Yahoo 2014 Annual Report Download - page 50

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. Free cash flow 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 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 BrightRoll
On December 12, 2014, the Company completed the acquisition of BrightRoll, Inc. (“BrightRoll”), a
leading programmatic video advertising platform, for $583 million. The transaction will combine
Yahoo’s premium-desktop and mobile video advertising inventory with BrightRoll’s programmatic
video platform and publisher relationships to bring substantial value to advertisers on both platforms.
See Note 4—“Acquisitions and Dispositions” in the Notes to our consolidated financial statements for
additional information.
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