Yahoo! (YHOO)

Q4 2011 Earnings Call

January 24, 2012 5:00 pm ET


Timothy R. Morse - Chief Financial Officer

Scott Thompson - Chief Executive Officer and Director

Marta Nichols -


Jeetil J. Patel - Deutsche Bank AG, Research Division

Mark S. Mahaney - Citigroup Inc, Research Division

Heath P. Terry - Goldman Sachs Group Inc., Research Division

Spencer Wang - Crédit Suisse AG, Research Division

Brian J. Pitz - UBS Investment Bank, Research Division

Douglas Anmuth - JP Morgan Chase & Co, Research Division

Ross Sandler - RBC Capital Markets, LLC, Research Division

Youssef H. Squali - Jefferies & Company, Inc., Research Division

Anthony J. DiClemente - Barclays Capital, Research Division

Jordan Rohan - Stifel, Nicolaus & Co., Inc., Research Division

Benjamin A. Schachter - Macquarie Research



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Good day, ladies and gentlemen, and welcome to the fourth quarter 2011 earnings conference call. My name is Katie, and I'll be your coordinator for today. [Operator Instructions] I would like to turn the call over to your host, Marta Nichols, VP of Investor Relations. Please proceed.

Marta Nichols

Thanks, Katie, and good afternoon. Welcome to Yahoo!'s Fourth Quarter 2011 Earnings Conference Call. On the call today will be Scott Thompson, Chief Executive Officer; and Tim Morse, Chief Financial Officer. Before we begin, I'd like to remind you that today's call may contain forward-looking statements concerning matters such as our expected financial and operational performance, our long-term financial objective and the company's strategic review process, as well as our expectations for the economy, in general, and online advertising, in particular. The financial and operational impact of our Search Alliance with Microsoft, our capital allocation decisions and our strategic operational and product plans.

Actual results may differ materially from the results predicted in our statements, and reported results should not be considered indicative of future performance. Potential risks and uncertainties that could cause our business and financial results to differ materially from our forward-looking statements are described in our Form 10-Q filed with the SEC November 7, 2011, as well as in the earnings release included as Exhibit 99.1 to the Form 8-K we furnished today to the SEC. All information discussed on this call is as of today, January 24, 2012, and Yahoo! does not intend and undertakes no duty to update this information to reflect subsequent events or circumstances.

On today's call, we'll also discuss some non-GAAP financial measures as we talk about the company's performance. These may include total expenses less traffic acquisition costs, or TAC; revenue excluding TAC, or revenue ex-TAC, and operating margin ex-TAC. Reconciliations of those non-GAAP measures to the GAAP measures we consider most comparable can be found on our corporate website,, under Investor Relations. We have prepared remarks that will last about 30 minutes, and then we'll have a brief Q&A session.

And now I'd like to turn the call over to Scott.

Scott Thompson

Good afternoon, everyone, and thanks to all of you for joining us today. For those of you who are counting, it's been 3 weeks since I arrived and only 2 weeks since my official start date. And as you would imagine, I have been extremely busy as I have been rapidly coming up to speed. As I said on our last call, I did an extensive amount of research on Yahoo! and had formed strong opinions before I arrived. And since then, I've spent all my time meeting Yahoo!'s leaders, our employees and our customers, and I have validated what I believed coming in. I see even more, today, the strength of Yahoo!'s assets, the talent of our people and the huge opportunity in front of us.

You all know Yahoo! has an exceptional foundation; a powerful brand; enormous numbers of unique visitors, 702 million of them globally; relationships with the world's leading advertisers and technology platforms operating at massive scale. We plan to do more with all of these advantages. We're going to work not just at scale, but with speed. We will focus on generating real, sustainable growth and value creation. I feel great about all that, but I'm also very clear that we have a lot of work to do. It is still early, and I don't intend to lay out any detailed strategy until I fully assess our direction, but I think it may be helpful to talk a bit about my approach to operating the business and how that will guide the way we move forward at Yahoo!.

Anytime you plan to move a company as large and as complex as Yahoo! quickly, aggressively and successfully, you need a guiding principle to ensure you keep all your key priorities clearly in view. The guiding principle for me is to insist that we be balanced. That balance applies to many things: how we think about our customers, who we are, our processes and, importantly, the way we allocate capital. I'm going to talk about each of these 4 concepts a bit later.

By operating the business in a balanced way, we'll prioritize the most important things, move aggressively, and we'll move fast. We have to get great, innovative products that matter into the market, absorb feedback quickly from our customers and grab those products constantly. We'll discuss how we'll take advantage of our strengths and tackle our challenges.

So let's start first with the purpose of today's call: to discuss our Q4 results and progress and to lay out the foundation for our plans in 2012. Yahoo!'s Q4 2011 revenue was down 3% to $1,169,000,000. And our operating income was up 10% year-on-year to $242 million. Both numbers were near the midpoints of our guidance provided to you in October. At a global company, a few headline numbers like these don't tell the whole story. There's a lot more detail for you to know about Yahoo!'s performance in each of our businesses and the diverse regions we operate. In the future, I'll provide more insight about those details behind our results.

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