Slide 1: Q2 2014 Quarterly Earnings Summary
Q2 2014 Quarterly Earnings Summary Google Confidential and Proprietary
Slide 2: Q2 2014 Highlights
Q2 2014 Highlights Financial Highlights: Operational Highlights: Revenue growth of 22% Y/Y and 3% Q/Q. Strong financial metrics: revenue growth and cash flow. Revenues were $15.96 billion. Continuing to invest in three major areas of focus: • Google sites revenues increased 23% Y/Y and 4% Q/Q • Core
Slide 3: Quarterly Revenues
Quarterly Revenues Revenues by Revenue Source U.S. vs. International $20,000 ($ in millions) ($ in millions) 10,964 11,526 12,905 12,951 13,107 13,754 15,707 15,420 15,955 Q2'14 Y/Y Change = 22% Q2'14 Q/Q Change = 3% 100% 54% 53% 54% 55% 55% 56% 56% 57% 58% 15,707 15,955 15,420 90% $15,000 13,754 3,
Slide 4: Paid Clicks
Paid Clicks (1) 50% Y/Y Paid Clicks Growth % 20% Q/Q Paid Clicks Growth % 44% 16% 40% 15% 40% 13% 37% 11% 33% 10% 31% 9% 29% 8% 30% 7% 26% 26% 6% 25% 5% 23% 5% 4% 4% 3% 3% 20% 2% 2% 20% 0% -1% 13% -3% 10% 10% 9% 9% -5% -5% -5% 5% 0% -10% Q1'13 Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q1'13 Q2'13 Q3'13 Q4'13 Q1
Slide 5: Cost-Per-Click
Cost-Per-Click Y/Y Cost-Per-Click Growth % Q/Q Cost-Per-Click Growth % 0% 6% -2% 4% 4% -4% 3% 3% -5% -5% 2% -6% -6% -6% -7% 0% 0% 0% -8% -8% 0% -9% -9% -2% -2% -2% -2% -10% -2% -11% -11% -12% -4% -4% -4% -13% -13% -4% -5% -15% -6% -15% -6% -7% -7% -8% -8% -20% -10% Q1'13 Q2'13 Q3'13 Q4'13 Q1'14 Q2'1
Slide 6: Traffic Acquisition Costs
Traffic Acquisition Costs $3,500 30% 3,311 3,293 3,232 3,076 2,962 3,013 2,972 $3,000 2,770 2,600 25.5% 25.5% $2,500 25.0% 24.7% 24.9% 25% 23.7% 23.5% 23.3% (in millions) $2,000 22.9% $1,500 20% $1,000 $500 $0 15% Q2'12 Q3'12 Q4'12 Q1'13 Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 TAC (in millions) TAC as % of Ad
Slide 7: Costs and Expenses
Costs and Expenses Q2 2013 Q1 2014 Q2 2014 GAAP $ in millions As % of revenues $ in millions As % of revenues $ in millions As % of revenues Cost of Revenues $5,195 40% $5,961 39% $6,114 38% Research & Development $1,766 13% $2,126 14% $2,238 14% Sales & Marketing $1,583 12% $1,729 11% $1,941 12% Ge
Slide 8: Profitability
Profitability GAAP ($ in millions) Q2 2013 Q1 2014 Q2 2014 Income from Operations $3,465 $4,115 $4,258 Operating margin (1) 26% 27% 27% Net Income from continuing operations $2,774 $3,650 $3,490 Net Income (loss) from discontinued operations $454 $(198) $(68) Net Income $3,228 $3,452 $3,422 EPS (Dil
Slide 9: Consolidated Free Cash Flow
Consolidated Free Cash Flow Non-GAAP ($ in millions) Q2 2013 (1)(2) Q1 2014 (2) Q2 2014 (2) Net cash provided by operating activities $4,705 $4,391 $5,627 Less: Purchases of property and equipment $(1,611) $(2,345) $(2,646) Free Cash Flow $3,094 $2,046 $2,981 (1) Including Motorola Home through the
Slide 10: Overview of Q2 2014 OI&E and FX
Overview of Q2 2014 OI&E and FX • In Q2, we recognized $145M of Interest and Other Income, net. • In Q2, we recognized $169M of interest income earned on our investments, $48M of net realized gains on marketable securities, $23M of realized gain on equity interests, $21M of gains on non-marketable e
Slide 11: Revenues by Geography
Revenues by Geography ($ in millions) Q2 2013 Q1 2014 Q2 2014 United States $5,896 $6,656 $6,630 United Kingdom 1,321 1,583 1,616 Rest of the world 5,890 7,181 7,709 Total Revenues $13,107 $15,420 $15,955 9
Slide 12: International Revenues excluding Hedging and FX Impact (Y/Y)
International Revenues excluding Hedging and FX Impact (Y/Y) ($ in millions) Q2 2013 Q2 2014 UK revenues (GAAP) $1,321 $1,616 exclude: a) f/x impact on Q2'14 revenues using Q2'13 rates n/a (124) b) hedging gains (24) 0 UK revenues excluding f/x and hedging impact (Non- $1,297 $1,492 GAAP) Y/Y% (Non-
Slide 13: International Revenues excluding Hedging and FX Impact (Q/Q)
International Revenues excluding Hedging and FX Impact (Q/Q) ($ in millions) Q1 2014 Q2 2014 UK revenues (GAAP) $1,583 $1,616 exclude: a) f/x impact on Q2'14 revenues using Q1'14 rates n/a (16) b) hedging gains 0 0 UK revenues excluding f/x and hedging impact (Non-GAAP) $1,583 $1,600 Q/Q% (Non-GAAP)
Slide 14: Table 1 - Reconciliations of consolidated GAAP to non-GAAP costs and expenses
Table 1 - Reconciliations of consolidated GAAP to non-GAAP costs and expenses Q2 2013 Q1 2014 Q2 2014 $ in millions As a % of revenues (1) $ in millions As a % of revenues (1) $ in millions As a % of revenues (1) Cost of Revenues (GAAP) $5,195 40% $5,961 39% $6,114 38% Less: Non-GAAP adjustments (2)
Slide 15: Table 2 - Reconciliations of non-GAAP consolidated results of operations measures
Table 2 - Reconciliations of non-GAAP consolidated results of operations measures to the nearest comparable GAAP measures ($ in millions) Q2 2013 Q1 2014 Q2 2014 Income from Operations (GAAP) $3,465 $4,115 $4,258 (1) Operating margin 26% 27% 27% Add: Stock-based compensation expense (SBC) $743 $839