Q2 2009 Quarterly Earnings Summary
Second Quarter 2009 Highlights
• Revenue growth of 3% Y/Y
– – –
Google properties revenue growth of 3% Y/Y and -1% Q/Q Network revenues increased 2% Y/Y and 3% Q/Q International revenues were $2 9 billion $2.9
• Operational Highlights
– – –
Traffic and revenues solid in Q2 despite difficult economic environment Key investments continue in our core search and ads businesses Continuing to invest in strategic growth areas:
• Display, Apps, and Mobile
• Maintaining a clear focus on operational
efficiency and continued cost management
2
Quarterly Revenues
$6,000 $5,500 $5,000 $4,500
Q2’09 Y/Y Growth = 3% Q2’09 Q/Q Growth = 0%
5,186
5,367
5,541 5 541
5,701
5,509
5,523
1,686
1,655 1 655
1,680
1,693
1,638
1,684 ,
$ in millions
$4,000 $3,500 $3,000 $3 000 $2,500 $2,000
3,400
$1,500 $1,000 $500 $0 Q1'08
3
3,530
3,672
3,811
3,693
3,653
Q2'08 Google.com
Q3'08 Network
Q4'08 Licensing and Other
Q1'09
Q2'09
U.S. vs. U S vs International Revenues
($ in millions)
5,186
100% 90% 80% 70% 60% 50% 40%
5,367
5,541
5,701
5,509
5,523
51%
52%
51%
50%
52%
53%
49%
30% 20% 10% 0% Q1'08
48%
49%
50%
48%
47%
Q2'08
Q3'08
Q4'08
Q1'09
Q2'09
US
4
International
Traffic Acquisition Costs
$1,500 $1,400 $1,300 $1,200 $1,100 $1,000
$ in millions n
40%
35%
29.2% 29 2%
28.4%
27.9% 1,495
$900 $800 $700 $600 $500 $400 $300 $200 $100 $0 Q1'08 Q2'08
TAC
26.9% 1,483
26.9% 1,436
27.2% 1,453 ,
30%
1,486
1,474
25%
20%
15%
10% Q3'08 Q4'08 Q1'09 Q2'09
TAC as % of Advertising Revenues
5
Costs and Expenses
GAAP $Millions
Cost of Revenues C f
Percent of revenues
Q2'08
$2,148
40%
Q1'09
$2,101
38%
Q2'09
$2,108
38%
Research & Development
Percent of revenues
$682
13%
$642
12%
$708
13%
Sales & Marketing
Percent of revenues
$485
9%
$434
8%
$469
8%
General & Administrative
Percent of revenues
$474
9%
$448
8%
$364
7%
Total Costs & Expenses
Percent of revenues
$3,789
71%
$3,625
66%
$3,649
66%
Non GAAP Non-GAAP $Millions
Cost of Revenues
Percent of revenues
Q2'08
$2,139
40%
Q1'09
$2,089
38%
Q2'09
$2,094
38%
Research & Development
Percent of revenues
$495
10%
$473
9%
$526
10%
Sales & Marketing
Percent of revenues
$442
8%
$375
7%
$412
7%
General & Administrative
Percent of revenues
$440
8%
$411
7%
$324
6%
Total Costs & Expenses
Percent of revenues
$3,516
66%
$3,348
61%
$3,356
61%
Note: Please refer to supporting Table 1 for reconciliations of non-GAAP costs and expenses to GAAP costs and expenses
6
Profitability
GAAP $Millions (except per share amounts) $Milli ( t h t ) Income from Operations Operating Margin Net Income N tI EPS (diluted) Non-GAAP $Millions (except per share amounts) Income from Operations Operating Margin Net Income EPS (diluted) Q2'08
$1,578 $ 29% $1,247 $ $3.92 $
Q1'09
1,884 34% 1,423 4.49 $ $ $
Q2'09
1,874 34% 1,485 4.66
Q2'08
$1,851 $ 34% $1,472 $ $4.63 $
Q1'09
2,161 39% 1,636 5.16 $ $ $
Q2'09
2,167 39% 1,708 5.36
Note: Please refer to supporting Table 2 for reconciliations of non-GAAP results of operations pp g p measures to the nearest comparable GAAP measures
7
Free Cash Flow
$Millions Net cash provided by operating activities Less purchases of property and equipment q p
Q2'08
$1,766
Q1'09
$2,250
Q2'09
$1,609
($ ($697) )
($ ($263) )
($ ($139) )
Free cash flow (Non-GAAP)
$1,069
$1,987
$1,470
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Table 1 - Reconciliations of non-GAAP costs and expenses to GAAP costs and expenses
$Millions 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) 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 Total T t l costs and expenses (non-GAAP) t d ( GAAP) $ $ $ $ $ $ $ $ $ $ Q2'08 2,148 2 148 (9) 2,139 682 (187) 495 485 (43) 442 474 (34) 440 3,789 (273) 3,516 3 516 As a % of Revenues (1) 40% $ 40% $ 13% $ 10% $ 9% $ 8% $ 9% $ 8% $ 71% $ 66% $ Q1'09 2,101 2 101 (12) 2,089 642 (169) 473 434 (59) 375 448 (37) 411 3,625 (277) 3,348 3 348 As a % of Revenues (1) 38% $ 38% $ 12% $ 9% $ 8% $ 7% $ 8% $ 7% $ 66% $ 61% $ Q2'09 2,108 2 108 (14) 2,094 708 (182) 526 469 (57) 412 364 (40) 324 3,649 (293) 3,356 3 356 As a % of Revenues (1) 38% 38% 13% 10% 8% 7% 7% 6% 66% 61%
(1) Percentages based on revenues of $5,367 million in Q2 '08, $5,509 million in Q1 '09 and $5,523 million in Q2 '09.
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Table 2 - Reconciliations of non-GAAP results of operations measures to the nearest comparable GAAP measures
$ millions except per share amounts Income from operations (GAAP) Add: Stock-based compensation Add S k b d i Income from operations (non-GAAP) Net income (GAAP) Add: Stock-based compensation (net of tax) Net income (non GAAP) (non-GAAP) Net income per share - diluted (GAAP) Net income per share - diluted (non-GAAP) Shares used in per share calculation - diluted $ $ $ $ $ $
Q2'08 1,578 273 1,851 1,247 225 1,472 3.92 4.63 318
Operating Margin (1) 29% $ 34% $ $ $ $ $
Q1'09 1,884 277 2,161 1,423 213 1,636 4.49 5.16 317
Operating Margin (1) 34% $ 39% $ $ $ $ $
Q2'09 1,874 293 2,167 1,485 223 1,708 4.66 5.36 319
Operating Margin (1) 34% 39%
(1) Percentages based on revenues of $5 367 million in Q2 '08 $5 509 million in Q1 '09 and $5 523 million in Q2 '09 $5,367 08, $5,509 09 $5,523 09.
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Q2 2009 Quarterly Earnings Summary