ALPHABET INC. Please read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes included under Part I, Item 1 of this Quarterly Report on Form 10-Q. Executive Overview of Results Below are our key financial results for the three months endedMarch 31, 2020 (consolidated unless otherwise noted): •Revenues of$41.2 billion and revenue growth of 13% year over year, constant currency revenue growth of 15% year over year. •Google segment revenues of$41.0 billion with revenue growth of 14% year over year and Other Bets revenues of$135 million with a decrease of 21% year over year. •Revenues fromthe United States , EMEA, APAC, and Other Americas were$18.9 billion ,$12.8 billion ,$7.2 billion , and$2.2 billion , respectively. •Cost of revenues was$19.0 billion , consisting of TAC of$7.5 billion and other cost of revenues of$11.5 billion . TAC as a percentage of advertising revenues ("TAC rate") was 22.1%. •Operating expenses (excluding cost of revenues) were$14.2 billion . •Income from operations was$8.0 billion . •Other income (expense), net, was a loss of$220 million . •Effective tax rate was 11.9%. •Net income was$6.8 billion with diluted net income per share of$9.87 . •Operating cash flow was$11.5 billion . •Capital expenditures were$6.0 billion . •Number of employees was 123,048 as ofMarch 31, 2020 . The majority of new hires during the quarter were engineers and product managers. By product area, the largest headcount additions were inMarch 11, 2020 was declared a global pandemic by TheWorld Health Organization . Acrossthe United States and the world, governments and municipalities instituted measures in an effort to control the spread of COVID-19, including quarantines, shelter-in-place orders, school closings, travel restrictions and the closure of non-essential businesses. By the end of March, the macroeconomic impacts became significant, exhibited by, among other things, a rise in unemployment and market volatility. For most of the quarter endedMarch 31, 2020 , our results reflect historical trends and seasonality. However, inMarch 2020 we experienced a decline in advertising revenues due to the impact of COVID-19 and the related reductions in global economic activity. While users' search activity increased, their interests shifted to less commercial topics. In addition, our advertising revenues were negatively affected by reduced spending by our advertisers in response to the macroeconomic impact. We also assessed the realized and potential credit deterioration of our customers due to changes in the macroeconomic environment, which has been reflected in an increase in our allowance for credit losses for accounts receivable. In addition, we experienced declines in the valuation of our equity investments. Looking ahead, the full impact of COVID-19 on our business is unknown and highly unpredictable. Our past results may not be indicative of our future performance and historical trends in revenues, operating income, operating margin, net income, EPS, among others, may differ materially. For example, to the extent the pandemic continues to disrupt economic activity globally we, like other businesses, would not be immune as it could adversely affect our business, operations and financial results through prolonged decreases in advertising spend, credit deterioration of our customers, depressed economic activity, or declines in capital markets. In addition, many of our expenses are less variable in nature and may not correlate to changes in revenues. The extent of the impact will depend on a number of factors, including the duration and severity of the pandemic; advances in testing, treatment 31
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and prevention; and the macroeconomic impact of government measures to contain the spread of the virus and related government stimulus measures. To address the potential impact to our business, over the near-term, we are reevaluating the pace of our investment plans, including, but not limited to, our hiring, investments in data centers, servers, network equipment, real estate and facilities, and marketing and travel spending, as well as taking certain measures to support our customers. Information about Segments We operate our business in multiple operating segments.$ 22,547 $ 24,502 YouTube ads(1) 3,025 4,038 Google properties 25,572 28,540 Google Network Members' properties 5,015 5,223 Google advertising 30,587 33,763 Google Cloud 1,825 2,777 Google other(1) 3,620 4,435 Google revenues 36,032 40,975 Other Bets revenues 170 135 Hedging gains (losses) 137 49 Total revenues$ 36,339 $ 41,159 (1) YouTube non-advertising revenues are included in
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•traffic growth in emerging markets compared to more mature markets and across various advertising verticals and channels. Our advertising revenue growth rate has been affected over time as a result of a number of factors, including challenges in maintaining our growth rate as revenues increase to higher levels; changes in our product mix; changes in advertising quality or formats and delivery; the evolution of the online advertising market; increasing competition; our investments in new business strategies; query growth rates; and shifts in the geographic mix of our revenues. We also expect that our revenue growth rate will continue to be affected by evolving user preferences, the acceptance by users of our products and services as they are delivered on diverse devices and modalities, our ability to create a seamless experience for both users and advertisers, and movements in foreign currency exchange rates. The following table presents our$ 22,547 $ 24,502 YouTube ads(1) 3,025 4,038 Google Network Members' properties 5,015 5,223
84.9 % 82.4 %
(1) YouTube non-advertising revenues are included in Google other revenues.
Google advertising revenues are generated on our Google properties (including
Google Search & other properties and YouTube) and Google Network Members'
properties. Google advertising revenues consist primarily of the following:
•Google Search & other consists of revenues generated on Google search
properties (including revenues from traffic generated by search distribution
partners who use Google.com as their default search in browsers, toolbars, etc.)
and other Google owned and operated properties like Gmail, Google Maps, and
Google Play;
•YouTube ads consists of revenues generated primarily on YouTube properties; and
•Google Network Members' properties consist of revenues generated primarily on
Google Network Members' properties participating in AdMob, AdSense, and Google
Ad Manager.
Google Search & other
Our Google Search & other revenues increased $1,955 million from the three
months ended March 31, 2019 to the three months ended March 31, 2020 . The
overall growth for the period was primarily driven by interrelated factors
including increases in search queries resulting from ongoing growth in user
adoption and usage, primarily on mobile devices, growth in advertiser activity,
and improvements we have made in ad formats and delivery. However, revenue
declined in March, driven by the impact of COVID-19. While we experienced an
increase in user search activity in March, our revenues were adversely affected
by a shift to less commercial topics and reduced advertiser spending. Revenue
growth for the period ending March 31, 2020 was also partially offset by the
general strengthening of the U.S. dollar compared to certain foreign currencies.
YouTube ads
YouTube ads revenues increased $1,013 million from the three months ended March
31, 2019 to the three months ended March 31, 2020 . The largest contributors to
the growth were our direct response and brand advertising products, both of
which benefited from improvements to ad formats and delivery and increased
advertiser spending. This increase was slightly offset by a deceleration in
revenue growth in March for our brand advertising products driven by the impact
of COVID-19.
Google Network Members' properties
Our Google Network Members' properties revenues increased $208 million from the
three months ended March 31, 2019 to the three months ended March 31, 2020 . The
growth was largely driven by AdMob and was partially offset by a decline in
revenues in March driven by the impact of COVID-19.
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Use of Monetization Metrics Paid clicks for ourMarch 31, 2019 to the three months endedMarch 31, 2020 due to an increase in paid clicks driven by growth in views of YouTube engagement ads; an increase in clicks due to interrelated factors, including an increase in search queries resulting from ongoing growth in user adoption and usage, primarily on mobile devices; continued growth in advertiser activity; and improvements we have made in ad formats and delivery. This growth was offset by a deceleration in paid clicks in March as a result of the impact of COVID-19, when search activity shifted to less commercial topics. The overall positive effect on our revenues from an increase in paid clicks was partially offset by a decrease in the cost-per-click paid by our advertisers. The decrease in cost-per-click was primarily driven by continued growth in YouTube engagement ads where cost-per-click remains lower than on our other advertising platforms, as well as a mix shift to less commercial topics and reduced advertiser spending in response to COVID-19 in March. Cost-per-click was also affected by changes in device mix, geographic mix, ongoing product changes, product mix, property mix, and fluctuations of theU.S. dollar compared to certain foreign currencies.
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Impressions increased from the three months endedMarch 31, 2019 to the three months endedMarch 31, 2020 primarily due to growth in AdManager. The positive effect on our revenues from an increase in impressions was partially offset by a decrease in the cost per impression paid by our advertisers largely due to a reduction in advertiser spending in March in response to COVID-19.$ 1,825 $ 2,777 Google Cloud revenues as a percentage of Google segment revenues 5.1 % 6.8 %$952 million from the three months endedMarch 31, 2019 to the three months endedMarch 31, 2020 . The growth was primarily driven by continued strength in our GCP and G Suite offerings. Our infrastructure and our data and analytics platform products have been the largest drivers of growth in GCP.$ 3,620 $ 4,435 Google other revenues as a percentage of Google segment revenues 10.0 % 10.8 %Nest home products, Pixelbooks, Pixel phones and other devices; •YouTube non-advertising, including YouTube Premium and YouTube TV subscriptions and other services; and •other products and services. Our$815 million from the three months endedMarch 31, 2019 to the three months endedMarch 31, 2020 . The growth was primarily driven by YouTube subscriptions and$ 170 $ 135 Other Bets revenues as a percentage of total revenues 0.5 % 0.3 %
Other Bets revenues consist primarily of revenues from the sale of Access internet services and Verily licensing and R&D services.
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Revenues by Geography The following table presents our revenues by geography as a percentage of revenues, determined based on the addresses of our customers (unaudited):
Three Months Ended
March 31,
2019 2020
United States 45 % 46 %
EMEA 33 % 31 %
APAC 17 % 18 %
Other Americas 5 % 5 %
For further details on revenues by geography, see Note 2 of the Notes to
Consolidated Financial Statements included in Part I, Item 1 of this Quarterly
Report on Form 10-Q.
Use of Constant Currency Revenues and Constant Currency Revenue Growth
The effect of currency exchange rates on our business is an important factor in
understanding period to period comparisons. Our international revenues are
favorably affected as the U.S. dollar weakens relative to other foreign
currencies, and unfavorably affected as the U.S. dollar strengthens relative to
other foreign currencies. Our revenues are also favorably affected by net
hedging gains and unfavorably affected by net hedging losses.
We use non-GAAP constant currency revenues and constant currency revenue growth
for financial and operational decision-making and as a means to evaluate
period-to-period comparisons. We believe the presentation of results on a
constant currency basis in addition to GAAP results helps improve the ability to
understand our performance because they exclude the effects of foreign currency
volatility that are not indicative of our core operating results.
Constant currency information compares results between periods as if exchange
rates had remained constant period over period. We define constant currency
revenues as total revenues excluding the effect of foreign exchange rate
movements and hedging activities, and use it to determine the constant currency
revenue growth on a year-on-year basis. Constant currency revenues are
calculated by translating current period revenues using prior period exchange
rates, as well as excluding any hedging effects realized in the current period.
Constant currency revenue growth (expressed as a percentage) is calculated by
determining the increase in current period revenues over prior period revenues
where current period foreign currency revenues are translated using prior period
exchange rates and hedging effects are excluded from revenues of both periods.
These results should be considered in addition to, not as a substitute for,
results reported in accordance with GAAP. Results on a constant currency basis,
as we present them, may not be comparable to similarly titled measures used by
other companies and are not a measure of performance presented in accordance
with GAAP.
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The following table presents the foreign exchange effect on our international revenues and total revenues (in millions, except percentages, unaudited):
Three Months Ended
March 31,
2019 2020
EMEA revenues
762 235
EMEA constant currency revenues $ 12,430 $ 13,080
Prior period EMEA revenues $ 10,691 $ 11,668
EMEA revenue growth 9 % 10 %
EMEA constant currency revenue growth 16 % 12 %
APAC revenues
199 61
APAC constant currency revenues $ 6,295 $ 7,299
Prior period APAC revenues $ 4,819 $ 6,096
APAC revenue growth 26 % 19 %
APAC constant currency revenue growth 31 % 20 %
Other Americas revenues
192 96
Other Americas constant currency revenues $ 2,098 $ 2,253
Prior period Other Americas revenues $ 1,731 $ 1,906
Other Americas revenue growth 10 % 13 %
Other Americas constant currency revenue growth 21 % 18 %
United States revenues $ 16,532 $ 18,870
United States revenue growth 17 % 14 %
Hedging gains $ 137 $ 49
Total revenues $ 36,339 $ 41,159
Total constant currency revenues $ 37,355 $ 41,502
Prior period revenues, excluding hedging effect(1) $ 31,385 $ 36,202
Total revenue growth 17 % 13 %
Total constant currency revenue growth 19 % 15 %
(1) Total revenues and hedging (losses) for the quarter ended March 31, 2018
were $31,146 million and $(239) million , respectively.
Our EMEA revenue growth from the three months ended March 31, 2019 to the three
months ended March 31, 2020 was unfavorably affected by changes in foreign
currency exchange rates, primarily due to the U.S. dollar strengthening relative
to the Euro.
Our APAC revenue growth from the three months ended March 31, 2019 to the three
months ended March 31, 2020 was unfavorably affected by changes in foreign
currency exchange rates primarily due to the U.S. dollar strengthening relative
to the Australian dollar and South Korean won.
Our Other Americas revenue growth from the three months ended March 31, 2019 to
the three months ended March 31, 2020 was unfavorably affected by changes in
foreign currency exchange rates, primarily due to the U.S. dollar strengthening
relative to the Brazilian real.
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Table of Contents Alphabet Inc. Costs and Expenses Cost of Revenues Cost of revenues consists of TAC which are paid to$ 6,860 $ 7,452 Other cost of revenues 9,152 11,530 Total cost of revenues$ 16,012 $ 18,982 Total cost of revenues as a percentage of revenues 44.1
% 46.1 %
Cost of revenues increased$2,970 million from the three months endedMarch 31, 2019 to the three months endedMarch 31, 2020 . The increase was due to increases in other cost of revenues and TAC of$2,378 million and$592 million , respectively. The increase in other cost of revenues from the three months endedMarch 31, 2019 to the three months endedMarch 31, 2020 was due to an increase in data center and other operations costs and an increase in content acquisition costs for YouTube consistent with the growth in YouTube revenues. The increase in TAC from the three months endedMarch 31, 2019 to the three months endedMarch 31, 2020 was due to increases in TAC paid to distribution partners and toMarch 31, 2019 to the three months endedMarch 31, 2020 . Over time, cost of revenues as a percentage of total revenues may be affected by a number of factors, including the following: •The amount of TAC paid to Google Network Members, which is affected by a combination of factors such as geographic mix, product mix, revenue share terms, and fluctuations of theU.S. dollar compared to certain foreign currencies; •The amount of TAC paid to distribution partners, which is affected by changes in device mix, geographic mix, partner mix, partner agreement terms such as revenue share arrangements, and the percentage of queries channeled through paid access points; •Relative revenue growth rates of
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•Content acquisition costs, which are primarily affected by the relative growth
rates in our YouTube advertising and subscription revenues;
•Costs related to hardware sales; and
•Increased proportion of non-advertising revenues, which generally have higher
costs of revenues, relative to our advertising revenues.
Research and Development
The following table presents our R&D expenses (in millions, unaudited):
Three Months Ended
March 31,
2019 2020
Research and development expenses $ 6,029 $ 6,820
Research and development expenses as a percentage of revenues 16.6 % 16.6 %
R&D expenses consist primarily of: •Compensation expenses (including SBC) and facilities-related costs for engineering and technical employees responsible for R&D of our existing and new products and services; •Depreciation expenses; •Equipment-related expenses; and •Professional services fees primarily related to consulting and outsourcing services. R&D expenses increased$791 million from the three months endedMarch 31, 2019 to the three months endedMarch 31, 2020 . The increase was primarily due to an increase in compensation expenses (including SBC) and facilities-related costs of$687 million , largely resulting from a 16% increase in headcount. Over time, R&D expenses as a percentage of revenues may fluctuate due to certain expenses that are generally less variable in nature and may not correlate to the changes in revenues. In addition, R&D expenses may be affected by a number of factors including continued investment in ads, Android, Chrome, Google Cloud, Google Play, hardware, machine learning, Other Bets, Search and YouTube. Sales and Marketing The following table presents our sales and marketing expenses (in millions, unaudited): Three Months Ended March 31, 2019 2020 Sales and marketing expenses$ 3,905 $ 4,500 Sales and marketing expenses as a percentage of revenues
10.7 % 10.9 %
Sales and marketing expenses consist primarily of: •Advertising and promotional expenditures related to our products and services; and •Compensation expenses (including SBC) and facilities-related costs for employees engaged in sales and marketing, sales support, and certain customer service functions. Sales and marketing expenses increased$595 million from the three months endedMarch 31, 2019 to the three months endedMarch 31, 2020 . The increase was primarily due to an increase in compensation expenses (including SBC) and facilities-related costs of$384 million , largely resulting from a 9% increase in headcount. Over time, sales and marketing expenses as a percentage of revenues may fluctuate due to certain expenses that are generally less variable in nature and may not correlate to the changes in revenues. In addition, sales and marketing expenses may be affected by a number of factors including the seasonality associated with new product and service launches and strategic decisions regarding the timing and extent of our spending. 39
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General and Administrative The following table presents our general and administrative expenses (in millions, unaudited):
Three Months Ended
March 31,
2019 2020
General and administrative expenses $ 2,088 $ 2,880
General and administrative expenses as a percentage of revenues 5.7 % 7.0 %
General and administrative expenses consist primarily of:
•Compensation expenses (including SBC) and facilities-related costs for
employees in our finance, human resources, information technology, and legal
organizations;
•Depreciation;
•Equipment-related expenses;
•Legal-related expenses; and
•Professional services fees primarily related to audit, information technology
consulting, outside legal, and outsourcing services.
General and administrative expenses increased $792 million from the three months
ended March 31, 2019 to the three months ended March 31, 2020 . Of the increase
$413 million was due to an increase in allowance for credit losses for accounts
receivable primarily related to the economic impact of COVID-19. In addition,
compensation expenses (including SBC) and facilities-related costs increased
$341 million , largely resulting from an 18% increase in headcount.
Over time, general and administrative expenses as a percentage of revenues may
fluctuate due to certain expenses that are generally less variable in nature and
may not correlate to the changes in revenues, the effect of discrete items such
as legal settlements, or further allowances for credit losses for accounts
receivable associated with the economic impact of COVID-19.
European Commission Fines
In March 2019 , the EC announced its decision that certain contractual provisions
in agreements that Google had with AdSense for Search partners infringed
European competition law. The EC decision imposed a €1.5 billion ($1.7 billion
as of March 20, 2019 ) fine, which was accrued in the first quarter of 2019.
Please refer to Note 10 of the Notes to Consolidated Financial Statements
included in Part 1, Item 1 of this Quarterly Report on Form 10-Q for further
information.
Other Income (Expense), Net
The following table presents other income (expense), net (in millions,
unaudited):
Three Months Ended
March 31,
2019 2020
Other income (expense), net $ 1,538 $ (220)
Other income (expense), net, decreased $1,758 million from the three months
ended March 31, 2019 to the three months ended March 31, 2020 . The decrease was
primarily driven by $814 million of net losses, including impairments, on equity
securities for the three months ended March 31, 2020 compared to a $1,083
million net gain on equity securities for the three months ended March 31, 2019 .
Over time, other income (expense), net, may be affected by market dynamics and
other factors. Equity values generally change daily for marketable equity
securities and upon the occurrence of observable price changes or upon
impairment of non-marketable equity securities. In addition, volatility in the
global economic climate and financial markets, including the effects of
COVID-19, could result in a significant change in the value of our investments.
Fluctuations in the value of these investments has, and we expect will continue
to, contribute to volatility of OI&E in future periods. For additional
information about our investments, see Note 3 of the Notes to Consolidated
Financial Statements included in Part I, Item 1 of this Quarterly Report on Form
10-Q.
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Provision for Income Taxes
The following table presents our provision for income taxes (in millions, except
for effective tax rate; unaudited):
Three Months Ended
March 31,
2019 2020
Provision for income taxes $ 1,489 $ 921
Effective tax rate 18.3 % 11.9 %
Our effective tax rate decreased 6.4% from the three months ended March 31, 2019
to the three months ended March 31, 2020 . The decrease in effective tax rate is
primarily due to a non-deductible EC fine in 2019 that did not recur in 2020 and
an increase in the U.S. federal Foreign-Derived Intangible Income tax benefit,
partially offset by higher earnings in countries that have higher statutory
rates, resulting from the change in our corporate legal entity structure
implemented as of December 31, 2019 .
Our effective tax rate is based on forecasted annual results, and therefore may
fluctuate significantly in future periods, due to the uncertainty in our annual
forecasts resulting from the unpredictable impact of COVID-19 on our operating
results. As such, evolving facts and circumstances surrounding these forecasts
could result in the application of different provisions of tax laws and cause
our estimated annual effective tax rate to change significantly through the
remainder of the year.
In addition, our future effective tax rate may be affected by changes in the
geographic mix of earnings in countries with different statutory rates, the
valuation of our deferred tax assets or liabilities, or changes in tax laws,
regulations, or accounting principles, as well as certain discrete items.
Capital Resources and Liquidity
As of March 31, 2020 , we had $117.2 billion in cash, cash equivalents, and
marketable securities. Cash equivalents and marketable securities are comprised
of time deposits, money market funds, highly liquid government bonds, corporate
debt securities, mortgage-backed and asset-backed securities and marketable
equity securities.
As of March 31, 2020 , we had long-term taxes payable of $7.3 billion related to
a one-time transition tax payable incurred as a result of the U.S. Tax Cuts and
Jobs Act ("Tax Act"). As permitted by the Tax Act, we will pay the transition
tax in annual interest-free installments through 2025.
In 2017, 2018 and 2019, the EC announced decisions that certain actions taken by
Google infringed European competition law and imposed fines of €2.4 billion
($2.7 billion as of June 27, 2017 ), €4.3 billion ($5.1 billion as of June 30,
2018 ), and €1.5 billion ($1.7 billion as of March 20, 2019 ), respectively. While
each EC decision is under appeal, we included the fines in accrued expenses and
other current liabilities on our Consolidated Balance Sheets as we provided bank
guarantees (in lieu of a cash payment) for the fines.
In November 2019 , we entered into an agreement to acquire Fitbit, a leading
wearables brand, for $7.35 per share, representing a total purchase price of
approximately $2.1 billion as of the date of the agreement. The acquisition of
Fitbit is expected to be completed later this year, subject to customary closing
conditions, including the receipt of regulatory approvals.
Our principal sources of liquidity are our cash, cash equivalents, and
marketable securities, as well as the cash flow that we generate from our
operations. The primary use of capital continues to be to invest for the long
term growth of the business. We regularly evaluate our cash and capital
structure, including the size, pace and form of capital return to stockholders.
We have a short-term debt financing program of up to $5.0 billion through the
issuance of commercial paper. Net proceeds from this program are used for
general corporate purposes. As of March 31, 2020 , we had no commercial paper
outstanding. As of March 31, 2020 , we have $4.0 billion of revolving credit
facilities expiring in July 2023 with no amounts outstanding. The interest rate
for the credit facilities is determined based on a formula using certain market
rates. We believe that our sources of funding will be sufficient to satisfy our
currently anticipated cash requirements including capital expenditures, working
capital requirements, potential acquisitions, and other liquidity requirements
through at least the next 12 months.
As of March 31, 2020 , we have senior unsecured notes outstanding due in 2021,
2024, and 2026 with a total carrying value of $4.0 billion .
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As ofMarch 31, 2020 , we had remaining authorization of$12.3 billion for repurchase of Class C capital stock. The repurchases are being executed from time to time, subject to general business and market conditions and other investment opportunities, through open market purchases or privately negotiated transactions, including through Rule 10b5-1 plans. The repurchase program does not have an expiration date. Refer to Note 11 of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q. While we continue to make investments in land and buildings for data centers, offices and information technology infrastructure through purchases of property and equipment and lease arrangements to provide capacity for the growth of our business, we may slow the pace of our investments due to COVID-19. During the three months endedMarch 31, 2020 , we spent$6.0 billion on capital expenditures and recognized total operating lease assets of$0.8 billion . As ofMarch 31, 2020 , the amount of total future lease payments under operating leases, which had a weighted average remaining lease term of 10 years, was$14.2 billion . Finance leases were not material for the three months endedMarch 31, 2020 . Refer to Note 4 of the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information on the leases. The following table presents our cash flows (in millions, unaudited): Three Months EndedMarch 31, 2019 2020
Net cash provided by operating activities
Cash Provided by Operating Activities Our largest source of cash provided by our operations are advertising revenues generated byMarch 31, 2019 to the three months endedMarch 31, 2020 primarily due to an increase in cash paid for compensation expenses accrued in 2019 and deposits made for certain tax matters. This was largely offset by the net impact of increases in cash received from revenues and cash paid for cost of revenues and operating expenses. Cash Used in Investing Activities Cash provided by investing activities consists primarily of maturities and sales of our investments in marketable and non-marketable securities. Cash used in investing activities consists primarily of purchases of property and equipment, which primarily includes our investments in land and buildings for data centers, offices and information technology infrastructure to provide capacity for the growth of our businesses; purchases of marketable and non-marketable securities; and payments for acquisitions. Net cash used in investing activities decreased from the three months endedMarch 31, 2019 to the three months endedMarch 31, 2020 primarily due to a net increase in maturities and sales of marketable securities and a net decrease in purchases of non-marketable securities, partially offset by an increase in purchases of property and equipment. The increase in purchases of property and equipment was driven by increases in purchases of land and buildings for offices as well as servers, and increases in data center construction. Cash Used in Financing Activities Cash provided by financing activities consists primarily of proceeds from issuance of debt and proceeds from the sale of interest in consolidated entities. Cash used in financing activities consists primarily of net payments related to stock-based award activities, repurchases of capital stock, and repayments of debt. Net cash used in financing activities increased from the three months endedMarch 31, 2019 to the three months endedMarch 31, 2020 primarily due to an increase in cash payments for repurchases of capital stock, partially offset by an increase in proceeds from the sale of interest in consolidated entities. 42
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Critical Accounting Policies and Estimates See Part II, Item 7, "Critical Accounting Policies and Estimates" in our Annual Report on Form 10-K for the year endedDecember 31, 2019 . There have been no material changes to our critical accounting policies and estimates since our Annual Report on Form 10-K for the year endedDecember 31, 2019 , certain of which are further described below. As ofMarch 31, 2020 , the impact of COVID-19 continues to unfold. As a result, many of our estimates and assumptions required increased judgment and carry a higher degree of variability and volatility. As events continue to evolve and additional information becomes available, our estimates may change materially in future periods. Income Taxes We are subject to income taxes in theU.S. and foreign jurisdictions. Significant judgment is required in evaluating our uncertain tax positions and determining our provision for income taxes. Our interim tax accruals are based on an estimated annual effective tax rate applied to year-to-date income along with certain discrete items recorded in the period. Estimates of the annual effective tax rate at the end of an interim period are based on our best estimate of future events and transactions which, as a result of COVID-19, may be impacted by a higher degree of variability and volatility. As such, evolving facts and circumstances surrounding these forecasts could result in the application of different provisions of tax laws and cause our estimated annual effective tax rate to change significantly through the remainder of the year. Although we believe we have adequately reserved for our uncertain tax positions, no assurance can be given that the final tax outcome of these matters will not be different. We adjust these reserves in light of changing facts and circumstances, such as the closing of a tax audit or the refinement of an estimate. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will affect the provision for income taxes and the effective tax rate in the period in which such determination is made. The provision for income taxes includes the effect of reserve provisions and changes to reserves that are considered appropriate as well as the related net interest and penalties. In addition, we are subject to the continuous examination of our income tax returns by the Internal Revenue Service ("IRS") and other tax authorities which may assert assessments against us. We regularly assess the likelihood of adverse outcomes resulting from these examinations and assessments to determine the adequacy of our provision for income taxes. Available Information Our website is located at www.abc.xyz, and our investor relations website is located at www.abc.xyz/investor. Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and our Proxy Statements, and any amendments to these reports, are available through our investor relations website, free of charge, after we file them with theSEC . We also provide a link to the section of theSEC's website at www.sec.gov that has all of the reports that we file or furnish with theSEC . We webcast via our investor relations website our earnings calls and certain events we participate in or host with members of the investment community. Our investor relations website also provides notifications of news or announcements regarding our financial performance and other items of interest to our investors, includingSEC filings, investor events, press and earnings releases, and blogs. We also share Google news and product updates on Google's Keyword blog at https://www.blog.google/, which may be of interest or material to our investors. Further, corporate governance information, including our certificate of incorporation, bylaws, governance guidelines, board committee charters, and code of conduct, is also available on our investor relations website under the heading "Other." The content of our websites are not incorporated by reference into this Quarterly Report on Form 10-Q or in any other report or document we file with theSEC , and any references to our websites are intended to be inactive textual references only.
© Edgar Online, source
