Yahoo! Inc. (NASDAQ:YHOO)

The analysis of the financial ratios over the five-year period reveals distinct trends in profitability, cost structure, and extraordinary gains or losses.

Revenue and Cost of Revenue

Revenue remained constant at 100% throughout the period as the base measure. The cost of revenue showed a notable increase, rising from 32.5% in 2012 to 52.6% in 2016, indicating a significant increase in direct costs relative to revenue over time.

Traffic Acquisition Costs

Traffic acquisition costs fluctuated markedly, starting at -10.41% of revenue in 2012, decreasing to -4.71% in 2014, then sharply rising to -31.94% by 2016. The volatility in these costs suggests changing strategies or market conditions impacting user acquisition expenses.

Gross Profit

Gross profit margins showed a declining trend, peaking at 71.89% in 2014 and falling sharply to 47.4% in 2016. This decline aligns with the increased cost of revenue and traffic acquisition costs, indicating margin compression.

Operating Expenses

Sales and marketing expenses decreased from -22.09% of revenue in 2012 to -17.05% in 2016, suggesting improved efficiency or reduced spending in this area. Product development costs rose initially from -17.76% in 2012 to a peak of -26.14% in 2014, but then declined to -20.42% in 2016. General and administrative expenses increased slightly from -10.83% to around -12.59%, showing relative stability in overhead costs.

Impairment and Restructuring Charges

Significant impairment charges notably appeared in 2015, with goodwill impairment reaching a drastic -89.79% of revenue, severely impacting operating results. Intangibles and asset impairment charges were also present but less severe. Restructuring charges remained relatively low but persistent, fluctuating between -4.74% and -1.71% of revenue.

Income From Operations

Income from operations showed a severe decline, initially positive at 11.36% in 2012 and 12.6% in 2013, before plummeting to -95.58% in 2015 due to impairment charges and other costs, and improving slightly to -12.48% in 2016, yet remaining negative.

Other Income and Gains

Extraordinary gains were significant in early years, with a remarkable 92.31% gain related to the sale of Alibaba Group shares in 2012 and a large one-time gain of 223.45% from Alibaba ADS sales in 2014. Gains on Hortonworks warrants appeared small and fluctuated between gain and loss. Other income experienced large variance, inflating net results in 2014 but turning slightly negative in later years.

Net Income and Taxation

Net income showed extreme variability, with a high of 163.1% of revenue in 2014 driven by extraordinary gains, falling sharply to losses of -87.58% in 2015 and -4.05% in 2016. Income tax provision mirrored this variability, with a large benefit in 2015 (1.8%) following heavy losses and a slight tax expense in other years. Earnings in equity interests were positive but decreased over the latter years.

Summary

The company experienced high volatility in profitability across the analyzed years. Early periods were marked by strong profitability supported by extraordinary gains, whereas later years saw a contraction in margins and significant losses mainly due to impairment charges. Operating efficiency improvements in certain expense categories were offset by rising costs directly tied to revenue and one-off impairments impacting overall financial performance.