EX-99.1 2 googexhibit991q12020.htm EX-99.1 Document
Exhibit 99.1
Alphabet Announces First Quarter 2020 Results
MOUNTAIN VIEW, Calif. – April 28, 2020 – Alphabet Inc. (NASDAQ: GOOG, GOOGL) today announced financial results for the quarter ended March 31, 2020.
“Given the depth of the challenges so many are facing, it’s a huge privilege to be able to help at this time,” said Sundar Pichai, Chief Executive Officer of Alphabet and Google. “People are relying on Google’s services more than ever and we’ve marshalled our resources and product development in this urgent moment.”
“Our business, led by Search, YouTube, and Cloud, drove Alphabet revenues to $41.2 billion, up 13% versus last year, or 15% on a constant currency basis,” said Ruth Porat, Chief Financial Officer of Alphabet and Google. “Performance was strong during the first two months of the quarter, but then in March we experienced a significant slowdown in ad revenues. We are sharpening our focus on executing more efficiently, while continuing to invest in our long-term opportunities.”
Q1 2020 financial highlights
The following table summarizes our consolidated financial results for the quarters ended March 31, 2019 and 2020 (in millions, except for per share information and percentages; unaudited). Prior period results excluding the effect of the European Commission (EC) fine of $1.7 billion have been included to facilitate comparison to current quarter performance (labeled “Non-GAAP”).
Quarter Ended March 31,
20192020
Revenues$36,339  $41,159  
Increase in revenues year over year17 %13 %
Increase in constant currency revenues year over year19 %15 %
Operating income$6,608  $7,977  
Operating margin18 %19 %
Operating income (Non-GAAP)(1)
$8,305  $7,977  
Operating margin (Non-GAAP)(1)
23 %19 %
Other income (expense), net
$1,538  ($220) 
Net income$6,657  $6,836  
Diluted EPS$9.50  $9.87  
Net income (Non-GAAP)(1)
$8,339  $6,836  
Diluted EPS (Non-GAAP)(1)
$11.90  $9.87  
(1)  Non-GAAP results presented for Q1 2019 exclude the EC fine. See the table captioned “Reconciliation of non-GAAP results of operations to the nearest comparable GAAP measures” for more details.


Q1 2020 supplemental information (in millions, except for number of employees; unaudited)
Revenues, Traffic Acquisition Costs (TAC) and number of employees
The following table summarizes our revenues, total TAC and number of employees. Hedging gains, which were previously included in Google revenues, are presented separately.
Quarter Ended March 31,
20192020
Google Search & other$22,547  $24,502  
YouTube ads(1)
3,025  4,038  
Google properties25,572  28,540  
Google Network Members' properties5,015  5,223  
Google advertising30,587  33,763  
Google Cloud1,825  2,777  
Google other(1)
3,620  4,435  
Google revenues36,032  40,975  
Other Bets revenues170  135  
Hedging gains137  49  
Total revenues$36,339  $41,159  
Total TAC$6,860  $7,452  
Number of employees103,459  123,048  
(1)  YouTube non-advertising revenues are included in Google other revenues.
Segment operating results
Quarter Ended March 31,
20192020
Google operating income*$9,188  $9,270  
Other Bets operating loss($868) ($1,121) 
*The EC fine is included in reconciling items for the quarter ended March 31, 2019 as it is not allocated to Google for segment reporting purposes.
Webcast and conference call information
A live audio webcast of our first quarter 2020 earnings release call will be available at http://abc.xyz/investor. The call begins today at 1:30 PM (PT) / 4:30 PM (ET). This press release, including the reconciliations of certain non-GAAP measures to their nearest comparable GAAP measures, is also available on that site.
We also provide announcements regarding our financial performance, including SEC filings, investor events, press and earnings releases, and blogs, on our investor relations website (http://abc.xyz/investor).
Forward-looking statements
This press release may contain forward-looking statements that involve risks and uncertainties. Actual results may differ materially from the results predicted, and reported results should not be considered as an indication of future performance. The potential risks and uncertainties that could cause actual results to differ from the results predicted include, among others, those risks and uncertainties included under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2019, which is on file with the SEC and is available on our investor relations website at http://abc.xyz/investor and on the SEC website at www.sec.gov. Additional information will also be set forth in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020. All information provided in this release and in the attachments is as of April 28, 2020. Undue reliance should not be placed on the forward-looking statements in this press release, which are based on information available to us on the date hereof. We undertake no duty to update this information unless required by law.
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About non-GAAP financial measures
To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we use the following non-GAAP financial measures: operating income, excluding the EC fine; operating margin, excluding the EC fine; net income, excluding the EC fine; diluted earnings per share, excluding the EC fine; free cash flow; constant currency revenues; and constant currency revenue growth. The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.
We use these non-GAAP financial measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons. We believe that these non-GAAP financial measures provide meaningful supplemental information regarding our performance and liquidity by excluding certain items that may not be indicative of our recurring core business operating results, such as our revenues excluding the effect of foreign exchange rate movements and hedging activities or our operating performance excluding extraordinary fines. We believe that both management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting, and analyzing future periods. These non-GAAP financial measures also facilitate management’s internal comparisons to our historical performance and liquidity as well as comparisons to our competitors’ operating results. We believe these non-GAAP financial measures are useful to investors both because (1) they allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making and (2) they are used by our institutional investors and the analyst community to help them analyze the health of our business.
There are a number of limitations related to the use of non-GAAP financial measures. We compensate for these limitations by providing specific information regarding the GAAP amounts excluded from these non-GAAP financial measures and evaluating these non-GAAP financial measures together with their relevant financial measures in accordance with GAAP.
For more information on these non-GAAP financial measures, please see the tables captioned “Reconciliation of non-GAAP results of operations to the nearest comparable GAAP measures,” “Reconciliation from net cash provided by operating activities to free cash flow” and “Reconciliation from GAAP revenues to non-GAAP constant currency revenues” included at the end of this release.
Contact
Investor relations
Media
investor-relations@abc.xyzpress@abc.xyz  

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Alphabet Inc.
CONSOLIDATED BALANCE SHEETS
(In millions, except share amounts which are reflected in thousands and par value per share amounts)
As of December 31,As of
March 31,
20192020
(unaudited)
Assets
Current assets:
Cash and cash equivalents$18,498  $19,644  
Marketable securities101,177  97,585  
Total cash, cash equivalents, and marketable securities119,675  117,229  
Accounts receivable, net25,326  21,825  
Income taxes receivable, net2,166  1,910  
Inventory999  889  
Other current assets4,412  5,165  
Total current assets152,578  147,018  
Non-marketable investments13,078  12,367  
Deferred income taxes721  730  
Property and equipment, net73,646  76,747  
Operating lease assets10,941  11,219  
Intangible assets, net1,979  1,840  
Goodwill20,624  20,734  
Other non-current assets2,342  2,748  
Total assets$275,909  $273,403  
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable$5,561  $4,099  
Accrued compensation and benefits8,495  5,656  
Accrued expenses and other current liabilities23,067  22,601  
Accrued revenue share5,916  4,982  
Deferred revenue1,908  1,938  
Income taxes payable, net274  913  
Total current liabilities45,221  40,189  
Long-term debt4,554  5,016  
Deferred revenue, non-current358  350  
Income taxes payable, non-current9,885  9,207  
Deferred income taxes1,701  2,079  
Operating lease liabilities10,214  10,476  
Other long-term liabilities2,534  2,427  
Total liabilities74,467  69,744  
Commitments and contingencies
Stockholders’ equity:
Convertible preferred stock, $0.001 par value per share, 100,000 shares authorized; no shares issued and outstanding0  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); 688,335 (Class A 299,828, Class B 46,441, Class C 342,066) and 683,972 (Class A 300,047, Class B 46,407, Class C 337,518) shares issued and outstanding
50,552  53,688  
Accumulated other comprehensive loss(1,232) (1,097) 
Retained earnings152,122  151,068  
Total stockholders’ equity201,442  203,659  
Total liabilities and stockholders’ equity$275,909  $273,403  

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Alphabet Inc.
CONSOLIDATED STATEMENTS OF INCOME
(In millions, except share amounts which are reflected in thousands and per share amounts)
Quarter Ended March 31,
20192020
(unaudited)
Revenues$36,339  $41,159  
Costs and expenses:
Cost of revenues16,012  18,982  
Research and development6,029  6,820  
Sales and marketing3,905  4,500  
General and administrative2,088  2,880  
European Commission fines1,697  0  
Total costs and expenses29,731  33,182  
Income from operations6,608  7,977  
Other income (expense), net1,538  (220) 
Income before income taxes 8,146  7,757  
Provision for income taxes1,489  921  
Net income$6,657  $6,836  
Basic earnings per share of Class A and B common stock and Class C capital stock$9.58  $9.96  
Diluted earnings per share of Class A and B common stock and Class C capital stock$9.50  $9.87  
Number of shares used in basic earnings per share calculation694,869  686,465  
Number of shares used in diluted earnings per share calculation700,879  692,267  

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Alphabet Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
Quarter Ended March 31,
20192020
(unaudited)
Operating activities
Net income$6,657  $6,836  
Adjustments:
Depreciation and impairment of property and equipment2,416  2,899  
Amortization and impairment of intangible assets197  209  
Stock-based compensation expense2,769  3,191  
Deferred income taxes(73) 175  
(Gain) loss on debt and equity securities, net(1,081) 802  
Other22  297  
Changes in assets and liabilities, net of effects of acquisitions:
Accounts receivable1,172  2,602  
Income taxes, net1,068  (245) 
Other assets(265) (115) 
Accounts payable(425) (835) 
Accrued expenses and other liabilities(229) (3,531) 
Accrued revenue share(147) (871) 
Deferred revenue(81) 37  
Net cash provided by operating activities12,000  11,451  
Investing activities
Purchases of property and equipment(4,638) (6,005) 
Purchases of marketable securities(20,883) (37,563) 
Maturities and sales of marketable securities21,006  41,811  
Purchases of non-marketable investments(907) (572) 
Maturities and sales of non-marketable investments99  260  
Acquisitions, net of cash acquired, and purchases of intangible assets(99) (190) 
Other investing activities34  412  
Net cash used in investing activities(5,388) (1,847) 
Financing activities
Net payments related to stock-based award activities(1,175) (1,241) 
Repurchases of capital stock(3,025) (8,496) 
Proceeds from issuance of debt, net of costs315  1,898  
Repayments of debt(345) (1,947) 
Proceeds from sale of interest in consolidated entities47  1,600  
Net cash used in financing activities(4,183) (8,186) 
Effect of exchange rate changes on cash and cash equivalents18  (272) 
Net increase in cash and cash equivalents2,447  1,146  
Cash and cash equivalents at beginning of period16,701  18,498  
Cash and cash equivalents at end of period$19,148  $19,644  


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Reconciliation of non-GAAP results of operations to the nearest comparable GAAP measures (in millions, except percentages, share amounts which are reflected in thousands and per share amounts; unaudited)
We provide non-GAAP consolidated results excluding certain charges because they allow investors to make meaningful comparisons between Alphabet's recurring core business operating results and those of other companies, as well as providing Alphabet's management with an important tool for financial and operational decision making and for evaluating Alphabet's own recurring core business operating results over different periods of time.
Quarter Ended March 31, 2019
Operating income (GAAP)$6,608  
     Add: EC fine*1,697  
Operating income (Non-GAAP)$8,305  
Operating margin (GAAP)18 %
Operating margin (Non-GAAP)23 %
Net income (GAAP)$6,657  
     Add: EC fine, net of the foreign exchange gain*1,682  
Net income (Non-GAAP)$8,339  
Diluted net income per share (GAAP)$9.50  
Diluted EPS (Non-GAAP)$11.90  
Shares used in diluted per share calculation (in thousands)700,879  
*There is no tax effect as this charge is not tax deductible.
Non-GAAP operating income: We define non-GAAP operating income as operating income excluding certain charges.
Non-GAAP operating margin: We define non-GAAP operating margin as non-GAAP operating income divided by revenues.
Non-GAAP net income and diluted EPS: We define non-GAAP net income as net income excluding certain charges, less the related tax effects as applicable and non-GAAP diluted EPS as net income excluding certain charges, less the related tax effects as applicable, divided by total weighted average outstanding shares, on a fully-diluted basis.
Reconciliation from net cash provided by operating activities to free cash flow (in millions; unaudited):
We provide free cash flow because it is a liquidity measure that provides useful information to management and investors about the amount of cash generated by the business that can be used for strategic opportunities, including investing in our business and acquisitions, and to strengthen our balance sheet.
Quarter Ended
March 31, 2020
Net cash provided by operating activities$11,451  
Less: purchases of property and equipment(6,005) 
Free cash flow$5,446  
Free cash flow: We define free cash flow as net cash provided by operating activities less capital expenditures.
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Reconciliation from GAAP revenues to non-GAAP constant currency revenues (in millions, except percentages; unaudited):
We provide non-GAAP constant currency revenues and growth because they facilitate the comparison of current results to historic performance by excluding the effect of foreign exchange rate movements and hedging activities, which are not indicative of our core operating results.
Quarter Ended March 31, 2020
YoY
(using Q1'19's FX rates)		QoQ
(using Q4'19's FX rates)
EMEA revenues (GAAP)$12,845  $12,845  
Exclude foreign exchange effect on Q1'20 revenues using Q1'19 rates235  N/A  
Exclude foreign exchange effect on Q1'20 revenues using Q4'19 ratesN/A  (63) 
EMEA constant currency revenues (non-GAAP)$13,080  $12,782  
Prior period EMEA revenues (GAAP)$11,668  $14,099  
EMEA revenue growth (GAAP)10 %(9)%
EMEA constant currency revenue growth (non-GAAP)12 %(9)%
APAC revenues (GAAP)$7,238  $7,238  
Exclude foreign exchange effect on Q1'20 revenues using Q1'19 rates61  N/A  
Exclude foreign exchange effect on Q1'20 revenues using Q4'19 ratesN/A  37  
APAC constant currency revenues (non-GAAP)$7,299  $7,275  
Prior period APAC revenues (GAAP)$6,096  $7,482  
APAC revenue growth (GAAP)19 %(3)%
APAC constant currency revenue growth (non-GAAP)20 %(3)%
Other Americas revenues (GAAP)$2,157  $2,157  
Exclude foreign exchange effect on Q1'20 revenues using Q1'19 rates96  N/A  
Exclude foreign exchange effect on Q1'20 revenues using Q4'19 ratesN/A  14  
Other Americas constant currency revenues (non-GAAP)$2,253  $2,171  
Prior period Other Americas revenues (GAAP)$1,906  $2,666  
Other Americas revenue growth (GAAP)13 %(19)%
Other Americas constant currency revenue growth (non-GAAP)18 %(19)%
United States revenues (GAAP)$18,870  $18,870  
United States revenue growth (GAAP)14 %(13)%
Hedging gains$49  $49  
Revenues (GAAP)$41,159  $41,159  
Constant currency revenues (non-GAAP)$41,502  $41,098  
Prior period revenues, excluding hedging effect (non-GAAP)(1)
$36,202  $45,984  
Revenue growth (GAAP)13 %(11)%
Constant currency revenue growth (non-GAAP)15 %(11)%
(1)  Total revenues and hedging gains for the quarter ended March 31, 2019 were $36,339 million and $137 million, respectively. Total revenues and hedging gains for the quarter ended December 31, 2019 were $46,075 million and $91 million, respectively.
Non-GAAP constant currency revenues and growth: We define non-GAAP constant currency revenues as total revenues excluding the effect of foreign exchange rate movements and hedging activities, and we use it to determine the constant currency revenue growth on year-on-year and quarter-on-quarter basis. Non-GAAP constant currency revenues are calculated by translating current quarter revenues using prior period exchange rates and excluding any hedging effect recognized in the current quarter. Constant currency revenue growth (expressed as a percentage) is calculated by determining the increase in current quarter non-GAAP constant currency revenues over prior period revenues, excluding any hedging effect recognized in the prior period.
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Other income (expense), net
The following table presents our other income (expense), net (in millions; unaudited):
 Quarter Ended
March 31,
20192020
Interest income$522  $586  
Interest expense(35) (21) 
Foreign currency exchange gain (loss), net74  (81) 
Gain (loss) on debt securities, net(2) 12  
Gain (loss) on equity securities, net(1)(2)
1,083  (814) 
Performance fees(117) 6  
Gain (loss) and impairment from equity method investments, net(40) 74  
Other53  18  
Other income (expense), net$1,538  $(220) 
(1)  Includes unrealized losses on equity investments that we hold. Fluctuations in the value of our investments could significantly contribute to the volatility of OI&E in future periods.
(2)  All gains and losses, unrealized and realized, on equity security investments are recognized in OI&E. For Q1 2020, the net effect of the loss on equity securities of $814 million and the performance fees reversal of $6 million decreased income tax, net income, and diluted EPS by $170 million, $638 million, and $0.92, respectively.
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Segment results
The following table presents our revenues, operating income (loss), stock-based compensation (SBC), capital expenditures, and depreciation, amortization, and impairment by segment (in millions; unaudited):
 Quarter Ended
March 31,
20192020
Revenues:
Google(1)
$36,032  $40,975  
Other Bets170  135  
Hedging gains(1)
137  49  
Total revenues$36,339  $41,159  
Operating income (loss):
Google(1)
$9,188  $9,270  
Other Bets(868) (1,121) 
Reconciling items(1)(2)
(1,712) (172) 
Total income from operations$6,608  $7,977  
Stock-based compensation(3):
Google$2,612  $2,988  
Other Bets123  135  
Reconciling items(4)
34  67  
Total stock-based compensation$2,769  $3,190  
Capital expenditures:
Google$4,534  $5,663  
Other Bets59  104  
Reconciling items(5)
45  238  
Total capital expenditures$4,638  $6,005  
Depreciation, amortization, and impairment:
Google$2,529  $3,013  
Other Bets84  92  
 Reconciling items(4)
0  3  
Total depreciation, amortization, and impairment$2,613  $3,108  
(1) Hedging gains, which were previously included in Google revenues, are presented separately.
(2) Reconciling items are generally comprised of corporate administrative costs, hedging gains and other miscellaneous items that are not allocated to individual segments. Additionally, reconciling items for the quarter ended March 31, 2019 includes the EC fine of $1.7 billion.
(3) For purposes of segment reporting, SBC represents awards that we expect to settle in Alphabet stock.
(4) Reconciling items are primarily related to corporate administrative and other costs that are not allocated to individual segments.
(5) 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.
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