Yahoo! Reports Record Revenue, Raises 2003 Estimates

Internet industry bellwether Yahoo! raised its full-year revenue and earnings estimates for 2003 Wednesday as it posted a second quarter profit of $51 million, or $0.08 a share, more than doubling its earnings from the same period in 2002.

The company reported revenues of $321.4 million in the three months ending June 30, its highest ever revenue figures for a quarter. The revenue numbers met analysts’ expectations, with some analysts having boosted their estimates over the past several days. The net income figures also met analysts’ consensus estimates, according to Thomson First Call.

The positive revenue and earnings numbers spurred Yahoo! to raise its estimates for the full year 2003, noting that the company felt it had a better handle on its financial future because it has been cultivating more stable revenue sources — namely, blue chip advertisers, small businesses and fee-paying consumers. Yahoo! now expects to bring in between $1.26 and $1.31 billion for the full year, with operating income — which the company formerly referred to as EBIDTA — coming in between $375 and $400 million.

Marketing services, which encompass advertising as well as paid search, continued to provide the lion’s share of Yahoo!’s revenues in the second quarter, coming in at $219.2 million, up 42 percent from the $151.7 million it brought in last year. Yahoo! Chairman and CEO Terry Semel credited the rise to the increased adoption of the Internet by traditional marketers and the popularity of paid search.

“The market has been more robust over the past year,” said Semel, “and I believe there are a number of factors that point to a significant bright future for Internet advertising.”

One of those factors was the fact traditional marketers continue to turn toward the Internet in greater numbers, according to Semel. While in previous quarters he had attributed growth to stealing market share from competitors (likely referring to AOL), this time it appeared the number of Internet advertisers was increasing, in Semel’s view. Still, he was a bit hesitant to predict a rosy future for the sector.

“It’s a good time to start to feel a little bit good,” he said.

Paid search, driven by Yahoo!’s relationship with Overture Services, grew in several different ways over the quarter. The number of clicks grew, the cost per click grew, and the popularity among marketers also grew. Some of that growth, at least, Yahoo! attributed to its recently re-configured search area.

Yahoo! is “only just beginning to realize our full potential and take advantage of the long term growth opportunities,” said Semel.

Other company executives mentioned contextual search as part of Yahoo!s future plans. The company has been experimenting with Sprinks as a contextual search provider, and Overture and Google — both of which have relationships with Yahoo! — also have offerings in the space.

The second quarter also saw Yahoo!’s fee revenues, such as for the Yahoo!/SBC co-branded ISP and for Yahoo! Personals, show a double-digit increase. They totaled $69.9 million, up 43 percent over the same year-ago period. Yahoo! said it had 3.5 million paying subscribers by the end of June and expects to have 4.2 to 4.5 by the end of the year.

Listings dollars, such as those brought in by the HotJobs employment service, came in at $32.3 million in the quarter, their 29 percent year-over-year growth rate driven primarily by revenue from HotJobs.

The company ends the quarter with quite a bit of money in the bank, not only because of its free cash flow of $67.7 million, but also because of the $750 million convertible debt offering it made last quarter. On the earnings call following the release of its financial results, company executives hinted that investments or acquisitions may be in the works.

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