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GooglePlex with Sheep Keeping Landscaping Trimmed
Google Reports Strong Q2 Financial Results
Google reported second quarter, June 30, 2010 financial results on Thursday, July 15. In the previous post, “Google Q2 Financial Results (Quick Review)”, I noted that Google's net income, EPS, operating cash flow, revenues, total assets, and stockholders' equity were increasing, trending upwards. Google now has $30 billion in cash, cash equivalents, and short-term marketable securites! No matter, GOOG stock has dropped today reflecting investor disappointment in financial performance.
From this information we can see Google continues to grow and be profitable. Assets are increasing but how effective is Google's deployment of assets? The Return On Average Assets ratio provides a measure of the effectiveness and efficiency of GOOG's asset deployment to generate an income stream, a cash flow stream.
For the 3ME 6-30-10, Google earned 17.7% ROA and for the 6ME 6-30-10 earned 17.1% ROA. By comparison, GOOG earned 18.0% for the 12ME 12-31-09 and 14.8% for the 12ME 12-31-08. Google is slightly below the 2009 ROA and well above the 2008 ROA, so far in 2010. I see no cause for concern yet.
Free Cash Flow, an alternative non-GAAP measure of liquidity, is defined as net cash provided by operating activities less capital expenditures. In the second quarter of 2010, Free Cash Flow was $1.61 billion, which is lower than normal and also reflects increased capital spending of $476M by GOOG. Google stated, "We expect to continue to make significant capital expenditures." By comparison, Free Cash Flow has been: 3ME 6-30-10 $1.61B, 3ME 3-31-10 $2.35B, 3ME 12-31-09 $2.51B, 3ME 9-30-09 $2.54B, 3ME 6-30-09 $1.47B, 3ME 3-31-09 $1.99B. Of course, capital spending is appropriating assets for future revenues and net income and Google has been spending significant sums for the future.
The following table shows Google still is totally dependent on advertising revenues. This has been the criticism of GOOG, that Google is a "one trick pony" and has not diversified.
Three Months Ended Six Months EndedJune 30 June 30
2009 2010 2009 2010
Advertising revenues:
Google web sites 66% 66% 67% 66%
Google Network web sites 31% 30% 30% 30%
Total advertising revenues 97% 96% 97% 96%
Other revenues 3% 4% 3% 4%
Revenues 100% 100% 100% 100%
Google Q2 Earnings Call
(Google) Patrick Pichette, Jonathan Rosenberg, and Nikesh Arora participae in Google's Q2 2010 Earnings Call July 15th, 2010.
(Google) Patrick Pichette, Jonathan Rosenberg, and Nikesh Arora participae in Google's Q2 2010 Earnings Call July 15th, 2010.
Links
Google Q2 Financial Results (Quick Review) (Google Investor)
Google Opens Lower After Q2 Results (Yahoo Video)
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