Delaware | 001-37580 | 61-1767919 |
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
¨ | 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)) |
Securities registered pursuant to Section 12(b) of the Act: | ||
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Class A Common Stock, $0.001 par value | GOOGL | Nasdaq Stock Market LLC |
(Nasdaq Global Select Market) | ||
Class C Capital Stock, $0.001 par value | GOOG | Nasdaq Stock Market LLC |
(Nasdaq Global Select Market) |
Item 9.01. | Financial Statements and Exhibits. |
(d) | Exhibits. |
Exhibit No. | Description |
99.1 |
ALPHABET INC. | |
Date: July 25, 2019 | /s/ RUTH M. PORAT |
Ruth M. Porat Senior Vice President and Chief Financial Officer |
Three Months Ended June 30, 2018 | Three Months Ended June 30, 2019 | ||||||
Revenues | $32,657 | $38,944 | |||||
Increase in revenues year over year | 26 | % | 19 | % | |||
Increase in constant currency revenues year over year | 23 | % | 22 | % | |||
Operating income(1) | $3,045 | $9,180 | |||||
Operating margin(1) | 9 | % | 24 | % | |||
Operating income (Non-GAAP)(1)(2) | $8,116 | $9,180 | |||||
Operating margin (Non-GAAP)(1)(2) | 25 | % | 24 | % | |||
Other income (expense), net(1) | $1,170 | $2,967 | |||||
Net income | $3,195 | $9,947 | |||||
Diluted EPS | $4.54 | $14.21 | |||||
Net income (Non-GAAP)(2) | $8,266 | $9,947 | |||||
Diluted EPS (Non-GAAP)(2) | $11.75 | $14.21 | |||||
Diluted shares (in thousands) | 703,247 | 699,954 | |||||
Effective tax rate | 24 | % | 18 | % | |||
Number of employees | 89,058 | 107,646 |
(1) | Q2 2018 results have been recast to reflect the reclassification of performance fees from general and administrative expenses to other income (expense), net (OI&E) to conform to the current period presentation. |
(2) | Non-GAAP results presented for Q2 2018 exclude the EC fine. See the table captioned "Reconciliation of non-GAAP results of operations to the nearest comparable GAAP measures" for more details. |
Three Months Ended June 30, 2018 | Three Months Ended June 30, 2019 | ||||||
Google properties revenues | $23,262 | $27,335 | |||||
Google Network Members' properties revenues | 4,825 | 5,266 | |||||
Google advertising revenues | 28,087 | 32,601 | |||||
Google other revenues | 4,425 | 6,181 | |||||
Google segment revenues | $32,512 | $38,782 | |||||
Other Bets revenues | $145 | $162 | |||||
Google operating income | $8,959 | $10,388 | |||||
Other Bets operating loss | ($732 | ) | ($989 | ) |
Three Months Ended June 30, 2018 | Three Months Ended June 30, 2019 | ||||||
TAC to Google Network Members | $3,411 | $3,621 | |||||
TAC to Google Network Members as % of Google Network Members' properties revenues | 71 | % | 69 | % | |||
TAC to distribution partners | $3,009 | $3,617 | |||||
TAC to distribution partners as % of Google properties revenues | 13 | % | 13 | % | |||
Total TAC | $6,420 | $7,238 | |||||
Total TAC as % of Google advertising revenues | 23 | % | 22 | % |
Change from Q2 2018 to Q2 2019 (YoY) | Change from Q1 2019 to Q2 2019 (QoQ) | ||||
Paid clicks on Google properties | 28 | % | 6 | % | |
Cost-per-click on Google properties | (11 | )% | (1 | )% | |
Impressions on Google Network Members' properties | 11 | % | 0 | % | |
Cost-per-impression on Google Network Members' properties | (1 | )% | 5 | % |
Investor relations | Media |
investor-relations@abc.xyz | press@abc.xyz |
December 31, 2018 | June 30, 2019 | ||||||
(unaudited) | |||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 16,701 | $ | 16,587 | |||
Marketable securities | 92,439 | 104,469 | |||||
Total cash, cash equivalents, and marketable securities | 109,140 | 121,056 | |||||
Accounts receivable, net of allowance of $729 and $721 | 20,838 | 20,965 | |||||
Income taxes receivable, net | 355 | 352 | |||||
Inventory | 1,107 | 964 | |||||
Other current assets | 4,236 | 4,100 | |||||
Total current assets | 135,676 | 147,437 | |||||
Non-marketable investments | 13,859 | 12,112 | |||||
Deferred income taxes | 737 | 585 | |||||
Property and equipment, net | 59,719 | 64,891 | |||||
Operating lease assets | 0 | 9,713 | |||||
Intangible assets, net | 2,220 | 1,902 | |||||
Goodwill | 17,888 | 18,000 | |||||
Other non-current assets | 2,693 | 2,461 | |||||
Total assets | $ | 232,792 | $ | 257,101 | |||
Liabilities and Stockholders’ Equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 4,378 | $ | 3,925 | |||
Accrued compensation and benefits | 6,839 | 6,432 | |||||
Accrued expenses and other current liabilities | 16,958 | 19,823 | |||||
Accrued revenue share | 4,592 | 4,567 | |||||
Deferred revenue | 1,784 | 1,717 | |||||
Income taxes payable, net | 69 | 536 | |||||
Total current liabilities | 34,620 | 37,000 | |||||
Long-term debt | 4,012 | 4,074 | |||||
Deferred revenue, non-current | 396 | 387 | |||||
Income taxes payable, non-current | 11,327 | 10,969 | |||||
Deferred income taxes | 1,264 | 1,892 | |||||
Operating lease liabilities | 0 | 9,088 | |||||
Other long-term liabilities | 3,545 | 1,499 | |||||
Total liabilities | 55,164 | 64,909 | |||||
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); 695,556 (Class A 299,242, Class B 46,636, Class C 349,678) and 694,050 (Class A 299,520, Class B 46,522, Class C 348,008) shares issued and outstanding | 45,049 | 47,937 | |||||
Accumulated other comprehensive loss | (2,306 | ) | (1,091 | ) | |||
Retained earnings | 134,885 | 145,346 | |||||
Total stockholders’ equity | 177,628 | 192,192 | |||||
Total liabilities and stockholders’ equity | $ | 232,792 | $ | 257,101 |
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2018 | 2019 | 2018 | 2019 | ||||||||||||
Revenues | $ | 32,657 | $ | 38,944 | $ | 63,803 | $ | 75,283 | |||||||
Costs and expenses: | |||||||||||||||
Cost of revenues | 13,883 | 17,296 | 27,350 | 33,308 | |||||||||||
Research and development | 5,114 | 6,213 | 10,153 | 12,242 | |||||||||||
Sales and marketing | 3,780 | 4,212 | 7,384 | 8,117 | |||||||||||
General and administrative | 1,764 | 2,043 | 3,167 | 4,131 | |||||||||||
European Commission fines | 5,071 | 0 | 5,071 | 1,697 | |||||||||||
Total costs and expenses | 29,612 | 29,764 | 53,125 | 59,495 | |||||||||||
Income from operations | 3,045 | 9,180 | 10,678 | 15,788 | |||||||||||
Other income (expense), net | 1,170 | 2,967 | 4,080 | 4,505 | |||||||||||
Income before income taxes | 4,215 | 12,147 | 14,758 | 20,293 | |||||||||||
Provision for income taxes | 1,020 | 2,200 | 2,162 | 3,689 | |||||||||||
Net income | $ | 3,195 | $ | 9,947 | $ | 12,596 | $ | 16,604 | |||||||
Basic earnings per share of Class A and B common stock and Class C capital stock | $ | 4.60 | $ | 14.33 | $ | 18.13 | $ | 23.91 | |||||||
Diluted earnings per share of Class A and B common stock and Class C capital stock | $ | 4.54 | $ | 14.21 | $ | 17.89 | $ | 23.71 |
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2018 | 2019 | 2018 | 2019 | ||||||||||||
Operating activities | |||||||||||||||
Net income | $ | 3,195 | $ | 9,947 | $ | 12,596 | $ | 16,604 | |||||||
Adjustments: | |||||||||||||||
Depreciation and impairment of property and equipment | 1,862 | 2,626 | 3,653 | 5,042 | |||||||||||
Amortization and impairment of intangible assets | 252 | 209 | 447 | 406 | |||||||||||
Stock-based compensation expense | 2,413 | 2,756 | 4,870 | 5,525 | |||||||||||
Deferred income taxes | (139 | ) | 693 | (157 | ) | 620 | |||||||||
Gain on debt and equity securities, net | (1,068 | ) | (2,797 | ) | (4,060 | ) | (3,878 | ) | |||||||
Other | 137 | (70 | ) | (120 | ) | (48 | ) | ||||||||
Changes in assets and liabilities, net of effects of acquisitions: | |||||||||||||||
Accounts receivable | (312 | ) | (1,146 | ) | 1,388 | 26 | |||||||||
Income taxes, net | (1,438 | ) | (1,043 | ) | (656 | ) | 25 | ||||||||
Other assets | (515 | ) | 89 | (756 | ) | (176 | ) | ||||||||
Accounts payable | (145 | ) | (18 | ) | (23 | ) | (443 | ) | |||||||
Accrued expenses and other liabilities | 5,742 | 1,303 | 4,600 | 1,074 | |||||||||||
Accrued revenue share | (17 | ) | 87 | (303 | ) | (60 | ) | ||||||||
Deferred revenue | 165 | (9 | ) | 295 | (90 | ) | |||||||||
Net cash provided by operating activities | 10,132 | 12,627 | 21,774 | 24,627 | |||||||||||
Investing activities | |||||||||||||||
Purchases of property and equipment | (5,477 | ) | (6,126 | ) | (12,776 | ) | (10,764 | ) | |||||||
Purchases of marketable securities | (14,192 | ) | (23,841 | ) | (23,041 | ) | (44,724 | ) | |||||||
Maturities and sales of marketable securities | 16,172 | 19,686 | 25,523 | 40,692 | |||||||||||
Purchases of non-marketable investments | (405 | ) | (188 | ) | (732 | ) | (1,095 | ) | |||||||
Maturities and sales of non-marketable investments | 693 | 107 | 1,191 | 206 | |||||||||||
Acquisitions, net of cash acquired, and purchases of intangible assets | (184 | ) | (148 | ) | (1,434 | ) | (247 | ) | |||||||
Other investing activities | 19 | 55 | 49 | 89 | |||||||||||
Net cash used in investing activities | (3,374 | ) | (10,455 | ) | (11,220 | ) | (15,843 | ) | |||||||
Financing activities | |||||||||||||||
Net payments related to stock-based award activities | (1,541 | ) | (1,260 | ) | (2,699 | ) | (2,435 | ) | |||||||
Repurchases of capital stock | (2,052 | ) | (3,577 | ) | (4,225 | ) | (6,602 | ) | |||||||
Proceeds from issuance of debt, net of costs | 1,545 | 2 | 6,236 | 317 | |||||||||||
Repayments of debt | (2,889 | ) | (48 | ) | (6,267 | ) | (393 | ) | |||||||
Proceeds from sale of subsidiary shares | 0 | 137 | 0 | 184 | |||||||||||
Net cash used in financing activities | (4,937 | ) | (4,746 | ) | (6,955 | ) | (8,929 | ) | |||||||
Effect of exchange rate changes on cash and cash equivalents | (331 | ) | 13 | (166 | ) | 31 | |||||||||
Net increase (decrease) in cash and cash equivalents | 1,490 | (2,561 | ) | 3,433 | (114 | ) | |||||||||
Cash and cash equivalents at beginning of period | 12,658 | 19,148 | 10,715 | 16,701 | |||||||||||
Cash and cash equivalents at end of period | $ | 14,148 | $ | 16,587 | $ | 14,148 | $ | 16,587 |
Three Months Ended June 30, 2018 | ||||
Operating income (GAAP) | $ | 3,045 | ||
Add: European Commission (EC) fine* | 5,071 | |||
Operating income (Non-GAAP) | $ | 8,116 | ||
Operating margin (GAAP) | 9 | % | ||
Operating margin (Non-GAAP) | 25 | % | ||
Net income (GAAP) | $ | 3,195 | ||
Add: EC fine* | 5,071 | |||
Net income (Non-GAAP) | $ | 8,266 | ||
Diluted net income per share (GAAP) | $ | 4.54 | ||
Diluted EPS (Non-GAAP) | $ | 11.75 | ||
Shares used in diluted per share calculation (in thousands) | 703,247 |
Three Months Ended June 30, 2019 | |||
Net cash provided by operating activities | $ | 12,627 | |
Less: purchases of property and equipment | (6,126 | ) | |
Free cash flow | $ | 6,501 |
Three Months Ended June 30, 2019 | Three Months Ended June 30, 2019 | ||||||
YoY (using Q2'18's FX rates) | QoQ (using Q1'19's FX rates) | ||||||
EMEA revenues (GAAP) | $ | 12,401 | $ | 12,401 | |||
Exclude foreign exchange effect on Q2'19 revenues using Q2'18 rates | 816 | N/A | |||||
Exclude foreign exchange effect on Q2'19 revenues using Q1'19 rates | N/A | 154 | |||||
Exclude hedging effect recognized in Q2'19 | (88 | ) | (88 | ) | |||
EMEA constant currency revenues (non-GAAP) | $ | 13,129 | $ | 12,467 | |||
Prior period EMEA revenues, excluding hedging effect (non-GAAP) | $ | 10,888 | $ | 11,668 | |||
EMEA revenue growth (GAAP) | 15 | % | 5 | % | |||
EMEA constant currency revenue growth (non-GAAP) | 21 | % | 7 | % | |||
APAC revenues (GAAP) | $ | 6,551 | $ | 6,551 | |||
Exclude foreign exchange effect on Q2'19 revenues using Q2'18 rates | 217 | N/A | |||||
Exclude foreign exchange effect on Q2'19 revenues using Q1'19 rates | N/A | 26 | |||||
Exclude hedging effect recognized in Q2'19 | (15 | ) | (15 | ) | |||
APAC constant currency revenues (non-GAAP) | $ | 6,753 | $ | 6,562 | |||
Prior period APAC revenues, excluding hedging effect (non-GAAP) | $ | 5,090 | $ | 6,096 | |||
APAC revenue growth (GAAP) | 29 | % | 7 | % | |||
APAC constant currency revenue growth (non-GAAP) | 33 | % | 8 | % | |||
Other Americas revenues (GAAP) | $ | 2,129 | $ | 2,129 | |||
Exclude foreign exchange effect on Q2'19 revenues using Q2'18 rates | 184 | N/A | |||||
Exclude foreign exchange effect on Q2'19 revenues using Q1'19 rates | N/A | 43 | |||||
Exclude hedging effect recognized in Q2'19 | (5 | ) | (5 | ) | |||
Other Americas constant currency revenues (non-GAAP) | $ | 2,308 | $ | 2,167 | |||
Prior period Other Americas revenues, excluding hedging effect (non-GAAP) | $ | 1,849 | $ | 1,906 | |||
Other Americas revenue growth (GAAP) | 15 | % | 12 | % | |||
Other Americas constant currency revenue growth (non-GAAP) | 25 | % | 14 | % | |||
United States revenues (GAAP) | $ | 17,863 | $ | 17,863 | |||
United States revenue growth (GAAP) | 20 | % | 8 | % | |||
Revenues (GAAP) | $ | 38,944 | $ | 38,944 | |||
Constant currency revenues (non-GAAP) | $ | 40,053 | $ | 39,059 | |||
Prior period revenues, excluding hedging effect (non-GAAP) | $ | 32,760 | $ | 36,202 | |||
Revenue growth (GAAP) | 19 | % | 7 | % | |||
Constant currency revenue growth (non-GAAP) | 22 | % | 8 | % |
Three Months Ended | |||||||
June 30, | |||||||
2018 | 2019 | ||||||
Interest income | $ | 456 | $ | 653 | |||
Interest expense | (27 | ) | (25 | ) | |||
Foreign currency exchange gain (loss), net | (33 | ) | (52 | ) | |||
Gain on debt securities, net | 6 | 98 | |||||
Gain on equity securities, net(1)(2) | 1,062 | 2,699 | |||||
Performance fees(3) | (238 | ) | (443 | ) | |||
Loss and impairment from equity method investments, net | (105 | ) | (16 | ) | |||
Other | 49 | 53 | |||||
Other income (expense), net | $ | 1,170 | $ | 2,967 |
(1) | The $2.7 billion gain on equity securities for Q2 2019 includes $2.6 billion of net unrealized gains on equity investments that we hold and which may not ultimately be realized. Fluctuations in the value of our investments could contribute to the volatility of OI&E in future periods. |
(2) | ASU 2016-01, effective January 1, 2018, requires that all gains and losses, unrealized and realized, on equity security investments are recognized in OI&E. For Q2 2019, the net effect of the gain on equity securities of $2.7 billion and the performance fees of $443 million increased income tax, net income, and diluted EPS by $474 million, $1,782 million, and $2.55 respectively. |
(3) | Q2 2018 results have been recast to reflect the reclassification of performance fees from general and administrative expenses to OI&E to conform to the current period presentation. |
Three Months Ended | |||||||
June 30, | |||||||
2018 | 2019 | ||||||
Revenues: | |||||||
Google | $ | 32,512 | $ | 38,782 | |||
Other Bets | 145 | 162 | |||||
Total revenues | $ | 32,657 | $ | 38,944 | |||
Operating income (loss): | |||||||
Google | $ | 8,959 | $ | 10,388 | |||
Other Bets | (732 | ) | (989 | ) | |||
Reconciling items(1) | (5,182 | ) | (219 | ) | |||
Total income from operations | $ | 3,045 | $ | 9,180 | |||
Stock-based compensation(2): | |||||||
Google | $ | 2,288 | $ | 2,600 | |||
Other Bets | 127 | 125 | |||||
Reconciling items(3) | (2 | ) | 35 | ||||
Total stock-based compensation | $ | 2,413 | $ | 2,760 | |||
Capital expenditures: | |||||||
Google | $ | 5,299 | $ | 6,896 | |||
Other Bets | 10 | 65 | |||||
Reconciling items(4) | 168 | (835 | ) | ||||
Total capital expenditures | $ | 5,477 | $ | 6,126 | |||
Depreciation, amortization, and impairment: | |||||||
Google | $ | 2,031 | $ | 2,756 | |||
Other Bets | 83 | 79 | |||||
Total depreciation, amortization, and impairment | $ | 2,114 | $ | 2,835 |
(1) | Reconciling items are generally comprised of corporate administrative costs and other miscellaneous items that are not allocated to individual segments. Additionally, reconciling items for the three months ended June 30, 2018 includes the EC fine of $5.1 billion. Performance fees previously included in reconciling items were reclassified for the prior period from general and administrative expenses to OI&E to conform with current period presentation. |
(2) | For purposes of segment reporting, SBC represents awards that we expect to settle in Alphabet stock. |
(3) | Reconciling items are primarily related to corporate administrative costs that are not allocated to individual segments. |
(4) | Reconciling items are related to timing differences of payments, as segment capital expenditures are on an accrual basis while total capital expenditures shown on the Consolidated Statements of Cash Flows are on a cash basis, and other miscellaneous differences. |