Yahoo 2013 Annual Report Download - page 40

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We create value for advertisers with a streamlined, simplified advertising technology stack that leverages
Yahoo’s data, reach and analytics to connect advertisers with their target audiences. For advertisers, the
opportunity to be a part of users’ daily habits across products and platforms is a powerful tool to engage
audiences and build brand loyalty.
Advertisers can build their businesses through advertising to targeted audiences on our online properties and
services (“Yahoo Properties”) or through a distribution network of third party entities (“Affiliates”) who integrate
our advertising offerings into their Websites or other offerings (“Affiliate sites”; together with Yahoo Properties,
the “Yahoo Network”). Our revenue is generated principally from display and search advertising.
We continue to manage and measure our business geographically, principally in the Americas, EMEA (Europe,
Middle East, and Africa) and Asia Pacific.
In the following Management’s Discussion and Analysis, we provide information regarding the following areas:
• Key Financial Metrics;
• Non-GAAP Financial Measures;
• Significant Transactions;
• Results of Operations;
• Liquidity and Capital Resources;
• Critical Accounting Policies and Estimates; and
• Recent Accounting Pronouncements.
Key Financial Metrics
The key financial metrics we use are as follows: revenue; revenue less traffic acquisition costs (“TAC”), or
revenue ex-TAC; income from operations; adjusted EBITDA; net income attributable to Yahoo! Inc.; net cash
provided by (used in) operating activities; and free cash flow. Revenue ex-TAC, adjusted EBITDA and free cash
flow are financial measures that are not defined in accordance with U.S. generally accepted accounting principles
(“GAAP”). We use these non-GAAP financial measures for internal managerial purposes and to facilitate period-
to-period comparisons. See “Non-GAAP Financial Measures” below for a description of, and limitations specific
to, each of these non-GAAP financial measures.
Years Ended December 31,
2011 2012 2013
(dollars in thousands)
Revenue ................................................... $4,984,199 $4,986,566 $4,680,380
Revenue ex-TAC ............................................ $4,380,828 $4,467,660 $4,425,938
Income from operations(1) ..................................... $ 800,341 $ 566,368 $ 589,926
Adjusted EBITDA ........................................... $1,654,583 $1,698,727 $1,564,245
Net income attributable to Yahoo! Inc ........................... $1,048,827 $3,945,479 $1,366,281
Net cash provided by (used in) operating activities ................. $1,323,806 $ (281,554) $1,195,247
Free cash flow(2) ............................................ $ 725,801 $ (834,865) $ 786,465
(1) Includes:
Stock-based compensation expense ......................... $ 203,958 $ 224,365 $ 278,220
Restructuring charges, net ................................. $ 24,420 $ 236,170 $ 3,766
(2) Excluding the impact of the cash taxes paid of $2.3 billion related to the Initial Repurchase described under
“Significant Transactions” below, free cash flow for the year ended December 31, 2012 would have been
$1.4 billion.
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