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8/8/2019 Google Earnings Slides (Q3, 2010)
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Q3 2010
Quarterly EarningsSummary
8/8/2019 Google Earnings Slides (Q3, 2010)
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Third Quarter 2010 Highlights
Revenue growth of 23% Y/Y and 7% Q/Q Google properties revenue increased 22% Y/Y and 7% Q/Q
Network revenues increased 22% Y/Y and 7% Q/Q
International revenues were $3.8 billion
Operational Highlights Strong financial metrics: revenue growth, profitability and cash flow
Continuing to invest heavily in our growth agenda
Investing in People -- to attract, retain, and reward the best talent
Investing in Products -- to leverage computer science to solve big problems
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Quarterly Revenues
($inmillions)
100 182 189 197 178 186 188 209 300 258 254
3,530
1,6861,655
1,6801,693
1,638
2,036 2,063
2,199
3,8113,400
3,693 3,956
4,439 4,499$4,833
4,421
3,672 3,653
1,801
2,044
1,684
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
$4,500
$5,000
$5,500
$6,000
$6,500
$7,000
$7,500
Q1'08 Q2'08 Q3'08 Q4'08 Q1'09 Q2'09 Q3'09 Q4'09 Q1'10 Q2'10 Q3'10
Other Google.com Network
Q310 Y/Y Growth = 23%
Q310 Q/Q Growth = 7%
5,186 5,3675,541 5,701 5,509 5,523
5,945
6,674 6,7756,820
7,286
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U.S. vs. International Revenues
49% 48% 49% 50% 48% 47% 47% 47% 47% 48% 48%
51% 52% 51% 50% 52% 53% 53% 53% 53% 52% 52%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Q1'08 Q2'08 Q3'08 Q4'08 Q1'09 Q2'09 Q3'09 Q4'09 Q1'10 Q2'10 Q3'10
US International
5,186 5,367 5,541 5,701 5,509 5,523
($ in millions)
6,6745,945 6,775 6,820 7,286
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1,5591,721
1,486 1,474 1,495 1,483 1,436 1,453
1,8051,7321,711
26.6%27.1%26.9% 26.9% 27.2%
27.9%28.4%29.2%
26.4% 26.4%25.7%
$0
$100
$200
$300
$400
$500
$600
$700
$800
$900
$1,000
$1,100$1,200
$1,300
$1,400
$1,500
$1,600
$1,700
$1,800
$1,900
Q1'08 Q2'08 Q3'08 Q4'08 Q1'09 Q2'09 Q3'09 Q4'09 Q1'10 Q2'10 Q3'10
10%
15%
20%
25%
30%
35%
40%
TAC TAC as % of Advertising Revenues
Traffic Acquisition Costs
($inmillions)
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Costs and Expenses
Note: Please refer to supporting Table 1 for reconciliations of non-GAAP costs and
expenses to GAAP costs and expenses
GAAP($ in millions) Q3'09 Q2'10 Q3'10Cost of Revenues $2,226 $2,467 $2,552
Percent of revenues 37% 36% 35%
Research & Development $758 $898 $994Percent of revenues 13% 13% 14%
Sales & Marketing $498 $629 $661Percent of revenues 8% 9% 9%
General & Administrative $389 $461 $532Percent of revenues 7% 7% 7%
Total Costs & Expenses $3,871 $4,455 $4,739Percent of revenues 65% 65% 65%
Non-GAAP($ in millions) Q3'09 Q2'10 Q3'10Cost of Revenues $2,211 $2,459 $2,544
Percent of revenues 37% 36% 35%
Research & Development $562 $696 $750
Percent of revenues 10% 10% 10%
Sales & Marketing $436 $573 $586Percent of revenues 7% 8% 8%
General & Administrative $344 $418 $479Percent of revenues 6% 7% 7%
Total Costs & Expenses $3,553 $4,146 $4,359Percent of revenues 60% 61% 60%
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Profitability
Note: Please refer to supporting Table 2 for reconciliations of non-GAAP results of operations
measures to the nearest comparable GAAP measures
GAAP($ in millions except per share amounts) Q3'09 Q2'10 Q3'10
Income from Operations 2,074$ 2,365$ 2,547$
Operating Margin 35% 35% 35%
Net Income 1,639$ 1,840$ 2,167$
EPS (diluted) 5.13$ 5.71$ 6.72$
Non-GAAP
($ in millions except per share amounts) Q3'09 Q2'10 Q3'10
Income from Operations 2,392$ 2,674$ 2,927$
Operating Margin 40% 39% 40%
Net Income 1,884$ 2,079$ 2,462$
EPS (diluted) 5.89$ 6.45$ 7.64$
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Free Cash Flow
($ in millions) Q3'09 Q2'10 Q3'10
Net cash provided by
operating activities $2,726 $2,085 $2,886
Less purchases of property
and equipment ($186) ($476) ($757)
Free cash flow (non-GAAP) $2,540 $1,609 $2,129
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Overview of Q3 2010 OI&E and FX
In Interest and Other Income (Expense), Net, we recognized net income of$167M for Q3
In Q3, we recognized $172M of interest income earned on our investments and $62M inrealized gains.
We expensed $60M related to our FX cash flow hedging program.
Excluding gains related to our FX cash flow hedging program, had foreign exchange ratesremained constant from Q2 2010 through Q3 2010, our revenue in Q3 2010 would havebeen $9M lower. Excluding gains related to our FX cash flow hedging program, had foreignexchange rates remained constant from Q3 2009 through Q3 2010, our revenue in Q3 2010would have been $169M higher.
In addition, our FX cash flow hedging program allowed us to recognize a benefit ofapproximately $89M to international revenue this quarter.
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Revenues by Geography
($ in millions) Q3'09 Q2'10 Q3'10
United States $2,802 $3,288 $3,517
United Kingdom $765 $770 $840
Rest of the World $2,378 $2,762 $2,929
Total Revenues $5,945 $6,820 $7,286
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International Revenues Excluding Hedging and FX Impact (Y/Y)
($ in millions) Q3'09 Q3'10 ($ in millions) Q2'09 Q2'10UK revenues (GAAP) $765 $840 UK revenues (GAAP) $715 $770
exclude: exclude:
a) f/x impact on Q3'10 revenues using Q3'09 rates
(gains)/losses n/a 50a) f/x impact on Q2'10 revenues using Q2'09 rates
(gains)/losses n/a 5
b) hedging gains (25) (11) b) hedging gains (67) (19)
UK revenues excluding f/x and hedging impact (Non-
GAAP) $740 $879
UK revenues excluding f/x and hedging impact (Non-
GAAP) $648 $756
Y/Y % (Non-GAAP) 19% Y/Y % (Non-GAAP) 17%
($ in millions) Q3'09 Q3'10 ($ in millions) Q2'09 Q2'10
ROW revenues (GAAP) $2,378 $2,929 ROW revenues (GAAP) $2,199 $2,762
exclude: exclude:
a) f/x impact on Q3'10 revenues using Q3'09 rates
(gains)/losses n/a 119
a) f/x impact on Q2'10 revenues using Q2'09 rates
(gains)/losses n/a (29)
b) hedging gains (14) (78) b) hedging gains (57) (60)
ROW revenues excluding f/x and hedging impact
(Non-GAAP) $2,364 $2,970
ROW revenues excluding f/x and hedging impact
(Non-GAAP) $2,142 $2,673
Y/Y % (Non-GAAP) 26% Y/Y % (Non-GAAP) 25%
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International Revenues Excluding Hedging and FX Impact (Q/Q)
($ in millions) Q2'10 Q3'10 ($ in millions) Q1'10 Q2'10UK Revenues (GAAP) $770 $840 UK Revenues (GAAP) $842 $770
exclude: exclude:
a) f/x impact on Q3'10 revenues using Q2'10 rates
(gains)/losses n/a (24)
a) f/x impact on Q2'10 revenues using Q1'10 rates
(gains)/losses n/a 47b) hedging gains (19) (11) b) hedging gains (10) (19)
UK revenues excluding f/x and hedging impact (Non-
GAAP) $751 $805
UK revenues excluding f/x and hedging impact (Non-
GAAP) $832 $798
Q/Q % (Non-GAAP) 7% Q/Q % (Non-GAAP) -4%
($ in millions) Q2'10 Q3'10 ($ in millions) Q1'10 Q2'10
ROW Revenues (GAAP) $2,762 $2,929 ROW Revenues (GAAP) $2,737 $2,762exclude: exclude:
a) f/x impact on Q3'10 revenues using Q2'10 rates
(gains)/losses n/a 15
a) f/x impact on Q2'10 revenues using Q1'10 rates
(gains)/losses n/a 129b) hedging gains (60) (78) b) hedging gains - (60)
ROW revenues excluding f/x and hedging impact
(Non-GAAP) $2,702 $2,866
ROW revenues excluding f/x and hedging impact
(Non-GAAP) $2,737 $2,831
Q/Q % (Non-GAAP) 6% Q/Q % (Non-GAAP) 3%
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Table 1 - Reconciliations of non-GAAP costs and expensesto GAAP costs and expenses
($ in millions) Q3'09As a % of
Revenues (1) Q2'10As a % of
Revenues (1) Q3'10As a % of
Revenues (1)
Cost of revenues (GAAP) 2,226$ 37% 2,467$ 36% 2,552$ 35%Less: Stock-based compensation expense (15) (8) (8)
Cost of revenues (non-GAAP) 2,211$ 37% 2,459$ 36% 2,544$ 35%
Research and development (GAAP) 758$ 13% 898$ 13% 994$ 14%Less: Stock-based compensation expense (196) (202) (244)
Research and development (non-GAAP) 562$ 10% 696$ 10% 750$ 10%
Sales and marketing (GAAP) 498$ 8% 629$ 9% 661$ 9%Less: Stock-based compensation expense (62) (56) (75)
Sales and marketing (non-GAAP) 436$ 7% 573$ 8% 586$ 8%
General and administrative (GAAP) 389$ 7% 461$ 7% 532$ 7%Less: Stock-based compensation expense (45) (43) (53)
General and administrative (non-GAAP) 344$ 6% 418$ 7% 479$ 7%
Total costs and expenses (GAAP) 3,871$ 65% 4,455$ 65% 4,739$ 65%Less: Stock-based compensation expense (318) (309) (380)
Total costs and expenses (non-GAAP) 3,553$ 60% 4,146$ 61% 4,359$ 60%
(1) Percentages based on revenues of $5,945 million in Q3'09, $6,820 million in Q2'10 and $7,286 million in Q3'10.
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Table 2 - Reconciliations of non-GAAP results of operationsmeasures to the nearest comparable GAAP measures
($ in millions except per share amounts) Q3'09
Operating
Margin (1) Q2'10
Operating
Margin (1) Q3'10
Operating
Margin (1)
Income from operations (GAAP) 2,074$ 35% 2,365$ 35% 2,547$ 35%
Add: Stock-based compensation expense 318 309 380
Income from operations (non-GAAP) 2,392$ 40% 2,674$ 39% 2,927$ 40%
Net income (GAAP) 1,639$ 1,840$ 2,167$
Add: Stock-based compensation expense (ne t of tax) 245 239 295
Net income (non-GAAP) 1,884$ 2,079$ 2,462$
Net income per share - diluted (GAAP) 5.13$ 5.71$ 6.72$
Net income per share - diluted (non-GAAP) 5.89$ 6.45$ 7.64$
Shares used in per share calculation - diluted 320 322 322
(1) Percentages based on revenues of $5,945 million in Q3'09, $6,820 million in Q2'10 and $7,286 million in Q3'10.
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Q3 2010
Quarterly EarningsSummary
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