Google's Happy Quarter
"I'm super excited about the amazing response to Google+ which lets you share just like in real life," said Google CEO Larry Page in the earnings call announcing the company's financial results for the quarter ended June 30, 2011. He was more vocal than the last call this time around, and spoke at length. And he had reason to be vocal.
The numbers beat both Wall Street and analyst expectations, and he was the bearer of good news. News good enough to get the company's stock at NASDAQ soaring. It had closed at $528.94 on Thursday, down $9.32 or 1.73 per cent. At the time of this report (Jul 14, 7:59PM EDT), stock prices had shot up by 12.62 per cent after trading hours.
"We had a great quarter, with revenue up 32 per cent year on year for a record breaking over $9 billion of revenue," Page said. What also exceeded expectations was the number of people already on Google+, despite it being a limited trial launch. Page confirmed that the service had exceeded over 10 million users. Yet another sky-rocketing statistic is the number of Android devices which are activated daily, which stands at 550,000 devices a day, said Page. As many as 135 million Android devices have been activated so far.
The company is sitting on cash, cash equivalents, and marketable securities worth $39.1 billion, and according to Page heavy investments in capex will continue. The company filed its first debt offering of $3 billion earlier this year. Just to give you a perspective, corporate spending has spiked over 54 per cent over the last couple of quarters, and the company bought 48 companies last year, and 14 companies so far this year. It has also stepped up on hiring.
What Larry Page said - Highlights
-It's exciting to be on the call today and to share directly with you the progress we have made in my first quarter as CEO
-We have substantially increased our velocity and execution this quarter--a key goal of mine since taking over as CEO
-I created a new, product focused management structure--with a clear leader responsible for each product area. This new management team is working together fabulously â€¦ and has already achieved a lot in just three months.
-Last month...we announced that we will be closing Google Health and Google PowerMeter
-I see more opportunities for Google today than ever before. Because, believe it or not, we are still in the very early stages of what we want to do. Even in searchâ€¦ which we've been working on for 12 years there have never been more important changes to make. For example this quarter we launched a pilot that shows an author's name and picture in the search results, making it easier for users to find things from authors they trust.
-We have tremendous new businesses being viewed as "crazy"
-Chrome - It's the fastest growing browser with over 160 million users.
-I understand the need to balance the short term with the longer term needs because our revenues and growth serve as the engine that funds our innovation... But our emerging high usage products can generate huge new businesses for Google in the long run, just like search. And we have tons of experience monetizing successful products over time.
-Well run technology businesses with tremendous consumer usage make a lot of money over the long term.
-I think about our products in three separate categories. First, there is search and our ads products, the core driver of revenue for the company. Next, we have products that are enjoying high consumer success--YouTube, Android and Chrome. We are investing in these in order to optimize their long-term success. Then we have our new products--Google+ and Commerce and Local. We are investing in them to drive innovation and adoption.
-Overall, we are focused on long term absolute profit and growth, as we have always been--and I will continue the tight financial management we have had in the last two years, even as we are making significant investments in our future.
-All of us at Google want to create services that people across the world use twice a day â€¦ just like a toothbrush!
-We have made a good start but we are at only 1 per cent of what's possible â€¦ Google is just getting started â€¦ and that is why I am here--working hard to lead this company to the next level.
You can read the full text on, where else, Page's Google+ page.
A quick look at Google's Financial Highlights
The company reported revenues of $9.03 billion for the quarter ended June 30, 2011, an increase of 32 per cent compared to the second quarter of 2010. (Google reports its revenues, consistent with GAAP, on a gross basis without deducting traffic acquisition costs (TAC).
Google-owned sites generated revenues of $6.23 billion, or 69 per cent of total revenues, in the second quarter of 2011. This represents 39 per cent increase over second quarter 2010 revenues of $4.50 billion.
Google's partner sites generated revenues, through AdSense programs, of $2.48 billion, or 28 per cent of total revenues, in the second quarter of 2011. This represents 20 per cent increase from second quarter 2010 network revenues of $2.06 billion.
The company continues to generate a significant portion of its revenues from overseas. Revenues from outside of the United States totaled $4.87 billion, representing 54 per cent of total revenues in the second quarter of 2011, compared to 53 per cent in the first quarter of 2011 and 52 per cent in the second quarter of 2010.
Revenues from the United Kingdom totaled $976 million, representing 11 per cent of revenues in the second quarter of 2011, compared to 11 per cent in the second quarter of 2010.
GAAP operating income in the second quarter of 2011 was $2.88 billion, or 32 per cent of revenues. This compares to $2.37 billion, or 35 per cent of revenues, in the second quarter of 2010.
GAAP net income in the second quarter of 2011 was $2.51 billion, compared to $1.84 billion in the second quarter of 2010.
GAAP EPS in the second quarter of 2011 was $7.68 on 326 million diluted shares outstanding, compared to $5.71 in the second quarter of 2010 on 322 million diluted shares outstanding.
In the second quarter of 2011, the charge related to stock based compensation (SBC) was $435 million, compared to $309 million in the second quarter of 2010. The tax benefit related to SBC was $91 million in the second quarter of 2011 and $70 million in the second quarter of 2010.
Aggregate paid clicks, which include clicks related to ads served on Google sites and the sites of its AdSense partners, increased approximately 18 per cent over the second quarter of 2010 and decreased approximately 2 per cent over the first quarter of 2011. Average cost-per-click, which includes clicks related to ads served on Google sites and the sites of its AdSense partners, increased approximately 12 per cent over the second quarter of 2010 and increased approximately 6 per cent over the first quarter of 2011.
Traffic Acquisition Costs (TAC)
TAC or the portion of revenues shared with Google's partners, increased to $2.11 billion in the second quarter of 2011, compared to TAC of $1.73 billion in the second quarter of 2010. TAC as a percentage of advertising revenues was 24 per cent in the second quarter of 2011, compared to 26 per cent in the second quarter of 2010.
Other Cost of Revenues
Other cost of revenues, which is comprised primarily of data center operational expenses, amortization of intangible assets, content acquisition costs as well as credit card processing charges, increased to $1.06 billion, or 12 per cent of revenues, in the second quarter of 2011, compared to $735 million, or 11 per cent of revenues, in the second quarter of 2010.
Operating expenses, other than cost of revenues, were $2.97 billion in the second quarter of 2011, or 33 per cent of revenues, compared to $1.99 billion in the second quarter of 2010, or 29 per cent of revenues.
On a worldwide basis, Google employed 28,768 full-time employees as of June 30, 2011, up from 26,316 full-time employees as of March 31, 2011. Net headcount growth (excluding approximately 450 employees hired as part of the acquisition of ITA Software) was similar to the first quarter of 2011.
For our coverage of Google's previous quarter results, please click here. Google does not give a break-up according to business units or regions.