2015 q3 google_earnings_slides
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- Google reported financial results for the third quarter of 2015, with revenues of $18.7 billion, up 13% year-over-year and 5% quarter-over-quarter. The majority of revenues came from advertising (47% from US, 43% from rest of world, 10% from UK). - On a non-GAAP basis, operating income was $6.1 billion (33% of revenues) and net income was $5.1 billion ($7.35 per share). Traffic acquisition costs (TAC) were $3.6 billion (21% of advertising revenues). - By geography, constant currency revenue growth was 18% year-over-year for UK and 23% for rest
2015 q3 google_earnings_slides
- 1. Q3 2015 Quarterly Earnings Summary
- 2. 2 Revenues by Revenue Source(1) Other Google Sites Network $25,000 $20,000 $15,000 $10,000 $5,000 $0 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 1,100 1,501 1,423 1,457 1,703 1,794 1,750 1,704 1,894 9,376 10,538 10,469 10,935 11,252 12,429 11,932 12,402 13,087 3,278 13,754 3,668 15,707 3,528 15,420 3,563 15,955 3,568 16,523 3,880 18,103 3,576 17,258 3,621 17,727 3,694 18,675 Quarterly Revenues Y/Y Change = 13% Q/Q Change = 5% ($ in millions) Revenues by Geography(2) US Rest of the world UK 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 46% 46% 45% 44% 44% 46% 45% 45% 47% 44% 44% 45% 46% 46% 45% 45% 45% 43% 10% 10% 10% 10% 10% 9% 10% 10% 10% 15,955 17,72713,754 15,707 15,420 16,523 18,103 17,258 (1) Prior period amounts have been adjusted to reflect the reclassification primarily related to DoubleClick ad serving software revenues from other revenues to advertising revenues from Google Network Members' websites to conform with our current period presentation. (2) In the second quarter of 2015, we identified an incorrect classification of certain revenues between legal entities. We revised the classification of such revenues between Rest of the world and U.S. for periods beginning in 2008 through the first quarter of 2015. ($ in millions) 18,675
- 3. 3 Traffic Acquisition Costs TAC ($ in millions) TAC as % of Advertising Revenues $4,000 $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 (inmillions) 30% 25% 20% 15% Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 2,972 3,311 3,232 3,293 3,348 3,624 3,345 3,377 3,566 23.5% 23.3% 23.1% 22.7% 22.6% 22.2% 21.6% 21.1% 21.3% (1) Prior period amounts have been adjusted to reflect the impact of reclassification primarily related to DoubleClick ad serving software revenues from other revenues to advertising revenues from Google Network Members' websites to conform with our current period presentation. (1)
- 4. 4 GAAP Costs and Expenses Cost of Revenues Research and Development Sales and Marketing General and Administrative $ in millions $16,000 $14,000 $12,000 $10,000 $8,000 $6,000 $4,000 $2,000 $0 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 5,409 6,253 5,961 6,114 6,695 6,921 6,356 6,583 7,0371,821 1,933 2,126 2,238 2,655 2,813 2,753 2,789 3,230 1,628 1,908 1,729 1,941 2,084 2,377 2,065 2,080 2,223 1,135 9,993 1,184 11,278 1,489 11,305 1,404 11,697 1,365 12,799 1,593 13,704 1,637 12,811 1,450 12,902 1,477 13,967 Cost of Revenues Research and Development Sales and Marketing General and Administrative As a % of Revenues 100% 80% 60% 40% 20% 0% Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 39% 40% 39% 38% 40% 38% 37% 37% 38% 13% 12% 14% 14% 16% 16% 16% 16% 17% 12% 12% 11% 12% 13% 13% 12% 12% 12% 9% 73% 8% 72% 9% 73% 9% 73% 8% 77% 9% 76% 9% 74% 8% 73% 8% 75%
- 5. 5 Non-GAAP Costs and Expenses Cost of Revenues Research and Development Sales and Marketing General and Administrative $ in millions $14,000 $12,000 $10,000 $8,000 $6,000 $4,000 $2,000 $0 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 5,276 6,126 5,866 6,014 6,148 6,750 6,196 6,420 6,8061,385 1,467 1,670 1,791 1,989 2,182 2,138 2,206 2,489 1,473 1,754 1,582 1,783 1,887 2,164 1,860 1,884 1,973 1,003 9,137 1,058 10,405 1,348 10,466 1,229 10,817 1,142 11,166 1,407 12,503 1,414 11,608 1,260 11,770 1,267 12,535 Cost of Revenues Research and Development Sales and Marketing General and Administrative As a % of Revenues 80% 60% 40% 20% 0% Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 38% 39% 38% 38% 37% 37% 36% 36% 36% 10% 9% 11% 11% 12% 12% 12% 12% 13% 11% 11% 10% 11% 11% 12% 11% 11% 11% 7% 66% 7% 66% 9% 68% 8% 68% 8% 68% 8% 69% 8% 67% 7% 66% 7% 67% For reconciliation of GAAP to non-GAAP costs and expenses, please refer to Table 1 at the end of the slide deck.
- 6. 6 Operating Income ($ in millions) Operating Margin (%) GAAP $5,000 $4,500 $4,000 $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 (inmillions) 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 3,761 4,429 4,115 4,258 3,724 4,399 4,447 4,825 4,708 27% 28% 27% 27% 23% 24% 26% 27% 25% Operating income ($ in millions) Operating Margin (%) Non-GAAP $6,000 $5,500 $5,000 $4,500 $4,000 $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 (inmillions) 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 4,617 5,302 4,954 5,138 5,357 5,600 5,650 5,957 6,140 34% 34% 32% 32% 32% 31% 33% 34% 33% Operating Income and Operating Margin For reconciliation of GAAP to non-GAAP operating income, please refer to Table 2 at the end of the slide deck.
- 7. 7 GAAP Net income ($ in millions) GAAP Diluted earnings per share ($) GAAP $5,000 $4,500 $4,000 $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 (inmillions) $8 $7 $6 $5 $4 $3 $2 $1 $0 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 2,921 3,324 3,371 3,351 2,739 4,675 3,515 3,931 3,979 4.31 4.87 4.92 4.88 3.98 6.79 5.10 4.93 5.73 6.43 Non-GAAP Net income ($ in millions) Non-GAAP Diluted earnings per share ($) Non-GAAP $5,000 $4,500 $4,000 $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 (inmillions) $8 $7 $6 $5 $4 $3 $2 $1 $0 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 3,770 4,519 4,218 4,104 4,299 4,654 4,461 4,829 5,102 5.56 6.63 6.16 5.98 6.25 6.76 6.47 6.99 7.35 Net Income and Earnings per Share(1) (2) (1) In the second quarter of 2015, we identified an incorrect classification of certain revenues between legal entities, and as a consequence, we revised our income tax expense for periods beginning in 2008 through the first quarter of 2015. (2) In the second quarter of 2015, an adjustment payment was made to Class C capital stockholders that resulted in EPS for Class A and B common stock of $4.93 (diluted EPS) and Class C capital stock of $6.43 (diluted EPS), based on Net income available to all stockholders of $3,409 million and the adjustment payment available to only Class C capital stockholders of $522 million. For reconciliation of GAAP to non-GAAP net income, please refer to Table 2 at the end of the slide deck.
- 8. 8 Constant Currency Q3'15 Revenues Using Q3'14 Rates (Y/Y) UK Revenues 2,000 1,500 1,000 500 0 $(Millions) Constant Currency Revenues Foreign exchange impact Hedging benefit GAAP revenues 1,917 (145) 20 1,792 Rest of the world (ROW) Revenues 10,000 8,000 6,000 4,000 2,000 0 $(Millions) Constant Currency Revenues Foreign exchange impact Hedging benefit GAAP revenues 9,301 (1,432) 266 8,135 Constant Currency Revenue Growth rate(1) = 18% Constant Currency Revenue Growth rate(2) = 23% (1) Constant currency growth rate is calculated as Q3'15 constant currency revenues of $1,917M compared with Q3'14 revenues of $1,627M (UK GAAP revenue of $1,627M less hedging benefit of $0M). (2) Constant currency growth rate is calculated as Q3'15 constant currency revenues of $9,301M compared with Q3'14 revenues of $7,562M (ROW GAAP revenue of $7,572M less hedging benefit of $10M).
- 9. 9 Constant Currency Q3'15 Revenues Using Q2'15 Rates (Q/Q) UK Revenues 2,000 1,500 1,000 500 0 $(Millions) Constant Currency Revenues Foreign exchange impact Hedging benefit GAAP revenues 1,733 39 20 1,792 Rest of the world (ROW) Revenues 10,000 8,000 6,000 4,000 2,000 0 $(Millions) Constant Currency Revenues Foreign exchange impact Hedging benefit GAAP revenues 7,930 (61) 266 8,135 Constant Currency Revenue Growth rate(1) = 7% Constant Currency Revenue Growth rate(2) = 5% (1) Constant currency growth rate is calculated as Q3'15 constant currency revenues of $1,733M compared with Q2'15 revenues of $1,624M (UK GAAP revenue of $1,678M less hedging benefit of $54M). (2) Constant currency growth rate is calculated as Q3'15 constant currency revenues of $7,930M compared with Q2'15 revenues of $7,584M (ROW GAAP revenue of $8,001M less hedging benefit of $417M).
- 10. 10 Paid Clicks Aggregated Network Google Sites 50% 40% 30% 20% 10% 0% -10% -20% Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 26% 31% 26% 25% 17% 14% 13% 18% 23% 5% 10% 9% 9% 2% (11)% (12)% (9)% (5)% 40% 44% 37% 33% 24% 25% 25% 30% 35% Aggregated Network Google Sites 25% 20% 15% 10% 5% 0% -5% -10% Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 8% 13% (1)% 2% 2% 11% (1)% 7% 6% 3% 7% 4% (5)% (4)% (7)% 4% (2)% 0% 11% 16% (3)% 6% 4% 18% (3)% 10% 7% Y/Y Paid Clicks Growth % Q/Q Paid Clicks Growth %
- 11. 11 Cost-per-Click Aggregated Network Google Sites 10% 5% 0% -5% -10% -15% -20% Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 (8)% (11)% (9)% (6)% (2)% (3)% (7)% (11)% (11)% (6)% (11)% (12)% (13)% (4)% 6% 2% (3)% (4)% (13)% (15)% (11)% (7)% (4)% (8)% (13)% (16)% (16)% Aggregated Network Google Sites 15% 10% 5% 0% -5% -10% -15% Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 (4)% (2)% 0% 0% 0% (3)% (5)% (4)% (1)% (7)% 0% (8)% 3% 2% 10% (11)% (3)% 1% (5)% (4)% 3% (2)% (1)% (8)% (3)% (5)% (2)% Y/Y Cost-Per-Click Growth % Q/Q Cost-Per-Click Growth %
- 12. 12 Capital Expenditures & Free Cash Flow Free Cash Flow Capital Expenditures ($ in millions) $8,000 $6,000 $4,000 $2,000 $0 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 2,794 2,983 2,046 2,981 3,577 2,813 3,690 4,470 3,634 2,289 5,083 2,255 5,238 2,345 4,391 2,646 5,627 2,417 5,994 3,551 6,364 2,927 6,617 2,515 6,985 2,373 6,007 Free cash flow is defined as net cash provided by operating activities less capital expenditures. All numbers include Motorola Mobile until its date of disposal (October 29, 2014).
- 13. 13 Overview of Q3 2015 OI&E $ (in millions) Interest income $ 259 Interest expense (26) Realized loss on marketable securities, net (6) Foreign currency exchange loss, net(1) (100) Realized gain on non-marketable investments, net 7 Other income, net 49 Interest & Other income, net $ 183 (1) Our foreign currency exchange losses are primarily related to the cost of our FX hedging programs.
- 14. 14 Table 1: Reconciliations of consolidated GAAP to non-GAAP costs and expenses Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Cost of Revenues (GAAP) $5,409 $6,253 $5,961 $6,114 $6,695 $6,921 $6,356 $6,583 $7,037 Less: Non-GAAP adjustments (1) (2) (133) (127) (95) (100) (547) (171) (160) (163) (231) Cost of Revenues (non-GAAP) $5,276 $6,126 $5,866 $6,014 $6,148 $6,750 $6,196 $6,420 $6,806 Research & Development (GAAP) $1,821 $1,933 $2,126 $2,238 $2,655 $2,813 $2,753 $2,789 $3,230 Less: Non-GAAP adjustments (1) (436) (466) (456) (447) (666) (631) (615) (583) (741) Research & Development (non- GAAP) $1,385 $1,467 $1,670 $1,791 $1,989 $2,182 $2,138 $2,206 $2,489 Sales & Marketing (GAAP) $1,628 $1,908 $1,729 $1,941 $2,084 $2,377 $2,065 $2,080 $2,223 Less: Non-GAAP adjustments (1) (155) (154) (147) (158) (197) (213) (205) (196) (250) Sales & Marketing (non-GAAP) $1,473 $1,754 1,582 1,783 1,887 2,164 $1,860 $1,884 $1,973 General & Administrative (GAAP) $1,135 $1,184 $1,489 $1,404 $1,365 $1,593 $1,637 $1,450 $1,477 Less: Non-GAAP adjustments (1) (132) (126) (141) (175) (223) (186) (223) (190) (210) General & Administrative (non- GAAP) $1,003 $1,058 $1,348 $1,229 $1,142 $1,407 $1,414 $1,260 $1,267 Total Costs & Expenses (GAAP) $9,993 $11,278 $11,305 $11,697 $12,799 $13,704 $12,811 $12,902 $13,967 Less: Non-GAAP adjustments (1) (856) (873) (839) (880) (1,633) (1,201) (1,203) (1,132) (1,432) Total Costs & Expenses (non- GAAP) $9,137 $10,405 $10,466 $10,817 $11,166 $12,503 $11,608 $11,770 $12,535 (1) Comprised of stock based compensation expense. (2) Q3'14 Includes a $378M impairment charge related to a patent licensing royalty asset acquired in the purchase of Motorola.
- 15. 15 (1) In the second quarter of 2015, we identified an incorrect classification of certain revenues between legal entities, and as a consequence, we revised our income tax expense for periods beginning in 2008 through the first quarter of 2015. (2) Tax effect of stock-based compensation expense is calculated using tax-deductible portion of stock-based compensation expense and applying entity-specific tax rates. ($ in millions) Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Income from operations (GAAP) $3,761 $4,429 $4,115 $4,258 $3,724 $4,399 $4,447 $4,825 $4,708 Add: Stock-based compensation expense from continuing operations $856 $873 $839 $880 $1,255 $1,201 $1,203 $1,132 $1,432 Add: Impairment charge related to a patent licensing royalty asset $— $— $— $— $378 $— $— $— $— Income from operations (non-GAAP) $4,617 $5,302 $4,954 $5,138 $5,357 $5,600 $5,650 $5,957 $6,140 ($ in millions) Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Net income (GAAP)(1) $2,921 $3,324 $3,371 $3,351 $2,739 $4,675 $3,515 $3,931 $3,979 Add: Stock-based compensation expense from continuing operations (net of tax) (2) $656 $689 $649 $685 $997 $946 $946 $898 $1,123 Add: Impairment charge related to a patent licensing royalty asset acquired in connection with the purchase of Motorola $— $— $— $— $378 $— $— $— $— Add: Net loss (income) from discontinued operations $193 $506 $198 $68 $185 $(967) $— $— $— Net income (non-GAAP)(1) $3,770 $4,519 $4,218 $4,104 $4,299 $4,654 $4,461 $4,829 $5,102 Table 2: Reconciliations of non-GAAP consolidated results of operations measures to the nearest comparable GAAP measures