Q4 2011Quarterly Earnings    Summary
Fourth Quarter 2011 Highlights    • Revenue growth of 25% Y/Y and 9% Q/Q      –   Google properties revenue increased 29% ...
Quarterly Revenues                                  Q4’11 Y/Y Growth = 25%                                  Q4’11 Q/Q Grow...
U.S. vs. International Revenues                                                       ($ in millions)               5,509 ...
Traffic Acquisition Costs                       $2,500                                                                    ...
Costs and Expenses        GAAP        ($ in millions)                                                          Q410       ...
Profitability          GAAP          ($ in millions except per share          amounts)                                    ...
Free Cash Flow           ($ in millions)              Q410      Q311     Q411           Net cash provided by           ope...
Overview of Q4 2011 OI&E and FX    In Interest and Other Income (Expense), Net, we recognized net expense of    $18M for Q...
Revenues by Geography           ($ in millions)     Q410     Q311     Q411           United States        $4,055    $4,420...
International Revenues Excluding Hedging and FX Impact (Y/Y)           ($ in millions)                                    ...
International Revenues Excluding Hedging and FX Impact (Q/Q)           ($ in millions)                                    ...
Table 1 - Reconciliations of non-GAAP costs and expenses     to GAAP costs and expenses                                   ...
Table 2 - Reconciliations of non-GAAP results of operations     measures to the nearest comparable GAAP measures          ...
Q4 2011Quarterly Earnings    Summary
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78793444 2011 q4-google-earnings-slides

  1. 1. Q4 2011Quarterly Earnings Summary
  2. 2. Fourth Quarter 2011 Highlights • Revenue growth of 25% Y/Y and 9% Q/Q – Google properties revenue increased 29% Y/Y and 8% Q/Q – Network revenues increased 15% Y/Y and 11% Q/Q – International revenues were $5.6 billion • Operational Highlights – Strong financial metrics: revenue growth, profitability, cash flow – Continuing to invest in three major areas of focus: • Core ads: Search and Display advertising • Businesses demonstrating high consumer success: YouTube, Android, Chrome • New businesses where we’re investing to drive adoption and innovation: Social, Enterprise, Commerce, Local2
  3. 3. Quarterly Revenues Q4’11 Y/Y Growth = 25% Q4’11 Q/Q Growth = 9% $11,000 10,584 $10,000 9,720 9,026 2,880 $9,000 8,575 8,440 2,595 $8,000 2,484 7,286 ($ in millions) 2,427 6,674 6,775 6,820 2,495 $7,000 5,945 2,199 $6,000 5,509 5,523 2,044 2,036 2,063 $5,000 1,801 1,638 1,684 $4,000 7,294 6,740 6,232 5,672 5,879 $3,000 4,439 4,499 4,833 4,421 3,956 $2,000 3,693 3,653 $1,000 178 186 188 209 300 258 254 273 269 310 385 410 $0 Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410 Q111 Q211 Q311 Q4113 Other Google.com Network
  4. 4. U.S. vs. International Revenues ($ in millions) 5,509 5,523 5,945 6,674 6,775 6,820 7,286 8,440 8,575 9,026 9,720 10,584 100% 90% 80% 52% 53% 53% 53% 53% 52% 52% 52% 53% 54% 55% 53% 70% 60% 50% 40% 30% 48% 47% 47% 47% 47% 48% 48% 48% 47% 46% 45% 47% 20% 10% 0% Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410 Q111 Q211 Q311 Q411 US International4
  5. 5. Traffic Acquisition Costs $2,500 30% 27.2% 27.1% 26.9% $2,000 26.6% 26.4% 26.4% 25.7% 25.3% 24.5% 25% 24.2% 24.1% 23.7% ($ in millions) $1,500 2,453 2,210 $1,000 2,069 2,038 2,110 1,721 1,711 1,732 1,805 20% 1,559 1,436 1,453 $500 $0 15% Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410 Q111 Q211 Q311 Q411 TAC TAC as % of Advertising Revenues5
  6. 6. Costs and Expenses GAAP ($ in millions) Q410 Q311 Q411 Cost of Revenues $2,946 $3,378 $3,702 Percent of revenues 35% 35% 35% Research & Development $1,051 $1,404 $1,298 Percent of revenues 12% 14% 12% Sales & Marketing $902 $1,204 $1,268 Percent of revenues 11% 12% 12% General & Administrative $559 $676 $809 Percent of revenues 7% 7% 8% Total Costs & Expenses $5,458 $6,662 $7,077 Percent of revenues 65% 69% 67% Non-GAAP ($ in millions) Q410 Q311 Q411 Cost of Revenues $2,901 $3,306 $3,625 Percent of revenues 34% 34% 34% Research & Development $827 $1,093 $1,032 Percent of revenues 10% 11% 10% Sales & Marketing $826 $1,100 $1,163 Percent of revenues 10% 11% 11% General & Administrative $508 $592 $721 Percent of revenues 6% 6% 7% Total Costs & Expenses $5,062 $6,091 $6,541 Percent of revenues 60% 63% 62% Note: Please refer to supporting Table 1 for reconciliations of non-GAAP costs and6 expenses to GAAP costs and expenses
  7. 7. Profitability GAAP ($ in millions except per share amounts) Q410 Q311 Q411 Income from Operations $ 2,982 $ 3,058 $ 3,507 Operating Margin 35% 31% 33% Net Income $ 2,543 $ 2,729 $ 2,705 EPS (diluted) $ 7.81 $ 8.33 $ 8.22 Non-GAAP ($ in millions except per share amounts) Q410 Q311 Q411 Income from Operations $ 3,378 $ 3,629 $ 4,043 Operating Margin 40% 37% 38% Net Income $ 2,850 $ 3,184 $ 3,127 EPS (diluted) $ 8.75 $ 9.72 $ 9.50 Note: Please refer to supporting Table 2 for reconciliations of non-GAAP results of operations measures to the nearest comparable GAAP measures7
  8. 8. Free Cash Flow ($ in millions) Q410 Q311 Q411 Net cash provided by operating activities $3,526 $3,950 $3,924 Less purchases of property and equipment ($2,545) ($680) ($951) Free cash flow (non-GAAP) $981 $3,270 $2,9738
  9. 9. Overview of Q4 2011 OI&E and FX In Interest and Other Income (Expense), Net, we recognized net expense of $18M for Q4 • In Q4, we recognized $199M of interest income earned on our investments and $39M in realized gains. • We recognized an impairment charge of $88M related to our investment in Clearwire. • We expensed $134M related to our FX cash flow hedging program. • Excluding gains related to our FX cash flow hedging program, had foreign exchange rates remained constant from Q3 2011 through Q4 2011, our revenue in Q4 2011 would have been $239M higher. Excluding gains related to our FX cash flow hedging program, had foreign exchange rates remained constant from Q4 2010 through Q4 2011, our revenue in Q4 2011 would have been $39M lower. • In addition, our FX cash flow hedging program allowed us to recognize a benefit of approximately $25M to international revenue this quarter.9
  10. 10. Revenues by Geography ($ in millions) Q410 Q311 Q411 United States $4,055 $4,420 $4,980 United Kingdom $878 $1,047 $1,064 Rest of the world $3,507 $4,253 $4,540 Total Revenues $8,440 $9,720 $10,58410
  11. 11. International Revenues Excluding Hedging and FX Impact (Y/Y) ($ in millions) Q410 Q411 ($ in millions) Q310 Q311 UK revenues (GAAP) $878 $1,064 UK revenues (GAAP) $840 $1,047 exclude: exclude: a) f/x impact on Q411 revenues using Q410 rates a) f/x impact on Q311 revenues using Q310 rates (gains)/losses n/a 2 (gains)/losses n/a (56) b) hedging gains (2) (6) b) hedging gains (11) - UK revenues excluding f/x and hedging impact (Non- UK revenues excluding f/x and hedging impact (Non- GAAP) $876 $1,060 GAAP) $829 $991 Y/Y % (Non-GAAP) 21% Y/Y % (Non-GAAP) 20% ($ in millions) Q410 Q411 ($ in millions) Q310 Q311 ROW revenues (GAAP) $3,507 $4,540 ROW revenues (GAAP) $2,929 $4,253 exclude: exclude: a) f/x impact on Q411 revenues using Q410 rates a) f/x impact on Q311 revenues using Q310 rates (gains)/losses n/a (41) (gains)/losses n/a (427) b) hedging gains (23) (19) b) hedging gains (78) (1) ROW revenues excluding f/x and hedging impact (Non- ROW revenues excluding f/x and hedging impact (Non- GAAP) $3,484 $4,480 GAAP) $2,851 $3,825 Y/Y % (Non-GAAP) 29% Y/Y % (Non-GAAP) 34%11
  12. 12. International Revenues Excluding Hedging and FX Impact (Q/Q) ($ in millions) Q311 Q411 ($ in millions) Q211 Q311 UK revenues (GAAP) $1,047 $1,064 UK revenues (GAAP) $976 $1,047 exclude: exclude: a) f/x impact on Q411 revenues using Q311 rates a) f/x impact on Q311 revenues using Q211 rates (gains)/losses n/a 32 (gains)/losses n/a 1 b) hedging gains - (6) b) hedging gains - - UK revenues excluding f/x and hedging impact (Non- UK revenues excluding f/x and hedging impact (Non- GAAP) $1,047 $1,090 GAAP) $976 $1,048 Q/Q % (Non-GAAP) 4% Q/Q % (Non-GAAP) 7% ($ in millions) Q311 Q411 ($ in millions) Q211 Q311 ROW revenues (GAAP) $4,253 $4,540 ROW revenues (GAAP) $3,895 $4,253 exclude: exclude: a) f/x impact on Q411 revenues using Q311 rates a) f/x impact on Q311 revenues using Q211 rates (gains)/losses n/a 207 (gains)/losses n/a (54) b) hedging gains (1) (19) b) hedging gains (4) (1) ROW revenues excluding f/x and hedging impact (Non- ROW revenues excluding f/x and hedging impact (Non- GAAP) $4,252 $4,728 GAAP) $3,891 $4,198 Q/Q % (Non-GAAP) 11% Q/Q % (Non-GAAP) 8%12
  13. 13. Table 1 - Reconciliations of non-GAAP costs and expenses to GAAP costs and expenses As a % of As a % of As a % of ($ in millions) Q410 Revenues (1) Q311 Revenues (1) Q411 Revenues (1) Cost of revenues (GAAP) $ 2,946 35% $ 3,378 35% $ 3,702 35% Less: Stock-based compensation expense (45) (72) (77) Cost of revenues (non-GAAP) $ 2,901 34% $ 3,306 34% $ 3,625 34% Research and development (GAAP) $ 1,051 12% $ 1,404 14% $ 1,298 12% Less: Stock-based compensation expense (224) (311) (266) Research and development (non-GAAP) $ 827 10% $ 1,093 11% $ 1,032 10% Sales and marketing (GAAP) $ 902 11% $ 1,204 12% $ 1,268 12% Less: Stock-based compensation expense (76) (104) (105) Sales and marketing (non-GAAP) $ 826 10% $ 1,100 11% $ 1,163 11% General and administrative (GAAP) $ 559 7% $ 676 7% $ 809 8% Less: Stock-based compensation expense (51) (84) (88) General and administrative (non-GAAP) $ 508 6% $ 592 6% $ 721 7% Total costs and expenses (GAAP) $ 5,458 65% $ 6,662 69% $ 7,077 67% Less: Stock-based compensation expense (396) (571) (536) Total costs and expenses (non-GAAP) $ 5,062 60% $ 6,091 63% $ 6,541 62% (1) Percentages based on revenues of $8,440 million in Q410, $9,720 million in Q311 and $10,584 million in Q411.13
  14. 14. Table 2 - Reconciliations of non-GAAP results of operations measures to the nearest comparable GAAP measures Operating Operating Operating (In millions except per share amounts) Q410 Margin (1) Q311 Margin (1) Q411 Margin (1) Income from operations (GAAP) $ 2,982 35% $ 3,058 31% $ 3,507 33% Add: Stock-based compensation expense 396 571 536 Income from operations (non-GAAP) $ 3,378 40% $ 3,629 37% $ 4,043 38% Net income (GAAP) $ 2,543 $ 2,729 $ 2,705 Add: Stock-based compensation expense (net of tax) 307 455 422 Net income (non-GAAP) $ 2,850 $ 3,184 $ 3,127 Net income per share - diluted (GAAP) $ 7.81 $ 8.33 $ 8.22 Net income per share - diluted (non-GAAP) $ 8.75 $ 9.72 $ 9.50 Shares used in per share calculation - diluted 326 327 329 (1) Percentages based on revenues of $8,440 million in Q410, $9,720 million in Q311 and $10,584 million in Q411.14
  15. 15. Q4 2011Quarterly Earnings Summary
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