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Alright, Yahoo's quarter sounded super-de-duper good. Here are my notes from the call, which although by no means comprehensive, capture many of the highlights. I encourage everyone at all interested in Yahoo or the Internet in general to listen to the call.

Yahoo! 1st Quarter 1999 Conference Call
Wednesday April 7, 1999


Highlights:

- Yahoo March Page View 235 Mln a Day Vs 167 Mln in Dec. (+141%)
- Yahoo Q1 Pro Forma Dil Shr $0.11 Excluding Charges Vs $0.02 (vs. 8 cents expected)
- Yahoo Q1 Dil Shr $0.07 Including Charges

- These financials do not include GeoCities, although GeoCities reported results today in-line with estimates

- GeoCities results will be included in Yahoo's next quarter results

- $86 million revs vs. $79 mil rev. estimate

- $524 million in cash (grown by $42 million in quarter)

Income Statement:

- 1st quarter is softest advertising quarter
- avg rev per customer doubled year-over-year
- avg advertising contract length was steady
- no single customer accounted for more than 10% of revs
- gross margin 90%
- Sales & Marketing 38% of revs
- G&A 4% revs (down slightly)
- 38% operating margin (ahead of target range 30-36%)
- this quarter's over-achievement was the result of timing
- tax rate increased to 36%, up from 25%
- headcount grew to 920 employees, up from 803 from prev quarter

Asset Management:

- strong quarter of positive cash flow
- cash comprises 2/3 of Total Assets (can we say Cash King!?)
- DSO declined to 28 days from 30 days in prev quarter

Quarter Summary:

- smart, strategic acquisitions can be expected in the future as the industry consolidates
- Leadership, Leverage, Speed, Time to Market, & People are the keys to Yahoo's biz

Leadership:
- most heavily trafficked network

Leverage:
- build user aps, then watch user trends
- acquire companies with great assets, then better utilize those assets with yahoo's distribution

Speed:
- build big brand and user-base early to create “non-linear” returns
- all operational decisions are made to increase pace of growth

Quarterly Operations (with Jeff Mallet, COO)
- over 47 million registered user-base
- visitors and members consumed 19.5 billion page views
- fastest growing top-10 website in February
- 53% reach
- this does not even include the growth that will be achieved from the upcoming GeoCities and Broadcast mergers
- Yahoo is #1 most bookmarked site, #1 for customer satisfaction
- Tons of partnerships (way too many to write down)
- Alignment with PC manufacturers: IBM, Gateway, Compaq-Europe, and HP – great way to reach new users
- My Yahoo! Services delivered to wireless pagers and pocketed devices
- Yahoo Germany #1 in Germany with 48% (?) reach
- Yahoo UK partnered with 2 high-speed retailers (with Yahoo as default homepage)
- 3 new local Yahoo's in Singapore, Thailand, and one other foreign (?)
- Merchant and small-biz services was major expansion with Yahoo Site (for setting up websites and easy upgrade path to YahooStore), Yahoo Business Express, Yahoo Connected Office (centralized, password-protected area on web for biz)
- Yahoo merchant accounts enable rapid e-commerce build-out
- Yahoo Auctions
- Yahoo Finance (world's most popular) – new Tax Center
- Advertising and Merchant Efforts: helps develop ads that are 1) targeted, 2) measurable, 3) scalable
- New customers: Claratin, ABC.com, Mercedez, MSFT Carpoint, Waterhouse Securities, AT&T, Eddie-Bauer, Gillette, and many others
- 95 of 125 top customers renewed
- Largest increase in revs from auto and financial services groups

Question & Answer:

Q – Drivers to page view growth in the context of revenue growth? Reduced DSO?
A – Page views driven by brand marketing efforts, distribution points, new and enhanced services. International page views are “amazingly strong.” Well-done integration across broad network, with underpinnings in personalization allows cross-distribution within Yahoo's network. Headcount growth – Yahoo is a magnet for top talent, especially in Engineering and Sales & Marketing. DSO's is a primary focus, and is being improved by happy customers who are willing to readily pay, and thereby reduce collection times.

Q – Minority interests? Gains in market share?
A – Minority interests create a business relationship that can lead to future opportunities, as was the case with GeoCities and broadcast.com. Three new minority investments made in 1st quarter (names not disclosed). Total of 6-8 minority interests in total. Page view growth from grabbing new users on web. Plus, stealing market share from the other portals. Operations in Europe and Asia/Pacific are doing very well.

Q – (Henry Blodgett) Comments on plans for integrating GeoCities and broadcast?
A – GeoCities will close end of May, early June. More specifics available then. Broadcast will be operated as a standalone division. TK expects it to be “killer.” GeoCities will be much more integrated within Yahoo's operations, and therefore will require more “elbow-grease.”

Q – Revenue per advertiser? Question about Gartner Group study that claimed portal ad contracts were doing poorly.
A – Advertisers are asking tough questions, looking for measurable, reliable results. Confident that Yahoo will only look better on go-forward basis as Yahoo shines for its multiple services available to the advertising merchant community. 92% of CEOs said Yahoo was helpful in building their business.

Q – Retail operation point (?), question about page views. Qualitative discussion of revenue breakdown – banners vs e-commerce sponsorships breakdown?
A – Apples-to-apples, 41% increase in page views. (As for rev breakdown, basically they just wouldn't say, although he talked around it craftily.) General trend in traffic was up, up, up throughout quarter.

Q – Business services?
A – 600+ merchants up and running in Yahoo Store.

Q – Any changes in usage behavior patterns?
A – No. Both entertainment and work-related activity is strong and relatively consistent.

Q – Accelerating growth worldwide? Will the growth rate increase due to the recent mergers?
A – Tough to quantify. Neither broadcast nor Geo has a significant worldwide presence. Subjectively, there's a lot of upside potential to launch those 2 companies worldwide. Rest assured, Yahoo will move those companies international very quickly.

Q – Free Internet access in Europe, and maybe in U.S.?
A – (missed it)

Q – Growth in unique users – add comment.
A – 10 million to 12 million sequentially. Stepped-up promotion for personalizing service throughout Yahoo. All aspects of personalization are extremely popular.

Q – Customer count? Any thought for acquiring companies with off-line assets?
A – Customer count totaled 2,125 merchants. No comment on acquisition targets. But, web-based assets are their primary target.

Q – Should this quarter be a benchmark to adjust models on go-forward? When more guidance on acquisitions?
A – Take a look at combined companies for next quarter modeling all 3 companies historical trends. More on acquisition later.

Q – Most rapidly growing segments of Yahoo?
A – Communication services is very high growth, as are financial services, news & sports, and entertainment, as well as personalized services.


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