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Exhibit
Exhibit 99.1

Alphabet Announces Third Quarter 2017 Results
MOUNTAIN VIEW, Calif. – October 26, 2017 – Alphabet Inc. (NASDAQ: GOOG, GOOGL) today announced financial results for the quarter ended September 30, 2017.
"We had a terrific quarter, with revenues up 24% year on year, reflecting strength across Google and Other Bets," said Ruth Porat, CFO of Alphabet. "Our momentum is a result of investments over many years in fantastic people, products and partnerships."
Q3 2017 financial highlights
The following summarizes our consolidated financial results for the quarters ended September 30, 2016 and 2017 (in millions, except for per share information, effective tax rate, and headcount; unaudited):
 
Three Months Ended September 30, 2016
 
Three Months Ended September 30, 2017
Revenues

$22,451

 

$27,772

Increase in revenues year over year
20
%
 
24
%
Increase in constant currency revenues year over year
23
%
 
24
%
 
 
 
 
Operating income

$5,767

 

$7,782

Operating margin
26
%
 
28
%
 
 
 
 
Net income

$5,061

 

$6,732

Diluted EPS

$7.25

 

$9.57

Diluted shares (in thousands)
698,440

 
703,716

 
 
 
 
Effective tax rate (ETR)
16
%
 
16
%
Headcount
69,953

 
78,101

Q3 2017 supplemental information
Segment revenues and operating results (in millions; unaudited):
 
Three Months Ended September 30, 2016
 
Three Months Ended September 30, 2017
Google properties revenues

$16,089

 

$19,723

Google Network Members' properties revenues
3,732

 
4,342
Google advertising revenues
19,821

 
24,065
Google other revenues
2,433

 
3,405
Google segment revenues

$22,254

 

$27,470

Other Bets revenues

$197

 

$302

 
 
 
 
Google operating income

$6,774

 

$8,744

Other Bets operating loss

($861
)
 

($812
)



Traffic acquisition costs (TAC) to Google Network Members and distribution partners (in millions; unaudited):
 
Three Months Ended September 30, 2016
 
Three Months Ended September 30, 2017
TAC to Google Network Members

$2,623

 

$3,101

TAC to Google Network Members as % of Google Network Members' properties revenues
70
%
 
71
%
TAC to distribution partners

$1,559

 

$2,401

TAC to distribution partners as % of Google properties revenues
10
%
 
12
%
Total TAC

$4,182

 

$5,502

Total TAC as % of Google advertising revenues
21
%
 
23
%
Paid clicks and cost-per-click information (unaudited):
 
Change from Q3 2016 to Q3 2017 (YoY)
 
Change from Q2 2017 to Q3 2017 (QoQ)
Aggregate paid clicks
47
 %
 
6
%
Paid clicks on Google properties
55
 %
 
7
%
Paid clicks on Google Network Members' properties
10
 %
 
2
%
 
 
 
 
Aggregate cost-per-click
(18
)%
 
1
%
Cost-per-click on Google properties
(21
)%
 
1
%
Cost-per-click on Google Network Members' properties
(5
)%
 
0
%
Webcast and conference call information
A live audio webcast of our third quarter 2017 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 announce investor information, including news and commentary about our business and financial performance, SEC filings, notices of investor events and our press and earnings releases, 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, 2016 and our most recent Quarterly Report on Form 10-Q for the quarter ended June 30, 2017, which are on file with the SEC and are 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 September 30, 2017. All information provided in this release and in the attachments is as of October 26, 2017, and 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: 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 and liquidity by excluding certain items that may not be indicative of our recurring core business operating results, such as our revenues excluding the impact of foreign currency movements. 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.
For more information on these non-GAAP financial measures, please see the tables captioned "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, 2016
 
September 30,
2017
 
 
 
(unaudited)
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
12,918

 
$
10,581

Marketable securities
73,415

 
89,562

Total cash, cash equivalents, and marketable securities
86,333

 
100,143

Accounts receivable, net of allowance of $467 and $625
14,137

 
15,295

Income taxes receivable, net
95

 
282

Inventory
268

 
765

Other current assets
4,575

 
2,860

Total current assets
105,408

 
119,345

Non-marketable investments
5,878

 
7,269

Deferred income taxes
383

 
505

Property and equipment, net
34,234

 
40,120

Intangible assets, net
3,307

 
2,883

Goodwill
16,468

 
16,731

Other non-current assets
1,819

 
2,683

Total assets
$
167,497

 
$
189,536

Liabilities and Stockholders’ Equity
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
2,041

 
$
2,674

Accrued compensation and benefits
3,976

 
4,022

Accrued expenses and other current liabilities
6,144

 
9,307

Accrued revenue share
2,942

 
3,200

Deferred revenue
1,099

 
1,269

Income taxes payable, net
554

 
221

Total current liabilities
16,756

 
20,693

Long-term debt
3,935

 
3,964

Deferred revenue, non-current
202

 
346

Income taxes payable, non-current
4,677

 
4,358

Deferred income taxes
226

 
151

Other long-term liabilities
2,665

 
2,924

Total liabilities
28,461

 
32,436

Commitments and contingencies
 
 
 
Stockholders’ equity:
 
 
 
Convertible preferred stock, $0.001 par value per share, 100,000 shares authorized; no shares issued and outstanding
0

 
0

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); 691,293 (Class A 296,992, Class B 47,437, Class C 346,864) and 694,790 (Class A 298,263, Class B 47,054, Class C 349,473) shares issued and outstanding
36,307

 
39,609

Accumulated other comprehensive loss
(2,402
)
 
(746
)
Retained earnings
105,131

 
118,237

Total stockholders’ equity
139,036

 
157,100

Total liabilities and stockholders’ equity
$
167,497

 
$
189,536






Alphabet Inc.
CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share amounts; unaudited)
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2016
 
2017
 
2016
 
2017
Revenues
$
22,451

 
$
27,772

 
$
64,208

 
$
78,532

Costs and expenses:
 
 
 
 
 
 
 
Cost of revenues
8,699

 
11,148

 
24,477

 
31,316

Research and development
3,596

 
4,205

 
10,326

 
12,319

Sales and marketing
2,565

 
3,042

 
7,367

 
8,583

General and administrative
1,824

 
1,595

 
4,961

 
5,096

European Commission fine
0

 
0

 
0

 
2,736

Total costs and expenses
16,684

 
19,990

 
47,131

 
60,050

Income from operations
5,767

 
7,782

 
17,077

 
18,482

Other income (expense), net
278

 
197

 
216

 
693

Income before income taxes
6,045

 
7,979

 
17,293

 
19,175

Provision for income taxes
984

 
1,247

 
3,148

 
3,493

Net income
$
5,061

 
$
6,732

 
$
14,145

 
$
15,682

 
 
 
 
 
 
 
 
Basic net income per share of Class A and B common stock and Class C capital stock
$
7.36

 
$
9.71

 
$
20.59

 
$
22.65

Diluted net income per share of Class A and B common stock and Class C capital stock
$
7.25

 
$
9.57

 
$
20.26

 
$
22.30






Alphabet Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions; unaudited)
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2016
 
2017
 
2016
 
2017
Operating activities
 
 
 
 
 
 
 
Net income
$
5,061

 
$
6,732

 
$
14,145

 
$
15,682

Adjustments:
 
 
 
 
 
 
 
Depreciation and impairment of property and equipment
1,377

 
1,561

 
3,803

 
4,272

Amortization and impairment of intangible assets
219

 
200

 
654

 
617

Stock-based compensation expense
1,860

 
1,820

 
4,857

 
5,832

Deferred income taxes
(245
)
 
(296
)
 
119

 
242

(Gain) loss on marketable and non-marketable investments, net
(90
)
 
76

 
204

 
160

Other
26

 
65

 
117

 
99

Changes in assets and liabilities, net of effects of acquisitions:
 
 
 
 
 
 
 
Accounts receivable
(282
)
 
(1,150
)
 
(299
)
 
(719
)
Income taxes, net
473

 
914

 
2,153

 
(865
)
Other assets
(47
)
 
(1,632
)
 
114

 
(2,086
)
Accounts payable
459

 
(61
)
 
238

 
58

Accrued expenses and other liabilities
809

 
1,434

 
338

 
3,121

Accrued revenue share
186

 
176

 
138

 
182

Deferred revenue
39

 
33

 
42

 
228

Net cash provided by operating activities
9,845

 
9,872

 
26,623

 
26,823

Investing activities
 
 
 
 
 
 
 
Purchases of property and equipment
(2,554
)
 
(3,538
)
 
(7,134
)
 
(8,877
)
Proceeds from disposals of property and equipment
197

 
27

 
226

 
81

Purchases of marketable securities
(25,371
)
 
(39,033
)
 
(70,959
)
 
(78,709
)
Maturities and sales of marketable securities
16,590

 
28,350

 
54,379

 
62,588

Purchases of non-marketable investments
(181
)
 
(177
)
 
(862
)
 
(871
)
Maturities and sales of non-marketable investments
91

 
97

 
189

 
215

Cash collateral related to securities lending
(2,065
)
 
0

 
(2,428
)
 
0

Investments in reverse repurchase agreements
500

 
0

 
450

 
0

Acquisitions, net of cash acquired, and purchases of intangible assets
(252
)
 
(130
)
 
(324
)
 
(273
)
Proceeds from collection of notes receivable
0

 
0

 
0

 
1,419

Net cash used in investing activities
(13,045
)
 
(14,404
)
 
(26,463
)
 
(24,427
)
Financing activities
 
 
 
 
 
 
 
Net payments related to stock-based award activities
(815
)
 
(1,018
)
 
(2,425
)
 
(3,111
)
Repurchases of capital stock
0

 
0

 
(3,693
)
 
(2,745
)
Proceeds from issuance of debt, net of costs
2,976

 
2,698

 
8,729

 
2,698

Repayments of debt
(3,250
)
 
(2,706
)
 
(10,051
)
 
(2,762
)
Proceeds from sale of subsidiary shares
0

 
320

 
0

 
800

Net cash used in financing activities
(1,089
)
 
(706
)
 
(7,440
)
 
(5,120
)
Effect of exchange rate changes on cash and cash equivalents
68

 
108

 
137

 
387

Net decrease in cash and cash equivalents
(4,221
)
 
(5,130
)
 
(7,143
)
 
(2,337
)
Cash and cash equivalents at beginning of period
13,627

 
15,711

 
16,549

 
12,918

Cash and cash equivalents at end of period
$
9,406

 
$
10,581

 
$
9,406

 
$
10,581






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 September 30, 2017
Net cash provided by operating activities
$
9,872

Less: purchases of property and equipment
(3,538
)
Free cash flow
$
6,334

Free cash flow: We define free cash flow as net cash provided by operating activities less capital expenditures. There is a limitation to using free cash flow to evaluate Alphabet rather than the GAAP measure of net cash provided by operating activities because free cash flow adjusts for the cash used for capital expenditures during the period and as such, it does not represent the total increase or decrease in the cash balance from operations for the period. We compensate for this limitation by providing information about our capital expenditures on the face of the statement of cash flows and under the caption “Management's Discussion and Analysis of Financial Condition and Results of Operations” in our Quarterly Reports on Form 10-Q and Annual Reports on Form 10-K. We have computed free cash flow using the same consistent method from quarter to quarter and year to year.





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 impact of foreign currency movements, which are not indicative of our core operating results.
 
Three Months Ended September 30, 2017
 
Three Months Ended September 30, 2017
 
YoY
(using Q3'16's FX rates)
 
QoQ
(using Q2'17's FX rates)
EMEA revenues (GAAP)
$
9,097

 
$
9,097

Exclude foreign exchange impact on Q3'17 revenues using Q3'16 rates
(283
)
 
N/A

Exclude foreign exchange impact on Q3'17 revenues using Q2'17 rates
N/A

 
(413
)
Exclude hedging impact recognized in Q3'17
161

 
161

EMEA constant currency revenues (non-GAAP)
$
8,975

 
$
8,845

Prior period EMEA revenues, excluding hedging impact (non-GAAP)
$
7,288

 
$
8,557

EMEA revenue growth (GAAP)
23
%
 
6
%
EMEA constant currency revenue growth (non-GAAP)
23
%
 
3
%
 
 
 
 
APAC revenues (GAAP)
$
4,199

 
$
4,199

Exclude foreign exchange impact on Q3'17 revenues using Q3'16 rates
54

 
N/A

Exclude foreign exchange impact on Q3'17 revenues using Q2'17 rates
N/A

 
(44
)
Exclude hedging impact recognized in Q3'17
18

 
18

APAC constant currency revenues (non-GAAP)
$
4,271

 
$
4,173

Prior period APAC revenues, excluding hedging impact (non-GAAP)
$
3,248

 
$
3,719

APAC revenue growth (GAAP)
29
%
 
13
%
APAC constant currency revenue growth (non-GAAP)
31
%
 
12
%
 
 
 
 
Other Americas revenues (GAAP)
$
1,546

 
$
1,546

Exclude foreign exchange impact on Q3'17 revenues using Q3'16 rates
(26
)
 
N/A

Exclude foreign exchange impact on Q3'17 revenues using Q2'17 rates
N/A

 
(30
)
Exclude hedging impact recognized in Q3'17
12

 
12

Other Americas constant currency revenues (non-GAAP)
$
1,532

 
$
1,528

Prior period Other Americas revenues, excluding hedging impact (non-GAAP)
$
1,161

 
$
1,409

Other Americas revenue growth (GAAP)
33
%
 
9
%
Other Americas constant currency revenue growth (non-GAAP)
32
%
 
8
%
 
 
 
 
United States revenues (GAAP)
$
12,930

 
$
12,930

United States revenue growth (GAAP)
21
%
 
5
%
 
 
 
 
Revenues (GAAP)
$
27,772

 
$
27,772

Constant currency revenues (non-GAAP)
$
27,708

 
$
27,476

Prior period revenues, excluding hedging impact (non-GAAP)
$
22,346

 
$
26,007

Revenue growth (GAAP)
24
%
 
7
%
Constant currency revenue growth (non-GAAP)
24
%
 
6
%
Non-GAAP constant currency revenues and growth: We define non-GAAP constant currency revenues as total revenues excluding the impact 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 impact 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 impact recognized in the prior period.





Other income (expense), net
The following table presents our other income (expense), net, (in millions, unaudited):
 
Three Months Ended
 
September 30,
 
2016
 
2017
Interest income
$
318

 
$
306

Interest expense
(29
)
 
(27
)
Foreign currency exchange losses, net
(123
)
 
(53
)
Gain (loss) on marketable securities, net
50

 
(44
)
Gain (loss) on non-marketable investments, net
40

 
(32
)
Other
22

 
47

Other income (expense), net
$
278

 
$
197






Segment results
The following table presents our revenues, operating income (loss), stock-based compensation, capital expenditures, and depreciation, amortization, and impairment by segment (in millions, unaudited):
 
Three Months Ended
 
September 30,
 
2016
 
2017
Revenues:
 
 
 
Google
$
22,254

 
$
27,470

Other Bets
197

 
302

Total revenues
$
22,451

 
$
27,772

 
 
 
 
Operating income (loss):
 
 
 
Google
$
6,774

 
$
8,744

Other Bets
(861
)
 
(812
)
Reconciling items(1)
(146
)
 
(150
)
Total income from operations
$
5,767

 
$
7,782

 
 
 
 
Stock-based compensation(2):
 
 
 
Google
$
1,629

 
$
1,654

Other Bets
199

 
130

Reconciling items(1)
32

 
36

Total stock-based compensation
$
1,860

 
$
1,820

 
 
 
 
Capital expenditures:
 
 
 
Google
$
2,434

 
$
3,559

Other Bets
324

 
77

Reconciling items(3)
(204
)
 
(98
)
Total capital expenditures
$
2,554

 
$
3,538

 
 
 
 
Depreciation, amortization, and impairment:
 
 
 
Google
$
1,488

 
$
1,667

Other Bets
104

 
94

 Reconciling items(1)
4

 
0

Total depreciation, amortization, and impairment
$
1,596

 
$
1,761

(1) 
Reconciling items are primarily related to corporate administrative costs and other miscellaneous items that are not allocated to individual segments.
(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 accrual basis while total capital expenditures shown on the Consolidated Statements of Cash Flows are on cash basis and other miscellaneous differences.


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