Q4 2007 Quarterly Earnings Summary
Fourth Quarter 2007 Highlights •
•
Revenue growth of 51% Y/Y and 14% Q/Q –
Google properties revenue growth of 58% Y/Y and 14% Q/Q, driven by strength in the holiday retail season
–
Network revenues increased 37% Y/Y and 12% Q/Q
–
Strong international performance, with $2.3 billion in Q4 international revenue
Executing on Search.Ads.Apps Strategy – Infrastructure investments in search leading to improved quality worldwide
– Giving g advertisers more control and improving p g ROI – Improving Apps performance and ensuring data portability – Significant strides in mobile with the launch of Android
• 2
Ongoing focus on growth and profitability
Quarterly Revenue 4,827 $4,500
Q4’07 Y/Y Growth = 51% Q4’07 Q/Q Growth = 14%
4,231 3,872
$ in m millions
$4,000
1,636
3,664
$3,500
3,205
1,455 1,352
$3,000
2,456 $2,500
1,198
2,254 1,037
1 919 1,919
$2,000
997
1,578
928
1,384 $1,500
1,345
2,690
1,257
3,122
799 675
$1,000 $ ,
584
$500
2,282
630
657
737
Q1'05
Q2'05
2,486
2,735
1,977
885
1,098
1,297
1,432
1,626
Q2'06
Q3'06
$0 Q3'05
Q4'05
Google.com 3
Q1'06
Network
Q4'06
Q1'07
Licensing and Other
Q2'07
Q3'07
Q4'07
U S vs U.S. vs. International Revenue 4,827 $4,500
4,231 3,872
$ in m millions
$4,000
3,664
$3,500
3,205
48%
48%
52%
52%
48% $3,000
2,690 2,456
$2,500
1,919
44% 42%
1,578 1,384
$1,500
44%
2,254
$2,000
47%
42% 38%
1,257 39%
$1,000 ,
$500
39%
61%
39%
61%
61%
62%
58%
Q4'05 Q4 05
Q1'06 Q1 06
58%
56%
Q2'06 Q2 06
Q3'06 Q3 06
56%
53%
52%
Q1'07 Q1 07
Q2'07 Q2 07
$0 Q1'05 Q1 05
Q2'05 Q2 05
Q3'05 Q3 05
US 4
International
Q4'06 Q4 06
Q3'07 Q3 07
Q4'07 Q4 07
Traffic Acquisition Costs 1,440 $1,400
37.2%
40%
36.1%
$1,300
1,221 34.0%
$1,200
1,125 1,148
33.2%32.5% 32.3%
35%
$1,100 976
$ in n millions
$1,000 $ ,
31.0% 30.7% 31.0%
$900
825
785
$800
29.9%
29.1% 30.3%
723
$700
25%
629
$600 $500
30%
462
494
530 20%
$400 $300 15%
$200 $100 $0
10% Q1'05 Q1 05 Q2 Q2'05 05 Q3 Q3'05 05 Q4 Q4'05 05 Q1 Q1'06 06 Q2 Q2'06 06 Q3 Q3'06 06 Q4 Q4'06 06 Q1 Q1'07 07 Q2 Q2'07 07 Q3 Q3'07 07 Q4 Q4'07 07 TAC
5
TAC as % of Advertising Revenues
Costs and Expenses GAAP $Millions
Q4'06
Q3'07
Q4'07
C Cost off Revenues
$1,283
$1,663
$1,956
40%
39%
41%
Percent of revenues
Research & Development
$387
$549
$631
Percent of revenues
12%
13%
13%
Sales & Marketing
$255
$381
$422
8%
9%
9%
$220
$321
$377
7%
8%
8%
$2,145
$2,914
$3,386
67%
69%
71%
Q4'06
Q3'07
Q4'07
$1,272
$1,659
$1,950
40%
39%
40%
$305
$418
$470
Percent of revenues
10%
10%
10%
Sales & Marketing
$241
$351
$384
7%
8%
8%
$193
$288
$337
6%
7%
7%
$2,011
$2,716
$3,141
63%
64%
65%
Percent of revenues
General & Administrative Percent of revenues
Total Costs & Expenses Percent of revenues
Non-GAAP Non GAAP $Millions Cost of Revenues Percent of revenues
Research & Development Percent of revenues
General & Administrative Percent of revenues
Total Costs & Expenses Percent of revenues
Note: Please refer to supporting Table 1 for reconciliations of non-GAAP costs and expenses to GAAP costs and expenses 6
Profitability GAAP $Millions
Q4'06
Q3'07
Q4'07
$1,061
$1,318
$1,441
33%
31%
30%
$1,031
$1,070
$1,206
EPS (diluted)
$3.29
$3.38
$3.79
Non-GAAP $Millions
Q4'06
Q3'07
Q4'07
$1,195
$1,516
$1,686
37%
36%
35%
Net Income
$ $997
$ $1,237
$ $1,409
EPS (diluted)
$3.18
$3.91
$4.43
Income from Operations Operating Margin Net Income
Income from Operations Operating Margin
Note: Please refer to supporting pp g Table 2 for reconciliations of non-GAAP results of operations p measures to the nearest comparable GAAP measures
7
Free Cash Flow
$Millions Net cash provided by operating activities
8
Q4'06
Q3'07
Q4'07
$911
$1,633
$1,693
Less purchases of property q p and equipment
($367)) ($
($553)) ($
($678)) ($
Free cash flow (Non-GAAP)
$544
$1,080
$1,015
Table 1 - Reconciliations of non-GAAP costs and expenses to GAAP costs and expenses $Millions
Q4'06
Cost of Revenues (GAAP) Less: Stock-based compensation Cost of Revenues (non-GAAP)
$
Research and development (GAAP) Less: Stock-based compensation Research and development (non-GAAP) (non GAAP)
$
$
$
As a % of Revenues (1)
As a % of Revenues (1)
Q3'07
Q4'07
1,283 1 283 (11) 1,272
40% $ 40% $
1,663 1 663 (4) 1,659
39% $ 39% $
1,956 1 956 (6) 1,950
41% 40%
387 (82) 305
12% $ 10% $
549 (131) 418
13% $ 10% $
631 (161) 470
13% 10%
255 (14) 241
8% $
381 (30) 351
9% $
-
-
422 (38) 384
-
220 (27) 193
-
7% $
377 (40) 337
-
6% $
321 (33) 288
Sales and marketing (GAAP) Less: Stock-based compensation Sales and marketing (non-GAAP)
$
General and administrative (GAAP) Less: Stock-based compensation General and administrative (non-GAAP)
$
Total costs and expenses (GAAP) Less: Stock-based compensation T t l costs Total t and d expenses (non-GAAP) ( GAAP)
$
2,145 (134)
67% $ -
2,914 (198)
69% $ -
3,386 (245)
71% -
$
2 011 2,011
63% $
2 716 2,716
64% $
3 141 3,141
65%
$
$
7% $ 7% $
8% $ 8% $
(1) Percentages based on GAAP revenues of $3,205 million in Q4 '06, $4,231 million in Q3 '07 and $4,827 million in Q4 '07
9
As a % of Revenues (1)
9% 8% 8% 7%
Table 2 - Reconciliations of non-GAAP results of operations measures to the nearest comparable GAAP measures
Figures in millions except per share amounts
Q4'06
Operating Margin (1)
Q3'07
Q4'07
Operating Margin (1)
Income from operations (GAAP) Add: Stock-based compensation
$
1,061 134
33% $ -
1,318 198
31% $
1,441 245
30%
Income from operations (non (non-GAAP) GAAP)
$
1 195 1,195
37% $
1 516 1,516
36% $
1 686 1,686
35%
Net income (GAAP) Add: Stock-based compensation (net of tax) Less: Advanced Pricing Agreement and R&D credit
$
1,031 99 (133)
$
1,070 167 -
$
1,206 203 -
Net income (non-GAAP)
$
997
$
1,237
$
1,409
Net income per share - diluted (GAAP)
$3.29
$3.38
$3.79
Net income per share - diluted (non-GAAP) Shares used in per share calculation - diluted
$3.18 313
$3.91 317
$4.43 318
(1) Percentages based on GAAP revenues of $3,205 million in Q4 '06, $4,231 million in Q3 '07 and $4,827 million in Q4 '07
10
Operating Margin (1)
Q4 2007 Quarterly Earnings Summary