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MarketScreener Homepage  >  Equities  >  Nasdaq  >  Alphabet    GOOGL

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Alphabet : Announces First Quarter 2019 Results

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04/29/2019 | 04:09pm EST

Alphabet Announces First Quarter 2019 Results

MOUNTAIN VIEW, Calif. - April 29, 2019 - Alphabet Inc. (NASDAQ: GOOG, GOOGL) today announced financial results for the quarter ended March 31, 2019.

"We delivered robust growth led by mobile search, YouTube, and Cloud with Alphabet revenues of $36.3 billion, up 17% versus last year, or 19% on a constant currency basis," said Ruth Porat, Chief Financial Officer of Alphabet and Google. "We remain focused on, and excited by, the significant growth opportunities across our businesses."

Q1 2019 financial highlights

The table below provides summary data to facilitate comparison of current quarter performance to prior period given the announcement on March 20, 2019 by the European Commission (EC) of its decision that certain contractual provisions in agreements that Google had with AdSense for Search partners infringed European competition law and the associated €1.5 billion ($1.7 billion as of March 31, 2019) fine.

Q1 2019 summary results

Including Fine

Excluding Fine

(GAAP)

Revenues

$36,339

$36,339

Operating income

$6,608

$8,305

Operating margin

18%

23%

Net income

$6,657

$8,339

Diluted EPS

$9.50

$11.90

The following summarizes our consolidated financial results for the quarters ended March 31, 2018 and 2019 (in millions, except for per share information, percentages, and number of employees; unaudited), reported on a GAAP basis including the effect of the EC fine:

Three Months Ended

Three Months Ended

March 31, 2018

March 31, 2019

Revenues

$31,146

$36,339

Increase in revenues year over year

26%

17%

Increase in constant currency revenues year over year

23%

19%

Operating income

$7,633

$6,608

Operating margin

25%

18%

Other income (expense), net

$2,910

$1,538

Net income

$9,401

$6,657

Diluted EPS

$13.33

$9.50

Diluted shares (in thousands)

705,134

700,879

Effective tax rate

11%

18%

Number of employees

85,050

103,459

Q1 2019 supplemental information (in millions, except for percentages; unaudited)

Segment revenues and operating results

Three Months Ended

Three Months Ended

March 31, 2018

March 31, 2019

Google properties revenues

$21,998

$25,682

Google Network Members' properties revenues

4,644

5,038

Google advertising revenues

26,642

30,720

Google other revenues

4,354

5,449

Google segment revenues

$30,996

$36,169

Other Bets revenues

$150

$170

Google operating income*

$8,368

$9,325

Other Bets operating loss

($571)

($868)

*The EC fine is included in reconciling items for the three months ended March 31, 2019 as it is not allocated to Google for segment reporting purposes.

Traffic acquisition costs (TAC) to Google Network Members and distribution partners

Three Months Ended

Three Months Ended

March 31, 2018

March 31, 2019

TAC to Google Network Members

$3,386

$3,477

TAC to Google Network Members as % of Google Network

73%

69%

Members' properties revenues

TAC to distribution partners

$2,902

$3,383

TAC to distribution partners as % of Google properties

13%

13%

revenues

Total TAC

$6,288

$6,860

Total TAC as % of Google advertising revenues

24%

22%

Monetization metrics information

Change from Q1 2018

Change from Q4 2018

to Q1 2019 (YoY)

to Q1 2019 (QoQ)

Paid clicks on Google properties

39 %

(9)%

Cost-per-click on Google properties

(19)%

5 %

Impressions on Google Network Members' properties

6 %

5 %

Cost-per-impression on Google Network Members' properties

1 %

(14)%

Webcast and conference call information

A live audio webcast of our first quarter 2019 earnings release call will be available at http://abc.xyz/investor. 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 provide announcements regarding our financial performance, including SEC filings, investor events, press and earnings releases, and blogs, on our investor relations website (http://abc.xyz/investor).

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, 2018, as amended, which is on file with the SEC and is available on our investor relations website at http://abc.xyz/investor and on the SEC website at www.sec.gov. Additional information will also be set forth in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2019. All information provided in this release and in the attachments is as of April 29, 2019. Undue reliance should not be placed on the forward-looking statements in this press release, which are based on information available to us on the date hereof. 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: operating income, excluding the EC fine; operating margin, excluding the EC fine; net income, excluding the EC fine; diluted earnings per share, excluding the EC fine; free cash flow; constant currency revenues; and 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. We believe that these non-GAAP financial measures provide meaningful supplemental information regarding our performance andliquidity byexcluding certainitems thatmaynotbe indicative ofourrecurring core business operating results, such as our revenues excluding the effect of foreign exchange rate movements and hedging activities or our operating performance excluding extraordinary fines. 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.

There are a number of limitations related to the use of non-GAAP financial measures. We compensate for these limitations by providing specific information regarding the GAAP amounts excluded from these non-GAAP financial measures and evaluating these non-GAAP financial measures together with their relevant financial measures in accordance with GAAP.

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.

Contact

Investor relations

Media

investor-relations@abc.xyz

press@abc.xyz

Alphabet Inc.

CONSOLIDATED BALANCE SHEETS

(In millions, except share amounts which are reflected in thousands and par value per share amounts)

December 31,

March 31,

2018

2019

(unaudited)

Assets

Current assets:

Cash and cash equivalents

$

16,701

$

19,148

Marketable securities

92,439

94,340

Total cash, cash equivalents, and marketable securities

109,140

113,488

Accounts receivable, net of allowance of $729 and $761

20,838

19,149

Income taxes receivable, net

355

111

Inventory

1,107

1,053

Other current assets

4,236

4,406

Total current assets

135,676

138,207

Non-marketable investments

13,859

14,474

Deferred income taxes

737

750

Property and equipment, net

59,719

60,528

Operating lease assets

0

8,837

Intangible assets, net

2,220

2,063

Goodwill

17,888

17,943

Other non-current assets

2,693

2,547

Total assets

$

232,792

$

245,349

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable

$

4,378

$

3,710

Accrued compensation and benefits

6,839

5,072

Accrued expenses and other current liabilities

16,958

19,382

Accrued revenue share

4,592

4,318

Deferred revenue

1,784

1,667

Income taxes payable, net

69

761

Total current liabilities

34,620

34,910

Long-term debt

4,012

4,066

Deferred revenue, non-current

396

391

Income taxes payable, non-current

11,327

11,605

Deferred income taxes

1,264

1,282

Operating lease liabilities

0

8,206

Other long-term liabilities

3,545

1,417

Total liabilities

55,164

61,877

Commitments and contingencies

Stockholders' equity:

Convertible preferred stock, $0.001 par value per share, 100,000 shares authorized; no

0

0

shares issued and outstanding

Class A and Class B common stock, and Class C capital stock and additional paid-in

capital, $0.001 par value per share: 15,000,000 shares authorized (Class A 9,000,000,

Class B 3,000,000, Class C 3,000,000); 695,556 (Class A 299,242, Class B 46,636,

Class C 349,678) and 694,782 (Class A 299,444, Class B 46,527, Class C 348,811)

45,049

46,532

shares issued and outstanding

Accumulated other comprehensive loss

(2,306)

(1,780)

Retained earnings

134,885

138,720

Total stockholders' equity

177,628

183,472

Total liabilities and stockholders' equity

$

232,792

$

245,349

Alphabet Inc.

CONSOLIDATED STATEMENTS OF INCOME

(In millions, except per share amounts; unaudited)

Three Months Ended

March 31,

2018

2019

Revenues

$

31,146

$

36,339

Costs and expenses:

Cost of revenues

13,467

16,012

Research and development

5,039

6,029

Sales and marketing

3,604

3,905

General and administrative

1,403

2,088

European Commission fine

0

1,697

Total costs and expenses

23,513

29,731

Income from operations

7,633

6,608

Other income (expense), net

2,910

1,538

Income before income taxes

10,543

8,146

Provision for income taxes

1,142

1,489

Net income

$

9,401

$

6,657

Basic earnings per share of Class A and B common stock and Class C capital stock

$

13.53

$

9.58

Diluted earnings per share of Class A and B common stock and Class C capital stock

$

13.33

$

9.50

Alphabet Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions; unaudited)

Three Months Ended

March 31,

2018

2019

Operating activities

Net income

$

9,401

$

6,657

Adjustments:

Depreciation and impairment of property and equipment

1,791

2,416

Amortization and impairment of intangible assets

195

197

Stock-based compensation expense

2,457

2,769

Deferred income taxes

(18)

(73)

Gain on debt and equity securities, net

(2,992)

(1,081)

Other

(257)

22

Changes in assets and liabilities, net of effects of acquisitions:

Accounts receivable

1,700

1,172

Income taxes, net

782

1,068

Other assets

(241)

(265)

Accounts payable

122

(425)

Accrued expenses and other liabilities

(1,142)

(229)

Accrued revenue share

(286)

(147)

Deferred revenue

130

(81)

Net cash provided by operating activities

11,642

12,000

Investing activities

Purchases of property and equipment

(7,299)

(4,638)

Proceeds from disposals of property and equipment

30

34

Purchases of marketable securities

(8,849)

(20,883)

Maturities and sales of marketable securities

9,351

21,006

Purchases of non-marketable investments

(327)

(907)

Maturities and sales of non-marketable investments

498

99

Acquisitions, net of cash acquired, and purchases of intangible assets

(1,250)

(99)

Net cash used in investing activities

(7,846)

(5,388)

Financing activities

Net payments related to stock-based award activities

(1,158)

(1,175)

Repurchases of capital stock

(2,173)

(3,025)

Proceeds from issuance of debt, net of costs

4,691

315

Repayments of debt

(3,378)

(345)

Proceeds from sale of subsidiary shares

0

47

Net cash used in financing activities

(2,018)

(4,183)

Effect of exchange rate changes on cash and cash equivalents

165

18

Net increase in cash and cash equivalents

1,943

2,447

Cash and cash equivalents at beginning of period

10,715

16,701

Cash and cash equivalents at end of period

$

12,658

$

19,148

Reconciliations of non-GAAP results of operations to the nearest comparable GAAP measures (in millions, except percentages, share amounts which are reflected in thousands and per share amounts, unaudited)

Weprovidenon-GAAPconsolidatedresultsexcludingcertainchargesbecausetheyallowinvestorstomakemeaningful comparisons between Alphabet's recurring core business operating results and those of other companies, as well as providingAlphabet'smanagementwithanimportanttoolforfinancialandoperationaldecisionmakingandforevaluating Alphabet's own recurring core business operating results over different periods of time.

Three Months

Ended March 31,

2019

Operating income (GAAP)

$

6,608

Add: European Commission (EC) fine*

1,697

Operating income, excluding the EC fine (Non-GAAP)

$

8,305

Operating margin (GAAP)

18%

Operating margin, excluding the EC fine (Non-GAAP)

23%

Net income (GAAP)

$

6,657

Add: EC fine, net of the foreign exchange gain*

1,682

Net income, excluding the EC fine (Non-GAAP)

$

8,339

Diluted net income per share (GAAP)

$

9.50

Diluted net income per share, excluding the EC fine (Non-GAAP)

$

11.90

Shares used in diluted per share calculation (in thousands)

700,879

*There is no tax effect as this charge is not tax deductible.

Non-GAAPoperating income: we define non-GAAP operating income as operating income excluding certain charges.

Non-GAAPoperating margin: we define non-GAAP operating margin as non-GAAP operating income divided by revenues.

Non-GAAPnetincome and diluted EPS: We define non-GAAP net income as net income excluding certain charges, less the related tax effects as applicable and non-GAAP diluted EPS as net income excluding certain charges, less the related tax effects as applicable, divided by total weighted average outstanding shares, on a fully-diluted basis.

Reconciliation from net cash provided by operating activities to free cash flow (in millions; unaudited):

We provide free cash flow because it is a liquidity measure that provides useful information to management and investors about the amount of cash generated by the business that can be used for strategic opportunities, including investing in our business and acquisitions, and to strengthen our balance sheet.

Three Months

Ended March 31,

2019

Net cash provided by operating activities

$

12,000

Less: purchases of property and equipment

(4,638)

Free cash flow

$

7,362

Free cash flow: We define free cash flow as net cash provided by operating activities less capital expenditures.

Reconciliation from GAAP revenues to non-GAAP constant currency revenues (in millions; unaudited):

We provide non-GAAP constant currency revenues and growth because they facilitate the comparison of current results to historic performance by excluding the effect of foreign exchange rate movements and hedging activities, which are not indicative of our core operating results.

Three Months Ended

Three Months Ended

March 31, 2019

March 31, 2019

YoY

QoQ

(using Q1'18's FX rates)

(using Q4'18's FX rates)

EMEA revenues (GAAP)

$

11,791

$

11,791

Exclude foreign exchange effect on Q1'19 revenues using Q1'18 rates

762

N/A

Exclude foreign exchange effect on Q1'19 revenues using Q4'18 rates

N/A

40

Exclude hedging effect recognized in Q1'19

(123)

(123)

EMEA constant currency revenues (non-GAAP)

$

12,430

$

11,708

Prior period EMEA revenues, excluding hedging effect (non-GAAP)

$

10,691

$

12,251

EMEA revenue growth (GAAP)

13%

(5)%

EMEA constant currency revenue growth (non-GAAP)

16%

(4)%

APAC revenues (GAAP)

$

6,112

$

6,112

Exclude foreign exchange effect on Q1'19 revenues using Q1'18 rates

199

N/A

Exclude foreign exchange effect on Q1'19 revenues using Q4'18 rates

N/A

(66)

Exclude hedging effect recognized in Q1'19

(16)

(16)

APAC constant currency revenues (non-GAAP)

$

6,295

$

6,030

Prior period APAC revenues, excluding hedging effect (non-GAAP)

$

4,819

$

6,031

APAC revenue growth (GAAP)

27%

1 %

APAC constant currency revenue growth (non-GAAP)

31%

0 %

Other Americas revenues (GAAP)

$

1,904

$

1,904

Exclude foreign exchange effect on Q1'19 revenues using Q1'18 rates

192

N/A

Exclude foreign exchange effect on Q1'19 revenues using Q4'18 rates

N/A

(1)

Exclude hedging effect recognized in Q1'19

2

2

Other Americas constant currency revenues (non-GAAP)

$

2,098

$

1,905

Prior period Other Americas revenues, excluding hedging effect (non-GAAP)

$

1,731

$

2,201

Other Americas revenue growth (GAAP)

10%

(13)%

Other Americas constant currency revenue growth (non-GAAP)

21%

(13)%

United States revenues (GAAP)

$

16,532

$

16,532

United States revenue growth (GAAP)

17%

(11)%

Revenues (GAAP)

$

36,339

$

36,339

Constant currency revenues (non-GAAP)

$

37,355

$

36,175

Prior period revenues, excluding hedging effect (non-GAAP)

$

31,385

$

39,152

Revenue growth (GAAP)

17%

(7)%

Constant currency revenue growth (non-GAAP)

19%

(8)%

Non-GAAPconstant currency revenues and growth: We define non-GAAP constant currency revenues as total revenues excluding the effect of foreign exchange rate movements and hedging activities, and we use it to determine the constant currency revenue growth on year-on-year and quarter-on-quarter bases. Non-GAAP constant currency revenues are calculated by translating current quarter revenues using prior period exchange rates and excluding any hedging effect recognized in the current quarter. Constant currency revenue growth (expressed as a percentage) is calculated by determining the increase in current quarter non-GAAP constant currency revenues over prior period revenues, excluding any hedging effect recognized in the prior period.

Other income (expense), net

The following table presents our other income (expense), net (in millions, except for EPS; unaudited):

Three Months Ended

March 31,

2018

2019

Interest income

$

399

$

522

Interest expense

(30)

(35)

Foreign currency exchange gain (loss), net

(24)

74

Loss on debt securities, net

(39)

(2)

Gain on equity securities, net(1)(2)

3,031

1,083

Performance fees(3)

(632)

(117)

Loss and impairment from equity method investments, net

(7)

(40)

Other

212

53

Other income (expense), net

$

2,910

$

1,538

(1)The $1.1 billion gain on equity securities for Q1 2019 includes $1.0 billion of net unrealized gains on equity investments that we hold and which may not ultimately be realized. Fluctuations in the value of these investments could contribute to the volatility of other income (expense), net (OI&E) in future periods.

(2)ASU 2016-01, effective January 1, 2018, requires that all gains and losses, unrealized and realized, on equity security investments are recognized in OI&E. For Q1 2019, the net effect of the gain on equity securities of $1.1 billion and the performance fees of $117 million increased income tax, net income, and diluted EPS by $203 million, $763 million, and $1.09 respectively.

(3)Performance fees were reclassified for the prior period from general and administrative expenses to OI&E to conform with current period presentation. Additional information on the reclassification can be found in our blog post on April 15, 2019 and our Q1 2019 10-Q.

Segment results

The following table presents our revenues, operating income (loss), stock-based compensation (SBC), capital expenditures, and depreciation, amortization, and impairment by segment (in millions, unaudited):

Three Months Ended

March 31,

2018

2019

Revenues:

Google

$

30,996

$

36,169

Other Bets

150

170

Total revenues

$

31,146

$

36,339

Operating income (loss):

Google

$

8,368

$

9,325

Other Bets

(571)

(868)

Reconciling items(1)

(164)

(1,849)

Total income from operations

$

7,633

$

6,608

Stock-based compensation(2):

Google

$

2,304

$

2,612

Other Bets

112

123

Reconciling items(1)

41

34

Total stock-based compensation

$

2,457

$

2,769

Capital expenditures:

Google

$

7,669

$

4,534

Other Bets

55

59

Reconciling items(3)

(425)

45

Total capital expenditures

$

7,299

$

4,638

Depreciation, amortization, and impairment:

Google

$

1,901

$

2,529

Other Bets

85

84

Total depreciation, amortization, and impairment

$

1,986

$

2,613

(1)Reconciling items are primarily comprised of the European Commission fine for the three months ended March 31, 2019 as well as corporate administrative costs and other miscellaneous items that are not allocated to individual segments for all periods presented. Performance fees previously included in reconciling items were reclassified for the prior period from general and administrative expenses to other income (expense), net to conform with current period presentation.

(2)For purposes of segment reporting, SBC represents awards that we expect to settle in Alphabet stock.

(3)Reconciling items are related to timing differences of payments, as segment capital expenditures are on an accrual basis while total capital expenditures shown on the Consolidated Statements of Cash Flows are on a cash basis, and other miscellaneous differences.

Disclaimer

Alphabet Inc. published this content on 29 April 2019 and is solely responsible for the information contained herein. Distributed by Public, unedited and unaltered, on 29 April 2019 20:07:08 UTC

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NameTitle
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