Quarterly Earnings Summary Q3 2015

Transcription

1 Quarterly Earnings Summary Q3 2015

2 Quarterly Revenues Revenues by Revenue Source (1) ($ in millions) Revenues by Geography (2) ($ in millions) $25, ,754 15,707 15,420 15,955 16,523 18,103 17,258 17,727 18, % $20,000 $15,000 $10,000 Y/Y Change = 13% Q/Q Change = 5% 13,754 3,278 15,707 3,668 15,420 3,528 15,955 3,563 16,523 3,568 18,103 3,880 17,258 3,576 17,727 3,621 18,675 3, % 44% 45% 46% 46% 45% 45% 45% 43% 46% 46% 45% 44% 44% 46% 45% 45% 47% $5,000 9,376 10,538 10,469 10,935 11,252 12,429 11,932 12,402 13, ,100 1,501 1,423 1,457 1,703 1,794 1,750 1,704 1,894 1 Other Google Sites Network US Rest of the world UK (1) Prior period amounts have been adjusted to reflect the reclassification primarily related to DoubleClick ad serving software revenues from other revenues to advertising revenues from Google Network Members' websites to conform with our current period presentation. (2) In the second quarter of 2015, we identified an incorrect classification of certain revenues between legal entities. We revised the classification of such revenues between Rest of the world and U.S. for periods beginning in 2008 through the first quarter of

3 Traffic Acquisition Costs 3 $3,500 3,311 3,232 3,293 3,348 3,624 3,345 3,377 3,566 $3,000 2,972 (in millions) $2, % 23.3% 23.1% 22.7% 22.6% 22.2% 21.6% 21.1% 21.3% 25% $1,500 2 $1,000 $500 15% (1) TAC ($ in millions) TAC as % of Advertising Revenues (1) Prior period amounts have been adjusted to reflect the impact of reclassification primarily related to DoubleClick ad serving software revenues from other revenues to advertising revenues from Google Network Members' websites to conform with our current period presentation. 3

4 GAAP Costs and Expenses $ in millions As a % of Revenues $16, $14,000 13,704 13,967 $12,000 $10,000 $8,000 9,993 1,135 1,628 11,278 11,305 1,184 1,489 1,908 1,729 1,933 2,126 12,799 11,697 1,365 1,404 2,084 1,941 2,655 2,238 1,593 2,377 2,813 12,811 1,637 2,065 2,753 12,902 1,450 2,080 2,789 1,477 2,223 3, % 72% 73% 73% 9% 8% 9% 9% 12% 12% 11% 12% 13% 12% 14% 14% 77% 8% 13% 16% 76% 74% 73% 9% 9% 8% 13% 12% 12% 16% 16% 16% 75% 8% 12% 17% $6,000 1,821 5,409 6,253 5,961 6,114 6,695 6,921 6,356 6,583 7, % 4 39% 38% 4 38% 37% 37% 38% 2 Cost of Revenues Research and Development Cost of Revenues Research and Development Sales and Marketing General and Administrative Sales and Marketing General and Administrative 4

5 Non-GAAP Costs and Expenses $ in millions As a % of Revenues $14,000 8 $12,000 $10,000 $8,000 $6,000 9,137 1,003 1,473 1,385 5,276 10,405 10,466 1,058 1,348 1,754 1,582 1,467 1,670 6,126 5,866 11,166 10,817 1,142 1,229 1,887 1,783 1,989 1,791 6,014 6,148 12,503 1,407 2,164 2,182 6,750 11,608 1,414 1,860 2,138 6,196 11,770 1,260 1,884 2,206 6,420 12,535 1,267 1,973 2,489 6, % 68% 68% 69% 66% 66% 7% 7% 9% 8% 8% 8% 11% 11% 1 11% 11% 12% 1 9% 11% 11% 12% 12% 38% 39% 38% 38% 37% 37% 67% 66% 67% 8% 7% 7% 11% 11% 11% 12% 12% 13% 36% 36% 36% 2 Cost of Revenues Research and Development Cost of Revenues Research and Development Sales and Marketing General and Administrative Sales and Marketing General and Administrative For reconciliation of GAAP to non-gaap costs and expenses, please refer to Table 1 at the end of the slide deck. 5

6 Operating Income and Operating Margin GAAP Non-GAAP $5,000 4,825 4,708 5 $6,000 5,600 5,650 5,957 6,140 5 $4,500 3,761 4,429 4,115 4,258 3,724 4,399 4,447 45% 4 $5,500 $5,000 $4,500 4,617 5,302 4,954 5,138 5,357 45% 4 $3,500 35% 34% 34% 32% 32% 32% 31% 33% 34% 33% 35% (in millions) $3,000 $2,500 27% 28% 27% 27% 23% 24% 26% 27% 25% 3 25% (in millions) $3,500 $3, % 2 $2,500 2 $1,500 15% 15% $1,500 $1,000 1 $1,000 1 $500 5% $500 5% Operating Income ($ in millions) Operating Margin (%) Operating income ($ in millions) Operating Margin (%) For reconciliation of GAAP to non-gaap operating income, please refer to Table 2 at the end of the slide deck. 6

7 Net Income and Earnings per Share (1) GAAP Non-GAAP 5,102 (in millions) $5,000 $4,500 $3,500 $3,000 $2,500 2, ,324 3,371 3, , , , , , $8 $7 $6 $5 $4 (in millions) $5,000 $4,500 $3,500 $3,000 $2,500 3, , , , , , , , $8 $7 $6 $5 $4 $3 $3 $1,500 $1,500 $2 $2 $1,000 $1,000 $500 $1 $500 $1 (2) GAAP Net income ($ in millions) GAAP Diluted earnings per share ($) Non-GAAP Net income ($ in millions) Non-GAAP Diluted earnings per share ($) (1) In the second quarter of 2015, we identified an incorrect classification of certain revenues between legal entities, and as a consequence, we revised our income tax expense for periods beginning in 2008 through the first quarter of (2) In the second quarter of 2015, an adjustment payment was made to Class C capital stockholders that resulted in EPS for Class A and B common stock of $4.93 (diluted EPS) and Class C capital stock of $6.43 (diluted EPS), based on Net income available to all stockholders of $3,409 million and the adjustment payment available to only Class C capital stockholders of $522 million. For reconciliation of GAAP to non-gaap net income, please refer to Table 2 at the end of the slide deck. 7

8 Constant Currency Q3'15 Revenues Using Q3'14 Rates (Y/Y) UK Revenues Rest of the world (ROW) Revenues 2,000 Constant Currency Revenue Growth rate (1) = 18% 1, ,792 10,000 9,301 Constant Currency Revenue Growth rate (2) = 23% 1,500 (145) 8,000 (1,432) 266 8,135 $ (Millions) 1,000 $ (Millions) 6,000 4, , Constant Currency Revenues Foreign exchange impact Hedging benefit GAAP revenues Constant Currency Revenues Foreign exchange impact Hedging benefit GAAP revenues (1) Constant currency growth rate is calculated as Q3'15 constant currency revenues of $1,917M compared with Q3'14 revenues of $1,627M (UK GAAP revenue of $1,627M less hedging benefit of M). (2) Constant currency growth rate is calculated as Q3'15 constant currency revenues of $9,301M compared with Q3'14 revenues of $7,562M (ROW GAAP revenue of $7,572M less hedging benefit of $10M). 8

9 Constant Currency Q3'15 Revenues Using Q2'15 Rates (Q/Q) UK Revenues Rest of the world (ROW) Revenues Constant Currency Revenue Growth rate (1) = 7% Constant Currency Revenue Growth rate (2) = 5% 2,000 1,500 1, ,792 10,000 8,000 7,930 (61) 266 8,135 $ (Millions) 1,000 $ (Millions) 6,000 4, , Constant Currency Revenues Foreign exchange impact Hedging benefit GAAP revenues Constant Currency Revenues Foreign exchange impact Hedging benefit GAAP revenues (1) Constant currency growth rate is calculated as Q3'15 constant currency revenues of $1,733M compared with Q2'15 revenues of $1,624M (UK GAAP revenue of $1,678M less hedging benefit of $54M). (2) Constant currency growth rate is calculated as Q3'15 constant currency revenues of $7,930M compared with Q2'15 revenues of $7,584M (ROW GAAP revenue of $8,001M less hedging benefit of $417M). 9

10 Paid Clicks 5 Y/Y Paid Clicks Growth % Q/Q Paid Clicks Growth % 25% 44% % 5% 31% 1 37% 33% 26% 25% 9% 9% 24% 17% 2% 25% 25% 14% 13% 3 18% 35% 23% 2 15% 1 5% 11% 8% 3% 16% 13% 7% 4% 6% 4% 2% 2% 18% 11% 4% 1 7% 7% 6% -1 (11)% (12)% (9)% (5)% -5% (1)% (3)% (5)% (4)% (1)% (3)% (2)% (7)% -2-1 Aggregated Network Google Sites Aggregated Network Google Sites 10

11 Cost-per-Click 1 Y/Y Cost-Per-Click Growth % Q/Q Cost-Per-Click Growth % 15% 6% 5% 1 1 2% 5% (2)% (4)% (3)% (3)% (4)% 3% 3% 2% 1% -5% -1 (6)% (8)% (11)% (9)% (11)% (6)% (7)% (8)% (7)% (11)% (11)% -5% (4)% (5)% (2)% (4)% (1)% (2)% (3)% (3)% (5)% (3)% (4)% (5)% (1)% (2)% (13)% (12)% (13)% (13)% (7)% (8)% (8)% -15% (15)% (16)% (16)% -1 (11)% -2-15% Aggregated Network Google Sites Aggregated Network Google Sites 11

12 Capital Expenditures & Free Cash Flow ($ in millions) $8,000 6,985 $6,000 5,083 2,289 5,238 2,255 4,391 5,627 2,646 5,994 2,417 6,364 3,551 6,617 2,927 2,515 4,470 6,007 2,373 2,794 2,983 2,345 2,981 3,577 2,813 3,690 3,634 2,046 Free Cash Flow Capital Expenditures Free cash flow is defined as net cash provided by operating activities less capital expenditures. All numbers include Motorola Mobile until its date of disposal (October 29, 2014). 12

13 Overview of Q OI&E $ (in millions) Interest income $ 259 Interest expense (26) Realized loss on marketable securities, net (6) Foreign currency exchange loss, net (1) (100) Realized gain on non-marketable investments, net 7 Other income, net 49 Interest & Other income, net $ 183 (1) Our foreign currency exchange losses are primarily related to the cost of our FX hedging programs. 13

14 Table 1: Reconciliations of consolidated GAAP to non-gaap costs and expenses Cost of Revenues (GAAP) $5,409 $6,253 $5,961 $6,114 $6,695 $6,921 $6,356 $6,583 $7,037 Less: Non-GAAP adjustments (1) (2) (133) (127) (95) (100) (547) (171) (160) (163) (231) Cost of Revenues (non-gaap) $5,276 $6,126 $5,866 $6,014 $6,148 $6,750 $6,196 $6,420 $6,806 Research & Development (GAAP) $1,821 $1,933 $2,126 $2,238 $2,655 $2,813 $2,753 $2,789 $3,230 Less: Non-GAAP adjustments (1) (436) (466) (456) (447) (666) (631) (615) (583) (741) Research & Development (non- GAAP) $1,385 $1,467 $1,670 $1,791 $1,989 $2,182 $2,138 $2,206 $2,489 Sales & Marketing (GAAP) $1,628 $1,908 $1,729 $1,941 $2,084 $2,377 $2,065 $2,080 $2,223 Less: Non-GAAP adjustments (1) (155) (154) (147) (158) (197) (213) (205) (196) (250) Sales & Marketing (non-gaap) $1,473 $1,754 1,582 1,783 1,887 2,164 $1,860 $1,884 $1,973 General & Administrative (GAAP) $1,135 $1,184 $1,489 $1,404 $1,365 $1,593 $1,637 $1,450 $1,477 Less: Non-GAAP adjustments (1) (132) (126) (141) (175) (223) (186) (223) (190) (210) General & Administrative (non- GAAP) $1,003 $1,058 $1,348 $1,229 $1,142 $1,407 $1,414 $1,260 $1,267 Total Costs & Expenses (GAAP) $9,993 $11,278 $11,305 $11,697 $12,799 $13,704 $12,811 $12,902 $13,967 Less: Non-GAAP adjustments (1) (856) (873) (839) (880) (1,633) (1,201) (1,203) (1,132) (1,432) Total Costs & Expenses (non- GAAP) $9,137 $10,405 $10,466 $10,817 $11,166 $12,503 $11,608 $11,770 $12,535 (1) Comprised of stock based compensation expense. (2) Q3'14 Includes a $378M impairment charge related to a patent licensing royalty asset acquired in the purchase of Motorola. 14

15 Table 2: Reconciliations of non-gaap consolidated results of operations measures to the nearest comparable GAAP measures ($ in millions) Income from operations (GAAP) $3,761 $4,429 $4,115 $4,258 $3,724 $4,399 $4,447 $4,825 $4,708 Add: Stock-based compensation expense from continuing operations $856 $873 $839 $880 $1,255 $1,201 $1,203 $1,132 $1,432 Add: Impairment charge related to a patent licensing royalty asset $ $ $ $ $378 $ $ $ $ Income from operations (non-gaap) $4,617 $5,302 $4,954 $5,138 $5,357 $5,600 $5,650 $5,957 $6,140 ($ in millions) Net income (GAAP) (1) $2,921 $3,324 $3,371 $3,351 $2,739 $4,675 $3,515 $3,931 $3,979 Add: Stock-based compensation expense from continuing operations (net of tax) (2) $656 $689 $649 $685 $997 $946 $946 $898 $1,123 Add: Impairment charge related to a patent licensing royalty asset acquired in connection with the purchase of Motorola $ $ $ $ $378 $ $ $ $ Add: Net loss (income) from discontinued operations $193 $506 $198 $68 $185 $(967) $ $ $ Net income (non-gaap) (1) $3,770 $4,519 $4,218 $4,104 $4,299 $4,654 $4,461 $4,829 $5,102 (1) In the second quarter of 2015, we identified an incorrect classification of certain revenues between legal entities, and as a consequence, we revised our income tax expense for periods beginning in 2008 through the first quarter of (2) Tax effect of stock-based compensation expense is calculated using tax-deductible portion of stock-based compensation expense and applying entity-specific tax rates. 15