State or Other Jurisdiction of Incorporation | Exact Name of Registrant as specified in its Charter, Address of Principal Executive Offices, Zip Code and Telephone Number (Including Area Code) | Commission File Number | IRS Employer Identification No. | |||
Delaware | Alphabet Inc. 1600 Amphitheatre Parkway Mountain View, CA 94043 (650) 253-0000 | 001-37580 | 61-1767919 | |||
Delaware | Google Inc. 1600 Amphitheatre Parkway Mountain View, CA 94043 (650) 253-0000 | 001-36380 | 77-0493581 | |||
Not Applicable (Former name or former address, if changed since last report) ___________________________________________________________ |
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02. | Results of Operations and Financial Condition. |
Item 9.01. | Financial Statements and Exhibits. |
(d) | Exhibits. |
Exhibit No. | Description |
99.1 | Press release of Google Inc. dated October 22, 2015 |
ALPHABET INC. | |
GOOGLE INC. | |
Date: October 22, 2015 | /s/ RUTH PORAT |
Ruth Porat Senior Vice President and Chief Financial Officer |
• | Revenues of $18.7 billion and revenue growth of 13% year over year; constant currency revenue growth of 21% year over year |
• | Substantial growth of mobile search revenue, complemented by contributions from YouTube and Programmatic Advertising |
• | GAAP and non-GAAP operating income of $4.7 billion and $6.1 billion, respectively |
• | GAAP and non-GAAP diluted EPS of $5.73 and $7.35, respectively |
• | Strong operating cash flow of $6.0 billion |
Three Months Ended September 30, 2014 | Three Months Ended September 30, 2015 | ||||||
Revenues | $ | 16,523 | $ | 18,675 | |||
Increase in revenues year over year | 20 | % | 13 | % | |||
Traffic acquisition costs (TAC) | $ | 3,348 | $ | 3,566 | |||
GAAP operating income | $ | 3,724 | $ | 4,708 | |||
GAAP operating margin | 23 | % | 25 | % | |||
Non-GAAP operating income | $ | 5,357 | $ | 6,140 | |||
Non-GAAP operating margin | 32 | % | 33 | % | |||
GAAP net income* | $ | 2,739 | $ | 3,979 | |||
Non-GAAP net income | $ | 4,299 | $ | 5,102 | |||
GAAP diluted EPS for Class A and B common stock and Class C capital stock* | $ | 3.98 | $ | 5.73 | |||
Non-GAAP diluted EPS for Class A and B common stock and Class C capital stock | $ | 6.25 | $ | 7.35 | |||
Diluted shares (in thousands) | 688,215 | 694,319 | |||||
*GAAP net income and diluted EPS include Net Loss from Discontinued Operations for the three months ended September 30, 2014. |
Three Months Ended September 30, 2015 | Change from Q3 2014 to Q3 2015 (YoY) | Change from Q2 2015 to Q3 2015 (QoQ) | |||||||
Google websites | $ | 13,087 | 16 | % | 6 | % | |||
Google Network Members' websites | 3,694 | 4 | % | 2 | % | ||||
Total advertising revenues* | 16,781 | 13 | % | 5 | % | ||||
Other revenues | 1,894 | 11 | % | 11 | % | ||||
Revenues | $ | 18,675 | 13 | % | 5 | % | |||
*Advertising revenues are generally reported on a gross basis, consistent with GAAP, without deducting TAC. |
Change from Q3 2014 to Q3 2015 (YoY) | Change from Q2 2015 to Q3 2015 (QoQ) | ||||
Aggregate paid clicks | 23 | % | 6 | % | |
Paid clicks on Google websites | 35 | % | 7 | % | |
Paid clicks on Google Network Members' websites | (5 | )% | 0 | % | |
Aggregate cost-per-click | (11 | )% | (1 | )% | |
Cost-per-click on Google websites | (16 | )% | (2 | )% | |
Cost-per-click on Google Network Members' websites | (4 | )% | 1 | % |
Three Months Ended September 30, 2014 | Three Months Ended September 30, 2015 | ||||||
TAC to Google Network Members | $ | 2,421 | $ | 2,514 | |||
TAC to distribution partners | $ | 927 | $ | 1,052 | |||
Total TAC | $ | 3,348 | $ | 3,566 | |||
TAC to Google Network Members as % of Google Network Members' revenues | 68 | % | 68 | % | |||
TAC to distribution partners as % of Google website revenues | 8 | % | 8 | % | |||
Total TAC as % of advertising revenues | 23 | % | 21 | % | |||
Other cost of revenues | $ | 3,347 | $ | 3,471 | |||
Other cost of revenues as % of revenues | 20 | % | 19 | % | |||
Operating expenses (other than cost of revenues) | $ | 6,104 | $ | 6,930 | |||
Operating expenses as % of revenues | 37 | % | 37 | % | |||
Stock-based compensation expense* | $ | 1,255 | $ | 1,432 | |||
Tax benefit related to stock-based compensation expense | $ | (258 | ) | $ | (309 | ) | |
Depreciation, amortization, and impairment charges* | $ | 1,524 | $ | 1,248 | |||
*Included in Cost of revenues and Operating expenses. Excludes impact from discontinued operations for the three months ended September 30, 2014. |
Three Months Ended September 30, 2014 | Three Months Ended September 30, 2015 | ||||||
Cash, cash equivalents, and marketable securities | $ | 62,157 | $ | 72,767 | |||
Net cash provided by operating activities | $ | 5,994 | $ | 6,007 | |||
Capital expenditures* | $ | 2,417 | $ | 2,373 | |||
Free cash flow | $ | 3,577 | $ | 3,634 | |||
Effective tax rate | 24 | % | 19 | % | |||
Headcount | 51,564 | 59,976 | |||||
*For Q3 2015, our capital expenditures are primarily related to production equipment, data center construction, and facilities. |
As of December 31, 2014 | As of September 30, 2015 | ||||||
(unaudited) | |||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 18,347 | $ | 18,068 | |||
Marketable securities | 46,048 | 54,699 | |||||
Total cash, cash equivalents, and marketable securities (including securities loaned of $4,058 and $4,351) | 64,395 | 72,767 | |||||
Accounts receivable, net of allowance of $225 and $291 | 9,383 | 9,749 | |||||
Receivable under reverse repurchase agreements | 875 | 400 | |||||
Deferred income taxes, net | 1,322 | 2,212 | |||||
Income taxes receivable, net | 591 | 287 | |||||
Prepaid revenue share, expenses and other assets | 3,412 | 2,688 | |||||
Total current assets | 79,978 | 88,103 | |||||
Prepaid revenue share, expenses and other assets, non-current | 3,280 | 3,329 | |||||
Non-marketable investments | 3,079 | 4,813 | |||||
Property and equipment, net | 23,883 | 28,338 | |||||
Intangible assets, net | 4,607 | 4,023 | |||||
Goodwill | 15,599 | 15,675 | |||||
Total assets | $ | 130,426 | $ | 144,281 | |||
Liabilities and Stockholders’ Equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 1,715 | $ | 1,549 | |||
Short-term debt | 2,009 | 3,237 | |||||
Accrued compensation and benefits | 3,069 | 2,988 | |||||
Accrued expenses and other current liabilities | 4,434 | 4,598 | |||||
Accrued revenue share | 1,952 | 1,899 | |||||
Securities lending payable | 2,778 | 3,266 | |||||
Deferred revenue | 752 | 705 | |||||
Income taxes payable, net | 96 | 215 | |||||
Total current liabilities | 16,805 | 18,457 | |||||
Long-term debt | 3,228 | 1,994 | |||||
Deferred revenue, non-current | 104 | 133 | |||||
Income taxes payable, non-current | 3,340 | 3,596 | |||||
Deferred income taxes, net, non-current | 1,971 | 1,976 | |||||
Other long-term liabilities | 1,118 | 1,884 | |||||
Commitments and contingencies |
Stockholders’ equity: | |||||||
Convertible preferred stock, $0.001 par value per share, 100,000 shares authorized; no shares issued and outstanding | 0 | 0 | |||||
Class A and Class B common stock, and Class C capital stock and additional paid-in capital, $0.001 par value per share: 15,000,000 shares authorized (Class A 9,000,000, Class B 3,000,000, Class C 3,000,000); 680,172 (Class A 286,560, Class B 53,213, Class C 340,399) and par value of $680 (Class A $287, Class B $53, Class C $340) and 687,693 (Class A 291,214, Class B 50,990, Class C 345,489) and par value of $688 (Class A $291, Class B $51, Class C $346) shares issued and outstanding | 28,767 | 31,864 | |||||
Accumulated other comprehensive income (loss) | 27 | (1,592 | ) | ||||
Retained earnings | 75,066 | 85,969 | |||||
Total stockholders’ equity | 103,860 | 116,241 | |||||
Total liabilities and stockholders’ equity | $ | 130,426 | $ | 144,281 |
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2014 | 2015 | 2014 | 2015 (a) | ||||||||||||
(unaudited) | |||||||||||||||
Revenues | $ | 16,523 | $ | 18,675 | $ | 47,898 | $ | 53,660 | |||||||
Costs and expenses: | |||||||||||||||
Cost of revenues | 6,695 | 7,037 | 18,770 | 19,976 | |||||||||||
Research and development | 2,655 | 3,230 | 7,019 | 8,772 | |||||||||||
Sales and marketing | 2,084 | 2,223 | 5,754 | 6,368 | |||||||||||
General and administrative | 1,365 | 1,477 | 4,258 | 4,564 | |||||||||||
Total costs and expenses | 12,799 | 13,967 | 35,801 | 39,680 | |||||||||||
Income from operations | 3,724 | 4,708 | 12,097 | 13,980 | |||||||||||
Interest and other income, net | 133 | 183 | 635 | 471 | |||||||||||
Income from continuing operations before income taxes | 3,857 | 4,891 | 12,732 | 14,451 | |||||||||||
Provision for income taxes | 933 | 912 | 2,820 | 3,026 | |||||||||||
Net income from continuing operations | 2,924 | 3,979 | 9,912 | 11,425 | |||||||||||
Net loss from discontinued operations | (185 | ) | 0 | (451 | ) | 0 | |||||||||
Net income | $ | 2,739 | $ | 3,979 | $ | 9,461 | $ | 11,425 | |||||||
Less: Adjustment Payment to Class C capital stockholders | 0 | 0 | 0 | 522 | |||||||||||
Net income available to all stockholders | $ | 2,739 | $ | 3,979 | $ | 9,461 | $ | 10,903 | |||||||
Basic net income (loss) per share of Class A and B common stock: | |||||||||||||||
Continuing operations | $ | 4.32 | $ | 5.80 | $ | 14.69 | $ | 15.95 | |||||||
Discontinued operations | (0.27 | ) | 0.00 | (0.67 | ) | 0.00 | |||||||||
Basic net income per share of Class A and B common stock | $ | 4.05 | $ | 5.80 | $ | 14.02 | $ | 15.95 | |||||||
Basic net income (loss) per share of Class C capital stock: | |||||||||||||||
Continuing operations | $ | 4.32 | $ | 5.80 | $ | 14.69 | $ | 17.47 | |||||||
Discontinued operations | (0.27 | ) | 0.00 | (0.67 | ) | 0.00 | |||||||||
Basic net income per share of Class C capital stock | $ | 4.05 | $ | 5.80 | $ | 14.02 | $ | 17.47 | |||||||
Diluted net income (loss) per share of Class A and B common stock: | |||||||||||||||
Continuing operations | $ | 4.25 | $ | 5.73 | $ | 14.44 | $ | 15.77 | |||||||
Discontinued operations | (0.27 | ) | 0.00 | (0.66 | ) | 0.00 | |||||||||
Diluted net income per share of Class A and B common stock | $ | 3.98 | $ | 5.73 | $ | 13.78 | $ | 15.77 | |||||||
Diluted net income (loss) per share of Class C capital stock: | |||||||||||||||
Continuing operations | $ | 4.25 | $ | 5.73 | $ | 14.44 | $ | 17.27 | |||||||
Discontinued operations | (0.27 | ) | 0.00 | (0.66 | ) | 0.00 | |||||||||
Diluted net income per share of Class C capital stock | $ | 3.98 | $ | 5.73 | $ | 13.78 | $ | 17.27 | |||||||
(a) Basic and diluted net income per share for the nine months ended September 30, 2015 includes impact from Adjustment Payment to Class C capital stockholders. |
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2014 | 2015 | 2014 | 2015 | ||||||||||||
(unaudited) | |||||||||||||||
Operating activities | |||||||||||||||
Net income | $ | 2,739 | $ | 3,979 | $ | 9,461 | $ | 11,425 | |||||||
Adjustments: | |||||||||||||||
Depreciation expense and impairment of property and equipment | 884 | 1,030 | 2,513 | 2,979 | |||||||||||
Amortization and impairment of intangible assets | 663 | 218 | 1,199 | 680 | |||||||||||
Stock-based compensation expense | 1,290 | 1,432 | 3,092 | 3,767 | |||||||||||
Excess tax benefits from stock-based award activities | (175 | ) | (138 | ) | (467 | ) | (354 | ) | |||||||
Deferred income taxes | (360 | ) | (416 | ) | (498 | ) | (566 | ) | |||||||
Gain on equity interest | 0 | 0 | (126 | ) | 0 | ||||||||||
(Gain) loss on marketable and non-marketable investments, net | (12 | ) | (1 | ) | (251 | ) | 32 | ||||||||
Other | 66 | 41 | 157 | 157 | |||||||||||
Changes in assets and liabilities, net of effects of acquisitions: | |||||||||||||||
Accounts receivable | (36 | ) | (267 | ) | (490 | ) | (336 | ) | |||||||
Income taxes, net | 487 | (857 | ) | 577 | 1,093 | ||||||||||
Prepaid revenue share, expenses and other assets | (13 | ) | 142 | 506 | 204 | ||||||||||
Accounts payable | (127 | ) | 230 | (113 | ) | (168 | ) | ||||||||
Accrued expenses and other liabilities | 484 | 583 | 416 | 820 | |||||||||||
Accrued revenue share | 104 | 52 | 36 | (69 | ) | ||||||||||
Deferred revenue | 0 | (21 | ) | 0 | (55 | ) | |||||||||
Net cash provided by operating activities | 5,994 | 6,007 | 16,012 | 19,609 | |||||||||||
Investing activities | |||||||||||||||
Purchases of property and equipment | (2,417 | ) | (2,373 | ) | (7,408 | ) | (7,815 | ) | |||||||
Purchases of marketable securities | (18,335 | ) | (23,091 | ) | (43,192 | ) | (56,217 | ) | |||||||
Maturities and sales of marketable securities | 13,045 | 19,274 | 36,650 | 46,860 | |||||||||||
Purchases of non-marketable investments | (69 | ) | (322 | ) | (536 | ) | (1,771 | ) | |||||||
Cash collateral related to securities lending | 316 | 572 | 2,029 | 488 | |||||||||||
Investments in reverse repurchase agreements | (725 | ) | 225 | (725 | ) | 475 | |||||||||
Acquisitions, net of cash acquired, and purchases of intangibles and other assets | (1,142 | ) | (102 | ) | (4,632 | ) | (244 | ) | |||||||
Net cash used in investing activities | (9,327 | ) | (5,817 | ) | (17,814 | ) | (18,224 | ) | |||||||
Financing activities | |||||||||||||||
Net payments related to stock-based award activities | (627 | ) | (606 | ) | (1,548 | ) | (1,610 | ) | |||||||
Excess tax benefits from stock-based award activities | 175 | 138 | 467 | 354 | |||||||||||
Adjustment Payment to Class C capital stockholders | 0 | 0 | 0 | (47 | ) | ||||||||||
Proceeds from issuance of debt, net of costs | 2,874 | 3,634 | 9,167 | 10,332 | |||||||||||
Repayments of debt | (2,877 | ) | (3,637 | ) | (9,181 | ) | (10,341 | ) | |||||||
Net cash used in financing activities | (455 | ) | (471 | ) | (1,095 | ) | (1,312 | ) | |||||||
Effect of exchange rate changes on cash and cash equivalents | (227 | ) | (104 | ) | (236 | ) | (352 | ) | |||||||
Net decrease in cash and cash equivalents | (4,015 | ) | (385 | ) | (3,133 | ) | (279 | ) |
Cash and cash equivalents at beginning of period | 19,620 | 18,453 | 18,898 | 18,347 | |||||||||||
Reclassification of assets previously held for sale | 0 | 0 | (160 | ) | 0 | ||||||||||
Cash and cash equivalents at end of period | $ | 15,605 | $ | 18,068 | $ | 15,605 | $ | 18,068 |
Three Months Ended September 30, 2014 | Three Months Ended September 30, 2015 | ||||||||||||||||||||||
GAAP Actual | Adjustments | Non-GAAP Results | GAAP Actual | Adjustments | Non-GAAP Results | ||||||||||||||||||
Revenues | $ | 16,523 | $ | 16,523 | $ | 18,675 | $ | 18,675 | |||||||||||||||
Cost of revenues | 6,695 | $ | 547 | (b) (e) | 6,148 | 7,037 | $ | 231 | (b) | 6,806 | |||||||||||||
Research and development | 2,655 | 666 | (b) | 1,989 | 3,230 | 741 | (b) | 2,489 | |||||||||||||||
Sales and marketing | 2,084 | 197 | (b) | 1,887 | 2,223 | 250 | (b) | 1,973 | |||||||||||||||
General and administrative | 1,365 | 223 | (b) | 1,142 | 1,477 | 210 | (b) | 1,267 | |||||||||||||||
Income from operations | $ | 3,724 | $ | 1,633 | $ | 5,357 | $ | 4,708 | $ | 1,432 | $ | 6,140 | |||||||||||
Operating Margin (a) | 22.5 | % | 32.4 | % | 25.2 | % | 32.9 | % | |||||||||||||||
$ | 1,255 | (b) | $ | 1,432 | (b) | ||||||||||||||||||
(258 | ) | (c) | (309 | ) | (c) | ||||||||||||||||||
185 | (d) | 0 | |||||||||||||||||||||
378 | (e) | 0 | |||||||||||||||||||||
Net income | $ | 2,739 | $ | 1,560 | $ | 4,299 | $ | 3,979 | $ | 1,123 | $ | 5,102 | |||||||||||
Diluted net income per share for Class A and B common stock and Class C capital stock | $ | 3.98 | $ | 6.25 | $ | 5.73 | $ | 7.35 | |||||||||||||||
Shares used in per share calculation - diluted | 688,215 | 688,215 | 694,319 | 694,319 | |||||||||||||||||||
(a) Operating margin is defined as income from operations divided by revenues. Non-GAAP operating margin is defined as non-GAAP income from operations divided by revenues. | |||||||||||||||||||||||
(b) To eliminate stock-based compensation expense from continuing operations. | |||||||||||||||||||||||
(c) To eliminate income tax effects related to expense noted in (b). | |||||||||||||||||||||||
(d) To eliminate net loss from discontinued operations. | |||||||||||||||||||||||
(e) To eliminate impairment charge related to a patent licensing royalty asset acquired in connection with the purchase of Motorola. |
Three Months Ended September 30, 2015 | |||
Net cash provided by operating activities | $ | 6,007 | |
Less: purchases of property and equipment | (2,373 | ) | |
Free cash flow | $ | 3,634 | |
Net cash used in investing activities (a) | $ | (5,817 | ) |
Net cash used in financing activities | $ | (471 | ) |
(a) Includes purchases of property and equipment. |
Three Months Ended September 30, 2015 | Three Months Ended September 30, 2015 | ||||||
(using Q3'14's FX rates) | (using Q2'15's FX rates) | ||||||
(unaudited) | |||||||
United Kingdom revenues (GAAP) | $ | 1,792 | $ | 1,792 | |||
Exclude foreign exchange impact on Q3'15 revenues using Q3'14 rates | 145 | N/A | |||||
Exclude foreign exchange impact on Q3'15 revenues using Q2'15 rates | N/A | (39 | ) | ||||
Exclude hedging gains recognized in Q3'15 | (20 | ) | (20 | ) | |||
United Kingdom revenues excluding foreign exchange and hedging impact (Non-GAAP) | $ | 1,917 | $ | 1,733 | |||
Rest of the world revenues (GAAP) | $ | 8,135 | $ | 8,135 | |||
Exclude foreign exchange impact on Q3'15 revenues using Q3'14 rates | 1,432 | N/A | |||||
Exclude foreign exchange impact on Q3'15 revenues using Q2'15 rates | N/A | 61 | |||||
Exclude hedging gains recognized in Q3'15 | (266 | ) | (266 | ) | |||
Rest of the world revenues excluding foreign exchange and hedging impact (Non-GAAP) | $ | 9,301 | $ | 7,930 | |||
United States revenues (GAAP) | $ | 8,748 | $ | 8,748 | |||
Constant currency revenues (Non-GAAP) | $ | 19,966 | $ | 18,411 | |||
Prior period revenues, excluding hedging gains (Non-GAAP) | $ | 16,513 | $ | 17,256 | |||
Constant currency revenue growth (Non-GAAP) | 21 | % | 7 | % |
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2014 | 2015 | 2014 | 2015 | ||||||||||||
(unaudited) | |||||||||||||||
Advertising revenues: | |||||||||||||||
Google websites | $ | 11,252 | $ | 13,087 | $ | 32,656 | $ | 37,421 | |||||||
Google Network Members' websites | 3,568 | 3,694 | 10,659 | 10,891 | |||||||||||
Total advertising revenues | 14,820 | 16,781 | 43,315 | 48,312 | |||||||||||
Other revenues | 1,703 | 1,894 | 4,583 | 5,348 | |||||||||||
Revenues | $ | 16,523 | $ | 18,675 | $ | 47,898 | $ | 53,660 |
Three Months Ended | Nine Months Ended | ||||||||||
September 30, | September 30, | ||||||||||
2014 | 2015 | 2014 | 2015 | ||||||||
(unaudited) | |||||||||||
Advertising revenues: | |||||||||||
Google websites | 68 | % | 70 | % | 68 | % | 70 | % | |||
Google Network Members' websites | 22 | % | 20 | % | 22 | % | 20 | % | |||
Total advertising revenues | 90 | % | 90 | % | 90 | % | 90 | % | |||
Other revenues | 10 | % | 10 | % | 10 | % | 10 | % | |||
Revenues | 100 | % | 100 | % | 100 | % | 100 | % |