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Tag: Earnings

  • Walmart CEO: We Had To Become More Digital

    Walmart CEO: We Had To Become More Digital

    “We had to learn to work in different ways to become more digital and to put data to work in different ways,” says Walmart CEO Doug McMillon as he reflected on the release of their blowout financial results. “Basically, to create a seamless experience for customers. We don’t want them to sense any difference as it relates to our brand whether they are shopping inside a store, picking it up, or having it delivered. All of those differences and channels that we might have thought about in the past need to be erased and taken away.”

    Doug McMillon, CEO of Walmart, discusses how the company has changed to become more digital over the last couple of quarters in response to the pandemic:

    Ecommerce Was Very Strong

    I would like to say thank you to all of our associates around the world and here in the US. They did a great job. You can imagine how challenging it is in this environment to go to work everyday and serve customers and keep the supply chain moving. Whether it’s in our stores, our Sam’s Club’s, or our distribution centers they have done a great job.

    Customers have been responding in waves as we’ve gone through the first and second quarters. Not surprisingly, they got really focused on things they needed to stock up to be at home for a long time at first. Over time, as we got through the second quarter and stimulus checks came in to play and people were at home, we certainly saw them buy things like laptops and tablets and fishing equipment and bicycles. Things that were related to home decor as they were at home thinking about their environment inside and outside the house we certainly saw them respond with what they were buying. Ecommerce, in particular, was very strong.

    Technology Phenomena Happening Around the World

    I’ve been in retail for almost 30 years and it’s really exciting when so many things can be done using technology. We can save customers time and expose them to so much more choice than we could previously. Our ecommerce assortments are broader as retailers and that’s certainly true at Walmart. We sell first-party owned inventory as well as through our marketplace. Now they can pick up their phone or be at home and open up their laptop and shop in so many different ways and have access to so many different things. It’s a lot of fun to be able to try and serve them in that way. That phenomena is happening around the world.

    You can use your app to do pickup and our stores. You can use your app to have the product brought straight to your house. Obviously, you can come in the store and we are learning how to use technology inside the stores in different ways to save you time. It boils down to access to assortment and an ease of shopping here in the US and around the world that people haven’t experienced before. That’s happening in Mexico, Canada, China, India, and all over the world.

    We Had To Become More Digital

    There have been a lot of changes inside the company. We had to learn to work in different ways to become more digital and to put data to work in different ways. Basically, to create a seamless experience for customers. We don’t want them to sense any difference as it relates to our brand whether they are shopping inside a store, picking it up, or having it delivered. All of those differences and channels that we might have thought about in the past need to be erased and taken away. Our teams have been doing a great job doing that.

    The outcome of that is this ease of shopping that’s unique and different. In our case, we’ve got so many stores so close to customers around the country it gives us a big advantage especially in being able to deliver quickly. We’ve got an express delivery system here in the United States that commits to delivering orders from our stores in less than two hours. That’s now in more than 2,000 stores and coming to stores all over the country. We are actually delivering a lot faster than two hours so far. That’s a great experience.

    We believe that this is something that we can build on along with having great stores where you want to come in from time to time, stock up, and experience what’s new. Really, we think that this omni world of retail is what will end up being the winning strategy over time.

    Scale Can Sometimes Be A Disadvantage

    Scale can sometimes be an advantage and sometimes it’s a disadvantage. Speed also matters a lot. Creativity matters a lot. What I’m proud of is how our team is responding to create new solutions for customers. Ultimately, whether Walmart grows or not is all up to them. We are serving families, moms and dads, and customers that have a lot of different choices. Even during the pandemic period with ecommerce and all the chains that were open there was still a lot of choice.

    We’ve got to compete to earn their business everyday and that’s the approach we take. Our team has really stepped up during this period and even before the pandemic to drive change and to create more solutions for customers.

    Walmart CEO Doug McMillon: We Had To Become More Digital
  • Microsoft Will Miss Windows Quarterly Guidance Due to Coronavirus

    Microsoft Will Miss Windows Quarterly Guidance Due to Coronavirus

    Microsoft has issued a statement warning investors it will miss its quarterly guidance for its Windows business as a result of the coronavirus.

    As the coronavirus continues to impact companies and supply chains, its far-reaching effects are continuing to be felt. Apple recently issued a statement saying it would miss its guidance as a result of the virus. Now Microsoft expects its More Personal Computing business to miss revenue for the same reason.

    “On Jan. 29, as part of our second quarter of fiscal year 2020 earnings call, we issued quarterly revenue guidance for our More Personal Computing segment between $10.75 and $11.15 billion, which included a wider than usual range to reflect uncertainty related to the public health situation in China,” reads the statement. “Although we see strong Windows demand in line with our expectations, the supply chain is returning to normal operations at a slower pace than anticipated at the time of our Q2 earnings call. As a result, for the third quarter of fiscal year 2020, we do not expect to meet our More Personal Computing segment guidance as Windows OEM and Surface are more negatively impacted than previously anticipated. All other components of our Q3 guidance remain unchanged.

    “As the conditions evolve, Microsoft will act to ensure the health and safety of our employees, customers, and partners during this difficult period. We will also continue to partner with local and global health authorities to provide additional assistance. We deeply appreciate the commitment of the people and organizations that have united to address this health emergency; our thoughts are with all those affected across the world.”

  • Twitter Crosses $1 Billion a Quarter Threshold

    Twitter Crosses $1 Billion a Quarter Threshold

    Reuters is reporting that, for the the first time ever, Twitter has brought in $1 billion in revenue in a single quarter.

    The company has had a difficult few years as it grappled with the balance between free speech and the spread of misinformation. With an upcoming election, the company has rolled out new policies designed to tackle these problems. The company has also taken steps to fight trolls and online abuse, as well as focus on relevant and useful content.

    The end result has been an increase in the “average monetisable daily active users (mDAU), or users who see ads when logged in through twitter.com or Twitter applications,” according to Reuters.

    As a result, Twitter’s stock closed at $38.41 a share, up 15%.

  • Verizon Reports Strong Third Quarter, Beating Analysts’ Estimates

    Verizon Reports Strong Third Quarter, Beating Analysts’ Estimates

    Verizon Communications, Inc. reported a strong Q3 2019 driven by solid gains in wireless customers.

    The telecommunications provider reported the “most third-quarter phone gross additions in five years.” In particular, Verizon saw significant growth in postpaid phone subscribers, the most lucrative and sought-after type of customers that wireless companies work to attract.

    Verizon also saw an increase of 2.1 percent in customer wireless revenue thanks to customers upgrading to higher-tier plans. This was no doubt encouraged by the company announcing new unlimited data plans in August, with each tier being $5 cheaper than on the previous plans.

    “Verizon continued its momentum in the third quarter by driving strong wireless volumes in both our Consumer and Business segments, while delivering solid financial results, highlighted by continued wireless service revenue growth, increased cash flow, and EPS growth,” said Chairman and CEO Hans Vestberg. “We are focused on our 5G rollout strategy, looking to deploy next-generation networks while enhancing our industry-leading 4G LTE network. Going into the fourth quarter, we are energized by the strong performance of the business and we are confident in our strategy to drive value for our customers and growth for our shareholders.”

    According to the report, “for third-quarter 2019, Verizon reported EPS of $1.25, compared with $1.19 in third-quarter 2018. The company’s reported earnings include a minimal net impact from special items: a net pre-tax gain of $261 million from dispositions of assets and businesses that was offset by a pension re-measurement pre-tax charge of $291 million. On an adjusted basis (non-GAAP), third-quarter 2019 EPS, excluding special items, was $1.25, compared with adjusted EPS of $1.22 in third-quarter 2018.

    “In third-quarter 2019, Verizon’s results included the effects of a reduction in benefits from the adoption of a revenue recognition standard, primarily due to the deferral of commission expense, and the adoption of a lease accounting standard. The combined net impact was a 4 cent headwind in third-quarter 2019, and 13 cents year-to-date, which is included in the year-over-year increase in adjusted EPS.”

  • Alphabet (Google) Earnings Not As Good As Expected

    Alphabet (Google) Earnings Not As Good As Expected

    Google parent Alphabet just announced its financial results for the first quarter with revenue up 17% year-over-year at $20.35 billion. Non-GAAP earnings per share were lower than expected at $7.50 (versus $7.96), and the stock is on the way down as a result. It quickly fell by as much as 8%.

    Aggregate cost per click fell 9% year-over-year.

    Screen Shot 2016-04-21 at 5.25.24 PM

    CFO Ruth Porat commented, “Our Q1 results represent a tremendous start to the year with 17% revenue growth year on year and 23% growth on a constant currency basis. We’re thoughtfully pursuing big bets and building exciting new technologies, in Google and our Other Bets, that position us well for long term growth.”

    Here are some of the other numbers:

    Alphabet Earnings

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    alphabet-earnings3

    alphabet-earnings4

    alphabet-earnings5

    See the full report here.

  • Netflix Earnings Out, 81 Million Members Reported

    Netflix Earnings Out, 81 Million Members Reported

    Netflix just reported its earnings for Q1, and announced that it has surpassed 81 million members. That’s up from 75 million on January 1, just after the prior quarter closed.

    Revenue for the quarter was $1.96 billion. Earnings per share (GAAP) was $0.06, which is better than expected, though the company disappointed on its Q2 guidance, quickly sending stock down.

    “As a reminder, the guidance we provide is our actual internal forecast at the time we report. For the second quarter, we expect to add 2.5 million members with 0.5 million in the US and 2.0 million internationally (versus prior year 2.4 million),” said the company’s letter to shareholders. “In the US, our Q2 net adds forecast of 0.5 million is in­line with prior years (0.5, 0.6, 0.6, and 0.9 million from 2012­2015), taking into account a modest impact from the beginning of un­grandfathering.”

    That’s of course in reference to the highly publicized price change.

    Here’s a quick look at the company’s numbers for Q1:

    netflix-earnings

    Checking in on Netflix’s DVD business, it ended the quarter with 4.7 million members and $72 million in contribution profit.

  • Etsy Gives Shareholders Something They Like

    Etsy Gives Shareholders Something They Like

    Investors weren’t thrilled with Etsy’s Q3 report when the company posted a net loss of $6.9 million ( 6 cents per share) and revenue of $65.7 million. On Tuesday, the company posted its Q4 and full-year 2015 financials with a much better reaction as shares quickly went upward.

    Etsy posted a Q4 adjusted loss of $0.04 per share and revenue of $87.8 million, which was higher than Wall Street projections.

    “We are proud of our progress in 2015. We hit many important milestones that are the building blocks for long-term, sustainable growth,” said CEO Chad Dickerson. “We executed against our strategic priorities, particularly in mobile, where we began to narrow the gap between mobile visits and mobile GMS. We also enhanced our existing seller services and continued to bring new constituents into the Etsy Economy. All of this activity allowed Etsy to generate $2.4 billion in GMS in 2015 and support approximately 1.6 million active sellers and more than 24.0 million active buyers. In 2016, we remain committed to reimagining commerce and are focused on launching more products and services that will allow us to build long-term value for our community.”

    The company provided three-year financial guidance.

    CFO Kristina Salen said, “We believe Etsy has significant opportunity ahead and we remain committed to delivering long-term, sustainable growth to all our stakeholders. One of our key values at Etsy is open and transparent communication. In that spirit, we are providing this additional long-term guidance to better demonstrate how we believe our strategic initiatives will translate to our financial results over the next three years.”

    Find the full release below:

    BROOKLYN, N.Y., Feb. 23, 2016 /PRNewswire/ — Etsy, Inc. (NASDAQ: ETSY), a marketplace where people around the world connect, both online and offline, to make, sell and buy unique goods, today announced financial results for its fourth quarter and full year ended December 31, 2015.

    “We are proud of our progress in 2015.  We hit many important milestones that are the building blocks for long-term, sustainable growth,” said Chad Dickerson, Etsy, Inc. CEO and Chairman. “We executed against our strategic priorities, particularly in mobile, where we began to narrow the gap between mobile visits and mobile GMS. We also enhanced our existing seller services and continued to bring new constituents into the Etsy Economy. All of this activity allowed Etsy to generate $2.4 billion in GMS in 2015 and support approximately 1.6 million active sellers and more than 24.0 million active buyers. In 2016, we remain committed to reimagining commerce and are focused on launching more products and services that will allow us to build long-term value for our community.”

     

    Fourth Quarter 2015 Financial Summary

    (in thousands)
    Three Months Ended
    December 31,    		 % Growth Y/Y Year Ended
    December 31,    		 % Growth Y/Y
    2014 2015 2014 2015
    GMS $ 611,474 $ 741,488 21.3 % $ 1,931,981 $ 2,388,387 23.6 %
    Revenue $ 64,912 $ 87,895 35.4 % $ 195,591 $ 273,499 39.8 %
    Marketplace revenue $ 33,311 $ 39,796 19.5 % $ 108,732 $ 132,648 22.0 %
    Seller Services revenue $ 30,690 $ 47,230 53.9 % $ 82,502 $ 136,608 65.6 %
    Adjusted EBITDA $ 9,298 $ 14,049 51.1 % $ 23,081 $ 31,007 34.3 %
    Active sellers 1,353 1,563 15.5 % 1,353 1,563 15.5 %
    Active buyers 19,810 24,046 21.4 % 19,810 24,046 21.4 %
    Percent mobile visits 56 % 61 % 500 bps 54 % 60 % 600 bps
    Percent mobile GMS 38 % 44 % 600 bps 37 % 43 % 600 bps
    Percent international GMS 30.6 % 29.2 % (140) bps 30.9 % 29.8 % (110) bps

     

    For information about how we define these metrics, see our Quarterly Report on Form 10-Q for the quarter ended September 30, 2015 filed with the SEC on November 5, 2015.

     

    Fourth Quarter 2015 Operational Highlights

    GMS was $741.5 million, up 21.3% compared with the fourth quarter of 2014. Growth in GMS was driven by 15.5% year-over-year growth in active sellers and 21.4% year-over-year growth in active buyers.  Continuing the trend we’ve seen for multiple quarters, mobile visits once again grew faster than desktop visits and, for the second consecutive quarter, we narrowed the gap between mobile visits and mobile GMS. Percent mobile visits was approximately 61% compared with approximately 56% in the fourth quarter of 2014 and percent mobile GMS was approximately 44% compared with approximately 38% in the fourth quarter of 2014. Throughout 2015, we continued to enhance our buyer mobile apps in many ways such as adding new deeplinking functionality, integrating social sign-up and sign-in, and expanding our mobile payment and digital wallet options with Apple Pay® and Google Wallet™. We believe this work strengthened our mobile footprint and contributed to our strong year-over-year GMS growth on our buyer mobile app, which further narrowed the gap between mobile visits and mobile GMS during the fourth quarter.

    We continue to believe that we can grow international GMS, over time, to represent 50% of our total GMS and that the impact of currency exchange rates contributed to the year-over-year decline in percent international GMS, which was 29.2% in the fourth quarter of 2015. Percent international GMS was 29.3% in the third quarter of this year.

    We believe that our GMS growth and percent international GMS are impacted by currency exchange rates in two ways. First, approximately 11% of our GMS comes from goods that are not listed in U.S. dollars and, as a result, is subject to the impact of currency exchange fluctuations. The percentage of GMS from goods that are not listed in U.S. dollars is slightly higher than what we reported in the third quarter of 2015. Excluding this direct impact, on a currency-neutral basis, GMS growth in the fourth quarter of 2015 would have been 22.7%, or approximately 1.4 percentage points higher than the as-reported 21.3% growth.

    Second, we believe weaker local currencies in key international markets continued to dampen the demand for U.S. dollar-denominated goods during the fourth quarter of 2015. For example, during the fourth quarter of 2015, GMS from international buyers purchasing from U.S. sellers declined approximately 13% year-over-year, compared with an approximately 13% and 6% year-over-year decline in the third and second quarters of 2015, approximately flat year-over-year performance in the first quarter of 2015, and approximately 23% and 44% year-over-year growth in the fourth and third quarters of 2014 respectively. In contrast, excluding our French marketplace ALM, GMS from international buyers making purchases from sellers in their own country grew approximately 49% year-over-year during the fourth quarter of 2015.

    Taken together, we estimate that the impact of currency translation on goods not listed in U.S. dollars and the impact of currency exchange rates on international buyer behavior reduced our year-over-year GMS growth rate by approximately two percentage points in the fourth quarter.

    Fourth Quarter 2015 Financial Highlights

    Total revenue was $87.9 million, up 35.4% year-over-year, driven by growth in both Marketplace and Seller Services revenue. Marketplace revenue grew 19.5%, primarily due to growth in transaction fee revenue and, to a lesser extent, growth in listing fee revenue. Seller Services revenue grew 53.9% year-over-year, due to growth in revenue from both Direct Checkout, which benefited from the integration of PayPal early in the fourth quarter, and Promoted Listings, which grew at a slightly lower rate than Direct Checkout. Seller Services revenue also benefited from growth in revenue from Shipping Labels, which continued to grow faster than Marketplace revenue in the fourth quarter.

    Gross profit for the fourth quarter was $57.7 million, up 36.9% year-over-year, and gross margin was 65.6%, up 70 bps compared with 64.9% in the fourth quarter of 2014. Similar to the first, second and third quarters of 2015, gross profit grew faster than revenue in the fourth quarter because of the leverage we achieved in employee-related and hosting and bandwidth-related costs as well as the continued strong growth of Promoted Listings, a higher-margin revenue stream.

    Total operating expenses were $49.3 million in the fourth quarter, up 17.5% year-over-year. Total operating expenses as a percent of revenue declined to 56.1% in the fourth quarter of 2015 compared with 64.6% in the fourth quarter of 2014, as revenue growth continued to outpace operating expense growth.

    The overall increase in operating expenses was primarily driven by the planned increase in reported marketing expenses, which grew 53.8% year-over-year mostly due to increased spending on digital marketing, which is currently focused on product listing ads. The year-over-year growth rate in fourth quarter marketing expenses decelerated relative to the growth rate of marketing expenses during the fourth quarter of 2014, which was 95.5%.

    Product development expenses grew 15.3% year-over-year, primarily due to higher employee-related expenses. G&A expenses decreased 11.5% year-over-year. The year-over-year reduction in G&A expenses reflects the favorable impact of a mark-to-market adjustment related to ALM stock-based compensation and a reduction in bad debt expense.

    Non-GAAP Adjusted EBITDA for the fourth quarter was $14.0 million and grew 51.1% year-over-year. Adjusted EBITDA margin was 16.0%, up 170 bps year-over-year.

    Net loss for the fourth quarter of 2015 was $4.2 million, compared with a $5.4 million net loss in the fourth quarter of 2014. Etsy’s net loss in the fourth quarter of 2015 was impacted by a foreign exchange loss and our income tax provision. We recorded $6.0 million of foreign exchange loss in the fourth quarter of 2015 largely made up of a non-cash currency loss related to the revised global corporate structure that we implemented on January 1, 2015. We also recorded a $6.3 million tax provision in the fourth quarter of 2015 primarily driven by non-cash charges related to our revised global corporate structure.

    Net cash provided by operating activities was $10.2 million in the fourth quarter of 2015 compared with $0.1 million in the fourth quarter of 2014. The increase in net cash provided by operating activities for the quarter was mainly due to the timing of payments to certain vendors.

    Cash, marketable securities and short-term investments were $292.9 million as of December 31, 2015.

    3-Year Financial Guidance

    “We believe Etsy has significant opportunity ahead and we remain committed to delivering long-term, sustainable growth to all our stakeholders.  One of our key values at Etsy is open and transparent communication.  In that spirit, we are providing this additional long-term guidance to better demonstrate how we believe our strategic initiatives will translate to our financial results over the next three years,” said Kristina Salen, Etsy, Inc. CFO.

    Over the next three years we believe we can deliver solid revenue growth and achieve leverage in our cost structure to expand our margins.

     

    2016-2018 CAGR Range 2016 Guidance
    GMS Growth 13-17% Mid-point of range
    Revenue Growth 20-25% High end of the range
    Gross Margin

    (by 2018)

    		 Mid 60s (%) 64-65%
    Adjusted EBITDA Margin

    (by 2018)

    		 High teens (%) 10-11%

     

    • We expect to achieve a three-year revenue CAGR in the 20-25% range and a three-year GMS CAGR in the 13-17% range. In 2016, we expect revenue growth to be at the high end of our three-year range and GMS growth to be near the mid-point of our three-year range. We anticipate that the key factors impacting revenue and GMS growth over the next three years include:
      • Further narrowing of the gap between mobile visits and mobile GMS
      • Stable percent international GMS, assuming that currency remains stable compared to average levels in December 2015
      • Continued revenue growth in our existing seller services, driven by both adoption and product enhancements
      • Modest contributions from new product launches and seller services
    • We expect to exit 2018 with a full-year gross margin that is in the mid-60s percent range, and that 2016 gross margin will be in this range as well. We anticipate that the key factors impacting our gross margin forecast over the next three years include:
      • Continued revenue growth in our existing seller services, driven by both adoption and product enhancements
      • The impact from new seller services that we intend to launch
    • We also expect to gain leverage in our operating cost structure over the next three years, particularly within marketing spend.
      • In 2016, we expect marketing expense as a percent of revenue to decline, but that overall operating expenses as a percent of revenue will increase driven by expenses associated with our new headquarters and with Sarbanes-Oxley compliance.
    • Finally, from an Adjusted EBITDA margin perspective, we estimate that our margin in 2016 will be comparable to 2015 in the 10-11% range and that it will expand to the high teens range by the end of 2018.

    Webcast and Conference Call Replay Information

    Etsy will host a webcast to discuss these results at 5:30 p.m. ET today. To access the live webcast, please visit the Etsy Investor Relations website, investors.etsy.com and go to the Investor Events section.

    A replay will be available following the live webcast and may be accessed on the same website. A telephonic replay will also be available through midnight ET on March 8, 2016 at (855) 859-2056 or (404) 537-3406; conference ID 44052221.

    About Etsy

    Etsy is a marketplace where millions of people around the world connect, both online and offline, to make, sell and buy unique goods. The Etsy community includes the creative entrepreneurs who sell on our platform, thoughtful consumers looking to buy unique goods in our marketplace, retailers and manufacturers who partner with Etsy sellers to help them grow their businesses, and Etsy employees who maintain our platform and nurture our ecosystem. Our mission is to reimagine commerce in ways that build a more fulfilling and lasting world, and we’re committed to using the power of business to strengthen communities and empower people.

    Etsy was founded in 2005 and is headquartered in Brooklyn, New York.

    Investor Relations Contact:
    Etsy, Jennifer Beugelmans, ir@etsy.com

    Media Relations Contact:
    Etsy, Kelly Clausen, press@etsy.com

    Forward-Looking Statements

    This press release contains forward-looking statements within the meaning of the federal securities laws. Forward-looking statements include information related to our possible or assumed future results of operations and expenses, our financial guidance, our mission, business strategies and plans, business environment and future growth. Forward-looking statements include all statements that are not historical facts. In some cases, forward-looking statements can be identified by words such as “believes,” “expects,” “may,” “plans,” “should,” “will,” “intends,”  or similar expressions and the negatives of those words.

    Forward-looking statements involve substantial risks and uncertainties that may cause actual results to differ materially from those that we expect. These risks and uncertainties include (i) our history of operating losses; (ii) the fluctuation of our quarterly operating results; (iii) adherence to our values and our focus on long-term sustainability, which may negatively influence our short- or medium-term financial performance; (iv) the importance to our success of the trustworthiness of our marketplace and the connections within our community; (v) our ability to expand successfully into markets outside of the United States; (vi) increases in our marketing efforts to help grow our business, which may not be effective at attracting and retaining Etsy sellers and buyers; (vii) our payments system, which depends on third-party providers and is subject to evolving laws and regulations; (viii) our ability to add new members to our community, grow our ecosystem and open new sales channels for Etsysellers; (ix) our ability to develop new offerings to respond to the changing needs of Etsy sellers and buyers; (x) the effectiveness of our mobile solutions for Etsy sellers and Etsy buyers; and (xi) our ability to compete effectively. These risks and uncertainties are more fully described in our filings with the Securities and Exchange Commission, including in the section entitled “Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2015.

    Forward-looking statements represent our beliefs and assumptions only as of the date of this press release. We disclaim any obligation to update these forward-looking statements.

     

     

    Etsy, Inc.

    Condensed Consolidated Balance Sheets

    (in thousands, unaudited)
    As of
    December 31,
    2014    		 As of
    December 31,
    2015
    ASSETS
    Current assets:
    Cash and cash equivalents $ 69,659 $ 271,244
    Short-term investments 19,184 21,620
    Accounts receivable, net 15,404 20,275
    Prepaid and other current assets 12,241 9,521
    Deferred tax charge—current — 17,132
    Funds receivable and seller accounts 10,573 19,262
    Total current assets 127,061 359,054
    Restricted cash 5,341 5,341
    Property and equipment, net 75,538 105,021
    Goodwill 30,831 27,752
    Intangible assets, net 5,410 2,871
    Deferred tax charge—net of current portion — 51,396
    Other assets 2,022 1,626
    Total assets $ 246,203 $ 553,061
    LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY
    Current liabilities:
    Accounts payable $ 8,231 $ 14,382
    Accrued expenses 12,852 31,253
    Capital lease obligations—current 1,755 5,610
    Funds payable and amounts due to sellers 10,573 19,262
    Deferred revenue 3,452 4,712
    Other current liabilities 4,590 4,903
    Total current liabilities 41,453 80,122
    Capital lease obligations—net of current portion 3,148 7,571
    Warrant liability 1,920 —
    Deferred tax liabilities 149 61,420
    Facility financing obligation 50,320 51,804
    Other liabilities 1,913 21,646
    Total liabilities 98,903 222,563
    Total convertible preferred stock 80,212 —
    Total stockholders’ equity 67,088 330,498
    Total liabilities, convertible preferred stock and stockholders’ equity $ 246,203 $ 553,061

     

     

    Etsy, Inc.

    Condensed Consolidated Statements of Operations

    (in thousands except share and per share data, unaudited)
    Three Months Ended
    December 31,    		 Year Ended
    December 31,
    2014 2015 2014 2015
    Revenue $ 64,912 $ 87,895 $ 195,591 $ 273,499
    Cost of revenue 22,779 30,196 73,633 96,979
    Gross profit 42,133 57,699 121,958 176,520
    Operating expenses:
    Marketing 14,613 22,476 39,655 66,771
    Product development 9,723 11,207 36,634 42,694
    General and administrative 17,621 15,600 51,920 68,939
    Total operating expenses 41,957 49,283 128,209 178,404
    Income (loss) from operations 176 8,416 (6,251) (1,884)
    Total other expense (2,431) (6,308) (4,009) (26,110)
    (Loss) income before income taxes (2,255) 2,108 (10,260) (27,994)
    Provision for income taxes (3,103) (6,340) (4,983) (26,069)
    Net loss $ (5,358) $ (4,232) $ (15,243) $ (54,063)
    Net loss per share—basic and diluted $ (0.12) $ (0.04) $ (0.38) $ (0.59)
    Weighted average common shares outstanding—basic and diluted 43,177,805 111,677,599 40,246,663 91,122,291

     

     

    Etsy, Inc.

    Condensed Consolidated Statements of Cash Flows

    (in thousands, unaudited)
    Year Ended
    December 31,
    2014 2015
    Cash flows from operating activities
    Net loss $ (15,243) $ (54,063)
    Adjustments to reconcile net loss to net cash provided by operating activities:
    Stock-based compensation expense 5,920 8,981
    Stock-based compensation expense-acquisitions 4,130 1,860
    Contribution of stock to Etsy.org — 3,200
    Depreciation and amortization expense 17,223 18,550
    Bad debt expense 1,881 1,780
    Foreign exchange loss 3,049 21,775
    Amortization of debt issuance costs 68 167
    Net unrealized loss on warrant and other liabilities 411 3,133
    Loss on disposal of assets 79 1,319
    Amortization of deferred tax charges — 17,132
    Excess tax benefit from exercise of stock options (4,877) (3,944)
    Changes in operating assets and liabilities, net of acquisitions (554) 9,321
    Net cash provided by operating activities 12,087 29,211
    Cash flows from investing activities
    Acquisition of businesses, net of cash acquired (4,688) —
    Purchases of property and equipment (1,304) (11,116)
    Development of internal-use software (8,280) (9,719)
    Purchase of U.S. Government and agency bills (21,698) (26,040)
    Sale of marketable securities 20,588 23,592
    Net increase in restricted cash (5,341) —
    Net cash used in investing activities (20,723) (23,283)
    Cash flows from financing activities
    Proceeds from public offering — 199,467
    Proceeds from the issuance of common stock 35,000 —
    Proceeds from exercise of stock options 7,956 3,626
    Excess tax benefit from the exercise of stock options 4,877 3,944
    Payments on capitalized lease obligations (1,480) (3,377)
    Deferred payments on acquisition of business (75) —
    Payments relating to public offering (1,041) (4,052)
    Net cash provided by financing activities 45,237 199,608
    Effect of exchange rate changes on cash (3,737) (3,951)
    Net increase in cash and cash equivalents 32,864 201,585
    Cash and cash equivalents at beginning of period 36,795 69,659
    Cash and cash equivalents at end of period $ 69,659 $ 271,244

     

     

    Use of Non-GAAP Financial Measures

    In this press release, we provide Adjusted EBITDA, a non-GAAP financial measure that represents our net loss before interest expense, net, provision for income taxes and depreciation and amortization, adjusted to eliminate stock-based compensation expense, net unrealized loss on warrant and other liabilities, foreign exchange loss, other non-operating expense, net, contributions to Etsy.org and acquisition-related expenses. Following is a reconciliation of Adjusted EBITDA to net loss, the most directly comparable GAAP financial measure.

    We have included Adjusted EBITDA in this press release because it is a key measure used by our management and board of directors to evaluate our operating performance and trends, allocate internal resources, prepare and approve our annual budget, develop short- and long-term operating plans and assess the health of our business. As our Adjusted EBITDA increases, we are able to invest more in our platform. We believe that Adjusted EBITDA can provide a useful measure for period-to-period comparisons of our business as it removes the impact of certain non-cash items and certain variable charges.

    Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:

    • although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements;
    • Adjusted EBITDA does not consider the impact of stock-based compensation expense or changes in the fair value of warrants;
    • Adjusted EBITDA does not reflect tax payments that may represent a reduction in cash available to us;
    • Adjusted EBITDA does not reflect acquisition-related expenses;
    • Adjusted EBITDA does not consider the impact of foreign exchange loss;
    • Adjusted EBITDA does not reflect other non-operating expenses, net of other non-operating income, including net interest expense (income);
    • Adjusted EBITDA does not reflect the impact of our contributions to Etsy.org; and
    • other companies, including companies in our industry, may calculate Adjusted EBITDA differently, which reduces its usefulness as a comparative measure.

    Because of these limitations, you should consider Adjusted EBITDA alongside other financial performance measures, including net loss and our other GAAP results.

    Etsy is not able, at this time, to provide GAAP targets for net income margin for 2016 and 2016-2018 because of the difficulty of estimating certain items that are excluded from non-GAAP adjusted EBITDA margin, including interest expense, net, provision for income taxes, depreciation and amortization, stock-based compensation expense, net unrealized loss on warrant and other liabilities, foreign exchange loss, other non-operating expense, net, contributions to Etsy.org and acquisition-related expenses, the effect of which may be significant.

     

    Reconciliation of Net Loss to Non-GAAP Adjusted EBITDA

    (in thousands, unaudited)
    Three Months Ended
    December 31,    		 Year Ended
    December 31,
    2014 2015 2014 2015
    Net loss $ (5,358) $ (4,232) $ (15,243) $ (54,063)
    Excluding:
    Interest and other non-operating expense, net 224 263 549 1,202
    Provision for income taxes (1) 3,103 6,340 4,983 26,069
    Depreciation and amortization 4,731 4,509 17,223 18,550
    Stock-based compensation expense (2) 1,708 2,422 5,920 8,981
    Stock-based compensation expense—acquisitions (2) 2,334 (1,298) 4,130 1,860
    Net unrealized loss (gain) on warrant and other liabilities 172 (3) 411 3,133
    Foreign exchange loss (3) 2,035 6,048 3,049 21,775
    Acquisition-related expenses 349 — 2,059 —
    Contribution to Etsy.org (4) — — — 3,500
    Adjusted EBITDA $ 9,298 $ 14,049 $ 23,081 $ 31,007

     

    (1) The provision for income taxes in the three and twelve months ended December 31, 2015 reflects the impact of the revised global corporate structure implemented on January 1, 2015.

    (2) Total stock-based compensation expense included in the consolidated statements of operations is as follows (in thousands):

     

    Three Months Ended
    December 31,    		 Year Ended
    December 31,
    2014 2015 2014 2015
    Cost of revenue $ 382 $ 190 $ 1,113 $ 871
    Marketing 85 211 216 560
    Product development 466 879 1,461 2,860
    General and administrative 3,109 (156) 7,260 6,550
    Total stock-based compensation expense $ 4,042 $ 1,124 $ 10,050 $ 10,841

     

    (3) The majority of the foreign exchange loss in the three and twelve months ended December 31, 2015 relates to intercompany debt incurred in connection with Etsy’s revised global corporate structure.

    (4) Etsy made a one-time contribution of 188,235 shares of common stock totaling $3.2 million to Etsy.org during the first quarter of 2015. In addition, Etsy made a one-time cash contribution of$300,000 to Etsy.org during the second quarter of 2015.

     

    To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/etsy-inc-reports-fourth-quarter-and-full-year-2015-financial-results-300224883.html

    SOURCE Etsy, Inc.

  • Groupon’s ‘Stronger Than Expected’ Earnings Out

    Groupon’s ‘Stronger Than Expected’ Earnings Out

    Groupon just reported its financials for Q4 with what the company calls “stronger than expected” results, including a record Black Friday and Cyber Monday period.

    Revenue grew to $917.2 million from $883.2 million in the same quarter in 2014 (up 9% YoY). As the company notes, this is above guidance of $815-865 million and above consensus of $846 million.

    Non-GAAP earnings per share was $0.04 in Q4 (above guidance of -$0.01 to $0.01) and consensus of $0.00.

    In North America, the company saw its eighth consecutive quarter of double-digit growth. Billings grew 11% year-over-year while revenue grew 13% and units increased 12%. Active customers grew to 25.9 million and active deals increased to nearly 350,000 in North America. They added nearly 650,000 active customers in North America in Q4 – the most added in 5 quarters.

    Worldwide, active customers grew 3% to 48.9 million while active deals grew 97% to about 650,000. This includes the addition of about 70,000 coupons.

    Here’s the release in its entirety:

    CHICAGO–(BUSINESS WIRE)– Groupon, Inc. (NASDAQ: GRPN) today announced financial results for the quarter and fiscal year ended December 31, 2015.

    “2015 saw sustained progress toward our vision of making Groupon the daily habit in local commerce,” said CEO Rich Williams. “Following a stronger than expected fourth quarter, we enter 2016 with a continued focus on streamlining our global operations, reducing our reliance on low margin products in our shopping business and rekindling our customer acquisition efforts to set the stage for accelerated growth.”

    Fourth Quarter 2015 Summary

    • Gross billings, which reflect the total dollar value of customer purchases of goods and services, was $1.71 billion in the fourth quarter 2015, compared with $1.72 billion in the fourth quarter 2014. Gross billings declined 1% globally, but grew 4% excluding the unfavorable impact from year-over-year changes in foreign exchange rates throughout the quarter. On this F/X neutral basis, North America billings increased 11%, EMEA declined 2% and Rest of World declined 7%.
    • Revenue was $917.2 million in the fourth quarter 2015, compared with $883.2 million in the fourth quarter 2014. Revenue increased 4% globally, or 9% excluding the unfavorable impact from year-over-year changes in foreign exchange rates throughout the quarter. On this F/X neutral basis, North America revenue increased 13%, EMEA increased 3% and Rest of World declined 8%.
    • Gross profit was $371.7 million in the fourth quarter 2015, compared with $378.1 million in the fourth quarter 2014. Gross profit declined 2% globally, but grew 4% excluding the unfavorable impact from year-over-year changes in foreign exchange rates throughout the quarter.
    • Adjusted EBITDA, a non-GAAP financial measure, was $67.0 million in the fourth quarter 2015, compared with $92.9 millionin the fourth quarter 2014.
    • Net loss attributable to common stockholders was $46.5 million, or $0.08 per share. Non-GAAP earnings attributable to common stockholders was $23.3 million, or $0.04 per share.
    • Operating cash flow for the trailing twelve months ended December 31, 2015 was $292.1 million. Free cash flow, a non-GAAP financial measure, was $233.5 million in the fourth quarter 2015, bringing free cash flow for the trailing twelve months ended December 31, 2015 to $208.1 million.
    • Cash and cash equivalents as of December 31, 2015 was $853.4 million and we had no outstanding borrowings under our revolving credit facility.

    Full Year 2015 Summary

    • Gross billings was $6.3 billion in 2015, compared with $6.2 billion in 2014. Gross billings was approximately flat, but grew 8% excluding the unfavorable impact from year-over-year changes in foreign exchange rates throughout the year. On this F/X neutral basis, North America billings increased 12%, EMEA increased 3% and Rest of World was approximately flat.
    • Revenue was $3.1 billion in 2015, compared with $3.0 billion in 2014. Revenue grew 3% globally, or 9% excluding the unfavorable impact from year-over-year changes in foreign exchange rates throughout the year. On this F/X neutral basis,North America revenue increased 12%, EMEA increased 7% and Rest of World declined 6%.
    • Gross profit was $1.4 billion in 2015, compared with $1.5 billion in 2014. Gross profit declined 5%, but grew 2% excluding the unfavorable impact from year-over-year changes in foreign exchange rates throughout the year.
    • Adjusted EBITDA was $256.8 million in 2015, compared with $262.3 million in 2014.
    • Net earnings attributable to common stockholders were $20.7 million, or $0.03 per share. Earnings per share includes $0.19from discontinued operations, which was driven by the gain on our sale of a controlling stake in Ticket Monster. Non-GAAP earnings attributable to common stockholders was $91.0 million, or $0.14 per share.

    Definitions and reconciliations of all non-GAAP financial measures are included below in the section titled “Non-GAAP Financial Measures” and in the accompanying tables.

    Highlights

    • Units: Global units, defined as vouchers and products sold before cancellations and refunds, were approximately flat year-over-year at 62 million for the fourth quarter 2015. North America units increased 12%, EMEA units declined 3% and Rest of World units declined 31%.
    • Active deals: At the end of the fourth quarter 2015, on average, active deals were approximately 650,000 globally, with nearly 350,000 in North America. Both include approximately 70,000 Coupons.
    • Active customers: Active customers, or customers that have purchased a voucher or product within the last twelve months, grew 3% year-over-year, to 48.9 million as of December 31, 2015, comprising 25.9 million in North America, 15.4 million in EMEA, and 7.6 million in Rest of World.
    • Customer spend: Fourth quarter 2015 trailing twelve month billings per average active customer was $130, compared with$137 in the fourth quarter 2014.

    Share Repurchase

    During the fourth quarter 2015, Groupon repurchased 35,326,954 shares of its Class A common stock for an aggregate purchase price of $112.5 million, as of December 31, 2015. Up to $156.8 million of Class A common stock remained available for repurchase under Groupon’s share repurchase program through August 2017. The timing and amount of any share repurchases are determined based on market conditions, share price and other factors, and the programs may be discontinued or suspended at any time.

    Outlook

    Groupon’s outlook for 2016 reflects current foreign exchange rates, as well as expected marketing investments, continued progress on increasing Shopping margins, and a reduction of our international footprint. We continue to expect revenue of between $2.75 and $3.05 billion for the full year, and we are increasing the company’s expected 2016 adjusted EBITDA range to between $80 million and $130 million. Moving forward, we are only providing annual Revenue and adjusted EBITDA guidance, which we will update quarterly.

    Conference Call

    A conference call will be webcast live today at 4:00 p.m. CST / 5:00 p.m. EST, and will be available on Groupon’s investor relations website at http://investor.groupon.com. This call will contain forward-looking statements and other material information regarding the Company’s financial and operating results.

    Groupon encourages investors to use its investor relations website as a way of easily finding information about the company.Groupon promptly makes available on this website, free of charge, the reports that the company files or furnishes with the SEC, corporate governance information (including Groupon’s Global Code of Conduct), and select press releases and social media postings. Groupon uses its investor relations site (investor.groupon.com) and its blog (https://www.groupon.com/blog) as a means of disclosing material non-public information and for complying with its disclosure obligations under Regulation FD.

    Non-GAAP Financial Measures

    In addition to financial results reported in accordance with U.S. generally accepted accounting principles (U.S. GAAP), we have provided the following non-GAAP financial measures in this release and the accompanying tables: foreign exchange rate neutral operating results, adjusted EBITDA, non-GAAP net income attributable to common stockholders, non-GAAP earnings per share and free cash flow. These non-GAAP financial measures, which are presented on a continuing operations basis, are intended to aid investors in better understanding Groupon’s current financial performance and its prospects for the future as seen through the eyes of management. We believe that these non-GAAP financial measures facilitate comparisons with our historical results and with the results of peer companies who present similar measures (although other companies may define non-GAAP measures differently than we define them, even when similar terms are used to identify such measures). However, non-GAAP financial measures are not intended to be a substitute for those reported in accordance with U.S. GAAP. For reconciliations of these measures to the most applicable financial measures under U.S. GAAP, see ”Non-GAAP Reconciliation Schedules” and ”Supplemental Financial Information and Business Metrics” included in the tables accompanying this release.

    We exclude the following items from one or more of our non-GAAP financial measures:

    Stock-based compensation. We exclude stock-based compensation because it is primarily non-cash in nature and we believe that non-GAAP financial measures excluding this item provide meaningful supplemental information about our operating performance and liquidity.

    Acquisition-related expense (benefit), net. Acquisition-related expense (benefit), net is comprised of the change in the fair value of contingent consideration arrangements and external transaction costs related to business combinations, primarily consisting of legal and advisory fees. The composition of our contingent consideration arrangements and the impact of those arrangements on our operating results vary over time based on a number of factors, including the terms of our business combinations and the timing of those transactions. We exclude acquisition-related expense (benefit), net because we believe that non-GAAP financial measures excluding this item provide meaningful supplemental information about our operating performance and facilitate comparisons to our historical operating results.

    Depreciation and amortization. We exclude depreciation and amortization expenses because they are non-cash in nature and we believe that non-GAAP financial measures excluding these items provide meaningful supplemental information about our operating performance and liquidity.

    Interest and Other Non-Operating Items. Interest and other non-operating items include: interest income, interest expense, gains and losses related to minority investments, and foreign currency gains and losses. We exclude interest and other non-operating items from certain of our non-GAAP financial measures because we believe that excluding these items provides meaningful supplemental information about our core operating performance and facilitates comparisons to our historical operating results.

    Items That Are Unusual in Nature or Infrequently Occurring. During the twelve months ended December 31, 2015, items that we believe to be unusual in nature or infrequently occurring were (a) charges related to our restructuring program, (b) the gain on our disposition of Groupon India, (c) the write-off of a prepaid asset related to a marketing program that was discontinued because the counterparty ceased operations and (d) the expense related to a significant increase in the contingent liability for our securities litigation matter. We exclude items that are unusual in nature or infrequently occurring because we believe that excluding those items provides meaningful supplemental information about our core operating performance and facilitates comparisons to our historical results.

    Descriptions of the non-GAAP financial measures included in this release and the accompanying tables are as follows:

    Foreign exchange rate neutral operating results show our current period operating results as if foreign currency exchange rates had remained the same as those in effect in the prior-year period. We present foreign exchange rate neutral information to facilitate comparisons to our historical operating results.

    Adjusted EBITDA is a non-GAAP financial measure that we define as net income (loss) from continuing operations excluding income taxes, interest and other non-operating items, depreciation and amortization, stock-based compensation, acquisition-related expense (benefit), net and other items that are unusual in nature or infrequently occurring. Our definition of Adjusted EBITDA may differ from similar measures used by other companies, even when similar terms are used to identify such measures. Adjusted EBITDA is a key measure used by our management and Board of Directors to evaluate operating performance, generate future operating plans and make strategic decisions regarding the allocation of capital. Accordingly, we believe that Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and Board of Directors.

    Non-GAAP net income (loss) attributable to common stockholders and non-GAAP earnings (loss) per share adjust our net income (loss) attributable to common stockholders and earnings (loss) per share to exclude the impact of:

    • stock-based compensation,
    • amortization of acquired intangible assets,
    • acquisition-related expense (benefit), net,
    • items that are unusual in nature or infrequently occurring,
    • non-operating foreign currency gains and losses related to intercompany balances and reclassifications of cumulative translation adjustments to earnings as a result of business dispositions or country exits,
    • non-operating gains and losses from minority investments that we have elected to record at fair value with changes in fair value reported in earnings,
    • income (loss) from discontinued operations and
    • the income tax effect of those items.

    We believe that excluding these items from our measures of non-GAAP net income (loss) attributable to common stockholders and non-GAAP earnings (loss) per share provides useful supplemental information for evaluating our operating performance and facilitates comparisons to our historical results by eliminating items that are non-cash in nature, relate to discrete events or are otherwise not indicative of the core operating performance of our ongoing business.

    Free cash flow is a non-GAAP financial measure that comprises net cash provided by (used in) operating activities from continuing operations less purchases of property and equipment and capitalized software from continuing operations. We use free cash flow to conduct and evaluate our business because, although it is similar to cash flow from operations, we believe that it typically represents a more useful measure of cash flows because purchases of fixed assets, software developed for internal-use and website development costs are necessary components of our ongoing operations. Free cash flow is not intended to represent the total increase or decrease in Groupon’s cash balance for the applicable period.

    Note on Forward-Looking Statements

    The statements contained in this release that refer to plans and expectations for the next quarter, the full year or the future are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that involve a number of risks and uncertainties, and actual results could differ materially from those discussed. The words ”may,” will,” should,” ”could,” ”expect,” anticipate,” ”believe,” ”estimate,” intend,” ”continue” and other similar expressions are intended to identify forward-looking statements. The risks and uncertainties that could cause our results to differ materially from those included in the forward-looking statements include, but are not limited to, volatility in our revenue and operating results; risks related to our business strategy, including our strategy to grow our local marketplaces, marketing strategy and spend and the productivity of those marketing investments and the impact of our shift away from lower margin products in our Goods category; effectively dealing with challenges arising from our international operations, including fluctuations in currency exchange rates; retaining existing customers and adding new customers, including as we increase our marketing spend and shift away from lower margin products in our Goods category; retaining and adding high quality merchants; cyber security breaches; incurring expenses as we expand our business; competing successfully in our industry; maintaining favorable payment terms with our business partners; providing a strong mobile experience for our customers; delivery and routing of our emails; product liability claims; managing inventory and order fulfillment risks; integrating our technology platforms; litigation; managing refund risks; retaining, attracting and integrating members of our executive team; difficulties, delays or our inability to successfully complete all or part of the announced restructuring actions or to realize the operating efficiencies and other benefits of such restructuring actions; higher than anticipated restructuring charges or changes in the timing of such restructuring charges; completing and realizing the anticipated benefits from acquisitions, dispositions, joint ventures and strategic investments; tax liabilities; tax legislation; compliance with domestic and foreign laws and regulations, including the CARD Act and regulation of the Internet and e-commerce; classification of our independent contractors; maintaining our information technology infrastructure; protecting our intellectual property; maintaining a strong brand; seasonality; customer and merchant fraud; payment-related risks; our ability to raise capital if necessary and our outstanding indebtedness; global economic uncertainty; the impact of our ongoing strategic review and any potential strategic alternatives we may choose to pursue. For additional information regarding these and other risks and uncertainties, we urge you to refer to the factors included under the headings ”Risk Factors” and ”Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the company’s Annual Report on Form 10-K for the ended December 31, 2015 and our other filings with the Securities and Exchange Commission, copies of which may be obtained by visiting the company’s Investor Relations web site at http://investor.groupon.com or the SEC’s web site at www.sec.gov. Groupon’s actual results could differ materially from those predicted or implied and reported results should not be considered an indication of future performance.

    You should not rely upon forward-looking statements as predictions of future events. Although Groupon believes that the expectations reflected in the forward-looking statements are reasonable, it cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, neither the company nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. The forward-looking statements reflect Groupon’s expectations as of February 11, 2016. Groupon undertakes no obligation to update publicly any forward-looking statements for any reason after the date of this release to conform these statements to actual results or to changes in its expectations.

    About Groupon

    Groupon (NASDAQ: GRPN) is a global leader of local commerce and the place you start when you want to buy just about anything, anytime, anywhere. By leveraging the company’s global relationships and scale, Groupon offers consumers a vast marketplace of unbeatable deals all over the world. Shoppers discover the best a city has to offer on the web or on mobile with Groupon Local, enjoy vacations with Groupon Getaways, and find a curated selection of electronics, fashion, home furnishings and more with Groupon Goods.

    Groupon is redefining how traditional small businesses attract, retain and interact with customers by providing merchants with a suite of products and services, including customizable deal campaigns, credit card payment processing capabilities, and point-of-sale solutions that help businesses grow and operate more effectively. To search for great deals or subscribe to Groupon emails, visit www.Groupon.com. To download Groupon’s top-rated mobile apps, visit www.groupon.com/mobile. To learn more about the company’s merchant solutions and how to work with Groupon, visit www.GrouponWorks.com

    Groupon, Inc.
    Summary Consolidated and Segment Results
    (in thousands, except share and per share amounts)
    (unaudited)
    The financial results of Ticket Monster, including the gain on disposition and related tax effects, are presented as discontinued operations in the accompanying condensed consolidated financial statements and tables for the three months and year endedDecember 31, 2015. Additionally, the assets and liabilities of Ticket Monster are presented as held for sale in the accompanying condensed consolidated balance sheet as of December 31, 2014. All prior period financial information and operational metrics have been retrospectively adjusted to reflect this presentation.
    Three Months Ended Year Ended
    December 31, December 31,
    Y/Y % Growth Y/Y % Growth
    FX Effect excluding FX Effect excluding
    2015 2014 Y/Y % Growth (2) FX (2) 2015 2014 Y/Y % Growth (2) FX (2)
    Gross Billings(1):
    North America $ 1,050,361 $ 948,579 10.7 % $ (1,511 ) 10.9 % $ 3,709,797 $ 3,303,479 12.3 % $ (5,415 ) 12.5 %
    EMEA 487,147 560,541 (13.1 ) (61,482 ) (2.1 ) 1,794,354 2,046,807 (12.3 ) (317,640 ) 3.2
    Rest of World 169,484 215,549 (21.4 ) (31,574 ) (6.7 ) 751,389 887,546 (15.3 ) (132,679 ) (0.4 )
    Consolidated gross billings $ 1,706,992 $ 1,724,669 (1.0 ) % $ (94,567 ) 4.5 % $ 6,255,540 $ 6,237,832 0.3 % $ (455,734 ) 7.6 %
    Revenue:
    North America $ 622,647 $ 550,974 13.0 % $ (408 ) 13.1 % $ 2,047,742 $ 1,824,461 12.2 % $ (1,351 ) 12.3 %
    EMEA 248,326 272,475 (8.9 ) (33,198 ) 3.3 867,880 961,130 (9.7 ) (157,892 ) 6.7
    Rest of World 46,197 59,779 (22.7 ) (8,785 ) (8.0 ) 203,894 256,532 (20.5 ) (36,932 ) (6.1 )
    Consolidated revenue $ 917,170 $ 883,228 3.8 % $ (42,391 ) 8.6 % $ 3,119,516 $ 3,042,123 2.5 % $ (196,175 ) 9.0 %
    Income (loss) from operations $ (5,423 ) $ 33,640 (116.1 ) % $ (2,742 ) (108.0 ) % $ (79,777 ) $ 30,701 (359.9 ) % $ (2,064 ) (353.1 ) %
    Income (loss) from continuing operations (32,552 ) 26,566 (89,171 ) (18,473 )
    Income (loss) from discontinued operations, net of tax (3) (10,613 ) (15,182 ) 122,850 (45,446 )
    Net income (loss) attributable toGroupon, Inc. $ (46,528 ) $ 8,788 $ 20,668 $ (73,090 )
    Basic net income (loss) per share:
    Continuing operations $ (0.06 ) $ 0.04 $ (0.16 ) $ (0.04 )
    Discontinued operations (0.02 ) (0.03 ) 0.19 (0.07 )
    Basic net income (loss) per share $ (0.08 ) $ 0.01 $ 0.03 $ (0.11 )
    Diluted net income (loss) per share:
    Continuing operations $ (0.06 ) $ 0.04 $ (0.16 ) $ (0.04 )
    Discontinued operations (0.02 ) (0.03 ) 0.19 (0.07 )
    Diluted net income (loss) per share $ (0.08 ) $ 0.01 $ 0.03 $ (0.11 )
    Weighted average number of shares outstanding
    Basic 607,517,010 671,885,967 650,106,225 674,832,393
    Diluted 607,517,010 681,543,847 650,106,225 674,832,393
    (1) Represents the total dollar value of customer purchases of goods and services, excluding applicable taxes and net of estimated refunds.
    (2) Represents the change in financial measures that would have resulted had average exchange rates in the reporting periods been the same as those in effect during the three months and year ended December 31, 2014.
    (3) The $10.6 million loss presented within income (loss) from discontinued operations, net of tax, for the three months endedDecember 31, 2015 represents additional income tax expense attributed to discontinued operations, which resulted from the valuation allowance that was recognized during the period against the Company’s net deferred tax assets in the United States.
    Groupon, Inc.
    Condensed Consolidated Statements of Cash Flows
    (in thousands)
    (unaudited)
    Three Months Ended December 31, Year Ended December 31,
    2015 2014 2015 2014
    Operating activities
    Net income (loss) $ (43,165 ) $ 11,384 $ 33,679 $ (63,919 )
    Less: Income (loss) from discontinued operations, net of tax (10,613 ) (15,182 ) 122,850 (45,446 )
    Income (loss) from continuing operations (32,552 ) 26,566 (89,171 ) (18,473 )
    Adjustments to reconcile net income (loss) to net cash provided by operating activities:
    Depreciation and amortization of property, equipment and software 28,807 25,414 113,048 94,145
    Amortization of acquired intangible assets 4,956 4,708 19,922 20,896
    Stock-based compensation 32,865 29,961 142,069 115,290
    Restructuring-related long-lived asset impairments 6,922 — 7,267 —
    Gain on disposition of business — — (13,710 ) —
    Deferred income taxes 6,267 (9,168 ) (8,985 ) (11,124 )
    Excess tax benefits on stock-based compensation (1,431 ) (3,407 ) (7,629 ) (15,980 )
    Loss on equity method investments — — — 459
    Gain (loss) from changes in fair value of contingent consideration 508 (1,385 ) 240 (2,444 )
    Loss from changes in fair value of investments 829 — 2,943 —
    Impairments of investments — — — 2,036
    Change in assets and liabilities, net of acquisitions:
    Restricted cash 75 (491 ) 4,630 7,195
    Accounts receivable 6,960 10,280 13,313 (16,277 )
    Prepaid expenses and other current assets 61,358 36,816 21,545 13,933
    Accounts payable 9,545 (1,073 ) 8,601 (14,046 )
    Accrued merchant and supplier payables 142,069 155,991 40,217 54,921
    Accrued expenses and other current liabilities (1,174 ) 11,117 56,040 (9,986 )
    Other, net (16,980 ) (12,057 ) (18,222 ) 31,952
    Net cash provided by (used in) operating activities from continuing operations 249,024 273,272 292,118 252,497
    Net cash provided by (used in) operating activities from discontinued operations (670 ) 13,550 (37,248 ) 36,327
    Net cash provided by (used in) operating activities 248,354 286,822 254,870 288,824
    Net cash provided by (used in) investing activities from continuing operations (31,238 ) (35,175 ) (177,250 ) (152,818 )
    Net cash provided by (used in) investing activities from discontinued operations — (714 ) 244,470 (76,638 )
    Net cash provided by (used in) investing activities (31,238 ) (35,889 ) 67,220 (229,456 )
    Net cash provided by (used in) financing activities (322,166 ) (21,088 ) (508,156 ) (194,156 )
    Effect of exchange rate changes on cash and cash equivalents, including cash classified within current assets held for sale (5,147 ) (13,100 ) (32,485 ) (33,771 )
    Net increase (decrease) in cash and cash equivalents, including cash classified within current assets held for sale (110,197 ) 216,745 (218,551 ) (168,559 )
    Less: Net increase (decrease) in cash classified within current assets held for sale — 11,955 (55,279 ) 55,279
    Net increase (decrease) in cash and cash equivalents (110,197 ) 204,790 (163,272 ) (223,838 )
    Cash and cash equivalents, beginning of period 963,559 811,844 1,016,634 1,240,472
    Cash and cash equivalents, end of period $ 853,362 $ 1,016,634 $ 853,362 $ 1,016,634
    Groupon, Inc.
    Condensed Consolidated Statements of Operations
    (in thousands, except share and per share amounts)
    (unaudited)
    Three Months EndedDecember 31, Year Ended December 31,
    2015 2014 2015 2014
    Revenue:
    Third party and other $ 345,260 $ 367,902 $ 1,372,533 $ 1,501,011
    Direct 571,910 515,326 1,746,983 1,541,112
    Total revenue 917,170 883,228 3,119,516 3,042,123
    Cost of revenue:
    Third party and other 43,640 49,725 188,932 203,058
    Direct 501,790 455,394 1,545,519 1,373,756
    Total cost of revenue 545,430 505,119 1,734,451 1,576,814
    Gross profit 371,740 378,109 1,385,065 1,465,309
    Operating expenses:
    Marketing 83,208 59,812 254,335 241,954
    Selling, general and administrative 287,976 285,466 1,192,792 1,191,385
    Restructuring charges 5,422 — 29,568 —
    Gain on disposition of business — — (13,710 ) —
    Acquisition-related expense (benefit), net 557 (809 ) 1,857 1,269
    Total operating expenses 377,163 344,469 1,464,842 1,434,608
    Income (loss) from operations (5,423 ) 33,640 (79,777 ) 30,701
    Other income (expense), net (1) (3,393 ) (11,531 ) (28,539 ) (33,450 )
    Income (loss) from continuing operations before provision (benefit) for income taxes (8,816 ) 22,109 (108,316 ) (2,749 )
    Provision (benefit) for income taxes 23,736 (4,457 ) (19,145 ) 15,724
    Income (loss) from continuing operations (32,552 ) 26,566 (89,171 ) (18,473 )
    Income (loss) from discontinued operations, net of tax (10,613 ) (15,182 ) 122,850 (45,446 )
    Net income (loss) (43,165 ) 11,384 33,679 (63,919 )
    Net income (loss) attributable to noncontrolling interests (3,363 ) (2,596 ) (13,011 ) (9,171 )
    Net income (loss) attributable to Groupon, Inc. $ (46,528 ) $ 8,788 $ 20,668 $ (73,090 )
    Basic net income (loss) per share:
    Continuing operations $ (0.06 ) $ 0.04 $ (0.16 ) $ (0.04 )
    Discontinued operations (0.02 ) (0.03 ) 0.19 (0.07 )
    Basic net income (loss) per share $ (0.08 ) $ 0.01 $ 0.03 $ (0.11 )
    Diluted net income (loss) per share:
    Continuing operations $ (0.06 ) $ 0.04 $ (0.16 ) $ (0.04 )
    Discontinued operations (0.02 ) (0.03 ) 0.19 (0.07 )
    Diluted net income (loss) per share $ (0.08 ) $ 0.01 $ 0.03 $ (0.11 )
    Weighted average number of shares outstanding
    Basic 607,517,010 671,885,967 650,106,225 674,832,393
    Diluted 607,517,010 681,543,847 650,106,225 674,832,393
    (1) Other income (expense), net includes foreign currency losses of $1.7 million and $11.4 million for the three months endedDecember 31, 2015 and 2014, respectively, and foreign currency losses of $23.8 million and $31.5 million for the year endedDecember 31, 2015 and 2014, respectively.
    Groupon, Inc.
    Condensed Consolidated Balance Sheets
    (in thousands, except share and per share amounts)
    December 31,
    2015 2014
    Assets
    Current assets:
    Cash and cash equivalents $ 853,362 $ 1,016,634
    Accounts receivable, net 68,175 90,597
    Prepaid expenses and other current assets 153,705 192,382
    Current assets held for sale — 85,445
    Total current assets 1,075,242 1,385,058
    Property, equipment and software, net 198,897 176,004
    Goodwill 287,332 236,756
    Intangible assets, net 36,483 30,609
    Investments (including $163.7 million and $7.4 million at December 31, 2015 and December 31, 2014, respectively, at fair value) 178,236 24,298
    Deferred income taxes 3,454 57,594
    Other non-current assets 16,620 16,173
    Non-current assets held for sale — 301,105
    Total Assets $ 1,796,264 $ 2,227,597
    Liabilities and Equity
    Current liabilities:
    Accounts payable $ 24,590 $ 13,822
    Accrued merchant and supplier payables 776,211 772,156
    Accrued expenses and other current liabilities 402,724 341,381
    Current liabilities held for sale — 166,239
    Total current liabilities 1,203,525 1,293,598
    Deferred income taxes 8,612 32,771
    Other non-current liabilities 113,540 129,531
    Non-current liabilities held for sale — 6,753
    Total Liabilities 1,325,677 1,462,653
    Commitments and contingencies (see Note 10)
    Stockholders’ Equity
    Class A common stock, par value $0.0001 per share, 2,000,000,000 shares authorized, 717,387,446 shares issued and 588,919,281 shares outstanding at December 31, 2015 and 699,008,084 shares issued and 671,768,980 shares outstanding at December 31, 2014 72 70
    Class B common stock, par value $0.0001 per share, 10,000,000 shares authorized, 2,399,976 shares issued and outstanding at December 31, 2015 and December 31, 2014 — —
    Common stock, par value $0.0001 per share, 2,010,000,000 shares authorized, no shares issued and outstanding at December 31, 2015 and December 31, 2014 — —
    Additional paid-in capital 1,964,453 1,847,420
    Treasury stock, at cost, 128,468,165 shares at December 31, 2015 and 27,239,104 shares atDecember 31, 2014 (645,041 ) (198,467 )
    Accumulated deficit (901,292 ) (921,960 )
    Accumulated other comprehensive income (loss) 51,206 35,763
    Total Groupon, Inc. Stockholders’ Equity 469,398 762,826
    Noncontrolling interests 1,189 2,118
    Total Equity 470,587 764,944
    Total Liabilities and Equity $ 1,796,264 $ 2,227,597
    Groupon, Inc.
    Segment Information
    (in thousands)
    (unaudited)
    Three Months Ended December 31, Year Ended December 31,
    2015 2014 2015 2014
    North America
    Gross billings (1) $ 1,050,361 $ 948,579 $ 3,709,797 $ 3,303,479
    Revenue 622,647 550,974 2,047,742 1,824,461
    Segment cost of revenue and operating expenses (2)(3)(4) 625,171 520,140 2,029,643 1,755,113
    Segment operating income (loss) (2) $ (2,524 ) $ 30,834 $ 18,099 $ 69,348
    Segment operating income (loss) as a percent of segment gross billings (0.2 )% 3.3 % 0.5 % 2.1 %
    Segment operating income (loss) as a percent of segment revenue (0.4 )% 5.6 % 0.9 % 3.8 %
    EMEA
    Gross billings (1) $ 487,147 $ 560,541 $ 1,794,354 $ 2,046,807
    Revenue 248,326 272,475 867,880 961,130
    Segment cost of revenue and operating expenses (2)(4)(5) 211,443 237,468 797,786 857,062
    Segment operating income (2) $ 36,883 $ 35,007 $ 70,094 $ 104,068
    Segment operating income as a percent of segment gross billings 7.6 % 6.2 % 3.9 % 5.1 %
    Segment operating income as a percent of segment revenue 14.9 % 12.8 % 8.1 % 10.8 %
    Rest of World
    Gross billings (1) $ 169,484 $ 215,549 $ 751,389 $ 887,546
    Revenue 46,197 59,779 203,894 256,532
    Segment cost of revenue and operating expenses (2)(4) 52,731 62,828 228,273 282,688
    Segment operating loss (2) $ (6,534 ) $ (3,049 ) $ (24,379 ) $ (26,156 )
    Segment operating loss as a percent of segment gross billings (3.9 )% (1.4 )% (3.2 )% (2.9 )%
    Segment operating loss as a percent of segment revenue (14.1 )% (5.1 )% (12.0 )% (10.2 )%
    (1) Represents the total dollar value of customer purchases of goods and services, excluding applicable taxes and net of estimated refunds.
    (2) Segment cost of revenue and operating expenses and segment operating income (loss) exclude stock-based compensation and acquisition-related expense (benefit), net.
    (3) Segment cost of revenue and operating expenses for North America for the year ended December 31, 2015 includes a $37.5 million expense related to an increase in the Company’s contingent liability for its securities litigation matter.
    (4) Segment cost of revenue and operating expenses for the three months ended December 31, 2015 includes restructuring charges (credits) of $9.1 million in North America, $(3.6) million in EMEA and $(0.1) million in Rest of World. Segment cost of revenue and operating expenses for the year ended December 31, 2015 includes restructuring charges of $10.5 million inNorth America, $16.1 million in EMEA and $3.0 million in Rest of World.
    (5) Segment cost of revenue and operating expenses for EMEA for the year ended December 31, 2015 includes a $6.7 millionexpense for the write-off of a prepaid asset related to a marketing program that was discontinued because the counterparty ceased operations.
    Groupon, Inc.
    Non-GAAP Reconciliation Schedules
    (in thousands, except share and per share amounts)
    (unaudited)
    Adjusted EBITDA, non-GAAP earnings attributable to common stockholders and non-GAAP earnings per share are non-GAAP financial measures. The Company reconciles Adjusted EBITDA to the most comparable U.S. GAAP financial measure, “Net income (loss) from continuing operations” for the periods presented and the Company reconciles non-GAAP earnings per share to the most comparable U.S. GAAP financial measure, “Diluted net income (loss) per share,” for the periods presented.
    The following is a quarterly reconciliation of Adjusted EBITDA to the most comparable U.S. GAAP financial measure, “Income (loss) from continuing operations.”
    Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015
    Income (loss) from continuing operations $ 26,566 $ (16,739) $ (15,267) $ (24,613) $ (32,552)
    Adjustments:
    Stock-based compensation (1) 29,961 35,144 38,467 35,432 32,691
    Depreciation and amortization 30,122 32,200 31,372 35,635 33,763
    Acquisition-related expense (benefit), net (809) (269) 505 1,064 557
    Restructuring charges — — — 24,146 5,422
    Gain on disposition of business — — — (13,710) —
    Prepaid marketing write-off — — — 6,690 —
    Securities litigation expense — — — 37,500 —
    Non-operating expense (income), net 11,531 19,927 (2,941) 8,160 3,393
    Provision (benefit) for income taxes (4,457) 2,107 8,982 (53,970) 23,736
    Total adjustments 66,348 89,109 76,385 80,947 99,562
    Adjusted EBITDA $ 92,914 $ 72,370 $ 61,118 $ 56,334 $ 67,010
    (1) Includes stock-based compensation recorded within cost of revenue, marketing expense, and selling, general and administrative expense. Non-operating expense (income), net, includes $0.02 million, $0.1 million and $0.2 million of additional stock-based compensation for the three months ended June 30, 2015, three months ended September 30, 2015and three months ended December 31, 2015, respectively.
    The following is a reconciliation of Adjusted EBITDA to the most comparable U.S. GAAP financial measure, “Net income (loss) from continuing operations” for the years ended December 31, 2015 and 2014:
    Year Ended December 31,
    2015 2014
    Income (loss) from continuing operations $ (89,171 ) $ (18,473 )
    Adjustments:
    Stock-based compensation (1) 141,734 115,290
    Depreciation and amortization 132,970 115,041
    Acquisition-related expense (benefit), net 1,857 1,269
    Restructuring charges 29,568 —
    Gain on disposition of business (13,710 ) —
    Prepaid marketing write-off 6,690 —
    Securities litigation expense 37,500 —
    Non-operating expense (income), net 28,539 33,450
    Provision (benefit) for income taxes (19,145 ) 15,724
    Total adjustments 346,003 280,774
    Adjusted EBITDA $ 256,832 $ 262,301
    (1) Includes stock-based compensation recorded within cost of revenue, marketing expense, and selling, general and administrative expense. Non-operating expense (income), net, includes $0.3 million of additional stock-based compensation for the year ended December 31, 2015.
    The following is a reconciliation of net income (loss) attributable to common stockholders to non-GAAP net income (loss) attributable to common stockholders and a reconciliation of diluted net income (loss) per share to non-GAAP net income (loss) per share for the three months and year ended December 31, 2015:
    Three Months Ended Year Ended
    December 31, 2015 December 31, 2015
    Net income (loss) attributable to common stockholders $ (46,528 ) $ 20,668
    Stock-based compensation 32,865 142,069
    Amortization of acquired intangible assets 4,956 19,922
    Acquisition-related expense (benefit), net 557 1,857
    Restructuring charges 5,422 29,568
    Gain on disposition of business — (13,710 )
    Prepaid marketing write-off — 6,690
    Securities litigation expense — 37,500
    Intercompany foreign currency losses (gains) and reclassifications of translation adjustments to earnings (1) (400 ) 20,266
    Loss from changes in fair value of investments 829 2,943
    Income tax effect of above adjustments 14,979 (53,953 )
    Loss (income) from discontinued operations, net of tax 10,613 (122,850 )
    Non-GAAP net income (loss) attributable to common stockholders $ 23,293 $ 90,970
    Diluted shares 607,517,010 650,106,225
    Incremental diluted shares 6,367,291 6,854,909
    Adjusted diluted shares 613,884,301 656,961,134
    Diluted net income (loss) per share (2) $ (0.08 ) $ 0.03
    Impact of stock-based compensation, amortization of acquired intangible assets, acquisition-related expense (benefit), net, intercompany foreign currency losses (gains), items that are unusual in nature and infrequently occurring, income (loss) from discontinued operations and related tax effects 0.12 0.11
    Non-GAAP net income (loss) per share $ 0.04 $ 0.14
    (1) For the three months and year ended December 31, 2015, a $3.7 million net cumulative translation adjustment gain was reclassified to earnings as a result of the Company’s exit from certain countries as part of its restructuring plan. For the year ended December 31, 2015, a $4.4 million loss related to the cumulative translation adjustment from the Company’s legacy business in the Republic of Korea was reclassified to earnings as a result of the Ticket Monster disposition.
    (2) The sum of per share amounts for quarterly periods may not equal year-to-date amounts due to rounding.
    Foreign exchange rate neutral operating results are non-GAAP financial measures. The Company reconciles foreign exchange rate neutral operating results to the most comparable U.S. GAAP financial measures, “Gross billings,” “Revenue” and “Income (loss) from continuing operations,” respectively, for the periods presented. The Company reconciles “foreign exchange rate neutral Gross billings growth” and “foreign exchange rate neutral Revenue growth” to year-over-year growth rates for the most comparable U.S. GAAP financial measures, “Gross billings growth” and “Revenue growth,” respectively, for the periods presented.
    The effect on the Company’s gross billings, revenue and income (loss) from changes in exchange rates versus the U.S. Dollar for the three months ended December 31, 2015 was as follows:
    Three Months Ended December 31, 2015 Three Months Ended December 31, 2015
    At Avg. Q4 2014 Exchange Rate As At Avg. Q3 2015 Exchange Rate As
    Rates (1) Effect (2) Reported Rates (3) Effect (2) Reported
    Gross billings $ 1,801,559 $ (94,567 ) $ 1,706,992 $ 1,721,580 $ (14,588 ) $ 1,706,992
    Revenue 959,561 (42,391 ) 917,170 923,903 (6,733 ) 917,170
    Income (loss) from operations $ (2,681 ) $ (2,742 ) $ (5,423 ) $ (4,620 ) $ (803 ) $ (5,423 )
    The effect on the Company’s gross billings, revenue and income (loss) from operations from changes in exchange rates versus theU.S. Dollar for the year ended December 31, 2015 was as follows:
    Year Ended December 31, 2015 Year Ended December 31, 2015
    At Avg. Q4 At Avg. Q4’14-
    2014 YTD Exchange Rate As Q3’15 Exchange Rate As
    Rates (1) Effect (2) Reported Rates (3) Effect (2) Reported
    Gross billings $ 6,711,274 $ (455,734 ) $ 6,255,540 $ 6,346,012 $ (90,472 ) $ 6,255,540
    Revenue 3,315,691 (196,175 ) 3,119,516 3,158,228 (38,712 ) 3,119,516
    Income (loss) from operations $ (77,713 ) $ (2,064 ) $ (79,777 ) $ (78,679 ) $ (1,098 ) $ (79,777 )
    (1) Represents the financial statement balances that would have resulted had average exchange rates in the reporting periods been the same as those in effect during the three months and year ended December 31, 2014.
    (2) Represents the increase or decrease in reported amounts resulting from changes in exchange rates from those in effect in the comparable prior periods.
    (3) Represents the financial statement balances that would have resulted had average exchange rates in the reporting periods been the same as those in effect during the three and twelve months ended September 30, 2015.
    The following is a quarterly reconciliation of foreign exchange rate neutral Gross billings growth from the comparable quarterly periods of the prior year to reported Gross billings growth from the comparable quarterly periods of the prior year.
    Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015
    EMEA Gross billings growth, excluding FX 8 % 7 % 9 % (1 ) % (2 ) %
    FX Effect (9 ) (18 ) (19 ) (14 ) (11 )
    EMEA Gross billings growth (1 ) % (11 ) % (10 ) % (15 ) % (13 ) %
    Rest of World Gross billings growth, excluding FX — % (1 ) % 6 % — % (7 ) %
    FX Effect (10 ) (11 ) (15 ) (19 ) (14 )
    Rest of World Gross billings growth (10 ) % (12 ) % (9 ) % (19 ) % (21 ) %
    Consolidated Gross billings growth, excluding FX 13 % 10 % 10 % 6 % 4 %
    FX Effect (5 ) (8 ) (8 ) (8 ) (5 )
    Consolidated Gross billings growth 8 % 2 % 2 % (2 ) % (1 ) %
    The following is a quarterly reconciliation of foreign exchange rate neutral Revenue growth from the comparable quarterly periods of the prior year to reported Revenue growth from the comparable quarterly periods of the prior year.
    Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015
    EMEA Revenue growth, excluding FX 18 % 13 % 9 % 2 % 3 %
    FX Effect (10 ) (19 ) (19 ) (15 ) (12 )
    EMEA Revenue growth 8 % (6 ) % (10 ) % (13 ) % (9 ) %
    Rest of World Revenue growth, excluding FX (9 ) % (8 ) % (4 ) % (5 ) % (8 ) %
    FX Effect (10 ) (10 ) (14 ) (18 ) (15 )
    Rest of World Revenue growth (19 ) % (18 ) % (18 ) % (23 ) % (23 ) %
    Consolidated Revenue growth, excluding FX 19 % 10 % 11 % 7 % 9 %
    FX Effect (4 ) (7 ) (8 ) (7 ) (5 )
    Consolidated Revenue growth 15 % 3 % 3 % — % 4 %
    The effect on North America’s gross billings by category from changes in foreign exchange rates versus the U.S. Dollar for the three months ended December 31, 2015 was as follows:
    Exchange
    At Avg. Q4 Rate December 31, 2015 December 31, 2014 Y/Y % Y/Y% Growth
    2014 Rates (1) Effect (2) As Reported As Reported Growth excluding FX
    Local:
    Third party and other $ 532,015 $ (861 ) $ 531,154 $ 499,250 6.4 % 6.6 %
    Travel:
    Third party 89,589 (200 ) 89,389 80,296 11.3 % 11.6 %
    Total services 621,604 (1,061 ) 620,543 579,546 7.1 % 7.3 %
    Goods:
    Third party 13,401 (450 ) 12,951 8,277 56.5 % 61.9 %
    Direct 416,867 — 416,867 360,756 15.6 15.6
    Total 430,268 (450 ) 429,818 369,033 16.5 % 16.6
    Total gross billings $ 1,051,872 $ (1,511 ) $ 1,050,361 $ 948,579 10.7 % 10.9 %
    The effect on EMEA’s gross billings by category from changes in foreign exchange rates versus the U.S. Dollar for the three months ended December 31, 2015 was as follows:
    Exchange
    At Avg. Q4 Rate December 31, 2015 December 31, 2014 Y/Y % Y/Y% Growth
    2014 Rates (1) Effect (2) As Reported As Reported Growth excluding FX
    Local:
    Third party and other $ 219,817 $ (22,372 ) $ 197,445 $ 242,119 (18.5 ) % (9.2 ) %
    Travel:
    Third party 68,439 $ (8,603 ) 59,836 72,710 (17.7 ) % (5.9 ) %
    Total services 288,256 (30,975 ) 257,281 314,829 (18.3 ) % (8.4 ) %
    Goods:
    Third party 92,612 (9,317 ) 83,295 99,710 (16.5 ) % (7.1 ) %
    Direct 167,761 (21,190 ) 146,571 146,002 0.4 14.9
    Total 260,373 (30,507 ) 229,866 245,712 (6.4 ) % 6.0 %
    Total gross billings $ 548,629 $ (61,482 ) $ 487,147 $ 560,541 (13.1 ) % (2.1 ) %
    The effect on Rest of World’s gross billings by category from changes in foreign exchange rates versus the U.S. Dollar for the three months ended December 31, 2015 was as follows:
    Exchange
    At Avg. Q4 Rate December 31, 2015 December 31, 2014 Y/Y % Y/Y% Growth
    2014 Rates (1) Effect (2) As Reported As Reported Growth excluding FX
    Local:
    Third party and other $ 99,590 $ (16,160 ) $ 83,430 $ 105,420 (20.9 ) % (5.5 ) %
    Travel:
    Third party 31,010 $ (5,641 ) 25,369 32,313 (21.5 ) % (4.0 ) %
    Total services 130,600 (21,801 ) 108,799 137,733 (21.0 ) % (5.2 ) %
    Goods:
    Third party 60,357 (8,144 ) 52,213 69,248 (24.6 ) % (12.8 ) %
    Direct 10,101 (1,629 ) 8,472 8,568 (1.1 ) 17.9
    Total 70,458 (9,773 ) 60,685 77,816 (22.0 ) % (9.5 ) %
    Total gross billings $ 201,058 $ (31,574 ) $ 169,484 $ 215,549 (21.4 ) % (6.7 ) %
    The effect on consolidated gross billings by category from changes in foreign exchange rates versus the U.S. Dollar for the three months ended December 31, 2015 was as follows:
    Exchange
    At Avg. Q4 Rate December 31, 2015 December 31, 2014 Y/Y % Y/Y% Growth
    2014 Rates (1) Effect (2) As Reported As Reported Growth excluding FX
    Local:
    Third party and other $ 851,422 $ (39,393) $ 812,029 $ 846,789 (4.1) % 0.5 %
    Travel:
    Third party $ 189,038 $ (14,444) 174,594 185,319 (5.8) % 2.0 %
    Total services 1,040,460 (53,837) 986,623 1,032,108 (4.4) % 0.8 %
    Goods:
    Third party 166,370 (17,911) 148,459 177,235 (16.2) % (6.1) %
    Direct 594,729 (22,819) 571,910 515,326 11.0 15.4
    Total 761,099 (40,730) 720,369 692,561 4.0 % 9.9 %
    Total gross billings $ 1,801,559 $ (94,567) $ 1,706,992 $ 1,724,669 (1.0) % 4.5 %
    (1) Represents the financial statement balances that would have resulted had average exchange rates in the reporting period been the same as those in effect during the three months ended December 31, 2014.
    (2) Represents the increase or decrease in reported amounts resulting from changes in exchange rates from those in effect in the comparable prior year period.
    Groupon, Inc.
    Supplemental Financial Information and Business Metrics (9) (10)
    (financial data in thousands; active customers in millions)
    (unaudited)
    Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015
    Segments
    North America Segment:
    Gross Billings (1):
    Local (2) Gross Billings $ 499,250 $ 512,558 $ 499,378 $ 481,608 $ 531,154
    Travel Gross Billings 80,296 96,678 102,908 101,801 89,389
    Gross Billings – Services 579,546 609,236 602,286 583,409 620,543
    Gross Billings – Goods 369,033 284,741 293,970 285,794 429,818
    Total Gross Billings $ 948,579 $ 893,977 $ 896,256 $ 869,203 $ 1,050,361
    Year-over-year growth 20 % 14 % 12 % 12 % 11 %
    % Third Party and Other 62 % 69 % 68 % 68 % 60 %
    % Direct 38 % 31 % 32 % 32 % 40 %
    Gross Billings Trailing Twelve Months (TTM) $ 3,303,479 $ 3,415,687 $ 3,513,098 $ 3,608,015 $ 3,709,797
    Revenue (3):
    Local Revenue $ 170,946 $ 180,864 $ 172,461 $ 163,786 $ 184,201
    Travel Revenue 17,165 19,989 21,958 21,394 18,390
    Revenue – Services 188,111 200,853 194,419 185,180 202,591
    Revenue – Goods 362,863 279,029 286,863 278,751 420,056
    Total Revenue $ 550,974 $ 479,882 $ 481,282 $ 463,931 $ 622,647
    Year-over-year growth 24 % 11 % 14 % 11 % 13 %
    % Third Party and Other 35 % 42 % 41 % 40 % 33 %
    % Direct 65 % 58 % 59 % 60 % 67 %
    Revenue TTM $ 1,824,461 $ 1,873,281 $ 1,930,632 $ 1,976,069 $ 2,047,742
    Gross Profit (4):
    Local Gross Profit $ 147,582 $ 154,776 $ 147,574 $ 138,798 $ 159,745
    % of North America Local Gross Billings 29.6 % 30.2 % 29.6 % 28.8 % 30.1 %
    Travel Gross Profit 14,187 15,791 18,385 17,644 15,207
    % of North America Travel Gross Billings 17.7 % 16.3 % 17.9 % 17.3 % 17.0 %
    Gross Profit – Services 161,769 170,567 165,959 156,442 174,952
    % of North America Services Gross Billings 27.9 % 28.0 % 27.6 % 26.8 % 28.2 %
    Gross Profit – Goods 34,404 23,923 30,598 34,801 44,329
    % of North America Goods Gross Billings 9.3 % 8.4 % 10.4 % 12.2 % 10.3 %
    Total Gross Profit $ 196,173 $ 194,490 $ 196,557 $ 191,243 $ 219,281
    Year-over-year growth 13 % 8 % 9 % 9 % 12 %
    % Third Party and Other 83 % 88 % 85 % 83 % 81 %
    % Direct 17 % 12 % 15 % 17 % 19 %
    % of North America Total Gross Billings 20.7 % 21.8 % 21.9 % 22.0 % 20.9 %
    EMEA Segment:
    Gross Billings:
    Local Gross Billings $ 242,119 $ 217,598 $ 198,553 $ 182,540 $ 197,445
    Travel Gross Billings 72,710 65,065 59,544 64,916 59,836
    Gross Billings – Services 314,829 282,663 258,097 247,456 257,281
    Gross Billings – Goods 245,712 176,526 175,439 167,026 229,866
    Total Gross Billings $ 560,541 $ 459,189 $ 433,536 $ 414,482 $ 487,147
    Year-over-year growth (1 ) % (11 ) % (10 ) % (15 ) % (13 ) %
    Year-over-year growth, excluding FX (5) 8 % 7 % 9 % (1 ) % (2 ) %
    % Third Party and Other 74 % 77 % 76 % 75 % 70 %
    % Direct 26 % 23 % 24 % 25 % 30 %
    Gross Billings TTM $ 2,046,807 $ 1,992,408 $ 1,942,689 $ 1,867,748 $ 1,794,354
    Revenue:
    Local Revenue $ 95,572 $ 82,536 $ 75,543 $ 70,781 $ 73,225
    Travel Revenue 16,321 14,717 13,100 13,561 11,681
    Revenue – Services 111,893 97,253 88,643 84,342 84,906
    Revenue – Goods 160,582 118,967 115,404 114,945 163,420
    Total Revenue $ 272,475 $ 216,220 $ 204,047 $ 199,287 $ 248,326
    Year-over-year growth 8 % (6 ) % (10 ) % (13 ) % 9 %
    Year-over-year growth, excluding FX 18 % 13 % 9 % 2 % 3 %
    % Third Party and Other 46 % 51 % 48 % 48 % 41 %
    % Direct 54 % 49 % 52 % 52 % 59 %
    Revenue TTM $ 961,130 $ 946,457 $ 922,814 $ 892,029 $ 867,880
    Gross Profit:
    Local Gross Profit $ 90,150 $ 77,356 $ 70,270 $ 66,288 $ 68,966
    % of EMEA Local Gross Billings 37.2 % 35.5 % 35.4 % 36.3 % 34.9 %
    Travel Gross Profit 15,226 12,400 11,939 12,323 10,732
    % of EMEA Travel Gross Billings 20.9 % 19.1 % 20.1 % 19.0 % 17.9 %
    Gross Profit – Services 105,376 89,756 82,209 78,611 79,698
    % of EMEA Services Gross Billings 33.5 % 31.8 % 31.9 % 31.8 % 31.0 %
    Gross Profit – Goods 38,154 25,481 21,878 24,905 43,026
    % of EMEA Goods Gross Billings 15.5 % 14.4 % 12.5 % 14.9 % 18.7 %
    Total Gross Profit $ 143,530 $ 115,237 $ 104,087 $ 103,516 $ 122,724
    Year-over-year growth (6 ) % (18 ) % (26 ) % (21 ) % (14 ) %
    % Third Party and Other 82 % 87 % 86 % 86 % 77 %
    % Direct 18 % 13 % 14 % 14 % 23 %
    % of EMEA Total Gross Billings 25.6 % 25.1 % 24.0 % 25.0 % 25.2 %
    Rest of World Segment:
    Gross Billings:
    Local Gross Billings $ 105,420 $ 99,735 $ 100,403 $ 92,972 $ 83,430
    Travel Gross Billings 32,313 32,946 31,263 30,709 25,369
    Gross Billings – Services 137,733 132,681 131,666 123,681 108,799
    Gross Billings – Goods 77,816 66,154 67,555 60,168 60,685
    Total Gross Billings $ 215,549 $ 198,835 $ 199,221 $ 183,849 $ 169,484
    Year-over-year growth (10 ) % (12 ) % (9 ) % (19 ) % (21 ) %
    Year-over-year growth, excluding FX — % (1 ) % 6 % — % (7 ) %
    % Third Party and Other 96 % 98 % 97 % 96 % 95 %
    % Direct 4 % 2 % 3 % 4 % 5 %
    Gross Billings TTM $ 887,546 $ 861,032 $ 840,243 $ 797,454 $ 751,389
    Revenue:
    Local Revenue $ 32,264 $ 30,281 $ 28,499 $ 26,372 $ 22,229
    Travel Revenue 5,757 6,495 6,363 6,135 5,098
    Revenue – Services 38,021 36,776 34,862 32,507 27,327
    Revenue – Goods 21,758 17,478 18,204 17,870 18,870
    Total Revenue $ 59,779 $ 54,254 $ 53,066 $ 50,377 $ 46,197
    Year-over-year growth (19 ) % (18 ) % (18 ) % (23 ) % (23 ) %
    Year-over-year growth, excluding FX (9 ) % (8 ) % (4 ) % (5 ) % (8 ) %
    % Third Party and Other 86 % 91 % 87 % 86 % 82 %
    % Direct 14 % 9 % 13 % 14 % 18 %
    Revenue TTM $ 256,532 $ 244,326 $ 232,802 $ 217,476 $ 203,894
    Gross Profit:
    Local Gross Profit $ 27,175 $ 26,161 $ 24,567 $ 22,568 $ 18,889
    % of Rest of World Local Gross Billings 25.8 % 26.2 % 24.5 % 24.3 % 22.6 %
    Travel Gross Profit 3,815 4,906 5,012 4,859 4,040
    % of Rest of World Travel Gross Billings 11.8 % 14.9 % 16.0 % 15.8 % 15.9 %
    Gross Profit – Services 30,990 31,067 29,579 27,427 22,929
    % of Rest of World Services Gross Billings 22.5 % 23.4 % 22.5 % 22.2 % 21.1 %
    Gross Profit – Goods 7,416 6,612 6,784 6,726 6,806
    % of Rest of World Goods Gross Billings 9.5 % 10.0 % 10.0 % 11.2 % 11.2 %
    Total Gross Profit $ 38,406 $ 37,679 $ 36,363 $ 34,153 $ 29,735
    Year-over-year growth (24 ) % (16 ) % (20 ) % (28 ) % (23 ) %
    % Third Party and Other 96 % 99 % 99 % 99 % 99 %
    % Direct 4 % 1 % 1 % 1 % 1 %
    % of Rest of World Total Gross Billings 17.8 % 18.9 % 18.3 % 18.6 % 17.5 %
    Consolidated Results of Operations:
    Gross Billings:
    Local Gross Billings $ 846,789 $ 829,891 $ 798,334 $ 757,120 $ 812,029
    Travel Gross Billings 185,319 194,689 193,715 197,426 174,594
    Gross Billings – Services 1,032,108 1,024,580 992,049 954,546 986,623
    Gross Billings – Goods 692,561 527,421 536,964 512,988 720,369
    Total Gross Billings $ 1,724,669 $ 1,552,001 $ 1,529,013 $ 1,467,534 $ 1,706,992
    Year-over-year growth 8 % 2 % 2 % (2 ) % (1 ) %
    Year-over-year growth, excluding FX 13 % 10 % 10 % 6 % 4 %
    % Third Party and Other 70 % 75 % 74 % 74 % 66 %
    % Direct 30 % 25 % 26 % 26 % 34 %
    Gross Billings TTM $ 6,237,832 $ 6,269,127 $ 6,296,030 $ 6,273,217 $ 6,255,540
    Year-over-year growth 8 % 7 % 6 % 3 % — %
    Revenue:
    Local Revenue $ 298,782 $ 293,681 $ 276,503 $ 260,939 $ 279,655
    Travel Revenue 39,243 41,201 41,421 41,090 35,169
    Revenue – Services 338,025 334,882 317,924 302,029 314,824
    Revenue – Goods 545,203 415,474 420,471 411,566 602,346
    Total Revenue $ 883,228 $ 750,356 $ 738,395 $ 713,595 $ 917,170
    Year-over-year growth 15 % 3 % 3 % — % 4 %
    Year-over-year growth, excluding FX 19 % 10 % 11 % 7 % 9 %
    % Third Party and Other 42 % 48 % 46 % 46 % 38 %
    % Direct 58 % 52 % 54 % 54 % 62 %
    Revenue TTM $ 3,042,123 $ 3,064,064 $ 3,086,248 $ 3,085,574 $ 3,119,516
    Year-over-year growth 18 % 13 % 10 % 5 % 3 %
    Gross Profit:
    Local Gross Profit $ 264,907 $ 258,293 $ 242,411 $ 227,654 $ 247,600
    % of Consolidated Local Gross Billings 31.3 % 31.1 % 30.4 % 30.1 % 30.5 %
    Travel Gross Profit 33,228 33,097 35,336 34,826 29,979
    % of Consolidated Travel Gross Billings 17.9 % 17.0 % 18.2 % 17.6 % 17.2 %
    Gross Profit – Services 298,135 291,390 277,747 262,480 277,579
    % of Consolidated Services Gross Billings 28.9 % 28.4 % 28.0 % 27.5 % 28.1 %
    Gross Profit – Goods 79,974 56,016 59,260 66,432 94,161
    % of Consolidated Goods Gross Billings 11.5 % 10.6 % 11.0 % 13.0 % 13.1 %
    Total Gross Profit $ 378,109 $ 347,406 $ 337,007 $ 328,912 $ 371,740
    Year-over-year growth — % (5 ) % (8 ) % (7 ) % (2 ) %
    % Third Party and Other 84 % 89 % 87 % 85 % 81 %
    % Direct 16 % 11 % 13 % 15 % 19 %
    % of Total Consolidated Gross Billings 21.9 % 22.4 % 22.0 % 22.4 % 21.8 %
    Marketing $ 59,812 $ 52,533 $ 57,007 $ 61,587 $ 83,208
    Selling, general and administrative $ 285,466 $ 289,847 $ 288,721 $ 326,248 $ 287,976
    Adjusted EBITDA $ 92,914 $ 72,370 $ 61,118 $ 56,334 $ 67,010
    % of Total Consolidated Gross Billings 5.4 % 4.7 % 4.0 % 3.8 % 3.9 %
    % of Total Consolidated Revenue 10.5 % 9.6 % 8.3 % 7.9 % 7.3 %
    Free cash flow is a non-GAAP financial measure. The following is a reconciliation of free cash flow to the most comparable U.S.GAAP financial measure, “Net cash provided by (used in) operating activities from continuing operations.”
    Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015
    Net cash provided by (used in) operating activities from continuing operations $ 273,272 $ 40,711 $ 9,995 $ (7,612 ) $ 249,024
    Purchases of property and equipment and capitalized software from continuing operations (20,117 ) (18,294 ) (22,452 ) (27,735 ) (15,507 )
    Free cash flow $ 253,155 $ 22,417 $ (12,457 ) $ (35,347 ) $ 233,517
    Net cash provided by (used in) operating activities from continuing operations (TTM) $ 252,497 $ 307,782 $ 346,302 $ 316,366 $ 292,118
    Purchases of property and equipment and capitalized software from continuing operations (TTM) (83,560 ) (85,761 ) (79,501 ) (88,598 ) (83,988 )
    Free cash flow (TTM) $ 168,937 $ 222,021 $ 266,801 $ 227,768 $ 208,130
    Net cash provided by (used in) investing activities from continuing operations $ (35,175 ) $ (19,443 ) $ (28,541 ) $ (98,028 ) $ (31,238 )
    Net cash provided by (used in) financing activities $ (21,088 ) $ (32,942 ) $ (138,227 ) $ (14,821 ) $ (322,166 )
    Net cash provided by (used in) investing activities from continuing operations (TTM) $ (152,818 ) $ (105,821 ) $ (102,205 ) $ (181,187 ) $ (177,250 )
    Net cash provided by (used in) financing activities (TTM) $ (194,156 ) $ (185,606 ) $ (209,080 ) $ (207,078 ) $ (508,156 )
    Other Metrics:
    Active Customers (6)
    North America 24.1 24.6 24.9 25.2 25.9
    EMEA 15.2 15.3 15.5 15.4 15.4
    Rest of World 8.1 8.2 8.2 8.0 7.6
    Total Active Customers 47.4 48.1 48.6 48.6 48.9
    TTM Gross Billings / Average Active Customer (7)
    North America $ 147 $ 147 $ 148 $ 148 $ 149
    EMEA 139 134 130 123 117
    Rest of World 105 101 98 99 96
    Consolidated 137 135 133 132 130
    Global headcount as of December 31, 2015 and 2014 was as follows:
    Q4 2014 Q4 2015
    Sales (8) 4,493 3,992
    % North America 31 % 34 %
    % EMEA 42 % 41 %
    % Rest of World 27 % 25 %
    Other 6,256 5,880
    Total Headcount 10,749 9,872
    (1) Represents the total dollar value of customer purchases of goods and services, excluding applicable taxes and net of estimated refunds.
    (2) Local represents deals with local and national merchants and through local events. Other revenue transactions include advertising, payment processing and commission revenue.
    (3) Includes third party revenue, direct revenue and other revenue. Third party revenue is related to sales for which the Company acts as a marketing agent for the merchant. This revenue is recorded on a net basis. Direct revenue is primarily related to the sale of merchandise for which the Company is the merchant of record. These revenues are accounted for on a gross basis, with the cost of inventory included in cost of revenue. Other revenue primarily consists of commission revenue, payment processing revenue and advertising revenue.
    (4) Represents third party revenue, direct revenue and other revenue reduced by cost of revenue.
    (5) Represents the change in financial measures that would have resulted had average exchange rates in the reporting periods been the same as those in effect in the prior year periods.
    (6) Reflects the total number of unique user accounts who have purchased a voucher or product from us during the trailing twelve months.
    (7) Reflects the total gross billings generated in the trailing twelve months per average active customer over that period.
    (8) Includes merchant sales representatives, as well as sales support from continuing operations.
    (9) Financial information and other metrics have been retrospectively adjusted to exclude Ticket Monster, which has been classified as discontinued operations.
    (10) The definition, methodology and appropriateness of each of our supplemental metrics is reviewed periodically. As a result, metrics are subject to removal and/or change.

    Groupon, Inc.
    Investor Relations
    Tom Grant, 312-999-3098
    ir@groupon.com
    or
    Public Relations
    Bill Roberts, 312-459-5191

    Source: Groupon, Inc.

    Image via Groupon

  • Twitter Earnings Out, User Growth Stalled

    Twitter Earnings Out, User Growth Stalled

    Twitter just released its financials for the fourth quarter, meeting Wall Street expectations on revenue and beating on earnings per share ($710 million and 16 cents respectively).

    However, the company failed to make an impact on its biggest area of concern, which is user growth. Twitter reported 320 million monthly active users, which is the same as what it reported for Q3.

    Twitter said in a letter to shareholders, “2015 was another very strong year for Twitter. Total revenue reached $2.2 billion, up 58% year over year with more than $550 million in adjusted EBITDA. We made significant progress in scaling the total number of active advertisers to 130,000 in Q4, up almost 90% year over year. It’s remarkable we built this business in just five years from zero revenue. We saw a decline in monthly active usage in Q4, but we’ve already seen January monthly actives bounce back to Q3 levels. We’re confident that, with disciplined execution, this growth trend will continue over time.”

    Ad revenue for the fourth quarter was$641 million,(up 48% year-over-year). Mobile ad revenue was 86% of total ad revenue.

    “Total average monthly active users (MAUs) were 320 million for Q4, up 9% year-over-year, compared to 320 million in the previous quarter,” the company reported. “Excluding SMS Fast Followers, MAUs were 305 million for Q4, up 6% year-over-year, compared to 307 million in the previous quarter. Mobile MAUs represented approximately 80% of total MAUs. Total audience, which consists of MAUs and monthly logged-out visitors, totaled more than 800 million in Q4.”

    That user growth problem appears to be what Wall Street remains fixated on as stock quickly sank following the earnings release.


    You can see all the numbers in the shareholder letter here.

    Image via Jack Dorsey (Twitter)

  • Yelp Earnings Out, CFO Steps Down

    Yelp just released its financials for Q4 and full year 2015 with revenue of 153.7 million (up 40% year-over-year) for the quarter.

    Cumulative reviews grew 34% to approximately 95 million. Local advertising accounts grew 32% to approximately 111,000.

    CEO Jeremy Stoppelman said, “We are pleased with the progress we made on the key initiatives we set at the beginning of 2015. We have evolved to a mobile-centric company and have successfully completed our transition to a performance-based advertising business. In 2016, our priorities are to continue to build our core local advertising business, further increase engagement and awareness and grow transactions. With our rich, relevant review content and highly engaged consumer traffic, we are well-positioned to capture the enormous opportunity ahead of us.”

    The company also announced that CFO Rob Krolik is stepping down.

    “Rob has played a crucial role in Yelp’s successful transition from startup to public company, bringing his professionalism and experience to bear in setting Yelp on a firm financial foundation and headed in the right direction,” said Stoppelman. “I am grateful for his counsel, his leadership and work on our public offerings and five acquisitions, and his efforts in opening facilities around the world to accommodate our more than 4,000 employees. I will miss his passion for Yelp and wish him continued success in his next endeavor.”

    “I am a strong believer in the power of Yelp to help consumers and local businesses alike, which is why it has been such a tremendous opportunity and privilege to serve as CFO,” said Krolik. “It’s been a rewarding experience taking Yelp public, diversifying our offerings through acquisitions, and seeing our team deliver significant and consistent revenue growth year after year. After almost five years with Yelp, I am ready to take some time off to spend more time with family, but expect us to seamlessly transition to a new chief financial officer in the meantime.”

    Here’s the release in its entirety:

    SAN FRANCISCO, Feb. 8, 2016 /PRNewswire/ — Yelp Inc. (NYSE: YELP), the company that connects consumers with great local businesses, today announced financial results for the fourth quarter and full year endedDecember 31, 2015.

    Yelp logo. (PRNewsFoto)
    • Net revenue was $153.7 million in the fourth quarter of 2015, reflecting 40% growth over the fourth quarter of 2014.
    • Cash flow from operations was $3.8 million in the fourth quarter. Adjusted EBITDA for the fourth quarter of 2015 was $17.5 million.
    • Cumulative reviews grew 34% year over year to approximately 95 million.
    • App Unique Devices grew 38% year over year to approximately 20 million on a monthly average basis1.
    • Local advertising accounts grew 32% year over year to approximately 111,000.

    Net loss in the fourth quarter of 2015 was ($22.2) million, or ($0.29) per share, compared to net income of $32.7 million, or $0.42 per share, in the fourth quarter of 2014. Net loss for the fourth quarter of 2015 included an income tax expense of $20.3 million due to the recording of a valuation allowance against our deferred tax assets. Non-GAAP net income, which consists of net income excluding stock-based compensation, amortization and valuation allowance and release, was $9.0 million for the fourth quarter, or $0.11 per share, compared to $14.5 million, or $0.19 per share, in the fourth quarter of 2014.

    Net revenue for the full year ended December 31, 2015 was $549.7 million, an increase of 46% compared to $377.5 million in the prior year. Adjusted EBITDA for the full year 2015 was $69.1 million compared to $70.9 million for the prior year. Net loss for the full year ended December 31, 2015 was ($32.9) million, or ($0.44) per share, compared to a net income of $36.5 million, or $0.48 per share, in 2014. Non-GAAP net income for the full year ended December 31, 2015 was $28.9 million, or $0.37 per share, compared to $36.3 million, or $0.47 per share in 2014.

    “We are pleased with the progress we made on the key initiatives we set at the beginning of 2015,” said Jeremy Stoppelman, Yelp’s co-founder and chief executive officer. “We have evolved to a mobile-centric company and have successfully completed our transition to a performance-based advertising business. In 2016, our priorities are to continue to build our core local advertising business, further increase engagement and awareness and grow transactions. With our rich, relevant review content and highly engaged consumer traffic, we are well-positioned to capture the enormous opportunity ahead of us.”

    “We delivered strong topline growth of 46% year over year as we surpassed half a billion dollars of revenue in 2015,” added Rob Krolik, Yelp’s chief financial officer.

    Fourth Quarter Operating Summary

    • Local advertising revenue totaled $125.9 million, representing 35% growth compared to the fourth quarter of 2014.
    • Transactions revenue totaled $14.0 million, compared to $1.4 million in the fourth quarter of 2014, primarily due to the acquisition of Eat24 in the first quarter of 2015.
    • Brand advertising revenue totaled $7.1 million, representing an 18% decrease compared to the fourth quarter of 2014. Yelp has completed the phase out of its brand advertising product and will have no Brand advertising revenue in 2016.
    • Other revenue totaled $6.8 million which was flat compared to the fourth quarter of 2014.

    Business Highlights

    • App engagement: Approximately 20 million unique devices accessed Yelp via the mobile app on a monthly average basis in the fourth quarter of 2015, an increase of 38% compared to the same period in 2014. In the fourth quarter of 2015, Yelp app users were more than 10 times as engaged as website users based on number of pages viewed.
    • Performance-based advertising: In 2015, Yelp completed its transition to a performance-based advertising business. As of the fourth quarter of 2015, 61% of local advertising revenue came from CPC advertisers, compared to 32% in the fourth quarter of 2014.
    • Eat24 & SeatMe: In 2015, Yelp acquired leading web and app-based online food ordering service Eat24. In the fourth quarter, Eat24 revenue growth accelerated, with revenue up approximately 80% compared to the fourth quarter of 2014. In the fourth quarter of 2015, over 15 million diners were seated through SeatMe, an increase of approximately 120% over the fourth quarter of 2014.

    CFO Transition

    The company announced that chief financial officer Rob Krolik will be stepping down and departing the company in the coming months. Krolik, who joined the company in 2011, will continue as chief financial officer until the earlier of the date a replacement is hired and December 15, 2016, and will assist in the search and transition. The company intends to immediately begin a search for a new chief financial officer.

    “Rob has played a crucial role in Yelp’s successful transition from startup to public company, bringing his professionalism and experience to bear in setting Yelp on a firm financial foundation and headed in the right direction,” said Jeremy Stoppelman. “I am grateful for his counsel, his leadership and work on our public offerings and five acquisitions, and his efforts in opening facilities around the world to accommodate our more than 4,000 employees. I will miss his passion for Yelp and wish him continued success in his next endeavor.”

    “I am a strong believer in the power of Yelp to help consumers and local businesses alike, which is why it has been such a tremendous opportunity and privilege to serve as CFO,” said Krolik. “It’s been a rewarding experience taking Yelp public, diversifying our offerings through acquisitions, and seeing our team deliver significant and consistent revenue growth year after year. After almost five years with Yelp, I am ready to take some time off to spend more time with family, but expect us to seamlessly transition to a new chief financial officer in the meantime.”

    Business Outlook

    As of today, Yelp is providing its outlook for the first quarter and full year of 2016.

    • For the first quarter of 2016, net revenue is expected to be in the range of $154 million to $157 million, representing growth of approximately 31% compared to the first quarter of 2015 at the the midpoint. Adjusted EBITDA is expected to be in the range of $10 million to $12 million. Stock-based compensation is expected to be in the range of $19 million to $21 million, and depreciation and amortization is expected to be approximately 5% of revenue.
    • For the full year of 2016, net revenue is expected to be in the range of $685 million to $700 million, representing growth of approximately 26% compared to full year 2015 at the midpoint. Adjusted EBITDA is expected to be in the range of $90 million to $105 million. Stock-based compensation is expected to be in the range of $83 million to $87 million, and depreciation and amortization is expected to be approximately 5% of revenue.

    Quarterly Conference Call

    To access the call, please dial 1 (866) 776-8879, or outside the U.S. 1 (440) 996-5670, with Passcode 29597481, at least five minutes prior to the 1:30 p.m. PT start time.  A live webcast of the call will also be available at http://www.yelp-ir.com under the Events & Presentations menu.  An audio replay will be available between 4:00 p.m. PT February 8, 2016 and 11:59 p.m. PT February 15, 2016 by calling 1 (855) 859-2056 or 1 (800) 585-8367, with Passcode 29597481.  The replay will also be available on the Company’s website at http://www.yelp-ir.com.

    About Yelp

    Yelp Inc. (http://www.yelp.com) connects people with great local businesses. Yelp was founded in San Franciscoin July 2004. Since then, Yelp communities have taken hold in major metros across more than 30 countries. Approximately 20 million unique devices1 accessed Yelp via the Yelp app, approximately 75 million unique visitors visited Yelp via desktop computer2 and approximately 66 million unique visitors visited Yelp via mobile website3 on a monthly average basis during the fourth quarter of 2015. By the end of the same quarter, Yelpers had written approximately 95 million rich, local reviews, making Yelp the leading local guide for real word-of-mouth on everything from boutiques and mechanics to restaurants and dentists.

    1 Calculated as the number of unique devices accessing the app on a monthly average basis over a given three-month period, according to internal Yelp logs.

    2 Calculated as the number of “users,” as measured by Google Analytics, accessing Yelp via desktop computer on an average monthly basis over a given three-month period.

    3 Calculated as the number of “users,” as measured by Google Analytics, accessing Yelp via mobile website on a monthly average basis over a given three-month period.

    Non-GAAP Financial Measures

    This press release includes information relating to adjusted EBITDA, non-GAAP net income and non-GAAP net income per share, each of which the Securities and Exchange Commission has defined as a “non-GAAP financial measure.” Adjusted EBITDA, non-GAAP net income and non-GAAP net income per share have been included in this press release because they are key measures used by Yelp management and board of directors to understand and evaluate core operating performance and trends, to prepare and approve its annual budget and to develop short- and long-term operational plans. The presentation of this financial information, which is not prepared under any comprehensive set of accounting rules or principles, is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with generally accepted accounting principles in the United States (“GAAP”).

    Adjusted EBITDA and non-GAAP net income have limitations as analytical tools, and you should not consider them in isolation or as substitutes for analysis of Yelp’s financial results as reported under GAAP. Some of these limitations are:

    • although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and adjusted EBITDA and non-GAAP net income do not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements;
    • adjusted EBITDA does not reflect changes in, or cash requirements for, Yelp’s working capital needs;
    • adjusted EBITDA and non-GAAP net income do not consider the potentially dilutive impact of equity-based compensation;
    • non-GAAP net income does not reflect the impact of the valuation allowance release in the fourth quarter of 2014 or the recording of the valuation allowance in the fourth quarter of 2015;
    • adjusted EBITDA does not reflect tax payments that may represent a reduction in cash available to Yelp; and
    • other companies, including those in Yelp’s industry, may calculate adjusted EBITDA and non-GAAP net income differently, which reduces their usefulness as comparative measures.

    Because of these limitations, you should consider adjusted EBITDA, non-GAAP net income and non-GAAP net income per share alongside other financial performance measures, including various cash flow metrics, net income (loss) and Yelp’s other GAAP results. Additionally, Yelp has not reconciled its adjusted EBITDA outlook for the first quarter and full year 2016 to its net income (loss) outlook because it does not provide an outlook for other income (expense) and provision for income taxes, which are reconciling items between net income (loss) and adjusted EBITDA. As items that impact net income (loss) are out of Yelp’s control and cannot be reasonably predicted, Yelp is unable to provide such an outlook. Accordingly, reconciliation to net income (loss) outlook for the first quarter and full year 2016 is not available without unreasonable effort. For a reconciliation of historical non-GAAP financial measures to the nearest comparable GAAP measures, see the non-GAAP reconciliations included below in this press release.

    Forward-Looking Statements

    This press release contains forward-looking statements relating to, among other things, the future performance of Yelp and its consolidated subsidiaries that are based on Yelp’s current expectations, forecasts and assumptions and involve risks and uncertainties. These statements include, but are not limited to, statements regarding expected financial results for the first quarter and full year 2016, Yelp’s priorities for 2016 and its ability to execute against those priorities, CFO transition and timing thereof, Yelp’s ability to improve its margins, Yelp’s ability to capture a meaningful share of the large local market, the future growth in Yelp revenue and continued investing by Yelp in its future growth, Yelp’s ability to drive daily usage and engagement (particularly on mobile), increase awareness of Yelp among consumers, and deliver value to local businesses, Yelp’s ability to increase transactions completed on its platform, Yelp’s ability to take advantage of trends toward app usage and native advertising and to become the leading destination for consumers connecting with great local businesses. Yelp’s actual results could differ materially from those predicted or implied and reported results should not be considered as an indication of future performance. Factors that could cause or contribute to such differences include, but are not limited to: Yelp’s limited operating history in an evolving industry; Yelp’s ability to generate sufficient revenue to regain profitability, particularly in light of its significant ongoing sales and marketing expenses; Yelp’s ability to successfully manage acquisitions of new businesses, solutions or technologies, such as Eat24, and to integrate those businesses, solutions or technologies; Yelp’s reliance on traffic to its website from search engines like Google and Bing; Yelp’s ability to generate and maintain sufficient high quality content from its users; maintaining a strong brand and managing negative publicity that may arise; maintaining and expanding Yelp’s base of advertisers; changes in political, business and economic conditions, including any European or general economic downturn or crisis and any conditions that affect ecommerce growth; fluctuations in foreign currency exchange rates; Yelp’s  ability to deal with the increasingly competitive local search environment; Yelp’s need and ability to manage other regulatory, tax and litigation risks as its services are offered in more jurisdictions and applicable laws become more restrictive; the competitive and regulatory environment while Yelp continues to expand geographically and introduce new products and as new laws and regulations related to Internet companies come into effect; Yelp’s ability to timely upgrade and develop its systems, infrastructure and customer service capabilities. The forward-looking statements in this release do not include the potential impact of any acquisitions or divestitures that may be announced and/or completed after the date hereof.

    More information about factors that could affect Yelp’s operating results is included under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Yelp’s most recent Annual Report on Form 10-K or Quarterly Report on Form 10-Q at http://www.yelp-ir.com or theSEC’s website at www.sec.gov. Undue reliance should not be placed on the forward-looking statements in this release, which are based on information available to Yelp on the date hereof. Yelp assumes no obligation to update such statements.

    Investor Relations Contact Information
    Wendy Lim, Ronald Clark, Allie Dalglish
    (415) 635-2412
    ir@yelp.com

    Media Contact Information
    Shannon Eis
    (415) 635-2478
    seis@yelp.com

     

    Yelp Inc.
    Condensed Consolidated Balance Sheets
    (In thousands)
    (Unaudited)
    December 31, December 31,
    2015 2014
    Assets
    Current assets:
    Cash and cash equivalents $         171,613 $        247,312
    Short-term marketable securities 199,214 118,498
    Accounts receivable, net 52,755 35,593
    Prepaid expenses and other current assets 19,700 19,355
    Total current assets 443,282 420,758
    Long-term marketable securities – 38,612
    Property, equipment and software, net 80,467 62,761
    Goodwill 172,197 67,307
    Intangibles, net 39,294 5,786
    Restricted cash 16,486 17,943
    Other assets 3,701 16,483
    Total assets $         755,427 $        629,650
    Liabilities  and stockholders’ equity
    Current liabilities:
    Accounts payable $             3,388 $            1,398
    Accrued liabilities 43,458 29,581
    Deferred revenue 2,931 2,994
    Total current liabilities 49,777 33,973
    Long-term liabilities 12,030 7,527
    Total liabilities 61,807 41,500
    Stockholders’ equity
    Common stock – –
    Additional paid-in capital 774,022 627,742
    Accumulated other comprehensive loss (13,519) (5,609)
    Accumulated deficit (66,883) (33,983)
    Total stockholders’ equity 693,620 588,150
    Total liabilities and stockholders’ equity $          755,427 $         629,650

     

    Yelp Inc.
    Condensed Consolidated Statements of Operations
    (In thousands, except per share amounts)
    (Unaudited)
    Three Months Ended Twelve Months Ended
    December 31, December 31,
    2015 2014 2015 2014
    Net revenue $ 153,731 $ 109,887 $ 549,711 $ 377,536
    Costs and expenses
    Cost of revenue (1) 15,000 7,286 51,015 24,382
    Sales and marketing (1) 87,535 53,580 301,764 201,050
    Product development (1) 28,970 19,076 107,786 65,181
    General and administrative (1) 20,659 16,662 80,866 58,274
    Depreciation and amortization 7,980 5,291 29,604 17,590
    Total costs and expenses 160,144 101,895 571,035 366,477
    Income (Loss) from operations (6,413) 7,992 (21,324) 11,059
    Other income (expense), net 40 38 386 221
    Income (Loss) before income taxes (6,373) 8,030 (20,938) 11,280
    Benefit (Provision) for income taxes (15,856) 24,698 (11,962) 25,193
    Net income (loss) attributable to common stockholders $ (22,229) $   32,728 $ (32,900) $   36,473
    Net income (loss) per share attributable to common stockholders:
    Basic $     (0.29) $       0.45 $     (0.44) $       0.51
    Diluted $     (0.29) $       0.42 $     (0.44) $       0.48
    Weighted-average shares used to compute net income (loss) per share attributable to common stockholders:
    Basic 75,372 72,645 74,683 71,936
    Diluted 75,372 77,211 74,683 76,712
    (1) Includes stock-based compensation expense as follows:
    Three Months Ended Twelve Months Ended
    December 31, December 31,
    2015 2014 2015 2014
    Cost of revenue $        336 $        207 $     1,117 $        729
    Sales and marketing 5,803 4,038 21,962 15,083
    Product development 6,314 4,508 23,431 14,804
    General and administrative 3,519 3,063 14,332 11,657
    Total stock-based compensation $   15,972 $   11,816 $   60,842 $   42,273

     

    Yelp Inc.
    Condensed Consolidated Statements of Cash Flows
    (In thousands)
    (Unaudited)
    Twelve Months Ended
    December 31,
    2015 2014
    Operating activities
    Net income (loss) $ (32,900) $  36,473
     Adjustments to reconcile net income (loss) to net cash provided by operating activities:
      Depreciation and amortization 29,604 17,590
      Provision for doubtful accounts and sales returns 16,788 7,238
      Stock-based compensation 60,842 42,273
      Recording (Release) of valuation allowance 20,341 (28,197)
      Loss on disposal of assets and website development costs 213 4
      Premium amortization, net, on securities held-to-maturity 1,190 349
      Excess tax benefit from share-based award activity (6,583) (1,834)
      Realized (gain) on investments (4) –
    Changes in operating assets and liabilities:
    Accounts receivable (25,279) (21,291)
    Prepaid expenses and other assets (22,703) (4,011)
    Accounts payable, accrued expenses and other liabilities 15,894 8,927
    Deferred revenue (41) 411
    Net cash provided by operating activities 57,362 57,932
    Investing activities
    Acquisition, net of cash received (73,422) (14,340)
    Purchases of property, equipment and software (31,127) (29,054)
    Capitalized website and software development costs (11,734) (11,349)
    Change in restricted cash 1,404 (14,764)
    Purchase of intangibles (647) (1,724)
    Proceeds from sale of property and equipment 134 14
    Purchases of marketable securities (246,160) (210,459)
    Maturities of marketable securities 202,870 53,002
    Net cash used in investing activities (158,682) (228,674)
    Financing activities
    Issuance of common stock upon exercise of employee stock options 12,255 –
    Proceeds from issuance of common stock from share-based awards – 20,164
    Proceeds from issuance of common stock for Employee Stock Purchase Plan 8,911 8,869
    Repurchase of common stock (482) (1,318)
    Excess tax benefit from stock-based award activity 6,583 1,834
    Contingent consideration payments (825) –
    Net cash provided by financing activities 26,442 29,549
    Effect of exchange rate changes on cash and cash equivalents (821) (1,259)
    Change in cash and cash equivalents (75,699) (142,452)
    Cash and cash equivalents – Beginning of period 247,312 389,764
    Cash and cash equivalents – End of period $ 171,613 $ 247,312

     

    Yelp Inc.
    Reconciliation of GAAP to Non-GAAP Financial Measures
    (In thousands)
    (Unaudited)
    Three Months Ended Twelve Months Ended
    December 31, December 31,
    2015 2014 2015 2014
    Adjusted EBITDA:
    Net income (loss) $ (22,229) $ 32,728 $ (32,900) $ 36,473
    (Benefit) provision for income taxes 15,856 (24,698) 11,962 (25,193)
    Other (income) expense, net (40) (38) (386) (221)
    Depreciation and amortization 7,980 5,291 29,604 17,590
    Stock-based compensation 15,972 11,816 60,842 42,273
    Adjusted EBITDA $  17,539 $ 25,099 $  69,122 $ 70,922
    Non-GAAP Net Income (Loss) and Income (Loss) per share:
    GAAP net income (loss) $ (22,229) $ 32,728 $ (32,900) $ 36,473
       Add back: stock-based compensation 15,972 11,816 60,842 42,273
       Add back: amortization of intangible assets 1,718 550 6,475 2,448
       Less: tax effect of stock-based compensation & amortization of intangible assets  

    (6,827)

    		  

    (4,422)

    		  

    (25,853)

    		  

    (16,654)
       Add back: recording (release) of valuation allowance (net of tax) 20,341 (26,197) 20,341 (28,197)
    NON-GAAP NET INCOME $    8,975 $ 14,475 $  28,905 $ 36,343
    GAAP diluted shares 78,166 77,211 78,078 76,712
    NON-GAAP NET INCOME PER SHARE $      0.11 $     0.19 $      0.37 $     0.47

     

    Logo – http://photos.prnewswire.com/prnh/20150714/236436LOGO

     

    To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/yelp-announces-fourth-quarter-and-full-year-2015-financial-results-300216659.html

    SOURCE Yelp Inc.

    Image via Yelp (Flickr)

  • LinkedIn Earnings Out, Revenue up 34%

    LinkedIn Earnings Out, Revenue up 34%

    LinkedIn reported its financials for Q4 and full-year 2015 with revenue up 34% year-over-year at $862 million for the quarter. Earnings per share for the quarter were $0.94, which was better than Wall Street expectations.

    Still, stock is plummeting after worse than expected Q1 projections like $820 million projected for Q1 revenue.

    The reported 414 million members (up 19%).

    Here’s the full earnings release:

    MOUNTAIN VIEW, Calif., February 4, 2016 – LinkedIn Corporation (NYSE: LNKD), the world’s largest professional network on the Internet, reported results for the fourth quarter and full year 2015. The transcript with prepared remarks is contained within this press release. In addition, a supplemental presentation will be made available on the investor relations section of the LinkedIn website at http://investors.linkedin.com.

    “Q4 was a strong quarter for LinkedIn, bringing to a close a successful year of growth and innovation against our long-term roadmap,” said Jeff Weiner, CEO of LinkedIn. “We enter 2016 with increased focus on core initiatives that will drive leverage across our portfolio of products.”

    During the quarter, LinkedIn made solid progress against its long-term product strategy to create value for members by connecting them to opportunity. We launched our reimagined flagship app in December, created a more streamlined experience for members to follow personalized and relevant content in the feed, and continued to scale the number of jobs on the platform to now more than six million open listings.

    Revenue increased 34% year-over-year in the fourth quarter to $862 million and increased 35% in 2015 to $2,991 million.

    Talent Solutions revenue (inclusive of Learning & Development) increased 45% year-over-year in the fourth quarter to $535 million and increased 41% year-over-year to $1,877 million in 2015.

    • Hiring revenue contributed $487 million and $1,770 million in the fourth quarter and 2015, respectively, which represents increases of 32% and 33% compared to the same periods last year. These increases were driven by strength in new account performance within field sales and continued strength in online subscriptions.
    • Learning & Development revenue contributed $49 million and $107 million in the fourth quarter and 2015, respectively.

    Marketing Solutions revenue increased 20% year-over-year in the fourth quarter to $183 million and increased 28% to $581 million in 2015.

    • Sponsored Updates performance was the primary driver of growth, surpassing 50% of total Marketing Solutions revenue for the first time, while premium display faced secular-driven headwinds similar to prior quarters.

    Premium Subscriptions revenue increased 19% year-over-year in the fourth quarter to $144 million and increased 22% year-over-year to $532 million in 2015.

    • Sales Navigator remained the faster growing component of Premium Subscriptions with continued  improvement in customer satisfaction and product usage.

    Adjusted EBITDA was $249 million in the fourth quarter, or 29% of revenue. Adjusted EBITDA was $780 million in 2015, or 26% of revenue.

    GAAP net loss attributable to common stockholders was $8 million in the fourth quarter and $166 million in 2015. Non-GAAP net income was $126 million in the fourth quarter and $373 million in 2015.

    GAAP diluted EPS was $(0.06) in the fourth quarter compared to $0.02 in the same period last year. GAAP diluted EPS was $(1.29) in 2015 compared to $(0.13) in 2014.

    Non-GAAP diluted EPS was $0.94 in the fourth quarter compared to $0.61 in the same period last year. Non-GAAP diluted EPS was $2.84 in 2015 compared to $2.02 in 2014.

    “LinkedIn delivered a strong end to 2015,” said Steve Sordello, CFO of LinkedIn. “As we look towards 2016, our focus is on investing intelligently in our core member and customer value propositions to capture the large, addressable opportunity ahead of us.”

    Business Outlook

    LinkedIn is providing guidance for the first quarter and full year 2016. Further details are in the transcript below and a supplemental presentation will be made available on the investor relations section of our website at http://investors.linkedin.com:

    • Q1 2016 Guidance: Revenue is expected to be approximately $820 million. Adjusted EBITDA is expected to be approximately $190 million. Non-GAAP EPS is expected to be approximately $0.55. The company expects depreciation of approximately $85 million, amortization of approximately $48 million, and stock-based compensation of approximately $153 million. The company also expects approximately 133 million GAAP fully-diluted weighted shares and 135 million non-GAAP fully-diluted weighted shares.
    • Full Year 2016 Guidance: Revenue is expected to range between $3.6 billion and $3.65 billion. Adjusted EBITDA is expected to be approximately $950 – 975 million. Non-GAAP EPS is expected to be approximately $3.05 – $3.20. The company expects depreciation of approximately $380 million, amortization of approximately $180 million, and stock-based compensation of approximately $630 million. The company also expects approximately 135 million GAAP fully-diluted weighted shares and 137 million non-GAAP fully-diluted weighted shares.

    Quarterly Results Webcast and Conference Call

    LinkedIn will host a webcast and conference call to discuss its fourth quarter 2015 financial results and business outlook today at 2:00 p.m. Pacific Time. Jeff Weiner and Steve Sordello will host the webcast, which can be viewed on the investor relations section of the LinkedIn website at http://investors.linkedin.com/. This call will contain forward-looking statements and other material information regarding the company’s financial and operating results. Following completion of the call, a recorded replay of the webcast will be available on our website.

    Upcoming Events

    Management will participate in upcoming financial Q&A discussions at industry events on February 9th and 29th  of 2016. LinkedIn will post a link to these events on its investor relations website, http://investors.linkedin.com/ for both the live and archived webcasts.

    About LinkedIn

    LinkedIn connects the world’s professionals to make them more productive and successful and transforms the ways companies hire, market, and sell. Our vision is to create economic opportunity for every member of the global workforce through the ongoing development of the world’s first Economic Graph. LinkedIn has offices around the world.

    Non-GAAP Financial Measures

    To supplement its condensed consolidated financial statements, which are prepared and presented in accordance with GAAP, the company uses the following non-GAAP financial measures: adjusted EBITDA, non-GAAP net income, and non-GAAP diluted EPS (collectively the “non-GAAP financial measures”). The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. The company uses these non-GAAP financial measures for financial and operational decision making and as a means to evaluate period-to-period comparisons. The company believes that they provide useful information about operating results, enhance the overall understanding of past financial performance and future prospects, and allow for greater transparency with respect to key metrics used by management in its financial and operational decision making.

    The company excludes the following items from one or more of its non-GAAP measures:

    Stock-based compensation. The company excludes stock-based compensation because it is non-cash in nature and because the company believes that the non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance and liquidity. The company further believes this measure is useful to investors in that it allows for greater transparency to certain line items in its financial statements and facilitates comparisons to peer operating results.

    Non-cash interest expense related to convertible senior notes. In November 2014, the company issued $1.3 billion aggregate principal amount of 0.50% convertible senior notes. In accordance with GAAP, the company separately accounted for the value of the conversion feature as a debt discount, which is amortized in a manner that reflects the company’s non-convertible debt borrowing rate. Accordingly, the company recognizes imputed interest expense on its convertible senior notes of approximately 4.7% in its statement of operations. The company excludes the difference between the imputed interest expense and coupon interest expense, net of any capitalized interest, because it is non-cash in nature and because the company believes that the non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance and liquidity. In addition, excluding this item from the non-GAAP measures facilitates comparisons to historical operating results and comparisons to peer operating results.

    Amortization of acquired intangible assets. The company excludes amortization of acquired intangible assets because it is non-cash in nature and because the company believes that the non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance and liquidity. In addition, excluding this item from the non-GAAP measures facilitates comparisons to historical operating results and comparisons to peer operating results.

    Accretion of redeemable noncontrolling interest. The accretion of redeemable noncontrolling interest represents the accretion of the company’s redeemable noncontrolling interest to its redemption value. The company excludes the accretion because it is non-cash in nature and because the company believes that the non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operating performance. In addition, excluding this item from the non-GAAP financial measures facilitates comparisons to historical operating results and comparisons to peer operating results.

    Fair value adjustment on other derivative. These adjustments represent the changes in fair value of the cash settlement feature for the preferred shares in the company’s joint venture. This non-GAAP adjustment is the result of the company’s modified retrospective adoption in the fourth quarter of 2015 of authoritative guidance on derivatives and hedges. The company excludes these fair value adjustments because they are non-cash in nature and the company believes that the non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operating performance. In addition, excluding this item from the non-GAAP financial measures facilitates comparisons to historical operating results and comparisons to peer operating results.

    Income tax effects and adjustments. The company adjusts non-GAAP net income by considering the income tax effects of excluding stock-based compensation and the amortization of acquired intangible assets. The company uses a static non-GAAP tax rate for evaluating its operating performance as well as for planning and forecasting purposes. This projected 10-year weighted average non-GAAP tax rate eliminates the effects of non-recurring and period specific items, which can vary in size and frequency and does not necessarily reflect the company’s long-term operations. Based on the company’s current forecast, a tax rate of 23% has been applied to its non-GAAP financial results for the current period. This rate will be adjusted annually, if necessary. The company believes that adjusting for these income tax effects and adjustments provides additional transparency to the overall or “after tax” effects of excluding these items from its non-GAAP net income.

    Dilutive shares under the treasury stock method. During periods with a net loss, the company excludes certain potential common shares from its GAAP diluted shares because their effect would have been anti-dilutive. On a non-GAAP basis, these shares would have been dilutive. As a result, the company has included the impact of these shares in the calculation of its non-GAAP diluted net income per share under the treasury stock method.

    For more information on the non-GAAP financial measures, please see the “Trended Reconciliation of GAAP to Non-GAAP Financial Measures” table in this press release. This accompanying table has more details on the GAAP financial measures that are most directly comparable to non-GAAP financial measures and the related reconciliations between these financial measures. Additionally, the company has not reconciled adjusted EBITDA or non-GAAP EPS guidance to net loss or GAAP EPS guidance because it does not provide guidance for either other income (expense), net, or GAAP provision for income taxes, which are reconciling items between net loss and adjusted EBITDA and non-GAAP EPS. As items that impact net loss are out of the company’s control and/or cannot be reasonably predicted, the company is unable to provide such guidance. Accordingly, a reconciliation to net loss is not available without unreasonable effort.

    Safe Harbor Statement

    “Safe Harbor” statement under the Private Securities Litigation Reform Act of 1995: This press release and the accompanying conference call contain forward-looking statements about our products, including our investments in products, technology and other key strategic areas, certain non-financial metrics, such as customer and member growth and engagement, and our expected financial metrics such as revenue, adjusted EBITDA, non-GAAP EPS, depreciation and amortization, stock-based compensation and fully-diluted weighted shares for the first quarter of 2016 and the full fiscal year 2016. The achievement of the matters covered by such forward-looking statements involves risks, uncertainties and assumptions. If any of these risks or uncertainties materialize or if any of the assumptions prove incorrect, the company’s results could differ materially from the results expressed or implied by the forward-looking statements the company makes.

    The risks and uncertainties referred to above include – but are not limited to – risks associated with: our core value of putting members first, which may conflict with the short-term interests of the business; engagement of our members; the price volatility of our Class A common stock; general economic conditions; expectations regarding the return on our strategic investments; execution of our plans and strategies, including with respect to mobile products and features and expansion into new areas and businesses; security measures and the risk that they may not be sufficient to secure our member data adequately or that we are subject to attacks that degrade or deny the ability of members to access our solutions; expectations regarding our ability to timely and effectively scale and adapt existing technology and network infrastructure to ensure that our solutions are accessible at all times with short or no perceptible load times; our ability to maintain our rate of revenue growth and manage our expenses and investment plans; our ability to accurately track our key metrics internally; members and customers curtailing or ceasing to use our solutions; privacy, security and data transfer concerns, as well as changes in regulations, which could impact our ability to serve our members or curtail our monetization efforts; litigation and regulatory issues; increasing competition; our ability to manage our growth; our international operations; our ability to recruit and retain our employees; the application of U.S. and international tax laws on our tax structure and any changes to such tax laws; acquisitions we have made or may make in the future; and the dual class structure of our Class A common stock.

    Further information on these and other factors that could affect the company’s financial results is included in filings it makes with the Securities and Exchange Commission from time to time, including the section entitled “Risk Factors” in the company’s Annual Report on Form 10-K for the year ended December 31, 2014,  as well as the company’s most recent Quarterly Report on Form 10-Q for the quarter ended September 30, 2015, and additional information will also be set forth in our Form 10-K that will be filed for the year ended December 31, 2015, which should be read in conjunction with these financial results. These documents are or will be available on the SEC Filings section of the Investor Relations page of the company’s website at http://investors.linkedin.com/. All information provided in this release and in the attachments is as of February 4, 2016, and LinkedIn undertakes no duty to update this information.

    Image via Wikimedia Commons

  • Yahoo Reports Earnings, Will Reduce Staff by 15%

    Yahoo Reports Earnings, Will Reduce Staff by 15%

    Yahoo just announced its Q4 and year-end 2015 financials and provided an update on the company’s business strategy going forward. It also it will reduce its workforce by 15% and exit five of its offices ( Dubai, Mexico City, Buenos Aires, Madrid, and Milan).

    By the end of the year, the company expects to have about 9,000 employees and fewer than 1,000 contractors. This, it says, will result in savings in short term operating expense of $400 million annually.

    “Today, we’re announcing a strategic plan that we strongly believe will enable us to accelerate Yahoo’s transformation,” said CEO Marissa Mayer. “This is a strong plan calling for bold shifts in products and in resources. We are extremely proud of the billion dollar plus business we have built in mobile, video, native, and social. Our strategic bets in Mavens have enabled us build an entirely new, forward-leaning business of tremendous scale and growth in just three years. The plan announced today builds from that achievement and will dramatically brighten our future and improve our competitiveness, and attractiveness to users, advertisers, and partners.”

    “The Board is committed to the turnaround efforts of the management team and supportive of the plan announced today. We have tremendous respect for the thousands of Yahoos who work very hard to make the world a better place,” said Maynard Webb, Yahoo’s Chairman of the Board. “The Board also believes that exploring additional strategic alternatives, in parallel to the execution of the management plan, is in the best interest of our shareholders. Separating our Alibaba stake from our operating business continues to be a primary focus, and our most direct path to value maximization. In addition to continuing work on the reverse spin, which we’ve discussed previously, we will engage on qualified strategic proposals.”

    Here’s the four-part “strategic plan” Yahoo has laid out for its business:

    yahooplan
    For Q4, the company reported revenue of $1.27 billion and EPS of $0.13, beating expectations on revenue and meeting them on earnings.

    Here’s the earnings release in its entirety:

    SUNNYVALE, Calif.–(BUSINESS WIRE)–

    Yahoo! Inc. (YHOO) today reported results for the quarter and full year ended December 31, 2015.

    Q4 2014 Q4 2015 Full Year 2014 Full Year 2015
    GAAP revenue $1,253 million $1,273 million $4,618 million $4,968 million
    Cost of revenue – TAC $74 million $271 million $218 million $878 million

    Goodwill impairment*

    		 $88 million $4,461 million $88 million $4,461 million
    Income (loss) from operations $32 million ($4,530) million $143 million ($4,748) million
    Non-GAAP income from operations $256 million $63 million $755 million $342 million
    Adjusted EBITDA $409 million $215 million $1,362 million $952 million
    Net earnings $166 million ($4,435) million $7,522 million ($4,359) million
    GAAP net earnings per diluted share $0.17 ($4.70) $7.45 ($4.64)
    Non-GAAP net earnings per diluted share $0.30 $0.13 $1.57 $0.59

    *See further discussion related to goodwill impairment below

    “I’m pleased to report that our Q4 performance exceeded guidance across GAAP revenue, revenue ex-TAC, adjusted EBITDA, and non-GAAP Operating Income,” said Marissa Mayer, CEO of Yahoo. “We continue to be encouraged by the performance of our Mavens investments, which in 2015 alone, grew to about a third of our GAAP revenue — $1.6 billion dollars.”

    Business Highlights

    Search

    • As part of Yahoo’s efforts to move search toward a more contextual, anticipatory and assistive experience, the Company made the first in a series of ongoing updates to the Yahoo Search app. For iOS in the U.S., the Yahoo Search app experience is now more actionable and guides users to the information they need whether it’s from the Web or their inboxes. Logged in users can now see Web and email results in one place, as the app can now search across email, contacts and calendar to help them find things like package delivery notifications, hotel reservation details and upcoming events, while partnerships with companies like Yelp and OpenTable allow users to take action directly from the search results page.

    Communications

    • Yahoo unveiled the next generation of Yahoo Messenger on mobile for both iOS and Android, the Web and Yahoo Mail on desktop. Built from the ground up, the powerful new platform integrates technology and features from Flickr, Tumblr and Xobni. Built for group and 1:1 messaging, Yahoo Messenger now allows users to unsend and like messages, photos and animated GIFs quickly and easily.

    Digital Content

    • Tumblr further strengthened the way that users communicate and connect over the things they love through threaded instant Messaging available across iOS and Android apps, and on the Web.
    • Yahoo presented the first free, global live stream of an NFL game to more than 15 million viewers across the globe. This was the first time users were able to enjoy the NFL’s premium content globally without cable, authentication or TV across both Yahoo and Tumblr. More than 30 top brands partnered with Yahoo to kick off this new era of sports programming. The Company delivered the live stream with a rebuffering ratio of less than one percent.
    • Yahoo, together with launch sponsor Fidelity Investments, introduced “The Final Round,” a live weekday show on Yahoo Finance that offers insight into the most important business news of the day and what’s driving markets, and features interviews with bold-faced names like premiere guest Charles Koch from the field and in the New York studio.
    • Yahoo debuted Adrian Wojnarowski’s new weekly NBA podcast, The Vertical, with an interview with NBA Commissioner Adam Silver. The podcast debuted in advance of the January launch of Wojnarowski’s new basketball site “The Vertical” on Yahoo Sports. “The Vertical” will feature content from an elite and talented group of reporters and industry insiders.

    Fourth Quarter and Full Year 2015 Financial Highlights

    Mavens Revenue:

    Q4 2014

    		 Q4 2015 Full Year 2014 Full Year 2015
    Mavens revenue

    $

    375 million

    $

    472 million

    $

    1,148 million

    $

    1,660 million
    Non-Mavens revenue 751 million 750 million 3,022 million 2,908 million
    Total traffic-driven revenue

    $

    1,126 million

    $

    1,222 million

    $

    4,170 million

    $

    4,568 million
    Non-traffic-driven revenue

    		127 million 51 million 448 million 400 million
    GAAP revenue

    $

    1,253 million

    $

    1,273 million

    $

    4,618 million

    $

    4,968 million

    Mavens revenue represented 33 percent and 28 percent of traffic-driven revenue in the fourth quarter and full year of 2014, respectively, and increased to 39 percent and 36 percent in the fourth quarter and full year of 2015, respectively.

    Mobile Revenue:

    Q4 2014 Q4 2015 Full Year 2014 Full Year 2015
    Mobile revenue

    $

    254 million

    $

    291 million

    $

    768 million

    $

    1,048 million
    PC revenue 872 million 931 million 3,402 million 3,520 million
    Total traffic-driven revenue

    $

    1,126 million

    $

    1,222 million

    $

    4,170 million

    $

    4,568 million
    Non-traffic-driven revenue 127 million 51 million 448 million 400 million
    GAAP revenue

    $

    1,253 million

    $

    1,273 million

    $

    4,618 million

    $

    4,968 million

    Mobile revenue represented 23 percent and 18 percent of traffic-driven revenue in the fourth quarter and full year of 2014, respectively, and increased to 24 percent and 23 percent in the fourth quarter and full year of 2015, respectively.

    Gross mobile revenue for the fourth quarter of 2014 and 2015 was $413 million and $449 million, respectively. Gross mobile revenue for the full year of 2014 and 2015 was $1,261 million and $1,679 million, respectively.

    Search Revenue:

    • Gross search revenue was $866 million for the fourth quarter of 2015, a decrease of 7 percent compared to the fourth quarter of 2014. Gross search revenue was $3,612 million for the full year of 2015, an increase of 7 percent compared to the prior year.
    • GAAP search revenue was $522 million for the fourth quarter of 2015, an increase of 12 percent compared to the fourth quarter of 2014. GAAP search revenue was $2,084 million for the full year of 2015, an increase of 16 percent compared to the prior year.
    • Cost of revenue – TAC paid to search partners was $141 million for the fourth quarter of 2015, which includes TAC from the Mozilla agreement, compared to $5 million in the fourth quarter of 2014. Cost of revenue – TAC paid to search partners was $465 million for the full year of 2015, which includes TAC from the Mozilla agreement, compared to $9 million in the prior year.
    • The number of Paid Clicks decreased 10 percent compared to the fourth quarter of 2014.
    • Price-per-Click increased 3 percent compared to the fourth quarter of 2014.

    Display Revenue:

    • GAAP display revenue was $601 million for the fourth quarter of 2015, a 13 percent increase compared to the fourth quarter of 2014. GAAP display revenue was $2,074 million for the full year of 2015, an 11 percent increase compared to the prior year.
    • Cost of revenue – TAC paid to display partners was $130 million for the fourth quarter of 2015 compared to $68 million in the fourth quarter of 2014. Cost of revenue – TAC paid to display partners was $410 million for the full year of 2015 compared to $205 million in the prior year.
    • The number of Ads Sold increased 8 percent compared to the fourth quarter of 2014.
    • Price-per-Ad increased 6 percent compared to the fourth quarter of 2014.

    Goodwill Impairment:

    We recorded a $4,461 million non-cash goodwill impairment charge as a result of our annual goodwill impairment test conducted in the fourth quarter of 2015. We concluded that the carrying value of our U.S. & Canada, Europe, Latin America and Tumblr reporting units exceeded their respective estimated fair values. The goodwill impairment resulted from a combination of factors, including decreases in our market capitalization, projected operating results and estimated future cash flows.

    Cash, Cash Equivalents, and Marketable Securities:

    • Cash, cash equivalents, and marketable securities were $6.8 billion as of December 31, 2015 compared to $10.2 billion as of December 31, 2014, a decrease of $3.4 billion. In the first quarter of 2015, the Company satisfied the $3.3 billion income tax liability related to the sale of Alibaba Group ADSs in September 2014.

    “We’re encouraged that our fourth quarter results exceeded expectations in all core metrics,” said Ken Goldman, CFO of Yahoo. “As we look forward to executing a more focused strategy for the Company, this is a solid baseline for the actions we’re taking to improve performance in 2016 and beyond.”

    Live Stream

    Yahoo will live stream a video broadcast of the Company’s fourth quarter and full year 2015 financial results at 2 p.m. Pacific Time/5 p.m. Eastern Time today. The live stream will be broadcast from Yahoo’s Sunnyvale studio and will be available exclusively on Yahoo Finance at finance.yahoo.com. The Company will provide its business outlook for the first quarter of 2016 during the presentation. Supplemental financial information can be accessed through the Company’s Investor Relations website at investor.yahoo.net. The video will be archived after the event at investor.yahoo.net and will be available for 90 days following the broadcast.

    Non-GAAP Financial Measures

    This press release and its attachments include the following financial measures defined as non-GAAP financial measures by the Securities and Exchange Commission (“SEC”): gross mobile revenue; gross search revenue; revenue ex-TAC; adjusted EBITDA; non-GAAP income from operations; non-GAAP net earnings; non-GAAP net earnings per share – diluted; and free cash flow.

    Gross mobile revenue is GAAP mobile revenue plus the related revenue share with third parties. Gross search revenue is GAAP search revenue plus the related revenue share with third parties. Revenue ex-TAC is GAAP revenue less cost of revenue – TAC. Adjusted EBITDA, non-GAAP income from operations, non-GAAP net earnings, and non-GAAP net earnings per share – diluted, exclude from the most comparable GAAP financial measures certain gains, losses, and expenses that we do not believe are indicative of ongoing results, and exclude stock-based compensation expense. Adjusted EBITDA also excludes taxes, depreciation, amortization of intangible assets, other income (expense), net (which includes interest), earnings in equity interests, and net income attributable to noncontrolling interests. Free cash flow is GAAP net cash provided by (used in) operating activities (adjusted to include excess tax benefits from stock-based awards), less acquisition of property and equipment, net (i.e., acquisition of property and equipment less proceeds received from disposition of property and equipment) and dividends received from equity investees.

    These measures may be different than non-GAAP financial measures used by other companies. The presentation of this financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with generally accepted accounting principles (“GAAP”). Explanations of the Company’s non-GAAP financial measures and reconciliations of these financial measures to the GAAP financial measures the Company considers most comparable are included in the accompanying “Note to Unaudited Condensed Consolidated Financial Statements,” and “Supplemental Financial Data and GAAP to Non-GAAP Reconciliations.”

    About Yahoo

    Yahoo is a guide focused on informing, connecting, and entertaining our users. By creating highly personalized experiences for our users, we keep people connected to what matters most to them, across devices and around the world. In turn, we create value for advertisers by connecting them with the audiences that build their businesses. Yahoo is headquartered in Sunnyvale, California, and has offices located throughout the Americas, Asia Pacific (APAC) and the Europe, Middle East and Africa (EMEA) regions. For more information, visit the pressroom (pressroom.yahoo.net) or the Company’s blog (yahoo.tumblr.com).

    “Ads Sold” consist of display ad impressions for paying advertisers on Yahoo Properties and Affiliate sites.

    “Affiliates” refers to the third-party entities that have integrated Yahoo’s advertising offerings into their websites or other offerings (those websites and other offerings, “Affiliate sites”).

    “Alibaba Group” means Alibaba Group Holding Limited. In September 2014, Alibaba Group completed its initial public offering of American Depositary Shares (“ADS”), in which Yahoo was a selling shareholder.

    “Gross mobile revenue” is GAAP mobile revenue plus the related revenue share with third parties.

    “Gross search revenue” is GAAP search revenue plus the related revenue share with third parties.

    “Mavens revenue” is revenue generated from, without duplication: (i) mobile (as defined below), (ii) video ads and video ad packages, (iii) native ads, and (iv) Tumblr ads and fees.

    “Mobile revenue” is revenue generated in connection with user activity on mobile devices, including smartphones and tablets, regardless of whether the device is accessing a mobile-optimized service. Mobile revenue is generated primarily from search and display ads. Mobile revenue also includes leads, listings and fees revenue and ecommerce revenue allocated to user activity on mobile devices.

    “Net earnings” means net income (loss) attributable to Yahoo! Inc., and “net earnings per diluted share” means net income (loss) attributable to Yahoo! Inc. common stockholders per share – diluted.

    “Non-Mavens revenue” is revenue generated from search ads and traditional (i.e., non-native, non-video, non-Tumblr) display ads served on PCs and also includes leads, listings and fees revenue and ecommerce revenue allocated to user activity on PCs.

    “Non-traffic-driven revenue” is revenue not arising from user activity on Yahoo Properties or Affiliate sites, and includes royalty revenue, license fee revenue, amortization under the technology and intellectual property license agreement with Alibaba Group through the third quarter of 2015, and all other revenue that is not traffic-driven.

    “Paid Clicks” are clicks by end-users on sponsored search listings (excluding native ads) on Yahoo Properties and Affiliate sites.

    “PC” means a desktop computer, and “PC revenue” is revenue generated from search and display ads served on PCs and also includes leads, listings and fees revenue and ecommerce revenue allocated to user activity on PCs.

    “Price-per-Ad” is defined as display revenue divided by our total number of Ads Sold.

    “Price-per-Click” is defined as Search click-driven revenue divided by our total number of Paid Clicks.

    “Search Agreement” refers to the Search and Advertising Services and Sales Agreement between Yahoo and Microsoft Corporation, as amended.

    “Search click-driven revenue” is gross search revenue excluding the Microsoft RPS guarantee and search revenue from Yahoo Japan.

    “TAC” refers to traffic acquisition costs. TAC consists of payments to Affiliates and payments made to companies that direct consumer and business traffic to Yahoo Properties.

    “Yahoo,” “Company,” and “we” refer to Yahoo! Inc. and its consolidated subsidiaries.

    “Yahoo Properties” refers to the online properties and services that Yahoo provides to users.

    We periodically review, refine and update our methodologies for monitoring, gathering, and counting number of Ads Sold and Paid Clicks, and for calculating Search click-driven revenue, Price-per-Ad, and Price-per-Click.

    Additional information about how “Ads Sold,” “Paid Clicks,” “Price-per-Ad,” “Price-per-Click,” and “Search click-driven revenue” are defined and calculated is included under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015, which is on file with the SEC and available on the SEC’s website at www.sec.gov.

    This press release contains forward-looking statements concerning Yahoo’s expected financial performance and Yahoo’s strategic and operational plans (including, without limitation, the quotations from management). Risks and uncertainties may cause actual results to differ materially from the results predicted, and reported results should not be considered as an indication of future performance. The potential risks and uncertainties include, among others, risks related to acceptance by users of new products and services; risks related to Yahoo’s ability to compete with new or existing competitors; reduction in spending by, or loss of, advertising customers; risks related to Yahoo’s ability to continue to grow its mobile users and revenue; risks related to Yahoo’s ability to continue to grow Mavens revenue; risks related to Yahoo’s ability to provide innovative search experiences and other products and services that differentiate its services and generate significant traffic; risks associated with the Search Agreement with Microsoft Corporation; risks related to acquiring or developing compelling content; risks related to joint ventures and the integration of acquisitions; risks related to possible impairment of goodwill or other assets; risks related to Yahoo’s ability to manage its operating expenses effectively; risks related to Yahoo’s ability to protect its intellectual property and the value of its brands; adverse results in litigation; security breaches; interruptions or delays in the provision of Yahoo’s services; risks related to Yahoo’s regulatory environment; risks related to fluctuations in foreign currency exchange rates; risks related to Yahoo’s international operations; risks related to Yahoo’s ability to recruit and retain key personnel; dependence on third parties for technology, services, content, and distribution; risks related to the calculation of our key operational metrics; and general economic conditions. All information set forth in this press release and its attachments is as of February 2, 2016. Yahoo does not intend, and undertakes no duty, to update this information to reflect subsequent events or circumstances. More information about potential factors that could affect the Company’s business and financial results is included under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014, as amended, and Quarterly Report on Form 10-Q for the quarter ended September 30, 2015, which are on file with the SEC and available on the SEC’s website at www.sec.gov. Additional information will also be set forth in those sections in Yahoo’s Annual Report on Form 10-K for the year ended December 31, 2015, which will be filed with the SEC in the first quarter of 2016.

    Yahoo!, the Yahoo family of marks, Flickr, Xobni, and the associated logos are trademarks and/or registered trademarks of Yahoo! Inc. Tumblr is a registered trademark of Tumblr, Inc. Other names are trademarks and/or registered trademarks of their respective owners.

    Yahoo! Inc.
    Unaudited Condensed Consolidated Balance Sheets
    (in thousands)

    December 31,

    December 31,

    2014

    2015
    ASSETS
    Current assets:
    Cash and cash equivalents $ 2,664,098 $ 1,631,911
    Short-term marketable securities 5,327,412 4,225,112
    Accounts receivable, net 1,032,704 1,047,504
    Prepaid expenses and other current assets 420,207 602,792
    Total current assets 9,444,421 7,507,319
    Long-term marketable securities 2,230,892 975,961
    Property and equipment, net 1,487,684 1,547,323
    Goodwill 5,152,570 808,114
    Intangible assets, net 470,842 347,269
    Other long-term assets and investments 563,560 342,390
    Investments in Alibaba Group 39,867,789 31,172,361
    Investments in equity interests 2,489,578 2,503,229
    Total assets $ 61,707,336 $ 45,203,966
    LIABILITIES AND EQUITY
    Current liabilities:
    Accounts payable $ 238,018 $ 208,691
    Income taxes payable related to sale of Alibaba Group ADSs 3,282,293 –
    Other accrued expenses and current liabilities 657,709 934,658
    Deferred revenue 336,963 134,031
    Total current liabilities 4,514,983 1,277,380
    Convertible notes 1,170,423 1,233,485
    Long-term deferred revenue 20,774 27,801
    Other long-term liabilities 143,095 118,689
    Deferred tax liabilities related to investment in Alibaba Group 16,154,906 12,611,867
    Deferred and other long-term tax liabilities 917,563 855,324
    Total liabilities 22,921,744 16,124,546
    Total Yahoo! Inc. stockholders’ equity 38,741,837 29,043,537
    Noncontrolling interests 43,755 35,883
    Total equity 38,785,592 29,079,420
    Total liabilities and equity $ 61,707,336 $ 45,203,966
    Yahoo! Inc.
    Unaudited Condensed Consolidated Statements of Operations
    (in thousands, except per share amounts)

    Three Months Ended

    Year Ended

    December 31,

    December 31,

    2014

    2015

    2014

    2015
    Revenue $ 1,253,072 $ 1,273,393 $ 4,618,133 $ 4,968,301
    Operating expenses:
    Cost of revenue – traffic acquisition costs 73,616 270,916 217,531 877,514
    Cost of revenue – other 287,808 316,193 1,169,844 1,200,234

    Sales and marketing

    		 261,040 256,728 1,084,438 1,080,718
    Product development 304,287 272,463 1,156,386 1,177,923
    General and administrative 190,051 181,733 686,272 687,804
    Amortization of intangibles 17,924 19,365 66,750 79,042
    Gain on sale of patents (35,094 ) – (97,894 ) (11,100 )
    Asset impairment charge – 2,682 – 44,381
    Goodwill impairment charge 88,414 4,460,837 88,414 4,460,837
    Intangibles impairment charge – 15,423 – 15,423
    Restructuring charges, net 32,872 7,087 103,450 104,019
    Total operating expenses

    1,220,918

    		 5,803,427 4,475,191 9,716,795
    Income (loss) from operations 32,154 (4,530,034 ) 142,942 (4,748,494 )
    Other income (expense), net 87,550 (9,023 ) 10,369,439 (75,782 )
    Income (loss) before income taxes and earnings in equity interests 119,704 (4,539,057 ) 10,512,381 (4,824,276 )
    (Provision) benefit for income taxes (52,340 ) 13,985 (4,038,102 ) 89,598
    Earnings in equity interests 101,917 92,845 1,057,863 383,571
    Net income (loss) 169,281 (4,432,227 ) 7,532,142 (4,351,107 )
    Less: Net income attributable to noncontrolling interests (2,937 ) (2,760 ) (10,411 ) (7,975 )
    Net income (loss) attributable to Yahoo! Inc. $ 166,344 $ (4,434,987 ) $ 7,521,731 $ (4,359,082 )
    Net income (loss) attributable to Yahoo! Inc. common stockholders per share – diluted (1) $ 0.17 $ (4.70 ) $ 7.45 $ (4.64 )
    Shares used in per share calculation – diluted 962,626 943,425 1,004,108 939,141
    Stock-based compensation expense by function:
    Cost of revenue – other $ 6,331 $ 9,053 $ 42,155 $ 32,010
    Sales and marketing 32,209 30,002 145,777 141,418
    Product development 44,839 45,010 139,056 190,454
    General and administrative 19,373 21,836 93,186 93,271
    Restructuring charges, net – – – 2,705

    Supplemental Financial Data:
    Revenue ex-TAC $ 1,179,456 $ 1,002,477 $ 4,400,602 $ 4,090,787
    Adjusted EBITDA $ 409,222 $ 214,687 $ 1,361,548 $ 951,740
    Free cash flow(2) $ 74,525 $ 31,502 $ 586,632 $ (3,010,172 )
    (1) The impact of outstanding stock awards of entities in which the Company holds equity interests that are accounted for using the equity method reduced the Company’s diluted earnings per share by $0.04 for the year ended December 31, 2014.
    (2) During the year ended December 31, 2015, the Company satisfied the $3.3 billion income tax liability related to the sale of Alibaba Group ADSs in September 2014.
    Yahoo! Inc.
    Unaudited Condensed Consolidated Statements of Cash Flows
    (in thousands)
    Three Months Ended Year Ended
    December 31, December 31,
    2014 2015 2014 2015
    CASH FLOWS FROM OPERATING ACTIVITIES:
    Net income (loss) $ 169,281 $ (4,432,227 ) $ 7,532,142 $ (4,351,107 )

    Adjustments to reconcile net income to net cash provided by (used in) operating activities:
    Depreciation 118,454 117,354 475,031 472,894
    Amortization of intangible assets 34,576 34,629 131,537 136,719
    Accretion of convertible notes discount 15,255 16,077 59,838 63,061
    Stock-based compensation expense 102,752 105,901 420,174 459,858
    Non-cash asset impairment charge – 2,682 – 44,381
    Non-cash goodwill impairment charge 88,414 4,460,837 88,414 4,460,837
    Non-cash intangibles impairment charge – 15,423 – 15,423
    Non-cash restructuring (credits) charges 3,637 3,181 (3,394 ) 3,150
    Non-cash accretion (amortization) on marketable securities 5,763 8,890 30,878 47,218
    Foreign exchange (gain) loss 3,271 (5,961 ) 15,978 4,376
    (Gain) loss on sale of assets and other (1,411 ) 180 (11,383 ) (2,878 )
    Gain on sale of Alibaba Group ADSs – – (10,319,437 ) –
    Gain on sale of patents (35,094 ) – (97,894 ) (11,100 )
    (Gain) loss on Hortonworks warrants (98,062 ) (42 ) (98,062 ) 19,199
    Earnings in equity interests (101,917 ) (92,845 ) (1,057,863 ) (383,571 )
    Tax benefits from stock-based awards 34,649 18,739 145,711 41,729
    Excess tax benefits from stock-based awards (35,190 ) (24,923 ) (149,582 ) (58,282 )
    Deferred income taxes 68,458 10,264 465,873 (42,341 )
    Dividends received from equity investees – – 83,685 142,045
    Changes in assets and liabilities, net of effects of acquisitions:
    Accounts receivable (113,370 ) (73,368 ) 29,278 (39,065 )
    Prepaid expenses and other assets (103,477 ) 85,954 (82,419 ) 21,842
    Accounts payable 14,475 (30,323 ) 14,165 (59,965 )
    Accrued expenses and other liabilities 12,821 (84,793 ) 132,839 133,244
    Income taxes payable related to sale of Alibaba Group ADSs – – 3,282,293 (3,282,293 )
    Deferred revenue (76,070 ) (3,339 ) (194,920 ) (195,328 )
    Net cash provided by (used in) operating activities 107,215 132,290 892,882 (2,359,954 )
    CASH FLOWS FROM INVESTING ACTIVITIES:
    Acquisition of property and equipment (70,276 ) (125,818 ) (389,551 ) (577,631 )
    Proceeds from sales of property and equipment 2,396 107 17,404 11,176
    Purchases of marketable securities (6,327,504 ) (1,733,658 ) (7,890,092 ) (5,206,245 )
    Proceeds from sales of marketable securities 587,924 256,676 2,269,659 822,997
    Proceeds from maturities of marketable securities 76,740 1,802,208 945,696 6,691,645
    Proceeds from sale of Alibaba Group ADSs, net of underwriting discounts, commissions, and fees – – 9,404,974 –
    Purchases of intangible assets (178 ) (78 ) (2,658 ) (4,811 )
    Proceeds from sales of patents 23,500 – 86,300 29,100
    Proceeds from the settlement of derivative hedge contracts 68,417 26,497 254,496 147,179
    Payments for the settlement of derivative hedge contracts (236 ) (2,223 ) (5,454 ) (8,817 )
    Acquisitions, net of cash acquired (545,199 ) (1,063 ) (859,036 ) (175,693 )
    Payments for equity investments in privately held companies (14,000 ) – (74,399 ) –
    Other investing activities, net 3,391 (53 ) 4,630 (256 )
    Net cash provided by (used in) investing activities (6,195,025 ) 222,595 3,761,969 1,728,644
    CASH FLOWS FROM FINANCING ACTIVITIES:
    Proceeds from issuance of common stock 60,461 6,833 308,029 59,130
    Repurchases of common stock (1,612,995 ) – (4,163,227 ) (203,771 )
    Excess tax benefits from stock-based awards 35,190 24,923 149,582 58,282
    Tax withholdings related to net share settlements of restricted stock units (54,454 ) (41,670 ) (280,879 ) (257,731 )
    Distributions to noncontrolling interests – – (22,344 ) (15,847 )
    Other financing activities, net (4,387 ) (3,767 ) (13,627 ) (17,321 )
    Net cash used in financing activities (1,576,185 ) (13,681 ) (4,022,466 ) (377,258 )
    Effect of exchange rate changes on cash and cash equivalents (17,192 ) 9,547 (45,877 ) (23,619 )
    Net change in cash and cash equivalents (7,681,187 ) 350,751 586,508 (1,032,187 )
    Cash and cash equivalents, beginning of period 10,345,285 1,281,160 2,077,590 2,664,098
    Cash and cash equivalents, end of period $ 2,664,098 $ 1,631,911 $ 2,664,098 $ 1,631,911

    Yahoo! Inc.
    Note to Unaudited Condensed Consolidated Financial Statements

    This press release and its attachments include the non-GAAP financial measures of revenue excluding traffic acquisition costs (“revenue ex-TAC”); gross mobile revenue; gross search revenue; adjusted EBITDA; non-GAAP income from operations; non-GAAP net earnings; non-GAAP net earnings per diluted share; and free cash flow, which are reconciled to revenue (in the case of revenue ex-TAC, gross mobile revenue, and gross search revenue); net income (loss) attributable to Yahoo! Inc. (in the case of adjusted EBITDA and non-GAAP net earnings); income (loss) from operations; net income (loss) attributable to Yahoo! Inc. common stockholders per share – diluted; and net cash provided by (used in) operating activities, which we believe are the most comparable GAAP measures. Yahoo! Inc. (together with its consolidated subsidiaries, “Yahoo,” the “Company,” or “we”) uses these non-GAAP financial measures for internal managerial purposes and to facilitate period-to-period comparisons. We describe limitations specific to each non-GAAP financial measure below. Management generally compensates for limitations in the use of non-GAAP financial measures by relying on comparable GAAP financial measures and providing investors with a reconciliation of the non-GAAP financial measure to the most directly comparable GAAP financial measure or measures. Further, management uses non-GAAP financial measures only in addition to and in conjunction with results presented in accordance with GAAP. We believe that these non-GAAP financial measures reflect additional ways of viewing aspects of our operations that, when viewed with our GAAP results, provide a more complete understanding of factors and trends affecting our business. These non-GAAP measures should be considered as a supplement to, and not as a substitute for, or superior to, revenue, net income (loss) attributable to Yahoo! Inc., income (loss) from operations, net income (loss) attributable to Yahoo! Inc. common stockholders per share – diluted, and net cash provided by (used in) operating activities calculated in accordance with GAAP.

    Revenue ex-TAC is a non-GAAP financial measure defined as GAAP revenue less TAC that has been recorded as a cost of revenue. TAC consists of payments made to Affiliates, and payments made to companies that direct consumer and business traffic to Yahoo Properties. TAC is recorded either as a reduction of revenue or as cost of revenue. We present revenue ex-TAC to provide investors a metric used by the Company for evaluation and decision-making purposes and to provide investors with comparable revenue numbers when comparing to our historical reported financial information. A limitation of revenue ex-TAC is that it is a measure we defined for internal and investor purposes that may be unique to the Company, and therefore it may not enhance the comparability of our results to those of other companies in our industry who have similar business arrangements but address the impact of TAC differently. Management compensates for these limitations by also relying on the comparable GAAP financial measures of revenue and cost of revenue—TAC.

    Each of gross mobile revenue and gross search revenue is a non-GAAP financial measure. Gross mobile revenue is defined as GAAP mobile revenue plus the related revenue share with third parties. Gross search revenue is defined as GAAP search revenue plus the related revenue share with third parties. We present these amounts to provide investors with additional metrics used by the Company for evaluation and decision-making purposes and as an indicator of the size of our presence in the relevant business. To this end, gross mobile revenue and gross search revenue report the total receipts generated on Yahoo Properties and Affiliate sites by the specified relevant Yahoo business (i.e., mobile or search), before any TAC or other revenue share is paid to the Affiliates and before any revenue share is allocated to Microsoft or other parties. A limitation of these non-GAAP measures is that they include revenue that is recognized by one or more third parties and not by Yahoo; furthermore, they are measures we defined for internal and investor purposes that may be unique to us, and therefore may not enhance the comparability of our results to those of other companies in our industry who have similar business arrangements but address the impact of TAC and revenue sharing differently. Management compensates for these limitations by also relying on the comparable financial measure GAAP revenue.

    Adjusted EBITDA is defined as net income (loss) attributable to Yahoo! Inc. before taxes, depreciation, amortization of intangible assets, stock-based compensation expense, other income, net (which includes interest), earnings in equity interests, net income attributable to noncontrolling interests and other gains, losses, and expenses that we do not believe are indicative of our ongoing results. We present adjusted EBITDA because the exclusion of certain gains, losses, and expenses facilitates comparisons of the operating performance of the Company on a period to period basis. Adjusted EBITDA has limitations as an analytical tool and should not be considered in isolation or as a substitute for results reported under GAAP. These limitations include: adjusted EBITDA does not reflect tax payments and such payments reflect a reduction in cash available to us; adjusted EBITDA does not reflect the periodic costs of certain capitalized tangible and intangible assets used in generating revenues in our businesses; adjusted EBITDA does not include stock-based compensation expense related to the Company’s workforce; adjusted EBITDA also excludes other income, net (which includes interest), earnings in equity interests, net income attributable to noncontrolling interests and other gains, losses, and expenses that we do not believe are indicative of our ongoing results, and these items may represent a reduction or increase in cash available to us; and adjusted EBITDA is a measure that may be unique to the Company, and therefore it may not enhance the comparability of our results to other companies in our industry. Management compensates for these limitations by also relying on the comparable GAAP financial measure of net income (loss) attributable to Yahoo! Inc., which includes taxes, depreciation, amortization, stock-based compensation expense, other income, net (which includes interest), earnings in equity interests, net income attributable to noncontrolling interests and the other gains, losses and expenses that are excluded from adjusted EBITDA.

    Non-GAAP income from operations is defined as income (loss) from operations excluding certain gains, losses, and expenses that we do not believe are indicative of our ongoing operating results and further adjusted to exclude stock-based compensation expense. Because of the variety of equity awards used by companies, the varying methodologies for determining stock-based compensation expense, and the subjective assumptions involved in those determinations, we believe excluding stock-based compensation expense enhances the ability of management and investors to understand the impact of stock-based compensation expense on income (loss) from operations. We consider non-GAAP income from operations to be a profitability measure which facilitates the forecasting of our operating results for future periods and allows for the comparison of our results to historical periods. A limitation of non-GAAP income from operations is that it does not include all items that impact our income from operations for the period. Management compensates for this limitation by also relying on the comparable GAAP financial measure of income (loss) from operations which includes the gains, losses, and expenses that are excluded from non-GAAP income from operations.

    Non-GAAP net earnings is defined as net income (loss) attributable to Yahoo! Inc. (which we sometimes refer to as net earnings) excluding certain gains, losses, expenses, and their related tax effects that we do not believe are indicative of our ongoing results and further adjusted to exclude stock-based compensation expense and its related tax effects. Because of the variety of equity awards used by companies, the varying methodologies for determining stock-based compensation expense, and the subjective assumptions involved in those determinations, we believe excluding stock-based compensation expense enhances the ability of management and investors to understand the impact of stock-based compensation expense on net income and net income per share. We consider non-GAAP net earnings and non-GAAP net earnings per diluted share to be profitability measures which facilitate the forecasting of our results for future periods and allow for the comparison of our results to historical periods. A limitation of non-GAAP net earnings and non-GAAP net earnings per diluted share is that they do not include all items that impact our net income and net income per diluted share for the period. Management compensates for this limitation by also relying on the comparable GAAP financial measures of net income (loss) attributable to Yahoo! Inc. and net income (loss) attributable to Yahoo! Inc. common stockholders per share – diluted, both of which include the gains, losses, expenses and related tax effects that are excluded from non-GAAP net earnings and non-GAAP net earnings per diluted share.

    Free cash flow is a non-GAAP financial measure defined as net cash provided by (used in) operating activities (adjusted to include excess tax benefits from stock-based awards), less acquisition of property and equipment, net (i.e., acquisition of property and equipment less proceeds received from disposition of property and equipment) and dividends received from equity investees. We consider free cash flow to be a liquidity measure which provides useful information to management and investors about the amount of cash generated by business operations, after deducting our net payments for acquisitions and dispositions of property and equipment, which cash can then be used for strategic opportunities or other business purposes including, among others, investing in the Company’s business, making strategic acquisitions, strengthening the balance sheet, and repurchasing stock. A limitation of free cash flow is that it does not represent the total increase or decrease in the cash balance for the period. Management compensates for this limitation by also relying on the net change in cash and cash equivalents as presented in the Company’s unaudited condensed consolidated statements of cash flows prepared in accordance with GAAP which incorporates all cash movements during the period.

    Yahoo! Inc.
    Supplemental Financial Data and GAAP to Non-GAAP Reconciliations
    (in thousands)
    Three Months Ended Year Ended
    December 31, December 31,
    2014 2015 2014 2015
    Revenue for groups of similar services:
    Search $ 467,321 $ 521,869 $ 1,792,861 $ 2,084,139
    Display 531,778 601,435 1,868,035 2,074,161
    Other 253,973 150,089 957,237 810,001
    Total revenue $ 1,253,072 $ 1,273,393 $ 4,618,133 $ 4,968,301
    Revenue excluding traffic acquisition costs recorded as cost of revenue (“revenue ex-TAC”) for groups of similar services:
    GAAP search revenue $ 467,321 $ 521,869 $ 1,792,861 $ 2,084,139
    TAC associated with search revenue (5,096 ) (140,596 ) (9,279 ) (465,484 )
    Search revenue ex-TAC $ 462,225 $ 381,273 $ 1,783,582 $ 1,618,655
    GAAP display revenue $ 531,778 $ 601,435 $ 1,868,035 $ 2,074,161
    TAC associated with display revenue (67,772 ) (129,756 ) (204,928 ) (409,590 )
    Display revenue ex-TAC $ 464,006 $ 471,679 $ 1,663,107 $ 1,664,571
    Other GAAP revenue $ 253,973 $ 150,089 $ 957,237 $ 810,001
    TAC associated with other GAAP revenue (748 ) (564 ) (3,324 ) (2,440 )
    Other revenue ex-TAC $ 253,225 $ 149,525 $ 953,913 $ 807,561
    Revenue ex-TAC:
    GAAP revenue $ 1,253,072 $ 1,273,393 $ 4,618,133 $ 4,968,301
    TAC (73,616 ) (270,916 ) (217,531 ) (877,514 )
    Revenue ex-TAC $ 1,179,456 $ 1,002,477 $ 4,400,602 $ 4,090,787
    Revenue ex-TAC by segment:
    Americas:
    GAAP revenue $ 972,092 $ 1,012,465 $ 3,517,861 $ 3,976,770
    TAC (59,548 ) (239,393 ) (166,545 ) (788,725 )
    Revenue ex-TAC $ 912,544 $ 773,072 $ 3,351,316 $ 3,188,045
    EMEA:
    GAAP revenue $ 96,358 $ 97,116 $ 374,833 $ 343,646
    TAC (9,482 ) (19,885 ) (36,867 ) (57,284 )
    Revenue ex-TAC $ 86,876 $ 77,231 $ 337,966 $ 286,362
    Asia Pacific:
    GAAP revenue $ 184,622 $ 163,812 $ 725,439 $ 647,885
    TAC (4,586 ) (11,638 ) (14,119 ) (31,505 )
    Revenue ex-TAC $ 180,036 $ 152,174 $ 711,320 $ 616,380
    Total revenue ex-TAC $ 1,179,456 $ 1,002,477 $ 4,400,602 $ 4,090,787
    Direct costs by segment (3):
    Americas $ 70,594 $ 79,338 $ 283,594 $ 319,744
    EMEA 20,985 31,842 87,490 95,789
    Asia Pacific 49,989 46,290 198,910 196,054
    Global operating costs (4) 663,760 631,128 2,566,954 2,547,368
    Gain on sale of patents (35,094 ) – (97,894 ) (11,100 )
    Asset impairment charge – 2,682 – 44,381
    Goodwill impairment charge 88,414 4,460,837 88,414 4,460,837

    Intangibles impairment charge

    –

    15,423

    –

    15,423
    Restructuring charges, net 32,872 7,087 103,450 104,019
    Depreciation and amortization 153,030 151,983 606,568 609,613
    Stock-based compensation expense 102,752 105,901 420,174 457,153
    Income (loss) from operations $ 32,154 $ (4,530,034 ) $ 142,942 $ (4,748,494 )
    (3) Direct costs for each segment include costs associated with the local sales teams and other cost of revenue.
    (4) Global operating costs include product development, marketing, real estate workplace, general and administrative, and other corporate expenses that are managed on a global basis and that are not directly attributable to any particular segment.
    Yahoo! Inc.
    Supplemental Financial Data and GAAP to Non-GAAP Reconciliations (continued)
    (in thousands)
    Three Months Ended Year Ended
    December 31, December 31,
    2014 2015 2014 2015
    Reconciliation of net income (loss) attributable to Yahoo! Inc. to adjusted EBITDA:
    Net income (loss) attributable to Yahoo! Inc. $ 166,344 $ (4,434,987 ) $ 7,521,731 $ (4,359,082 )
    Advisory fees – 808 – 8,808
    Depreciation and amortization 153,030 151,983 606,568 609,613
    Stock-based compensation expense 102,752 105,901 420,174 457,153
    Asset impairment charge – 2,682 – 44,381
    Goodwill impairment charge 88,414 4,460,837 88,414 4,460,837
    Intangibles impairment charge – 15,423 – 15,423
    Restructuring charges, net 32,872 7,087 103,450 104,019
    Other (expense) income, net (87,550 ) 9,023 (10,369,439 ) 75,782
    (Provision) benefit for income taxes 52,340 (13,985 ) 4,038,102 (89,598 )
    Earnings in equity interests (101,917 ) (92,845 ) (1,057,863 ) (383,571 )
    Net income attributable to noncontrolling interests 2,937 2,760 10,411 7,975
    Adjusted EBITDA $ 409,222 $ 214,687 $ 1,361,548 $ 951,740
    Reconciliation of net cash provided by (used in) operating activities to free cash flow:
    Net cash provided by (used in) operating activities $ 107,215 $ 132,290 $ 892,882 $ (2,359,954 )
    Acquisition of property and equipment, net (67,880 ) (125,711 ) (372,147 ) (566,455 )
    Dividends received from equity investees – – (83,685 ) (142,045 )
    Excess tax benefits from stock-based awards 35,190 24,923 149,582 58,282
    Free cash flow(2) $ 74,525 $ 31,502 $ 586,632 $ (3,010,172 )
    Three Months Ended Year Ended
    December 31, December 31,
    2014 2015 2014 2015
    Reconciliation of GAAP mobile revenue to gross mobile revenue:
    GAAP mobile revenue $ 253,755 $ 290,756 $ 767,998 $ 1,047,539
    Revenue share with third parties 158,840 158,338 492,919 631,744
    Gross mobile revenue $ 412,595 $ 449,094 $ 1,260,917 $ 1,679,283
    Reconciliation of GAAP search revenue to gross search revenue:
    GAAP search revenue $ 467,321 $ 521,869 $ 1,792,861 $ 2,084,139
    Revenue share with third parties 464,758 344,345 1,588,754 1,527,624
    Gross search revenue $ 932,079 $ 866,214 $ 3,381,615 $ 3,611,763
    (2) During the year ended December 31, 2015, the Company satisfied the $3.3 billion income tax liability related to the sale of Alibaba Group ADSs in September 2014.
    Yahoo! Inc.
    GAAP to Non-GAAP Reconciliations (continued)
    (in thousands, except per share amounts)

    Three Months Ended
    December 31,
    2014 2015
    GAAP income (loss) from operations $ 32,154 $ (4,530,034 )
    (a) Restructuring charges, net 32,872 7,087
    (b) Stock-based compensation expense 102,752 105,901
    (c) Asset impairment charge – 2,682
    (d) Goodwill impairment charge 88,414 4,460,837
    (e) Intangibles impairment charge – 15,423
    (f) Advisory fees – 808
    Non-GAAP income from operations $ 256,192 $ 62,704
    GAAP net income (loss) attributable to Yahoo! Inc. $ 166,344 $ (4,434,987 )
    (a) Restructuring charges, net 32,872 7,087
    (b) Stock-based compensation expense 102,752 105,901
    (c) Gain on Hortonworks warrants (98,062 ) (42 )
    (d) Asset impairment charge – 2,682
    (e) Goodwill impairment charge 88,414 4,460,837
    (f) Intangibles impairment charge – 15,423
    (g) Advisory fees – 808
    (h) To adjust the provision for income taxes to reflect an effective tax rate of 35% for the three months ended December 31, 2015 and to exclude the tax impact of items (a) through (g) above for the three months ended December 31, 2014 1,124 (32,759 )
    Non-GAAP net earnings $ 293,444 $ 124,950
    GAAP net income (loss) attributable to Yahoo! Inc. common stockholders per share – diluted $ 0.17 $ (4.70 )
    Non-GAAP net earnings per share – diluted $ 0.30 $ 0.13
    Shares used in non-GAAP per share calculation – diluted 962,626 949,758
    Year Ended
    December 31,
    2014 2015
    GAAP income (loss) from operations $ 142,942 $ (4,748,494 )
    (a) Restructuring charges, net 103,450 104,019
    (b) Stock-based compensation 420,174 457,153
    (c) Advisory fees – 8,808
    (d) Asset impairment charge – 44,381
    (e) Goodwill impairment charge 88,414 4,460,837
    (f) Intangibles impairment charge – 15,423
    Non-GAAP income from operations $ 754,980 $ 342,127
    GAAP net income (loss) attributable to Yahoo! Inc. $ 7,521,731 $ (4,359,082 )
    (a) Restructuring charges, net 103,450 104,019
    (b) Stock-based compensation 420,174 457,153
    (c) Advisory fees – 8,808
    (d) (Gain) loss on Hortonworks warrants (98,062 ) 19,199
    (e) Asset impairment charge – 44,381
    (f) Goodwill impairment charge 88,414 4,460,837
    (g) Intangibles impairment charge – 15,423
    (h) Gain related to sale of Alibaba Group ADSs (10,319,437 ) –
    (i) To adjust the provision for income taxes to reflect an effective tax rate of 35% in the year ended December 31, 2015 and to exclude the tax impact of items (a) through (h) above for the year ended December 31, 2014 3,903,951 (189,538 )
    Non-GAAP net earnings $ 1,620,221 $ 561,200
    GAAP net income (loss) attributable to Yahoo! Inc. common stockholders per share – diluted (1) $ 7.45 $ (4.64 )
    Non-GAAP net earnings per share – diluted (5) $ 1.57 $ 0.59
    Shares used in non-GAAP per share calculation – diluted 1,004,108 948,111
    (1) The impact of outstanding stock awards of entities in which the Company holds equity interests that are accounted for using the equity method reduced the Company’s diluted earnings per share by $0.04 for the year ended December 31, 2014.
    (5) The impact of outstanding stock awards of entities in which the Company holds equity interests that are accounted for using the equity method reduced the Company’s non-GAAP diluted earnings per share by $0.04 for the year ended December 31, 2014.


    Images via Wikimedia Commons, Yahoo

  • Alphabet Impresses On Revenue, Earnings

    Alphabet Impresses On Revenue, Earnings

    Google parent Alphabet announced its financial results for the fourth quarter and fiscal year ended December 31, 2015. The company beat Wall Street estimates for the quarter on earnings per share ($8.67) and revenue ($21.32 billion).

    Cost per click on ads was down 13% year-over-year. Paid clicks were up 31%.

    CFO Ruth Porat said, “Our very strong revenue growth in Q4 reflects the vibrancy of our business, driven by mobile search as well as YouTube and programmatic advertising, all areas in which we’ve been investing for many years. We’re excited about the opportunities we have across Google and Other Bets to use technology to improve the lives of billions of people.”

    The company’s headcount jumped from 53,600 in Q4 2014 to 61,814 this past quarter.

    Here are the numbers:

    Screen Shot 2016-02-01 at 4.38.15 PM

    Screen Shot 2016-02-01 at 4.41.28 PM

    Screen Shot 2016-02-01 at 4.41.51 PM

    Screen Shot 2016-02-01 at 4.43.18 PM

    Screen Shot 2016-02-01 at 4.44.10 PM

    Screen Shot 2016-02-01 at 4.44.30 PM

    Screen Shot 2016-02-01 at 4.45.23 PM

    See the full report here.

  • Microsoft Earnings Out, Revenue $25.7 billion

    Microsoft Earnings Out, Revenue $25.7 billion

    Microsoft just announced its earnings report for its fiscal year 2016 Q2. The company beat Wall Street expectations for revenue and earnings per share at $25.7 billion and $0.78 respectively.

    The company says its results are highlighted by its cloud strength.

    CEO Satya Nadella said, “Businesses everywhere are using the Microsoft Cloud as their digital platform to drive their ambitious transformation agendas. Businesses are also piloting Windows 10, which will drive deployments beyond 200 million active devices.”

    Here’s the release in its entirety:

    REDMOND, Wash. — January 28, 2016 — Microsoft Corp. today announced the following results for the quarter ended December 31, 2015:

    • Revenue was $23.8 billion GAAP, and $25.7 billion non-GAAP
    • Operating income was $6.0 billion GAAP, and $7.9 billion non-GAAP
    • Net income was $5.0 billion GAAP, and $6.3 billion non-GAAP
    • Earnings per share was $0.62 GAAP, and $0.78 non-GAAP

    During the quarter, Microsoft returned $6.5 billion to shareholders in the form of share repurchases and dividends.

    “Businesses everywhere are using the Microsoft Cloud as their digital platform to drive their ambitious transformation agendas,” said Satya Nadella, chief executive officer at Microsoft. “Businesses are also piloting Windows 10, which will drive deployments beyond 200 million active devices.”

    The following table reconciles our financial results reported in accordance with generally accepted accounting principles (“GAAP”) to non-GAAP financial results. Microsoft has provided this non-GAAP financial information to aid investors in better understanding the company’s performance. All growth comparisons relate to the corresponding period in the last fiscal year.

      Three Months Ended December 31,
     ($ in millions, except per share amounts) Revenue Operating Income Net Income Earnings per Share  
    2014 As Reported (GAAP) $26,470 $7,776 $5,863 $0.71  
      Net Impact from Revenue Deferrals (326) (326) (248) (0.03)  
      Integration and Restructuring Charges – 243 175 0.02  
    2014 As Adjusted (non-GAAP) $26,144 $7,693 $5,790 $0.70  
    2015 As Reported (GAAP) $23,796 $6,026 $4,998 $0.62  
      Net Impact from Revenue Deferrals 1,897 1,897 1,277 0.16  
    2015 As Adjusted (non-GAAP) $25,693 $7,923 $6,275 $0.78  
    Percentage Change Y/Y (GAAP) (10)% (23)% (15)% (13)%  
    Percentage Change Y/Y (non-GAAP) (2)% 3% 8% 11%  
    Percentage Change Y/Y (non-GAAP) Constant Currency 3% 13% 20% 23%  
               

    “We delivered double-digit operating income growth in non-GAAP constant currency while investing in key strategic areas that position Microsoft for continued long term growth,” said Amy Hood, executive vice president and chief financial officer of Microsoft.

    Revenue in Productivity and Business Processes declined 2% (up 5% in constant currency) to $6.7 billion, with the following business highlights:

    • Office commercial products and cloud services revenue grew 5% in constant currency driven by Office 365 revenue growth of nearly 70% in constant currency
    • Office 365 consumer subscribers increased to 20.6 million
    • Dynamics revenue grew 11% in constant currency with Dynamics CRM Online seat adds more than doubling year-over-year for the fifth consecutive quarter

    Revenue in Intelligent Cloud grew 5% (up 11% in constant currency) to $6.3 billion, with the following business highlights:

    • Server products and cloud services revenue grew 10% in constant currency
    • Azure revenue grew 140% in constant currency with revenue from Azure premium services growing nearly 3x year-over-year
    • Over one third of the Fortune 500 have chosen our Enterprise Mobility solutions, up nearly 3x year-over-year

    Revenue in More Personal Computing declined 5% (down 2% in constant currency) to $12.7 billion, with the following business highlights:

    • Windows OEM revenue declined 5% in constant currency, outperforming the PC market, driven by higher consumer premium and mid-range device mix
    • Surface revenue increased 29% in constant currency driven by the launch of Surface Pro 4 and Surface Book
    • Phone revenue declined 49% in constant currency reflecting our strategy change announced in July 2015
    • Search advertising revenue excluding traffic acquisition costs grew 21% in constant currency with continued benefit from Windows 10 usage
    • Xbox Live monthly active users grew 30% year-over-year to a record 48 million

    “It was a strong holiday season for Microsoft highlighted by Surface and Xbox,” said Kevin Turner, chief operating officer at Microsoft. “Our commercial business executed well as our sales teams and partners helped customers realize the value of Microsoft’s cloud technologies across Azure, Office 365 and CRM Online.”

    Business Outlook

    Microsoft will provide forward-looking guidance in connection with this quarterly earnings announcement on its earnings conference call and webcast.

    Webcast Details

    Satya Nadella, chief executive officer, Amy Hood, executive vice president and chief financial officer, Frank Brod, chief accounting officer, John Seethoff, deputy general counsel and corporate secretary, and Chris Suh, general manager of Investor Relations, will host a conference call and webcast at 2:30 p.m. Pacific time (5:30 p.m. Eastern time) today to discuss details of the company’s performance for the quarter and certain forward-looking information. The session may be accessed athttp://www.microsoft.com/investor. The webcast will be available for replay through the close of business on January 28, 2017.

    Adjusted Financial Results and non-GAAP Measures

    During the second quarter of fiscal year 2016, GAAP revenue, operating income, net income, and earnings per share include the net impact from revenue deferrals. For the second quarter of fiscal year 2015, GAAP revenue, operating income, net income, and earnings per share include the recognition of previously deferred net revenue and charges related to integration and restructuring expenses. These items are defined below. In addition to these financial results reported in accordance with GAAP, Microsoft has provided certain non-GAAP financial information to aid investors in better understanding the company’s performance. Presenting these non-GAAP measures gives additional insight into operational performance and helps clarify trends affecting the company’s business. For comparability of reporting, management considers this information in conjunction with GAAP amounts in evaluating business performance. These non-GAAP financial measures should not be considered as a substitute for, or superior to, the measures of financial performance prepared in accordance with GAAP.

    Non-GAAP Definitions

    Revenue Deferrals. Microsoft recorded a net $1.9 billion revenue deferral during the three months ended December 31, 2015, primarily related to Windows 10 and Halo 5.

    Microsoft recognized a net $326 million of previously deferred revenue during the three months ended December 31, 2014, primarily related to sales of bundled products and services.

    Integration and Restructuring Charges. Integration and restructuring expenses were $243 million during the three months ended December 31, 2014. Integration and restructuring expenses include employee severance expenses and costs associated with the consolidation of facilities and manufacturing operations related to restructuring activities, and systems consolidation and other business integration expenses associated with the acquisition of Nokia’s Devices and Services business.

    Constant Currency

    Microsoft presents constant currency information to provide a non-GAAP framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period non-GAAP results for entities reporting in currencies other than United States dollars are converted into United States dollars using the average exchange rates from the comparative period rather than the actual exchange rates in effect during the respective periods.  The non-GAAP financial measures presented below should not be considered as a substitute for, or superior to, the measures of financial performance prepared in accordance with GAAP. All growth comparisons relate to the corresponding period in the last fiscal year.

    Financial Performance Constant Currency Reconciliation

      Three Months Ended December 31,
     ($ in millions, except per share amounts) Revenue Operating Income Net Income Earnings per Share  
    2014 As Reported (GAAP) $26,470 $7,776 $5,863 $0.71  
    2014 As Adjusted (non-GAAP) $26,144 $7,693 $5,790 $0.70  
    2015 As Reported (GAAP) $23,796 $6,026 $4,998 $0.62  
    2015 As Reported (non-GAAP) $25,693 $7,923 $6,275 $0.78  
    Percentage Change Y/Y (GAAP) (10)% (23)% (15)% (13)%  
    Percentage Change Y/Y (non-GAAP) (2)% 3% 8% 11%  
    Constant Currency Impact $(1,212) $(766) $(676) $(0.08)  
    Percentage Change Y/Y (non-GAAP) Constant Currency 3% 13% 20% 23%  

    Segment Revenue Constant Currency Reconciliation

      Three Months Ended December 31,
     ($ in millions) Productivity and Business Processes Intelligent Cloud More Personal Computing  
    2014 As Reported (GAAP) $6,822 $6,041 $13,282  
    2015 As Reported (GAAP) $6,690 $6,343 $12,660  
    Percentage Change Y/Y (GAAP) (2)% 5% (5)%  
    Constant Currency Impact $(439) $(369) $(404)  
    Percentage Change Y/Y (GAAP) Constant Currency 5% 11% (2)%  

     

    About Microsoft

    Microsoft (Nasdaq “MSFT” @microsoft) is the leading platform and productivity company for the mobile-first, cloud-first world and its mission is to empower every person and every organization on the planet to achieve more.

    Forward-Looking Statements

    Statements in this release that are “forward-looking statements” are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could differ materially because of factors such as:

    • intense competition in all of Microsoft’s markets;
    • increasing focus on services presents execution and competitive risks;
    • significant investments in new products and services that may not be profitable;
    • acquisitions, joint ventures, and strategic alliances may have an adverse effect on our business;
    • impairment of goodwill or amortizable intangible assets causing a significant charge to earnings;
    • Microsoft’s continued ability to protect and earn revenues from its intellectual property rights;
    • claims that Microsoft has infringed the intellectual property rights of others;
    • the possibility of unauthorized disclosure of significant portions of Microsoft’s source code;
    • cyber-attacks and security vulnerabilities in Microsoft products and services that could reduce revenue or lead to liability;
    • disclosure of personal data that could cause liability and harm to Microsoft’s reputation;
    • outages, data losses, and disruptions of our online services if we fail to maintain an adequate operations infrastructure;
    • government litigation and regulation that may limit how Microsoft designs and markets its products;
    • potential liability under trade protection and anti-corruption laws resulting from our international operations;
    • laws and regulations relating to the handling of personal data may impede the adoption of our services or result in increased costs, legal claims or fines against us;
    • Microsoft’s ability to attract and retain talented employees;
    • adverse results in legal disputes;
    • unanticipated tax liabilities;
    • Microsoft’s hardware and software products may experience quality or supply problems;
    • exposure to increased economic and operational uncertainties from operating a global business;
    • catastrophic events or geo-political conditions may disrupt our business; and
    • adverse economic or market conditions may harm our business.

    For more information about risks and uncertainties associated with Microsoft’s business, please refer to the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” sections of Microsoft’s SEC filings, including, but not limited to, its annual report on Form 10-K and quarterly reports on Form 10-Q, copies of which may be obtained by contacting Microsoft’s Investor Relations department at (800) 285-7772 or at Microsoft’s Investor Relations website athttp://www.microsoft.com/investor.

    All information in this release is as of January 28, 2016. The company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the company’s expectations.

    For more information, press only:

    Rapid Response Team, Waggener Edstrom Worldwide, (503) 443-7070,rrt@waggeneredstrom.com

    For more information, financial analysts and investors only:

    Chris Suh, general manager, Investor Relations, (425) 706-4400

    Note to editors: For more information, news and perspectives from Microsoft, please visit the Microsoft News Center at http://www.microsoft.com/news/. Web links, telephone numbers, and titles were correct at time of publication, but may since have changed. Shareholder and financial information, as well as today’s 2:30 p.m. Pacific time conference call with investors and analysts, is available athttp://www.microsoft.com/investor.

    MICROSOFT CORPORATION
    INCOME STATEMENTS
    (In millions, except per share amounts)(Unaudited)
    Three Months Ended December 31, Six Months Ended December 31,
      2015   2014   2015   2014
    Revenue  $   23,796  $26,470  $    44,175  $49,671
    Cost of revenue 9,872 10,136 17,079 18,409
       Gross margin 13,924 16,334 27,096 31,262
    Research and development 2,900 2,903 5,862 5,968
    Sales and marketing 3,960 4,315 7,293 8,043
    General and administrative 1,038 1,097 2,122 2,248
    Impairment, integration, and
    restructuring    		 0 243 0 1,383
    Operating income 6,026 7,776 11,819 13,620
    Other income (expense), net (171) 74 (451) 126
    Income before income taxes 5,855 7,850 11,368 13,746
    Provision for income taxes 857 1,987 1,750 3,343
    Net income  $     4,998  $  5,863  $      9,618  $10,403
    Earnings per share:
       Basic  $      0.63  $    0.71  $        1.21  $    1.26
       Diluted  $      0.62  $    0.71  $        1.20  $    1.25
    Weighted average shares outstanding:
       Basic 7,964 8,228 7,980 8,238
       Diluted 8,028 8,297 8,047 8,321
    Cash dividends declared per
    common share    		  $      0.36    $    0.31    $        0.72    $    0.62

     

    MICROSOFT CORPORATION
    COMPREHENSIVE INCOME STATEMENTS
    (In millions)(Unaudited)
    Three Months Ended December 31, Six Months Ended December 31,
      2015   2014   2015   2014
    Net income  $     4,998  $  5,863  $      9,618  $10,403
    Other comprehensive income (loss):
       Net unrealized gains (losses) on
    derivatives (net of tax effects
    of $5, $6, $28, and $10)    		 (49) 247 8 566
       Net unrealized gains (losses) on
    investments (net of tax effects
    of $86, $(124), $(222), and
    $(226))    		 160 (231) (411) (420)
       Translation adjustments and
    other (net of tax effects of
    $(9), $(211), $(21), and $(258))    		 (76) (390) (346) (471)
          Other comprehensive income
    (loss)    		 35 (374) (749) (325)
    Comprehensive income  $     5,033  $  5,489  $      8,869  $10,078

     

    MICROSOFT CORPORATION
    BALANCE SHEETS
    (In millions)(Unaudited)
      December 31,
    2015    		   June 30, 2015
    Assets
    Current assets:
      Cash and cash equivalents  $           7,185  $      5,595
      Short-term investments (including securities
    loaned of $360 and $75)    		 95,455 90,931
        Total cash, cash equivalents, and short-term
    investments    		 102,640 96,526
      Accounts receivable, net of allowance for doubtful
    accounts of $384 and $335    		 14,507 17,908
      Inventories 2,702 2,902
      Deferred income taxes 1,618 1,915
      Other 6,345 5,461
        Total current assets 127,812 124,712
    Property and equipment, net of accumulated
    depreciation of $18,008 and $17,606    		 15,789 14,731
    Equity and other investments 11,514 12,053
    Goodwill 17,436 16,939
    Intangible assets, net 4,619 4,835
    Other long-term assets 2,928 2,953
               Total assets  $       180,098  $  176,223
    Liabilities and stockholders’ equity
    Current liabilities:
      Accounts payable  $           6,936  $      6,591
      Short-term debt 3,000 4,985
      Current portion of long-term debt 750 2,499
      Accrued compensation 3,649 5,096
      Income taxes 493 606
      Short-term unearned revenue 20,929 23,223
      Securities lending payable 439 92
      Other 6,447 6,766
        Total current liabilities 42,643 49,858
    Long-term debt 40,679 27,808
    Long-term unearned revenue 4,102 2,095
    Deferred income taxes 2,194 2,835
    Other long-term liabilities 13,700 13,544
        Total liabilities 103,318 96,140
    Commitments and contingencies
    Stockholders’ equity:
      Common stock and paid-in capital – shares
    authorized 24,000; outstanding 7,925 and 8,027    		 68,279 68,465
      Retained earnings 6,728 9,096
      Accumulated other comprehensive income 1,773 2,522
        Total stockholders’ equity 76,780 80,083
               Total liabilities and stockholders’ equity  $       180,098  $  176,223

     

    MICROSOFT CORPORATION
    CASH FLOWS STATEMENTS
    (In millions)(Unaudited)
    Three Months Ended December 31, Six Months Ended December 31,
      2015   2014   2015   2014
    Operations
    Net income  $     4,998  $  5,863  $      9,618  $10,403
    Adjustments to reconcile net
    income to net cash from
    operations:
       Depreciation, amortization, and
    other    		 1,544 1,521 3,005 2,949
       Stock-based compensation
    expense    		 658 633 1,332 1,279
       Net recognized losses (gains)
    on investments and derivatives    		 50 (179) 151 (124)
       Excess tax benefits from
    stock-based compensation    		 (20) (22) (302) (524)
       Deferred income taxes (247) 314 (174) 615
       Deferral of unearned revenue 12,570 10,200 22,993 18,222
       Recognition of unearned revenue (11,929) (11,495) (23,284) (22,138)
       Changes in operating assets
    and liabilities:
          Accounts receivable (3,118) (3,378) 3,258 3,249
          Inventories 1,104 1,070 167 587
          Other current assets (912) (159) (1,192) (439)
          Other long-term assets 56 170 51 449
          Accounts payable 369 137 234 (522)
          Other current liabilities 105 (986) (1,919) (2,152)
          Other long-term liabilities 370 651 254 840
             Net cash from operations 5,598 4,340 14,192 12,694
    Financing
    Proceeds from issuance
    (repayments) of short-term debt,
    maturities of 90 days or less, net    		 (7,031) 4,798 (2,141) 7,797
    Proceeds from issuance of debt 13,128 0 13,249 0
    Repayments of debt (121) 0 (1,871) (1,500)
    Common stock issued 117 121 336 337
    Common stock repurchased (3,678) (2,145) (8,435) (5,033)
    Common stock cash dividends paid (2,868) (2,547) (5,343) (4,854)
    Excess tax benefits from
    stock-based compensation    		 20 22 302 524
    Other (65) 285 (243) 285
             Net cash from (used in)
    financing    		 (498) 534 (4,146) (2,444)
    Investing
    Additions to property and
    equipment    		 (2,024) (1,490) (3,380) (2,772)
    Acquisition of companies, net of
    cash acquired, and purchases of
    intangible and other assets    		 (381) (2,794) (771) (2,935)
    Purchases of investments (34,750) (19,167) (72,320) (43,252)
    Maturities of investments 5,351 2,389 11,037 4,082
    Sales of investments 28,191 16,108 56,693 32,553
    Securities lending payable 285 238 347 (129)
             Net cash used in investing (3,328) (4,716) (8,394) (12,453)
    Effect of exchange rates on cash
    and cash equivalents    		 (18) (34) (62) (40)
    Net change in cash and cash
    equivalents    		 1,754 124 1,590 (2,243)
    Cash and cash equivalents,
    beginning of period    		 5,431 6,302 5,595 8,669
    Cash and cash equivalents, end of
    period    		  $     7,185  $  6,426  $      7,185  $  6,426

     

     

    MICROSOFT CORPORATION              
                   
    SEGMENT REVENUE AND OPERATING INCOME
    (In millions)(Unaudited)
                   
      Three Months Ended December 31,   Six Months Ended December 31,
       
      2015   2014   2015   2014
    Revenue              
    Productivity and Business Processes  $     6,690    $  6,822    $   12,990    $13,312
    Intelligent Cloud 6,343   6,041   12,232   11,516
    More Personal Computing 12,660   13,282   22,114   24,548
    Corporate and Other (1,897)   325   (3,161)   295
      Total revenue  $   23,796    $26,470    $   44,175    $49,671
                   
    Operating Income (Loss)              
    Productivity and Business Processes  $     3,305    $  3,587    $     6,460    $  6,988
    Intelligent Cloud 2,580   2,600   4,977   4,705
    More Personal Computing 2,038   1,506   3,542   3,014
    Corporate and Other (1,897)   83   (3,160)   (1,087)
      Total operating income  $     6,026    $  7,776    $   11,819    $13,620


     
    Image via Microsoft

  • Amazon Earnings Out, Sales up 22%

    Amazon Earnings Out, Sales up 22%

    Amazon just announced its earnings for Q4 with sales up 22% to $35.7 billion.

    Operating cash flow was up 74% to $11.9 billion over the year with free cash flow up to $7.3 billion.

    EPS was $1, which was significantly lower than Wall Street expectations.

    CEO Jeff Bezos said, “Twenty years ago, I was driving the packages to the post office myself and hoping we might one day afford a forklift. This year, we pass $100 billion in annual sales and serve 300 million customers. And still, measured by the dynamism we see everywhere in the marketplace and by the ever-expanding opportunities we see to invent on behalf of customers, it feels every bit like Day 1.”

    Here’s the release in its entirety:

    SEATTLE–(BUSINESS WIRE)–Jan. 28, 2016– Amazon.com, Inc. (NASDAQ: AMZN) today announced financial results for its fourth quarter ended December 31, 2015.

    Operating cash flow increased 74% to $11.9 billion for the trailing twelve months, compared with $6.8 billion for the trailing twelve months ended December 31, 2014. Free cash flow increased to $7.3 billion for the trailing twelve months, compared with $1.9 billion for the trailing twelve months ended December 31, 2014. Free cash flow less lease principal repayments increased to $4.7 billion for the trailing twelve months, compared with $529 million for the trailing twelve months ended December 31, 2014. Free cash flow less finance lease principal repayments and assets acquired under capital leases increased to $2.5 billion for the trailing twelve months, compared with an outflow of $2.2 billion for the trailing twelve months ended December 31, 2014.

    Common shares outstanding plus shares underlying stock-based awards totaled 490 million on December 31, 2015, compared with 483 million one year ago.

    Fourth Quarter 2015

    Net sales increased 22% to $35.7 billion in the fourth quarter, compared with $29.3 billion in fourth quarter 2014. Excluding the $1.2 billion unfavorable impact from year-over-year changes in foreign exchange rates throughout the quarter, net sales increased 26% compared with fourth quarter 2014.

    Operating income increased 88% to $1.1 billion in the fourth quarter, compared with operating income of $591 million in fourth quarter 2014.

    Net income was $482 million in the fourth quarter, or $1.00 per diluted share, compared with net income of $214 million, or$0.45 per diluted share, in fourth quarter 2014.

    Full Year 2015

    Net sales increased 20% to $107.0 billion, compared with $89.0 billion in 2014. Excluding the $5.2 billion unfavorable impact from year-over-year changes in foreign exchange rates throughout the year, net sales increased 26% compared with 2014.

    Operating income was $2.2 billion, compared with operating income of $178 million in 2014.

    Net income was $596 million, or $1.25 per diluted share, compared with net loss of $241 million, or $0.52 per diluted share, in 2014.

    “Twenty years ago, I was driving the packages to the post office myself and hoping we might one day afford a forklift. This year, we pass $100 billion in annual sales and serve 300 million customers,” said Jeff Bezos, founder and CEO of Amazon.com. “And still, measured by the dynamism we see everywhere in the marketplace and by the ever-expanding opportunities we see to invent on behalf of customers, it feels every bit like Day 1.”

    Highlights

    • Fire TV remains the #1 best-selling streaming media player in the U.S., having added over 1,000 new apps, channels, and games since September, including NBC, NBC Sports, Watch HGTV, Watch Food Network, and Watch Travel Channel.
    • The $50 Fire tablet has been the #1 best-selling, most gifted, and most wished-for product across all items available on Amazon.com since its introduction 19 weeks ago.
    • The Alexa Skills Kit and Alexa Voice Service continue to attract innovative companies, with Ford, Invoxia, Vivint,Alarm.com, and Ooma announcing plans to integrate their products and services with Alexa. In addition, Alexa continues to get smarter with new features, including local search from Yelp, news sources from CNN andBloomberg, enhanced IFTTT support, new alarm tones, and customized sports updates.
    • Last quarter, developers added over 100 new capabilities to Alexa-enabled devices. Amazon Echo and Fire TV customers can now play Jeopardy!, get stock quotes with Fidelity, hear headlines from The Huffington Post, exercise with a seven-minute workout, and test their Star Wars knowledge with a trivia quiz from Disney.
    • Amazon announced the first devices available with Amazon Dash Replenishment Service, including products from Brother, GE, and Gmate. Additionally, new brands and devices have joined the Dash Replenishment program, including Purell and Whirlpool.
    • In 2015, worldwide paid Prime memberships increased 51% — 47% in the U.S. and even faster outside the U.S.
    • Prime Video continues to grow internationally with nearly double the streaming customers compared with fourth quarter 2014.
    • The Prime-exclusive Original Series Mozart in the Jungle received two Golden Globes for Best Television Series – Musical or Comedy and Best Performance by an Actor in a Television Series – Musical or Comedy (Gael García Bernal).
    • Over the holidays Prime members made The Man in The High Castle the most watched series on Prime Video by 4.5x. The Amazon Original Series received outstanding critical acclaim, including USA Today calling it the “best new drama of the season.”
    • The second season of hit show Transparent was named as one of the top television series of 2015 by The New York Times, Variety, IndieWire, and The New Yorker.
    • Amazon Studios released its first Original Movie Chi-Raq, directed by Spike Lee, to rave reviews. The film has been included in 2015 “Best Films” lists from LA Weekly, The New Yorker, The Washington Post, Los Angeles Times, Slant, and Vulture.
    • Amazon launched the Streaming Partners Program, an over-the-top streaming subscription program that gives Prime members the option to add SHOWTIME, STARZ, and dozens more video subscriptions to their Prime membership.
    • In the fourth quarter, Prime Music streaming hours more than tripled in the U.S. compared with fourth quarter 2014.
    • Prime Music launched in Germany and Japan, offering Prime members more than one million songs and hundreds of playlists at no additional cost to their membership.
    • Since launching in December 2014 with one location, Prime Now has grown to more than 25 metropolitan areas across the U.S., U.K., Italy, and Japan.
    • Prime Same Day launched in the U.K. and Germany, offering Prime members unlimited free same-day delivery on a million items.
    • Amazon Pantry launched in the U.K., allowing Prime members to purchase daily essentials in everyday sizes and have items delivered for a low, flat-rate fee.
    • In 2015, Fulfillment by Amazon (FBA) shipped over one billion units on behalf of sellers. The number of active sellers using FBA grew more than 50%.
    • In the fourth quarter, FBA units represented nearly 50% of total third-party units.
    • Payment volume from Pay with Amazon grew more than 150% year-over-year in 2015, giving Amazon shoppers a secure way to pay on thousands of websites using information already stored in their Amazon accounts.
    • Amazon China launched the Amazon Global Store (AGS) 2.0 customer experience, which provides customers an easier and more convenient shopping experience through single login, unified shopping cart, and local payment. Additionally, AGS selection has grown to over nine million items.
    • Amazon.in was the top e-commerce site in India throughout the fourth quarter, including the busy Diwali shopping season, according to global analytics firm comScore.
    • Downloads of the Amazon.in mobile shopping app grew faster in the fourth quarter than any other e-commerce app in India, according to app analytics firm App Annie.
    • Sellers on Amazon.in sold more in the fourth quarter than in all four quarters combined in 2014.
    • Amazon Fashion, East Dane, and MyHabit return as the lead sponsor for the second season of New York Fashion Week: Men’s, hosted by The Council of Fashion Designers of America.
    • Amazon Launchpad, a program that helps startups launch, market, and distribute their products, has worked with leading venture capital firms, startup accelerators, and crowd-funding platforms to help more than 500 startups launch over 750 products in the U.S., U.K., and China.
    • Amazon entered into an agreement to support the construction and operation of Amazon Wind Farm U.S. Central, which is expected to generate approximately 320,000 megawatt hours (MWh) of wind energy on an annual basis. Amazon Wind Farm U.S. Central, combined with Amazon’s previously announced projects, Amazon Wind Farm Fowler Ridge, Amazon Solar Farm U.S. East in Virginia, and Amazon Wind Farm U.S. East in North Carolina, will be responsible for delivering more than 1.6 million MWh of additional renewable energy annually, roughly equivalent to the amount of energy required to power 150,000 U.S. homes for a year.
    • Only eight months after launch, Amazon Business, a marketplace with features and benefits tailored to businesses, serves more than 200,000 businesses ranging from small businesses to Fortune 500 companies.
    • Amazon Web Services (AWS) announced the launch of its Asia Pacific (Seoul) Region in Korea and its plans to open a new region in Canada. The AWS Cloud is now available from 32 Availability Zones across 12 geographic regions worldwide, with another five AWS Regions (and 11 Availability Zones) in Canada, China, India, Ohio, and the U.K. expected to be available in the coming year.
    • AWS announced the general availability of Amazon WorkMail, a secure, managed business email and calendaring service with support for existing desktop and mobile email clients.
    • AWS announced the general availability of AWS IoT, a managed cloud platform that lets billions of connected devices — such as mobile phones, cars, factory floors, aircraft engines, sensor grids, and more — easily and securely interact with cloud applications and other devices. AWS IoT can support trillions of messages, and can process, route, and keep track of those messages to AWS endpoints and other devices reliably and securely, even when the devices aren’t connected.
    • AWS announced AWS Certificate Manager (ACM), a new service that enables customers to easily provision, manage, and deploy Secure Sockets Layer/Transport Layer Security (SSL/TLS) certificates for use with AWS services. SSL/TLS certificates are used to secure network communications and establish the identity of websites over the Internet. Certificates, which typically cost between $45 and $499, are provided to AWS customers free of charge through ACM and are verified by Amazon’s certificate authority, Amazon Trust Services.
    • AWS launched EC2 Scheduled Reserved Instances, allowing customers to reserve capacity for their applications that run on a part-time, recurring basis with a daily, weekly, or monthly schedule over the course of a one-year term.
    • AWS announced 722 significant new services and features in 2015, a 40% increase over 2014.

    Financial Guidance

    The following forward-looking statements reflect Amazon.com’s expectations as of January 28, 2016, and are subject to substantial uncertainty. Our results are inherently unpredictable and may be materially affected by many factors, such as fluctuations in foreign exchange rates, changes in global economic conditions and customer spending, world events, the rate of growth of the Internet and online commerce, and the various factors detailed below.

    First Quarter 2016 Guidance

    • Net sales are expected to be between $26.5 billion and $29.0 billion, or to grow between 17% and 28% compared with first quarter 2015.
    • Operating income is expected to be between $100 million and $700 million, compared with $255 million in first quarter 2015.
    • This guidance includes approximately $600 million for stock-based compensation and other operating expense (income), net. It assumes, among other things, that no additional business acquisitions, investments, restructurings, or legal settlements are concluded and that there are no further revisions to stock-based compensation estimates.

    A conference call will be webcast live today at 2:00 p.m. PT/5:00 p.m. ET, and will be available for at least three months atwww.amazon.com/ir. This call will contain forward-looking statements and other material information regarding the Company’s financial and operating results.

    These forward-looking statements are inherently difficult to predict. Actual results could differ materially for a variety of reasons, including, in addition to the factors discussed above, the amount that Amazon.com invests in new business opportunities and the timing of those investments, the mix of products sold to customers, the mix of net sales derived from products as compared with services, the extent to which we owe income taxes, competition, management of growth, potential fluctuations in operating results, international growth and expansion, the outcomes of legal proceedings and claims, fulfillment, sortation, delivery, and data center optimization, risks of inventory management, seasonality, the degree to which the Company enters into, maintains, and develops commercial agreements, acquisitions and strategic transactions, payments risks, and risks of fulfillment throughput and productivity. Other risks and uncertainties include, among others, risks related to new products, services, and technologies, system interruptions, government regulation and taxation, and fraud. In addition, the current global economic climate amplifies many of these risks. More information about factors that potentially could affect Amazon.com’s financial results is included in Amazon.com’s filings with the Securities and Exchange Commission (“SEC”), including its most recent Annual Report on Form 10-K and subsequent filings.

    Our investor relations website is www.amazon.com/ir and we encourage investors to use it as a way of easily finding information about us. We promptly make available on this website, free of charge, the reports that we file or furnish with theSEC, corporate governance information (including our Code of Business Conduct and Ethics), and select press releases and social media postings, which may contain material information about us, and you may subscribe to be notified of new information posted to this site.

    About Amazon

    Amazon.com opened on the World Wide Web in July 1995. The company is guided by four principles: customer obsession rather than competitor focus, passion for invention, commitment to operational excellence, and long-term thinking. Customer reviews, 1-Click shopping, personalized recommendations, Prime, Fulfillment by Amazon, AWS, Kindle Direct Publishing, Kindle, Fire tablets, Fire TV, Amazon Echo, and Alexa are some of the products and services pioneered byAmazon. For more information, visit www.amazon.com/about.

    AMAZON.COM, INC.
    Consolidated Statements of Cash Flows
    (in millions)
    Three Months Ended Twelve Months Ended
    December 31, December 31,
    2015 2014 2015

    2014
    (unaudited)
    CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD $ 10,709 $ 5,258 $ 14,557 $ 8,658
    OPERATING ACTIVITIES:
    Net income (loss) 482 214 596 (241 )
    Adjustments to reconcile net income (loss) to net cash from operating activities:
    Depreciation of property and equipment, including internal-use software and website development, and other amortization, including capitalized content costs 1,752 1,379 6,281 4,746
    Stock-based compensation 606 408 2,119 1,497
    Other operating expense (income), net 35 36 155 129
    Losses (gains) on sales of marketable securities, net 1 — 5 (3 )
    Other expense (income), net 79 78 245 62
    Deferred income taxes 190 185 81 (316 )
    Excess tax benefits from stock-based compensation 93 115 (119 ) (6 )
    Changes in operating assets and liabilities:
    Inventories (1,343 ) (1,139 ) (2,187 ) (1,193 )
    Accounts receivable, net and other (1,178 ) (1,104 ) (1,755 ) (1,039 )
    Accounts payable 6,140 5,053 4,294 1,759
    Accrued expenses and other 1,836 1,451 913 706
    Additions to unearned revenue 2,422 1,378 7,401 4,433
    Amortization of previously unearned revenue (2,303 ) (1,339 ) (6,109 ) (3,692 )
    Net cash provided by (used in) operating activities 8,812 6,715 11,920 6,842
    INVESTING ACTIVITIES:
    Purchases of property and equipment, including internal-use software and website development, net (1,309 ) (1,144 ) (4,589 ) (4,893 )
    Acquisitions, net of cash acquired, and other (317 ) (53 ) (795 ) (979 )
    Sales and maturities of marketable securities 1,135 355 3,025 3,349
    Purchases of marketable securities (1,359 ) (1,623 ) (4,091 ) (2,542 )
    Net cash provided by (used in) investing activities (1,850 ) (2,465 ) (6,450 ) (5,065 )
    FINANCING ACTIVITIES:
    Excess tax benefits from stock-based compensation (93 ) (115 ) 119 6
    Proceeds from long-term debt and other 93 5,981 353 6,359
    Repayments of long-term debt and other (940 ) (183 ) (1,652 ) (513 )
    Principal repayments of capital lease obligations (724 ) (406 ) (2,462 ) (1,285 )
    Principal repayments of finance lease obligations (26 ) (68 ) (121 ) (135 )
    Net cash provided by (used in) financing activities (1,690 ) 5,209 (3,763 ) 4,432
    Foreign-currency effect on cash and cash equivalents (91 ) (160 ) (374 ) (310 )
    Net increase (decrease) in cash and cash equivalents 5,181 9,299 1,333 5,899
    CASH AND CASH EQUIVALENTS, END OF PERIOD $ 15,890 $ 14,557 $ 15,890 $ 14,557
    SUPPLEMENTAL CASH FLOW INFORMATION:
    Cash paid for interest on long-term debt $ 148 $ 36 $ 325 $ 91
    Cash paid for interest on capital and finance lease obligations 44 29 153 86
    Cash paid for income taxes (net of refunds) 73 30 273 177
    Property and equipment acquired under capital leases 1,332 1,214 4,717 4,008
    Property and equipment acquired under build-to-suit leases 163 214 544 920
    AMAZON.COM, INC.
    Consolidated Statements of Operations
    (in millions, except per share data)
    Three Months Ended Twelve Months Ended
    December 31, December 31,
    2015 2014 2015 2014
    (unaudited)
    Net product sales $ 26,618 $ 23,102 $ 79,268 $ 70,080
    Net service sales 9,129 6,226 27,738 18,908
    Total net sales 35,747 29,328 107,006 88,988
    Operating expenses (1):
    Cost of sales 24,341 20,671 71,651 62,752
    Fulfillment 4,546 3,424 13,410 10,766
    Marketing 1,755 1,526 5,254 4,332
    Technology and content 3,571 2,635 12,540 9,275
    General and administrative 390 442 1,747 1,552
    Other operating expense (income), net 36 39 171 133
    Total operating expenses 34,639 28,737 104,773 88,810
    Income from operations 1,108 591 2,233 178
    Interest income 13 8 50 39
    Interest expense (115 ) (74 ) (459 ) (210 )
    Other income (expense), net (68 ) (96 ) (256 ) (118 )
    Total non-operating income (expense) (170 ) (162 ) (665 ) (289 )
    Income (loss) before income taxes 938 429 1,568 (111 )
    Provision for income taxes (453 ) (205 ) (950 ) (167 )
    Equity-method investment activity, net of tax (3 ) (10 ) (22 ) 37
    Net income (loss) $ 482 $ 214 $ 596 $ (241 )
    Basic earnings per share $ 1.03 $ 0.46 $ 1.28 $ (0.52 )
    Diluted earnings per share $ 1.00 $ 0.45 $ 1.25 $ (0.52 )
    Weighted-average shares used in computation of earnings per share:
    Basic 470 464 467 462

    Diluted

    		 481 472 477 462

    ______________________________
    (1) Includes stock-based compensation as follows:
    Fulfillment $ 137 $ 97 $ 482 $ 375
    Marketing 57 34 190 125
    Technology and content 364 226 1,224 804
    General and administrative 48 51 223 193
    AMAZON.COM, INC.
    Consolidated Statements of Comprehensive Income (Loss)
    (in millions)

    Three Months Ended

    		 Twelve Months Ended
    December 31, December 31,
    2015 2014 2015 2014
    (unaudited)
    Net income (loss) $ 482 $ 214 $ 596 $ (241 )
    Other comprehensive income (loss):
    Foreign currency translation adjustments, net of tax of $7, $(3), $10, and $(3) (40 ) (116 ) (210 ) (325 )
    Net change in unrealized gains (losses) on available-for-sale securities:
    Unrealized gains (losses), net of tax of $1, $1, $(5), and $1 (9 ) 2 (7 ) 2
    Reclassification adjustment for losses (gains) included in “Other income (expense), net,” net of tax of $0, $(1), $0, and $(1) 1 (2 ) 5 (3 )
    Net unrealized gains (losses) on available-for-sale securities (8 ) — (2 ) (1 )
    Total other comprehensive income (loss) (48 ) (116 ) (212 ) (326 )
    Comprehensive income (loss) $ 434 $ 98 $ 384 $ (567 )
    AMAZON.COM, INC.
    Segment Information
    (in millions)
    Three Months Ended Twelve Months Ended
    December 31, December 31,
    2015 2014 2015 2014
    (unaudited)
    North America
    Net sales $ 21,501 $ 17,333 $ 63,708 $ 50,834
    Segment operating expenses (1) 20,498 16,600 60,957 49,542
    Segment operating income (loss) $ 1,003 $ 733 $ 2,751 $ 1,292
    International
    Net sales $ 11,841 $ 10,575 $ 35,418 $ 33,510
    Segment operating expenses (1) 11,781 10,510 35,509 33,654
    Segment operating income (loss) $ 60 $ 65 $ (91 ) $ (144 )
    AWS
    Net sales $ 2,405 $ 1,420 $ 7,880 $ 4,644
    Segment operating expenses (1) 1,718 1,180 6,017 3,984
    Segment operating income (loss) $ 687 $ 240 $ 1,863 $ 660
    Consolidated
    Net sales $ 35,747 $ 29,328 $ 107,006 $ 88,988
    Segment operating expenses (1) 33,997 28,290 102,483 87,180
    Segment operating income (loss) 1,750 1,038 4,523 1,808
    Stock-based compensation (606 ) (408 ) (2,119 ) (1,497 )
    Other operating income (expense), net (36 ) (39 ) (171 ) (133 )
    Income from operations 1,108 591 2,233 178
    Total non-operating income (expense) (170 ) (162 ) (665 ) (289 )
    Provision for income taxes (453 ) (205 ) (950 ) (167 )
    Equity-method investment activity, net of tax (3 ) (10 ) (22 ) 37
    Net income (loss) $ 482 $ 214 $ 596 $ (241 )
    Segment Highlights:
    Y/Y net sales growth:
    North America 24 % 21 % 25 % 23 %
    International 12 3 6 12
    AWS 69 47 70 49
    Consolidated 22 15 20 20
    Net sales mix:
    North America 60 % 59 % 60 % 57 %
    International 33 36 33 38
    AWS 7 5 7 5
    Consolidated 100 % 100 % 100 % 100 %

    ______________________________

    (1) Excludes stock-based compensation and “Other operating expense (income), net,” which are not allocated to segments.
    AMAZON.COM, INC.
    Supplemental Net Sales Information
    (in millions)
    Three Months Ended Twelve Months Ended
    December 31, December 31,
    2015 2014 2015 2014
    (unaudited)
    Net Sales:
    North America
    Media $ 3,931 $ 3,544 $ 12,483 $ 11,567
    Electronics and other general merchandise 17,325 13,529 50,401 38,517
    Other (1) 245 260 824 750
    Total North America $ 21,501 $ 17,333 $ 63,708 $ 50,834
    International
    Media $ 3,292 $ 3,406 $ 10,026 $ 10,938
    Electronics and other general merchandise 8,491 7,109 25,196 22,369
    Other (1) 58 60 196 203
    Total International $ 11,841 $ 10,575 $ 35,418 $ 33,510
    Year-over-year Percentage Growth:
    North America
    Media 11 % 1 % 8 % 7 %
    Electronics and other general merchandise 28 27 31 28
    Other (6 ) 28 10 22
    Total North America 24 21 25 23
    International
    Media (3 )% (8 )% (8 )% — %
    Electronics and other general merchandise 19 10 13 19
    Other (3 ) (6 ) (3 ) (3 )
    Total International 12 3 6 12
    Year-over-year Percentage Growth, excluding the effect of foreign exchange rates:
    North America
    Media 12 % 1 % 8 % 7 %
    Electronics and other general merchandise 28 27 31 29
    Other (6 ) 28 10 22
    Total North America 24 21 26 23
    International
    Media 5 % (1 )% 4 % 2 %
    Electronics and other general merchandise 31 19 29 21
    Other 5 1 10 (3 )
    Total International 22 12 21 14

    ______________________________

    (1) Includes sales from non-retail activities, such as certain advertising services and our co-branded credit card agreements.
    AMAZON.COM, INC.
    Consolidated Balance Sheets
    (in millions, except per share data)
    December 31, 2015 December 31, 2014
    ASSETS
    Current assets:
    Cash and cash equivalents $ 15,890 $ 14,557
    Marketable securities 3,918 2,859
    Inventories 10,243 8,299
    Accounts receivable, net and other 6,423 5,612
    Total current assets 36,474 31,327
    Property and equipment, net 21,838 16,967
    Goodwill 3,759 3,319
    Other assets 3,373 2,892
    Total assets $ 65,444 $ 54,505
    LIABILITIES AND STOCKHOLDERS’ EQUITY
    Current liabilities:
    Accounts payable $ 20,397 $ 16,459
    Accrued expenses and other 10,384 9,807
    Unearned revenue 3,118 1,823
    Total current liabilities 33,899 28,089
    Long-term debt 8,235 8,265
    Other long-term liabilities 9,926 7,410
    Commitments and contingencies
    Stockholders’ equity:
    Preferred stock, $0.01 par value:
    Authorized shares — 500
    Issued and outstanding shares — none — —
    Common stock, $0.01 par value:
    Authorized shares — 5,000
    Issued shares — 494 and 488
    Outstanding shares — 471 and 465 5 5
    Treasury stock, at cost (1,837 ) (1,837 )
    Additional paid-in capital 13,394 11,135
    Accumulated other comprehensive loss (723 ) (511 )
    Retained earnings 2,545 1,949
    Total stockholders’ equity 13,384 10,741
    Total liabilities and stockholders’ equity $ 65,444 $ 54,505
    AMAZON.COM, INC.
    Supplemental Financial Information and Business Metrics
    (in millions, except per share data)
    (unaudited)

    		Y/Y %
    Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Change
    Cash Flows and Shares
    Operating cash flow — trailing twelve months (TTM) $ 6,842 $ 7,845 $ 8,980 $ 9,823 $ 11,920 74 %
    Operating cash flow — TTM Y/Y growth (decline) 25 % 47 % 69 % 72 % 74 % N/A
    Purchases of property and equipment, including internal-use software and website development, net — TTM $ 4,893 $ 4,684 $ 4,607 $ 4,424 $ 4,589

    (6

    )%
    Principal repayments of capital lease obligations — TTM $ 1,285 $ 1,537 $ 1,832 $ 2,144 $ 2,462 92 %
    Principal repayments of finance lease obligations — TTM $ 135 $ 132 $ 155 $ 163 $ 121 (11 )%
    Property and equipment acquired under capital leases — TTM $ 4,008 $ 4,246 $ 4,710 $ 4,599 $ 4,717 18 %
    Free cash flow — TTM (1) $ 1,949 $ 3,161 $ 4,373 $ 5,399 $ 7,331 276 %
    Invested capital (2) $ 21,021 $ 23,090 $ 25,289 $ 27,425 $ 29,694 41 %
    Free cash flow less lease principal repayments — TTM (3) $ 529 $ 1,492 $ 2,386 $ 3,092 $ 4,748 797 %
    Free cash flow less finance lease principal repayments and assets acquired under capital leases — TTM (4) $ (2,194 ) $ (1,217 ) $ (492 ) $ 637 $ 2,493 N/A
    Common shares and stock-based awards outstanding 483 483 488 489 490 1 %
    Common shares outstanding 465 466 468 469 471 1 %
    Stock-based awards outstanding 18 17 20 20 19 7 %
    Stock-based awards outstanding — % of common shares outstanding 3.8 % 3.8 % 4.4 % 4.3 % 4.1 % N/A
    Results of Operations
    Worldwide (WW) net sales $ 29,328 $ 22,717 $ 23,185 $ 25,358 $ 35,747 22 %
    WW net sales — Y/Y growth, excluding F/X 18 % 22 % 27 % 30 % 26 % N/A
    WW net sales — TTM $ 88,988 $ 91,963 $ 95,808 $ 100,588 $ 107,006 20 %
    WW net sales — TTM Y/Y growth, excluding F/X 20 % 20 % 22 % 24 % 26 % N/A
    Operating income (loss) $ 591 $ 255 $ 464 $ 406 $ 1,108 88 %
    Operating income/loss — Y/Y growth (decline), excluding F/X 22 % 90 % N/A N/A 84 % N/A
    Operating margin — % of WW net sales 2.0 % 1.1 % 2.0 % 1.6 % 3.1 % N/A
    Operating income (loss) — TTM $ 178 $ 287 $ 765 $ 1,715 $ 2,233 N/A
    Operating income/loss — TTM Y/Y growth (decline), excluding F/X (79 )% (56 )% 35 % N/A N/A N/A
    Operating margin — TTM % of WW net sales 0.2 % 0.3 % 0.8 % 1.7 % 2.1 % N/A
    Net income (loss) $ 214 $ (57 ) $ 92 $ 79 $ 482 125 %
    Net income (loss) per diluted share $ 0.45 $ (0.12 ) $ 0.19 $ 0.17 $ 1.00 121 %
    Net income (loss) — TTM $ (241 ) $ (405 ) $ (188 ) $ 328 $ 596 N/A
    Net income (loss) per diluted share — TTM $ (0.52 ) $ (0.88 ) $ (0.41 ) $ 0.69 $ 1.25 N/A

    ______________________________

    (1) Free cash flow is cash flow from operations reduced by “Purchases of property and equipment, including internal-use software and website development, net” which is included in cash flow from investing activities.

    (2) Average Total Assets minus Current Liabilities (excluding current portion of Long-Term Debt) over five quarter ends.

    (3) Free cash flow less lease principal repayments is free cash flow reduced by “Principal repayments of capital lease obligations,” and “Principal repayments of finance lease obligations,” which are included in cash flow from financing activities.

    (4) Free cash flow less finance lease principal repayments and assets acquired under capital leases is free cash flow reduced by “Principal repayments of finance lease obligations,” which are included in cash flow from financing activities, and property and equipment acquired under capital leases. In this measure, property and equipment acquired under capital leases is reflected as if these assets had been purchased with cash, which is not the case as these assets have been leased.
    AMAZON.COM, INC.
    Supplemental Financial Information and Business Metrics
    (in millions)
    (unaudited)
    Y/Y %
    Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Change
    Segments
    North America Segment:
    Net sales $ 17,333 $ 13,406 $ 13,796 $ 15,006 $ 21,501 24 %
    Net sales — Y/Y growth, excluding F/X 21 % 24 % 26 % 29 % 24 % N/A
    Net sales — TTM $ 50,834 $ 53,432 $ 56,233 $ 59,540 $ 63,708 25 %
    Operating income (loss) $ 733 $ 517 $ 703 $ 528 $ 1,003 37 %
    Operating income/loss — Y/Y growth (decline), excluding F/X 77 % 111 % N/A 36 % N/A
    Operating margin — % of North America net sales 4.2 % 3.9 % 5.1 % 3.5 % 4.7 % N/A
    Operating income (loss) — TTM $ 1,292 $ 1,520 $ 1,893 $ 2,480 $ 2,751 113 %
    Operating margin — TTM % of North America net sales 2.5 % 2.8 % 3.4 % 4.2 % 4.3 % N/A
    International Segment:
    Net sales $ 10,575 $ 7,745 $ 7,565 $ 8,267 $ 11,841 12 %
    Net sales — Y/Y growth, excluding F/X 12 % 14 % 22 % 24 % 22 % N/A
    Net sales — TTM $ 33,510 $ 33,371 $ 33,598 $ 34,154 $ 35,418 6 %
    Net sales — TTM % of WW net sales 38 % 36 % 35 % 34 % 33 % N/A
    Operating income (loss) $ 65 $ (76 ) $ (19 ) $ (56 ) $ 60 (7 )%
    Operating income/loss — Y/Y growth (decline), excluding F/X N/A N/A N/A 65 % N/A
    Operating margin — % of International net sales 0.6 % (1.0 )% (0.2 )% (0.7 )% 0.5 % N/A
    Operating income (loss) — TTM $ (144 ) $ (188 ) $ (205 ) $ (86 ) $ (91 ) (36 )%
    Operating margin — TTM % of International net sales (0.4 )% (0.6 )% (0.6 )% (0.3 )% (0.3 )% N/A
    AWS Segment:
    Net sales $ 1,420 $ 1,566 $ 1,824 $ 2,085 $ 2,405 69 %
    Net sales — Y/Y growth, excluding F/X 47 % 49 % 81 % 78 % 69 % N/A
    Net sales — TTM $ 4,644 $ 5,160 $ 5,977 $ 6,894 $ 7,880 70 %
    Net sales — TTM % of WW net sales 5 % 6 % 6 % 7 % 7 % N/A
    Operating income (loss) $ 240 $ 265 $ 391 $ 521 $ 687 186 %
    Operating income/loss — Y/Y growth (decline), excluding F/X (13 )% 314 % 353 % 161 % N/A
    Operating margin — % of AWS net sales 16.9 % 16.9 % 21.4 % 25.0 % 28.5 % N/A
    Operating income (loss) — TTM $ 660 $ 680 $ 993 $ 1,417 $ 1,863 182 %
    Operating margin — TTM % of AWS net sales 14.2 % 13.2 % 16.6 % 20.6 % 23.6 % N/A
    Consolidated Segments:
    Operating expenses (5) $ 28,290 $ 22,011 $ 22,110 $ 24,365 $ 33,997 20 %
    Operating expenses — TTM (5) $ 87,180 $ 89,951 $ 93,126 $ 96,777 $ 102,483 18 %
    Operating income (loss) $ 1,038 $ 706 $ 1,075 $ 993 $ 1,750 69 %
    Operating income/loss — Y/Y growth (decline), excluding F/X 22 % 45 % 168 % N/A 67 % N/A
    Operating margin — % of Consolidated sales 3.5 % 3.1 % 4.6 % 3.9 % 4.9 % N/A
    Operating income (loss) — TTM $ 1,808 $ 2,012 $ 2,682 $ 3,811 $ 4,523 150 %
    Operating income/loss — TTM Y/Y growth (decline), excluding F/X (10 )% (1 )% 34 % 134 % 149 % N/A
    Operating margin — TTM % of Consolidated net sales 2.0 % 2.2 % 2.8 % 3.8 % 4.2 % N/A

    ______________________________

    (5) Represents cost of sales, fulfillment, marketing, technology and content, and general and administrative operating expenses, excluding stock-based compensation.
    AMAZON.COM, INC.
    Supplemental Financial Information and Business Metrics
    (in millions, except inventory turnover, accounts payable days and employee data)
    (unaudited)
    Y/Y %
    Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Change
    Supplemental
    Supplemental North America Segment Net Sales:
    Media $ 3,544 $ 2,969 $ 2,620 $ 2,963 $ 3,931 11 %
    Media — Y/Y growth, excluding F/X 1 % 5 % 7 % 9 % 12 % N/A
    Media — TTM $ 11,567 $ 11,711 $ 11,867 $ 12,096 $ 12,483 8 %
    Electronics and other general merchandise $ 13,529 $ 10,250 $ 10,987 $ 11,840 $ 17,325 28 %
    Electronics and other general merchandise — Y/Y growth, excluding F/X 27 % 31 % 32 % 35 % 28 % N/A
    Electronics and other general merchandise — TTM $ 38,517 $ 40,938 $ 43,559 $ 46,606 $ 50,401 31 %
    Electronics and other general merchandise — TTM % of North America net sales 76 % 77 % 77 % 78 % 79 % N/A
    Other $ 260 $ 187 $ 189 $ 203 $ 245 (6 )%
    Supplemental International Segment Net Sales:
    Media $ 3,406 $ 2,320 $ 2,094 $ 2,320 $ 3,292 (3 )%
    Media — Y/Y growth, excluding F/X (1 )% 2 % 3 % 6 % 5 % N/A
    Media — TTM $ 10,938 $ 10,615 $ 10,329 $ 10,140 $ 10,026 (8 )%
    Electronics and other general merchandise $ 7,109 $ 5,378 $ 5,425 $ 5,901 $ 8,491 19 %
    Electronics and other general merchandise — Y/Y growth, excluding F/X 19 % 21 % 31 % 32 % 31 % N/A
    Electronics and other general merchandise — TTM $ 22,369 $ 22,559 $ 23,072 $ 23,814 $ 25,196 13 %
    Electronics and other general merchandise — TTM % of International net sales 67 % 68 % 69 % 70 % 71 % N/A
    Other $ 60 $ 47 $ 46 $ 46 $ 58 (3 )%
    Balance Sheet
    Cash and marketable securities — ending $ 17,416 $ 13,781 $ 14,001 $ 14,428 $ 19,808 14 %
    Inventory, net — ending $ 8,299 $ 7,369 $ 7,470 $ 8,981 $ 10,243 23 %
    Inventory turnover, average — TTM 8.6 8.8 8.9 8.6 8.5 (2 )%
    Property and equipment, net — ending $ 16,967 $ 17,736 $ 19,479 $ 20,636 $ 21,838 29 %
    Accounts payable — ending $ 16,459 $ 11,917 $ 12,391 $ 14,437 $ 20,397 24 %
    Accounts payable days — ending 73 70 74 79 77 5 %
    Other
    WW shipping revenue $ 1,701 $ 1,299 $ 1,399 $ 1,494 $ 2,328 37 %
    WW shipping revenue – % of net sales (6) 6.1 % 6.1 % 6.6 % 6.4 % 7.0 % N/A
    WW shipping costs $ 3,049 $ 2,309 $ 2,340 $ 2,720 $ 4,170 37 %
    WW shipping costs – % of net sales (6) 10.9 % 10.9 % 11.0 % 11.7 % 12.5 % N/A
    WW net shipping costs $ 1,348 $ 1,010 $ 941 $ 1,226 $ 1,842 37 %
    WW net shipping costs — % of WW net sales (6) 4.8 % 4.8 % 4.4 % 5.3 % 5.5 % N/A
    WW paid units — Y/Y growth 20 % 20 % 22 % 26 % 26 % N/A
    WW seller unit mix — % of WW paid units 43 % 44 % 45 % 46 % 47 % N/A
    Employees (full-time and part-time; excludes contractors & temporary personnel) 154,100 165,000 183,100 222,400 230,800 50 %

    ______________________________

    (6) Includes North America and International segment net sales.

    Amazon.com, Inc.
    Certain Definitions

    Customer Accounts

    • References to customers mean customer accounts, which are unique e-mail addresses, established either when a customer places an order or when a customer orders from other sellers on our websites. Customer accounts exclude certain customers, including customers associated with certain of our acquisitions, Amazon Payments customers, AWS customers, and the customers of select companies with whom we have a technology alliance or marketing and promotional relationship. Customers are considered active when they have placed an order during the preceding twelve-month period.

    Seller Accounts

    • References to sellers means seller accounts, which are established when a seller receives an order from a customer account. Sellers are considered active when they have received an order from a customer during the preceding twelve-month period.

    AWS Customers

    • References to AWS customers mean unique AWS customer accounts, which are unique e-mail addresses that are eligible to use AWS services. This includes AWS accounts in the AWS free tier. Multiple users accessing AWS services via one account are counted as a single account. Customers are considered active when they have had AWS usage activity during the preceding one-month period.

    Units

    Source: Amazon.com, Inc.

    Image via Amazon

  • Facebook Earnings Out, Mobile Ad Revenue 80% Of All Ad Revenue

    Facebook Earnings Out, Mobile Ad Revenue 80% Of All Ad Revenue

    Facebook just released its earnings report for the fourth quarter and full-year 2015. Full-year revenue was $17.93 billion, up 44% year-over-year. Net income was $3.69 billion.

    Mobile ad revenue represented 80% of all ad revenue in the fourth quarter. That’s up 69% from the fourth quarter in 2014.

    The company announced that it hit 1.04 billion daily active users (on average) in December, which is up 17% from the year prior. Mobile daily active users were 934 million in December (up 25% year-over-year).

    Monthly active users were 1.59 billion at the end of the year, up 14% year-over-year. Mobile MAUs were 1.44 billion (up 21% year-over-year).

    Here’s the release in its entirety:

    MENLO PARK, Calif., Jan. 27, 2016 /PRNewswire/ — Facebook, Inc. (NASDAQ: FB) today reported financial results for the fourth quarter and full year ended December 31, 2015.

    “2015 was a great year for Facebook. Our community continued to grow and our business is thriving,” said Mark Zuckerberg, Facebookfounder and CEO. “We continue to invest in better serving our community, building our business, and connecting the world.”

    Fourth Quarter and Full Year 2015 Financial Summary  

    Three Months Ended December 31,

    Year Ended December 31,

    In millions, except percentages and per share amounts

    2015

    2014

    2015

    2014

    Revenue

    $ 5,841

    $ 3,851

    $ 17,928

    $ 12,466

    Income from Operations

       GAAP

    $ 2,560

    $ 1,133

    $   6,225

    $   4,994

       Non-GAAP*

    $ 3,523

    $ 2,219

    $ 10,001

    $   7,207

    Operating Margin

       GAAP

    44%

    29%

    35%

    40%

       Non-GAAP*

    60%

    58%

    56%

    58%

    Net Income

       GAAP

    $ 1,562

    $    701

    $   3,688

    $   2,940

       Non-GAAP*

    $ 2,265

    $ 1,518

    $   6,518

    $   4,713

    Diluted Earnings per Share (EPS)

       GAAP

    $   0.54

    $   0.25

    $     1.29

    $     1.10

       Non-GAAP*

    $   0.79

    $   0.54

    $     2.28

    $     1.77

    *

    Non-GAAP financial measures exclude amortization of intangible assets, share-based compensation and related payroll tax expenses. Non-GAAP net income and EPS also exclude the income tax effects of these non-GAAP adjustments. See the table below titled “Reconciliation of Non-GAAP Results to Nearest GAAP Measures.”

    Full Year 2015 Business Highlights

    • Revenue – Revenue for the full year 2015 was $17.93 billion, an increase of 44% year-over-year.
    • Income from operations – Income from operations for the full year 2015 was $6.23 billion.
    • Net income – Net income for the full year 2015 was $3.69 billion.
    • Free cash flow – Free cash flow for the full year 2015 was $6.08 billion.
    • Daily active users (DAUs) – DAUs were 1.04 billion on average for December 2015, an increase of 17% year-over-year.
    • Mobile DAUs – Mobile DAUs were 934 million on average for December 2015, an increase of 25% year-over-year.
    • Monthly active users (MAUs) – MAUs were 1.59 billion as of December 31, 2015, an increase of 14% year-over-year.
    • Mobile MAUs – Mobile MAUs were 1.44 billion as of December 31, 2015, an increase of 21% year-over-year.

    Fourth Quarter 2015 Financial Highlights

    GAAP

    Year-over-
    Year %
    Change

    Three Months Ended December 31,

    In millions, except percentages and per share amounts

    2015

    2014

    Revenue:

       Advertising(1)

    $ 5,637

    $ 3,594

    57%

       Payments and other fees

    204

    257

    (21)%

    Total revenue(2)

    5,841

    3,851

    52%

    Total costs and expenses

    3,281

    2,718

    21%

    Income from operations

    $ 2,560

    $ 1,133

    126%

    Operating margin

    44%

    29%

    Provision for income taxes

    995

    Effective tax rate

    39%

    Net income

    $ 1,562

    $    701

    123%

    Diluted EPS

    $   0.54

    $   0.25

    116%

    (1) Excluding the impact of year-over-year changes in foreign exchange rates, advertising revenue would have increased by 66%.

    (2) Excluding the impact of year-over-year changes in foreign exchange rates, total revenue would have increased by 60%.

    Non-GAAP

    Year-over-
    Year %
    Change

    Three Months Ended December 31,

    In millions, except percentages and per share amounts

    2015

    2014

    GAAP revenue

    $ 5,841

    $ 3,851

    52%

    Total costs and expenses

    2,318

    1,632

    42%

    Income from operations

    $ 3,523

    $ 2,219

    59%

    Operating margin

    60%

    58%

    Effective tax rate

    36%

    Net income

    $ 2,265

    $ 1,518

    49%

    Diluted EPS

    $   0.79

    $   0.54

    46%

    Fourth Quarter 2015 Other Financial Highlights

    • Mobile advertising revenue – Mobile advertising revenue represented approximately 80% of advertising revenue for the fourth quarter of 2015, up from 69% of advertising revenue in the fourth quarter of 2014.
    • Capital expenditures – Capital expenditures for the fourth quarter of 2015 were $692 million.
    • Cash and cash equivalents and marketable securities – Cash and cash equivalents and marketable securities were $18.43 billionat the end of the fourth quarter of 2015.
    • Free cash flow – Free cash flow for the fourth quarter of 2015 was $2.14 billion.

    Webcast and Conference Call Information

    Facebook will host a conference call to discuss the results at 2 p.m. PT / 5 p.m. ET today. The live webcast of Facebook’s earnings release call can be accessed at investor.fb.com, along with the earnings press release, financial tables and slide presentation. Facebookuses the investor.fb.com website and Mark Zuckerberg’s Facebook Page (https://www.facebook.com/zuck) as means of disclosing material non-public information and for complying with its disclosure obligations under Regulation FD.

    Following the call, a replay will be available at the same website. A telephonic replay will be available for one week following the conference call at +1 (404) 537-3406 or +1 (855) 859-2056, conference ID 16251646.

    About Facebook

    Founded in 2004, Facebook’s mission is to give people the power to share and make the world more open and connected. People useFacebook to stay connected with friends and family, to discover what’s going on in the world, and to share and express what matters to them.

    Contacts

    Investors:
    Deborah Crawford
    investor@fb.com / investor.fb.com

    Press:
    Vanessa Chan
    press@fb.com / newsroom.fb.com

    Forward Looking Statements

    This press release contains forward-looking statements regarding our future business expectations, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are only predictions and may differ materially from actual results due to a variety of factors including: our ability to retain or increase users and engagement levels; our reliance on advertising revenue; our dependency on mobile operating systems, networks, and standards that we do not control; risks associated with new product development and their introduction as well as other new business initiatives; our emphasis on user growth and engagement and the user experience over short-term financial results; competition; litigation; privacy and regulatory concerns; risks associated with acquisitions; security breaches; and our ability to manage growth and geographically-dispersed operations. These and other potential risks and uncertainties that could cause actual results to differ from the results predicted are more fully detailed under the caption “Risk Factors” in our Quarterly Report on Form 10-Q filed with the SEC on November 5, 2015, which is available on our Investor Relations website at investor.fb.com and on the SEC website at www.sec.gov. Additional information will also be set forth in our Annual Report on Form 10-K for the year ended December 31, 2015. In addition, please note that the date of this press release is January 27, 2016, and any forward-looking statements contained herein are based on assumptions that we believe to be reasonable as of this date. We undertake no obligation to update these statements as a result of new information or future events.

    Non-GAAP Financial Measures

    To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we use the following non-GAAP financial measures: revenue excluding foreign exchange effect and advertising revenue excluding foreign exchange effect; non-GAAP costs and expenses; non-GAAP income from operations; non-GAAP net income; non-GAAP diluted shares; non-GAAP diluted earnings per share; non-GAAP operating margin; non-GAAP effective tax rate; and free cash flow. The presentation of these financial measures is not intended to be considered in isolation or as a substitute for, or superior to, financial information prepared and presented in accordance with GAAP. Investors are cautioned that there are material limitations associated with the use of non-GAAP financial measures as an analytical tool. In particular, many of the adjustments to our GAAP financial measures reflect the exclusion of items, specifically amortization of intangible assets, share-based compensation expense, and payroll tax related to share-based compensation expense, and the related income tax effects of the aforementioned exclusions, that are recurring and will be reflected in our financial results for the foreseeable future. In addition, these measures may be different from non-GAAP financial measures used by other companies, limiting their usefulness for comparison purposes. We compensate for these limitations by providing specific information regarding the GAAP amounts excluded from these non-GAAP financial measures.

    We believe these non-GAAP financial measures provide investors with useful supplemental information about the financial performance of our business, enable comparison of financial results between periods where certain items may vary independent of business performance, and allow for greater transparency with respect to key metrics used by management in operating our business.

    We exclude the following items from one or more of our non-GAAP financial measures:

    Amortization of intangible assets. We amortize intangible assets acquired in connection with acquisitions. We exclude these amortization expenses because we do not believe these expenses are reflective of ongoing operating results in the period. These amounts arise from our prior acquisitions and have no direct correlation to the operation of our business.

    Share-based compensation expense. We exclude share-based compensation expense because we believe that the non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance. In particular, because of varying available valuation methodologies, subjective assumptions and the variety of award types that companies can use under FASB ASC 718, we believe that providing non-GAAP financial measures that exclude this expense allows investors to make more meaningful comparisons between our operating results and those of other companies. Accordingly, we believe that excluding this expense provides investors and management with greater visibility to the underlying performance of our business operations, facilitates comparison of our results with other periods, and may also facilitate comparison with the results of other companies in our industry.

    Payroll tax expense related to share-based compensation. We exclude payroll tax expense related to share-based compensation expense because, without excluding these tax expenses, investors would not see the full effect that excluding share-based compensation expense had on our operating results. These expenses are tied to the exercise or vesting of underlying equity awards and the price of our common stock at the time of vesting or exercise, which factors may vary from period to period independent of the operating performance of our business. Similar to share-based compensation expense, we believe that excluding this payroll tax expense provides investors and management with greater visibility to the underlying performance of our business operations and facilitates comparison with other periods as well as the results of other companies.

    Income tax effect of amortization of intangible assets, share-based compensation and related payroll tax expenses. We believe excluding the income tax effect of non-GAAP adjustments assists investors and management in understanding the tax provision related to those adjustments and provides useful supplemental information regarding the underlying performance of our business operations.

    Foreign exchange effect on revenue. We translated revenue for the three months and year ended December 31, 2015 using the prior year’s monthly exchange rates for our settlement currencies other than the U.S. dollar, which we believe is a useful metric that facilitates comparison to our historical performance.

    Purchases of property and equipment. We subtract purchases of property and equipment in our calculation of free cash flow because we believe that this methodology can provide useful supplemental information to help investors better understand underlying trends in our business.

    For more information on our non-GAAP financial measures and a reconciliation of such measures to the nearest GAAP measure, please see the “Reconciliation of Non-GAAP Results to Nearest GAAP Measures” table in this press release.

    FACEBOOK, INC.

    CONDENSED CONSOLIDATED STATEMENTS OF INCOME

    (In millions, except for per share amounts)

    (Unaudited)

    Three Months EndedDecember 31,

    Year EndedDecember 31,

    2015

    2014

    2015

    2014

    Revenue

    $ 5,841

    $ 3,851

    $ 17,928

    $ 12,466

    Costs and expenses:

       Cost of revenue

    824

    653

    2,867

    2,153

       Research and development

    1,314

    1,111

    4,816

    2,666

       Marketing and sales

    772

    624

    2,725

    1,680

       General and administrative

    371

    330

    1,295

    973

          Total costs and expenses

    3,281

    2,718

    11,703

    7,472

    Income from operations

    2,560

    1,133

    6,225

    4,994

    Interest and other income/(expense), net

    (3)

    (19)

    (31)

    (84)

    Income before provision for income taxes

    2,557

    1,114

    6,194

    4,910

    Provision for income taxes

    995

    413

    2,506

    1,970

    Net income

    $ 1,562

    $    701

    $   3,688

    $   2,940

    Less: Net income attributable to participating securities

    7

    5

    19

    15

    Net income attributable to Class A and Class B common stockholders

    $ 1,555

    $    696

    $   3,669

    $   2,925

    Earnings per share attributable to Class A and Class B common stockholders:

       Basic

    $   0.55

    $   0.25

    $     1.31

    $     1.12

       Diluted

    $   0.54

    $   0.25

    $     1.29

    $     1.10

    Weighted average shares used to compute earnings per share attributable to Class A and Class B common stockholders:

       Basic

    2,825

    2,761

    2,803

    2,614

       Diluted

    2,878

    2,816

    2,853

    2,664

    Share-based compensation expense included in costs and expenses:

       Cost of revenue

    $      22

    $      18

    $        81

    $        62

       Research and development

    583

    685

    2,350

    1,328

       Marketing and sales

    84

    103

    320

    249

       General and administrative

    57

    90

    218

    198

          Total share-based compensation expense

    $    746

    $    896

    $   2,969

    $   1,837

    Payroll tax expenses related to share-based compensation included in costs and expenses:

       Cost of revenue

    $         –

    $         –

    $          2

    $          3

       Research and development

    22

    6

    56

    33

       Marketing and sales

    2

    2

    10

    9

       General and administrative

    2

    5

    9

    12

          Total payroll tax expenses related to share-based compensation

    $      26

    $      13

    $        77

    $        57

    Amortization of intangible assets included in costs and expenses:

       Cost of revenue

    $      55

    $      42

    $      187

    $        87

       Research and development

    9

    10

    39

    33

       Marketing and sales

    103

    102

    410

    105

       General and administrative

    24

    23

    94

    94

          Total amortization of intangible assets

    $    191

    $    177

    $      730

    $      319

    FACEBOOK, INC.

    CONDENSED CONSOLIDATED BALANCE SHEETS

    (In millions)

    (Unaudited)

    December 31, 2015

    December 31, 2014

    Assets

    Current assets:

    Cash and cash equivalents

    $                       4,907

    $                       4,315

    Marketable securities

    13,527

    6,884

    Accounts receivable, net of allowances for doubtful accounts of $68 and $39 as of December 31, 2015 and December 31, 2014, respectively

    2,559

    1,678

    Prepaid expenses and other current assets(1)

    659

    513

       Total current assets

    21,652

    13,390

    Property and equipment, net

    5,687

    3,967

    Intangible assets, net

    3,246

    3,929

    Goodwill

    18,026

    17,981

    Other assets(1)

    796

    699

    Total assets

    $                     49,407

    $                     39,966

    Liabilities and stockholders’ equity

    Current liabilities:

    Accounts payable

    $                          196

    $                          176

    Partners payable

    217

    202

    Accrued expenses and other current liabilities

    1,449

    866

    Deferred revenue and deposits

    56

    66

    Current portion of capital lease obligations

    7

    114

       Total current liabilities

    1,925

    1,424

    Capital lease obligations, less current portion

    107

    119

    Other liabilities(1)

    3,157

    2,327

       Total liabilities

    5,189

    3,870

    Stockholders’ equity

    Common stock and additional paid-in capital

    34,886

    30,225

    Accumulated other comprehensive loss

    (455)

    (228)

    Retained earnings

    9,787

    6,099

       Total stockholders’ equity

    44,218

    36,096

    Total liabilities and stockholders’ equity

    $                     49,407

    $                     39,966

    (1)

    In November 2015, the FASB issued Accounting Standards Update No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes (ASU 2015-17), which simplifies the presentation of deferred income taxes by requiring deferred tax assets and liabilities be classified as noncurrent on the balance sheet. We early adopted this standard retrospectively and reclassified $280 million of our current deferred tax assets to noncurrent deferred tax assets as of December 31, 2014. This resulted in net adjustments of $62 million increase and $218 milliondecrease to our noncurrent deferred tax assets and noncurrent deferred tax liability, respectively, on our December 31, 2014condensed consolidated balance sheet.

    FACEBOOK, INC.

    CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

    (In millions)

    (Unaudited)

    Three Months Ended December 31,

    Year Ended
    December 31,

    2015

    2014

    2015

    2014

    Cash flows from operating activities

    Net income

    $ 1,562

    $      701

    $  3,688

    $   2,940

    Adjustments to reconcile net income to net cash provided by operating activities:

    Depreciation and amortization

    543

    433

    1,945

    1,243

    Lease abandonment

    —

    —

    —

    (31)

    Share-based compensation

    746

    845

    2,960

    1,786

    Deferred income taxes

    (123)

    (180)

    (795)

    (210)

    Tax benefit from share-based award activity

    566

    499

    1,721

    1,853

    Excess tax benefit from share-based award activity

    (566)

    (504)

    (1,721)

    (1,869)

    Other

    3

    2

    17

    7

    Changes in assets and liabilities:

    Accounts receivable

    (568)

    (346)

    (973)

    (610)

    Prepaid expenses and other current assets

    1

    (78)

    (144)

    (123)

    Other assets

    (7)

    (58)

    (3)

    (216)

    Accounts payable

    11

    19

    18

    31

    Partners payable

    (23)

    (6)

    17

    (28)

    Accrued expenses and other current liabilities

    222

    130

    513

    328

    Deferred revenue and deposits

    9

    7

    (9)

    10

    Other liabilities

    451

    119

    1,365

    346

    Net cash provided by operating activities

    2,827

    1,583

    8,599

    5,457

    Cash flows from investing activities

    Purchases of property and equipment

    (692)

    (517)

    (2,523)

    (1,831)

    Purchases of marketable securities

    (5,605)

    (2,889)

    (15,938)

    (9,104)

    Sales of marketable securities

    2,803

    1,047

    6,928

    8,438

    Maturities of marketable securities

    747

    199

    2,310

    1,909

    Acquisitions of businesses, net of cash acquired, and purchases of intangible assets

    (4)

    (4,221)

    (313)

    (4,975)

    Change in restricted cash and deposits

    25

    (235)

    102

    (348)

    Other investing activities, net

    —

    —

    —

    (2)

    Net cash used in investing activities

    (2,726)

    (6,616)

    (9,434)

    (5,913)

    Cash flows from financing activities

    Taxes paid related to net share settlement

    —

    (70)

    (20)

    (73)

    Proceeds from exercise of stock options

    —

    11

    —

    18

    Principal payments on capital lease obligations

    (12)

    (44)

    (119)

    (243)

    Excess tax benefit from share-based award activity

    566

    504

    1,721

    1,869

    Net cash provided by financing activities

    554

    401

    1,582

    1,571

    Effect of exchange rate changes on cash and cash equivalents

    (56)

    (52)

    (155)

    (123)

    Net increase (decrease) in cash and cash equivalents

    599

    (4,684)

    592

    992

    Cash and cash equivalents at beginning of period

    4,308

    8,999

    4,315

    3,323

    Cash and cash equivalents at end of period

    $ 4,907

    $   4,315

    $  4,907

    $   4,315

    FACEBOOK, INC.

    CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

    (In millions)

    (Unaudited)

    Three Months EndedDecember 31,

    Year Ended
    December 31,

    2015

    2014

    2015

    2014

    Supplemental cash flow data

    Cash paid during the period for:

    Interest

    $        2

    $           3

    $       10

    $        14

    Income taxes

    $      71

    $         77

    $     273

    $      184

    Cash received during the period for:

    Income taxes

    $         –

    $            –

    $         3

    $          6

    Non-cash investing and financing activities:

    Net change in accounts payable, accrued expenses and other current liabilities, and other liabilities related to property and equipment additions

    $     (19)

    $         53

    $       88

    $        91

    Fair value of shares issued related to acquisitions of businesses

    $          –

    $  12,987

    $          –

    $ 14,344

    Promissory note payable issued in connection with an acquisition

    $          –

    $            –

    $     198

    $           –

    Reconciliation of Non-GAAP Results to Nearest GAAP Measures

    (In millions, except percentages and per share amounts)

    (Unaudited)

    Three Months Ended December 31,

    Year Ended
    December 31,

    2015

    2014

    2015

    2014

    GAAP revenue

    $  5,841

    $  3,851

    $  17,928

    $  12,466

       Foreign exchange effect on 2015 revenue using 2014 rates

    322

    1,185

    Revenue excluding foreign exchange effect

    $  6,163

    $  19,113

    GAAP revenue year-over-year change %

    52%

    44%

    Revenue excluding foreign exchange effect year-over-year change %

    60%

    53%

    GAAP advertising revenue

    $  5,637

    $  3,594

    $  17,079

    $  11,492

       Foreign exchange effect on 2015 advertising revenue using 2014 rates

    322

    1,185

    Advertising revenue excluding foreign exchange effect

    $  5,959

    $  18,264

    GAAP advertising revenue year-over-year change %

    57%

    49%

    Advertising revenue excluding foreign exchange effect year-over-year change %

    66%

    59%

    GAAP costs and expenses

    $  3,281

    $  2,718

    $  11,703

    $    7,472

       Share-based compensation expense

    (746)

    (896)

    (2,969)

    (1,837)

       Payroll tax expenses related to share-based compensation

    (26)

    (13)

    (77)

    (57)

       Amortization of intangible assets

    (191)

    (177)

    (730)

    (319)

    Non-GAAP costs and expenses

    $  2,318

    $  1,632

    $    7,927

    $    5,259

    GAAP income from operations

    $  2,560

    $  1,133

    $    6,225

    $    4,994

       Share-based compensation expense

    746

    896

    2,969

    1,837

       Payroll tax expenses related to share-based compensation

    26

    13

    77

    57

       Amortization of intangible assets

    191

    177

    730

    319

    Non-GAAP income from operations

    $  3,523

    $  2,219

    $  10,001

    $    7,207

    GAAP net income

    $  1,562

    $     701

    $    3,688

    $    2,940

       Share-based compensation expense

    746

    896

    2,969

    1,837

       Payroll tax expenses related to share-based compensation

    26

    13

    77

    57

       Amortization of intangible assets

    191

    177

    730

    319

       Income tax adjustments

    (260)

    (269)

    (946)

    (440)

    Non-GAAP net income

    $  2,265

    $  1,518

    $    6,518

    $    4,713

    GAAP and Non-GAAP diluted shares

    2,878

    2,816

    2,853

    2,664

    GAAP diluted earnings per share

    $    0.54

    $    0.25

    $      1.29

    $      1.10

       Net income attributable to participating securities

    —

    —

    —

    (0.01)

       Non-GAAP adjustments to net income

    0.25

    0.29

    0.99

    0.68

    Non-GAAP diluted earnings per share

    $    0.79

    $    0.54

    $      2.28

    $      1.77

    GAAP operating margin

    44%

    29%

    35%

    40%

       Share-based compensation expense

    13%

    23%

    17%

    15%

       Payroll tax expenses related to share-based compensation

    —%

    —%

    —%

    —%

       Amortization of intangible assets

    3%

    5%

    4%

    3%

    Non-GAAP operating margin

    60%

    58%

    56%

    58%

    GAAP income before provision for income taxes

    $  2,557

    $  1,114

    $    6,194

    $    4,910

    GAAP provision for income taxes

    995

    413

    2,506

    1,970

    GAAP effective tax rate

    39%

    37%

    40%

    40%

    GAAP income before provision for income taxes

    $  2,557

    $  1,114

    $    6,194

    $    4,910

    Share-based compensation and related payroll tax expenses

    772

    909

    3,046

    1,894

    Amortization of intangible assets

    191

    177

    730

    319

    Non-GAAP income before provision for income taxes

    $  3,520

    $  2,200

    $    9,970

    $    7,123

    Non-GAAP provision for income taxes

    1,255

    682

    3,452

    2,410

    Non-GAAP effective tax rate

    36%

    31%

    35%

    34%

    Net cash provided by operating activities

    $  2,827

    $  1,583

    $    8,599

    $    5,457

       Purchases of property and equipment

    (692)

    (517)

    (2,523)

    (1,831)

    Free cash flow

    $  2,135

    $  1,066

    $    6,076

    $    3,626

     

    Image via Mark Zuckerberg (Facebook)

  • eBay Earnings Released, Active Buyer Base Grows 5%

    eBay Earnings Released, Active Buyer Base Grows 5%

    eBay just reported its earnings for the fourth quarter and full-year 2015. Highlights include gross merchandise volume of $21.9 billion, revenue of $2.3 billion, 5% growth in active buyer base (to 162 million), Non-GAAP and GAAP EPS per diluted share of $0.50 and $0.43, respectively, and a $550 million repurchase of common stock.

    eBay President and CEO Devin Wenig said, “We delivered solid fourth quarter results and continued to make progress against our key priorities. The quarter also marked the end of an extraordinary year during which we completed the spin-off of PayPal. We continue to grow our business and customer base while executing our plan to reposition eBay for long-term success.”

    Revenue and earnings were pretty close to Wall Street forecasts.

    Here’s the release in its entirety:

    SAN JOSE, Calif.–(BUSINESS WIRE)– eBay Inc. (NASDAQ: EBAY), a global commerce leader, today reported that gross merchandise volume (GMV) for the quarter ended December 31, 2015 was $21.9 billion, increasing 5% on a foreign exchange (FX) neutral basis and was flat year over year on an as-reported basis, reflecting the continued impact of a strong U.S. dollar. Revenue for the quarter was $2.3 billion, up 5% on an FX-Neutral basis and flat year over year on an as-reported basis, driving non-GAAP net income from continuing operations of $600 million, or $0.50 per diluted share, and GAAP net income from continuing operations of $523 million, or $0.43 per diluted share. During the quarter, the company generated $1.1 billion of operating cash flow from continuing operations and $1.0 billion of free cash flow from continuing operations. eBay also repurchased $550 million of its common stock and completed the divestiture of its Enterprise business on November 2, 2015.

    “We delivered solid fourth quarter results and continued to make progress against our key priorities,” said Devin Wenig, President and CEO of eBay Inc. “The quarter also marked the end of an extraordinary year during which we completed the spin-off of PayPal. We continue to grow our business and customer base while executing our plan to reposition eBay for long-term success.”

    Underlying total eBay Inc. performance, the Marketplace platform delivered $20.7 billion of GMV, resulting in $1.9 billion in revenue for the fourth quarter, up 1% on an FX-Neutral basis and down 3% on an as-reported basis. During the 2015 holiday shopping season, the Marketplace platform saw over 265 million transactions across 190 markets, as consumers around the world shopped for great deals and sought-after gifts. StubHub ended the year with strong momentum, driving GMV of $1.2 billion in the fourth quarter and $232 million of revenue, up 34%, aided by strength in the sports and concerts categories. Classifieds delivered another quarter of accelerating growth with revenue of $183 million, up 15% on an FX-Neutral basis and up 2% on an as-reported basis with strong performance in Germany and the United Kingdom.

    For the full year 2015, eBay Inc.’s commerce platforms continued to connect buyers and sellers around the world, with an active buyer base that grew by 8 million, to 162 million total active buyers, representing 5% growth. Total GMV was $82 billion, up 5% on an FX-Neutral basis and down 1% on an as-reported basis, reflecting the impact of a strong U.S. dollar. Revenue was $8.6 billion, growing 5% on an FX-Neutral basis and down 2% on an as-reported basis. The company delivered strong operating and free cash flow on a continuing operations basis, generating $2.9 billion and $2.2 billion, respectively, during 2015.

    The results of eBay Enterprise and PayPal are presented as discontinued operations, appearing net of tax in a single line in the company’s statement of income.

    Fourth Quarter and Full Year 2015 Financial Highlights (presented in millions, except per share data and percentages)
    Fourth Quarter Full Year
    2015 2014 Change 2015 2014 Change
    eBay Inc.
    Net revenues $2,322 $2,323 $(1) —% $8,592 $8,790 $(198) (2)%
    GAAP – Continuing Operations
    Income (loss) from continuing operations $523 $729 $(206) (28)% $1,947 $(865) $2,812 **
    Earnings (loss) per diluted share from continuing operations $0.43 $0.59 $(0.16) (26)% $1.60 $(0.69) $2.29 **
    Non-GAAP – Continuing Operations
    Net income (loss) $600 $685 $(85) (12)% $2,232 $2,386 $(154) (6)%
    Earnings (loss) per diluted share $0.50 $0.55 $(0.05) (10)% $1.83 $1.89 $(0.06) (3)%
    **Not meaningful

    Other Selected Financial and Operational Results

    • Operating margin — GAAP operating margin decreased to 28.5% for the fourth quarter of 2015, compared to 31.5% for the same period last year. Non-GAAP operating margin decreased to 34.4% in the fourth quarter, compared to 36.7% for the same period last year.
    • Taxes — The GAAP effective tax rate for continuing operations for the fourth quarter of 2015 was 19.5%, compared to 1.2% for the fourth quarter of 2014. The non-GAAP effective tax rate for continuing operations for the fourth quarter of 2015 was 23.8%, compared to 20.3% for the fourth quarter of 2014.
    • Cash flow — The company generated $1.1 billion of operating cash flow from continuing operations and $1.0 billion of free cash flow from continuing operations during the fourth quarter of 2015.
    • Stock repurchase program — The company repurchased approximately $550 million of its common stock, or 19.9 million shares, in the fourth quarter of 2015. The company’s total repurchase authorization remaining as of December 31, 2015 was $1.8 billion.
    • Cash and cash equivalents and non-equity investments — The company’s cash and cash equivalents and non-equity investments portfolio totaled $8.5 billion as of December 31, 2015.

    Business Outlook

    • First quarter 2016 — The company expects net revenue between $2.05 billion and $2.10 billion, representing FX-Neutral growth of 3% – 5%, with non-GAAP earnings per diluted share from continuing operations in the range of $0.43 – $0.45 and GAAP earnings per diluted share from continuing operations in the range of $0.37 – $0.39.
    • Full year 2016 — The company expects net revenue between $8.5 billion and $8.8 billion, representing FX-Neutral growth of 2% – 5%, with non-GAAP earnings per diluted share from continuing operations in the range of $1.82 – $1.87 and GAAP earnings per diluted share from continuing operations in the range of $1.55 – $1.60.

    Quarterly Conference Call and Webcast

    eBay Inc. will host a conference call to discuss fourth quarter 2015 results at 1:30 p.m. Pacific Time today. A live webcast of the conference call, together with a slide presentation that includes supplemental financial information and reconciliations of certain non-GAAP measures to their nearest comparable GAAP measures, can be accessed through the company’s Investor Relations website at https://investors.ebayinc.com. In addition, an archive of the webcast will be accessible for 90 days through the same link.

    eBay Inc. uses its Investor Relations website at https://investors.ebayinc.com as a means of disclosing material non-public information and for complying with its disclosure obligations under Regulation FD. Accordingly, investors should monitor, in addition to following press releases, SEC filings, public conference calls and webcasts.

    About eBay

    eBay Inc. (NASDAQ: EBAY) is a global commerce leader including the Marketplace, StubHub and Classifieds platforms. Collectively, we connect millions of buyers and sellers around the world, empowering people and creating opportunity through Connected Commerce. Founded in 1995 in San Jose, Calif., eBay is one of the world’s largest and most vibrant marketplaces for discovering great value and unique selection. In 2015, eBay enabled $82 billion of gross merchandise volume. For more information about the company and its global portfolio of online brands, visit www.ebayinc.com.

    Presentation

    All growth rates represent year over year comparisons, except as otherwise noted. All amounts in tables are presented in U.S. dollars, rounded to the nearest millions, except as otherwise noted. As a result, certain amounts may not sum or recalculate using the rounded dollar amounts provided.

    Non-GAAP Financial Measures

    This press release includes the following financial measures defined as “non-GAAP financial measures” by the Securities and Exchange Commission (SEC): non-GAAP net income, non-GAAP earnings per diluted share, non-GAAP operating margin, non-GAAP effective tax rate and free cash flow. These non-GAAP financial measures are presented on a continuing operations basis. These measures may be different from non-GAAP financial measures used by other companies. The presentation of this financial information, which is not prepared under any comprehensive set of accounting rules or principles, is not intended to be considered in isolation of, or as a substitute for, the financial information prepared and presented in accordance with generally accepted accounting principles (GAAP). For a reconciliation of these non-GAAP financial measures to the nearest comparable GAAP measures, see “Business Outlook,” “Non-GAAP Measures of Financial Performance,” “Reconciliation of GAAP Operating Margin to Non-GAAP Operating Margin,” “Reconciliation of GAAP Net Income to Non-GAAP Net Income and Reconciliation of GAAP Effective Tax Rate to Non-GAAP Effective Tax Rate” and “Reconciliation of Operating Cash Flow to Free Cash Flow” included in this press release.

    Forward-Looking Statements

    This press release contains forward-looking statements relating to, among other things, the future performance of eBay Inc. and its consolidated subsidiaries that are based on the company’s current expectations, forecasts and assumptions and involve risks and uncertainties. These statements include, but are not limited to, statements regarding the future performance of eBay Inc. and its consolidated subsidiaries, including expected financial results for the first quarter and full year 2016 and the future growth in our business. Actual results could differ materially from those predicted or implied and reported results should not be considered as an indication of future performance. Other factors that could cause or contribute to such differences include, but are not limited to: changes in political, business and economic conditions, any regional or general economic downturn or crisis and any conditions that affect ecommerce growth or cross-border trade; fluctuations in foreign currency exchange rates; the company’s need to successfully react to the increasing importance of mobile commerce and the increasing social aspect of commerce; an increasingly competitive environment for our business; changes to the company’s capital allocation or management of operating cash the company’s ability to manage its indebtedness, including managing exposure to interest rates and maintaining its credit ratings; the company’s need to manage an increasingly large enterprise with a broad range of businesses of varying degrees of maturity and in many different geographies; the company’s need and ability to manage regulatory, tax, data security and litigation risks; whether the operational, marketing and strategic benefits of the separation of the eBay and PayPal businesses can be achieved; the company’s ability to timely upgrade and develop its technology systems, infrastructure and customer service capabilities at reasonable cost while maintaining site stability and performance and adding new products and features; and the company’s ability to integrate, manage and grow businesses that have been acquired or may be acquired in the future.

    The forward-looking statements in this release do not include the potential impact of any acquisitions or divestitures that may be announced and/or completed after the date hereof.

    More information about factors that could affect the company’s operating results is included under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the company’s most recent annual report on Form 10-K and subsequent quarterly reports on Form 10-Q, copies of which may be obtained by visiting the company’s Investor Relations website at https://investors.ebayinc.com or the SEC’s website atwww.sec.gov. All information in this release is as of January 27, 2016. Undue reliance should not be placed on the forward-looking statements in this press release, which are based on information available to the company on the date hereof. The company assumes no obligation to update such statements.

    eBay Inc.
    Unaudited Condensed Consolidated Balance Sheet
    December 31,
    2015    		 December 31,
    2014
    (In millions, except par value amounts)
    ASSETS
    Current assets:
    Cash and cash equivalents $ 1,832 $ 4,105
    Short-term investments 4,299 3,730
    Accounts receivable, net 619 600
    Other current assets 1,154 1,048
    Current assets of discontinued operations — 17,048
    Total current assets 7,904 26,531
    Long-term investments 3,391 5,736
    Property and equipment, net 1,554 1,486
    Goodwill 4,451 4,671
    Intangible assets, net 90 133
    Other assets 395 207
    Long-term assets of discontinued operations — 6,368
    Total assets $ 17,785 $ 45,132
    LIABILITIES AND STOCKHOLDERS’ EQUITY
    Current liabilities:
    Short-term debt $ — $ 850
    Accounts payable 349 107
    Accrued expenses and other current liabilities 1,736 3,830
    Deferred revenue 106 108
    Income taxes payable 72 125
    Current liabilities of discontinued operations — 12,511
    Total current liabilities 2,263 17,531
    Deferred and other tax liabilities, net 2,092 522
    Long-term debt 6,779 6,777
    Other liabilities 75 79
    Long-term liabilities of discontinued operations — 317
    Total liabilities 11,209 25,226
    Total stockholders’ equity 6,576 19,906
    Total liabilities and stockholders’ equity $ 17,785 $ 45,132
    eBay Inc.
    Unaudited Condensed Consolidated Statement of Income
    Three Months Ended
    December 31,    		 Year Ended
    December 31,
    2015 2014 2015 2014
    (In millions, except per share amounts)
    Net revenues $ 2,322 $ 2,323 $ 8,592 $ 8,790
    Cost of net revenues (1) 493 442 1,771 1,663
    Gross profit 1,829 1,881 6,821 7,127
    Operating expenses:
    Sales and marketing (1) 595 627 2,267 2,442
    Product development (1) 229 236 923 983
    General and administrative (1) 260 211 1,122 889
    Provision for transaction losses 72 66 271 262
    Amortization of acquired intangible assets 11 10 41 75
    Total operating expenses 1,167 1,150 4,624 4,651
    Income from operations 662 731 2,197 2,476
    Interest and other, net (12 ) 7 209 39
    Income from continuing operations before income taxes 650 738 2,406 2,515
    Provision for income taxes (127 ) (9 ) (459 ) (3,380 )
    Income (loss) from continuing operations $ 523 $ 729 $ 1,947 $ (865 )
    Income (loss) from discontinued operations, net of income taxes (2) (46 ) 294 (222 ) 911
    Net income $ 477 $ 1,023 $ 1,725 $ 46
    Income (loss) per share – basic:
    Continuing operations $ 0.44 $ 0.59 $ 1.61 $ (0.69 )
    Discontinued operations $ (0.04 ) $ 0.24 $ (0.18 ) $ 0.73
    Net income per share – basic $ 0.40 $ 0.83 $ 1.43 $ 0.04
    Income (loss) per share – diluted:
    Continuing operations $ 0.43 $ 0.59 $ 1.60 $ (0.69 )
    Discontinued operations $ (0.04 ) $ 0.23 $ (0.18 ) $ 0.73
    Net income per share – diluted $ 0.39 $ 0.82 $ 1.42 $ 0.04
    Weighted average shares:
    Basic 1,191 1,230 1,208 1,251
    Diluted 1,204 1,241 1,220 1,251
    (1) Includes stock-based compensation as follows:
    Cost of net revenues $ 10 $ 10 $ 38 $ 33
    Sales and marketing 19 22 94 93
    Product development 25 26 108 116
    General and administrative 24 35 139 102
    $ 78 $ 93 $ 379 $ 344
    (2)  Includes PayPal financial results from October 1, 2014 to December 31, 2014 for Fourth Quarter; January 1, 2015 to July 17, 2015 and January 1, 2014 toDecember 31, 2014 for Full Year; also includes the eBay Enterprise financial results from October 1, 2015 to November 2, 2015 and October 1, 2014 toDecember 31, 2014 for Fourth Quarter; January 1, 2015 to November 2, 2015 and January 1, 2014 to December 31, 2014 for Full Year.
    eBay Inc.
    Unaudited Condensed Consolidated Statement of Cash Flows
    Three Months Ended
    December 31,    		 Year Ended
    December 31,
    2015 2014 2015 2014
    (In millions)
    Cash flows from operating activities:
    Net income $ 477 $ 1,023 $ 1,725 $ 46
    (Income) loss from discontinued operations, net of income taxes 46 (294 ) 222 (911 )
    Adjustments:
    Provision for transaction losses 72 66 271 262
    Depreciation and amortization 171 164 687 682
    Stock-based compensation 78 93 379 344
    Gain on sale of investments 17 (9 ) (195 ) (12 )
    Deferred income taxes 83 (235 ) (32 ) 2,744
    Changes in assets and liabilities, net of acquisition effects 182 30 (180 ) 73
    Net cash provided by continuing operating activities 1,126 838 2,877 3,228
    Net cash provided by (used in) discontinued operating activities(1) (86 ) 803 1,156 2,449
    Net cash provided by operating activities 1,040 1,641 4,033 5,677
    Cash flows from investing activities:
    Purchases of property and equipment (129 ) (200 ) (668 ) (622 )
    Purchases of investments (2,292 ) (1,944 ) (6,744 ) (8,752 )
    Maturities and sales of investments 1,202 3,910 6,781 8,115
    Acquisitions, net of cash acquired — — (24 ) (55 )
    Other (3 ) (6 ) (18 ) (11 )
    Net cash provided by (used in) continuing investing activities (1,222 ) 1,760 (673 ) (1,325 )
    Net cash provided by (used in) discontinued investing activities(1) 899 (688 ) (2,938 ) (1,348 )
    Net cash provided by (used in) investing activities (323 ) 1,072 (3,611 ) (2,673 )
    Cash flows from financing activities:
    Proceeds from issuance of common stock 48 122 221 300
    Repurchases of common stock (637 ) (1,182 ) (2,149 ) (4,658 )
    Excess tax benefits from stock-based compensation 2 19 74 75
    Tax withholdings related to net share settlements of restricted stock units and awards (19 ) (28 ) (245 ) (252 )
    Proceeds from issuance of long-term debt, net — — — 3,482
    Repayment of debt (600 ) — (850 ) —
    Other (21 ) (2 ) (11 ) 6
    Net cash used in continuing financing activities (1,227 ) (1,071 ) (2,960 ) (1,047 )
    Net cash provided by (used in) discontinued financing activities(1) 5 6 (1,594 ) 25
    Net cash used in financing activities (1,222 ) (1,065 ) (4,554 ) (1,022 )
    Effect of exchange rate changes on cash and cash equivalents (78 ) (110 ) (364 ) (148 )
    Net (decrease) increase in cash and cash equivalents (583 ) 1,538 (4,496 ) 1,834
    Cash and cash equivalents at beginning of period 2,415 4,790 6,328 4,494
    Cash and cash equivalents at end of period 1,832 6,328 1,832 6,328
    Less: Cash and cash equivalents of discontinued operations – Enterprise — 29 — 29
    Less: Cash and cash equivalents of discontinued operations – PayPal — 2,194 — 2,194
    Cash and cash equivalents of continuing operations at end of period $ 1,832 $ 4,105 $ 1,832 $ 4,105
    (1)  Includes PayPal financial results from October 1, 2014 to December 31, 2014 for Fourth Quarter; January 1, 2015 to July 17, 2015 and January 1, 2014 toDecember 31, 2014 for Full Year; also includes the eBay Enterprise financial results from October 1, 2015 to November 2, 2015 and October 1, 2014 toDecember 31, 2014 for Fourth Quarter; January 1, 2015 to November 2, 2015 and January 1, 2014 to December 31, 2014 for Full Year.
    eBay Inc.
    Unaudited Summary of Consolidated Net Revenues
    Net Revenues by Type Three Months Ended
    December 31,
    2015    		 September 30,
    2015    		 June 30,
    2015    		 March 31,
    2015    		 December 31,
    2014
    (In millions, except percentages)
    Net Revenues by Type:
    Net transaction revenues:
    Marketplace $ 1,584 $ 1,459 $ 1,524 $ 1,536 $ 1,662
    Current quarter vs prior year quarter (5 )% (5 )% (3 )% (3 )% N/A
    Percent from international 63 % 62 % 62 % 60 % 63 %
    StubHub 232 200 161 132 174
    Current quarter vs prior year quarter 34 % 17 % 8 % (2 )% N/A
    Percent from international 1 % 2 % 2 % 2 % 1 %
    Total net transaction revenues 1,816 1,659 1,685 1,668 1,836
    Current quarter vs prior year quarter (1 )% (3 )% (2 )% (3 )% N/A
    Percent from international 55 % 54 % 56 % 55 % 57 %
    Marketing services and other revenues:
    Marketplace 326 266 251 235 312
    Current quarter vs prior year quarter 4 % — % (5 )% (10 )% N/A
    Percent from international 47 % 44 % 47 % 49 % 48 %
    Classifieds 183 178 180 162 180
    Current quarter vs prior year quarter 2 % (3 )% (4 )% (2 )% N/A
    Percent from international 100 % 100 % 100 % 100 % 100 %
    Corporate and other (3 ) (4 ) (6 ) (4 ) (5 )
    Total marketing services and other revenues 506 440 425 393 487
    Current quarter vs prior year quarter 4 % (2 )% (5 )% (8 )% N/A
    Percent from international 66 % 67 % 70 % 70 % 67 %
    Total net revenues $ 2,322 $ 2,099 $ 2,110 $ 2,061 $ 2,323
    Current quarter vs prior year quarter — % (2 )% (3 )% (4 )% N/A
    eBay Inc.
    Unaudited Supplemental Operating Data
    Three Months Ended
    December 31,
    2015    		 September 30,
    2015    		 June 30,
    2015    		 March 31,
    2015    		 December 31,
    2014
    (In millions, except percentages)
    Active Buyers (1) 162 159 157 156 154
    Current quarter vs prior year quarter 5 % 5 % 6 % 8 % 10 %
    Gross Merchandise Volume (2)
    Marketplace $20,676 $18,674 $19,273 $19,476 $20,883
    Current quarter vs prior year quarter (1 )% (3 )% (2 )% (2 )% 1 %
    StubHub $1,184 $927 $788 $675 $911
    Current quarter vs prior year quarter 30 % 10 % 1 % 6 % 2 %
    Total GMV $21,860 $19,601 $20,061 $20,151 $21,794
    Current quarter vs prior year quarter — % (2 )% (2 )% (2 )% 1 %
    (1) All buyers who successfully closed a transaction on our Marketplace and StubHub platforms within the previous 12-month period. Buyers may register more than once, and as a result, may have more than one account.
    (2) Total value of all successfully closed transactions between users on our Marketplace and StubHub platforms during the period regardless of whether the buyer and seller actually consummated the transaction. We believe that GMV provides a useful measure of the overall volume of closed transactions that flow through our platforms in a given period, notwithstanding the inclusion in GMV of closed transactions that are not ultimately consummated.

    eBay Inc.
    Business Outlook
    (In Millions, Except Per Share Amounts)

    The guidance figures provided below and elsewhere in this press release are forward-looking statements, reflect a number of estimates, assumptions and other uncertainties, and are approximate in nature because the company’s future performance is difficult to predict. Such guidance is based on information available on the date of this press release, and the company assumes no obligation to update it.

    The company’s future performance involves risks and uncertainties, and the company’s actual results could differ materially from the information below and elsewhere in this press release. Some of the factors that could affect the company’s operating results are set forth under the caption “Forward-Looking Statements” above in this press release. More information about factors that could affect the company’s operating results is included under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in its most recent annual report on Form 10-K and subsequent quarterly reports on Form 10-Q, copies of which may be obtained by visiting eBay’s investor relations website at https://investors.ebayinc.com or theSEC’s website at www.sec.gov.

    eBay Inc.
    Three Months Ending
    March 31, 2016
    (In millions, except per share amounts) GAAP Non-GAAP (a)
    Diluted EPS from continuing operations $0.37 – $0.39 $0.43 – $0.45
    Twelve Months Ending
    December 31, 2016
    GAAP Non-GAAP (b)
    (In millions, except per share amounts)
    Diluted EPS from continuing operations $1.55 – $1.60 $1.82 – $1.87
    (a) Estimated non-GAAP amounts above for the three months ending March 31, 2016, reflect adjustments that exclude the estimated amortization of acquired intangible assets of approximately $10 – $15 million and estimated stock-based compensation expense and employer payroll taxes on stock-based compensation expense of approximately $85 – $95 million as well as the related tax impact.
    (b) Estimated non-GAAP amounts above for the twelve months ending December 31, 2016, reflect adjustments that exclude the estimated amortization of acquired intangible assets of approximately $35 – $45 million and estimated stock-based compensation expense and employer payroll taxes on stock-based compensation expense of approximately $410 – $430 million.

    eBay Inc.
    Non-GAAP Measures of Financial Performance

    To supplement the company’s condensed consolidated financial statements presented in accordance with generally accepted accounting principles, or GAAP, the company uses non-GAAP measures of certain components of financial performance. These non-GAAP measures include non-GAAP net income, non-GAAP earnings per diluted share, non-GAAP operating margin, non-GAAP effective tax rate, and free cash flow. These non-GAAP financial measures are presented on a continuing operations basis.

    These non-GAAP measures are not in accordance with, or an alternative to, measures prepared in accordance with GAAP and may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles. Non-GAAP measures have limitations in that they do not reflect all of the amounts associated with the company’s results of operations as determined in accordance with GAAP. These measures should only be used to evaluate the company’s results of operations in conjunction with the corresponding GAAP measures.

    Reconciliation to the nearest GAAP measure of all non-GAAP measures included in this press release can be found in the tables included in this press release.

    These non-GAAP measures are provided to enhance investors’ overall understanding of the company’s current financial performance and its prospects for the future. Specifically, the company believes the non-GAAP measures provide useful information to both management and investors by excluding certain expenses, gains and losses, or net purchases of property and equipment, as the case may be, that may not be indicative of its core operating results and business outlook. In addition, because the company has historically reported certain non-GAAP results to investors, the company believes that the inclusion of non-GAAP measures provides consistency in the company’s financial reporting.

    For its internal budgeting process, and as discussed further below, the company’s management uses financial measures that do not include stock-based compensation expense, employer payroll taxes on stock-based compensation, amortization or impairment of acquired intangible assets, impairment of goodwill, significant gains or losses from the disposal/acquisition of a business, certain effects of the planned separation of our eBay and PayPal business, certain gains and losses on investments, restructuring-related charges and the income taxes associated with the foregoing. In addition to the corresponding GAAP measures, the company’s management also uses the foregoing non-GAAP measures in reviewing the financial results of the company.

    The company excludes the following items from non-GAAP net income, non-GAAP earnings per diluted share, non-GAAP operating margin and non-GAAP effective tax rate:

    Stock-based compensation expense and related employer payroll taxes. This expense consists of expenses for stock options, restricted stock and employee stock purchases. The company excludes stock-based compensation expense from its non-GAAP measures primarily because they are non-cash expenses that management does not believe are reflective of ongoing operating results. The related employer payroll taxes is dependent on the company’s stock price and the timing and size of exercises by employees of their stock options and the vesting of their restricted stock, over which management has limited to no control, and as such management does not believe it correlates to the company’s operation of the business.

    Amortization or impairment of acquired intangible assets, impairment of goodwill, significant gains or losses and transaction expenses from the acquisition or disposal of a business and certain gains or losses on investments. The company incurs amortization or impairment of acquired intangible assets and goodwill in connection with acquisitions and may incur significant gains or losses from the acquisition or disposal of a business and therefore excludes these amounts from its non-GAAP measures. The company also excludes certain gains and losses on investments. The company excludes the impact of the accretion of a note receivable associated with the disposal of certain businesses. The company excludes these items because management does not believe they correlate to the ongoing operating results of the company’s business.

    Restructuring. These charges consist of expenses for employee severance and other exit and disposal costs. The company excludes significant restructuring charges primarily because management does not believe they are reflective of ongoing operating results.

    Other certain significant gains, losses, or charges that are not indicative of the Company’s core operating results. These are significant gains, losses, or charges during a period that are the result of isolated events or transactions which have not occurred frequently in the past and are not expected to occur regularly or be repeated in the future. The company excludes these amounts from its results primarily because management does not believe they are indicative of its current or ongoing operating results.

    Separation. These are significant expenses that are related to the separation of our eBay and PayPal businesses into separate publicly traded companies. These consist primarily of third-party consulting fees, legal fees, employee retention payments, tax indemnifications and other expenses related to the separation.

    Tax effect of non-GAAP adjustments. This amount is used to present stock-based compensation and the other amounts described above on an after-tax basis consistent with the presentation of non-GAAP net income.

    In addition to the non-GAAP measures discussed above, the company also uses free cash flow. Free cash flow represents operating cash flows less purchases of property and equipment. The company considers free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by the business after the purchases of property, buildings, and equipment, which can then be used to, among other things, invest in the company’s business, make strategic acquisitions, and repurchase stock. A limitation of the utility of free cash flow as a measure of financial performance is that it does not represent the total increase or decrease in the company’s cash balance for the period.

    eBay Inc.
    Reconciliation of GAAP Operating Margin to Non-GAAP Operating Margin
    Three Months Ended Year Ended
    December 31,
    2015    		 December 31,
    2014    		 December 31,
    2015    		 December 31,
    2014
    (In millions, except percentages)
    GAAP operating income $ 662 $ 731 $ 2,197 $ 2,476
    Stock-based compensation expense and related employer payroll taxes 78 96 396 373
    Amortization of acquired intangible assets within cost of net revenues 5 8 25 34
    Amortization of acquired intangible assets within operating expenses 11 10 41 75
    Separation 43 7 160 7
    Restructuring and acquisition related — — 62 —
    Total non-GAAP operating income adjustments 137 121 684 489
    Non-GAAP operating income $ 799 $ 852 $ 2,881 $ 2,965
    Non-GAAP operating margin 34.4 % 36.7 % 33.5 % 33.7 %
    Reconciliation of GAAP Net Income to Non-GAAP Net Income and
    GAAP Effective Tax Rate to Non-GAAP Effective Tax Rate*
    Three Months Ended Year Ended
    December 31,
    2015    		 December 31,
    2014    		 December 31,
    2015    		 December 31,
    2014
    (In millions, except percentages)
    GAAP income from continuing operations before income taxes $ 650 $ 738 $ 2,406 $ 2,515
    GAAP provision for income taxes (127 ) (9 ) (459 ) (3,380 )
    GAAP net income from continuing operations $ 523 $ 729 $ 1,947 $ (865 )
    Non-GAAP adjustments to net income from continuing operations:
    Non-GAAP operating income from continuing operations adjustments (see table above) 137 121 684 489
    Gains or losses on investments — — (264 ) —
    Tax effect of non-GAAP adjustments (60 ) (165 ) (135 ) 2,762
    Non-GAAP net income from continuing operations $ 600 $ 685 $ 2,232 $ 2,386
    Diluted net income from continuing operations per share:
    GAAP $ 0.43 $ 0.59 $ 1.60 $ (0.69 )
    Non-GAAP $ 0.50 $ 0.55 $ 1.83 $ 1.89
    Shares used in GAAP diluted net income (loss) per-share calculation 1,204 1,241 1,220 1,251
    Shares used in non-GAAP diluted net income per-share calculation 1,204 1,241 1,220 1,262
    GAAP effective tax rate – Continuing operations 20 % 1 % 19 % 134 %
    Tax effect of non-GAAP adjustments to net income (loss) from continuing operations 4 % 19 % 2 % (113 )%
    Non-GAAP effective tax rate – Continuing Operations 24 % 20 % 21 % 21 %
    *Presented on a continuing operations basis
    Reconciliation of Operating Cash Flow to Free Cash Flow*
    Three Months Ended Year Ended
    December 31,
    2015    		 December 31,
    2014    		 December 31,
    2015    		 December 31,
    2014
    (In millions) (In millions)
    Net cash provided by continuing operating activities $ 1,126 $ 838 $ 2,877 $ 3,228
    Less: Purchases of property and equipment (129 ) (200 ) (668 ) (622 )
    Free cash flow from continuing operations $ 997 $ 638 $ 2,209 $ 2,606
     
    *Presented on a continuing operations basis

    eBay Inc.

    Image via eBay

  • Apple Earnings Released, Company Has ‘Biggest Quarter Ever’

    Apple Earnings Released, Company Has ‘Biggest Quarter Ever’

    Apple just announced its earnings for its fiscal 2016 first quarter ended December 26, 2015. Once again, the company announced record profit at $18.4 billion for the quarter.

    Apple also posted record quarterly revenue at $75.9 billion. Net income was $3.28 per diluted share.

    The company beat analysts expectations on profit, but missed on revenue.

    CEO Tim Cook said, “Our team delivered Apple’s biggest quarter ever, thanks to the world’s most innovative products and all-time record sales of iPhone, Apple Watch and Apple TV. The growth of our Services business accelerated during the quarter to produce record results, and our installed base recently crossed a major milestone of one billion active devices.”

    The company sold 74.8 million iPhones, 16.1 million iPads, and 5.31 Macs.

    Here’s the release in its entirety:

    Apple® today announced financial results for its fiscal 2016 first quarter ended December 26, 2015. The Company posted record quarterly revenue of $75.9 billion and record quarterly net income of $18.4 billion, or $3.28 per diluted share. These results compare to revenue of $74.6 billion and net income of $18 billion, or $3.06 per diluted share, in the year-ago quarter. Gross margin was 40.1 percent compared to 39.9 percent in the year-ago quarter. International sales accounted for 66 percent of the quarter’s revenue.

    “Our team delivered Apple’s biggest quarter ever, thanks to the world’s most innovative products and all-time record sales of iPhone, Apple Watch and Apple TV,” said Tim Cook, Apple’s CEO. “The growth of our Services business accelerated during the quarter to produce record results, and our installed base recently crossed a major milestone of one billion active devices.”

    “Our record sales and strong margins drove all-time records for net income and EPS in spite of a very difficult macroeconomic environment,” said Luca Maestri, Apple’s CFO. “We generated operating cash flow of $27.5 billion during the quarter, and returned over $9 billion to investors through share repurchases and dividends. We have now completed $153 billion of our $200 billion capital return program.”

    Apple is providing the following guidance for its fiscal 2016 second quarter:
    • revenue between $50 billion and $53 billion
    • gross margin between 39 percent and 39.5 percent
    • operating expenses between $6 billion and $6.1 billion
    • other income/(expense) of $325 million
    • tax rate of 25.5 percent

    Apple’s board of directors has declared a cash dividend of $.52 per share of the Company’s common stock. The dividend is payable on February 11, 2016, to shareholders of record as of the close of business on February 8, 2016.

    Apple will provide live streaming of its Q1 2016 financial results conference call beginning at 2:00 p.m. PST on January 26, 2016 at www.apple.com/investor/earnings-call/. This webcast will also be available for replay for approximately two weeks thereafter.

    Q1’16 Earnings Supplemental Material

    This press release contains forward-looking statements including without limitation those about the Company’s estimated revenue, gross margin, operating expenses, other income/(expense), and tax rate. These statements involve risks and uncertainties, and actual results may differ. Risks and uncertainties include without limitation the effect of competitive and economic factors, and the Company’s reaction to those factors, on consumer and business buying decisions with respect to the Company’s products; continued competitive pressures in the marketplace; the ability of the Company to deliver to the marketplace and stimulate customer demand for new programs, products, and technological innovations on a timely basis; the effect that product introductions and transitions, changes in product pricing or mix, and/or increases in component costs could have on the Company’s gross margin; the inventory risk associated with the Company’s need to order or commit to order product components in advance of customer orders; the continued availability on acceptable terms, or at all, of certain components and services essential to the Company’s business currently obtained by the Company from sole or limited sources; the effect that the Company’s dependency on manufacturing and logistics services provided by third parties may have on the quality, quantity or cost of products manufactured or services rendered; risks associated with the Company’s international operations; the Company’s reliance on third-party intellectual property and digital content; the potential impact of a finding that the Company has infringed on the intellectual property rights of others; the Company’s dependency on the performance of distributors, carriers and other resellers of the Company’s products; the effect that product and service quality problems could have on the Company’s sales and operating profits; the continued service and availability of key executives and employees; war, terrorism, public health issues, natural disasters, and other circumstances that could disrupt supply, delivery, or demand of products; and unfavorable results of legal proceedings. More information on potential factors that could affect the Company’s financial results is included from time to time in the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of the Company’s public reports filed with the SEC, including the Company’s Form 10-K for the fiscal year ended September 26, 2015, and its Form 10-Q for the fiscal quarter ended December 26, 2015 to be filed with the SEC. The Company assumes no obligation to update any forward-looking statements or information, which speak as of their respective dates.

    Apple revolutionized personal technology with the introduction of the Macintosh in 1984. Today, Apple leads the world in innovation with iPhone, iPad, Mac, Apple Watch and Apple TV. Apple’s four software platforms — iOS, OS X, watchOS and tvOS — provide seamless experiences across all Apple devices and empower people with breakthrough services including the App Store, Apple Music, Apple Pay and iCloud. Apple’s 100,000 employees are dedicated to making the best products on earth, and to leaving the world better than we found it.

    NOTE TO EDITORS: For additional information visit Apple’s PR website (www.apple.com/pr), or call Apple’s Media Helpline at (408) 974-2042.

    © 2016 Apple Inc. All rights reserved. Apple and the Apple logo are trademarks of Apple. Other company and product names may be trademarks of their respective owners.

    Apple Inc.

    UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

    (In millions, except number of shares which are reflected in thousands and per share amounts)
    Three Months Ended

    December 26,
    2015

    December 27,
    2014
    Net sales $ 75,872 $ 74,599
    Cost of sales (1) 45,449 44,858
    Gross margin 30,423 29,741
    Operating expenses:
    Research and development (1) 2,404 1,895
    Selling, general and administrative (1) 3,848 3,600
    Total operating expenses 6,252 5,495
    Operating income 24,171 24,246
    Other income/(expense), net 402 170
    Income before provision for income taxes 24,573 24,416
    Provision for income taxes 6,212 6,392
    Net income $ 18,361 $ 18,024
    Earnings per share:
    Basic $ 3.30 $ 3.08
    Diluted $ 3.28 $ 3.06
    Shares used in computing earnings per share:
    Basic 5,558,930 5,843,082
    Diluted 5,594,127 5,881,803
    Cash dividends declared per share $ 0.52 $ 0.47
    (1) Includes share-based compensation expense as follows:
    Cost of sales $ 204 $ 140
    Research and development $ 466 $ 374
    Selling, general and administrative $ 408 $ 374

    Apple Inc.

    UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

    (In millions, except number of shares which are reflected in thousands and par value)

    December 26,
    2015

    September 26,
    2015
    ASSETS:
    Current assets:
    Cash and cash equivalents $ 16,689 $ 21,120
    Short-term marketable securities 21,385 20,481
    Accounts receivable, less allowances of $63 in each period 12,953 16,849
    Inventories 2,451 2,349
    Vendor non-trade receivables 11,668 13,494
    Other current assets 11,073 15,085
    Total current assets 76,219 89,378
    Long-term marketable securities 177,665 164,065
    Property, plant and equipment, net 22,300 22,471
    Goodwill 5,202 5,116
    Acquired intangible assets, net 3,924 3,893
    Other non-current assets 7,974 5,556
    Total assets $ 293,284 $ 290,479
    LIABILITIES AND SHAREHOLDERS’ EQUITY:
    Current liabilities:
    Accounts payable $ 33,312 $ 35,490
    Accrued expenses 24,032 25,181
    Deferred revenue 8,989 8,940
    Commercial paper 7,259 8,499
    Current portion of long-term debt 2,500 2,500
    Total current liabilities 76,092 80,610
    Deferred revenue, non-current 3,546 3,624
    Long-term debt 53,204 53,463
    Other non-current liabilities 32,175 33,427
    Total liabilities 165,017 171,124
    Commitments and contingencies
    Shareholders’ equity:
    Common stock and additional paid-in capital, $0.00001 par value: 12,600,000 shares authorized; 5,544,487 and 5,578,753 shares issued and outstanding, respectively 28,253 27,416
    Retained earnings 101,494 92,284
    Accumulated other comprehensive income/(loss) (1,480) (345)
    Total shareholders’ equity 128,267 119,355
    Total liabilities and shareholders’ equity $ 293,284 $ 290,479

    Apple Inc.

    UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

    (In millions)
    Three Months Ended
    December 26, 2015 December 27, 2014
    Cash and cash equivalents, beginning of the period $ 21,120 $ 13,844
    Operating activities:
    Net income 18,361 18,024
    Adjustments to reconcile net income to cash generated by operating activities:
    Depreciation and amortization 2,954 2,575
    Share-based compensation expense 1,078 888
    Deferred income tax expense 1,592 2,197
    Changes in operating assets and liabilities:
    Accounts receivable, net 3,896 751
    Inventories (102) (172)
    Vendor non-trade receivables 1,826 (3,508)
    Other current and non-current assets (893) (1,648)
    Accounts payable (852) 9,003
    Deferred revenue (29) 945
    Other current and non-current liabilities (368) 4,667
    Cash generated by operating activities 27,463 33,722
    Investing activities:
    Purchases of marketable securities (47,836) (44,915)
    Proceeds from maturities of marketable securities 3,514 2,807
    Proceeds from sales of marketable securities 28,262 24,166
    Payments made in connection with business acquisitions, net (86) (23)
    Payments for acquisition of property, plant and equipment (3,612) (3,217)
    Payments for acquisition of intangible assets (394) (48)
    Other (298) 65
    Cash used in investing activities (20,450) (21,165)
    Financing activities:
    Proceeds from issuance of common stock 1 80
    Excess tax benefits from equity awards 224 264
    Payments for taxes related to net share settlement of equity awards (597) (512)
    Payments for dividends and dividend equivalents (2,969) (2,801)
    Repurchase of common stock (6,863) (5,030)
    Proceeds from issuance of term debt, net 0 3,485
    Change in commercial paper, net (1,240) (2,409)
    Cash used in financing activities (11,444) (6,923)
    Increase/(decrease) in cash and cash equivalents (4,431) 5,634
    Cash and cash equivalents, end of the period $ 16,689 $ 19,478
    Supplemental cash flow disclosure:
    Cash paid for income taxes, net $ 3,398 $ 3,869
    Cash paid for interest $ 396 $ 202
    Apple Inc.
    Q1 2016 Unaudited Summary Data
    (Units in thousands, Revenue in millions)
    Q1 2016 Q4 2015 Q1 2015 Sequential Change Year/Year Change
    Operating Segments Revenue Revenue Revenue Revenue Revenue
    Americas $29,325 $21,773 $30,566 35% – 4%
    Europe 17,932 10,577 17,214 70% 4%
    Greater China 18,373 12,518 16,144 47% 14%
    Japan 4,794 3,929 5,448 22% – 12%
    Rest of Asia Pacific 5,448 2,704 5,227 101% 4%
    Total Apple $75,872 $51,501 $74,599 47% 2%
    Q1 2016 Q4 2015 Q1 2015 Sequential Change Year/Year Change
    Product Summary Units Revenue Units Revenue Units Revenue Units Revenue Units Revenue
    iPhone (1) 74,779 $51,635 48,046 $32,209 74,468 $51,182 56% 60% 0% 1%
    iPad (1) 16,122 7,084 9,883 4,276 21,419 8,985 63% 66% – 25% – 21%
    Mac (1) 5,312 6,746 5,709 6,882 5,519 6,944

    – 7%

    		 – 2% – 4% – 3%
    Services (2) 6,056 5,086 4,799 19% 26%
    Other Products (1)(3) 4,351 3,048 2,689 43% 62%
    Total Apple $75,872 $51,501 $74,599 47% 2%

    (1)

    Includes deferrals and amortization of related software upgrade rights and non-software services.

    (2)

    Includes revenue from Internet Services, AppleCare, Apple Pay, licensing and other services.

    (3)

    Includes sales of Apple TV, Apple Watch, Beats products, iPod and Apple-branded and third-party accessories.

    Image via Wikimedia Commons

  • Netflix Is Earning Well, Surpasses 75 Million Members

    Netflix Is Earning Well, Surpasses 75 Million Members

    Netflix just released its earnings report for Q4, exceeding Wall Street expectations on earnings per share at 10 cents. Revenue was $1.82 billion, up from $1.48 billion in Q4 2014.

    Netflix says that on January 1, just after the quarter closed, it crossed the 75 million member mark. For 2015, it had 17 million net additions for the year. The company says it expects to grow by over 6 million members in Q1 given its recent expansion.

    Here’s a look at the numbers:

    Screen Shot 2016-01-19 at 4.53.49 PM

    In a letter to shareholders, CEO Reed Hastings and CFO David Wells wrote:

    In Q4 ‘15, we launched an unprecedented number of original series and films, while maintaining a high bar on quality. We unveiled five new original series in Q4, including Marvel’s Jessica Jones and Master of None, starring Aziz Ansari. Both combined with Narcos, Sense8, Marvel’s Daredevil and Bloodline to claim six of the Top 10 new TV shows of 2015 according to IMDB. In late December, we debuted a ten‐part documentary series Making a Murderer, which has enthralled audiences and critics alike and triggered a national conversation on fairness of the American criminal justice system.

    Our first original feature films also premiered in Q4. Beasts of No Nation, a gripping journey into the world of African child soldiers from writer and director Cary Fukunaga and starring Idris Elba, was a favorite of critics and has picked up several major awards nominations. Adam Sandler’s first Netflix original film The Ridiculous Six, which debuted globally on December 11, was the most viewed movie on Netflix in every territory the week of its debut and the most‐viewed movie ever on Netflix in the first 30 days on service. Two of our original documentaries, What Happened, Miss Simone? and Winter on Fire, are both nominated for Academy Awards, our third and fourth nominations in three years for best documentary feature.

    The company’s DVD business still has over 4.9 million members, and generated $80 million in contribution profit in Q4. The executives say they are pleased with how the DVD business is managing its decline in the face of increasing postal costs.

    Images via Netflix

  • GoDaddy Earnings Impress, Revenue Up Over 15%

    GoDaddy just reported its financials for Q3 with revenue up 15.2% year over year at $411.1 million, beating Wall Street expectations. The company also reported total bookings of $475.6 million (up 14.1%).

    Domains revenue was $215.0 million (up 10.5%) while Hosting and Presence revenue was $150.8 million (up 14.7%), Business Applications revenue was $45.3 million (up 47.1%), and International revenue was $105.3 million (up 17.4%).

    The company topped 4 million international customers, which is more than double its total international customer base over the previous four years.

    GoDaddy now has over 61 million domains under management, which it says is over 20% of the global total.

    Here’s the release in its entirety:

    SCOTTSDALE, Ariz., Nov. 4, 2015 /PRNewswire/ — GoDaddy Inc. (NYSE: GDDY), the world’s largest technology provider dedicated to small businesses, today reported financial results for the third quarter ended September 30, 2015.

    “Our third quarter results demonstrate that consistent execution against our strategy yields positive results for our shareholders. We’re growing revenue across all of our business lines by delivering products and services that meet the needs of our customers globally. With 15% revenue growth and adjusted EBITDA up over 22% in the quarter, our combination of products, technology and care will continue to differentiate us and produce strong financial results.”

    Third Quarter Financial Highlights

    • Revenue of $411.1 million, up 15.2% year over year.
    • Total Bookings of $475.6 million, up 14.1% year over year.
    • Adjusted EBITDA of $87.7 million, up 22.5% year over year.
    • Unlevered free cash flow of $79.7 million, an increase of 40.6% year over year.
    • Customers were 13.6 million at quarter end, up 8.8% year over year.
    • Annual ARPU of $119, up 6.8% year over year.

    Three Months Ended

    September 30,

    Nine Months Ended

    September 30,

    in millions, except ARPU

    2015

    2014

    Change

    2015

    2014

    Change

    GAAP Results

    Revenue

    $

    411.1

    $

    356.9

    15.2

    %

    $

    1,181.9

    $

    1,015.6

    16.4

    %

    Net loss (1)

    $

    (5.2)

    $

    (27.6)

    NM

    $

    (119.9)

    $

    (116.5)

    NM

    Net cash provided by operating activities

    $

    198.1

    $

    154.9

    27.9

    %

    Non-GAAP Results

    Total Bookings

    $

    475.6

    $

    416.8

    14.1

    %

    $

    1,450.2

    $

    1,265.6

    14.6

    %

    Adjusted EBITDA

    $

    87.7

    $

    71.6

    22.5

    %

    $

    263.9

    $

    215.1

    22.7

    %

    Unlevered Free Cash Flow

    $

    79.7

    $

    56.7

    40.6

    %

    $

    241.8

    $

    170.1

    42.2

    %

    Customers (at quarter end)

    13.6

    12.5

    8.8

    %

    13.6

    12.5

    8.8

    %

    ARPU (Average revenue per user)

    $

    119

    $

    112

    6.8

    %

    $

    119

    $

    112

    6.8

    %

    (1)

    Net loss for the nine months ended September 30, 2015 includes $51.1 million of costs consisting of $29.7 million in termination payments made in connection with the completion of the IPO and the $21.4 million loss on debt extinguishment associated with the prepayment of the $300 million senior note.

     

    Third Quarter Operating Highlights

    • Domains revenue of $215.0 million, up 10.5% year over year.
    • Hosting and Presence revenue of $150.8 million, up 14.7% year over year.
    • Business Applications revenue of $45.3 million, up 47.1% year over year.
    • International revenue of $105.3 million, up 17.4% year over year.
    • GoDaddy topped 4 million international customers during the quarter, more than doubling its total international customer base over the last 4 years.
    • GoDaddy now has more than 61 million domains under management, representing over 20% of the global total.
    • GoDaddy Pro continues to grow, with over 50,000 web professionals now signed up, half of which are in international markets.
    • GoDaddy expanded its Online Store with more than a dozen new features, including the integration of GoDaddy Email Marketing; Shippo, a customized shipping solution; and McAfee SECURE Certification.
    • GoDaddy extended its Search Engine Visibility (SEV) service, which allows a website using GoDaddy’s Domain Name System (DNS) to rank better in search results without requiring manual code updates. SEV was previously offered with GoDaddy’s Website Builder and Managed WordPress products, and is now available for use with any website, regardless of how it was built or how it is hosted.

    Balance Sheet

    At September 30, 2015, total cash and cash equivalents and short-term investments were $333.1 million, total long-term debt outstanding, including current portion, was $1,048.0 million, gross debt was $1,086.3 million and net debt was $753.2 million.

    Business Outlook

    For the fourth quarter ending December 31, 2015, the Company expects revenues in the range of $421 – $424 million and adjusted EBITDA in the range of $70 – $73 million.

    For the full year ending December 31, 2015, the Company expects revenues in the range of $1,603 – $1,606 million and adjusted EBITDA in the range of $334 – $337 million.

    Quarterly Conference Call and Webcast

    GoDaddy will host a conference call and webcast to discuss third quarter 2015 results at 5:00 p.m. Eastern Time on November 4, 2015. To hear the call, dial (877) 201-0168 in the United States or (647) 788-4901 from international locations, with passcode 51288356. A live webcast of the call, together with a slide presentation that includes supplemental financial information and reconciliations of certain non-GAAP measures to their nearest comparable GAAP measures, will be available through the Company’s Investor Relations website at https://investors.godaddy.net. Following the call, a recorded replay of the webcast will be available on the website.

    GoDaddy Inc. uses its Investor Relations website at https://investors.godaddy.net as a means of disclosing material non-public information and for complying with its disclosure obligations under Regulation FD. Accordingly, investors should monitor the Company’s Investor Relations website, in addition to following press releases, Securities and Exchange Commission (SEC) filings, public conference calls and webcasts.

    Forward-Looking Statements

    This press release contains forward-looking statements which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on estimates and information available to us at the time of this press release and are not guarantees of future performance. Statements in this release involve risks, uncertainties and assumptions. If the risks or uncertainties ever materialize or the assumptions prove incorrect, our results may differ materially from those expressed or implied by such forward-looking statements. All statements other than statements of historical fact could be deemed forward-looking statements, including, but not limited to: any projections of product or service availability, technology developments, customer growth, addressable market size or other future events; any statements about historical results that may suggest future trends for our business; any statements regarding our plans, strategies or objectives with respect to future operations; any statements regarding future economic conditions; and any statements of assumptions underlying any of the foregoing.

    Actual results could differ materially from our current expectations as a result of many factors, including, but not limited to: the unpredictable nature of our rapidly evolving market; fluctuations in our financial and operating results; our rate of growth; interruptions or delays in our service or our web hosting; breaches of our security measures; the impact of any previous or future acquisitions; our ability to continue to release, and gain customer acceptance of, our existing and future products and services; our ability to manage our growth; our ability to hire, retain and motivate employees; the effects of competition; technological, regulatory and legal developments; intellectual property litigation; and developments in the economy, financial markets and credit markets.

    Additional risks and uncertainties that could affect GoDaddy’s financial results are included under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in the Company’s prospectus dated March 31, 2015, filed with the SEC on April 1, 2015, which is available on the Company’s website at https://investors.godaddy.net and on the SEC’s website at www.sec.gov. Additional information will also be set forth in other filings that the Company makes with the SEC from time to time. All forward-looking statements in this press release are based on information available to the Company as of the date hereof, and GoDaddy does not assume any obligation to update the forward-looking statements provided to reflect events that occur or circumstances that exist after the date on which they were made.

    Non-GAAP Financial Measures

    In addition to financial measures prepared in accordance with generally accepted accounting principles in the United States (GAAP), this press release includes financial measures defined as “non-GAAP financial measures” by the SEC including Total Bookings, Adjusted EBITDA, Unlevered Free Cash Flow, Average Revenue Per User (ARPU) and Net Debt. These measures may be different from non-GAAP financial measures used by other companies in our industry, as those other companies may calculate their non-GAAP financial measures differently, particularly related to adjustments for acquisition accounting and non-recurring expenses.

    We believe that these non-GAAP financial measures are useful as a supplement in evaluating our ongoing operational performance and enhancing an overall understanding of our past financial performance. The non-GAAP financial measures included in this release should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. A reconciliation between each non-GAAP financial measure and its nearest GAAP equivalent is included in this release following the financial statements. We use both GAAP and non-GAAP measures to evaluate and manage our operations.

    Total bookings. Total bookings represents gross cash receipts from the sale of products to customers in a given period before giving effect to certain adjustments, primarily net refunds granted in the period. Total bookings provides valuable insight into the sales of our products and the performance of our business since we typically collect payment at the time of sale and recognize revenue ratably over the term of our customer contracts. We report total bookings without giving effect to refunds granted in the period because refunds often occur in periods different from the period of sale for reasons unrelated to the marketing efforts leading to the initial sale. Accordingly, by excluding net refunds, we believe total bookings reflects the effectiveness of our sales efforts in a given period.

    Adjusted EBITDA. Adjusted EBITDA is a measure of our performance aligning our bookings and operating expenditures, and is the primary metric management uses to evaluate the profitability of our business. We calculate adjusted EBITDA as net loss excluding depreciation and amortization, interest expense (net), provision (benefit) for income taxes and adjustments to the TRA liability, equity-based compensation expense, change in deferred revenue, change in prepaid and accrued registry costs, acquisition and sponsor-related costs and a non-recurring reserve for sales taxes. As a result of our business model, we typically collect payment at the time of sale and generally recognize revenue ratably over the term of our customer contracts. At the time of a domain sale, we also incur the obligation for the domain name registry fees associated with the customer contract. As a result, sales to customers increase our deferred revenue and prepaid and accrued registry costs. We therefore adjust net loss for changes in deferred revenue and changes in the associated prepaid and accrued registry costs to facilitate a better comparison of our performance from period to period.

    Unlevered Free Cash Flow. Unlevered free cash flow is a measure of our performance used by management to evaluate our business prior to the impact of our capital structure and after purchases of property and equipment, such as data center and infrastructure investments, that can be used by us for strategic opportunities and strengthening our balance sheet. However, given our debt obligations, unlevered free cash flow does not represent residual cash flow available for discretionary expenses.

    ARPU. We calculate ARPU as total revenue during the preceding 12-month period divided by the average of the number of total customers at the beginning and end of the period. ARPU provides insight into our ability to sell additional products to customers, though the impact to date has been muted due to our continued growth in total customers. The impact of purchase accounting adjustments makes comparisons of ARPU among historical periods less meaningful; however, in future periods, as the effects of purchase accounting decrease, ARPU will become a more meaningful metric.

    Net Debt. We define net debt as gross debt less cash and cash equivalents and short-term investments. Gross debt consists of the current portion of long-term debt plus long-term debt and unamortized original issue discounts on long-term debt. We believe the presentation of net debt provides useful information to investors because our management reviews net debt as part of its management of our overall liquidity, financial flexibility, capital structure and leverage. Furthermore, certain analysts and debt rating agencies monitor our net debt as part of their assessments of our business.

    About GoDaddy

    GoDaddy’s mission is to radically shift the global economy toward small businesses by empowering people to easily start, confidently grow and successfully run their own ventures. With more than 13 million customers worldwide and more than 61 million domain names under management, GoDaddy gives small business owners the tools to name their idea, build a beautiful online presence, attract customers and manage their business. To learn more about the Company, visit www.GoDaddy.com.

    GoDaddy Inc.

    Condensed Consolidated Statements of Operations (unaudited)

    (In millions, except share amounts which are reflected in thousands and per share amounts)

    Three Months Ended
    September 30,

    Nine Months Ended
    September 30,

    2015

    2014

    2015

    2014

    Revenue:

    Domains

    $

    215.0

    $

    194.6

    $

    622.7

    $

    564.1

    Hosting and presence

    150.8

    131.5

    436.5

    369.9

    Business applications

    45.3

    30.8

    122.7

    81.6

    Total revenue

    411.1

    356.9

    1,181.9

    1,015.6

    Costs and operating expenses(1):

    Cost of revenue (excluding depreciation and amortization)

    144.0

    131.7

    420.9

    384.6

    Technology and development

    67.5

    62.4

    202.8

    187.4

    Marketing and advertising

    49.3

    40.2

    150.8

    121.7

    Customer care

    54.8

    48.9

    167.2

    140.6

    General and administrative (2)

    44.6

    41.8

    167.6

    127.5

    Depreciation and amortization

    40.6

    38.5

    116.4

    113.0

    Total costs and operating expenses

    400.8

    363.5

    1,225.7

    1,074.8

    Operating income (loss)

    10.3

    (6.6)

    (43.8)

    (59.2)

    Interest expense

    (14.6)

    (23.1)

    (54.7)

    (61.3)

    Loss on debt extinguishment

    —

    —

    (21.4)

    —

    Other income (expense), net

    —

    1.1

    0.7

    1.0

    Loss before income taxes

    (4.3)

    (28.6)

    (119.2)

    (119.5)

    Benefit (provision) for income taxes

    (0.9)

    1.0

    (0.7)

    3.0

    Net loss

    (5.2)

    (27.6)

    (119.9)

    (116.5)

    Less: net loss attributable to non-controlling interests

    (2.7)

    —

    (44.2)

    —

    Net loss attributable to GoDaddy Inc.

    $

    (2.5)

    $

    (27.6)

    $

    (75.7)

    $

    (116.5)

    Net loss per share of Class A common stock—basic and

    diluted(3)

    $

    (0.04)

    $

    (0.21)

    $

    (0.82)

    $

    (0.91)

    Weighted-average shares of Class A common stock outstanding—basic and diluted(3)

    64,999

    38,826

    56,153

    38,826

    (1)    Costs and operating expenses include equity-based compensation expense as follows:

    Technology and development

    $

    4.4

    $

    2.7

    $

    12.5

    $

    7.2

    Marketing and advertising

    1.5

    3.4

    4.5

    5.1

    Customer care

    0.9

    0.2

    2.1

    0.5

    General and administrative

    3.2

    3.1

    9.4

    9.4

    (2)

    General and administrative for the nine months ended September 30, 2015 includes $29.7 million of additional expenses related to certain termination payments made in connection with the completion of the initial public offering (IPO).

    (3)

    Amounts for periods prior to our IPO have been retrospectively adjusted to give effect to the reorganization transactions that occurred prior to the completion of our IPO. The prior period amounts do not consider the 26,000 shares of Class A common stock sold in our initial public offering. For purposes of calculating loss per share for periods prior to the IPO, including the nine months ended September 30, 2015 for which a portion of the period preceded the IPO, we treated the reorganization transactions as a merger of entities under common control. Therefore, we have retrospectively reflected loss per share as though these transactions had occurred as of the earliest period presented. For purposes of calculating net loss per share of Class A common stock for all periods prior to the IPO, we allocated our historical net loss between the Class A stockholders and the non-controlling interest based on their respective share ownership. For these allocations, the weighted average shares of Class A common stock outstanding was based upon the number of LLC units exchanged in the reorganization transactions, while the weighted average shares of Class B common stock outstanding for the non-controlling interest was based upon the LLC units held by the continuing owners. As of September 30, 2015, we have a total of 155,661 shares of common stock outstanding, consisting of 65,263 shares of Class A common stock and 90,398 shares of Class B common stock as shown in a separate table at the end of this release.

     

    GoDaddy Inc.

    Condensed Consolidated Balance Sheets (unaudited)

    (In millions, except share amounts which are reflected in thousands and per share amounts)

    September 30,

    December 31,

    2015

    2014

    Assets

    Current assets:

    Cash and cash equivalents

    $

    327.7

    $

    139.0

    Short-term investments

    5.4

    3.0

    Accounts and other receivables

    6.2

    3.5

    Registry deposits

    21.2

    17.8

    Prepaid domain name registry fees

    295.2

    272.8

    Prepaid expenses and other current assets

    28.0

    24.8

    Total current assets

    683.7

    460.9

    Property and equipment, net

    221.5

    220.9

    Prepaid domain name registry fees, net of current portion

    162.9

    152.8

    Goodwill

    1,662.3

    1,661.2

    Intangible assets, net

    728.2

    749.7

    Other assets

    11.5

    19.3

    Total assets

    $

    3,470.1

    $

    3,264.8

    Liabilities and stockholders’/members’ equity

    Current liabilities:

    Accounts payable

    $

    28.9

    $

    31.9

    Accrued expenses

    142.8

    114.5

    Current portion of payable to related parties pursuant to tax receivable agreements

    3.0

    —

    Current portion of deferred revenue

    934.0

    821.4

    Current portion of long-term debt

    4.8

    5.0

    Total current liabilities

    1,113.5

    972.8

    Deferred revenue, net of current portion

    478.5

    429.2

    Long-term debt, net of current portion

    1,043.2

    1,413.9

    Payable to related parties pursuant to tax receivable agreements, net of current portion

    167.9

    —

    Other long-term liabilities

    35.8

    38.5

    Commitments and contingencies

    Stockholders’/members’ equity:

    Members’ interest

    —

    410.4

    Preferred stock, $0.001 par value – 50,000 shares authorized; none issued and outstanding

    —

    —

    Class A common stock, $0.001 par value – 1,000,000 shares authorized; 65,263 shares issued and outstanding as of September 30, 2015

    0.1

    —

    Class B common stock, $0.001 par value – 500,000 shares authorized; 90,398 shares issued and outstanding as of September 30, 2015

    0.1

    —

    Additional paid-in capital

    395.0

    —

    Accumulated other comprehensive income

    0.9

    —

    Accumulated deficit

    (32.3)

    —

    Total stockholders’ equity attributable to GoDaddy Inc./members’ equity

    363.8

    410.4

    Non-controlling interests

    267.4

    —

    Total stockholders’/members’ equity

    631.2

    410.4

    Total liabilities and stockholders’/members’ equity

    $

    3,470.1

    $

    3,264.8

     

    GoDaddy Inc.

    Consolidated Statements of Cash Flows (unaudited)

    (In millions)

    Nine Months Ended
    September 30,

    2015

    2014

    Operating activities

    Net loss

    $

    (119.9)

    $

    (116.5)

    Adjustments to reconcile net loss to net cash provided by operating activities:

    Depreciation and amortization

    116.4

    113.0

    Equity-based compensation

    28.5

    22.2

    Loss on debt extinguishment

    21.4

    —

    Other

    7.5

    8.2

    Changes in operating assets and liabilities, net of amounts acquired:

    Registry deposits

    (3.4)

    (1.7)

    Prepaid domain name registry fees

    (32.5)

    (24.8)

    Deferred revenue

    161.9

    157.3

    Other operating assets and liabilities

    18.2

    (2.8)

    Net cash provided by operating activities

    198.1

    154.9

    Investing activities

    Purchases of short-term investments

    (7.3)

    (6.0)

    Maturities of short-term investments

    4.9

    6.2

    Business acquisitions, net of cash acquired

    (30.7)

    (40.7)

    Purchase of intangible assets

    (22.5)

    —

    Purchases of property and equipment, excluding improvements

    (31.3)

    (35.1)

    Purchases of leasehold and building improvements

    (3.0)

    (6.3)

    Other

    1.1

    1.1

    Net cash used in investing activities

    (88.8)

    (80.8)

    Financing activities

    Proceeds from issuance of Class A common stock sold in initial public offering, net of offering costs

    482.4

    (1.4)

    Distributions paid to unit and option holders

    —

    (349.0)

    Proceeds from option exercises and other

    1.2

    2.6

    Proceeds from term loan

    —

    263.8

    Proceeds from revolving credit loan

    —

    75.0

    Repayment of senior note

    (300.0)

    —

    Repayment of revolving credit loan

    (75.0)

    —

    Repayment of term loan

    (8.2)

    (4.9)

    Payment of financing-related costs

    (13.5)

    (8.4)

    Repayment of other financing obligations

    (7.4)

    (2.2)

    Net cash provided by (used in) financing activities

    79.5

    (24.5)

    Effect of exchange rate changes on cash and cash equivalents

    (0.1)

    —

    Net increase in cash and cash equivalents

    188.7

    49.6

    Cash and cash equivalents, beginning of period

    139.0

    95.4

    Cash and cash equivalents, end of period

    $

    327.7

    $

    145.0

     

    Reconciliation of Non-GAAP Financial Measures

    The following tables reconcile the most directly comparable GAAP financial measure to each of these non-GAAP financial measures.

    Three Months Ended
    September 30,

    Nine Months Ended
    September 30,

    2015

    2014

    2015

    2014

    (in millions)

    Total Bookings:

    Total revenue

    $

    411.1

    $

    356.9

    $

    1,181.9

    $

    1,015.6

    Change in deferred revenue

    29.8

    27.9

    161.9

    157.3

    Net refunds

    34.3

    28.7

    104.8

    87.1

    Other

    0.4

    3.3

    1.6

    5.6

    Total bookings

    $

    475.6

    $

    416.8

    $

    1,450.2

    $

    1,265.6

    Three Months Ended
    September 30,

    Nine Months Ended
    September 30,

    2015

    2014

    2015

    2014

    (in millions)

    Adjusted EBITDA:

    Net loss (1)

    $

    (5.2)

    $

    (27.6)

    $

    (119.9)

    $

    (116.5)

    Interest expense, net of interest income

    14.3

    23.0

    54.2

    61.1

    (Benefit) provision for income taxes and adjustments to the TRA liability

    1.4

    (1.0)

    1.2

    (3.0)

    Depreciation and amortization

    40.6

    38.5

    116.4

    113.0

    Equity-based compensation expense

    10.0

    9.4

    28.5

    22.2

    Change in deferred revenue

    29.8

    27.9

    161.9

    157.3

    Change in prepaid and accrued registry costs

    (4.0)

    —

    (32.8)

    (22.3)

    Acquisition and sponsor-related costs (1)

    0.8

    1.4

    54.4

    3.9

    Sales tax accrual

    —

    —

    —

    (0.6)

    Adjusted EBITDA

    $

    87.7

    $

    71.6

    $

    263.9

    $

    215.1

    (1)

    Net loss for the nine months ended September 30, 2015 includes $51.1 million of costs, consisting of $29.7 million in sponsor-related termination payments made in connection with the completion of the IPO and the $21.4 million loss on debt extinguishment associated with the prepayment of the $300 million senior note.

    Three Months Ended
    September 30,

    Nine Months Ended
    September 30,

    2015

    2014

    2015

    2014

    (in millions)

    Unlevered Free Cash Flow:

    Net cash provided by operating activities

    $

    78.7

    $

    50.3

    $

    198.1

    $

    154.9

    Cash paid for interest

    11.9

    28.4

    47.3

    54.4

    Cash paid for acquisition and sponsor-related costs

    0.4

    0.8

    30.7

    2.2

    Capital expenditures

    (11.3)

    (22.8)

    (34.3)

    (41.4)

    Unlevered free cash flow

    $

    79.7

    $

    56.7

    $

    241.8

    $

    170.1

    September 30, 2015

    (in millions)

    Net Debt:

    Current portion of long-term debt

    $

    4.8

    Long-term debt

    1,043.2

    Unamortized original issue discount on long-term debt

    38.3

    Gross debt

    1,086.3

    Less: Cash and cash equivalents

    (327.7)

    Less: Short-term investments

    (5.4)

    Net debt

    $

    753.2

    The following table sets forth expenses included in net loss related to the termination payments made in connection with the completion of the IPO and the loss on debt extinguishment related to the prepayment of debt following the IPO:

    Nine Months
    Ended September 30,

    2015

    2014

    (in millions)

    Expenses incurred in connection with the IPO:

    Transaction and monitoring fee agreement termination fee

    $

    26.7

    $

    —

    Executive chairman services agreement termination fee

    3.0

    —

    Prepayment premium on debt

    13.5

    —

    Write-off of unamortized original issue discount on debt

    7.1

    —

    Write off of unamortized deferred financing costs on debt

    0.8

    —

    $

    51.1

    $

    —

    Shares of Class B common stock do not share in our earnings and are not participating securities. Total shares of common stock outstanding are as follows:

    September 30, 2015

    December 31, 2014(1)

    (in thousands)

    Shares Outstanding:

    Class A common stock

    65,263

    38,826

    Class B common stock

    90,398

    90,177

    155,661

    129,003

    (1)

    Shares for December 31, 2014 have been retrospectively adjusted to give effect to the reorganization transactions that occurred prior to the completion of our IPO.

     

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    Source: GoDaddy Inc.

     

    SOURCE GoDaddy Inc.

    Image via GoDaddy (Facebook)

  • Facebook Has Over a Billion Daily Active Users on Average

    Facebook Has Over a Billion Daily Active Users on Average

    Facebook has officially topped 1.5 billion monthly active users, and for the first time reported over a billion daily active users on average.

    The company reported 1.55 MAUs as of September, 2015 and 1.01 billion average DAUs.

    This is an increase of 14 and 17 percent year-over-year, respectively.

    With $4.5 billion in revenue and $0.57 earnings per share, Facebook has beat estimates ($4.37 billion and $0.52 earnings per share).

    Stock close up $1.36 today, and is around 3 percent up in after-hours trading.

    “We had a good quarter and got a lot done,” said Mark Zuckerberg, Facebook founder and CEO. “We’re focused on innovating and investing for the long term to serve our community and connect the entire world.”

    Screen Shot 2015-11-04 at 4.09.57 PM

    The first time Facebook ever hit one billion users logged on in a single day was late August.