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Yahoo! Inc. (YHOO)

Q2 2009 Earnings Call

July 21, 2009 5:00 pm ET


Marta Nicols - IR

Carol Bartz - CEO

Tim Morse - CFO


Sandeep Aggarwal - Collins Stewart

Youssef Squali - Jefferies & Company

Jeffrey Lindsey – Sanford Bernstein

Mark Mahaney - Citigroup

Imran Khan - JP Morgan

James Mitchell – Goldman Sachs

Christa Quarles - Thomas Weisel Partners

Collin Gillis – Brigantine Advisors

Jason Helfstein - Oppenheimer & Company

Spencer Wang – Credit Suisse

Justin Post - Merrill Lynch

Ben Schachter – Broadpoint Amtech

Doug Anmuth - Barclays Capital



Welcome to the Yahoo! second quarter 2009 earnings conference call. (Operator Instructions) I will now turn the call over to Ms. Marta Nicols. Ms. Nicols you may begin.

Marta Nichols

Good afternoon and welcome to Yahoo!'s second quarter earnings conference call. On the call today will be Carol Bartz, Chief Executive Officer, and Tim Morse, Chief Financial Officer.

Before we begin, I would like to remind you that today’s call will contain forward-looking statements concerning matters such as our expected financial performance, our expectations for the economy in general and online advertising in particular, our product plans, our cost initiatives, planned investments and corporate strategic alternatives. Actual results may differ materially from the results predicted in our statements and reported results should not be considered indicative of future performance.

The potential risks and uncertainties that could cause our business and financial results to differ materially from our forward-looking statements are described in our form 10K filed with the SEC on February 27, 2009, our form 10Q filed with the SEC May 8, 2009 as well as in the earnings release included as Exhibit 99.1 to the form 8K we furnished today to the SEC. All information discussed on this call is as of today, July 21, 2009 and Yahoo! does not intend and undertakes no duty to update this information to reflect future events or circumstances.

On today’s call we will also discuss some non-GAAP financial measures as we talk about the company's performance. These will include operating income before depreciation, amortization and stock-based compensation expense, which will be referred to as operating cash flow; revenue excluding traffic acquisition costs, which we will refer to as revenue ex-TAC; free cash flow, non-GAAP net income and non-GAAP net income per share. Reconciliations of these non-GAAP measures to the GAAP measures we consider most comparable can be found on our corporate website, info.yahoo.com, under Investor Relations.

We have prepared remarks that will last about 30 minutes. Then we'll have a brief Q&A session with Carol and Tim.

With that I'd like to turn the call over to Carol.

Carol Bartz

Thanks Marta. Good afternoon and thank all of you for joining us today. I would also like to welcome Tim Morse, our new CFO. Tim has just been a joy to work with. He has been with us a little over a month and already I can tell you he brings real passion for efficiency and process that will serve us well.

I am also very happy to announce that our new Homepage will be available in the U.S. starting today. This is an exciting part of our effort to provide a “Wow” experience to our users. I will get to that a little later in the call but first I would like to update you on the quarter. Then I will turn it over to Tim for more on our financials and I will end the call with a discussion on our vision and we will touch on our user and ad initiatives before opening it up for questions.

First on the quarter. Considering the economy I am pleased with our results. Revenue was ahead of the mid point of our outlook with lots of the upside coming from currency and our affiliate business. Our teams did a great job controlling costs but as Tim and I will discuss later, we are ramping up spending on our priorities this quarter.

Overall we are seeing less fear in the marketplace and advertisers are planning their spending more actively than they did earlier this year. As far as the economy goes it is easy to assume it is bumping along the bottom but in all honesty there is just so much conflicting information in the market that it is just too early to call. Our goal in the midst of this is to run our business and focus on what we can control. We will leave the economic predictions to others.

Beyond the numbers this past quarter we have three themes. One, we put a great leadership team in place. With Tim coming on board we are essentially solidifying my staff and we are closing in on someone to head our international region. Two, we continue to define our audience priorities. This includes identifying our most important vertical experiences like the Homepage, mail and our media properties as well as the capabilities that support all of them like open, social, video, mobile and more.

It also includes advertising. We need to ensure our ads are more relevant and quite frankly less irritating to users. Three, we focused on our internal and external business processes. In other words, we are hard at work making ourselves a better company to work for and to do business with.

Before I go into more detail about what all this means moving forward, I will turn it to Tim so he can dive into the quarter’s financials. Tim?

Tim Morse

Thanks for the warm welcome Carol. I am excited to be here. Before turning to second quarter, I would like to provide some perspective on my background. I have spent the last two and a half years at CFO at Altera where we reshaped the financial organization to help drive significant margin expansion. Prior to Altera I spent 15 years at General Electric in a variety of different roles throughout the company. GE taught me a lot about organizing, streamlining and growing businesses and I look forward to putting those skills to work here at Yahoo!

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