AOL Reports Q1 Earnings

  AOL Reports Q1 Earnings

  Improved Revenue & Expense Trends Lead AOL to Increase 2012 Adjusted OIBDA
                          Guidance to $350 Million*

  Global Advertising Revenue Grows Year-Over-Year for the Fourth Consecutive
                                   Quarter

   Combined AOL Properties Display & Third Party Network Revenue Grows 10%
                                Year-Over-Year

              Subscription Churn Rate the Lowest in Seven Years

    Significant Improvements Made to Search and Contextual Revenue Trends

  Operating Expenses Decline Quarter-over-Quarter for the Fourth Consecutive
                                   Quarter

              Reported EPS of $0.22 Compares to $0.04 in Q1 2011

  AOL Repurchased 1.8M Shares Since its Last Earnings Release at an Average
                               Price of $17.65

    AOL has Repurchased 14.8M Shares To-Date at an Average Price of $14.11

Business Wire

NEW YORK -- May 09, 2012

AOL Inc. (NYSE: AOL) released first quarter 2012 results today.

“AOL is a much stronger company today than a year ago and began 2012 by
growing advertising revenue, lowering expenses and improving Adjusted OIBDA
trends," said Tim Armstrong, Chairman and CEO."In 2012 and beyond we are
simultaneously focused on the continued successful execution of our strategy
and on creating and unlocking value for our shareholders.”


Summary Results
In millions (except per share amounts)
                                                             
                                        Q1 2012      Q1 2011      Change
                                                                        
Revenue
Advertising                             $ 330.1         $ 313.7         5    %
Subscription                              182.1           215.4         -15  %
Other                                    17.2          22.3         -23  %
Total revenues                          $ 529.4         $ 551.4         -4   %
                                                                        
Adjusted operating income
before depreciation and                 $ 93.8          $ 99.1          -5   %
amortization (OIBDA) ^(1)
                                                                        
Restructuring costs                     $ 7.4           $ 27.8          73   %
                                                                        
Operating income (loss)                 $ 31.4          $ (11.8 )       NM
                                                                        
Net income attributable to AOL          $ 21.1          $ 4.7           349  %
Inc.
                                                                        
Diluted EPS                             $ 0.22          $ 0.04          450  %
                                                                        
Cash provided by operating              $ 19.9          $ 4.0           397  %
activities
                                                                        
Free Cash Flow ^(1)                     $ (9.5  )       $ (41.5 )       77   %
                                                           

(1)See Page 9 for a reconciliation of Adjusted OIBDA and Free Cash Flow to the
GAAP financial measures the Company considers most comparable.

(*) Adjusted OIBDA is defined on page 10 of this release. Guidance also
excludes expenses related to the proxy contest and the patent sale.

                             KEY QUARTERLY TRENDS

Revenue Trends:

  *AOL grew global advertising revenue 5%, its fourth consecutive quarter of
    year-over-year growth.
  *Global Advertising revenue reflects strong growth, including:

       *Achieving global display revenue year-over-year growth for the fifth
         consecutive quarter.
       *10% growth in combined AOL Properties Display and Third Party Network
         revenue, which totaled $240.5 million for the quarter.
       *23% growth in Third Party Network revenue, its fourth consecutive
         quarter of year-over-year growth.
       *The lowest rate of search and contextual revenue decline in
         approximately three years, driven primarily by continued double digit
         growth in search revenue on AOL.com.
       *Sequential growth in search and contextual revenue for the second
         consecutive quarter, despite seasonality.

  *Subscription revenue trends continued to improve meaningfully with a 14%
    decline in subscribers the lowest rate of decline in five years, while
    monthly average churn of 2.0% was the lowest rate of churn in seven years.

Profitability Trends:

  *AOL significantly improved its profitability trends:

       *Adjusted OIBDA declined 5%, its lowest rate of decline in four years.
       *Adjusted OIBDA expenses, excluding Traffic Acquisition Costs (TAC)
         and a legal settlement in Q4 2011, declined by 7% year-over-year and
         $6 million sequentially. This is the third consecutive quarter of
         sequential declines in Adjusted OIBDA expenses, excluding TAC.
       *Operating and net income improved by $43.2 million and $16.4 million
         year-over-year, respectively.
       *Net income includes a $10.8 million non-cash gain related to our
         pre-existing investment in Ad.com Japan, triggered by acquiring a
         controlling interest in the entity during the quarter.

Product/Consumer Trends:

  *AOL continued to make progress in key Internet growth areas:

       *Video: AOL grew its videos, video views, video ad impressions and
         video revenue at double-digit rates.
       *Brand Advertising: Project Devil became an IAB industry standard and
         continued to grow advertisers, ad impressions and revenue at
         double-digit rates.
       *Local: Patch grew traffic and advertisers over 40% year-over-year and
         revenue over 100% year-over-year.
       *Traffic: Consumer usage increased versus Q4 2011 to 108 million
         unique visitors.

Asset, Cash & Cash Flow Trends:

  *On April 5^th, AOL agreed to sell over 800 of its patents and patent
    applications to Microsoft Corporation (“Microsoft”) and grant Microsoft a
    non-exclusive license to its retained patent portfolio for aggregate
    proceeds of $1.056 billion in cash.
  *AOL repurchased 1.8 million shares between its last earnings release and
    today at an average price of $17.65 per share (approximately $32 million)
    and 14.8 million shares to date at an average price of $14.11 per share
    (approximately $209 million). AOL temporarily suspended its repurchase
    program during the quarter. AOL has approximately $41 million left on its
    $250 million share repurchase authorization.
  *AOL had $361.9 million of cash at March 31, 2012. Q1 cash provided by
    operating activities and Free Cash Flow were $15.9 million and $32.0
    million higher than the prior year quarter, respectively, benefiting from
    the growth in operating income. The Free Cash Flow outflow of $9.5 million
    reflects the payment of 2011 employee bonuses during the quarter.


DISCUSSION OF RESULTS

Revenue
                                                                                   
                      Q1 2012    Q1 2011    Change
                      (In millions)           
Advertising                     
revenue
Display               $ 130.3       $ 128.5       1    %                                               
Display -               118.9         120.0       -1   %                           Q1 2012    Q1 2011    Change
domestic
Display -               11.4          8.5         34   %                            (In millions)
international
Search and                                                       AOL
contextual             89.6      95.8        -6   %         Properties         $ 130.3       $ 128.5       1   %
                                                                 Display
AOL                                                              Third
Properties              219.9         224.3       -2   %         Party                110.2         89.4        23  %
                                                                 Network
Third Party            110.2     89.4        23   %                                        
Network
                                                                 AOL
                                                                 Properties
Total                                                            Display &
advertising             330.1         313.7       5    %                            $ 240.5       $ 217.9       10  %
revenue                                                          Third
                                                                 Party
                                                                 Network
                                                                                                                
Subscription            182.1         215.4       -15  %
revenue
                                                                                                                
Other revenue          17.2      22.3        -23  %
                                                                                                                
Total revenue         $ 529.4    $ 551.4       -4   %
                                                                                            

Global advertising revenue grew 5% year-over-year in Q1 2012, reflecting
double-digit growth in the third party network and growth in global display
revenue, partially offset by declines in search and contextual revenue.

Global display revenue was driven by growth in international display
advertising, partially offset by a slight decline in domestic display
advertising revenue. International display revenue growth reflects continued
growth in both the U.K. and Canada. Domestic display advertising revenue
declined primarily reflecting a decline in reserved impressions sold,
partially offset by growth in reserved inventory pricing and Patch revenue.

Third party network revenue increased $20.8 million, reflecting 14% growth in
Advertising.com and $2.4 million related to one month of additional goviral
revenue (acquired January 31, 2011). Advertising.com growth reflects an
increase in advertisers and publishers on the network and increased sales of
premium packages and products. Third party network revenue also reflects $6.4
million related to Ad.com Japan, a Japanese joint venture which AOL began
consolidating during the quarter as a result of acquiring a controlling
interest in the joint venture by increasing its ownership from 50% to 53% and
gaining control of the board and day-to-day operations.

Search and contextual revenue trends continued to improve year-over-year and
revenue grew sequentially for the second consecutive quarter. Total search and
contextual revenue declined $6.2 million year-over-year, primarily due to a
14% decline in domestic AOL-brand access subscribers and fewer queries from
cobranded portals and international markets. Search and contextual revenue
declines were partially offset by continued growth in search revenue on
AOL.com.

Subscription revenue declines reflect a 14% decline in domestic AOL-brand
access subscribers. The decline in subscription revenue was the lowest level
of decline in 5 years. In addition to benefitting from the continued
maturation of the tenured base, the decrease in the rate of decline in
subscription revenue reflects the impact of a price rationalization program
AOL began in late Q3 2011. This program significantly reduced the number of
price points and more clearly defined and enhanced the value of our product
offerings for consumers. Additionally, monthly average churn contributed to
the lower rate of decline, falling from 2.5% in Q1 2011 to 2.0% in Q1 2012.

Other revenue declines primarily reflect lower mobile carrier revenues.
Revenue from mobile carriers represented 32% of total “Other revenue” in Q1
2011 and 11% in Q1 2012.

Profitability

AOL’s Adjusted OIBDA decline was the lowest rate of decline in four years and
primarily reflects the lower revenue discussed above, partially offset by
lower cost of revenues and general and administrative expenses. Costs of
revenues have declined sequentially for three consecutive quarters and during
Q1 declined year-over-year for the first time since Q4 2010, driven by lower
network related expenses and reduced content costs related primarily to AOL’s
reduced reliance on freelancers. Cost of revenue declines were partially
offset by $9.4 million of increased TAC, as a result of continued growth in
third party network advertising revenue, and $4.7 million of increased
personnel costs related to 2011 headcount. General and administrative expenses
year-over-year declines reflect a reduction in personnel costs including
reduced corporate headcount in Q1 2012. Operating and net income grew
meaningfully year-over-year driven by the aforementioned reduction in
expenses, lower restructuring costs and a $22.7 million reduction in
depreciation and amortization in Q1 2012 versus Q1 2011. The year-over-year
decline in depreciation and amortization primarily reflects a decline of $19.6
million related to certain intangible assets being fully amortized in 2011.
The year-over-year decline in depreciation and amortization in 2012 also
reflects decommissioning certain network equipment, partially offset by an
increase of $5.0 million primarily resulting from our 2011 and 2012
acquisitions.

Tax

The Company had pre-tax income from operations of $39.8 million and a related
income tax expense of $18.8 million, resulting in an effective tax rate of
47.2% for the three months ended March 31, 2012, as compared to an effective
tax rate of 142.0% for the three months ended March 31, 2011. The effective
tax rate for the three months ended March 31, 2012 differed from the statutory
U.S. federal income tax rate of 35.0% primarily due to foreign losses that did
not produce a tax benefit and due to a change in state tax rates. The
effective tax rate for the three months ended March 31, 2012 differed from the
effective tax rate for the three months ended March 31, 2011 primarily due to
a $7.1 million income tax benefit in 2011 associated with a worthless stock
deduction related to the sale of a subsidiary and favorable adjustments in
2011 of $8.2 million related to escrow disbursements from prior acquisitions
for which we concluded we will be able to recognize a tax benefit.

Cash Flow

Q1 2012 cash provided by operating activities was $19.9 million while Free
Cash Flow was a $9.5 million outflow. Cash provided by operating activities
and Free Cash Flow increased versus Q1 2011, primarily reflecting the growth
in operating income, partially offset by incentive compensation payments made
in the first quarter of 2012 related to prior year acquisitions. Free Cash
Flow for the quarter was negative due to the payment of 2011 employee bonuses.

Subsequent Event

On April 5, 2012, we entered into a definitive agreement (“the Purchase
Agreement”) to sell over 800 of our patents and their related patent
applications (the “Patent Portfolio”) to Microsoft, and to grant Microsoft a
non-exclusive license to our retained patent portfolio, for aggregate proceeds
of approximately $1.1 billion in cash (excluding transaction costs). The
transaction is structured as a purchase of all of the outstanding shares of a
wholly owned non-operating subsidiary and the direct acquisition of those
patents in the Patent Portfolio not held by the subsidiary.

The closing is expected to occur by the end of the year. Both parties are
required to use their reasonable best efforts to close the transaction within
six months. However, this date may be extended by either party for 180 days,
and if extended by Microsoft, a per day fee will apply.Microsoft would be
required to pay the Company a termination fee of $211.2 million if the
transaction is terminated other than by mutual written consent, if the
Company’s failure to perform a covenant is the cause of the termination or if
the conditions to the agreement are met and the Company fails to close the
transaction within two business days. Based on our utilization of tax losses
generated by the sale of the subsidiary and existing deferred tax assets, we
do not expect the $1.1 billion proceeds to result in material cash taxes.


OPERATING METRICS
                        
                       Q1 2012   Q1 2011   Y/Y      Q4 2011   Q/Q
                                                 Change                 Change
                                                               
Subscriber
Information
Domestic AOL-brand
access subscribers         3,115       3,621     -14%         3,272     -5%
(in thousands) ^(1)
Domestic average
monthly
subscription
revenue per             $ 17.88     $ 17.96     0%         $ 17.87     0%
AOL-brand access
subscriber (ARPU)
^(1)
Domestic AOL-brand
access subscriber          2.0%        2.5%      20%          2.2%      9%
monthly average
churn ^(2)
                                                                        
Unique Visitors (in
millions) ^ (3)
                                                                        
Domestic average
monthly unique             108         112       -4%          107       1%
visitors to AOL
Properties
                                                                        
Domestic average
monthly unique
visitors to AOL            186         179       4%           187       -1%
Advertising Network
^ (4)
                                                                    

     Domestic AOL-brand access subscribers include subscribers participating
     in introductory free-trial periods and subscribers that are paying no
     monthly fees or reduced monthly fees through member service and retention
     programs. Individuals who have registered for our free offerings,
^(1) including subscribers who have migrated from paid subscription plans, are
     not included in the AOL-brand access subscriber numbers presented above.
     The average monthly subscription revenue per subscriber is calculated as
     average monthly subscription revenue divided by the average monthly
     subscribers for the applicable period.
     Churn represents the percentage of subscribers that terminate or cancel
     our services, factoring in new and reactivated subscribers. Monthly
^(2) average churn is calculated as the monthly average number of terminations
     plus cancellations divided by the initial subscriber base plus any new
     registrations and reactivations for the applicable period.
^(3) See “Unique Visitor Metrics” on page 10 of this press release.
     We also utilize unique visitors to evaluate the reach of our total
^(4) advertising network, which includes both AOL Properties and the Third
     Party Network.
     

Webcast and Conference Call Information

AOL Inc. will host a conference call to discuss first quarter 2012 financial
results on Wednesday, May 9, 2012, at 8:00 am Eastern Time (ET). To access the
call, parties in the United States and Canada should call toll-free (800)
299-0148 and international parties should call (617) 801-9711. Additionally, a
live webcast of the conference call, together with supplemental financial
information, can be accessed through the Company's Investor Relations website
athttp://ir.aol.com. In addition, an archive of the webcast can be accessed
through the link above for one year following the conference call, and an
audio replay of the call will be available for two weeks following the
conference call by calling (888) 286-8010 and international parties should
call (617) 801-6888. The access code for the replay is 37276329.


FINANCIAL STATEMENTS


AOL Inc.
Consolidated Statements of Comprehensive Income
(In millions, except per share amounts)

                                            Three Months Ended March 31,
                                                  2012           2011
                                                  (unaudited)
Revenues:                                                      
Advertising                                       $  330.1        $  313.7
Subscription                                         182.1           215.4
Other                                               17.2           22.3   
Total revenues                                       529.4           551.4
Costs of revenues                                    384.6           388.9
General and administrative                           96.2            120.7
Amortization of intangible assets                    9.8             24.2
Restructuring costs                                  7.4             27.8
Loss on disposal of consolidated                    –              1.6    
business
Operating income (loss)                              31.4            (11.8  )
Other income (loss), net                            8.4            0.6    
Income (loss) from operations before                 39.8            (11.2  )
income taxes
Income tax provision (benefit)                      18.8           (15.9  )
Net income                                        $  21.0         $  4.7
Net (income) loss attributable to                   0.1            –      
noncontrolling interests
Net income attributable to AOL Inc.               $  21.1         $  4.7    
                                                                     
Per share information attributable to
AOL Inc. common stockholders:
                                                                     
Basic net income per common share                 $  0.22         $  0.04   
                                                                     
Diluted net income per common share               $  0.22         $  0.04   
                                                                     
Shares used in computing basic income               94.4           106.9  
per common share
                                                                     
Shares used in computing diluted                    95.0           107.9  
income per common share
                                                                     
Comprehensive income attributable to
AOL Inc.:
Comprehensive income                              $  20.1         $  12.0
Comprehensive (income) loss
attributable to noncontrolling                       0.8            –      
interests
Comprehensive income attributable to              $  20.9         $  12.0   
AOL Inc.
                                                                     
                                                         
Depreciation expense by function:
Costs of revenues                                 $  32.1         $  38.6
General and administrative                          4.0            5.8    
Total depreciation expense                        $  36.1         $  44.4   
                                                                     
Equity-based compensation by
function:
Costs of revenues                                 $  4.0          $  3.4
General and administrative                          4.6            7.0    
Total equity-based compensation                   $  8.6          $  10.4   
                                                                     
Retention compensation expense
related to acquired companies by
function: ^(1)
Costs of revenues                                 $  4.7          $  7.8
General and administrative                          –              0.6    
Total retention compensation expense              $  4.7          $  8.4    
related to acquired companies
                                                                     
Traffic Acquisition Costs (included               $  80.8         $  71.4   
in costs of revenues)
                                           
                                                  

^(1) These amounts relate to incentive cash compensation arrangements with
employees of acquired companies made at the time of acquisition. Incentive
compensation amounts are recorded as retention compensation expense over the
future service period of the employees of the acquired companies.


AOL Inc.
Consolidated Balance Sheets
(In millions, except per share amounts)

                                            March 31,      December 31,
                                                2012              2011
Assets                                          (unaudited)
                                                                     
Current assets:
Cash and equivalents                            $ 361.9           $  407.5
Accounts receivable, net of allowances            288.8              311.5
of $7.8 and $8.3, respectively
Prepaid expenses and other current                34.8               36.9
assets
Deferred income taxes                            93.3             53.7    
Total current assets                              778.8              809.6
Property and equipment, net                       499.0              505.2
Goodwill                                          1,073.6            1,064.0
Intangible assets, net                            143.5              135.2
Long-term deferred income taxes                   211.3              259.2
Other long-term assets                           51.1             51.8    
Total assets                                    $ 2,757.3        $  2,825.0 
Liabilities and Equity
Current liabilities:
Accounts payable                                $ 70.7            $  74.9
Accrued compensation and benefits                 74.6               152.8
Accrued expenses and other current                164.4              171.6
liabilities
Deferred revenue                                  74.2               70.9
Current portion of obligations under             44.1             44.6    
capital leases
Total current liabilities                         428.0              514.8
Obligations under capital leases                  63.8               66.2
Long-term deferred income taxes                   10.2               3.5
Other long-term liabilities                      75.4             67.9    
Total liabilities                                577.4            652.4   
                                                                     
Redeemable noncontrolling interest                13.7               –
                                                                             
Stockholders' equity:
Common stock, $0.01 par value, 107.9
million shares issued and 93.1 million
shares

outstanding as of March 31, 2012 and            1.1                1.1
107.0 million shares issued and 94.3

million shares outstanding as of
December 31, 2011
Additional paid-in capital                        3,430.9            3,422.4
Accumulated other comprehensive loss,             (287.7  )          (287.5  )
net
Accumulated deficit                               (768.7  )          (789.8  )
Treasury stock, at cost, 14.8 million
shares at March 31, 2012 and 12.7
million                                          (209.4  )         (173.6  )

shares at December 31, 2011
Total stockholders' equity                       2,166.2          2,172.6 
Total liabilities, redeemable
noncontrolling interest and                     $ 2,757.3        $  2,825.0 
stockholders' equity



AOL Inc.
Consolidated Statements of Cash Flows
(In millions)

                                             Three Months Ended March 31,
                                                  2012           2011
                                                  (unaudited)
Operating Activities
                                                                      
Net income                                        $  21.0           $ 4.7
Adjustments for non-cash and
non-operating items:
Depreciation and amortization                        45.9             68.6
Asset impairments and write-offs                     0.9              1.5
(Gain) loss on investments and sale of               (10.8  )         3.0
consolidated businesses, net
Equity-based compensation                            8.6              10.4
Other non-cash adjustments                           -                3.2
Deferred income taxes                                8.6              (15.6  )
Changes in operating assets and                     (54.3  )        (71.8  )
liabilities, net of acquisitions
Cash provided by operating activities                19.9             4.0
                                                                      
Investing Activities
                                                                      
Investments and acquisitions, net of                 4.3              (369.7 )
cash acquired
Capital expenditures and product                     (15.0  )         (34.2  )
development costs
Other investment proceeds                            0.3              0.2
                                                                   
Cash used by investing activities                    (10.4  )         (403.7 )
                                                                      
Financing Activities
                                                                      
Repurchase of common stock                           (35.8  )         -
Principal payments on capital leases                 (14.4  )         (11.3  )
Tax withholdings related to net share                (5.4   )         (0.2   )
settlements of restricted stock units
Decrease (increase) in cash collateral               0.2              (12.2  )
securing letters of credit
Other financing activities                           0.3              0.1
                                                                   
Cash used by financing activities                    (55.1  )         (23.6  )
                                                                      
Effect of exchange rate changes on cash              -                3.3
and equivalents
                                                                      
Decrease in cash and equivalents                     (45.6  )         (420.0 )
                                                                      
Cash and equivalents at beginning of                407.5          801.8  
period
                                                                      
Cash and equivalents at end of period             $  361.9         $ 381.8  


                     SUPPLEMENTAL INFORMATION – UNAUDITED

Items impacting comparability: The following table represents certain items
that impacted the comparability of net income attributable to AOL Inc. for the
three months ended March 31, 2012 and 2011 (In millions, except per share
amounts):


                                              Three Months Ended March 31,
                                                  2012            2011
                                                                       
Restructuring costs                               $  (7.4   )        $ (27.8 )
Equity-based compensation expense                    (8.6   )          (10.4 )
Retention compensation expense related to            (4.7   )          (8.4  )
acquired companies ^(1)
Costs related to proxy contest                       (1.8   )          –
Acquisition-related costs                            (0.1   )          (9.0  )
Gain on consolidation of Ad.com Japan               10.8            –     
^(2)
Pre-tax impact                                      (11.8  )         (55.6 )
                                                                       
Income tax impact ^(3)                              3.7             19.8  
After-tax impact                                     (8.1   )          (35.8 )
Income tax benefit related to worthless             –               7.1   
stock deduction
After-tax impact of items impacting               $  (8.1   )        $ (28.7 )
comparability of net income
                                                                       
Impact per basic common share                     $  (0.09  )        $ (0.27 )
                                                                       
Impact per diluted common share                   $  (0.09  )        $ (0.27 )
                                                                       
Effective tax rate ^(4)                              40.2   %          39.0  %

      These amounts relate to incentive cash compensation arrangements with
      employees of acquired companies made at the time of acquisition.
      Incentive compensation amounts are recorded as retention compensation
(1)  expense over the future service period of the employees of the acquired
      companies. For tax purposes, a portion of these costs are treated as
      additional basis in the acquired entity and are not deductible until
      disposition of the acquired entity.
      During the three months ended March 31, 2012, AOL purchased additional
      interest in a joint venture, Ad.com Japan and gained control of the
      board and day-to-day operations of the joint venture. As a result,
(2)   beginning in February 2012, AOL consolidated the results of Ad.com Japan
      and upon closing of the transaction, AOL recorded a non-cash gain of
      approximately $10.8 million related to our pre-existing investment in
      Ad.com Japan.
      The income tax impact is calculated by applying the normalized effective
(3)   tax rate to deductible items. Items that are not deductible include a
      portion of the retention compensation expense, discussed above.
      For the three months ended March 31, 2012, the effective tax rate was
      calculated based on AOL's 2012 projected normalized annual effective tax
(4)   rate. The effective tax rate for the three months ended March 31, 2011
      was calculated based upon AOL's 2011 normalized annual effective tax
      rate.
      


AOL Inc.

Reconciliation of Adjusted OIBDA to Operating Income (Loss) and Free Cash Flow
to Cash Provided by Operating Activities
(In millions)

                                         Three Months Ended March 31,
                                             2012                   2011
                                                                      
Operating income (loss)                      $    31.4            $   (11.8)
                                                                      
Add: Depreciation                                 36.1                44.4
                                                                      
Add: Amortization of                              9.8                 24.2
intangible assets
                                                                      
Add: Restructuring costs                          7.4                 27.8
                                                                      
Add: Equity-based                                 8.6                 10.4
compensation
                                                                      
Add: Asset impairments and                        0.9                 1.5
write-offs
                                                                      
Add: Losses/(gains) on
disposal of consolidated                          -                   1.6
businesses, net
                                                                      
Add: Losses/(gains) on other                      (0.4)               1.0
asset sales
                                                                   
Adjusted OIBDA                               $    93.8            $   99.1
                                                                      
                                                                      
Cash provided by operating                   $    19.9            $   4.0
activities
                                                                      
Less: Capital expenditures
and product development                           15.0                34.2
costs
                                                                      
Less: Principal payments on                       14.4                11.3
capital leases
                                                                   
Free Cash Flow                               $    (9.5)           $   (41.5)
                                                                      

Note Regarding Non-GAAP Financial Measures

This press release and its attachments include the financial measures Adjusted
OIBDA and Free Cash Flow, both of which are defined as non-GAAP financial
measures by the Securities and Exchange Commission (SEC). These measures may
be different than similarly-titled 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 our non-GAAP financial measures are as
follows:

Adjusted OIBDA. We define Adjusted OIBDA as operating income before
depreciation and amortization excluding the impact of restructuring costs,
noncash equity-based compensation, gains and losses on all disposals of assets
(including those recorded in costs of revenues) and noncash asset impairments.
We consider Adjusted OIBDA to be a useful metric for management and investors
to evaluate and compare the performance of our business on a consistent basis
across reporting periods, as it eliminates the effect of noncash items such as
depreciation of tangible assets, amortization of intangible assets that were
primarily recognized in business combinations and asset impairments, as well
as the effect of restructurings and gains and losses on asset sales, which we
do not believe are indicative of our core operating performance. We exclude
the impacts of equity-based compensation to allow us to be more closely
aligned with the industry and analyst community. A limitation of this measure,
however, is that it does not reflect the periodic costs of certain capitalized
tangible and intangible assets used in generating revenues in our business or
the current or future expected cash expenditures for restructuring costs. The
Adjusted OIBDA measure also does not include equity-based compensation, which
is and will remain a key element of our overall long-term compensation
package. Moreover, the Adjusted OIBDA measures are limited in not reflecting
gains and losses on asset sales or impairment charges related to goodwill,
intangible assets and fixed assets which impact our operating performance. We
evaluate the investments in such tangible and intangible assets through other
financial measures, such as capital expenditure budgets, investment spending
levels and return on capital.

Free Cash Flow. We define Free Cash Flow as cash provided by operating
activities, less capital expenditures and product development costs and
principal payments on capital leases. We consider Free Cash Flow to be a
liquidity measure that provides useful information to management and investors
about the amount of cash generated by the continuing business that, after
capital expenditures and product development costs and principal payments on
capital leases, can be used for strategic opportunities, including investing
in our business, making strategic acquisitions, and strengthening the balance
sheet. Analysis of Free Cash Flow also facilitates management's comparisons of
our operating results to competitors' operating results. A limitation on the
use of this metric is that Free Cash Flow does not represent the total
increase or decrease in cash for the period because it excludes certain
non-operating cash flows.

Unique Visitor Metrics

We utilize unique visitor numbers to evaluate the performance of AOL
Properties. In addition, we utilize unique visitor numbers to evaluate the
reach of our total advertising network, which includes both AOL Properties and
the Third Party Network. Unique visitor numbers provide an indication of our
consumer reach. Although our consumer reach does not correlate directly to
advertising revenue, we believe that our ability to broadly reach diverse
demographic and geographic audiences is attractive to brand advertisers
seeking to promote their brands to a variety of consumers without having to
partner with multiple content providers. The source for our unique visitor
information is a third party (comScore Media Metrix, or “Media Metrix”). While
we are familiar with the general methodologies and processes that Media Metrix
uses in estimating unique visitors, we have not performed independent testing
or validation of Media Metrix’s data collection systems or proprietary
statistical models, and therefore we can provide no assurance as to the
accuracy of the information that Media Metrix provides.

Cautionary Statement Concerning Forward-Looking Statements

This press release and our conference call at 8:00 a.m. Eastern Time today may
contain “forward-looking statements” within the meaning of the Private
Securities Litigation Reform Act of 1995 regarding business strategies, market
potential, future financial and operational performance and other matters.
Words such as “anticipates,” “estimates,” “expects,” “projects,” “forecasts,”
“intends,” “plans,” “will,” “believes” and words and terms of similar
substance used in connection with any discussion of future operating or
financial performance identify forward-looking statements. These
forward-looking statements are based on management’s current expectations and
beliefs about future events. As with any projection or forecast, they are
inherently susceptible to uncertainty and changes in circumstances. Except as
required by law, we are under no obligation to, and expressly disclaim any
obligation to, update or alter any forward-looking statements whether as a
result of such changes, new information, subsequent events or otherwise.
Various factors could adversely affect our operations, business or financial
results in the future and cause our actual results to differ materially from
those contained in the forward-looking statements, including those factors
discussed in detail in the “Risk Factors” section contained in our Annual
Report on Form 10-K for the year ended December 31, 2011 (the “Annual
Report”), filed with the Securities and Exchange Commission. In addition, we
operate a web services company in a highly competitive, rapidly changing and
consumer- and technology-driven industry. This industry is affected by
government regulation, economic, strategic, political and social conditions,
consumer response to new and existing products and services, technological
developments and, particularly in view of new technologies, the continued
ability to protect intellectual property rights. Our actual results could
differ materially from management’s expectations because of changes in such
factors. Achieving our business and financial objectives, including growth in
operations and maintenance of a strong balance sheet and liquidity position,
could be adversely affected by the factors discussed or referenced under the
“Risk Factors” section contained in the Annual Report as well as, among other
things: 1) changes in our plans, strategies and intentions; 2) continual
decline in market valuations associated with our cash flows and revenues; 3)
the impact of significant acquisitions, dispositions and other similar
transactions; 4) our ability to attract and retain key employees; 5) any
negative unintended consequences of cost reductions, restructuring actions or
similar efforts, including with respect to any associated savings, charges or
other amounts; 6) market adoption of new products and services; 7) the failure
to meet earnings expectations; 8) asset impairments; 9) decreased liquidity in
the capital markets; 10) our ability to access the capital markets for debt
securities or bank financings; and 11) the impact of “cyber-warfare” or
terrorist acts and hostilities. In addition, matters relating to the sale of
the Patent Portfolio to Microsoft are subject to uncertainty and changes in
circumstances, including, but not limited to the approval of the transaction
by antitrust authorities and the satisfaction of the other closing conditions
to the transaction as well as to factors that could affect the manner, timing
and amount of the return of any of the sale proceeds to AOL shareholders
including the need for AOL to retain cash for its business or to satisfy
liabilities.

About AOL

AOL Inc. (NYSE: AOL) is a brand company, committed to continuously innovating,
growing, and investing in brands and experiences that inform, entertain, and
connect the world. The home of a world-class collection of premium brands, AOL
creates original content that engages audiences on a local and global scale.
We help marketers connect with these audiences through effective and engaging
digital advertising solutions.

From time to time, we post information about AOL on our investor relations
website (http://ir.aol.com) and our official corporate blog
(http://blog.aol.com).

Contact:

AOL Investor Relations
Eoin Ryan, 212-206-5025
Eoin.Ryan@teamaol.com
or
AOL Marketing & Corporate Communications
Maureen Sullivan, 212-206-5030
Maureen.Sullivan@teamaol.com