Flat Q1 revenue for Yahoo, investors wait for CEO to map out his plan

CEO Scott Thompson, presiding over his first full quarter as the boss, is expected to reveal long-anticipated comeback plan this afternoon.

Updated 2:15 p.m. PT As investors braced to learn about CEO Scott Thompson's plan to revive the company, Yahoo reported a 38 percent increase in first-quarter net income on basically flat revenue compared with a year earlier.

The company said that revenue, minus traffic acquisition costs, was $1.077 billion for the quarter ended March 31. That's just a 1 percent increase over the first quarter of 2011.

Income from operations decreased 11 percent to $169 million in the first quarter of 2012, compared to $190 million in the first quarter of 2011. Still, that qualified as a "beat the Street" performance as analysts had projected flat earnings. Following the publication of the earnings report, investors seized on the news to send the stock up nearly 4 percent in after-hours trading

In the long term, Wall Street may care less about this particular set of numbers than what happens during the conference call that follows, in which Thompson, presiding over his first full quarter as the new boss, is expected to map out details of his plans for a struggling Yahoo. Two weeks ago, at the start of the current quarter, Yahoo announced that it would lay off about 2,000 employees as it seeks to reshape its future.

Revenue highlights:

  • Display revenue excluding TAC: $454 million, a 4 percent decrease compared to $471 million for the first quarter of 2011.
  • GAAP display revenue: $511 million, a 2 percent decrease compared to $523 million for the first quarter of 2011.
  • Search revenue excluding TAC: $384 million, an 8 percent increase compared to $357 million for the first quarter of 2011.
  • GAAP search revenue: $470 million, a 3 percent increase compared to $455 million for the first quarter of 2011.

Cash flow and cash balance

  • Cash flow from operating activities for the first quarter of 2012: $297 million, a 45 percent increase compared to $206 million for the same period of 2011.
  • Free cash flow: $196 million for the first quarter of 2012, a 247 percent increase compared to $56 million for the same period of 2011.
  • Cash, cash equivalents, and investments in marketable debt securities: $2.65 billion as of March 31, 2012 compared to $2.53 billion at December 31, 2011, an increase of $122 million.
  • During the first quarter of 2012, Yahoo repurchased 5 million shares for $71 million.

On the conference call, Thompson said that he was "more convinced than ever of the value of our assets, the potential our business and what we can do to make the most of our market opportunity." At the same time, however, he expressed dissatisfaction with Yahoo's current state, noting that the company's display business was "nowhere close to where it needs to be." He also indicated that Yahoo's alliance on search with Microsoft was not living up to expectations. Thompson said he was working with Microsoft to improve the results.

 

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