Wednesday, October 26, 2011

Google Quarterly Earnings Call (Review) "Strong growth despite global economic uncertainty" GOOG

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Google reported Q3 2011 financial results on October 13, 2011
Reviewed at the Google Financial Performance page


Google Reports Record Financial Results! *Record revenues, net income, cash flow, & EPS*

Google Summary Q3 2011 Google Q3 financial performance was record-setting and improved QoQ and YoY. Next quarter, Q4, should exceed the current Q3 and is projected to be another annual cyclical high. Google's financial position continues very strong, liquid, and stable. An increase in operating expenses, reflected in a downtrending operating margin, is a negative for Google along with a decreasing return on assets. The gross profit margin also dipped this quarter. This is the third quarter reported after the management restructure with co-founder Larry Page returning as CEO. CEO Page has redeemed himself after the disappointing prior Q1 2011 financial results and Google is hitting on all cylinders. Return on assets continue a moderate downward trend and is now +16.51%. Google is the #2 global brand, behind Apple. International sales are now 54.53% of total revenues, up from 53.97% QoQ and 51.73% YoY.

Google Income Statement Q3 2011 Google financial performance was record total revenues $9.72 billion,  record net income $2.73 billion, record earnings per share $8.33, and record operating cash flow per share of $11.99. From the prior quarter Q2 2011, QoQ, total revenues were up +7.69%, net income up +8.94%, and earnings per share up +8.46%. From the prior year quarter Q3 2010, these were up an impressive +33.41%, +25.93%, and +23.96%, respectively. From the prior quarter Q2 2011, gross margin of 65.25% was up slightly, operating margin of 31.46% was down slightly, and net margin of 28.08% was up slightly. Cash flow from operations per share of $11.99 increased from the prior quarter Q2 2011. All of this data is summarized in the charts below.

Google Balance Sheet Q3 2011 Total assets increased +6.52% QoQ and +29.52% YoY to a record $69.09 billion. The capital to assets ratio (total stockholders' equity divided by total assets) decreased to a still very strong 79.36%, but this is a multi-year low and had been as high as 90%+ in 2006. Google is incredibly liquid with a current ratio (current assets divided by total assets) of 72.43%, but this is the lowest since Q3 2009 (69.90%). Google has over $42.56 billion in cash, cash equivalents, and marketable securities! Capital expenditures decreased to $680 million from the prior quarter of $917 million and was related to "IT infrastructure investments, including data centers, servers, and networking equipment."

Press Release "We had a great quarter,” said Larry Page, CEO of Google. “Revenue was up 33% year on year and our quarterly revenue was just short of $10 billion. Google+ is now open to everyone and we just passed the 40 million user mark. People are flocking into Google+ at an incredible rate and we are just getting started!"

Google Q3 2011 Earnings Conference Call

Google Management Present at the earnings conference call were Larry Page, Co-Founder and CEO, Patrick Pichette, Senior Vice President and Chief Financial Officer, Susan Wojcicki, Senior Vice President of Advertising, and Nikesh Arora, Senior Vice President and Chief Business Officer. Eric Schmidt, former CEO and now Executive Chairman, was not present as in past quarters. Schmidt, as Executive Chairman, is no longer involved in daily operations.

CEO Larry Page: "When I look back over the last quarter, the word that springs to mind is gangbusters" Google Co-Founder and CEO Larry Page opened the earnings call. "When I look back over the last quarter, the word that springs to mind is gangbusters. Revenue was up 33% year-on-year, and our quarterly revenue was just short of $10 billion, not bad for a 13-year-old. I'm also incredibly excited about the progress we've made on the product side. Ever since taking over as CEO, I had to focus much of my energy on increasing Google's velocity and execution, and we're beginning to see results."

Google+ CEO Page then discussed Google+. Page noted, "Looking at the numbers for Google+, I was taken aback. I now want to announce that we passed the 40 million user mark on Google+. People are flocking into Google+ at an incredible rate and we're just getting started. The engagement we're seeing is phenomenal too. Over 3.4 billion photos have already been uploaded in Google+. But it's still incredibly early days for Google+ because our goal is actually far bigger than the individual feature launches themselves. Our ultimate ambition is to transform the overall Google experience, making it beautifully simple, almost automagical because we understand what you want and can deliver it instantly. This means baking identity and sharing into all of our products so that we build a real relationship with our users. Sharing on the web will be like sharing in real-life across all your stuff. You'll have better, more relevant search results and ads. Think about it this way. Last quarter, we shipped the Plus, and now we're going to ship the Google part. The new visual design, beautiful, consistent UIs for Search, News, Maps, Translate, and lots of other features, is only the beginning of that process."

Google Chrome CEO Page said, "Chrome usage is going through the roof. We have now hit over 200 million users and still growing fast. Turns out that people really care about getting to the web quickly and securely and having a whole ecosystem of apps at their fingertips."

Google Maps CEO Page stated, "I'm super pleased with Google Maps, it's a favorite with our users, especially on mobile devices. In August, we launched in 40 new countries, taking our total to 130 countries."

Google Android CEO Page observed, "The growth of Android is mind-boggling too. Over 190 million devices have now been activated globally. I'm super excited about the soon-to-be released new version of Android called Ice Cream Sandwich, that's right, Ice Cream Sandwich. You won't believe what we managed to get done in this release."

Google Mobile CEO Page said, "We're also seeing a huge positive revenue impact from Mobile, which has grown 2.5x in the last 12 months to a run rate of over $2.5 billion. Generally, I found that high usage products will make a lot of money over time for well-managed technology companies, and that's why it's so important to run these businesses for the long term."

CFO Patrick Pichette: "Our growth rates remain very strong" Patrick Pichette, Senior Vice President and Chief Financial Officer, then reviewed the financial results, which are also reviewed on the Google Financial Performance page. "Our gross revenue grew 33% year-over-year to $9.7 billion and 8% quarter-over-quarter. Note that while some currency fluctuation boosted our revenue again this quarter a little bit, even in constant FX terms, our growth rates remain very strong. We will, as always, stay focused on what we control, our agenda for the long term, with the strategy and investments that are not calibrated for quarter-to-quarter views but really designed to create, as Larry said, fantastic products that transform our users lives and create significant value for our shareholders."

SVP Nikesh Arora: "Strong business growth despite uncertainty in the global economy" Nikesh Arora, Senior Vice President and Chief Business Officer, provided an "update on our business activities". Arora said, "Our sales, customer support, marketing and partnership activities drove $9.7 billion in revenue this quarter.
● Search: our core desktop Search business maintained its momentum. Google.com growth was faster than one year ago. Our syndicated Search revenue also accelerated this quarter with new large global deals contributing to our growth. We're monetizing clicks better by working closely with our clients to grow the value of search advertising.
● Display: Growth this quarter was robust, with products like YouTube and Google Display Network, we're giving advertisers more options to engage with their customers online.
Mobile Advertising: Larry mentioned $2.5 billion as a run rate. Our revenue growth continues to accelerate even in Mobile, driven primarily by mobile search.
● Enterprise: We see continued revenue acceleration in our Enterprise business. More companies are fundamentally going Google. Our Apps products continue strong growth.
● Chromebooks have been available for purchase since mid-June, and we're beginning to see lots of interest and good uptake, both from the businesses and educational institutions.

SVP Susan Wojcicki: "We expanded Google Offers to 11 cities" Susan Wojcicki, Senior Vice President of Advertising, began, "We had another great quarter for Search quality with over 100 launches. We improved our preview feature so that when you hover your mouse over a search result, a large thumbnail of the site appears on the right. We also expanded the site links feature to include more links, with full snippets for each link."
● Adwords Express: Starting with the local and the small business market, we launched AdWords Express in the U.S. There are a lot of businesses who want to advertise online, and they haven't done so because they're too busy running their business. AdWords Express makes it possible for these businesses to start running an ad campaign in just a few minutes. The advertiser gives us some basic information, and we do all the rest. The keywords and the bids are automated.
Google Offers With regard to the local market, we also expanded Google Offers to 11 cities.

Question and Answer Session

Mobile Phones
(Page) The mobile phones are just getting amazing. I think that your experience on phone could actually get to be better than your experience on a computer. The phone knows where you are and can help you even when you're mobile and so on. We definitely see that the experience on mobile improving greatly, especially with Android.
Mobile Advertising
(Page) We're still very early in the Mobile business, and it's incredibly exciting business. There's a lot of activity. The user experiences are getting tremendously better, just growing like crazy. And there's a lot of economic activity. So we've done well by having a long-term view about it.

Google Q3 2011 Earnings Call

Earnings Call Larry Page, Patrick Pichette, Nikesh Arora and Susan Wojcicki participate in Google's Q3 2011 Earnings Call October 13, 2011.


About Google

Google describes itself in press releases as, "Google's innovative search technologies connect millions of people around the world with information every day. Founded in 1998 by Stanford Ph.D. students Larry Page and Sergey Brin, Google today is a top web property in all major global markets. Google's targeted advertising program provides businesses of all sizes with measurable results, while enhancing the overall web experience for users. Google is headquartered in Silicon Valley with offices throughout the Americas, Europe and Asia."

Google's Mission Statement: "Google's mission is to organize the world's information and make it universally accessible and useful. The first step toward fulfilling that mission came when our founders, Larry Page and Sergey Brin, working out of a Stanford University dorm room, developed a new approach to online search that quickly spread to information seekers around the globe. Google is now widely recognized as the world's largest search engine -- a free service whose utility and ease of use have made it one of the world's best-known brands almost entirely through word of mouth from satisfied users."

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