In late trading Thursday, Yahoo shares closed down $2.99 at $15.45 on the Nasdaq Stock Market. Although most notes to investors Thursday were cautiously optimistic, investment bank Merrill Lynch downgraded the stock, saying it was the HotJobs acquisition that helped push Yahoo into positive growth from the previous year.
"The company delivered only modest upside to top-line estimates and increased financial targets only slightly excluding the impact of the HotJobs acquisition," Merrill Lynch analyst Justin Baldauf wrote in an investor note.
For the first quarter of 2002, Yahoo posted a net loss of $53.6 million, or 9 cents a share, on sales of $192.7 million. Wall Street had expected company revenue to reach $175 million, according to research firm First Call.
Yahoo CEO Terry Semel said the financial results represent "outstanding growth in a time of economic turbulence."
Indeed, the report comes as the Internet sector continues to suffer from sluggish advertising sales. Money made in the first quarter through Yahoo's marketing services business, which largely consists of online ads, dropped 15 percent from the same period last year and 11 percent from last quarter.
Despite declines in ad sales, Yahoo was able to piece together various revenue sources to show growth. Its online transaction sales, which come from e-commerce, tripled from the previous year and jumped 28 percent quarterly. Much of this increase came from deferred revenue from the 2001 holiday shopping season.
Furthermore, sales from online job board HotJobs.com, which it recently, and a revenue-sharing arrangement with search company Overture Services may have helped non-advertising revenue increase to 37 percent of its total sales this quarter, up from 21 percent last year. The Overture deal likely contributed between $12 million and $15 million this quarter, according to Safa Rashtchy, an equity analyst at financial services firm U.S. Bancorp Piper Jaffray.
"Advertising went down and non-advertising went up, and the component most contributing to that is Overture," he said.
Yahoo does not break out revenue numbers for such deals.
Meanwhile, the quarter also showed considerable declines in Yahoo's overseas business, whose revenue dropped 22 percent from last year and 13 percent from the previous quarter. International revenue now accounts for 14 percent of the company's total revenue.
Excluding charges, Yahoo posted a profit of $10.5 million, or 2 cents per share. The per-share figure met Wall Street expectations, according to First Call.
Yahoo also said it recorded $24.4 million in earnings before interest, taxes, depreciation and amortization (EBITDA). The company reported $0.9 million during the same period last year.
Looking ahead, Yahoo revised its financial goals for the year to include revenue from itsof HotJobs. The company expects revenue to reach between $205 million and $225 million next quarter and between $870 million and $910 million for 2002. Last quarter, company executives pegged 2002 revenue to be between $750 million and $800 million, excluding HotJobs revenue.
Yahoo also expects EBITDA to reach between $23 million and $33 million for the second quarter of 2002 and between $105 million and $130 million for full year.
Capital expenditures is expected to reach between $10 million and $12 million for the quarter and between $40 million and $50 million for the year. Depreciation is anticipated at $21 million for the second quarter and $85 million for the year.
"The strategy they outlined awhile ago is coming together nicely, which is to diversify away from marketing and more to consumer-oriented services to generate revenue," said Jeetil Patel, an equity analyst at brokerage firm Deutsche Banc Alex Brown.