Yahoo Beats Q4 Earnings, Delays Verizon Closing to Second Quarter

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Yahoo (YHOO) on Monday reported fourth quarter fiscal 2016 earnings results that beat Wall Street estimates on both the top and bottom lines. But the release of headline numbers were secondary to the bigger issue at hand — the pending merger with Verizon (VZ), which in July agreed to buy Yahoo for $4.8 billion.

Yahoo, however, threw a curve ball Monday, saying it will push back the Verizon closing to the second quarter. It needs more time to "meet closing conditions,” the company said. And this delay, which sent Yahoo stock climbing 1% in the after-hour session Monday, could work in Yahoo’s favor. I’ll get back to that in a moment.

For now, let’s go through the numbers.

In the three months that ended December, the internet technology and media company posted a net income of $162 million or 17 cents per share, reversing last year’s loss. On an adjusted basis, when taking out one-time gains and costs, earnings came to 25 cents per share, topping the 21 cents per share analysts were looking for. Fourth quarter revenue came to $1.47 billion, up 15.7% year over year and also topping forecasts of $1.38 billion.

"In addition to integration planning, our top priority continues to be enhancing security for our users," CEO Marissa Mayer said in a statement. "With security protocols and password changes in place, approximately 90% of our daily active users have already taken or do not need to take remedial action to protect their accounts, and we're aggressively continuing to drive this number up.”

Yahoo is currently under investigation by the SEC which is looking to determine whether Yahoo's two data breaches, which occurred in 2013 and 2014, should have been reported to investors sooner. And this is likely what Mayer was referring to regarding the "work required to meet closing conditions.” Adding, that Yahoo's commitment to the security of its users is "unwavering."

At the same time, Monday’s earnings beat and the delay with closing the Verizon deal could benefit Yahoo. While the SEC’s investigation is certainly an overhang, any positive outcome could lessen the leverage Verizon might have to either bail on the deal or pressure Yahoo to lower the sale price. What’s more, Mayer remarked that the company's cost structure was the lowest in a decade, meaning Yahoo — despite the competitive pressures — is operating more efficiently.

Put all this together, Mayer will likely have one more full quarter as CEO. And while she is certain to get plenty of criticism for some questionable decisions — notably spending $1.1 billion for Tumblr and failing to monetize Yahoo’s large user base — it’s hard to argue with what Yahoo stock price has done since her arrival in July 2012: Rise more than 160%. In other words, Mayer did her job. While her legacy may forever be debated, it is one she should nonetheless be proud of.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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Richard Saintvilus

After having spent 20 years in the IT industry serving in various roles from system administration to network engineer, Richard Saintvilus became a finance writer, covering the investor's view on the premise that everyone deserves a level playing field. His background as an engineer with strong analytical skills helps him provide actionable insights to investors. Saintvilus is a Warren Buffett disciple who bases his investment decisions on the quality of a company's management, its growth prospects, return on equity and other metrics, including price-to-earnings ratios. He employs conservative strategies to increase capital, while keeping a watchful eye on macro-economic events to mitigate downside risk. Saintvilus' work has been featured on CNBC, Yahoo! Finance, MSN Money, Forbes, Motley Fool and numerous other outlets. You can follow him on Twitter at @Richard_STv.

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