Alphabet Inc.: 07.28.2016 Alphabet Announces Second Quarter 2016 Results more

MOUNTAIN VIEW, Calif. - July 28, 2016 - Alphabet Inc. (NASDAQ: GOOG, GOOGL) today announced financial results for the quarter ended June 30, 2016.

'Our terrific second quarter results, with 21% revenue growth year on year, and 25% on a constant currency basis reflect the successful investments we've made over many years in rapidly expanding areas such as mobile and video. We continue to invest responsibly in support of our many compelling opportunities,' said Ruth Porat, CFO of Alphabet.

Top Company Interviews

Microsoft Corporation
Intel Corporation
Pfizer, Inc.
General Electric Company
International Business Machines Corporation
Q2 2016 financial highlights

The following summarizes our consolidated financial results for the quarters ended June 30, 2015 and 2016 (in millions, except for per share information; unaudited):

Revenues $17,727 $21,500
Increase in revenues year over year 11 % 21 %
Increase in constant currency revenues year over year 18 % 25 %
GAAP operating income $4,825 $5,968
GAAP operating margin 27 % 28 %
Non-GAAP operating income $5,957 $7,471
Non-GAAP operating margin 34 % 35 %
GAAP net income $3,931 $4,877
Non-GAAP net income $4,829 $5,864
GAAP diluted EPS for Class A and B common stock $4.93 $7.00
GAAP diluted EPS for Class C capital stock $6.43 $7.00
Non-GAAP diluted EPS for Class A and B common stock and Class C capital stock $6.99 $8.42
Diluted shares (in thousands) * 696,847
*For Q2 2015, diluted shares used to calculate GAAP diluted EPS for Class A and B common stock and Class C capital stock were 343,190, 52,114, and 347,688, respectively. Diluted shares used to calculate non-GAAP diluted EPS for Class A and B common stock and Class C capital stock were 690,878.
Operating income, operating margin, net income, and earnings per share (EPS) are reported on a GAAP and non-GAAP basis. Non-GAAP operating income and non-GAAP operating margin exclude stock-based compensation (SBC) expense. Non-GAAP net income and non-GAAP diluted EPS exclude SBC expense, net of the SBC related tax benefits. For Q2 2015, non-GAAP diluted EPS also excludes the impact from the adjustment payment to Class C capital stockholders. These non-GAAP measures, as well as free cash flow, an alternative non-GAAP measure of liquidity, and non-GAAP constant currency revenues and growth, are described and reconciled to the corresponding GAAP measures at the end of this release.

The following summarizes our segment results where Google is presented as a single segment and all other Alphabet businesses are combined as Other Bets (in millions; unaudited):

Google segment revenues $17,653 $21,315
Google operating income $5,608 $6,994
Other Bets revenues $74 $185
Other Bets operating loss $(660) $(859)
Q2 2016 consolidated financial summary

Revenues (in millions; unaudited):

Revenues $21,500 21% 6%
Constant currency revenues (YoY) $21,535 25% N/A
Constant currency revenues (QoQ) $21,121 N/A 5%
Our revenues and constant currency revenues are reconciled in the financial tables following this release.

Costs and expenses

Cost of revenues, operating expenses, SBC expense, and depreciation, amortization, and impairment charges (in millions; unaudited):

Cost of revenues $6,583 $8,130
Cost of revenues as % of revenues 37 % 38 %
Operating expenses (other than cost of revenues) $6,319 $7,402
Operating expenses as % of revenues 36 % 34 %
SBC expense* $1,132 $1,503
SBC related tax benefits $(234) $(516)
Depreciation, amortization, and impairment charges $1,234 $1,490
*Excludes the expense for awards accounted for as stock-based compensation that we expect to ultimately settle in cash.
Supplemental information (in millions, except for headcount data; unaudited)

Cash, cash equivalents, and marketable securities $69,780 $78,460
Net cash provided by operating activities $7,096 $9,120
Capital expenditures $2,515 $2,123
Free cash flow $4,581 $6,997
Effective tax rate (ETR) 21 % 20 %
Headcount 57,148 66,575
Q2 2016 Google segment summary

Revenues and monetization

Google segment revenues by source (in millions; unaudited):

Google segment
Google websites $12,402 $15,400 24%
Google Network Members' websites 3,621 3,743 3%
Google advertising revenues 16,023 19,143 19%
Google other revenues 1,630 2,172 33%
Google segment revenues $17,653 $21,315 21%
Paid clicks and cost-per-click information (unaudited):

Aggregate paid clicks 29% 7%
Paid clicks on Google websites 37% 9%
Paid clicks on Google Network Members' websites 0% -3%
Aggregate cost-per-click -7% -1%
Cost-per-click on Google websites -9% -2%
Cost-per-click on Google Network Members' websites -8% -2%
Traffic acquisition costs (TAC) and operating income

TAC to Google Network Members and distribution partners, operating income, and SBC expense (in millions; unaudited):

TAC to Google Network Members $2,432 $2,623
TAC to Google Network Members as % of Google Network Members' revenues 67 % 70 %
TAC to distribution partners $945 $1,352
TAC to distribution partners as % of Google website revenues 8 % 9 %
Total TAC $3,377 $3,975
Total TAC as % of Google advertising revenues 21 % 21 %
Three Months Ended June 30, 2015 Three Months Ended June 30, 2016
Operating income, excluding SBC expense $6,604 $8,314
SBC expense $996 $1,320
Operating income $5,608 $6,994
Supplemental information (in millions; unaudited)

Capital expenditures $2,060 $2,056
Depreciation, amortization, and impairment $1,189 $1,409
Q2 2016 Other Bets summary

Revenues and operating results

Other Bets revenues, operating loss, and SBC expense (in millions; unaudited):

Other Bets revenues $74 $185
Operating loss, excluding SBC expense $(555) $(709)
SBC expense $105 $150
Operating loss $(660) $(859)
Supplemental information (in millions; unaudited)

Capital expenditures $232 $280
Depreciation, amortization, and impairment $45 $81
Stock repurchase

In Q2 2016, we repurchased 2.0 million shares of Class C capital stock for an aggregate amount of $1.4 billion. Cash paid for repurchases totaled $1.6 billion during the quarter, which includes repurchases from Q1 2016 settled in Q2 2016. As of June 30, 2016, we completed all authorized share repurchases under our repurchase program.

Prior period recast

Prior period segment information has been recast to conform to the current period segment presentation. Consolidated financial information is not impacted.

Webcast and conference call information

A live audio webcast of our second quarter 2016 earnings release call will be available at 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 announce investor information, including news and commentary about our business and financial performance, SEC filings, notices of investor events and our press and earnings releases, on our investor relations website.

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, 2015, as updated by the Form 8-K filed on May 3, 2016, and our most recent Quarterly Report on Form 10-Q for the quarter ended March 31, 2016, which are on file with the SEC and are available on our investor relations website at and on the SEC website at Additional information will also be set forth in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2016. All information provided in this release and in the attachments is as of July 28, 2016, and we undertake no duty to update this information unless required by law.

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: non-GAAP operating income, non-GAAP operating margin, non-GAAP net income, non-GAAP diluted EPS, free cash flow, non-GAAP constant currency revenues, and non-GAAP 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. Our management believes 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 impact for foreign currency fluctuations or our operating performance excluding not only non-cash charges, such as SBC expense, but also discrete cash charges that are infrequent in nature. 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.

For more information on these non-GAAP financial measures, please see the tables captioned 'Reconciliations 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.


Investor Relations:


Links and downloads
Download press release (PDF)

Q2 financial data

Alphabet Inc. published this content on 28 July 2016 and is solely responsible for the information contained herein.
Distributed by Public, unedited and unaltered, on 28 July 2016 20:09:05 UTC.