2010 Q2 Google Earnings Slides

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Q2 2010

Summary



• Revenue growth of 24% Y/Y and 1% Q/Q – oog e proper es revenue ncrease an

– 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

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$7,000

Q2’10 Y/Y Growth = 24%Q2’10 Q/Q Growth = 1%

6 674 6,775 6,820

2,036 2,0632,044

$5,500

$6,000

$6,500

5,186 5,3675,541 5,701

5,509 5,523

5,945

i n m

i l l i o n s )

1,6861,655

1,6801,693

1,638

1,801

1,684

$4,000

$4,500

$5,000

( $

3,5303,811 3,693

3,956

4,439 4,4994,421

3,672 3,653$2,000

$2,500

$3,000

,

,

$500

$1,000

$1,500

3

100 182 189 197 178 186 188 209 258$0

Q1'08 Q2'08 Q3'08 Q4'08 Q1'09 Q2'09 Q3'09 Q4'09 Q1'10 Q2'10

Other Google.com Network



. . .

100%

5,186 5,367 5,541 5,701 5,509 5,523($ in millions)

6,6745,945 6,775 6,820

51% 52% 51% 50% 52% 52%

80%

90%

50%

60%

70%

30%

40%

10%

20%

4

0%

Q1'08 Q2'08 Q3'08 Q4'08 Q1'09 Q2'09 Q3'09 Q4'09 Q1'10 Q2'10

US International



$1,700

$1,800 40%

$1,300

$1,400

$1,500

$1,600

35%

1,721 1,7321,711

26.6%27.1%26.9% 26.9% 27.2%27.9%28.4%

.

26.4% 26.4%

$900

$1,000

$1,100

$1,200

25%

30%

n m i

l l i o n s )

1,5591,486 1,474 1,495 1,483 1,436 1,453

$400

$500

$600

$700

20%

( $ i

$0

$100

$200

$300

10%

15%

5

Q1'08 Q2'08 Q3'08 Q4'08 Q1'09 Q2'09 Q3'09 Q4'09 Q1'10 Q2'10

TAC TAC as % of Advertising Revenues



GAAP

($ in millions) Q2'09 Q1'10 Q2'10Cost of Revenues $2,108 $2,452 $2,467

Percent of revenues 38% 36% 36% Research & Development $708 $818 $898

Percent of revenues 13% 12% 13%

Sales & Marketing $469 $607 $629

General & Administrative $364 $410 $461Percent of revenues 7% 6% 7%

Total Costs & Expenses $3,649 $4,287 $4,455


-

($ in millions) Q2'09 Q1'10 Q2'10Cost of Revenues $2,094 $2,446 $2,459


Research & Development $526 $627 $696Percent of revenues 10% 9% 10%

Sales & Marketing $412 $553 $573Percent of revenues 7% 8% 8%

General & Administrative $324 $370 $418Percent of revenues 6% 6% 7%

Total Costs & Expenses $3,356 $3,996 $4,146

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Note: Please refer to supporting Table 1 for reconciliations of non-GAAP costs and

expenses to GAAP costs and expenses



GAAP

($ in millions except per share amounts) Q2'09 Q1'10 Q2'10

Income from Operations 1,874$ 2,488$ 2,365$

Operating Margin 34% 37% 35%

Net Income 1,485$ 1,955$ 1,840$

EPS (diluted) 4.66$ 6.06$ 5.71$

Non-GAAPn m ons excep per s are amoun s

Income from Operations 2,167$ 2,779$ 2,674$

Operating Margin 39% 41% 39%

Note: Please refer to su ortin Table 2 for reconciliations of non-GAAP results of o erations

Net Income 1,708$ 2,181$ 2,079$

EPS (diluted) 5.36$ 6.76$ 6.45$

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measures to the nearest comparable GAAP measures



($ in millions) Q2'09 Q1'10 Q2'10

Net cash provided by

operating activities $1,609 $2,584 $2,085

Less purchases of propertyand e ui ment $139 $239 $476

Free cash flow (Non-GAAP) $1,470 $2,345 $1,609

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In Interest Income and Other (Expense), Net, we recognized net income of

• In Q2, we recognized $136M of interest income earned on our investments and $43M inrealized gains.

• In Q2, a greater portion of our option portfolio was in the money as foreign exchange ratesmoved 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 ratesremained 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 foreignexchange rates remained constant from Q2 2009 through Q2 2010, our revenue in Q2 2010

wou ave een ower.

• In addition, our FX cash flow hedging program allowed us to recognize a benefit ofapproximately $79M to international revenue this quarter.

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($ in millions) Q2'09 Q1'10 Q2'10

n te tates $2,609 $3,196 $3,288

United Kingdom $715 $842 $770

Rest of the World $2,199 $2,737 $2,762

Total Revenues $5,523 $6,775 $6,820

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($ in millions) Q2'09 Q2'10 ($ in millions) Q1'09 Q1'10

UK revenues (GAAP) $715 $770 UK revenues (GAAP) $733 $842

exclude: exclude:

a) f/x impact on Q2'10 revenues using Q2'09 rates

(gains)/losses n/a 5


(gains)/losses n/a (72)

b) hedging gains (67) (19) b) hedging gains (82) (10)

UK revenues excluding f/x and hedging impact (Non-

GAAP) $648 $756


GAAP) $651 $760

Y/Y % (Non-GAAP) 17% Y/Y % (Non-GAAP) 17%


ROW revenues (GAAP) $2,199 $2,762 ROW revenues (GAAP) $2,149 $2,737

exclude: exclude:

a) f/x impact on Q2'10 revenues using Q2'09 rates(gains)/losses n/a (29)

a) f/x impact on Q1'10 revenues using Q1'09 rates(gains)/losses n/a (170)

b) hedging gains (57) (60) b) hedging gains (72) -

ROW revenues excluding f/x and hedging impact ROW revenues excluding f/x and hedging impact

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(Non-GAAP) $2,142 $2,673 (Non-GAAP) $2,077 $2,567

Y/Y % (Non-GAAP) 25% Y/Y % (Non-GAAP) 24%




UK Revenues (GAAP) $842 $770 UK Revenues (GAAP) $772 $842

exclude: exclude:





b) hedging gains (10) (19) b) hedging gains (8) (10)


GAAP) $832 $798


GAAP) $764 $852

Q/Q % (Non-GAAP) -4% Q/Q % (Non-GAAP) 12%

($ in millions) Q1'10 Q2'10 ($ in millions) Q4'09 Q1'10ROW Revenues (GAAP) $2,737 $2,762 ROW Revenues (GAAP) $2,747 $2,737

exclude: exclude:

a) f/x impact on Q2'10 revenues using Q1'10 rates(gains)/losses n/a 129

a) f/x impact on Q1'10 revenues using Q4'09 rates(gains)/losses n/a 92

b) hedging gains - (60) b) hedging gains - -

ROW revenues excluding f/x and hedging impact

(Non-GAAP) $2,737 $2,831

ROW revenues excluding f/x and hedging impact

(Non-GAAP) $2,747 $2,829

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Q/Q % (Non-GAAP) 3% Q/Q % (Non-GAAP) 3%



Table 1 - Reconciliations of non-GAAP costs and expenses

($ in millions) Q2'09

As a % of

Revenues (1) Q1'10

As a % of

Revenues (1) Q2'10

As a % of

Revenues (1)

, , ,

Less: Stock-based compensation expense (14) (6) (8)

Cost of revenues (non-GAAP) 2,094$ 38% 2,446$ 36% 2,459$ 36%

Research and development (GAAP) 708$ 13% 818$ 12% 898$ 13%


esearc an eve opmen non-

Sales and marketing (GAAP) 469$ 8% 607$ 9% 629$ 9%


Sales and marketing (non-GAAP) 412$ 7% 553$ 8% 573$ 8%


General and administrative (non-GAAP) 324$ 6% 370$ 6% 418$ 7%

Total costs and expenses (GAAP) 3,649$ 66% 4,287$ 63% 4,455$ 65%


o a cos s an expenses non- 3,356 61% 3,996 59% 4,146 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.

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Table 2 - Reconciliations of non-GAAP results of operations

($ in millions except per share amounts) Q2'09

Operating

Margin (1) Q1'10

Operating

Margin (1) Q2'10

Operating

Margin (1)

Income from operations (GAAP) 1,874$ 34% 2,488$ 37% 2,365$ 35%Add: Stock-based compensation expense 293 291 309

Income from operations (non-GAAP) 2,167$ 39% 2,779$ 41% 2,674$ 39%

Net income (GAAP) 1,485$ 1,955$ 1,840$

Add: Stock-based compensation expense (net of tax) 223 226 239 Net income non-GAAP 1 708 2 181 2 079

Net income per share - diluted (GAAP) 4.66$ 6.06$ 5.71$

Net income per share - diluted (non-GAAP) 5.36$ 6.76$ 6.45$

Shares used in per share calculation - diluted 319 323 322

' ' ', , , , .

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Q2 2010

Summary

2010 Q2 Google Earnings Slides

Documents

Transcript of 2010 Q2 Google Earnings Slides