- Google reported quarterly revenues of $17.7 billion for Q2 2015, an increase of 11% year-over-year and 3% quarter-over-quarter. The majority of revenues came from advertising.
- By geography, 45% of revenues came from the US, 45% from the rest of the world, and 10% from the UK.
- On a non-GAAP basis, operating income was $5.96 billion for a 34% operating margin, higher than the previous year.
2. 2
Revenues by Revenue Source(1)
Other Google Sites Network
$25,000
$20,000
$15,000
$10,000
$5,000
$0
Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15
926 1,100
1,501 1,423 1,457 1,703 1,794 1,750 1,704
8,868
9,376
10,538 10,469 10,935
11,252
12,429 11,932 12,402
3,313
13,107
3,278
13,754
3,668
15,707
3,528
15,420
3,563
15,955
3,568
16,523
3,880
18,103
3,576
17,258
3,621
17,727
Quarterly Revenues
Y/Y Change = 11%
Q/Q Change = 3%
($ in millions)
Revenues by Geography(2)
US Rest of the world UK
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15
47% 46% 46% 45% 44% 44%
46% 45% 45%
43% 44% 44% 45% 46% 46% 45% 45% 45%
10% 10% 10% 10% 10% 10% 9% 10% 10%
15,955 17,72713,107 13,754 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 prior periods. Please refer to Table 3 at the end of the slide deck for revised historical financial information.
($ in millions)
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%
Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15
3,013 2,972
3,311
3,232 3,293 3,348
3,624
3,345 3,377
24.7%
23.5% 23.3% 23.1%
22.7% 22.6%
22.2%
21.6%
21.1%
(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
Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15
5,195
5,409
6,253
5,961 6,114
6,695
6,921
6,356
6,583
1,766
1,821
1,933 2,126
2,238
2,655
2,813
2,753
2,789
1,583
1,628
1,908 1,729
1,941
2,084
2,377
2,065
2,080
1,098
9,642
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
Cost of Revenues Research and Development
Sales and Marketing General and Administrative
As a % of Revenues
100%
80%
60%
40%
20%
0%
Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15
40% 39% 40% 39% 38%
40%
38% 37% 37%
13% 13% 12% 14% 14%
16%
16% 16% 16%
12% 12% 12% 11% 12%
13%
13%
12% 12%
9%
74
9%
73
8%
72
9%
73
9%
73
8%
77
9%
76
9%
74
8%
73% % % % %
% %
% %
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
$0
Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15
5,085
5,276
6,126
5,866 6,014 6,148
6,750
6,196
6,4201,365
1,385
1,467 1,670
1,791
1,989
2,182
2,138
2,206
1,458
1,473
1,754 1,582
1,783
1,887
2,164
1,860
1,884
991
8,899
1,003
9,137
1,058
10,405
1,348
10,466
1,229
10,817
1,142
11,166
1,407
12,503
1,414
11,608
1,260
11,770
Cost of Revenues Research and Development
Sales and Marketing General and Administrative
As a % of Revenues
80%
60%
40%
20%
0%
Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15
39% 38% 39% 38% 38% 37% 37% 36% 36%
10% 10% 9% 11% 11% 12% 12% 12% 12%
11% 11% 11% 10% 11% 11% 12%
11% 11%
8%
68
7%
66
7%
66
9%
68
8%
68
8%
68
8%
69
8%
67
7%
66
For reconciliation of GAAP to non-GAAP costs and expenses, please refer to Table 1 at the end of the slide deck.
%
% %
% % %
%
%
%
6. 6
Operating Income ($ in millions) Operating Margin (%)
GAAP
$5,000
$4,500
$4,000
$3,500
$3,000
$2,500
$2,000
$1,500
$1,000
$500
$0
(inmillions)
50%
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15
3,465
3,761
4,429
4,115
4,258
3,724
4,399 4,447
4,825
26%
27%
28%
27% 27%
23%
24%
26%
27%
Operating income ($ 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
$0
(inmillions)
50%
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15
4,208
4,617
5,302
4,954
5,138
5,357
5,600 5,650
5,957
32%
34% 34%
32% 32% 32%
31%
33%
34%
Operating Income and Operating Margin
For reconciliation of GAAP to non-GAAP operating income, please refer to Table 2 at the end of the slide deck.
7. 7
GAAP Net income ($ 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
$0
Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15
3,186
2,921
3,324 3,371 3,351
2,739
4,675
3,515
3,931
4.71
4.31
4.87 4.92 4.88
3.98
6.79
5.10
4.93
6.43
Non-GAAP Net income ($ 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
Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15
3,315
3,770
4,519
4,218
4,104
4,299
4,654
4,461
4,829
4.90
5.56
6.63
6.16
5.98
6.25
6.76
6.47
6.99
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. Please refer to Table 3 at the end of the slide deck for revised historical financial information.
(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.
8. 8
Constant Currency Q2'15 Revenues Using Q2'14 Rates (Y/Y)
UK Revenues
2,000
1,500
1,000
500
0
$(Millions)
Constant Currency
Revenues
Foreign exchange impact Hedging benefit GAAP revenues
1,791
(167)
54 1,678
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
8,991
(1,407)
417 8,001
Constant Currency Revenue
Growth rate(1)
= 11%
Constant Currency Revenue
Growth rate(2)
= 22%
(1)
Constant currency growth rate is calculated as Q2'15 constant currency revenues of $1,791M compared with Q2'14 revenues of $1,616M (UK GAAP revenue of $1,616M
less hedging benefit of $0M).
(2)
Constant currency growth rate is calculated as Q2'15 constant currency revenues of $8,991M compared with Q2'14 revenues of $7,375M (ROW GAAP revenue of
$7,381M less hedging benefit of $6M).
9. 9
Constant Currency Q2'15 Revenues Using Q1'15 Rates (Q/Q)
UK Revenues
2,000
1,500
1,000
500
0
$(Millions)
Constant Currency
Revenues
Foreign exchange
impact
Hedging benefit GAAP revenues
1,654
(30)
54 1,678
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 Non-GAAP revenues
7,876
(292)
417 8,001
Constant Currency Revenue
Growth rate(1)
= 0%
Constant Currency Revenue
Growth rate(2)
= 4%
(1)
Constant currency growth rate is calculated as Q2'15 constant currency revenues of $1,654M compared with Q1'15 revenues of $1,655M (UK GAAP revenue of $1,675M
less hedging benefit of $20M).
(2)
Constant currency growth rate is calculated as Q2'15 constant currency revenues of $7,876M compared with Q1'15 revenues of $7,571M (ROW GAAP revenue of
$7,862M less hedging benefit of $291M).
12. 12
Capital Expenditures & Free Cash Flow
Free Cash Flow Capital Expenditures
($ in millions)
$8,000
$6,000
$4,000
$2,000
$0
Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15
3,094
2,794
2,983
2,046
2,981
3,577
2,813
3,690
4,470
1,611 2,289
2,255
2,345
2,646
2,417
3,551
2,927
2,515
Free cash flow is defined as net cash provided by operating activities less capital expenditures.
All numbers include Motorola Home until its date of disposal (April 17,2013) and Motorola Mobile until its date of disposal (October 29, 2014).
4,705
5,083
5,238
4,391
5,627
5,994
6,364
6,617
6,985
13. 13
Overview of Q2 2015 OI&E
$ (in millions)
Interest income $ 240
Interest expense (26)
Realized gains on marketable securities, net 53
Foreign currency exchange losses, net(1)
(99)
Realized gain (loss) on non-marketable investments, net (70)
Other income (expense), net 33
Interest & Other income, net $ 131
(1)
Our foreign currency exchange losses are primarily related to the cost of our FX hedging programs.
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. Please refer to Table 3 for revised historical financial information.
(2)
Tax effect of SBC is calculated using tax-deductible portion of SBC and applying entity-specific tax rates.
($ in millions) Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15
Income from operations (GAAP) $3,465 $3,761 $4,429 $4,115 $4,258 $3,724 $4,399 $4,447 $4,825
Add: Stock-based compensation expense (SBC)
from continuing operations $743 $856 $873 $839 $880 $1,255 $1,201 $1,203 $1,132
Add: Impairment charge related to a patent
licensing royalty asset $— $— $— $— $— $378 $— $— $—
Income from operations (non-GAAP) $4,208 $4,617 $5,302 $4,954 $5,138 $5,357 $5,600 $5,650 $5,957
($ in millions) Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15
Net income (GAAP)(1)
$3,186 $2,921 $3,324 $3,371 $3,351 $2,739 $4,675 $3,515 $3,931
Add: Stock-based compensation expense (net of
tax) (2)
$583 $656 $689 $649 $685 $997 $946 $946 $898
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 $(454) $193 $506 $198 $68 $185 $(967) $— $—
Net income (non-GAAP)(1)
$3,315 $3,770 $4,519 $4,218 $4,104 $4,299 $4,654 $4,461 $4,829
Table 2: Reconciliations of non-GAAP consolidated results of
operations measures to the nearest comparable GAAP measures
16. 16
GAAP Consolidated Statements of Income ($ in millions, except for per share
amounts)
FY 2013 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15
Effective Tax Rate - As Previously Reported 16.1% 18.4% 20.7% 22.3% 16.3% 22.1%
Adjustments(1)
1.1% 1.8% 1.6% 1.9% 1.8% 1.6%
Effective Tax Rate - As Revised 17.2% 20.2% 22.3% 24.2% 18.1% 23.7%
Net income - As Previously Reported $12,920 $3,452 $3,422 $2,813 $4,757 $3,586
Adjustments(1)
$(187) $(81) $(71) $(74) $(82) $(71)
Net income - As Revised $12,733 $3,371 $3,351 $2,739 $4,675 $3,515
Diluted Earnings Per Share - As Revised(1) $18.79 $4.92 $4.88 $3.98 $6.79 $5.10
GAAP Revenues by geography ($ in millions) FY 2013 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15
Rest of the world revenues - As Revised(2)
$24,332 $6,942 $7,381 $7,572 $8,141 $7,862
United States revenues - As Revised(2)
$25,587 $6,895 $6,958 $7,324 $8,305 $7,721
Table 3: Revisions to Previously Reported Financial
Information
(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, 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 prior periods.