SUNNYVALE — In perhaps its final earnings report, Yahoo on Monday beat Wall Street’s revenue expectations but suffered a $440 million quarterly loss.
Final bids for Yahoo were reportedly due Monday. CEO Marissa Mayer said in the earnings report conference call that she would not disclose details, other than to say the firm was “deep into the process” of evaluating proposals.
“We faced a lot of adversity and uncertainty throughout this quarter,” Mayer noted.
Gartner Research analyst Andrew Frank saw no surprises in the report that would affect the sale of the company. “The big takeaway was it is still able to sell advertising and create revenue and earnings, and I think that makes it valuable, although more valuable as part of a diversified portfolio (in another company) than as a standalone entity,” Frank said.
Yahoo brought in $1.3 billion in revenue in the second quarter. Wall Street had expected the troubled firm to bring in $1.08 billion in revenue, after making $1.2 billion in the second quarter of last year.
While the company’s revenue increased, so did the costs of acquiring web traffic, which more than doubled to $466 million from $200 million in the second quarter of last year. Subtracting those expenses, Yahoo was left with $841 million in net earnings, a substantial drop from the $1 billion of the same quarter last year.
“Revenues continue to be soft,” said analyst Aaron Kessler of Raymond James. “Yahoo’s just losing advertising revenue share to other sites. It’s unclear if there’s an answer at this point as to how Yahoo can re-accelerate revenue growth.”
Yahoo’s net advertising revenue from its search service fell to $319 million in the second quarter from $422 million in the same period last year, and net display advertising revenue dropped to $396 million from $410 million.
Google and Facebook together reap 64 percent of all U.S. online advertising revenue, according to Pivotal Research.
Yahoo announced earnings of 9 cents per share for the quarter, only a penny below analysts’ expectations, but a sharp drop from 16 cents in the second quarter of 2015.
The company wrote down $482 million in charges related to its social media site Tumblr — which it bought for $1.1 billion in 2013 — because of reductions in projected operating results and cash flows, according to the company.
“It’s not a big surprise to investors — there’s been a view for the past few quarters that Tumblr wasn’t monetizing as well or growing as well as initially expected,” Kessler said.
The Tumblr write-down was the main driver of Yahoo’s $440 million quarterly loss.
Yahoo’s so-called MAVENS — Mayer’s acronym for mobile, video, native advertising and social media — saw reported growth to $504 million in the second quarter of 2016. Mobile alone generated $378 million. However, those revenue figures reflected changes in revenue presentation that added $119 million each to MAVENS and mobile revenue numbers.
Adjusted for the changes, second-quarter revenue for MAVENS dropped to $385 million from $401 million in the second quarter of last year. “We did see that fall off last quarter as well,” Kessler said.
Mobile revenue edged up to $259 million from $252 million for the same period last year.
Yahoo has reached its target of cutting 15 percent of its workforce by the end of this year and now has 8,800 employees, down 45 percent from 2012, Mayer said.
Chief financial officer Ken Goldman said Yahoo had reduced cash expenses by 14 percent for the quarter to $669 million and capital spending by 43 percent to $152 million.
“They are rationalizing their cost structure,” Kessler said. “They are doing the things they need to on the cost side.”
Contact Ethan Baron at 408-920-5011 or follow him at Twitter.com/ethanbaron.
