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2012 q1 google_earnings_slides

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  • 1. Q1 2012Quarterly Earnings Summary
  • 2. First Quarter 2012 Highlights • Revenue growth of 24% Y/Y and 1% Q/Q – Google properties revenues increased 24% Y/Y and flat Q/Q – Network revenues increased 20% Y/Y and 1% Q/Q – International revenues were $5.8 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. Quarterly Revenues $11,000 Q1’12 Y/Y Growth = 24% 10,584 10,645 Q1’12 Q/Q Growth = 1% $10,000 9,720 9,026 2,880 2,913 $9,000 8,575 8,440 2,595 $8,000 2,484 7,286 2,427 6,775 6,820 2,495 $7,000 ($ in millions) 2,199 $6,000 2,036 2,063 $5,000 $4,000 7,294 7,312 6,740 6,232 5,672 5,879 $3,000 4,439 4,833 4,499 $2,000 $1,000 300 258 254 273 269 310 385 410 420 $0 Q110 Q210 Q310 Q410 Q111 Q211 Q311 Q411 Q112 Other Google.com Network3
  • 4. U.S. vs. International Revenues ($ in millions) 6,775 6,820 7,286 8,440 8,575 9,026 9,720 10,584 10,645 100% 90% 80% 53% 52% 52% 52% 53% 54% 55% 53% 54% 70% 60% 50% 40% 30% 47% 48% 48% 48% 47% 46% 45% 47% 46% 20% 10% 0% Q110 Q210 Q310 Q410 Q111 Q211 Q311 Q411 Q112 US International4
  • 5. Traffic Acquisition Costs $3,000 30.0% $2,500 26.4% 26.4% 25.7% 25.3% $2,000 24.5% 24.5% 25.0% 24.2% 24.1% 23.7% ($ in millions) $1,500 2,453 2,510 2,210 2,069 2,038 2,110 $1,000 20.0% 1,732 1,805 1,711 $500 $0 15.0% Q110 Q210 Q310 Q410 Q111 Q211 Q311 Q411 Q112 TAC TAC as % of Advertising Revenues5
  • 6. Costs and Expenses GAAP ($ in millions) Q111 Q411 Q112 Cost of Revenue $2,936 $3,702 $3,789 Percent of revenues 34% 35% 36% Research & Development $1,226 $1,298 $1,441 Percent of revenues 14% 12% 13% Sales & Marketing $1,026 $1,268 $1,269 Percent of revenues 12% 12% 12% General & Administrative $591 $809 $757 Percent of revenues 7% 8% 7% Charge related to the resolution of Department of Justice investigation $500 $0 $0 Percent of revenues 6% 0% 0% Total Costs & Expenses $6,279 $7,077 $7,256 Percent of revenues 73% 67% 68% Non-GAAP ($ in millions) Q111 Q411 Q112 Cost of Revenue $2,887 $3,625 $3,715 Percent of revenues 34% 34% 35% Research & Development $989 $1,032 $1,142 Percent of revenues 12% 10% 11% Sales & Marketing $948 $1,163 $1,172 Percent of revenues 11% 11% 11% General & Administrative $523 $721 $671 Percent of revenues 6% 7% 6% Charge related to the resolution of Department of Justice investigation $0 $0 $0 Percent of revenues 0% 0% 0% Total Costs & Expenses $5,347 $6,541 $6,700 Percent of revenues 62% 62% 63% Note: Please refer to supporting Table 1 for reconciliations of non-GAAP costs and expenses to GAAP costs and expenses6
  • 7. Profitability GAAP ($ in millions except per share amounts) Q111 Q411 Q112 Income from Operations $ 2,296 $ 3,507 $ 3,389 Operating Margin 27% 33% 32% Net Income $ 1,798 $ 2,705 $ 2,890 EPS (diluted) $ 5.51 $ 8.22 $ 8.75 Non-GAAP ($ in millions except per share amounts) Q111 Q411 Q112 Income from Operations $ 3,228 $ 4,043 $ 3,945 Operating Margin 38% 38% 37% Net Income $ 2,638 $ 3,127 $ 3,328 EPS (diluted) $ 8.08 $ 9.50 $ 10.08 Note: Please refer to supporting Table 2 for reconciliations of non-GAAP results of operations measures to the nearest comparable GAAP measures7
  • 8. Free Cash Flow ($ in millions) Q111 Q411 Q112 Net cash provided by operating activities $3,172 $3,924 $3,694 Less purchases of property and equipment ($890) ($951) ($607) Free cash flow (non-GAAP) $2,282 $2,973 $3,0878
  • 9. Overview of Q1 2012 OI&E and FX In Interest and Other Income, Net, we recognized net income of $156M for Q1 • In Q1, we recognized $182M of interest income earned on our investments and $120M in realized gains. • We expensed $126M 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 Q4 2011 through Q1 2012, our revenue in Q1 2012 would have been $79M higher. Excluding gains related to our FX cash flow hedging program, had foreign exchange rates remained constant from Q1 2011 through Q1 2012, our revenue in Q1 2012 would have been $67M higher. • In addition, our FX cash flow hedging program allowed us to recognize a benefit of approximately $37M to international revenue this quarter.9
  • 10. Revenues by Geography ($ in millions) Q111 Q411 Q112 United States $4,005 $4,980 $4,874 United Kingdom $969 $1,064 $1,150 Rest of the world $3,601 $4,540 $4,621 Total Revenues $8,575 $10,584 $10,64510
  • 11. International Revenues Excluding Hedging and FX Impact (Y/Y) ($ in millions) Q111 Q112 ($ in millions) Q410 Q411 UK revenues (GAAP) $969 $1,150 UK revenues (GAAP) $878 $1,064 exclude: exclude: a) f/x impact on Q112 revenues using Q111 rates a) f/x impact on Q411 revenues using Q410 rates (gains)/losses n/a 7 (gains)/losses n/a 2 b) hedging gains (4) (4) b) hedging gains (2) (6) UK revenues excluding f/x and hedging impact (Non- UK revenues excluding f/x and hedging impact (Non- GAAP) $965 $1,153 GAAP) $876 $1,060 Y/Y % (Non-GAAP) 19% Y/Y % (Non-GAAP) 21% ($ in millions) Q111 Q112 ($ in millions) Q410 Q411 ROW revenues (GAAP) $3,601 $4,621 ROW revenues (GAAP) $3,507 $4,540 exclude: exclude: a) f/x impact on Q112 revenues using Q111 rates a) f/x impact on Q411 revenues using Q410 rates (gains)/losses n/a 60 (gains)/losses n/a (41) b) hedging gains (10) (33) b) hedging gains (23) (19) ROW revenues excluding f/x and hedging impact (Non- ROW revenues excluding f/x and hedging impact (Non- GAAP) $3,591 $4,648 GAAP) $3,484 $4,480 Y/Y % (Non-GAAP) 29% Y/Y % (Non-GAAP) 29%11
  • 12. International Revenues Excluding Hedging and FX Impact (Q/Q) ($ in millions) Q411 Q112 ($ in millions) Q311 Q411 UK revenues (GAAP) $1,064 $1,150 UK revenues (GAAP) $1,047 $1,064 exclude: exclude: a) f/x impact on Q112 revenues using Q411 rates a) f/x impact on Q411 revenues using Q311 rates (gains)/losses n/a 4 (gains)/losses n/a 32 b) hedging gains (6) (4) b) hedging gains - (6) UK revenues excluding f/x and hedging impact (Non- UK revenues excluding f/x and hedging impact (Non- GAAP) $1,058 $1,150 GAAP) $1,047 $1,090 Q/Q % (Non-GAAP) 9% Q/Q % (Non-GAAP) 4% ($ in millions) Q411 Q112 ($ in millions) Q311 Q411 ROW revenues (GAAP) $4,540 $4,621 ROW revenues (GAAP) $4,253 $4,540 exclude: exclude: a) f/x impact on Q112 revenues using Q411 rates a) f/x impact on Q411 revenues using Q311 rates (gains)/losses n/a 75 (gains)/losses n/a 207 b) hedging gains (19) (33) b) hedging gains (1) (19) ROW revenues excluding f/x and hedging impact (Non- ROW revenues excluding f/x and hedging impact (Non- GAAP) $4,521 $4,663 GAAP) $4,252 $4,728 Q/Q % (Non-GAAP) 3% Q/Q % (Non-GAAP) 11%12
  • 13. Table 1 - Reconciliations of non-GAAP costs and expenses to GAAP costs and expenses As a % of As a % of As a % of ($ in millions) Q111 Revenues (1) Q411 Revenues (1) Q112 Revenues (1) Cost of revenue (GAAP) $ 2,936 34% $ 3,702 35% $ 3,789 36% Less: Stock-based compensation expense (49) (77) (74) Cost of revenue (non-GAAP) $ 2,887 34% $ 3,625 34% $ 3,715 35% Research and development (GAAP) $ 1,226 14% $ 1,298 12% $ 1,441 13% Less: Stock-based compensation expense (237) (266) (299) Research and development (non-GAAP) $ 989 12% $ 1,032 10% $ 1,142 11% Sales and marketing (GAAP) $ 1,026 12% $ 1,268 12% $ 1,269 12% Less: Stock-based compensation expense (78) (105) (97) Sales and marketing (non-GAAP) $ 948 11% $ 1,163 11% $ 1,172 11% General and administrative (GAAP) $ 591 7% $ 809 8% $ 757 7% Less: Stock-based compensation expense (68) (88) (86) General and administrative (non-GAAP) $ 523 6% $ 721 7% $ 671 6% Charge related to the resolution of Department of Justice investigation (GAAP) $ 500 6% $ - 0% $ - 0% Less: Charge related to the resolution of Department of Justice investigation (500) - - Charge related to the resolution of Department of Justice investigation (non-GAAP) $ - 0% $ - 0% $ - 0% Total costs and expenses (GAAP) $ 6,279 73% $ 7,077 67% $ 7,256 68% Less: Stock-based compensation expense and charge related to the resolution of Department of Justice investigation (932) (536) (556) Total costs and expenses (non-GAAP) $ 5,347 62% $ 6,541 62% $ 6,700 63% (1) Percentages based on consolidated revenues of $8,575 million in Q111, $10,584 million in Q411 and $10,645 million in Q112.13
  • 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) Q111 Margin (1) Q411 Margin (1) Q112 Margin (1) Income from operations (GAAP) $2,296 27% $3,507 33% $3,389 32% Add: Stock-based compensation expense 432 536 556 Add: Charge related to the resolution of Department of Justice investigation 500 - - Income from operations (non-GAAP) $3,228 38% $4,043 38% $3,945 37% Net income (GAAP) $1,798 $2,705 $2,890 Add: Stock-based compensation expense (net of tax effect) (2) 340 422 438 Add: Charge related to the resolution of Department of Justice investigation 500 - - Net income (non-GAAP) $2,638 $3,127 $3,328 Net income per share - diluted (GAAP) $ 5.51 $ 8.22 $ 8.75 Net income per share - diluted (non-GAAP) $ 8.08 $ 9.50 $10.08 Shares used in per share calculation - diluted 326 329 330 (1) Percentages based on consolidated revenues of $8,575 million in Q111, $10,584 million in Q411 and $10,645 million in Q112. (2) The tax effect of stock-based compensation expense is calculated using the tax-deductible portion of stock-based compensation expense and applying the entity-specific, U.S. federal and blended state tax rates.14
  • 15. Q1 2012Quarterly Earnings Summary