EX-99.2 3 googexhibit992q12016.htm EXHIBIT 99.2 Exhibit
Exhibit 99.2


Alphabet Inc.
CONSOLIDATED BALANCE SHEETS
(In millions, except share amounts which are reflected in thousands and par value)
 
As of December 31, 2015
 
As of
March 31,
2016
 
 
 
(unaudited)
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
16,549

 
$
15,111

Marketable securities
56,517

 
60,153

Total cash, cash equivalents, and marketable securities (including securities loaned of $4,531 and $3,851)
73,066

 
75,264

Accounts receivable, net of allowance of $296 and $276
11,556

 
10,818

Receivable under reverse repurchase agreements
450

 
350

Income taxes receivable, net
1,903

 
1,804

Prepaid revenue share, expenses and other assets
3,139

 
2,719

Total current assets
90,114

 
90,955

Prepaid revenue share, expenses and other assets, non-current
3,181

 
3,297

Non-marketable investments
5,183

 
5,577

Deferred income taxes
251

 
233

Property and equipment, net
29,016

 
30,162

Intangible assets, net
3,847

 
3,657

Goodwill
15,869

 
15,866

Total assets
$
147,461

 
$
149,747

Liabilities and Stockholders’ Equity
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
1,931

 
$
1,667

Short-term debt
3,225

 
3,221

Accrued compensation and benefits
3,539

 
2,618

Accrued expenses and other current liabilities
4,768

 
4,517

Accrued revenue share
2,329

 
2,227

Securities lending payable
2,428

 
2,171

Deferred revenue
788

 
933

Income taxes payable, net
302

 
330

Total current liabilities
19,310

 
17,684

Long-term debt
1,995

 
1,987

Deferred revenue, non-current
151

 
131

Income taxes payable, non-current
3,663

 
3,812

Deferred income taxes
189

 
599

Other long-term liabilities
1,822

 
1,965

Total liabilities
27,130

 
26,178

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); 687,348 (Class A 292,297, Class B 50,295, Class C 344,756) and 686,792 (Class A 293,573, Class B 49,536, Class C 343,683) shares issued and outstanding
32,982

 
33,695

Accumulated other comprehensive loss
(1,874
)
 
(1,294
)
Retained earnings
89,223

 
91,168

Total stockholders’ equity
120,331

 
123,569

Total liabilities and stockholders’ equity
$
147,461

 
$
149,747





Alphabet Inc.
CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share amounts)
 
Three Months Ended
 
March 31,
 
2015
 
2016
 
(unaudited)
Revenues
$
17,258

 
$
20,257

Costs and expenses:
 
 
 
Cost of revenues
6,356

 
7,648

Research and development
2,753

 
3,367

Sales and marketing
2,065

 
2,387

General and administrative
1,637

 
1,513

Total costs and expenses
12,811

 
14,915

Income from operations
4,447

 
5,342

Other income (expense), net
157

 
(213
)
Income before income taxes
4,604

 
5,129

Provision for income taxes
1,089

 
922

Net income
$
3,515

 
$
4,207

 
 
 
 
Basic net income per share of Class A and B common stock and Class C capital stock
$
5.16

 
$
6.12

Diluted net income per share of Class A and B common stock and Class C capital stock
$
5.10

 
$
6.02





Alphabet Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
 
Three Months Ended
 
March 31,
 
2015
 
2016
 
(unaudited)
Operating activities
 
 
 
Net income
$
3,515

 
$
4,207

Adjustments:
 
 
 
Depreciation and impairment of property and equipment
938

 
1,155

Amortization and impairment of intangible assets
239

 
216

Stock-based compensation expense
1,203

 
1,494

Deferred income taxes
71

 
414

Loss on marketable and non-marketable investments, net
16

 
280

Other
61

 
64

Changes in assets and liabilities, net of effects of acquisitions:
 
 
 
Accounts receivable
698

 
818

Income taxes, net
827

 
271

Prepaid revenue share, expenses and other assets
43

 
185

Accounts payable
(24
)
 
(269
)
Accrued expenses and other liabilities
(601
)
 
(1,064
)
Accrued revenue share
(205
)
 
(131
)
Deferred revenue
(59
)
 
18

Net cash provided by operating activities
6,722

 
7,658

Investing activities
 
 
 
Purchases of property and equipment
(2,927
)
 
(2,428
)
Purchases of marketable securities
(12,558
)
 
(20,748
)
Maturities and sales of marketable securities
10,389

 
17,443

Purchases of non-marketable investments
(1,074
)
 
(321
)
Cash collateral related to securities lending
(1,120
)
 
(257
)
Investments in reverse repurchase agreements
50

 
100

Acquisitions, net of cash acquired, and purchases of intangible assets
(64
)
 
(34
)
Net cash used in investing activities
(7,304
)
 
(6,245
)
Financing activities
 
 
 
Net payments related to stock-based award activities
(493
)
 
(807
)
Repurchases of capital stock
0

 
(2,098
)
Proceeds from issuance of debt, net of costs
3,305

 
3,956

Repayments of debt
(3,308
)
 
(3,962
)
Net cash used in financing activities
(496
)
 
(2,911
)
Effect of exchange rate changes on cash and cash equivalents
(293
)
 
60

Net decrease in cash and cash equivalents
(1,371
)
 
(1,438
)
Cash and cash equivalents at beginning of period
18,347

 
16,549

Cash and cash equivalents at end of period
$
16,976

 
$
15,111






Other income (expense), net
The following table presents our other income (expense), net, (in millions, unaudited):
 
Three Months Ended
 
March 31,
 
2015
 
2016
Interest income
$
226

 
$
270

Interest expense
(26
)
 
(30
)
Foreign currency exchange losses, net
(62
)
 
(186
)
Gain (loss) on marketable securities, net
32

 
(167
)
Loss on non-marketable investments, net
(48
)
 
(113
)
Other
35

 
13

Other income (expense), net
$
157

 
$
(213
)





Segment results
The following tables present our revenues, operating income, stock-based compensation, capital expenditures, and depreciation, amortization, and impairment by segment (in millions, unaudited):
 
Three Months Ended
 
March 31,
 
2015
 
2016
Revenues:
 
 
 
Google
$
17,178

 
$
20,091

Other Bets
80

 
166

Total revenues
$
17,258

 
$
20,257

 
 
 
 
Stock-based compensation(1):
 
 
 
Google
$
1,055

 
$
1,316

Other Bets
117

 
145

Reconciling items(2)
31

 
33

Total stock-based compensation
$
1,203

 
$
1,494

 
 
 
 
Operating income (loss):
 
 
 
Google
$
5,188

 
$
6,272

Other Bets
(633
)
 
(802
)
Reconciling items(2)
(108
)
 
(128
)
Total income from operations
$
4,447

 
$
5,342

 
 
 
 
Capital expenditures:
 
 
 
Google
$
2,678

 
$
2,036

Other Bets
157

 
280

Reconciling items(3)
92

 
112

Total capital expenditures
$
2,927

 
$
2,428

 
 
 
 
Depreciation, amortization and impairment:
 
 
 
Google
$
1,137

 
$
1,317

Other Bets
40

 
54

Total depreciation, amortization and impairment
$
1,177

 
$
1,371

(1) 
For purposes of determining SBC for segment reporting, we define SBC as awards accounted for under FASB ASC Topic 718 that we expect to settle in stock. SBC does not include expenses related to awards that we will ultimately settle in cash.
(2) 
Reconciling items are primarily related to corporate administrative costs and other miscellaneous items that are not allocated to individual segments.
(3) 
Reconciling items are related to timing differences of payments as segment capital expenditures are on accrual basis while total capital expenditures shown on Consolidated Statements of Cash Flow are on cash basis and other miscellaneous differences.





Revenues by source
The following tables present our revenues by revenue source (in millions, unaudited):
 
Three Months Ended
 
March 31,
 
2015
 
2016
Revenues:
 
 
 
Google websites
$
11,932

 
$
14,328

Google Network Members' websites
3,576

 
3,692

Google advertising revenues
15,508

 
18,020

Google other revenues
1,670

 
2,071

Google segment revenues
17,178

 
20,091

Other Bets revenues
80

 
166

Total revenues
$
17,258

 
$
20,257

Traffic acquisition costs (TAC)
The following table presents our TAC to Google Network Members and distribution partners (in millions, unaudited):
 
Three Months Ended
 
March 31,
 
2015
 
2016
TAC to Google Network Members

$2,432

 

$2,571

TAC to Google Network Members as % of Google Network Members' revenues
68
%
 
70
%
TAC to distribution partners

$913

 

$1,217

TAC to distribution partners as % of Google website revenues
8
%
 
8
%
Total TAC

$3,345

 

$3,788

Total TAC as % of Google advertising revenues
22
%
 
21
%
Stock repurchase
In Q1 2016, we repurchased 3.2 million shares of Alphabet Class C capital stock for an aggregate amount of $2.3 billion, of which $2.1 billion was paid during the quarter. The total remaining authorization for future repurchases is approximately $1.4 billion. The authorization has no expiration date.
Adoption of new accounting guidance
In Q1 2016, we early adopted Accounting Standards Update No. 2016-09 "Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting," which changes several aspects of the accounting for share-based payments, including income tax consequences and classification on the consolidated statement of cash flows. Starting this quarter, certain tax benefits are reflected in our consolidated statement of income, whereas they were previously recognized in equity. Additionally, our consolidated statements of cash flows now present such tax benefits as an operating activity and the prior period is adjusted accordingly.
Headcount
Our headcount for the three months ended March 31, 2016 was 64,115, as compared to 55,419 for the three months ended March 31, 2015.