Google Inc. (GOOG) last month announced financial results for the quarter ended June 30, 2014. “Google had a great quarter with revenue up 22% year on year, at $16.0 billion,” said Patrick Pichette, CFO of Google. “We are moving forward with great product momentum and are excited to continue providing amazing user experiences, with a view to the long term,” he added.
Q2 financial summary
Google Inc. reported consolidated revenues of $15.96 billion for the quarter ended June 30, 2014, an increase of 22% compared to the second quarter of 2013. The company reports advertising revenues consistent with GAAP on a gross basis without deducting traffic acquisition costs (TAC). In the second quarter of 2014, TAC totaled $3.29 billion, or 23% of advertising revenues.
GAAP operating income in the second quarter of 2014 was $4.26 billion, or 27% of revenues. This compares to GAAP operating income of $3.47 billion, or 26% of revenues, in the second quarter of 2013. Non-GAAP operating income in the second quarter of 2014 was $5.14 billion, or 32% of revenues. This compares to non-GAAP operating income of $4.21 billion, or 32% of revenues, in the second quarter of 2013. GAAP net income (including net income [loss] from discontinued operations) in the second quarter of 2014 was $3.42 billion, compared to $3.23 billion in the second quarter of 2013. Non-GAAP net income in the second quarter of 2014 was $4.18 billion, compared to $3.36 billion in the second quarter of 2013. GAAP EPS (including impact from net income [loss] from discontinued operations) in the second quarter of 2014 was $4.99 on 686 million diluted shares outstanding, compared to $4.77 in the second quarter of 2013 on 677 million diluted shares outstanding. Non-GAAP EPS in the second quarter of 2014 was $6.08, compared to $4.96 in the second quarter of 2013.
Revenues and other information
Google Inc. revenues for the quarter ended June 30, 2014 were $15.96 billion, representing a 22% increase over second quarter of 2013 revenues of $13.11 billion.
· Sites Revenues – The company’s sites generated revenues of $10.94 billion, or 69% of total revenues, in the second quarter of 2014. This represents a 23% increase over second quarter of 2013 sites revenues of $8.87 billion.
· Network Revenues – The company’s partner sites generated revenues of $3.42 billion, or 21% of total revenues, in the second quarter of 2014. This represents a 7% increase over the second quarter of 2013 network revenues of $3.19 billion.
· Other Revenues – Other revenues were $1.60 billion, or 10% of total revenues, in the second quarter of 2014. This represents a 53% increase over second quarter of 2013 other revenues of $1.05 billion.
Foreign exchange impact on revenues
Excluding gains related to a foreign exchange risk management program, foreign exchange rates remained constant from the first quarter of 2014 through the second quarter of 2014, Google’s revenues in the second quarter of 2014 would have been $77 million lower. Excluding gains related to their foreign exchange risk management program, had foreign exchange rates remained constant from the second quarter of 2013 through the second quarter of 2014, Google’s revenues in the second quarter of 2014 would have been $120 million lower.
Depreciation and loss on disposal of property and equipment and amortization expenses
Depreciation and loss on disposal of property and equipment and amortization expenses were $1.08 billion for the second quarter of 2014, of which $1.07 billion was related to Google, compared to $1.03 billion in the second quarter of 2013. Of the $1.07 billion, $116 million was related to amortization of Motorola intangibles, which Google will retain subsequent to the disposal of Motorola Mobile.
Stock-Based Compensation (SBC) – In the second quarter of 2014, the total charge related to SBC was $880 million compared to $743 million in the second quarter of 2013. The analysts currently estimate SBC charges for grants made to employees prior to June 30, 2014 to be approximately $3.42 billion for 2014. This estimate does not include expenses to be recognized related to employee stock awards that are granted after June 30, 2014 or nonemployee stock awards that have been or may be granted.
Operating Income – GAAP operating income in the second quarter of 2014 was $4.26 billion, or 27% of revenues. This compares to GAAP operating income of $3.47 billion, or 26% of revenues, in the second quarter of 2013. Non-GAAP operating income in the second quarter of 2014 was $5.14 billion, or 32% of revenues. This compares to non-GAAP operating income of $4.21 billion, or 32% of revenues, in the second quarter of 2013.
Net Income – GAAP-consolidated net income in the second quarter of 2014 was $3.42 billion, compared to $3.23 billion in the second quarter of 2013. Non-GAAP-consolidated net income was $4.18 billion in the second quarter of 2014, compared to $3.36 billion in the second quarter of 2013. GAAP EPS in the second quarter of 2014 was $4.99 on 686 million diluted shares outstanding, compared to $4.77 in the second quarter of 2013 on 677 million diluted shares outstanding. Non-GAAP EPS in the second quarter of 2014 was $6.08, compared to $4.96 in the second quarter of 2013.
Cash Flow and Capital Expenditures – Net cash provided by operating activities in the second quarter of 2014 totaled $5.63 billion, compared to $4.71 billion in the second quarter of 2013. In the second quarter of 2014, capital expenditures were $2.65 billion, the majority of which was for data-center construction, real estate purchases and production equipment. Free cash flow, an alternative non-GAAP measure of liquidity, is defined as net cash provided by operating activities less capital expenditures. In the second quarter of 2014, free cash flow was $2.98 billion.
