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2007Q4_google_earnings_slides

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  • 1. Q4 2007 Quarterly Earnings Summary
  • 2. Fourth Quarter 2007 Highlights • Revenue growth of 51% Y/Y and 14% Q/Q – Google properties revenue growth of 58% Y/Y and 14% Q/Q, driven by strength in the holiday retail season – Network revenues increased 37% Y/Y and 12% Q/Q – Strong international performance, with $2.3 billion in Q4 international revenue • Executing on Search.Ads.Apps Strategy – Infrastructure investments in search leading to improved quality worldwide – Giving advertisers more control and improving ROI g p g – Improving Apps performance and ensuring data portability – Significant strides in mobile with the launch of Android • Ongoing focus on growth and profitability 2
  • 3. Quarterly Revenue 4,827 Q4’07 Y/Y Growth = 51% Q4’07 Q/Q Growth = 14% $4,500 4,231 3,872 $4,000 1,636 3,664 $ in millions $3,500 3,205 1,455 m 1,352 $3,000 1,345 2,690 2,456 1,198 $2,500 2,254 1,037 1,919 1 919 $2,000 997 1,578 928 1,384 3,122 1,257 $1,500 799 2,735 2,486 675 2,282 630 $, $1,000 1,977 584 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 Q1'07 Q2'07 Q3'07 Q4'07 Google.com Network Licensing and Other 3
  • 4. U.S. vs. U S vs International Revenue 4,827 $4,500 4,231 3,872 $4,000 3,664 $ in millions 48% $3,500 3,205 48% 48% m $3,000 2,690 47% 2,456 44% $2,500 2,254 1,919 44% $2,000 42% 1,578 42% 1,384 38% 1,257 $1,500 39% 52% 39% 52% 39% $1,000 , 53% 52% 56% 58% 56% 62% 58% 61% 61% $500 61% $0 Q1 05 Q1'05 Q2 05 Q2'05 Q3 05 Q3'05 Q4 05 Q4'05 Q1 06 Q1'06 Q2 06 Q2'06 Q3 06 Q3'06 Q4 06 Q4'06 Q1 07 Q1'07 Q2 07 Q2'07 Q3 07 Q3'07 Q4 07 Q4'07 US International 4
  • 5. Traffic Acquisition Costs 1,440 40% $1,400 37.2% 36.1% $1,300 1,221 34.0% 1,125 1,148 35% $1,200 33.2%32.5% 32.3% $1,100 976 $, $1,000 30% 31.0% 30.7% 31.0% $900 825 29.9% 29.1% 30.3% $ in millions 785 $800 723 25% $700 629 n $600 530 494 462 $500 20% $400 $300 15% $200 $100 $0 10% Q1 05 Q2 05 Q3 05 Q4 05 Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 Q2 07 Q3 07 Q4 07 Q1'05 Q2'05 Q3'05 Q4'05 Q1'06 Q2'06 Q3'06 Q4'06 Q1'07 Q2'07 Q3'07 Q4'07 TAC TAC as % of Advertising Revenues 5
  • 6. Costs and Expenses GAAP $Millions Q4'06 Q3'07 Q4'07 Cost of Revenues C f $1,283 $1,663 $1,956 Percent of revenues 40% 39% 41% Research & Development $387 $549 $631 Percent of revenues 12% 13% 13% Sales & Marketing $255 $381 $422 Percent of revenues 8% 9% 9% General & Administrative $220 $321 $377 Percent of revenues 7% 8% 8% Total Costs & Expenses $2,145 $2,914 $3,386 Percent of revenues 67% 69% 71% Non GAAP Non-GAAP $Millions Q4'06 Q3'07 Q4'07 Cost of Revenues $1,272 $1,659 $1,950 Percent of revenues 40% 39% 40% Research & Development $305 $418 $470 Percent of revenues 10% 10% 10% Sales & Marketing $241 $351 $384 Percent of revenues 7% 8% 8% General & Administrative $193 $288 $337 Percent of revenues 6% 7% 7% Total Costs & Expenses $2,011 $2,716 $3,141 Percent of revenues 63% 64% 65% Note: Please refer to supporting Table 1 for reconciliations of non-GAAP costs and expenses to GAAP costs and expenses 6
  • 7. Profitability GAAP $Millions Q4'06 Q3'07 Q4'07 Income from Operations $1,061 $1,318 $1,441 Operating Margin 33% 31% 30% Net Income $1,031 $1,070 $1,206 EPS (diluted) $3.29 $3.38 $3.79 Non-GAAP $Millions Q4'06 Q3'07 Q4'07 Income from Operations $1,195 $1,516 $1,686 Operating Margin 37% 36% 35% Net Income $997 $ $1,237 $ $1,409 $ EPS (diluted) $3.18 $3.91 $4.43 Note: Please refer to supporting Table 2 for reconciliations of non-GAAP results of operations pp g p measures to the nearest comparable GAAP measures 7
  • 8. Free Cash Flow $Millions Q4'06 Q3'07 Q4'07 Net cash provided by operating activities $911 $1,633 $1,693 Less purchases of property and equipment qp ($ ($367) ) ($ ($553) ) ($ ($678) ) Free cash flow (Non-GAAP) $544 $1,080 $1,015 8
  • 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 Q4'06 Q3'07 Q4'07 Cost of Revenues (GAAP) $ 1,283 1 283 40% $ 1,663 1 663 39% $ 1,956 1 956 41% Less: Stock-based compensation (11) - (4) - (6) - Cost of Revenues (non-GAAP) $ 1,272 40% $ 1,659 39% $ 1,950 40% Research and development (GAAP) $ 387 12% $ 549 13% $ 631 13% Less: Stock-based compensation (82) - (131) - (161) - Research and development (non-GAAP) (non GAAP) $ 305 10% $ 418 10% $ 470 10% Sales and marketing (GAAP) $ 255 8% $ 381 9% $ 422 9% Less: Stock-based compensation (14) - (30) - (38) - Sales and marketing (non-GAAP) $ 241 7% $ 351 8% $ 384 8% General and administrative (GAAP) $ 220 7% $ 321 8% $ 377 8% Less: Stock-based compensation (27) - (33) - (40) - General and administrative (non-GAAP) $ 193 6% $ 288 7% $ 337 7% Total costs and expenses (GAAP) $ 2,145 67% $ 2,914 69% $ 3,386 71% Less: Stock-based compensation (134) - (198) - (245) - Total T t l costs and expenses (non-GAAP) t d ( GAAP) $ 2,011 2 011 63% $ 2,716 2 716 64% $ 3,141 3 141 65% (1) Percentages based on GAAP revenues of $3,205 million in Q4 '06, $4,231 million in Q3 '07 and $4,827 million in Q4 '07 9
  • 10. Table 2 - Reconciliations of non-GAAP results of operations measures to the nearest comparable GAAP measures Operating Operating Operating Margin Margin Margin (1) (1) (1) Figures in millions except per share amounts Q4'06 Q3'07 Q4'07 Income from operations (GAAP) $ 1,061 33% $ 1,318 31% $ 1,441 30% Add: Stock-based compensation 134 - 198 245 Income from operations (non GAAP) (non-GAAP) $ 1,195 1 195 37% $ 1,516 1 516 36% $ 1,686 1 686 35% Net income (GAAP) $ 1,031 $ 1,070 $ 1,206 Add: Stock-based compensation (net of tax) 99 167 203 Less: Advanced Pricing Agreement and R&D credit (133) - - Net income (non-GAAP) $ 997 $ 1,237 $ 1,409 Net income per share - diluted (GAAP) $3.29 $3.38 $3.79 Net income per share - diluted (non-GAAP) $3.18 $3.91 $4.43 Shares used in per share calculation - diluted 313 317 318 (1) Percentages based on GAAP revenues of $3,205 million in Q4 '06, $4,231 million in Q3 '07 and $4,827 million in Q4 '07 10
  • 11. Q4 2007 Quarterly Earnings Summary