Description
2010 Q2 Google Earnings Slides
Q2 2010 Quarterly Earnings Summary
Second Quarter 2010 Highlights
• Revenue growth of 24% Y/Y and 1% Q/Q
– – –
Google properties revenue i G l ti increased 23% Y/Y and 1% Q/Q d d Network revenues increased 23% Y/Y and decreased 1% Q/Q International revenues were $3.5 billion
• Operational Highlights
– –
Strong financial metrics: revenue growth, profitability and cash flow Continuing to invest in our largest growth opportunities with the highest long-term ROI:
• • • •
Search Monetization Display Mobile Enterprise
2
Quarterly Revenues
Q2’10 Y/Y Growth = 24% Q2’10 Q/Q Growth = 1%
$7,000 $6,500 $6,000 $5,500 $5,000
6,820 6,674 6,775 5,945
2,044 1,801 2,036 2,063
5,541 5,701 5,509 5,523 5,186 5,367
1,655 1,686 1,680 1,693 1,638 1,684
($ in millions) $
$4,500 $4,000 $3,500 $3 500 $3,000 $2,500 $2,000
4,421 3,400 3 400 3,530 , 3,672 3,811 3,693 3,653 3,956
4,439
4,499
$1,500 $1,000 $500 $0 100 Q1'08
3
182 Q2'08
189 Q3'08 Other
197 Q4'08
178 Q1'09
186 Q2'09
188 Q3'09
209 Q4'09
300 Q1'10
258 Q2'10
Google.com
Network
U.S. vs. U S vs International Revenues
($ in millions)
5,186 5,367 5,541 5,701 5,509 5,523 5,945 6,674 6,775 6,820
100% 90% 80%
51%
70% 60% 50% 40% 30%
52%
51%
50%
52%
53%
53%
53%
53%
52%
49%
20% 10% 0% Q1'08
48%
49%
50%
48%
47%
47%
47%
47%
48%
Q2'08
Q3'08
Q4'08
Q1'09
Q2'09
Q3'09
Q4'09
Q1'10
Q2'10
US
4
International
Traffic Acquisition Costs
$1,800 $ , $1,700 $1,600 $1,500 $1,400 $1,300 $1,200 $1,100 $1,000 $900 $800 $700 $600 $500 $ $400 $300 $200 $100 $0 Q1'08 Q2'08 Q3'08 Q4'08 Q1'09 Q2'09 Q3'09 Q4'09 Q1'10 Q2'10
TAC
5
40%
35%
29.2% 29 2%
28.4% 27.9%
30% 26.9% 26.9% 27.2% 27.1% 26.6% 26.4% 26.4% 1,721 1,711 1,732 25%
($ in millions)
1,486
1,474 1,495
1,483
1,436
1,453
1,559 1 559 20%
15%
10%
TAC as % of Advertising Revenues
Costs and Expenses
GAAP ( ($ in millions) )
Cost of Revenues
Percent of revenues
Q2'09
$2,108
38%
Q1'10
$2,452
36%
Q2'10
$2,467
36%
Research & Development
Percent of revenues
$708
13%
$818
12%
$898
13%
Sales & Marketing
Percent of revenues
$469
8%
$607
9%
$629
9%
General & Administrative
Percent of revenues
$364
7%
$410
6%
$461
7%
Total Costs & Expenses
Percent of revenues
$3,649
66%
$4,287
63%
$4,455
65%
Non-GAAP ($ in millions)
Cost of Revenues
Percent of revenues
Q2'09
$2,094
38%
Q1'10
$2,446
36%
Q2'10
$2,459
36%
Research & Development
Percent of revenues
$526
10%
$627
9%
$696
10%
Sales & Marketing
Percent of revenues
$412
7%
$553
8%
$573
8%
General & Administrative
Percent of revenues
$324
6%
$370
6%
$418
7%
Total Costs & Expenses
Percent of revenues
$3,356
61%
$3,996
59%
$4,146
61%
Note: Please refer to supporting Table 1 for reconciliations of non-GAAP costs and expenses to GAAP costs and expenses
6
Profitability
GAAP ($ in millions except per share amounts) Income from Operations Operating Margin Net Income EPS (diluted) Non-GAAP ($ in millions except per share amounts) i illi t h t ) Income from Operations Operating Margin Net Income EPS (diluted)
$ $ $ $ $ $
Q2'09
1,874 34% 1,485 4.66 $ $ $
Q1'10
2,488 37% 1,955 6.06 $ $ $
Q2'10
2,365 35% 1,840 5.71
Q2'09
2,167 39% 1,708 5.36 $ $ $
Q1'10
2,779 41% 2,181 6.76 $ $ $
Q2'10
2,674 39% 2,079 6.45
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
Free Cash Flow
($ in millions) Net cash provided by operating activities Less purchases of property and equipment q p
Q2'09
$1,609
Q1'10
$2,584
Q2'10
$2,085
($ ($139) )
($ ($239) )
($ ($476) )
Free cash flow (Non-GAAP)
$1,470
$2,345
$1,609
8
Overview of Q2 2010 OI&E and FX
In Interest Income and Other (Expense), Net, we recognized net income of $69M for Q2
• In Q2, we recognized $136M of interest income earned on our investments and $43M in realized gains. • In Q2, a greater portion of our option portfolio was in the money as foreign exchange rates moved farther away from the option strike prices in Q2. As a result, we expensed $100M 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 Q1 2010 through Q2 2010, our revenue in Q2 would have been $176M higher. Excluding gains related to our FX cash flow hedging program, had foreign exchange rates remained constant from Q2 2009 through Q2 2010, our revenue in Q2 2010 would h ld have b been $24M l lower. • In addition, our FX cash flow hedging program allowed us to recognize a benefit of approximately $79M to international revenue this quarter.
9
Revenues by Geography
($ in millions) United St t U it d States United Kingdom Rest of the World Total Revenues
Q2'09
$2,609 $715 $2,199 $5,523
Q1'10
$3,196 $842 $2,737 $6,775
Q2'10
$3,288 $770 $2,762 $6,820
10
International Revenues Excluding Hedging and FX Impact (Y/Y)
($ in millions) UK revenues (GAAP) ( ) exclude: a) f/x impact on Q2'10 revenues using Q2'09 rates (gains)/losses b) hedging gains UK revenues excluding f/x and hedging impact (NonGAAP) Y/Y % (Non-GAAP)
n/a (67) 5 (19)
Q2'09 Q2'10
$715 $770
($ in millions) UK revenues (GAAP) ( ) exclude: a) f/x impact on Q1'10 revenues using Q1'09 rates (gains)/losses b) hedging gains UK revenues excluding f/x and hedging impact (NonGAAP) Y/Y % (Non-GAAP)
Q1'09 Q1'10
$733 $842
n/a (82)
(72) (10)
$648
$756 17%
$651
$760 17%
($ in millions) ROW revenues (GAAP) exclude: a) f/x impact on Q2'10 revenues using Q2'09 rates (gains)/losses b) hedging gains ROW revenues excluding f/x and hedging impact (Non-GAAP) Y/Y % (Non-GAAP)
11
Q2'09 Q2'10
$2,199 $2,762
($ in millions) ROW revenues (GAAP) exclude: a) f/x impact on Q1'10 revenues using Q1'09 rates (gains)/losses b) hedging gains ROW revenues excluding f/x and hedging impact (Non-GAAP) Y/Y % (Non-GAAP)
Q1'09 Q1'10
$2,149 $2,737
n/a (57)
(29) (60)
n/a (72)
(170) -
$2,142 $2,673 25%
$2,077 $2,567 24%
International Revenues Excluding Hedging and FX Impact (Q/Q)
($ in millions) UK Revenues (GAAP) exclude: a) f/x impact on Q2'10 revenues using Q1'10 rates (gains)/losses b) hedging gains UK revenues excluding f/x and hedging impact (NonGAAP) Q/Q % (Non-GAAP)
n/a (10) $832 47 (19) $798 -4%
Q1'10 Q2'10
$842 $770
($ in millions) UK Revenues (GAAP) exclude: a) f/x impact on Q1'10 revenues using Q4'09 rates (gains)/losses b) hedging gains UK revenues excluding f/x and hedging impact (NonGAAP) Q/Q % (Non-GAAP)
Q4'09 Q1'10
$772 $842
n/a (8) $764
20 (10) $852 12%
($ in millions) ROW Revenues (GAAP) exclude: a) f/x impact on Q2'10 revenues using Q1'10 rates (gains)/losses b) hedging gains ROW revenues excluding f/x and hedging impact ( (Non-GAAP) ) Q/Q % (Non-GAAP)
12
Q1'10 Q2'10
$2,737 $2,762
($ in millions) ROW Revenues (GAAP) exclude: a) f/x impact on Q1'10 revenues using Q4'09 rates (gains)/losses b) hedging gains ROW revenues excluding f/x and hedging impact ( (Non-GAAP) ) Q/Q % (Non-GAAP)
Q4'09 Q1'10
$2,747 $2,737
n/a -
129 (60)
n/a -
92 -
$2,737 $2,831 3%
$2,747 $2,829 3%
Table 1 - Reconciliations of non-GAAP costs and expenses to GAAP costs and expenses
($ in millions) Cost of revenues (GAAP) Less: Stock-based compensation expense Cost of revenues (non-GAAP) Research and development (GAAP) Less: Stock-based compensation expense Research and development (non GAAP) (non-GAAP) Sales and marketing (GAAP) Less: Stock-based compensation expense Sales and marketing (non-GAAP) General and administrative (GAAP) Less: Stock-based compensation expense General and administrative (non-GAAP) Total costs and expenses (GAAP) Less: Stock-based compensation expense Total T t l costs and expenses (non-GAAP) t d ( GAAP) $ $ $ $ $ $ $ $ $ $ Q2'09 2,108 2 108 (14) 2,094 708 (182) 526 469 (57) 412 364 (40) 324 3,649 (293) 3,356 3 356 As a % of Revenues (1) 38% $ 38% $ 13% $ 10% $ 8% $ 7% $ 7% $ 6% $ 66% $ 61% $ Q1'10 2,452 2 452 (6) 2,446 818 (191) 627 607 (54) 553 410 (40) 370 4,287 (291) 3,996 3 996 As a % of Revenues (1) 36% $ 36% $ 12% $ 9% $ 9% $ 8% $ 6% $ 6% $ 63% $ 59% $ Q2'10 2,467 2 467 (8) 2,459 898 (202) 696 629 (56) 573 461 (43) 418 4,455 (309) 4,146 4 146 As a % of Revenues (1) 36% 36% 13% 10% 9% 8% 7% 7% 65% 61%
(1) Percentages based on revenues of $5,523 million in Q2'09, $6,775 million in Q1'10 and $6,820 million in Q2'10.
13
Table 2 - Reconciliations of non-GAAP results of operations measures to the nearest comparable GAAP measures
($ in millions except per share amounts) Income from operations (GAAP) Add: Stock-based compensation expense Add S k b d i Income from operations (non-GAAP) Net income (GAAP) Add: Stock-based compensation expense (net of tax) Net income (non GAAP) (non-GAAP) Net income per share - diluted (GAAP) Net income per share - diluted (non-GAAP) Shares used in per share calculation - diluted $ $ $ $ $ $
Q2'09 1,874 293 2,167 1,485 223 1,708 4.66 5.36 319
Operating Margin (1) 34% $ 39% $ $ $ $ $
Q1'10 2,488 291 2,779 1,955 226 2,181 6.06 6.76 323
Operating Margin (1) 37% $ 41% $ $ $ $ $
Q2'10 2,365 309 2,674 1,840 239 2,079 5.71 6.45 322
Operating Margin (1) 35% 39%
(1) Percentages based on revenues of $5 523 million in Q2 09, $6 775 million in Q1 10 and $6 820 million in Q2 10. $5,523 Q2'09 $6,775 Q1'10 $6,820 Q2'10
14
Q2 2010 Quarterly Earnings Summary
doc_281467835.pdf
2010 Q2 Google Earnings Slides
Q2 2010 Quarterly Earnings Summary
Second Quarter 2010 Highlights
• Revenue growth of 24% Y/Y and 1% Q/Q
– – –
Google properties revenue i G l ti increased 23% Y/Y and 1% Q/Q d d Network revenues increased 23% Y/Y and decreased 1% Q/Q International revenues were $3.5 billion
• Operational Highlights
– –
Strong financial metrics: revenue growth, profitability and cash flow Continuing to invest in our largest growth opportunities with the highest long-term ROI:
• • • •
Search Monetization Display Mobile Enterprise
2
Quarterly Revenues
Q2’10 Y/Y Growth = 24% Q2’10 Q/Q Growth = 1%
$7,000 $6,500 $6,000 $5,500 $5,000
6,820 6,674 6,775 5,945
2,044 1,801 2,036 2,063
5,541 5,701 5,509 5,523 5,186 5,367
1,655 1,686 1,680 1,693 1,638 1,684
($ in millions) $
$4,500 $4,000 $3,500 $3 500 $3,000 $2,500 $2,000
4,421 3,400 3 400 3,530 , 3,672 3,811 3,693 3,653 3,956
4,439
4,499
$1,500 $1,000 $500 $0 100 Q1'08
3
182 Q2'08
189 Q3'08 Other
197 Q4'08
178 Q1'09
186 Q2'09
188 Q3'09
209 Q4'09
300 Q1'10
258 Q2'10
Google.com
Network
U.S. vs. U S vs International Revenues
($ in millions)
5,186 5,367 5,541 5,701 5,509 5,523 5,945 6,674 6,775 6,820
100% 90% 80%
51%
70% 60% 50% 40% 30%
52%
51%
50%
52%
53%
53%
53%
53%
52%
49%
20% 10% 0% Q1'08
48%
49%
50%
48%
47%
47%
47%
47%
48%
Q2'08
Q3'08
Q4'08
Q1'09
Q2'09
Q3'09
Q4'09
Q1'10
Q2'10
US
4
International
Traffic Acquisition Costs
$1,800 $ , $1,700 $1,600 $1,500 $1,400 $1,300 $1,200 $1,100 $1,000 $900 $800 $700 $600 $500 $ $400 $300 $200 $100 $0 Q1'08 Q2'08 Q3'08 Q4'08 Q1'09 Q2'09 Q3'09 Q4'09 Q1'10 Q2'10
TAC
5
40%
35%
29.2% 29 2%
28.4% 27.9%
30% 26.9% 26.9% 27.2% 27.1% 26.6% 26.4% 26.4% 1,721 1,711 1,732 25%
($ in millions)
1,486
1,474 1,495
1,483
1,436
1,453
1,559 1 559 20%
15%
10%
TAC as % of Advertising Revenues
Costs and Expenses
GAAP ( ($ in millions) )
Cost of Revenues
Percent of revenues
Q2'09
$2,108
38%
Q1'10
$2,452
36%
Q2'10
$2,467
36%
Research & Development
Percent of revenues
$708
13%
$818
12%
$898
13%
Sales & Marketing
Percent of revenues
$469
8%
$607
9%
$629
9%
General & Administrative
Percent of revenues
$364
7%
$410
6%
$461
7%
Total Costs & Expenses
Percent of revenues
$3,649
66%
$4,287
63%
$4,455
65%
Non-GAAP ($ in millions)
Cost of Revenues
Percent of revenues
Q2'09
$2,094
38%
Q1'10
$2,446
36%
Q2'10
$2,459
36%
Research & Development
Percent of revenues
$526
10%
$627
9%
$696
10%
Sales & Marketing
Percent of revenues
$412
7%
$553
8%
$573
8%
General & Administrative
Percent of revenues
$324
6%
$370
6%
$418
7%
Total Costs & Expenses
Percent of revenues
$3,356
61%
$3,996
59%
$4,146
61%
Note: Please refer to supporting Table 1 for reconciliations of non-GAAP costs and expenses to GAAP costs and expenses
6
Profitability
GAAP ($ in millions except per share amounts) Income from Operations Operating Margin Net Income EPS (diluted) Non-GAAP ($ in millions except per share amounts) i illi t h t ) Income from Operations Operating Margin Net Income EPS (diluted)
$ $ $ $ $ $
Q2'09
1,874 34% 1,485 4.66 $ $ $
Q1'10
2,488 37% 1,955 6.06 $ $ $
Q2'10
2,365 35% 1,840 5.71
Q2'09
2,167 39% 1,708 5.36 $ $ $
Q1'10
2,779 41% 2,181 6.76 $ $ $
Q2'10
2,674 39% 2,079 6.45
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
Free Cash Flow
($ in millions) Net cash provided by operating activities Less purchases of property and equipment q p
Q2'09
$1,609
Q1'10
$2,584
Q2'10
$2,085
($ ($139) )
($ ($239) )
($ ($476) )
Free cash flow (Non-GAAP)
$1,470
$2,345
$1,609
8
Overview of Q2 2010 OI&E and FX
In Interest Income and Other (Expense), Net, we recognized net income of $69M for Q2
• In Q2, we recognized $136M of interest income earned on our investments and $43M in realized gains. • In Q2, a greater portion of our option portfolio was in the money as foreign exchange rates moved farther away from the option strike prices in Q2. As a result, we expensed $100M 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 Q1 2010 through Q2 2010, our revenue in Q2 would have been $176M higher. Excluding gains related to our FX cash flow hedging program, had foreign exchange rates remained constant from Q2 2009 through Q2 2010, our revenue in Q2 2010 would h ld have b been $24M l lower. • In addition, our FX cash flow hedging program allowed us to recognize a benefit of approximately $79M to international revenue this quarter.
9
Revenues by Geography
($ in millions) United St t U it d States United Kingdom Rest of the World Total Revenues
Q2'09
$2,609 $715 $2,199 $5,523
Q1'10
$3,196 $842 $2,737 $6,775
Q2'10
$3,288 $770 $2,762 $6,820
10
International Revenues Excluding Hedging and FX Impact (Y/Y)
($ in millions) UK revenues (GAAP) ( ) exclude: a) f/x impact on Q2'10 revenues using Q2'09 rates (gains)/losses b) hedging gains UK revenues excluding f/x and hedging impact (NonGAAP) Y/Y % (Non-GAAP)
n/a (67) 5 (19)
Q2'09 Q2'10
$715 $770
($ in millions) UK revenues (GAAP) ( ) exclude: a) f/x impact on Q1'10 revenues using Q1'09 rates (gains)/losses b) hedging gains UK revenues excluding f/x and hedging impact (NonGAAP) Y/Y % (Non-GAAP)
Q1'09 Q1'10
$733 $842
n/a (82)
(72) (10)
$648
$756 17%
$651
$760 17%
($ in millions) ROW revenues (GAAP) exclude: a) f/x impact on Q2'10 revenues using Q2'09 rates (gains)/losses b) hedging gains ROW revenues excluding f/x and hedging impact (Non-GAAP) Y/Y % (Non-GAAP)
11
Q2'09 Q2'10
$2,199 $2,762
($ in millions) ROW revenues (GAAP) exclude: a) f/x impact on Q1'10 revenues using Q1'09 rates (gains)/losses b) hedging gains ROW revenues excluding f/x and hedging impact (Non-GAAP) Y/Y % (Non-GAAP)
Q1'09 Q1'10
$2,149 $2,737
n/a (57)
(29) (60)
n/a (72)
(170) -
$2,142 $2,673 25%
$2,077 $2,567 24%
International Revenues Excluding Hedging and FX Impact (Q/Q)
($ in millions) UK Revenues (GAAP) exclude: a) f/x impact on Q2'10 revenues using Q1'10 rates (gains)/losses b) hedging gains UK revenues excluding f/x and hedging impact (NonGAAP) Q/Q % (Non-GAAP)
n/a (10) $832 47 (19) $798 -4%
Q1'10 Q2'10
$842 $770
($ in millions) UK Revenues (GAAP) exclude: a) f/x impact on Q1'10 revenues using Q4'09 rates (gains)/losses b) hedging gains UK revenues excluding f/x and hedging impact (NonGAAP) Q/Q % (Non-GAAP)
Q4'09 Q1'10
$772 $842
n/a (8) $764
20 (10) $852 12%
($ in millions) ROW Revenues (GAAP) exclude: a) f/x impact on Q2'10 revenues using Q1'10 rates (gains)/losses b) hedging gains ROW revenues excluding f/x and hedging impact ( (Non-GAAP) ) Q/Q % (Non-GAAP)
12
Q1'10 Q2'10
$2,737 $2,762
($ in millions) ROW Revenues (GAAP) exclude: a) f/x impact on Q1'10 revenues using Q4'09 rates (gains)/losses b) hedging gains ROW revenues excluding f/x and hedging impact ( (Non-GAAP) ) Q/Q % (Non-GAAP)
Q4'09 Q1'10
$2,747 $2,737
n/a -
129 (60)
n/a -
92 -
$2,737 $2,831 3%
$2,747 $2,829 3%
Table 1 - Reconciliations of non-GAAP costs and expenses to GAAP costs and expenses
($ in millions) Cost of revenues (GAAP) Less: Stock-based compensation expense Cost of revenues (non-GAAP) Research and development (GAAP) Less: Stock-based compensation expense Research and development (non GAAP) (non-GAAP) Sales and marketing (GAAP) Less: Stock-based compensation expense Sales and marketing (non-GAAP) General and administrative (GAAP) Less: Stock-based compensation expense General and administrative (non-GAAP) Total costs and expenses (GAAP) Less: Stock-based compensation expense Total T t l costs and expenses (non-GAAP) t d ( GAAP) $ $ $ $ $ $ $ $ $ $ Q2'09 2,108 2 108 (14) 2,094 708 (182) 526 469 (57) 412 364 (40) 324 3,649 (293) 3,356 3 356 As a % of Revenues (1) 38% $ 38% $ 13% $ 10% $ 8% $ 7% $ 7% $ 6% $ 66% $ 61% $ Q1'10 2,452 2 452 (6) 2,446 818 (191) 627 607 (54) 553 410 (40) 370 4,287 (291) 3,996 3 996 As a % of Revenues (1) 36% $ 36% $ 12% $ 9% $ 9% $ 8% $ 6% $ 6% $ 63% $ 59% $ Q2'10 2,467 2 467 (8) 2,459 898 (202) 696 629 (56) 573 461 (43) 418 4,455 (309) 4,146 4 146 As a % of Revenues (1) 36% 36% 13% 10% 9% 8% 7% 7% 65% 61%
(1) Percentages based on revenues of $5,523 million in Q2'09, $6,775 million in Q1'10 and $6,820 million in Q2'10.
13
Table 2 - Reconciliations of non-GAAP results of operations measures to the nearest comparable GAAP measures
($ in millions except per share amounts) Income from operations (GAAP) Add: Stock-based compensation expense Add S k b d i Income from operations (non-GAAP) Net income (GAAP) Add: Stock-based compensation expense (net of tax) Net income (non GAAP) (non-GAAP) Net income per share - diluted (GAAP) Net income per share - diluted (non-GAAP) Shares used in per share calculation - diluted $ $ $ $ $ $
Q2'09 1,874 293 2,167 1,485 223 1,708 4.66 5.36 319
Operating Margin (1) 34% $ 39% $ $ $ $ $
Q1'10 2,488 291 2,779 1,955 226 2,181 6.06 6.76 323
Operating Margin (1) 37% $ 41% $ $ $ $ $
Q2'10 2,365 309 2,674 1,840 239 2,079 5.71 6.45 322
Operating Margin (1) 35% 39%
(1) Percentages based on revenues of $5 523 million in Q2 09, $6 775 million in Q1 10 and $6 820 million in Q2 10. $5,523 Q2'09 $6,775 Q1'10 $6,820 Q2'10
14
Q2 2010 Quarterly Earnings Summary
doc_281467835.pdf