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2007Q2_google_earnings_slides

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2007Q2_google_earnings_slides

  1. 1. Q2 2007 Quarterly Earnings Summary
  2. 2. Second Quarter 2007 Highlights • Revenue growth of 58% Y/Y and 6% Q/Q – Google properties revenue growth of 74% Y/Y and 9% Q/Q, driven by both traffic and monetization – Network revenues increased 36% Y/Y and flat Q/Q, reflecting seasonality – International revenue growth strong, particularly in Spain, Italy, and France • Investments in hiring the best people and building the best global infrastructure remained key priorities • Continued leadership in search and ads • Raised the bar with the launch of Universal Search • Strengthened Google Apps with agreement to acquire Postini (July) – Demonstrates Google’s commitment to providing hosted applications to businesses of all sizes 2
  3. 3. Quarterly Revenue 3,872 $4,000 Q2’07 Y/Y Growth = 58% 3,664 Q2’07 Q/Q Growth = 6% $3,500 3,205 1,352 $ in millions $3,000 1,345 2,690 2,456 1,198 $2,500 2,254 1,037 1,919 $2,000 997 928 1,578 1,384 $1,500 799 1,257 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 Google.com Network Licensing and Other 3
  4. 4. U.S. vs. International Revenue 3,872 $4,000 Q2’07 US = 52% of total revenue 3,664 Q2’07 International = 48% of total revenue $3,500 3,205 48% $ in millions 47% $3,000 2,690 44% 2,456 $2,500 2,254 44% 42% 1,919 $2,000 42% 1,578 38% 1,384 $1,500 1,257 39% 39% 39% $1,000 56% 53% $500 56% 52% 58% 58% 62% 61% 61% 61% $0 Q1'05 Q2'05 Q3'05 Q4'05 Q1'06 Q2'06 Q3'06 Q4'06 Q1'07 Q2'07 US International 4
  5. 5. Traffic Acquisition Costs 1,125 1,148 $1,200 40% 37.2% 36.1% $1,100 976 34.0% $1,000 35% 33.2% 32.5% 32.3% $900 825 785 $800 30% 31.0% 30.7% 31.0% 723 $ in millions 29.9% $700 629 $600 25% 530 494 462 $500 $400 20% $300 $200 15% $100 $0 10% Q1'05 Q2'05 Q3'05 Q4'05 Q1'06 Q2'06 Q3'06 Q4'06 Q1'07 Q2'07 TAC TAC as % of Advertising Revenues 5
  6. 6. Costs and Expenses GAAP $Millions Q2'06 Q1'07 Q2'07 Costs of Revenues $989.0 $1,470.4 $1,560.3 Percent of revenues 40.3% 40.1% 40.3% Research & Development $282.6 $408.4 $532.1 Percent of revenues 11.5% 11.1% 13.7% Sales & Marketing $196.4 $302.6 $355.6 Percent of revenues 8.0% 8.3% 9.2% General & Administrative $172.6 $261.4 $319.4 Percent of revenues 7.0% 7.2% 8.2% Total Costs & Expenses $1,640.6 $2,442.8 $2,767.4 Percent of revenues 66.8% 66.7% 71.4% Non-GAAP $Millions Q2'06 Q1'07 Q2'07 Costs of Revenues $986.7 $1,466.0 $1,552.6 Percent of revenues 40.2% 40.0% 40.1% Research & Development $212.0 $287.6 $375.1 Percent of revenues 8.6% 7.8% 9.7% Sales & Marketing $182.1 $275.3 $319.2 Percent of revenues 7.4% 7.5% 8.2% General & Administrative $150.7 $230.0 $279.0 Percent of revenues 6.1% 6.3% 7.2% Total Costs & Expenses $1,531.5 $2,258.9 $2,525.9 Percent of revenues 62.3% 61.6% 65.2% 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 Q2'06 Q1'07 Q2'07 Income from Operations $815.4 $1,221.2 $1,104.6 Operating Margin 33.2% 33.3% 28.5% Net Income $721.1 $1,002.2 $925.1 EPS (diluted) $2.33 $3.18 $2.93 Non-GAAP $Millions Q2'06 Q1'07 Q2'07 Income from Operations $924.5 $1,405.1 $1,346.1 Operating Margin 37.6% 38.3% 34.8% Net Income $772.1 $1,159.3 $1,123.6 EPS (diluted) $2.49 $3.68 $3.56 Note: Please refer to supporting Table 2 for reconciliations of non-GAAP results of operations measures to the nearest comparable GAAP measures 7
  8. 8. Free Cash Flow $Millions Q2'06 Q1'07 Q2'07 Net cash provided by operating activities $840.6 $1,219.6 $1,229.9 Less purchases of property and equipment ($699.0) ($596.9) ($575.1) Free cash flow (Non-GAAP) $141.6 $622.7 $654.8 8
  9. 9. Key Takeaways • Google’s excellence in search and ads continues to drive growth • Executing on Search.Ads.Apps strategy at scale around the world • Investing in international markets to meet tremendous opportunity • Significant investments in people and infrastructure key differentiator • Creating a better, richer experience for users around the world drives all investment decisions 9
  10. 10. 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 Q2'06 Q1'07 Q2'07 Cost of Revenues (GAAP) $ 989.0 40.3% $ 1,470.4 40.1% $ 1,560.3 40.3% Less: Stock-based compensation (2.3) - (4.4) - (7.7) - Cost of Revenues (non-GAAP) $ 986.7 40.2% $ 1,466.0 40.0% $ 1,552.6 40.1% Research and development (GAAP) $ 282.6 11.5% $ 408.4 11.1% $ 532.1 13.7% Less: Stock-based compensation (70.6) - (120.8) - (157.0) - Research and development (non-GAAP) $ 212.0 8.6% $ 287.6 7.8% $ 375.1 9.7% Sales and marketing (GAAP) $ 196.4 8.0% $ 302.6 8.3% $ 355.6 9.2% Less: Stock-based compensation (14.3) - (27.3) - (36.4) - Sales and marketing (non-GAAP) $ 182.1 7.4% $ 275.3 7.5% $ 319.2 8.2% General and administrative (GAAP) $ 172.6 7.0% $ 261.4 7.2% $ 319.4 8.2% Less: Stock-based compensation (21.9) - (31.4) - (40.4) - General and administrative (non-GAAP) $ 150.7 6.1% $ 230.0 6.3% $ 279.0 7.2% Total costs and expenses (GAAP) $ 1,640.6 66.8% $ 2,442.8 66.7% $ 2,767.4 71.4% Less: Stock-based compensation (109.1) - (183.9) - (241.5) - Total costs and expenses (non-GAAP) $ 1,531.5 62.3% $ 2,258.9 61.6% $ 2,525.9 65.2% (1) Percentages based on GAAP revenues of $2,456 million in Q2 '06, $3,664 million in Q1 '07 and $3,872 million in Q2 '07 10
  11. 11. 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) $Millions except per share amounts Q2'06 Q1'07 Q2'07 Income from operations (GAAP) $ 815.4 33.2% $ 1,221.2 33.3% $ 1,104.6 28.5% Add: Stock-based compensation 109.1 - 183.9 - 241.5 - Income from operations (non-GAAP) $ 924.5 37.6% $ 1,405.1 38.3% $ 1,346.1 34.8% Net income (GAAP) $ 721.1 $ 1,002.2 $ 925.1 Add: Stock-based compensation (net of tax) 83.3 157.1 198.5 Less: One-time gain from the sale of our investment in Baidu (net of tax) (32.3) - - Net income (non-GAAP) $ 772.1 $ 1,159.3 $ 1,123.6 Net income per share - diluted (GAAP) $2.33 $3.18 $2.93 Net income per share - diluted (non-GAAP) $2.49 $3.68 $3.56 Shares used in per share calculation - diluted 310 315 315 (1) Percentages based on GAAP revenues of $2,456 million in Q2 '06, $3,664 million in Q1 '07 and $3,872 million in Q2 '07 11
  12. 12. Q2 2007 Quarterly Earnings Summary

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