Soaring above predictions, Yahoo! reported net income of $101 million, beat Wall Street estimates by three cents per share and revised its guidance for 2004 upward in its earnings report for the first quarter of 2004.
The online giant was expected to do well and it did not disappoint, thanks to almost 48 percent growth in organic search and advertising revenue and strong marketing services growth. First-quarter profits more than doubled, reaching $101 million, or $0.14 per share compared to $46.7 million, or $0.08 per share, for the first quarter of 2003.
Yahoo! reported revenue of $758 million for the quarter, smashing Wall Street’s expectations of $501 million in revenue. Not only has revenue grown, but the user base has expanded as well, to 141 million active registered users.
“It was a huge upside,” said Safa Rashtchy, an analyst for Piper Jaffray. “A lot more dollars dropped to the bottom line. It was a very profitable quarter. Reminds one of the old Yahoo!,” referring to the days of the dot-com boom.
Rashtchy said he expected Yahoo! to continue its strong performance.
“This was the beginning of fairly strong performance this year and with the advertising campaign they have on the way, they will have a strong year. This was not just a one-off performance,” the analyst said.
He was referring to Yahoo!’s new ad campaign, due to debut Thursday, which is aimed at reinforcing the Yahoo! brand. Semel also announced that the company will do a two-for-one stock split effective May 11.
Marketing services revenue for the first quarter totaled $635 million, an amazing 235 percent increase from the $190 million reported in the same period in 2003. (The increase did include a one-time gain of about $10 million attributed to unredeemed third party loyalty program points.) Semel pegged the phenomenal rise to growth in Yahoo!’s organic business and its acquisitions.
The company revised its earnings guidance for 2004. In its previous earnings report, Yahoo! had estimated earnings would come in at between $2.1 and $2.2 billion. The company said it now expects between $2.4 and $2.5 billion.
Semel praised the performance of Yahoo!’s auto, finance, entertainment, sports and games verticals in ad sales. The CEO said, “We’re starting to see the ability to say, ‘Let’s not talk about verticals, let’s talk about the demographics you’re looking for. They exist in huge numbers within Yahoo!'”
Revenue per page view is up about 15 percent, said Susan Decker, Yahoo!’s CFO.
Looking toward the future, Semel said, “We will expand search on Yahoo! and focus increasingly on personalization.” He also promised extensive changes to the Yahoo! home page and verticals.
The company’s also focusing on international expansion, as evidenced by its recent acquisition of the Kelkoo shopping search engine, which closed this week.
Dan Rosensweig, Yahoo!’s COO, said, “There are significant opportunities outside the United States,” and Decker added, “International represents a significant opportunity.”