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Q2 2008
Quarterly Earnings
    Summary
Second Quarter 2008 Highlights
    •   Revenue growth of 39% Y/Y and 3% Q/Q
        –   Google properties revenue growth o...
Quarterly Revenue
                                                                                                        ...
U.S. vs.
    U S vs International Revenue
                                                                                ...
Traffic Acquisition Costs
                                                                                                ...
Costs and Expenses

          GAAP
          $Millions                                  Q2 07
                            ...
Profitability
           GAAP
           $Millions                                         Q2'07             Q1'08        ...
Free Cash Flow



       $Millions                    Q2'07     Q1'08     Q2'08
       Net
       N t cash provided by
   ...
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



 ...
Q2 2008
Quarterly Earnings
    Summary
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Transcript of "2008Q2_google_earnings_slides"

  1. 1. Q2 2008 Quarterly Earnings Summary
  2. 2. Second Quarter 2008 Highlights • Revenue growth of 39% Y/Y and 3% Q/Q – Google properties revenue growth of 42% Y/Y and 4% Q/Q – Network revenues increased 22% Y/Y and decreased 2% Q/Q – Growth in international markets continued to be strong, with $2.8 billion in Q2 international revenue • Operational Highlights – Improvements in search quality remain key focus – Continued ads quality initiatives to show users better, more relevant ads – Increasing value for advertisers and publishers with broader and deeper solutions • A i iti of D bl Cli k gives G Acquisition f DoubleClick i Google th l di di l ad platform l the leading display d l tf – Strong Apps traction and addition of functionality to Google Apps suite of products • Exercising operational discipline while investing in long-term gp p g g opportunities 2
  3. 3. Quarterly Revenue 5,367 $5,500 5,186 Q2’08 Y/Y Growth = 39% Q2’08 Q/Q Growth = 3% $5,000 , 4,827 4 827 $4,500 4,231 1,655 1,686 3,872 $4,000 1,636 3,664 $3,500 1,455 3,205 $ in millions 1,352 $3,000 1,345 2,690 2,456 1,198 $2,500 2,254 1,037 1,919 $2,000 997 928 3,400 3,530 1,578 3,122 799 1,384 $1,500 1,257 2,735 2,282 2,486 675 630 1,977 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 Q1'07 Q2'07 Q3'07 Q4'07 Q1'08 Q2'08 Google.com Network Licensing and Other 3
  4. 4. U.S. vs. U S vs International Revenue 5,367 $5,500 5,186 4,827 4 827 $5,000 $5 000 $4,500 4,231 3,872 51% $4,000 3,664 48% 52% $3,500 48% 3,205 48% $ in millions 47% $3,000 2,690 44% 2,456 $2,500 2,254 n % 44% 1,919 42% $2,000 42% 1,578 1,384 38% 1,257 49% $1,500 48% 39% 52% 52% 39% 53% 52% 39% $1,000 $1 000 56% 58% 58% 56% 62% 61% 61% $500 61% $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 Q1 08 Q2 08 Q1'05 Q2'05 Q3'05 Q4'05 Q1'06 Q2'06 Q3'06 Q4'06 Q1'07 Q2'07 Q3'07 Q4'07 Q1'08 Q2'08 US International 4
  5. 5. Traffic Acquisition Costs 1,486 1,474 1,440 $1,500 40% 37.2% $, $1,400 36.1% 1,221 $1,300 34.0% 35% 33.2%32.5%32.3% 1,125 1,148 $1,200 $1,100 976 $1,000 30% 31.0% 31 0% 30.7%31 0% 31.0% 28.4% 29.9% 29.1% 30.3% 29.2% $900 825 $ in millions 785 $800 723 25% $700 629 $600 n 530 494 462 $500 20% $400 $300 15% $200 $100 $0 10% 05 05 05 05 06 06 06 06 07 07 07 07 08 08 1' 2' 3' 4' 1' 2' 3' 4' 1' 2' 3' 4' 1' 2' Q Q Q Q Q Q Q Q Q Q Q Q Q Q TAC TAC as % of Advertising Revenues 5
  6. 6. Costs and Expenses GAAP $Millions Q2 07 Q2'07 Q1 08 Q1'08 Q2 08 Q2'08 Cost of Revenues $1,560 $2,111 $2,148 Percent of revenues 40% 41% 40% Research & Development $532 $673 $682 Percent of revenues 14% 13% 13% Sales & Marketing $356 $447 $485 Percent of revenues P tf 9% 9% 9% General & Administrative $319 $409 $474 Percent of revenues 8% 7% 9% Total Costs & Expenses $2,767 $3,640 $3,789 Percent of revenues 71% 70% 71% Non-GAAP Non GAAP $Millions Q2'07 Q1'08 Q2'08 Cost of Revenues $1,552 $2,102 $2,139 Percent of revenues 40% 41% 40% Research & Development $375 $479 $495 Percent of revenues 10% 9% 10% Sales & Marketing $320 $404 $442 Percent of revenues 8% 8% 8% General & Administrative $279 $374 $440 Percent of revenues 7% 7% 8% Total Costs & Expenses $2,526 $3,359 $3,516 Percent of revenues 65% 65% 66% Note: Please refer to supporting Table 1 for reconciliations of non-GAAP costs and expenses to GAAP costs and expenses 6
  7. 7. Profitability GAAP $Millions Q2'07 Q1'08 Q2'08 Income from Operations $ 1,105 $ 1,546 $ 1,578 Operating Margin 29% 30% 29% Net Income $ 925 $ 1,307 $ 1,247 EPS (diluted) $2.93 $4.12 $3.92 Non-GAAP $Millions $Milli Q2'07 Q1'08 Q2'08 Income from Operations $ 1,346 $ 1,827 $ 1,851 Operating Margin 35% 35% 34% Net Income $ 1,124 $ 1,537 $ 1,472 EPS (diluted) $ 3.56 $ 4.84 $ 4.63 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. 8. Free Cash Flow $Millions Q2'07 Q1'08 Q2'08 Net N t cash provided by h id d b operating activities $1,230 $1,780 $1,766 Less purchases of property L h f t and equipment ($575) ($842) ($697) Free cash flow (Non-GAAP) $655 $938 $1,069 8
  9. 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 Q2'07 Q1'08 Q2'08 Cost of Revenues (GAAP) $ 1,560 1 560 40% $ 2,111 2 111 41% $ 2,148 2 148 40% Less: Stock-based compensation (8) (9) (9) Cost of Revenues (non-GAAP) $ 1,552 40% $ 2,102 41% $ 2,139 40% Research and development (GAAP) $ 532 14% $ 673 13% $ 682 13% Less: Stock-based compensation (157) (194) (187) Research and development (non GAAP) (non-GAAP) $ 375 10% $ 479 9% $ 495 10% - Sales and marketing (GAAP) $ 356 9% $ 447 9% $ 485 9% Less: Stock-based compensation (36) (43) (43) Sales and marketing (non-GAAP) $ 320 8% $ 404 8% $ 442 8% General and administrati e (GAAP) administrative $ 319 8% $ 409 7% $ 474 9% Less: Stock-based compensation (40) (35) (34) General and administrative (non-GAAP) $ 279 7% $ 374 7% $ 440 8% Total costs and expenses (GAAP) $ 2,767 71% $ 3,640 70% $ 3,789 71% Less: Stock-based compensation (241) (281) (273) Total costs and expenses (non-GAAP) $ 2,526 65% $ 3,359 65% $ 3,516 66% (1) Percentages based on GAAP revenues of $3,872 million in Q2 '07, $5,186 million in Q1 '08 and $5,367 million in Q2 '08. 9
  10. 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 Q2'07 Q1'08 Q2'08 Income from operations (GAAP) $ 1,105 29% $ 1,546 30% $ 1,578 29% Add: Stock-based Add St k b d compensationti 241 281 273 Income from operations (non-GAAP) $ 1,346 35% $ 1,827 35% $ 1,851 34% Net income (GAAP) $ 925 $ 1,307 $ 1,247 Add: Stock-based compensation (net of tax) 199 230 225 Net income (non-GAAP) (non GAAP) $ 1,124 $ 1,537 $ 1,472 Net income per share - diluted (GAAP) $2.93 $4.12 $3.92 Net income per share - diluted (non-GAAP) $3.56 $4.84 $4.63 Shares used in per share calculation - diluted 315 317 318 (1) Percentages based on GAAP revenues of $3 872 million in Q2 '07 $5 186 million in Q1 '08 and $5 367 million in Q2 '08 $3,872 '07, $5,186 $5,367 '08. 10
  11. 11. Q2 2008 Quarterly Earnings Summary
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