Yahoo 2013 Annual Report Download - page 43

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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 total operating expenses, which include
TAC in non-transitioned markets.
Adjusted EBITDA. Adjusted EBITDA is a non-GAAP financial measure defined as net income 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 certain 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 our 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 our workforce; adjusted EBITDA also excludes other
income, net (which includes interest), earnings in equity interests, net income attributable to noncontrolling
interests and certain 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. Adjusted EBITDA is a measure that
may be unique to us, 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 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.
Free Cash Flow. 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 (i) acquisition of
property and equipment, net and (ii) 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 the business after the acquisition of property and equipment,
which can then be used for strategic opportunities including, among others, investing in our 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 the limitation of free cash flow by also relying on the net change in cash and cash equivalents as
presented in our consolidated statements of cash flows prepared in accordance with GAAP which incorporates all
cash movements during the period.
Significant Transactions
Acquisition of Tumblr
On June 19, 2013, we completed the acquisition of Tumblr, Inc. (“Tumblr”), a blog-hosting Website that allows
users to post their own content as well as follow or re-blog posts made by other users. The acquisition of Tumblr
brings a community of new users to the Yahoo Network. The total purchase price of approximately $990 million
consisted mainly of cash consideration. See Note 4—“Acquisitions” in the Notes to our consolidated financial
statements for additional information.
Initial Repurchase of Alibaba Group Holding Limited Ordinary Shares
See Note 8—“Investments in Equity Interests” in the Notes to our consolidated financial statements for
information regarding the repurchase by Alibaba Group of 523 million of the 1,047 million ordinary shares of
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