Google has announced financial results for the quarter and the fiscal year ended 31 December, 2012.
“We ended 2012 with a strong quarter,” says Larry Page, CEO of Google. “Revenues were up 36% year on year, and 8% quarter on quarter.
“And we hit $50-billion in revenues for the first time last year – not a bad achievement in just a decade and a half. In today’s multi-screen world, we face tremendous opportunities as a technology company focused on user benefit. It’s an incredibly exciting time to be at Google.”
Q4 financial summary
In December 2012, Google entered into an agreement with Arris Group, and certain other persons to dispose the Motorola Home business for a total consideration of approximately $2.35-billion in cash and stock, subject to certain adjustments.
The transaction is expected to close in 2013. As a result, financial results related to the Home business are presented as net loss from discontinued operations on the consolidated statements of income, and are excluded from all other results unless otherwise noted.
Assets and liabilities of the Home business are not presented separately because they are not material. Google reported consolidated revenues of $14,42-billion for the quarter ended 31 December, 2012, an increase of 36% compared to the fourth quarter of 2011.
Google reports advertising revenues, consistent with GAAP, on a gross basis without deducting traffic acquisition costs (TAC). In the fourth quarter of 2012, TAC totalled $3,08-billion, or 25% of advertising revenues.
Operating income, operating margin, net income and earnings per share (EPS) are reported on a GAAP and non-GAAP basis.
GAAP operating income in the fourth quarter of 2012 was $3,39-billion, or 24% of revenues. This compares to GAAP operating income of $3,51-billion, or 33% of revenues, in the fourth quarter of 2011.
Non-GAAP operating income in the fourth quarter of 2012 was $4,27-billion, or 30% of revenues. This compares to non-GAAP operating income of $4,04-billion, or 38% of revenues, in the fourth quarter of 2011.
Had Google included Home, non-GAAP operating income in the fourth quarter of 2012 would have been $4,31-billion.
GAAP net income including net loss from discontinued operations in the fourth quarter of 2012 was $2,89-billion, compared to $2,71-billion in the fourth quarter of 2011. Non-GAAP net income in the fourth quarter of 2012 was $3,57-billion, compared to $3,13-billion in the fourth quarter of 2011.
GAAP EPS including impact from net loss from discontinued operations in the fourth quarter of 2012 was $8.62 on 335-million diluted shares outstanding, compared to $8.22 in the fourth quarter of 2011
on 329-million diluted shares outstanding. Non-GAAP EPS in the fourth quarter of 2012 was $10.65, compared to $9.50 in the fourth quarter of 2011.
Non-GAAP operating income and non-GAAP operating margin exclude stock-based compensation (SBC) expense, as well as restructuring and related charges recorded in the Motorola Mobile business.
Non-GAAP net income and non-GAAP EPS exclude the expenses noted above, net of the related tax benefits, as well as net loss from discontinued operations. In the fourth quarter of 2012, the expense related to SBC and the related tax benefits were $700-million and $152-million compared to $536-million and $114-million in the fourth quarter of 2011.
In the fourth quarter of 2012, restructuring and related charges recorded in the Motorola Mobile business were $178-million, and the related tax benefits were $65-million. In addition, net loss from discontinued operations, in the fourth quarter of 2012, was $21-million.
In the fourth quarter of 2012, non-GAAP operating income with Home included the impact from Home of $35 million and excludes the above SBC expense and restructuring and related charges.
Q4 financial highlights
* Revenues and other information – on a consolidated basis, Google revenues for the quarter ended 31 December, 2012 was $14,42-billion, an increase of 36% compared to the fourth quarter of 2011.
* Google revenues (advertising and other) were $12,91-billion, or 89% of consolidated revenues, in the fourth quarter of 2012, representing a 22% increase over fourth quarter 2011 revenues of $10,58-billion.
* Google sites revenues – Google owned sites generated revenues of $8,64-billion, or 67% of total Google revenues, in the fourth quarter of 2012. This represents an 18% increase over fourth quarter 2011 Google sites revenues of $7,29-billion.
* Google network revenues – Google’s partner sites generated revenues of $3,44-billion, or 27% of total Google revenues, in the fourth quarter of 2012. This represents a 19% increase from fourth quarter 2011 Google network revenues of $2,88-billion.
* Other revenues – other revenues from Google were $82-million, or 6% of total Google revenues, in the fourth quarter of 2012. This represents a 102% increase over fourth quarter 2011 other revenues of $410-million.
* Google international revenues – Google revenues from outside of the United States totalled $6,9-billion, representing 54% of total Google revenues in the fourth quarter of 2012, compared to 53% in the third quarter of 2012 and 53% in the fourth quarter of 2011.
* Foreign exchange impact on Google revenues – excluding gains related to the foreign exchange risk management programme, had foreign exchange rates remained constant from the third quarter of 2012 through the fourth quarter of 2012, Google revenues in the fourth quarter of 2012 would have been $130-million lower.
Excluding gains related to foreign exchange risk management programme, had foreign exchange rates remained constant from the fourth quarter of 2011 through the fourth quarter of 2012, Google revenues in the fourth quarter of 2012 would have been $193-million higher.
* Google revenues from the United Kingdom totalled $1,30-billion, representing 10% of Google revenues in the fourth quarter of 2012, compared to 10% in the fourth quarter of 2011.
* In the fourth quarter of 2012, Google recognised a benefit of $37-million to revenues through foreign exchange risk management program, compared to $25-million in the fourth quarter of 2011.
Reconciliations of non-GAAP international revenues excluding the impact of foreign exchange and hedging to GAAP international revenues are included at the end of this release.
* Paid clicks – aggregate paid clicks, which include clicks related to ads served on Google sites and the sites of network members, increased approximately 24% over the fourth quarter of 2011 and increased approximately 9% over the third quarter of 2012.
* Cost per click – average cost per click, which includes clicks related to ads served on Google sites and the sites of network members, decreased approximately 6% over the fourth quarter of 2011 and increased approximately 2% over the third quarter of 2012.
* TAC – traffic acquisition costs, the portion of revenues shared with Google’s partners, increased to $3,08-billion in the fourth quarter of 2012, compared to $2,45-billion in the fourth quarter of 2011. TAC as a percentage of advertising revenues was 25% in the fourth quarter of 2012, compared to 24% in the fourth quarter of 2011.
The majority of TAC is related to amounts ultimately paid to network members, which totalled $2,44-billion in the fourth quarter of 2012. TAC also includes amounts ultimately paid to certain distribution partners and others who direct traffic to the Web site, which totalled $634 million in the fourth quarter of 2012.
* Motorola Mobile revenues were $1,51-billion, or 11% of consolidated revenues in the fourth quarter of 2012.
* Other cost of revenues, which is comprised primarily of data centre operational expenses, amortisation of intangible assets, content acquisition costs, credit card processing charges, and manufacturing and inventory related costs, increased to $3,14-billion, or 22% of revenues, in the fourth quarter of 2012, compared to $1,25-billion, or 12% of revenues, in the fourth quarter of 2011.
* Operating expenses, other than cost of revenues, were $4,81-billion in the fourth quarter of 2012, or 33% of revenues, compared to $3.38 billion in the fourth quarter of 2011, or 32% of revenues.
* Amortisation expenses – amortisation expenses of acquisition related intangible assets were $289-million for the fourth quarter of 2012. Of the $289-million, $153-million was as a result of the acquisition of Motorola, of which $116-million was allocated to Google and $37 million was allocated to Motorola Mobile.
* Stock-based compensation (SBC) – in the fourth quarter of 2012, the total charge related to SBC was $708-million, compared to $536-million in the fourth quarter of 2011.
Google estimates SBC charges for grants to employees prior to 1 January, 2013 to be approximately $2,5-billion for 2013. This estimate does not include expenses to be recognised related to employee stock awards that are granted after 31 December, 2012 or non-employee stock awards that have been or may be granted.
* Operating income – on a consolidated basis, GAAP operating income in the fourth quarter of 2012 was $3,39-billion, or 24% of revenues. This compares to GAAP operating income of $3,51-billion, or 33% of
revenues, in the fourth quarter of 2011. Non-GAAP operating income in the fourth quarter of 2012 was $4,27-billion, or 30% of revenues.
This compares to non-GAAP operating income of $4,04-billion, or 38% of revenues, in the fourth quarter of 2011.
* Google operating income – GAAP operating income for Google was $3,75-billion, or 29% of Google revenues, in the fourth quarter of 2012.
This compares to GAAP operating income of $3,51-billion, or 33% of Google revenues, in the fourth quarter of 2011. Non-GAAP operating income in the fourth quarter of 2012 was $4,42-billion, or 34% of Google revenues. This compares to non-GAAP operating income of $4,04-billion in the fourth quarter of 2011, or 38% of Google revenues.
* Motorola Mobile operating loss – GAAP operating loss for Motorola Mobile was $353-million, or 23% of Motorola Mobile revenues in the fourth quarter of 2012.
Non-GAAP operating loss for Motorola Mobile in the fourth quarter of 2012 was $152-million, or 10% of Motorola Mobile revenues. Interest and other income, net, was $152-million in the fourth quarter of 2012, compared to an expense of $18-million in the fourth quarter of 2011.
* Income taxes – effective tax rate was 18% for the fourth quarter of 2012.
* Net income – GAAP net income in the fourth quarter of 2012 was $2,89-billion, compared to $2,71-billion in the fourth quarter of 2011. Non-GAAP net income was $3,57-billion in the fourth quarter of 2012, compared to $3,13-billion in the fourth quarter of 2011.
GAAP EPS in the fourth quarter of 2012 was $8.62 on 335-million diluted shares outstanding, compared to $8.22 in the fourth quarter of 2011 on 329-million diluted shares outstanding.
Non-GAAP EPS in the fourth quarter of 2012 was $10.65, compared to $9.50 in the fourth quarter of 2011.
* Cash flow and capital expenditures (including Home) – net cash provided by operating activities in the fourth quarter of 2012 totalled $4,67-billion, compared to $3,92-billion in the fourth quarter of 2011.
In the fourth quarter of 2012, capital expenditures were $1,02-billion, the majority of which was for production equipment, data centre construction and facilities-related purchases. Free cash flow, an alternative non-GAAP measure of liquidity, is defined as net cash provided by operating activities less capital expenditures. In the fourth quarter of 2012, free cash flow was $3,65-billion.
Google expects to continue to make significant capital expenditures.
* Cash – as of 31 December, 2012, cash, cash equivalents, and marketable securities were $48,1-billion.
* Headcount – on a worldwide basis, Google employed 53 861 fulltime employees (37 544 in Google and 11 113 in Motorola Mobile and 5 204 in Motorola Home) as of 31 December, 2012, compared to 53 546 fulltime employees as of 30 September, 2012.
“We ended 2012 with a strong quarter,” says Larry Page, CEO of Google. “Revenues were up 36% year on year, and 8% quarter on quarter.
“And we hit $50-billion in revenues for the first time last year – not a bad achievement in just a decade and a half. In today’s multi-screen world, we face tremendous opportunities as a technology company focused on user benefit. It’s an incredibly exciting time to be at Google.”
Q4 financial summary
In December 2012, Google entered into an agreement with Arris Group, and certain other persons to dispose the Motorola Home business for a total consideration of approximately $2.35-billion in cash and stock, subject to certain adjustments.
The transaction is expected to close in 2013. As a result, financial results related to the Home business are presented as net loss from discontinued operations on the consolidated statements of income, and are excluded from all other results unless otherwise noted.
Assets and liabilities of the Home business are not presented separately because they are not material. Google reported consolidated revenues of $14,42-billion for the quarter ended 31 December, 2012, an increase of 36% compared to the fourth quarter of 2011.
Google reports advertising revenues, consistent with GAAP, on a gross basis without deducting traffic acquisition costs (TAC). In the fourth quarter of 2012, TAC totalled $3,08-billion, or 25% of advertising revenues.
Operating income, operating margin, net income and earnings per share (EPS) are reported on a GAAP and non-GAAP basis.
GAAP operating income in the fourth quarter of 2012 was $3,39-billion, or 24% of revenues. This compares to GAAP operating income of $3,51-billion, or 33% of revenues, in the fourth quarter of 2011.
Non-GAAP operating income in the fourth quarter of 2012 was $4,27-billion, or 30% of revenues. This compares to non-GAAP operating income of $4,04-billion, or 38% of revenues, in the fourth quarter of 2011.
Had Google included Home, non-GAAP operating income in the fourth quarter of 2012 would have been $4,31-billion.
GAAP net income including net loss from discontinued operations in the fourth quarter of 2012 was $2,89-billion, compared to $2,71-billion in the fourth quarter of 2011. Non-GAAP net income in the fourth quarter of 2012 was $3,57-billion, compared to $3,13-billion in the fourth quarter of 2011.
GAAP EPS including impact from net loss from discontinued operations in the fourth quarter of 2012 was $8.62 on 335-million diluted shares outstanding, compared to $8.22 in the fourth quarter of 2011
on 329-million diluted shares outstanding. Non-GAAP EPS in the fourth quarter of 2012 was $10.65, compared to $9.50 in the fourth quarter of 2011.
Non-GAAP operating income and non-GAAP operating margin exclude stock-based compensation (SBC) expense, as well as restructuring and related charges recorded in the Motorola Mobile business.
Non-GAAP net income and non-GAAP EPS exclude the expenses noted above, net of the related tax benefits, as well as net loss from discontinued operations. In the fourth quarter of 2012, the expense related to SBC and the related tax benefits were $700-million and $152-million compared to $536-million and $114-million in the fourth quarter of 2011.
In the fourth quarter of 2012, restructuring and related charges recorded in the Motorola Mobile business were $178-million, and the related tax benefits were $65-million. In addition, net loss from discontinued operations, in the fourth quarter of 2012, was $21-million.
In the fourth quarter of 2012, non-GAAP operating income with Home included the impact from Home of $35 million and excludes the above SBC expense and restructuring and related charges.
Q4 financial highlights
* Revenues and other information – on a consolidated basis, Google revenues for the quarter ended 31 December, 2012 was $14,42-billion, an increase of 36% compared to the fourth quarter of 2011.
* Google revenues (advertising and other) were $12,91-billion, or 89% of consolidated revenues, in the fourth quarter of 2012, representing a 22% increase over fourth quarter 2011 revenues of $10,58-billion.
* Google sites revenues – Google owned sites generated revenues of $8,64-billion, or 67% of total Google revenues, in the fourth quarter of 2012. This represents an 18% increase over fourth quarter 2011 Google sites revenues of $7,29-billion.
* Google network revenues – Google’s partner sites generated revenues of $3,44-billion, or 27% of total Google revenues, in the fourth quarter of 2012. This represents a 19% increase from fourth quarter 2011 Google network revenues of $2,88-billion.
* Other revenues – other revenues from Google were $82-million, or 6% of total Google revenues, in the fourth quarter of 2012. This represents a 102% increase over fourth quarter 2011 other revenues of $410-million.
* Google international revenues – Google revenues from outside of the United States totalled $6,9-billion, representing 54% of total Google revenues in the fourth quarter of 2012, compared to 53% in the third quarter of 2012 and 53% in the fourth quarter of 2011.
* Foreign exchange impact on Google revenues – excluding gains related to the foreign exchange risk management programme, had foreign exchange rates remained constant from the third quarter of 2012 through the fourth quarter of 2012, Google revenues in the fourth quarter of 2012 would have been $130-million lower.
Excluding gains related to foreign exchange risk management programme, had foreign exchange rates remained constant from the fourth quarter of 2011 through the fourth quarter of 2012, Google revenues in the fourth quarter of 2012 would have been $193-million higher.
* Google revenues from the United Kingdom totalled $1,30-billion, representing 10% of Google revenues in the fourth quarter of 2012, compared to 10% in the fourth quarter of 2011.
* In the fourth quarter of 2012, Google recognised a benefit of $37-million to revenues through foreign exchange risk management program, compared to $25-million in the fourth quarter of 2011.
Reconciliations of non-GAAP international revenues excluding the impact of foreign exchange and hedging to GAAP international revenues are included at the end of this release.
* Paid clicks – aggregate paid clicks, which include clicks related to ads served on Google sites and the sites of network members, increased approximately 24% over the fourth quarter of 2011 and increased approximately 9% over the third quarter of 2012.
* Cost per click – average cost per click, which includes clicks related to ads served on Google sites and the sites of network members, decreased approximately 6% over the fourth quarter of 2011 and increased approximately 2% over the third quarter of 2012.
* TAC – traffic acquisition costs, the portion of revenues shared with Google’s partners, increased to $3,08-billion in the fourth quarter of 2012, compared to $2,45-billion in the fourth quarter of 2011. TAC as a percentage of advertising revenues was 25% in the fourth quarter of 2012, compared to 24% in the fourth quarter of 2011.
The majority of TAC is related to amounts ultimately paid to network members, which totalled $2,44-billion in the fourth quarter of 2012. TAC also includes amounts ultimately paid to certain distribution partners and others who direct traffic to the Web site, which totalled $634 million in the fourth quarter of 2012.
* Motorola Mobile revenues were $1,51-billion, or 11% of consolidated revenues in the fourth quarter of 2012.
* Other cost of revenues, which is comprised primarily of data centre operational expenses, amortisation of intangible assets, content acquisition costs, credit card processing charges, and manufacturing and inventory related costs, increased to $3,14-billion, or 22% of revenues, in the fourth quarter of 2012, compared to $1,25-billion, or 12% of revenues, in the fourth quarter of 2011.
* Operating expenses, other than cost of revenues, were $4,81-billion in the fourth quarter of 2012, or 33% of revenues, compared to $3.38 billion in the fourth quarter of 2011, or 32% of revenues.
* Amortisation expenses – amortisation expenses of acquisition related intangible assets were $289-million for the fourth quarter of 2012. Of the $289-million, $153-million was as a result of the acquisition of Motorola, of which $116-million was allocated to Google and $37 million was allocated to Motorola Mobile.
* Stock-based compensation (SBC) – in the fourth quarter of 2012, the total charge related to SBC was $708-million, compared to $536-million in the fourth quarter of 2011.
Google estimates SBC charges for grants to employees prior to 1 January, 2013 to be approximately $2,5-billion for 2013. This estimate does not include expenses to be recognised related to employee stock awards that are granted after 31 December, 2012 or non-employee stock awards that have been or may be granted.
* Operating income – on a consolidated basis, GAAP operating income in the fourth quarter of 2012 was $3,39-billion, or 24% of revenues. This compares to GAAP operating income of $3,51-billion, or 33% of
revenues, in the fourth quarter of 2011. Non-GAAP operating income in the fourth quarter of 2012 was $4,27-billion, or 30% of revenues.
This compares to non-GAAP operating income of $4,04-billion, or 38% of revenues, in the fourth quarter of 2011.
* Google operating income – GAAP operating income for Google was $3,75-billion, or 29% of Google revenues, in the fourth quarter of 2012.
This compares to GAAP operating income of $3,51-billion, or 33% of Google revenues, in the fourth quarter of 2011. Non-GAAP operating income in the fourth quarter of 2012 was $4,42-billion, or 34% of Google revenues. This compares to non-GAAP operating income of $4,04-billion in the fourth quarter of 2011, or 38% of Google revenues.
* Motorola Mobile operating loss – GAAP operating loss for Motorola Mobile was $353-million, or 23% of Motorola Mobile revenues in the fourth quarter of 2012.
Non-GAAP operating loss for Motorola Mobile in the fourth quarter of 2012 was $152-million, or 10% of Motorola Mobile revenues. Interest and other income, net, was $152-million in the fourth quarter of 2012, compared to an expense of $18-million in the fourth quarter of 2011.
* Income taxes – effective tax rate was 18% for the fourth quarter of 2012.
* Net income – GAAP net income in the fourth quarter of 2012 was $2,89-billion, compared to $2,71-billion in the fourth quarter of 2011. Non-GAAP net income was $3,57-billion in the fourth quarter of 2012, compared to $3,13-billion in the fourth quarter of 2011.
GAAP EPS in the fourth quarter of 2012 was $8.62 on 335-million diluted shares outstanding, compared to $8.22 in the fourth quarter of 2011 on 329-million diluted shares outstanding.
Non-GAAP EPS in the fourth quarter of 2012 was $10.65, compared to $9.50 in the fourth quarter of 2011.
* Cash flow and capital expenditures (including Home) – net cash provided by operating activities in the fourth quarter of 2012 totalled $4,67-billion, compared to $3,92-billion in the fourth quarter of 2011.
In the fourth quarter of 2012, capital expenditures were $1,02-billion, the majority of which was for production equipment, data centre construction and facilities-related purchases. Free cash flow, an alternative non-GAAP measure of liquidity, is defined as net cash provided by operating activities less capital expenditures. In the fourth quarter of 2012, free cash flow was $3,65-billion.
Google expects to continue to make significant capital expenditures.
* Cash – as of 31 December, 2012, cash, cash equivalents, and marketable securities were $48,1-billion.
* Headcount – on a worldwide basis, Google employed 53 861 fulltime employees (37 544 in Google and 11 113 in Motorola Mobile and 5 204 in Motorola Home) as of 31 December, 2012, compared to 53 546 fulltime employees as of 30 September, 2012.