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2006 Q4 Google Earnings Slides
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2006 Q4 Google Earnings Slides

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2006 Q4 Google Earnings Slides

2006 Q4 Google Earnings Slides

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2006 Q4 Google Earnings Slides 2006 Q4 Google Earnings Slides Presentation Transcript

  • Q4 2006 Earnings Conference Call
  • Fourth Quarter 2006 Highlights • Revenue growth of 67% Y/Y and 19% Q/Q – Strong holiday season led to healthy traffic growth – International revenues grew 20% sequentially; particular strength in Germany and France – UK (15% of total revenue) demonstrated typical seasonal patterns, including relative softness in the travel and finance verticals • Checkout acceptance and adoption exceeded expectations • Signed key mobile partnerships – Apple, Samsung, China Mobile • Closed acquisition of YouTube • Continued to invest in employees and infrastructure 2
  • Quarterly Revenue $3,500 Q4’06 Y/Y Growth = 67% 3,205 Q4’06 Q/Q Growth = 19% $3,000 2,690 $ in millions 1,198 2,456 $2,500 2,254 1,037 1,919 $2,000 997 928 1,578 1,384 799 $1,500 1,257 675 630 1,977 $1,000 584 1,626 1,432 1,297 1,098 $500 885 737 657 $0 Q1'05 Q2'05 Q3'05 Q4'05 Q1'06 Q2'06 Q3'06 Q4'06 Google.com Network Licensing and Other 3
  • U.S. vs. International Revenue $3,500 Q4’06 Domestic = 56% of total revenue 3,205 Q4’06 International = 44% of total revenue $3,000 2,690 $ in millions 2,456 $2,500 2,254 44% 44% 1,919 $2,000 42% 1,578 42% 1,384 $1,500 38% 1,257 39% 39% $1,000 39% $500 58% 58% 61% 61% 61% 56% 62% 56% $0 Q1'05 Q2'05 Q3'05 Q4'05 Q1'06 Q2'06 Q3'06 Q4'06 US International 4
  • Traffic Acquisition Costs 976 $1,000 40% 37.2% 36.1% $900 825 34.0% 35% 33.2% 723 785 $800 32.5% $700 32.3% 30% 629 31.0% 30.7% $ in millions $600 530 494 462 $500 25% $400 20% $300 $200 15% $100 $0 10% Q1'05 Q2'05 Q3'05 Q4'05 Q1'06 Q2'06 Q3'06 Q4'06 TAC TAC as % of Advertising Revenues 5
  • Costs and Expenses GAAP $Millions Q4'05 Q3'06 Q4'06 Costs of Revenues $777.0 $1,048.7 $1,283.1 Percent of revenues 40.5% 39.0% 40.0% Research & Development $189.9 $312.6 $386.8 Percent of revenues 9.9% 11.6% 12.1% Sales & Marketing $162.6 $207.0 $255.2 Percent of revenues 8.5% 7.7% 8.0% General & Administrative* $219.9 $190.0 $219.8 Percent of revenues 11.5% 7.1% 6.9% Total Costs & Expenses $1,349.4 $1,758.3 $2,144.9 Percent of revenues 70.4% 65.4% 67.0% Non-GAAP $Millions Q4'05 Q3'06 Q4'06 Costs of Revenues $775.3 $1,046.6 $1,272.2 Percent of revenues 40.4% 38.9% 39.7% Research & Development $157.1 $250.9 $304.7 Percent of revenues 8.2% 9.3% 9.5% Sales & Marketing $154.7 $192.3 $240.7 Percent of revenues 8.1% 7.1% 7.5% General & Administrative $114.1 $168.7 $192.9 Percent of revenues 5.9% 6.3% 6.0% Total Costs & Expenses $1,201.2 $1,658.5 $2,010.5 Percent of revenues 62.6% 61.6% 62.7% * Q405 includes $90M contribution to Google Foundation Note: Please refer to supporting Table 1 for reconciliations of non-GAAP costs and expenses to GAAP costs and expenses 6
  • Profitability GAAP $Millions Q4'05 Q3'06 Q4'06 Income from Operations $569.6 $931.3 $1,060.6 Operating Margin 29.7% 34.6% 33.1% Net Income $372.2 $733.4 $1,030.7 EPS (diluted) $1.22 $2.36 $3.29 Non-GAAP $Millions Q4'05 Q3'06 Q4'06 Income from Operations $717.8 $1,031.2 $1,195.0 Operating Margin 37.4% 38.3% 37.3% Net Income $469.5 $812.3 $997.3 EPS (diluted) $1.54 $2.62 $3.18 Note: Please refer to supporting Table 2 for reconciliations of non-GAAP results of operations measures to the nearest comparable GAAP measures 7
  • Free Cash Flow $Millions Q4'05 Q3'06 Q4'06 Net cash provided by operating activities $658.4 $1,004.3 $910.8 Less purchases of property and equipment $245.8 $492.2 $366.6 Free cash flow (Non-GAAP) $412.6 $512.1 $544.2 8
  • Summary • Google’s continued excellence and market leadership in core search and ads drove strong results in Q4 • We continue to invest in our international operations, which represented an increasing portion of total revenues on a year-over- year basis • Partnerships remain a key strategic initiative • Innovation for the user and strengthening the Google ecosystem are overriding goals • Investments in infrastructure and people are a competitive advantage and key factor in our success; we continue to invest aggressively for the long term 9
  • Table 1 - Reconciliations of non-GAAP costs and expenses to GAAP costs and expenses As a % of As a % of As a % of Revenues (1) Revenues (1) Revenues (1) $Millions Q4'05 Q3'06 Q4'06 Cost of Revenues (GAAP) $ 777.0 40.5% $ 1,048.7 39.0% $ 1,283.1 40.0% Less: Stock-based compensation (1.7) - (2.1) - (10.9) - Cost of Revenues (non-GAAP) $ 775.3 40.4% $ 1,046.6 38.9% $ 1,272.2 39.7% Research and development (GAAP) $ 189.9 9.9% $ 312.6 11.6% $ 386.8 12.1% Less: Stock-based compensation (32.8) - (61.7) - (82.1) - Research and development (non-GAAP) $ 157.1 8.2% $ 250.9 9.3% $ 304.7 9.5% Sales and marketing (GAAP) $ 162.6 8.5% $ 207.0 7.7% $ 255.2 8.0% Less: Stock-based compensation (7.9) - (14.7) - (14.5) - Sales and marketing (non-GAAP) $ 154.7 8.1% $ 192.3 7.1% $ 240.7 7.5% General and administrative (GAAP) $ 219.9 11.5% $ 190.0 7.1% $ 219.8 6.9% Less: Google Foundation Contribution (90.0) - - - - - Less: Stock-based compensation (15.8) - (21.3) - (26.9) - General and administrative (non-GAAP) $ 114.1 5.9% $ 168.7 6.3% $ 192.9 6.0% Total costs and expenses (GAAP) $ 1,349.4 70.4% $ 1,758.3 65.4% $ 2,144.9 67.0% Less: Google Foundation Contribution (90.0) - - - - - Less: Stock-based compensation (58.2) - (99.8) - (134.4) - Total costs and expenses (non-GAAP) $ 1,201.2 62.6% $ 1,658.5 61.6% $ 2,010.5 62.7% (1) Percentages based on GAAP revenues of $1,919 million in Q4 '05, $2,690 million in Q3 '06 and $3,205 million in Q4 '06 10
  • Table 2 - Reconciliations of non-GAAP results of operations measures to the nearest comparable GAAP measures As a % of As a % of As a % of Revenues (1) Revenues (1) Revenues (1) $Millions except per share amounts Q4'05 Q3'06 Q4'06 Income from operations (GAAP) $ 569.6 29.7% $ 931.3 34.6% $ 1,060.6 33.1% Add: Stock-based compensation 58.2 - 99.9 - 134.4 - Add: Google Foundation contribution 90.0 - - - - - Income from operations (non-GAAP) $ 717.8 37.4% $ 1,031.2 38.3% $ 1,195.0 37.3% Net income (GAAP) $ 372.2 19.4% $ 733.4 27.3% $ 1,030.7 32.2% Add: Stock-based compensation (net of tax) 44.3 - 78.9 - 99.8 - Add: Google Foundation contribution (net of tax) 53.0 Less: Advanced Pricing Agreement and R&D credit - - - - (133.2) - Net income (non-GAAP) $ 469.5 24.5% $ 812.3 30.2% $ 997.3 31.1% Net income per share - diluted (GAAP) $1.22 $2.36 $3.29 Net income per share - diluted (non-GAAP) $1.54 $2.62 $3.18 Shares used in per share calculation - diluted 304 311 313 (1) Percentages based on GAAP revenues of $1,919 million in Q4 '05, $2,690 million in Q3 '06 and $3,205 million in Q4 '06 11
  • Q4 2006 Earnings Conference Call