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Yahoo! Inc.

Q1’10 Financial Highlights


4.20.2010
Legal Notice

Note:
The matters discussed in this presentation contain forward-looking statements that involve risks and uncertainties concerning
Yahoo!’s expected financial performance, and expected reimbursements from Microsoft, as well as Yahoo!’s strategic and
operational plans. Actual results may differ materially from the results predicted, and reported results should not be considered
as an indication of future performance. The potential risks and uncertainties include, among others, the impact of management
and organizational changes; the implementation and results of Yahoo!'s ongoing strategic and cost initiatives; Yahoo!'s ability to
compete with new or existing competitors; reduction in spending by, or loss of, marketing services customers; the demand by
customers for Yahoo!'s premium services; acceptance by users of new products and services; risks related to joint ventures and
the integration of acquisitions; risks related to Yahoo!'s international operations; failure to manage growth and diversification;
adverse results in litigation, including intellectual property infringement claims; Yahoo!'s ability to protect its intellectual property
and the value of its brands; dependence on key personnel; dependence on third parties for technology, services, content, and
distribution; general economic conditions and changes in economic conditions; and transition and implementation risks
associated with our search agreement with Microsoft Corporation. All information in this presentation is as of April 20, 2010.
Yahoo! does not intend, and undertakes no duty, to update this information to reflect future events or circumstances. More
information about potential factors that could affect Yahoo!’s business and financial results is included under the captions “Risk
Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Yahoo!’s Annual
Report on Form 10-K for the fiscal year ended December 31, 2009, which is on file with the Securities and Exchange
Commission (“SEC”) and available on the SEC’s web site at www.sec.gov. Additional information will also be set forth in those
sections in Yahoo!’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2010, which will be filed with the SEC in
the second quarter of 2010.

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Quarterly Overview

4/20/2010
Quarterly GAAP Revenue & TAC Rate Trends

$1,732
$1,580 $1,573 $1,575 $1,597

27% TAC % of
27% 28% 28% 29% GAAP Revenue

Note: Traffic Acquisition Costs (“TAC”) consists of payments made to Affiliate sites that have integrated our advertising offerings into their website or their other offerings and payments made
to companies that direct consumer and business traffic to the Yahoo! website.

Note: Revenue excluding traffic acquisition costs (Revenue ex-TAC) is a non-GAAP financial measure defined as GAAP revenue less TAC. Please refer to supporting Table 1 for Revenue ex-
TAC Calculation by Segment. Throughout this presentation, we have rounded numbers as appropriate.

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Quarterly Revenue ex-TAC Trends

$1,258
$1,156 $1,136 $1,131 $1,130

Note: Revenue excluding traffic acquisition costs (Revenue ex-TAC) is a non-GAAP financial measure defined as GAAP revenue less TAC. Please refer to supporting Table 1 for
Revenue ex-TAC Calculation by Segment.

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Revenue and Revenue ex-TAC Comparisons

$ in millions Q1’09 Q4’09 Q1’10 Q1’10


YOY QOQ
Revenues for Groups of Similar
Services
Marketing Services:
Owned and Operated sites(1) $871.8 $971.3 $874.8 0% (10%)
Affiliate sites(2) 511.4 564.0 547.7 7% (3%)
Fees 196.9 196.7 174.4 (11%) (11%)
Total Revenue $1,580.0 $1,732.0 $1,597.0 1% (8%)

Revenue ex-TAC
United States $897.8 $927.0 $842.8 (6%) (9%)
International 258.5 331.5 287.6 11% (13%)
Total $1,156.2 $1,258.5 $1,130.4 (2%) (10%)

Note: Revenue excluding traffic acquisition costs (Revenue ex-TAC) is a non-GAAP financial measure defined as GAAP Revenue less TAC. Please refer to supporting Table 1 for
Revenue ex-TAC Calculation by Segment.
(1) Refers to Yahoo!’s owned and operated (O&O) online properties and services.
(2) Refers to Yahoo!’s distribution network of third-party entities who have integrated Yahoo!’s advertising offerings into their websites or their other offerings.

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Adjusted GAAP Revenue Growth

Year/Year Growth Q1’09 Q2’09 Q3’09 Q4’09 Q1’10

Reported GAAP Revenue Growth (13%) (13%) (12%) (4%) 1%


Impact of:
Currency(1) 5% 5% 3% (2%) (2%)
Acquisitions/Divestitures(2) 5% 2% 2% 2% 0%
Total Impact 10% 7% 5% (0%) (2%)

Adjusted Growth Rate (3%) (6%) (7%) (5%) (1%)

(1) The currency impact reflects the impact on year-over-year reported GAAP revenue growth from changes in currency exchange rates.
(2) The acquisitions/divestitures impact reflects the contribution to reported GAAP revenue growth from acquisitions made in the prior 12 months and the loss of revenue related to the
sale of Zimbra, Inc. in Q1’10.

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GAAP Revenue Details
$ in millions Q1’09 Q2’09 Q3’09 Q4’09 Q1’10

O&O Search $399 $359 $354 $370 $343


Year/Year Growth (3%) (15%) (19%) (15%) (14%)

O&O Display $371 $393 $399 $503 $444


Year/Year Growth (13%) (14%) (8%) (1%) 20%
Affiliate $511 $520 $526 $564 $548
Year/Year Growth (16%) (9%) (6%) 6% 7%

O&O Listings & Other Marketing Services $102 $106 $98 $98 $88
Year/Year Growth (22%) (21%) (24%) (18%) (14%)

Total Marketing Services $1,383 $1,378 $1,377 $1,535 $1,423


Year/Year Growth (12%) (13%) (12%) (4%) 3%

Fees $197 $195 $198 $197 $174


Year/Year Growth (20%) (8%) (11%) (7%) (11%)

Total Revenues $1,580 $1,573 $1,575 $1,732 $1,597


Year/Year Growth (13%) (13%) (12%) (4%) 1%

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Operating Income Trends
(1)
$188

$119
$101
$91
$76

Operating Margin: 6% 5% 6% 7% 12%

Note: Operating margin is calculated as operating income divided by revenues.


(1) Operating income for Q1’10 includes $43 million of net transition cost reimbursements from Microsoft. See Table 5 for presentation (and reconciliation) of Non-GAAP
operating income, which excludes certain items that the Company does not consider indicative of its ongoing operating performance.

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Segment Data
$ in millions Q1’09 Q1’10 Q1’10
YOY
United States Segment
Revenues $1,187.9 $1,120.7 (6%)
Direct Costs(1) (464.7) (413.4) (11%)
Contribution by Segment $723.2 $707.3 (2%)
Segment Contribution Margin(2) 61% 63% N/M

International Segment
Revenues $392.1 $476.3 21%
Direct Costs(1) (214.6) (263.2) 23%
Contribution by Segment $177.5 $213.1 20%
Segment Contribution Margin(2) 45% 45% N/M

Combined Segments
Revenues $1,580.0 $1597.0 1%
Direct Costs(1) (679.2) (676.7) 0%
Contribution by Combined Segments $900.8 $920.3 2%
Combined Segment Contribution Margin(2) 57% 58% N/M

(1) Direct costs for each segment include TAC, other cost of revenues, and other operating expenses that are directly attributable to the segment such as employee compensation
expense, local sales and marketing expenses, and facilities expenses.
(2) Segment contribution margin is calculated as segment contribution divided by segment revenues.
Note: Please refer to supporting table 6, “Supplemental Financial Data.”
N/M = Not Meaningful

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Free Cash Flow (FCF) Trends

(1) Microsoft search operating cost reimbursements and transition cost reimbursements were recognized on the income statement but not received as cash in the first quarter of 2010.

Note: Free Cash Flow (FCF) is a non-GAAP financial measure defined as cash flow from operating activities (adjusted to include excess tax benefits from stock-based awards), less net
capital expenditures and dividends received. Please refer to supporting Table 2 for Free Cash Flow Calculation.

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Non-GAAP Net Income Per Share Trends

Note: Non-GAAP Net Income is a non-GAAP financial measure defined as net income (loss) attributable to Yahoo! Inc. excluding certain gains, losses, expenses, and their related tax effects that
we do not believe are indicative of our ongoing results. All per share amounts are based on fully diluted share counts.

Beginning in Q1’10, our presentation of Non-GAAP Net income no longer excludes stock-based compensation expense and its related tax effects. For comparison purposes, prior period amounts
have been revised to conform to the current presentation.

See Table 3 for Reconciliation of GAAP Net Income Attributable to Yahoo! Inc. and GAAP Net Income Attributable to Yahoo! Inc. Per Share - Diluted to Non-GAAP Net Income and Non-GAAP
Net Income Per Share and Table 4 for Reconciliation of GAAP Net Income Attributable to Yahoo! Inc. to Non-GAAP Net Income, with Details on Adjustments.

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Key Operational & Balance Sheet Metrics
$ in millions except where noted Q1’09 Q2’09 Q3’09 Q4’09 Q1’10

Cash & Marketable Debt Securities $3,691 $4,197 $4,503 $4,518 $4,244

Accounts Receivable, net $913 $907 $907 $1,003 $900


DSO (in days) 52 53 53 53 51

Current Deferred Revenue $406 $417 $413 $411 $352

Ending Employees (ones) 13,500 13,000 13,200 13,900 14,200

Year/Year Growth
Page Views 5% 4% 5% 3% 0%

Note: We periodically review and refine our methodology for monitoring, gathering, and counting Page Views to more accurately reflect the total number of Web pages viewed by users on Yahoo!
properties. Based on this process, from time to time we update our methodology to exclude from the count of Page Views interactions with our servers that we determine or believe are not the
result of user visits to our Owned and Operated sites.

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Yahoo! and Microsoft Search Alliance
Q1 Q2 – Q4 2010
Indicative
of long-term
cost savings, not
including 2010
reinvestments

Going forward should


$43 M net to approximately
$0

Net $78M $75M - $85M per quarter

Operating Cost Transition Cost


Transition Costs
Reimbursements Reimbursements

• Approximately $25M - $30M • Up to $150M of reimbursements • Transition costs include


per month for direct costs of that Microsoft will pay to Yahoo! sales training, customer migration,
running Yahoo! Search over the next two years as consulting, legal, retention and other
specified in the agreement costs incurred in connection with the
• Monthly reimbursements will be
transition of search services to
reduced as algo and paid • Payments relate to specific
transition costs Microsoft
search employees move to
Microsoft • 1Q’10 includes reimbursements • Transition costs and reimbursements
for transition costs that occurred are expected to be nearly
equal in 2Q-4Q’10
in 2009 and 1Q’10

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Business Outlook
$ in millions Q2’10 FY’10
Current Outlook Current Outlook
Revenues $1,600-$1,680 -

Traffic Acquisition Costs (TAC) $475-$495 -

Total expenses(1) less TAC $970-$990 $3,850-$3,925

Total expenses(1) less $750-$760 $2,970-$3,025


TAC, D&A, and SBC

Income from Operations $155-$195 -

(1) Total expenses is calculated as cost of revenues plus total operating expenses.
Note: D&A refers to Depreciation & Amortization (D&A) and SBC refers to Stock-Based Compensation Expense (SBC).
The above business outlook is based on current information and expectations as of April 20, 2010. Yahoo! does not expect, and undertakes no obligation, to update
this business outlook prior to the release of the Company’s next quarterly earnings announcement, notwithstanding subsequent developments; however, Yahoo! may
update this business outlook or any portion thereof at any time at its discretion.
Please refer to supporting Table 7 for calculations of total expenses less TAC, and total expenses less TAC, D&A and SBC.

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Appendix

4/20/2010
Table 1 – Revenue ex-TAC Calculation by Segment
Reconciliation of GAAP Revenue to Revenue ex-TAC

$ in millions Q1’09 Q2’09 Q3’09 Q4’09 Q1’10

United States
GAAP Revenue $1,187.9 $1,152.4 $1,143.2 $1,230.9 $1,120.7
TAC (290.1) (290.5) (294.7) (304.0) (277.8)
US Revenue ex-TAC $897.8 $861.9 $848.5 $927.0 $842.8

International
GAAP Revenue $392.1 $420.5 $432.2 $501.0 $476.3
TAC (133.7) (146.0) (149.3) (169.5) (188.7)
Int’l Revenue ex-TAC $258.5 $274.5 $283.0 $331.5 $287.6

Worldwide
GAAP Revenue $1,580.0 $1,572.9 $1,575.4 $1,732.0 $1,597.0
TAC (423.8) (436.6) (444.0) (473.5) (466.5)
Revenue ex-TAC $1,156.2 $1,136.3 $1,131.4 $1,258.5 $1,130.4

Note: Revenue ex-TAC is a non-GAAP financial measure defined as GAAP Revenue less TAC.

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Table 2 - Free Cash Flow Calculation
Reconciliation of Cash Flow from Operating Activities to FCF

$ in millions Q1’09 Q2’09 Q3’09 Q4’09 Q1’10


Free Cash Flow
Cash Flow from Operating Activities $262.3 $341.8 $355.1 $351.1 $143.6
Excess Tax Benefits from Stock-Based Awards 22.1 45.1 2.9 38.4 32.9
Acquisition of Property & Equipment, Net (70.5) (94.7) (98.9) (169.7) (112.5)
Dividends Received - (26.1) (1.5) - -
Total $214.0 $266.0 $257.7 $219.7 $63.9

Note: Free Cash Flow (FCF) is a non-GAAP financial measure defined as cash flow from operating activities (adjusted to include excess tax benefits from stock-based awards), less net
capital expenditures and dividends received. The excess tax benefits from stock-based awards, as reported on the statements of cash flows in cash flows from financing activities,
represent the reduction in income taxes otherwise payable during the period, attributable to the actual gross tax benefits in excess of the expected tax benefits for options
exercised/awards released in current and prior periods.

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Table 3 – Non-GAAP Net Income Per Share Calculation
Reconciliation of GAAP Net Income Attributable to Yahoo! Inc. and GAAP Net
Income Attributable to Yahoo! Inc. Common Stockholders Per Share - Diluted to
Non-GAAP Net Income and Non-GAAP Net Income Per Share - Diluted

in millions except per share amounts Q1’09 Q2’09 Q3’09 Q4’09 Q1’10

GAAP Net Income Attributable to Yahoo! Inc. $117.6 $141.4 $186.1 $153.0 $310.2
Adjustments 5.6 4.0 (40.8) 47.2 (91.4)
Non-GAAP Net Income $123.1 $145.4 $145.3 $200.2 $218.8

GAAP Net Income Attributable to Yahoo! Inc. Common Stockholders $0.08 $0.10 $0.13 $0.11 $0.22
Per Share - Diluted

Non-GAAP Net Income Per Share - Diluted $0.09 $0.10 $0.10 $0.14 $0.15

Diluted Shares Outstanding 1,406.5 1,414.3 1,424.9 1,417.0 1,413.4

Note: All per share amounts are based on fully diluted share counts. Please refer to supporting Table 4 for details on Adjustments.

Beginning in Q1’10, our presentation of Non-GAAP Net Income no longer excludes stock-based compensation expense and its related tax effects. For comparison purposes, prior period
amounts have been revised to conform to the current presentation.

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Table 4 - Non-GAAP Net Income Calculation
Reconciliation of GAAP Net Income Attributable to Yahoo! Inc. to Non-GAAP Net Income, with
Details on Adjustments
$ in thousands Q1'09 Q2'09 Q3'09 Q4'09 Q1'10

GAAP Net income attributable to Yahoo! Inc. $ 117,558 $ 141,387 $ 186,093 $ 152,954 $ 310,191

(a) (1) - - 12,141 32,013 (43,300)


Transition cost reimbursements from Microsoft, net

(b) Incremental costs for advisors related to strategic alternatives and related 3,709 2,596 - - -
(2)
matters

(c) Restructuring charges, net 4,801 65,002 16,689 40,409 4,412

(d) Gain on sale of Gmarket investment - (66,684) - - -

(e) Gain on sale of the Company's direct investment in Alibaba.com - - (98,167) -

(f) Goodwill impairment charge - - - - -

(g) Gain on sale of Zimbra, Inc. - - - - (66,130)

(h) Yahoo!'s non-cash gain related to Alibaba Group's initial public offering of - - - - -
Alibaba.com, net of tax, which is included in earnings in equity interests

(i) Yahoo!'s non-cash loss related to the impairment of our direct investment in - - - - -
Alibaba.com, net of tax, which is included in earnings in equity interests

(j) To adjust the provision for income taxes to reflect the tax impact of items (a) - (g) (2,957) 3,103 28,516 (25,200) 13,668

Non-GAAP Net income $ 123,111 $ 145,404 $ 145,272 $ 200,176 $ 218,841

(1) Non-GAAP Net income excludes reimbursements for prior periods. For the three months ended March 31, 2010 Yahoo! accrued $67 million of transition cost
reimbursements from Microsoft for transition costs incurred by Yahoo! in 2009 and the first quarter of 2010, partially offset by $24 million of transition costs
incurred by Yahoo! in the first quarter of 2010. No adjustment is made for the $35 million of search operating cost reimbursements from Microsoft accrued in the
first quarter of 2010, because the underlying costs were incurred in the same period.
(2) Includes incremental costs for advisors related to Microsoft's proposals to acquire all or a part of the Company, other strategic alternatives, including the Google
agreement, the proxy contest, and related litigation defense.

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Table 5 - Non-GAAP Operating Income Calculation
Reconciliation of GAAP Operating Income to Non-GAAP Operating Income, with Details on
Adjustments
$ in thousands Q1'09 Q2'09 Q3'09 Q4'09 Q1'10

GAAP Income from operations $ 100,685 $ 75,753 $ 91,499 $ 118,755 $ 188,021

(a) Transition cost reimbursements from Microsoft, net (1) - - 12,141 32,013 (43,300)

(b) Incremental costs for advisors related to strategic alternatives and related 3,709 2,596 - - -
(2)
matters

(c) Restructuring charges, net 4,801 65,002 16,689 40,409 4,412

Non-GAAP Income from operations $ 109,195 $ 143,351 $ 120,329 $ 191,177 $ 149,133

(1) Non-GAAP Net income excludes reimbursements for prior periods. For the three months ended March 31, 2010 Yahoo! accrued $67 million of transition cost
reimbursements from Microsoft for transition costs incurred by Yahoo! in 2009 and the first quarter of 2010, partially offset by $24 million of transition costs
incurred by Yahoo! in the first quarter of 2010. No adjustment is made for the $35 million of search operating cost reimbursements from Microsoft accrued in the
first quarter of 2010, because the underlying costs were incurred in the same period.
(2) Includes incremental costs for advisors related to Microsoft's proposals to acquire all or a part of the Company, other strategic alternatives, including the Google
agreement, the proxy contest, and related litigation defense.

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Table 6 – Supplemental Financial Data
$ in millions Q1’09 Q1’10

Revenues by Segment:
United States $1,187.9 $1,120.7
International 392.1 476.3
Total Revenues $1,580.0 $1,597.0

Direct costs by segment(1):


United States $464.7 $413.4
International 214.6 263.2
Global Operating Costs(2) 487.0 501.8
Restructuring charges, net 4.8 4.4
Depreciation and amortization 181.6 165.2
Stock-based compensation 126.7 60.8
Income from Operations $100.7 $188.0

(1) Direct costs for each segment include TAC, other cost of revenues, and other operating expenses that are directly attributable to the segment such as employee compensation
expense, local sales and marketing expenses, and facilities expenses.
(2) Global operating costs include product development, service engineering and operations, marketing, customer advocacy, general and administrative, and other corporate expenses
that are managed on a global basis and that are not directly attributable to any segment.

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Table 7 – Reconciliations
Q1'10A Q2'10E FY'10E
(in millions) (in millions) (in millions)

Total Expenses less TAC:


(1)
Total Expenses (GAAP Cost of Revenues + GAAP Total Operating Expenses) $ $1,409 $ 1,445 - 1,485
(1)
Less: Traffic Acquisition Costs ("TAC") ($467) (475 - 495)
Total Expenses less TAC $ $942 $ 970 - 990 $ 3,850 - 3,925

Total Expenses less TAC, D&A, and SBC:


(1)
Total Expenses (GAAP Cost of Revenues + GAAP Total Operating Expenses) $ $1,409 $ 1,445 - 1,485
(1)
Less: Traffic Acquisition Costs ("TAC") ($467) (475 - 495)
(2)
Less: Depreciation and Amortization ("D&A") ($165) (160 - 165)
(2)
Less: Stock-Based Compensation Expense ("SBC") ($61) (60 - 65)
Total Expenses less TAC, D&A, and SBC $ $716 $ 750 - 760 $ 2,970 - 3,025

Note: D&A refers to Depreciation & Amortization (D&A) and SBC refers to Stock-Based Compensation Expense (SBC).
(1) We are unable to provide Total Expenses or TAC on a forward-looking basis for the full year.
(2) We expect the sum of D&A and SBC for the full year to be approximately $880-$900 million.
The above business outlook for Q2’10 and FY’10 is based on current information and expectations as of April 20, 2010. Yahoo! does not expect, and undertakes no obligation, to
update this business outlook prior to the release of the Company’s next quarterly earnings announcement, notwithstanding subsequent developments; however, Yahoo! may
update this business outlook or any portion thereof at any time at its discretion.

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