Thursday, October 13, 2011

Google Reports Record Earnings! (Charts, Video) *Record revenues, net income, cash flow, EPS* GOOG


Google reported calendar Q3 2011 financial results on Thursday, October 13, 2011
*Charts and commentary have been updated for Google Q3 2011 financial results*

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."

Google Financial Performance by the Quarters (Charts)

Google Earnings Per Share & Cash Flow from Operations per Share (Chart) Below  is a chart of quarterly earnings per share and cash flow from operations per share. Current Earnings per Share of $8.33 is an all-time high, exceeding the prior peak of $7.81 in Q4 2010. Current Cash Flow from Operations per Share of $11.99 is an all-time high, exceeding the prior peak of $10.83 in Q4 2010. The chart averages for EPS and CFS are $4.86 and $6.91, respectively. Recent chart data is:
Quarter, Earnings per Diluted Share, Cash Flow per Diluted Share
Sep10: $6.72, $8.95
Dec10: $7.81, $10.83
Mar11: $7.04, $9.72
Jun11: $7.68, $10.79
Sep11: $4.86, $11.99

Google Total Revenues, Operating Income, and Net Income (Chart) Below is a chart of quarterly total revenues, operating income, and net income. Current Total Revenues of $9.72B are another all-time high and have increased for 10 consecutive quarters. Current Operating Income of $3.06B is an all-time high. Current Net Income of $2.73B is also an all-time high. The chart averages for TR, OI, and NI are $5.93B, $1.96B, and $1.56B, respectively. Recent chart data is:
Quarter, Total Revenues, Operating Income, Net Income
Sep10: $7.29B, $2.55B, $2.2B
Dec10: $8.44B, $2.98B, $2.54B
Mar11: $8.58B, $2.796B, $2.298B
Jun11: $9.03B, $2.88B, $2.51B
Sep11: $9.72B, $3.06B, $2.73B

Google Gross Margin, Operating Margin, and Net Margin (Chart) Below is a chart of quarterly gross margin, operating margin, and net margin. Current Gross Margin of 65.25% is just below the all-time high of 65.76% in Q1 2011. Current Operating Margin of 31.46% is disappointing, a 12-quarter low, and the lowest since Q3 2008 (29.72%). This is the 3rd consecutive quarterly decrease. The current Net Income Margin of 28.08% is a 3-quarter high. The current average income tax rate is a historically lower 18.78%. The chart averages for GM, OM, and IM are 62.20%, 32.85%, and 26.07%. Recent chart data is:
Quarter, Gross Margin, Operating Margin, Net Margin
Sep10: 64.97%, 34.96%, 29.74%
Dec10: 65.09%, 35.33%, 30.13%
Mar11: 65.76%, 32.61%, 26.80%
Jun11: 64.86%, 31.92%, 27.75%
Sep11: 65.25%, 31.46%, 28.08%

Google Return on Assets (Chart) Below is a chart of annual return on average assets per quarter. The total net income for the most recent 4 quarters is divided into average assets for the most recent 4 quarters to obtain a rolling annualized ROA, an annualized return on average assets for the 12 months (4 quarters) ended. The ROA dipped during the Global Recession then improved through Q1 2010. The ROA has been decreasing for 6 consecutive quarters and is now at a 8-quarter low (Q3 2009 = 14.58%). Some investment operations are slightly inflating the balance sheet, effective Q3 2010, which reduces ROA slightly. Also, the huge cash, cash equivalents, and marketable securities - Google's cash reserves of approximately $43 billion reduce ROA. In general, returns on these cash reserves are not as high as assets deployed to the core business, thus the asset mix has been skewed increasingly to lower yielding cash reserves. Recent chart data is:
Quarter, Return on Assets
Sep10: 17.84%
Dec10: 17.53%
Mar11: 16.88%
Jun11: 16.74%
Sep11: 16.51%

Google Growth Rates (Chart) Below is a chart of the annual (YoY, Y/Y, annual change) growth rates for revenues and earnings per share. Google, as with some other technology companies, has an annual cyclical high in Q4 and an annual cyclical low in Q1. Therefore, comparing YoY growth rates best reflects Google's growth. Google has been a high growth company and stock and has now become a very large technology company ($69+ billion in total assets and $9+ billion in quarterly total  revenues). The Total Revenues Growth rate has been positive since at least the QE December 2006. The Earnings per Share Growth growth rate has been volatile, especially since December 2008, but has been positive for 11 consecutive quarters. The chart averages for TRG and EPSG are +26.83% and +27.22%, respectively. Recent chart data is:
Quarter, Total Revenues Change %, Earnings Per Share Change %
Sep10: +22.56%, +30.99%
Dec10: +26.46%, +27.41%
Mar11: +26.57%, +16.17%
Jun11: +32.35%, +34.50%
Sep11: +33.41%, +23.96%

Google Revenue Sources (Chart) Below is a chart of revenue sources, which consist of advertising and "other". Google is an advertising company, period, when it comes to cash flow. The criticism of Google is the lack of diversification. Advertising continues to generate 96%+ of revenues. Recent chart data is:
Quarter, Advertising Revenues, Other Revenues
Sep10: 96.54%, 3.46%
Dec10: 96.77%, 3.23%
Mar11: 96.86%, 3.14%
Jun11: 96.57%, 3.43%
Sep11: 96.04%, 3.96%

Google Traffic Acquisition Costs (Chart) Below is a chart of traffic acquisition costs (TAC) as a percentage (%) of advertising revenues. This is a direct cost and the net is the gross profit before other expenses are allocated to cost of revenues. TAC has been trending downwards and now for 5 consecutive quarters which means increased gross profit for Google. Recent chart data is:
Quarter, TAC as a % of Advertising Revenues
Sep10: 25.7%
Dec10: 25.3%
Mar11: 24.5%
Jun11: 24.2%
Sep11: 23.7%

Google Geographic Revenues (Chart) Below is a chart of geographic revenues by quarter and is limited to what Google chooses to disclose. International revenues accounted for 54.53% of Google's total revenues in the latest quarter reported, Q3 2011. This is an increase from the 53.97% reported QoQ and 51.73% YoY. Overall the the Rest of the World is gaining on the United States while the UK has increased slightly. This appears to be the longer-term trend as Google expands outwards from the USA and UK. Recent chart data is:
Quarter, United States, Rest of World, United Kingdom
Sep10: $3.5B, $2.9B, $840M
Dec10: $4.1B, $3.5B, $878M
Mar11: $4.0B, $3.6B, $969M
Jun11: $4.2B, $3.9B, $976M
Sep11: $4.4B, $4.3B, $1.0B

Google Operating Expense Ratio (Chart) Below is a chart of the quarterly operating expense ratio, which is operating expenses divided by total revenues. The current Operating Expense Ratio of 33.79% is a multi-year if not all-time high. The OER chart average of 29.34%. This indicates in the current quarter slightly decreased efficiency plus a slightly lower proportion of revenues reaching the bottom line, net income and earnings per share. Recent chart data is:
Quarter, Operating Expense Ratio
Sep10: 30.02%
Dec10: 29.76%
Mar11: 33.15%
Jun11: 32.94%
Sep11: 33.79%

Google Announces Third Quarter 2011 Financial Results

MOUNTAIN VIEW, Calif. – October 13, 2011 - Google Inc. (NASDAQ: GOOG) today announced financial results for the quarter ended September 30, 2011. "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 reported revenues of $9.72 billion for the quarter ended September 30, 2011, an increase of 33% compared to the third quarter of 2010. Google reports its revenues, consistent with GAAP, on a gross basis without deducting traffic acquisition costs (TAC). In the third quarter of 2011, TAC totaled $2.21 billion, or 24% of advertising revenues.

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."

Headcount: On a worldwide basis, Google employed 31,353 full-time employees as of September 30, 2011, up from 28,768 full-time employees as of June 30, 2011.

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