoughtfortheMavensbusiness,ataround12%revenuegrowth,giventheindustryisgrowingroughlyaroundthemidteensbroadlyfordigitaladvertising.SomaybeyoucouldgiveusalittlebitofcoloronsomeoftheputsandtakesthatdrovetheMavensforecast?Thankyou.
MarissaMayer (CEO):
Sure,soI'lltakethequestiononthelegacydrag.Ingeneral,wehavebeenexperiencing,aswetalkedabout,ratherintenselegacydragfromourpremiumdecline.Thatsaid,whatwe'reseeingisthepremiumaddollarsareshiftingbothintoprogrammaticwiththesameadformats,butalsothey'reshiftingintonewadformats.Largely,thenewadformatsareclassifiedintoourMavensrevenue.Therearesomehistoricaladformatsthatarestayinginourlegacynumbers.
Andsooneofthethingsyou'reseeinghappeningisthere'salotofpriceperadpressureinthenear-term,intermsoftheimmediateyearsfollowing.Asthatpremiumshifttoprogrammatic,thatmixshiftcontinuestohappen.Thatsaysoncethatstabilizes,wedothinkwe'llstarttoseepriceappreciationinprogrammaticsellingofolder-styleadformats,andsothat'soneofthethingsthatcausesthattobuoybackup.
AndintermsofMavens,asweprojected,weanticipateitwillbeatleast$1.8billionin2016.We'rereallyhappywiththestronggrowthwe'veseeninmobile,andparticularlyinnative.ThefactthatGeminihadmorethan$0.5billioninGAAPrevenuethispastyearisjutsterrific,it'saproductthatwasinventedinthemiddleof2013,we'rereallyexcitedaboutthat.Butoverall,aswelookedatourstrategicplan,oneofthethingswedidwaswetookatighterviewonrevenue,tobasicallyhelpusreallyseekthetypesofefficienciesoncostthatweultimatelywouldseek.Andso,webasicallyworkedwithatightrevenuenumbertoreallydrivealargersetofcostefficienciesacrossthebusiness.Butwefeelconfident,thatgiventheindustrytrendsandourownproduct,ourownproductmomentumhere,thatthisisareasonablenumber.
ShibaniJoshi(Moderator):
AnthonyDiClementewithNomura.
AnthonyDiClemente (Analyst-NomuraSecurities):
Thankyoufortakingmyquestions.FirstforKen,youdiscussedsomeoftheefficienciesingettingtothat$1billionofadjustedEBITDArunratebythesecondhalfoftheyear,butthatplan,Ithink,impliesabout20%adjustedEBITDAgrowthaswegettotheendof2016.Aretherespecificareasorefficienciesyoucanpointto,thatgiveyouconfidenceinthequarterlyphasingofthat,togettothatrunrate?Andwhatgivesyoutheconfidenceyoucanexecute$400millionincostsavings,whilereturningtothatprettysubstantialEBITDAgrowthtoendtheyear?
AndMarissaifImay,justbetweenthereversespinstrategy,thestrategicplanforthecorebusiness,andthepotentialforstrategicproposals,itstrikesmethatyou'llbepursuingthreeplansbasicallyatthesametime,allwiththeirowncomplexities,allwiththeirownmulti-variableoutcomes,asyoulaidoutinyour
CompanyName:Yahoo!IncCompanyTicker:YHOOSector:T echnologyIndustry:Internet
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preparedremarks.Canyoujusthelpusunderstandhowyou'regoingtoprioritizeyourtimeorprioritizethosethree?Arethereoneortwothatyouwouldfavoroveranother,forexample?Thanksfortakingmyquestion.
KenGoldman (CFO):
Soletmetalkafewthings.Oneis,intermsofcosts,we'regoingtotake--wealreadytalkedabouttheactionsonheadcount.Itwilltakeusalittlebitoftimetoeffectuatethose.Wedoexpectthattobefullyeffectiveforthesecondhalfoftheyear,soalotofthecoststhatwillgodownincludesworkforce-relatedexpenses,sothat'sagoodpartofit.
Therearefacilitiesactionswe'regoingtotake.AsMarissanoted,someofthefacilitiesthatweareeliminating,sothat--therealsowillbecoststhatwe'lltakeout.We'llbetakingoutsomecontentcosts,particularlywe'relookingatcontentcoststhatdon'tmakesenseforwhereweare,whatregionswe'reinandsoforth.Sothere'sanumberofthingswe'regoingtodototakeoutcosts.
Certainlythevariablecostsaremorequicklytotakeout.Thefixedcostsbynatureareabitfixed,buteventhere,we'regoingtodosomework,particularlyonthefacilitiesthingsthatcomeinmyarea.Andthenthere'salotofworkforce-relatedcostslikeT&E,whatever,thatwillalsocomedownwiththeheadcount.Soalotofthosecosts,aswetakeactionsthisquarteronthose,andtheygeteffectuated,that'showweseethesecondhalf.
TheotherthingthathelpsusonEBITDAforthesecondhalfisclearly,weexpectrevenuetogrowinQ4,sowedoexpectanormalseasonalpatterninQ4revenue.SosomeofthebetterEBITDAisbothfromreducingthecostbaseby$100millionaquarterroughlyaswegoforwardhere,andoncewegetitalldone.Andtwoisthenthehigherrevenue.
Iwouldsaydowntheroad,wecontinue,wewillcontinuetolookatsomeofthefixedcosts,wherewecanbemoreeffectiveinourdatacenters,ourotherfacilities,consolidationswecando,andsoforth.Theremaybeareasofcontentandpartnershiparrangementsthatwecanalsoreduce.Sothere'sanumberofthingswelookforwardtoaswegopast2016to2017.Andthethingis,franklywe'veusedalotofobjectivedata,benchmarkingandsoforth,toreallydriveourselvestobemuchmoreefficientandeffective.
MarissaMayer (CEO):
Tothesecondquestion,attheriskofstatingtheobvious,Ithinkit'scleartoeveryoneoursituationiscomplex.Andit'snotsurprisingthatthestrategyformaximizingourvalueisalsogoingtobecomplex.
Yes,weneedtoexecuteonourstrategicplan,weneedtocreatetheverybestversionofYahoo!thatwecancreate.Wealsoseealotofpossiblevalueinaspinofftransaction,andthereversespinoffbeinglikelythemostvaluablethere.Andfinally,asweannouncedtoday,wewouldliketotakealookatalternativestrategicopportunities.
Soweneedtolookatallthreeofthose.Itisgoingtobeverybusybuttoputthingsinperspective,forthemajorityofpeoplehereatYahoo!,wereallyneedtobefocusedonexecutingtheplan,becauseexecutingtheplanwellcreatesvalueinallpossiblescenarios,andreallyincreasesourshareholdervalue.That'swhatthemajorityofpeopleherewillbeworkingon.
Thereisasmallergroup,muchthesamegroupthatworkedontheforwardspinlastyear,thatwillbededicatingtimetothereversespin.There'smanyofthesamecomplexities,there'safewnewcomplexities,andthey'llbededicatingtheirtimethere.
Andreviewingstrategicalternatives,aswellasitshouldbe,willbeaBoard-ledprocesssoIwould
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anticipatingourBoardwillbededicatingtheirtimethere.Iwhilehavetospendtimeoneachofthethreethings,butagain,myviewisthehighestpriorityformepersonallyisworkingonthestrategicplan,andmakingsurethatwereallyexecutetothebestofourabilitiesinsidetheCompany,becausethat'swhatunlocksthemostshareholdervalue.
ShibaniJoshi(Moderator):
MarkMayatCitigroup.
MarkMay(Analyst-Citigroup):
Oneisabitofafollow-upfromanearlierquestion.RegardingMavens,Ibelievethatrevenuetheregrew45%lastyear,butyourguidanceimpliesthatitcouldslowaslittleas8%thisyear.Justwonderingifyoucouldshedalittlebitmorelightonwhatexactlyisdrivingthatslowdown.
Itseemslikepartofthatmightbedrivenbysomeofthecutsandreductionsthatyou'remaking,butmaybeifyoucouldshedalittlebitmorelightonthat,thatwouldbehelpful.
Thanks.
MarissaMayer (CEO):
Sure,we'veseen,andI'llhanditovertoKenforsomeperspectiveinamoment,too,butwe'veobviouslyseenstronggrowthintheMavens,anditissomethingwe'rereallyquiteproudof.Thatsaid,wedohave--theMavensrevenueislargelysplitbetweenbothsearchanddisplay,andsooursearch,ourmobilesearchbusinessisonethathasreachedapointofsomematurity,soit'saverylargebusiness,andwedothinkwe'regoingtostartseeingsomeslowingingrowththere.
IwillsaythatthenativebusinessthatwehaveinsideofMavens,aswellasoursyndicatedbusinessthroughYahoo!AppPublishingisgrowingquitestrong.Soalotoftheseisreally,Iwouldsayhardtoprojectexactlywherewe'relikelytoendup,butwedofeelconfidentinthe$1.8billionnumber.It'sstillgoodsolidgrowth,andhopefullywithgoodexecution,wecanpossiblybetterthatnumber.Ken?
KenGoldman (CFO):
Maybeit'seasyformetosayIhopeit'sabitconservative,butIthinksomeareasthatwearelookingforgrowth,clearlyTumblrwe'relookingforgoodgrowththisyear.IthinkintheareaMarissatalkedaboutinsearch,particularlyasweinvestmorethere,itwilltakeussometimetogetthatgrowingattherateswewouldliketogrow.Wedothinkwecando,franklyI'mhopingtodobetterinvideothanwehavehere.
Sotherearesomenumberstherethatfrankly,theotherthingIthinkthatMarissatalkedaboutis,weeliminatesomeoftheregionswhatever,thereissomerevenuethatgoeswiththat,andthatwaspartofMavens.Sopartofitisatransitionaswe'regoingforward,andpartofitis,aswemoveforwardtheCompany.SoIthinkthisisabasenumberthatwe'regoingtoworkwithintermsofoursalesorganization,particularlyastheyrealignthemselvesaswell.
ShibaniJoshi(Moderator):
JustinPostwithBankofAmerica.
Just inPost (Analyst-BofAMerrillLynch):
Iwonderifyoucouldtalkalittlebitabouttheseparation.Whatyou'velearnedsofar?Isitontrack?Doyoustillfeelconfidentthatitcanbesomethingyoucandothiscalendaryearornextcalendaryear?
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Thankyou.
KenGoldman (CFO):
Yes.Idofeelcomfortablewecandoitthisyear.We'veclearlylearnedalot.Toreiteratealittlebit,wewerevery,veryclosetocompletingtheforwardspinasitwas,nowweclearlyunderstandtheissuesthatitincluded.
So--butwewereclose,andwedidalotofthings.Therearesomeotherthingswehavetodo,asI'mnotgoingthroughthemall,asyousawthechartweputtogether.
Therearealotofthingswedohavetodotoconsummatethat,whichiswhyitjusttakessometime.Thereareanumberofthingsthatareincludedinthereversespinthatweren'tincludedintheforward,whichisoneofthereasonswhyweinitiallyselectedaforwardspin.Sotoyourpointofdowefeelcomfortableaboutcompletingitin2016?Yeswedo.We'reveryfocusedonit.Wedofeel,we'vealwaysfeltthathavingaseparationofAlibabaandlettingitbefree,sotospeakandletusfocusonthecorebusinesswouldbeveryhelpfulnomatterwhatdirectionwetakethis.
Soweareveryfocusedonit,wehaveaverygreatgroupoffolksworkingonit.Wehaveeffectivelythesamegroupofinternalpeople,aswellastheadvisorsworkingonit,soit'sagoodcontinuousstreamofpeoplethatarelookingatitandworkingwithus,includingthepeoplewehaveinternally.SoIguesstheshortanswerwouldbeyes.
ShibaniJoshi(Moderator):
RonJoseyatJMPSecurities.
RonJosey(Analyst-JMPSecurities):
Whenthinkingaboutperformingverticals,news,sports,finance,lifestyles,youtalkaboutwhatpercentageoftraffictheyrepresenttoday,maybeintermsofthe600million,andtheyusemobileMAUs,Ithinkyoumentionedearlier.Andjustthedifferenceinhowyou'rethinkingaboutstrategicalternativesbetweennowandmaybeearlyDecemberwhentheBoardmet,whatsparkedachange.Thatwouldbehelpful,thankyou.
MarissaMayer (CEO):
Sure,intermsofnews,sports,financeandlifestyle,obviously,wehavealargenetwork.Mailisactuallythelargestofourtrafficdriversandengagementdrivers,asIreferencedinmyremarks.Andsoit'sprobablythebiggestdriveroverall,soIwouldsayinthegrandschemeofYahoo!,I'mnotgoingtoofferaspecificpercentage,butthepercentagesareoverallsmallintermsofhowmuchtrafficisbeingdrivenbynews,sports,finance,andlifestyle.
That'ssothattrafficisverywelltargeted.It'sverydesirabletrafficforadvertisers,andwhileit'ssmallinthecontextofYahoo!,it'squitelargeinthoseareasofthoseverticals,withmostofthoseapplicationsbeingeithernumberoneornumbertwointheirspace,bothintermsofusageandratingsandotherthings.Andsoitissomethingthatwethinkisreallyimportanttofocuson,intermsofdigitalcontent.
Ithelpsusultimatelyreallydifferentiate,andtheyareveryvaluablebusinessintheirspace,whereYahoo!canmakeanameforitself.Intermsofreviewingthestrategicalternatives,wedidreferenceinourannouncementinDecemberthatwhilewewerefocusedonthereversespin,weweregoingtolookatanumberofdifferentalternativesandIthinkthattheannouncementtodayisbasicallytheformalizationofthat.
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KenGoldman (CFO):
I'daddtoyourpoint,clearly,ifyoulookatwhereourrevenuecomesfrom,itissearch,andthenifyoulookatdisplay,displayreallyishomepageandbythewayhopefully,you'llseeournewhomepagedisplayed,whichincludesnews,sportsandfinance,andTumblr.
Thoseareourbigrevenuedrivers,andthosearetheoneswearereallyputtingalotofeffortbehind.Sowhatyouseereallyisarecognitionofhere'stheproductsthatreallydodriveourrevenue,aligningtheheadcountagainstthoseproductsaswellascoreregions,andthenbasically,otherareasthatweren'tcoreorfocused,thoseweretheonesthatwereexiting,ifyouwill.
ShibaniJoshi(Moderator):
BenSchachteratMacquarie.
BenSchachter (Analyst-MacquarieResearch):
Marissa,goingbacktothemobilesearchquestion,youtalkedaboutmobilesearchevolving,buthowdoyoustayaheadofwhatGoogleandothersaretryingtodothere?
Andhowdoyoudoitwithoutitbecomingaveryexpensivearmsrace?
Inotherwordsevenifyou'recorrectthatmobilesearchdoesevolvedifferently,howdoesYahoo!winthere?
Thanks.
MarissaMayer (CEO):
Sure.Wethinkthattheprofileofhowmobilesearchevolveswillbesomewhatdifferentthanwebsearchevolved.Obviously,thewebisreallylarge,insomewaysit'snearlyinfiniteandsocrawlingallinformationthat'soutonthewebthat'spubliclyavailable,that'sprivatelyavailableissomethingthat'sreallychallengingandverycapitalintensive.
Inmobilesearch,it'smuchmoreaboutyourpersonalinformation.Howcanwemakeyoumoreefficient,moreeffective,knowwhereyoumightwanttobegoing,howtogetyoutheremostefficiently,whatappscanhelpyouaccomplishthetaskthatyouultimatelywanttoaccomplish?Thesearchspaceisbasicallymuchsmaller,therequireddiscspace,thecomputationspaceissmaller,andwejustthinkitreallycomesdownto,it'salotaboutbeingabletodothosebasicsofsearchwell,butthenit'sreallyarounduserinteraction,userexpectations,andhowdowebuildthebestpossibleapplicationtomeetthoseneeds.
Buttheoverallcostprofilewillbesomewhatdifferent,andIdothinkthisisanareathat'sreallydeeplyinneedofreimagination.Ithinkwhenyoulookathowsmartphoneshavetransformedsomanydifferentindustriesanddifferenttypesofactivitiesthatwealldo,whenyoulockatsearchandmail,it'sveryclearthere'sgoingtobealotmoreevolutiontocome,andthat'ssomethingthatwe'rereallyexcitedtoparticipatein.Wehavealongheritageinsearch,andwehavealotofpeopleherewhohavegreatideasaboutwhattheywouldliketodo.
ShibaniJoshi(Moderator):
YoussefSqualiatCantorFitzgerald.
Youssef Squali(Analyst-CantorFitzgerald):
Marissa,canyousharewithuswhatyourlearningswerefromtheNFLgamethatyoustreamed?The
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economicsofthattoyou,andjustyourforayintovideocontentingeneral?
ThenKen,thanksforhelpinguswiththebreakoutoftheimpairmentcharges,thoughyoudidmentionthatsince2012therewas$1.2billioninimpairment.IthinkTumblrwas--onlycountedforabout230.
Iwaswonderingifyoucouldmaybecallouttheothercomponentsfortheother$1billion?
Thanks.
MarissaMayer (CEO):
SureI'llstartontheNFLgame.Ijusthavetoglowaboutit.WeweresoproudthattheNFLchoseusforthisfirst-evergloballivestream,andtheteamexecutedonitjustbrilliantly.Wesaw33millionviewsofthegame,with15millionuniqueviewers.Itreallysetrecordsinanumberofdifferentways,intermsofaliveevent,livesportingevent.Itwasjustoneofthebiggestaudienceseverassembledforsomethinglikethat,andit'sbecausetheNFLbroughtussuchgreatcontent.
ButIwasalsoreallyproudofhowourteamexecutedtechnically.WehadIbelievea0.6rebufferringratewhichisunheardofacrosstheindustry,andwewererunningonincrediblyHi-Definitiononallplatforms.Itwasreallymagnificenttoseehowthetechnicalpieceofthisperformed.Ithinkitreallyshowshowstrongourstreamingtechnologycanbe,andwherestreamingcanultimatelygo.
Wealso,Ithink,reallyshowedandoneofthethingswereallylearnedwasthevalueofournetwork,andthevalueofourlargeaudience.ThefactthatonaSundaymorning,franklyquiteearlyinalotofplaceswheretheyliketowatchNFL,wewereabletoassemblesuchalargeaudience,bybasicallyputtingthegameinplaceswherepeoplewhoarecomingtoYahoo!Propertiesmightseeit,andmightgoontoviewit.Thatwassomethingthatworkedincrediblywell,anditshowsthatYahoo!havingthatlargeaudience,whatitcanreallydointermsofdistributinggreatcontent,helpingourusersreallygetthatsamecontent.
Andthenfinally,Iwasreallyveryimpressedwithoursalesteam.Wehadmorethan30differentbrandsparticipatinginapproximately70spotsoverallinthegame.Thecommercialswereallterrific,andIwasjustreallyhappywiththeexecutionofthoseadvertisementsforouradvertisers,andouradvertiserswerereallyexcitedaboutitaswell,toparticipateinthattypeofopportunity.Soit'sterrifictobeinvolvedin,Ithinkwelearnedalottechnically,welearnedalotaboutwhatouraudiencecanprovide,andwelearnedalotaboutwhatwecandoforadvertisersinavideolivestreamformat.
KenGoldman (CFO):
Letmeaddressyourquestion.
Firstofall,Ithinkit'simportanttounderstandthatwehaveninereportingunits.Mostofthemaregeographicallybased,Tumblrisaseparatereportingunit,andthat'swhyItalkedabouttheseparatedelineationforgoodwillimpairmentthere.Andsotheonewetalkedaboutthatincludestheacquisitions,themorerecentacquisitionsreallyisAmericasandCanada.
Soit'snotdirectlyassociatedwithanyoneacquisition,butthoseacquisitionsthatareincludedinthatifyouwill,includethingslikeBrightRoll,Polyvore,Flurry,andsoforth.Sothoseareinthere,butagain,themostimportantpart,it'sareportingunitofAmericasandCanada.It'snotspecifictoanyacquisition,andyou'lllookatthevariouscashflowsandmarketcompsforthatreportingunit.SoIjustwantedmakeitclear,andwhenthatcarryingvalueexceedsafairvalue,that'swhenwehaveanissueintermsofwrite-off.
ShibaniJoshi(Moderator):
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StephenJuatCreditSuisse.
StephenJu (Analyst-CreditSuisse):
Thanks.SoMarissa,intermsofyourfourverticals,ofnews,sports,financeandlifestyle,whatisyourviewofadloadsatthispoint?
Areyoustartingtogetanypushbackfromusers,orcanyoucomfortablyincreaseadloadsthere?
AndKen,IthinkthemarketalreadyunderstandsthemathematicalrealityofwhatwillhappentoyourgrowthrateswiththefastergrowingMavensaccountingforagreaterpartoftheoverallrevenuemix,butcanyouhelpusbetterunderstandtheincrementalmarginsontheincrementaldollarrevenue,ofwhat'sinMavensversusyourlegacybusiness?
Thanks.
MarissaMayer (CEO):
Sure,I'llstartoffontheadloadquestionaroundthedifferentverticals.Sothesearetherightverticalsforus,they'reverticalswhereYahoo!hasalwaysbeenstrong,andthey'resomethingthatwe'reexcitedtoreallyinvestin,andseewherewecangowiththem,ifwe'rereallyfocusedontheminmobile.
Weoverallarereallyhappywiththeadformatswehave,andtheadloadthatwehave.WeobviouslyuseourYahoo!Geminiproducttodoourmonetizationonmobile,sowhenwelookatthesefourverticalsandbuildingoutthebestofbreedapplicationonmobileforthem,Geminiishowwewillbegintomonetizethem.Thatsaid,wehavebeendoingexperimentationlatelywithsome,forexample,firststartofthedaytakeovers,thingslikethat,sothefirsttimeyoubootupthe,youmightseeforexample,afullscreenadvertisement.
We'vetriedthatonTumblr.Thatworkswell,butIwouldsaywiththeadformatswehave,I'mcomfortablewithouradload.Iwouldrathernotseeusincreaseit,butoneofthethingswehaveseenexcitementaround,bothfromadvertisersandfromusers,issometimeschangingupsomeoftheadformats,introducingnewadformats,andpossiblyincreasingtheadloadthatway.
KenGoldman (CFO):
AndI'dsayonmargins,weclearlyonMavensarestillininvestmentmode,soyes,weareprofitable,particularlyonanEBITDApointofview,butagainwedon'tbreakoutprofitabilitybyproduct,becausemostofourcostsareveryshared,andwefranklyareamuchmorefunctionalorganization,sowedon'treallylookatitthatway.Thekeyisfrankly,isreallyverysimple.It'sreallydriving,continuetodriverevenueaswegrowMavens,andtakingoutcosts,likewetalkedabout.Thatisthewaywe'regoingtodrivetheprofitabilityoftheCompany.
AndagainwhatIwantedtoreallytalktois,we'regoingtotakesomeactionsinthefirsthalfoftheyear,theytakeawhiletoexecuteon,butbythetimewegettothesecondhalfoftheyear,it'smuchmoreofarunratebusiness.Andagain,Idon'twanttosaywewon'tcontinuetolookatsomeofthefixedcosts,becausetherearethingsinthefixedcostareasthatwedobelievewecancontinuetoworkon,aswellaswegoforward.I'denumeratedsomeofthosebeforeintermsoffacilitiescostsinparticular,somedatacenterandsoforth,sowewillcontinuetolookathowwecanbestbasicallyachieveEBITDAandoverallprofitabilityinfutureyears,onagrowingrevenuebase.
ShibaniJoshi(Moderator):
AndthatconcludesYahoo!'sfourth-quarterandfull-year2015earningsvideowebcast.Thankyouso
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muchforjoiningusthisafternoon,andwe'llseeyounextquarter.
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