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Yahoo! Reports Third Quarter 2012 Results

“Yahoo! had a solid third quarter, and we are encouraged by the stabilization in search and display revenue,” said Marissa Mayer, CEO of Yahoo!. “We’re taking important steps to position Yahoo! for long-term success, and we’re confident that our focus on quality and improving the user experience will drive increased value for our advertisers, partners and shareholders.”

Business Highlights
  • Yahoo! strengthened its executive team, appointing Henrique de Castro as chief operating officer; Ken Goldman as chief financial officer; Ron Bell as general counsel; Jacqueline Reses as executive vice president of people and development; and Kathy Savitt as chief marketing officer.
  • Yahoo! closed the initial stage of its share repurchase agreement with Alibaba, receiving pre-tax proceeds valued at $7.6 billion, $6.3 billion in cash and $800 million in preferred shares, as well as a payment of $550 million related to a technology and intellectual property license agreement. Yahoo! announced plans to return $3.65 billion in after-tax proceeds to shareholders, or 85 percent of the net cash proceeds. This amount includes the $646 million Yahoo! has already returned to shareholders through share repurchases since the announcement of the agreement through the third quarter of 2012 of which $190 million was repurchased during the third quarter of 2012.
  • Yahoo! introduced new, interactive and immersive experiences for users across PC, mobile, tablet and connected TV devices. For the 2012 London Games, Yahoo! had over 3 billion page views – more than its page views for the Beijing and Vancouver Games combined. During the first two weeks of the political conventions, Yahoo! had 45 percent more page views and 35 percent more time spent on its election-related experiences compared to 2008.
  • Yahoo! continued to innovate on mobile and connected devices, launching IntoNow 3.0, an innovative and fun way to connect with friends and get more from the TV experience. The number of TV shows tagged on IntoNow has increased approximately 80 percent year over year. Yahoo! also extended its connected TV experience by launching the Yahoo! Connected TV experience in Brazil with AOC and Philco branded devices. Yahoo! introduced new multi-screen Fantasy Football experiences, including a new iOS app for iPad, iPhone and iPod touch.
  • In October 2012, Yahoo! entered into a 364-day, $750 million unsecured revolving credit facility. The facility is currently undrawn and is expected to be used for general corporate purposes.

Third Quarter 2012 Revenue Highlights
  • Display revenue ex-TAC was $452 million, flat compared to the third quarter of 2011.
  • GAAP display revenue was $506 million, a 1 percent increase compared to $502 million for the third quarter of 2011.
  • Search revenue ex-TAC was $414 million, an 11 percent increase compared to $374 million for the third quarter of 2011.
  • GAAP search revenue was $473 million, a 1 percent increase compared to $467 million for the third quarter of 2011.

Cash Flow and Cash Balance
  • Cash flow from operating activities for the third quarter of 2012 was $1,046 million, a 194 percent increase compared to $356 million for the same period of 2011. Excluding a payment of $550 million from Alibaba related to a technology and intellectual property license agreement, cash flow from operating activities for the third quarter of 2012 was $496 million.
  • Free cash flow was $920 million for the third quarter of 2012, a 273 percent increase compared to $247 million for the same period of 2011. Excluding a payment of $550 million from Alibaba related to a technology and intellectual property license agreement, free cash flow for the third quarter of 2012 was $370 million.
  • Cash, cash equivalents, and investments in marketable debt securities were $9.4 billion at September 30, 2012 compared to $2.5 billion at December 31, 2011, an increase of $6.9 billion. We estimate that we will pay approximately $2.5 billion in taxes related to the Alibaba share repurchase agreement, the majority of which will be paid in the fourth quarter of 2012.
  • During the third quarter of 2012, Yahoo! repurchased 12 million shares for $190 million.

Conference Call

Yahoo! will host a conference call to discuss third quarter 2012 results at 5 p.m. Eastern Time today. A live Webcast of the conference call, together with supplemental financial information, can be accessed through the Company's Investor Relations Website at http://investor.yahoo.com/results.cfm. In addition, an archive of the Webcast can be accessed through the same link. An audio replay of the call will be available for one week following the conference call by calling (888) 286-8010 or (617) 801-6888, reservation number: 43594094.

Note Regarding 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”): revenue ex-TAC; free cash flow; non-GAAP income from operations; non-GAAP net income; and non-GAAP net income per diluted share. 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,” “Supplemental Financial Data,” and “GAAP to Non-GAAP Reconciliations.”

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