Revenues of $17.7 billion and revenue growth of 11% year over year; constant
currency revenue growth of 18% year over year
Strong performance of core search business, particularly mobile, complemented by
growth in YouTube and Programmatic Advertising
GAAP and non-GAAP operating income grew 13% and 16%, respectively, year over year
GAAP diluted EPS for Class A and B common stock and Class C capital stock of $4.93
and $6.43, respectively, and non-GAAP diluted EPS of $6.99
Strong operating cash flow of $7.0 billion
MOUNTAIN VIEW, Calif. – July 16, 2015 – Google Inc. (NASDAQ: GOOG, GOOGL) today
announced financial results for the quarter ended June 30, 2015.
“Our strong Q2 results reflect continued growth across the breadth of our products,
most notably core search, where mobile stood out, as well as YouTube and programmatic
advertising”, said Ruth Porat, CFO of Google. “We are focused every day on developing
big new opportunities across a wide range of businesses. We will do so with great care
regarding resource allocation.”
Q2 2015 Financial Highlights
The following summarizes our consolidated financial results for the quarters ended June
30, 2014 and 2015 (in millions, except for per share information; unaudited):
|
|
|
|---|
|
Revenues
|
$
|
15,955
|
|
|
$
|
17,727
|
|
|
Increase in revenues year over year
|
|
22
|
%
|
|
|
11
|
%
|
|
|
|
|
|
|
|
|
|
|
Traffic acquisition costs (TAC)
|
$
|
3,293
|
|
|
$
|
3,377
|
|
|
|
|
|
|
|
|
|
|
|
GAAP operating income
|
$
|
4,258
|
|
|
$
|
4,825
|
|
|
GAAP operating margin
|
|
27
|
%
|
|
|
27
|
%
|
|
Non-GAAP operating income
|
$
|
5,138
|
|
|
$
|
5,957
|
|
|
Non-GAAP operating margin
|
|
32
|
%
|
|
|
34
|
%
|
|
|
|
|
|
|
|
|
|
|
GAAP net income*
|
$
|
3,351
|
|
|
$
|
3,931
|
|
|
Non-GAAP net income
|
$
|
4,104
|
|
|
$
|
4,829
|
|
|
|
|
|
|
|
|
|
|
|
GAAP diluted EPS for Class A and B common stock*
|
$
|
4.88
|
|
|
$
|
4.93
|
|
|
GAAP diluted EPS for Class C capital stock*
|
$
|
4.88
|
|
|
$
|
6.43
|
|
|
Non-GAAP diluted EPS for Class A and B common stock and Class C capital stock
|
|
5.98
|
|
|
$
|
6.99
|
|
|
*GAAP net income and diluted EPS include Net Loss from Discontinued Operations for
the three months ended June 30, 2014.
|
Operating income, operating margin, net income, and earnings per share (EPS) are
reported on a GAAP and non-GAAP basis. Non-GAAP operating income and non-GAAP operating
margin exclude stock-based compensation (SBC) expense from continuing operations.
Non-GAAP net income and non-GAAP diluted EPS exclude SBC expense from continuing
operations, net of the related tax benefits, as well as the impact from Net Loss from
Discontinued Operations. Non-GAAP diluted EPS also excludes the impact from the
adjustment payment to Class C capital stockholders. These non-GAAP measures, as well as
free cash flow, an alternative non-GAAP measure of liquidity, and non-GAAP constant
currency revenues and growth, are described and reconciled to the corresponding GAAP
measures at the end of this release.
Adjustment Payment in Relation to Class C Capital Stock Distribution
In May 2015, we paid $522 million to the holders of Class C capital stock in the form
of approximately 853 thousand shares of Class C capital stock and $47 million of cash
in lieu of fractional shares of Class C capital stock, in accordance with the
settlement of litigation involving the authorization to distribute Class C capital
stock (the Adjustment Payment). The Adjustment Payment was allocated to the numerator
for calculating net income per share of Class C capital stock from net income available
to all stockholders and the remaining undistributed earnings were allocated on a pro
rata basis to Class A and Class B common stock and Class C capital stock based on the
number of shares used in the per share computation for each class of stock. The
weighted-average share impact of the Adjustment Payment is included in the denominator
of both basic and diluted net income per share computations for the three and six
months ended June 30, 2015.
Q2 2015 Financial Summary
Revenues and Monetization
Revenues by source (in millions; unaudited):
|
|
|
|
|---|
|
Google websites
|
$
|
12,402
|
|
13
|
%
|
|
4
|
%
|
|
Google Network Members' websites
|
|
3,621
|
|
2
|
%
|
|
1
|
%
|
|
Total advertising revenues*
|
|
16,023
|
|
11
|
%
|
|
3
|
%
|
|
Other revenues
|
|
1,704
|
|
17
|
%
|
|
(3)
|
%
|
|
Revenues
|
$
|
17,727
|
|
11
|
%
|
|
3
|
%
|
|
*Advertising revenues are generally reported on a gross basis, consistent with
GAAP, without deducting TAC.
|
Had foreign exchange rates remained constant from the second quarter of 2014 through
the second quarter of 2015, our revenues in the second quarter of 2015 would have been
$1,103 million higher with a constant currency growth rate of 18% year over year. This
includes a foreign exchange rate impact of $1,574 million, offset by hedging gains of
$471 million related to our foreign exchange risk management program. Our constant
currency revenues are presented in the financial tables following this release as well
as in the accompanying materials on the Investor Relations website.
Paid clicks and cost-per-click information (unaudited):
|
|
|
|---|
|
Aggregate paid clicks
|
18
|
%
|
|
7
|
%
|
|
Paid clicks on Google websites
|
30
|
%
|
|
10
|
%
|
|
Paid clicks on Google Network Members' websites
|
(9)
|
%
|
|
(2)
|
%
|
|
|
|
|
|
|
|
|
Aggregate cost-per-click
|
(11)
|
%
|
|
(4)
|
%
|
|
Cost-per-click on Google websites
|
(16)
|
%
|
|
(5)
|
%
|
|
Cost-per-click on Google Network Members' websites
|
(3)
|
%
|
|
(3)
|
%
|
Costs and Expenses
Traffic acquisition costs (TAC), other cost of revenues, operating expenses,
stock-based compensation expense, and depreciation and amortization expense (in
millions; unaudited):
|
|
|
|---|
|
TAC to Google Network Members
|
$
|
2,400
|
|
|
$
|
2,432
|
|
|
TAC to distribution partners
|
$
|
893
|
|
|
$
|
945
|
|
|
Total TAC
|
$
|
3,293
|
|
|
$
|
3,377
|
|
|
|
|
|
|
|
|
|
|
|
TAC to Google Network Members as % of Google Network Members' revenues
|
|
67
|
%
|
|
|
67
|
%
|
|
TAC to distribution partners as % of Google Website revenues
|
|
8
|
%
|
|
|
8
|
%
|
|
Total TAC as % of advertising revenues
|
|
23
|
%
|
|
|
21
|
%
|
|
|
|
|
|
|
|
|
|
|
Other cost of revenues
|
$
|
2,821
|
|
|
$
|
3,206
|
|
|
Other cost of revenue as % of revenues
|
|
18
|
%
|
|
|
18
|
%
|
|
|
|
|
|
|
|
|
|
|
Operating expenses (other than cost of revenues)
|
$
|
5,583
|
|
|
$
|
6,319
|
|
|
Operating expenses as % of revenues
|
|
35
|
%
|
|
|
36
|
%
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation expense*
|
$
|
880
|
|
|
$
|
1,132
|
|
|
Tax benefit related to stock-based compensation expense
|
$
|
(195)
|
|
|
$
|
(234)
|
|
|
Depreciation, amortization, and impairment charges*
|
$
|
1,079
|
|
|
$
|
1,234
|
|
|
*Included in Cost of revenues and Operating expenses. Excludes impact from
discontinued operations for the three months ended June 30, 2014.
|
Supplemental Information (in millions except for headcount data;
unaudited)
|
|
|
|---|
|
Cash, cash equivalents, and marketable securities
|
$
|
61,204
|
|
|
$
|
69,780
|
|
|
Net cash provided by operating activities
|
$
|
5,627
|
|
|
$
|
6,985
|
|
|
Capital expenditures*
|
$
|
2,646
|
|
|
$
|
2,515
|
|
|
Free cash flow
|
$
|
2,981
|
|
|
$
|
4,470
|
|
|
Effective tax rate
|
|
22
|
%
|
|
|
21
|
%
|
|
Headcount
|
|
48,584
|
|
|
|
57,148
|
|
|
*For Q2 2015, our capital expenditures are primarily related to production
equipment and data center construction.
|
Adjustments to Previously Reported Financial Information
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 in the
cumulative amount of $711 million. The income tax amount is not material to the periods
impacted and consolidated revenues are not impacted. We have elected to revise
previously issued consolidated financial statements in our upcoming filings to correct
prior periods. Please refer to the supplementary slides posted on our Investor
Relations website for revised historical financial information.
In the first quarter of 2015, we reclassified revenues primarily related to DoubleClick
ad serving software revenues from Other revenues to Advertising revenues from Google
Network Members' Websites. Prior period amounts have been adjusted to conform with our
current period presentation.
Webcast and Conference Call Information
A live audio webcast of Google’s second quarter 2015 earnings release call will be
available at http://investor.google.com/webcast.html. The
call begins today at 1:30 PM (PT) / 4:30 PM (ET). This press release, the financial
tables, as well as other supplemental information including the reconciliations of
certain non-GAAP measures to their nearest comparable GAAP measures, are also available
on that site.
We also announce investor information, including news and commentary about our business
and financial performance, SEC filings, notices of investor events and our press and
earnings releases, on our investor relations website (http://investor.google.com).
Forward-Looking Statements
This press release may contain forward-looking statements that involve risks and
uncertainties. Actual results may differ materially from the results predicted, and
reported results should not be considered as an indication of future performance. The
potential risks and uncertainties that could cause actual results to differ from the
results predicted include, among others, those risks and uncertainties included under
the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” in our Annual Report on Form 10-K for the year
ended December 31, 2014 and our most recent Quarterly Report on Form 10-Q for the
quarter ended March 31, 2015, which are on file with the SEC and are available on our
investor relations website at investor.google.com and on the SEC website at
www.sec.gov. Additional information will also be set
forth in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2015. All
information provided in this release and in the attachments is as of July 16, 2015, and
we undertake no duty to update this information unless required by law.
About Non-GAAP Financial Measures
To supplement our consolidated financial statements, which are prepared and presented
in accordance with GAAP, we use the following non-GAAP financial measures: non-GAAP
operating income, non-GAAP operating margin, non-GAAP net income, non-GAAP diluted EPS,
free cash flow, non-GAAP constant currency revenues, and non-GAAP constant currency
revenue growth. The presentation of this financial information is not intended to be
considered in isolation or as a substitute for, or superior to, the financial
information prepared and presented in accordance with GAAP.
We use these non-GAAP financial measures for financial and operational decision-making
and as a means to evaluate period-to-period comparisons. Our management believes that
these non-GAAP financial measures provide meaningful supplemental information regarding
our performance and liquidity by excluding certain expenses and expenditures that may
not be indicative of our recurring core business operating results, such as our
revenues excluding the impact for foreign currency fluctuations or our operating
performance excluding not only non-cash charges, such as SBC, but also discrete cash
charges that are infrequent in nature. We believe that both management and investors
benefit from referring to these non-GAAP financial measures in assessing our
performance and when planning, forecasting, and analyzing future periods. These
non-GAAP financial measures also facilitate management's internal comparisons to our
historical performance and liquidity as well as comparisons to our competitors'
operating results. We believe these non-GAAP financial measures are useful to investors
both because (1) they allow for greater transparency with respect to key metrics used
by management in its financial and operational decision-making and (2) they are used by
our institutional investors and the analyst community to help them analyze the health
of our business.
For more information on these non-GAAP financial measures, please see the tables
captioned "Reconciliations of non-GAAP results of operations to the nearest comparable
GAAP measures," "Reconciliation from net cash provided by operating activities to free
cash flow," and "Reconciliation from GAAP revenues to non-GAAP constant currency
revenues" included at the end of this release.
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