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    2012 q3 google_earnings_slides 2012 q3 google_earnings_slides Presentation Transcript

    • Q3 2012Quarterly Earnings Summary
    • Third Quarter 2012 Highlights• Consolidated revenue growth of 45% Y/Y and 15% Q/Q – Consolidated revenues were $14.1 billion • Google business revenues (advertising and other) were $11.5 billion – Google properties revenues increased 15% Y/Y and 2% Q/Q – Network revenues increased 21% Y/Y and 5% Q/Q • Motorola business revenues (hardware and other) were $2.6 billion – Consolidated international revenues were $7.1 billion• Operational Highlights – Strong financial metrics: revenue growth and 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
    • Consolidated Quarterly Revenues $15,000 14,101 $14,000 Q3’12 Y/Y Growth = 45% Q3’12 Q/Q Growth = 15% $13,000 2,575 12,214 $12,000 1,250 $11,000 10,584 10,645 $10,000 9,720 3,133 9,026 2,983 2,913($ in millions) $9,000 8,575 2,880 8,440 2,595 $8,000 7,286 2,484 6,775 6,820 2,495 2,427 $7,000 $6,000 2,199 2,036 2,063 $5,000 7,727 $4,000 7,294 7,312 7,542 6,740 5,879 6,232 $3,000 5,672 4,439 4,499 4,833 $2,000 $1,000 300 258 254 273 269 310 385 410 420 439 666 $0 Q110 Q210 Q310 Q410 Q111 Q211 Q311 Q411 Q112 Q212 Q312 Other Google.com Network Motorola3
    • U.S. vs. International Revenues - Consolidated ($ in millions) 6,775 6,820 7,286 8,440 8,575 9,026 9,720 10,584 10,645 12,214 14,101100% 90% 80% 53% 52% 52% 52% 53% 53% 53% 50% 54% 55% 54% 70% 60% 50% 40% 30% 47% 48% 48% 48% 47% 47% 47% 50% 46% 45% 46% 20% 10% 0% Q110 Q210 Q310 Q410 Q111 Q211 Q311 Q411 Q112 Q212 Q312 US International4
    • Traffic Acquisition Costs $3,000 30% 26.4% 26.4% 25.7% 25.3% 25.5% 24.5% 24.5% 24.7% 24.2% 24.1% $2,500 23.7% $2,000 20% ($ in millions) $1,500 2,770 2,600 2,453 2,510 2,210 2,069 2,038 2,110 $1,000 10% 1,732 1,805 1,711 $500 $0 0% Q110 Q210 Q310 Q410 Q111 Q211 Q311 Q411 Q112 Q212 Q312 TAC TAC as % of Advertising Revenues5
    • Consolidated Costs and Expenses GAAP ($ in millions) Q311 Q212 Q312 Cost of Revenue $3,378 $5,013 $6,554 Percent of revenues 35% 41% 46% Research & Development $1,404 $1,585 $2,009 Percent of revenues 14% 13% 14% Sales & Marketing $1,204 $1,433 $1,760 Percent of revenues 12% 12% 12% General & Administrative $676 $980 $1,042 Percent of revenues 7% 8% 7% Total Costs & Expenses $6,662 $9,011 $11,365 Percent of revenues 69% 74% 81% Non-GAAP ($ in millions) Q311 Q312 Q312 Cost of Revenue $3,306 $4,918 $6,360 Percent of revenues 34% 40% 45% Research & Development $1,093 $1,281 $1,527 Percent of revenues 11% 10% 11% Sales & Marketing $1,100 $1,294 $1,521 Percent of revenues 11% 11% 11% General & Administrative $592 $771 $893 Percent of revenues 6% 6% 6% Total Costs & Expenses $6,091 $8,264 $10,301 Percent of revenues 63% 68% 73% Note: Please refer to supporting Table 1 for reconciliations of non-GAAP costs and expenses to GAAP costs and expenses6
    • Profitability Consolidated GAAP ($ in millions except per share amounts) Q311 Q212 Q312 Income from Operations $ 3,058 $ 3,203 $ 2,736 Operating Margin 31% 26% 19% Net Income $ 2,729 $ 2,785 $ 2,176 EPS (diluted) $ 8.33 $ 8.42 $ 6.53 Non-GAAP ($ in millions except per share amounts) Q311 Q212 Q312 Income from Operations $ 3,629 $ 3,950 $ 3,800 Operating Margin 37% 32% 27% Net Income $ 3,184 $ 3,346 $ 3,009 EPS (diluted) $ 9.72 $ 10.12 $ 9.03 Google Inc. GAAP ($ in millions except per share amounts) Q311 Q212 Q312 Income from Operations $ 3,058 $ 3,436 $ 3,263 Google Operating Margin 31% 31% 28% Non-GAAP ($ in millions except per share amounts) Q311 Q212 Q312 Income from Operations $ 3,629 $ 3,988 $ 3,951 Google Operating Margin 37% 36% 34% Motorola GAAP ($ in millions except per share amounts) Q311 Q212 Q312 Loss from Operations $ (233) $ (527) Motorola Operating Margin -19% -20% Non-GAAP ($ in millions except per share amounts) Q311 Q212 Q312 Loss from Operations $ (38) $ (151) Motorola Operating Margin -3% -6%7 Note: Please refer to supporting Table 2 for reconciliations of non-GAAP results of operations measures to the nearest comparable GAAP measures
    • Consolidated Free Cash Flow ($ in millions) Q311 Q212 Q312 Net cash provided by operating activities $3,950 $4,252 $4,004 Less purchases of property and equipment ($680) ($774) ($872) Free cash flow (non-GAAP) $3,270 $3,478 $3,1328
    • Overview of Q3 2012 OI&E and FX • In Interest and Other Income, Net, we recognized net income of $63M for Q3 • In Q3, we recognized $172M of interest income earned on our investments and $36M in net realized gains. • We expensed $124M related to our FX cash flow hedging program. • Excluding gains related to our foreign exchange risk management program, had foreign exchange rates remained constant from the second quarter of 2012 through the third quarter of 2012, our Google business revenues in the third quarter of 2012 would have been $136 million higher. Excluding gains related to our foreign exchange risk management program, had foreign exchange rates remained constant from the third quarter of 2011 through the third quarter of 2012, our Google business revenues in the third quarter of 2012 would have been $557 million higher. • In addition, our FX cash flow hedging program allowed us to recognize a benefit of approximately $62M to Google business international revenue this quarter.9
    • Google Business - Revenues by Geography Q311 Q212 Q312 ($ in millions) United States $ 4,420 $ 5,005 $ 5,416 United Kingdom 1,047 1,175 1,216 Rest of the world 4,253 4,784 4,894 Total Revenues $ 9,720 $ 10,964 $ 11,52610
    • Google Business - International Revenues Excluding Hedging and FX Impact (Y/Y) ($ in millions) Q311 Q312 ($ in millions) Q211 Q212 UK revenues (GAAP) $1,047 $1,216 UK revenues (GAAP) $976 $1,175 exclude: exclude: a) f/x impact on Q312 revenues using Q311 rates a) f/x impact on Q212 revenues using Q211 rates (gains)/losses n/a 47 (gains)/losses n/a 30 b) hedging gains - (6) b) hedging gains - (7) UK revenues excluding f/x and hedging impact (Non- UK revenues excluding f/x and hedging impact (Non- GAAP) $1,047 $1,257 GAAP) $976 $1,198 Y/Y % (Non-GAAP) 20% Y/Y % (Non-GAAP) 23% ($ in millions) Q311 Q312 ($ in millions) Q211 Q212 ROW revenues (GAAP) $4,253 $4,894 ROW revenues (GAAP) $3,895 $4,784 exclude: exclude: a) f/x impact on Q312 revenues using Q311 rates a) f/x impact on Q212 revenues using Q211 rates (gains)/losses n/a 510 (gains)/losses n/a 320 b) hedging gains (1) (56) b) hedging gains (4) (74) ROW revenues excluding f/x and hedging impact ROW revenues excluding f/x and hedging impact (Non-GAAP) $4,252 $5,348 (Non-GAAP) $3,891 $5,030 Y/Y % (Non-GAAP) 26% Y/Y % (Non-GAAP) 29%11
    • Google Business - International Revenues Excluding Hedging and FX Impact (Q/Q) ($ in millions) Q212 Q312 ($ in millions) Q112 Q212 UK revenues (GAAP) $1,175 $1,216 UK revenues (GAAP) $1,150 $1,175 exclude: exclude: a) f/x impact on Q312 revenues using Q212 rates a) f/x impact on Q212 revenues using Q112 rates (gains)/losses n/a 17 (gains)/losses n/a (10) b) hedging gains (7) (6) b) hedging gains (4) (7) UK revenues excluding f/x and hedging impact (Non- UK revenues excluding f/x and hedging impact (Non- GAAP) $1,168 $1,227 GAAP) $1,146 $1,158 Q/Q % (Non-GAAP) 5% Q/Q % (Non-GAAP) 1% ($ in millions) Q212 Q312 ($ in millions) Q112 Q212 ROW revenues (GAAP) $4,784 $4,894 ROW revenues (GAAP) $4,621 $4,784 exclude: exclude: a) f/x impact on Q312 revenues using Q212 rates a) f/x impact on Q212 revenues using Q112 rates (gains)/losses n/a 119 (gains)/losses n/a 78 b) hedging gains (74) (56) b) hedging gains (33) (74) ROW revenues excluding f/x and hedging impact (Non- ROW revenues excluding f/x and hedging impact (Non- GAAP) $4,710 $4,957 GAAP) $4,588 $4,788 Q/Q % (Non-GAAP) 5% Q/Q % (Non-GAAP) 4%12
    • Table 1 - Reconciliations of consolidated non-GAAP costs and expenses to GAAP costs and expenses As a % of As a % of As a % of ($ in millions) Q311 Revenues (1) Q212 Revenues (1) Q312 Revenues (1) Cost of revenue - (GAAP) $ 3,378 35% $ 5,013 41% $ 6,554 46% Less: non-GAAP adjustments (2) (72) (95) (194) Cost of revenue - (non-GAAP) $ 3,306 34% $ 4,918 40% $ 6,360 45% Research and development - (GAAP) $ 1,404 14% $ 1,585 13% $ 2,009 14% Less: non-GAAP adjustments (2) (311) (304) (482) Research and development (non-GAAP) $ 1,093 11% $ 1,281 10% $ 1,527 11% Sales and marketing - (GAAP) $ 1,204 12% $ 1,433 12% $ 1,760 12% Less: non-GAAP adjustments (2) (104) (139) (239) Sales and marketing (non-GAAP) $ 1,100 11% $ 1,294 11% $ 1,521 11% General and administrative - (GAAP) $ 676 7% $ 980 8% $ 1,042 7% Less: non-GAAP adjustments (2) (84) (209) (149) General and administrative (non-GAAP) $ 592 6% $ 771 6% $ 893 6% Total costs and expenses (GAAP) $ 6,662 69% $ 9,011 74% $ 11,365 81% Less: non-GAAP adjustments (2) (571) (747) (1,064) Total costs and expenses (non-GAAP) $ 6,091 63% $ 8,264 68% $ 10,301 73% (1) Percentages based on consolidated revenues of $9,720 million in Q311, $12,214 million in Q212 and $14,101 million in Q312. (2) Pertains to stock-based compensation expense and Motorola restructuring and related charges13
    • Table 2 - Reconciliations of non-GAAP results of operations measures to the nearest comparable GAAP measures Consolidated Operating Operating Operating (In millions except per share amounts) Q311 Margin (1) Q212 Margin (1) Q312 Margin (1) Income from operations (GAAP) $ 3,058 31% $ 3,203 26% $ 2,736 19% Add: Stock-based compensation expense 571 565 715 Add: Motorola restructuring and related charges 182 (3) 349 (3) Income from operations (non-GAAP) $ 3,629 37% $ 3,950 32% $ 3,800 27% Net income (GAAP) $ 2,729 $ 2,785 $ 2,176 Add: Stock-based compensation expense (net of tax) (2) 455 430 560 Add: Motorola restructuring and related charges (net of tax) (2) 131 273 Net income (non-GAAP) $ 3,184 $ 3,346 $ 3,009 Net income per share - diluted (GAAP) $ 8.33 $ 8.42 $ 6.53 Net income per share - diluted (non-GAAP) $ 9.72 $ 10.12 $ 9.03 Shares used in per share calculation - diluted 327 331 333 (1) Percentages based on consolidated revenues of $9,720 million in Q311, $12,214 million in Q212 and $14,101 million in Q312. (2) The tax effects are calculated using the tax-deductible portion of stock-based compensation expense and Motorola restructuring and related charges, applying the entity-specific, US federal and blended state tax rates. (3) Includes stock-based compensation expense of $93 million in Q2’12 and $47 million in Q3’12 Google and Motorola Google (4) Motorola (4) Operating Operating (In millions except per share amounts) Q312 Margin Q312 Margin Income from operations (GAAP) $ 3,263 28% $ (527) -20% Add: Stock-based compensation expense 688 27 Add: Motorola restructuring and related charges 349 (5) Income from operations (non-GAAP) $ 3,951 34% $ (151) -6% (4) Percentages based on Google revenues of $11,526 million in Q312 and Motorola revenues of $2,575 million in Q312 (5) Includes stock-based compensation expense of $47 million.14
    • Q3 2012Quarterly Earnings Summary