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Google Announces Record Revenues for the First Quarter of Fiscal 2005
Business Wire - April 21, 2005 16:01

MOUNTAIN VIEW, Calif., Apr 21, 2005 (BUSINESS WIRE) -- Google Inc. (Nasdaq:GOOG) today announced financial results for the quarter ended March 31, 2005.

"This was a very strong quarter for Google. We continue to execute well and we have been able to take full advantage of the growth in online advertising," said Eric Schmidt, Google chief executive officer. "In addition, we performed well across our operations with our engineering and product teams delivering dozens of new products and features for Google users around the world."

-- Google reported record revenues of $1.256 billion for the quarter ended March 31, 2005, up 93% year over year. Google reports its revenues, consistent with GAAP, on a gross basis without deducting traffic acquisition costs or TAC, the portion of revenues shared with partners.

-- Income from operations, on a GAAP basis, was $443 million, or 35.2% of revenues for the quarter ended March 31, 2005 compared to $155 million or 23.8% of revenues for the first quarter of 2004.

-- Income from operations includes a $49 million non-cash, stock-based compensation charge compared to a $76 million non-cash, stock-based compensation charge in the prior year's first quarter.

-- Net income on a GAAP basis for the quarter ended March 31, 2005 was computed based on the following income statement or condensed income statement line items. Revenues of $1.256 billion less TAC of $462 million, less both other costs and expenses before stock-based compensation of $303 million and stock-based compensation of $49 million, increased by other income of $14 million and then reduced by a provision for income taxes of $87 million.

-- Net income on a GAAP basis in the first quarter of 2005 was $369 million or $1.29 per share on a basis of a diluted 286.6 million weighted average shares outstanding. This compared to net income for the first quarter of 2004 of $64 million or $0.24 per share on a basis of a diluted 264.2 million weighted average shares outstanding.
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-- Some Wall Street analysts use non-GAAP measures to analyze our operating results. For instance, they may subtract TAC of $462 million from revenues of $1.256 billion to arrive at a net revenues amount. Also, certain analysts may arrive at net income before stock-based compensation by subtracting traffic acquisition costs of $462 million, other costs and expenses before stock-based compensation of $303 million, adding back other income of $14 million and subtracting our provision for income taxes of $87 million from revenues of $1.256 billion.

-- Net cash provided by operating activities for the three months ended March 31, 2005 totaled $530 million as compared to $208 million for the first quarter of 2004, an increase of 155%.
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-- Adjusted EBITDA, which is an alternative measure of liquidity to GAAP net cash provided by operating activities (and is defined as income before interest, taxes, depreciation, amortization, the non-cash stock-based compensation charge and in-process R&D), increased by $293 million or 115% to $ 548 million (or 44% of revenues) in the first quarter of 2005 from $255 million in the first quarter of 2004 (or 39% of revenues).

Financial Highlights

Revenues -- Revenues in the quarter totaled a record $1.256 billion, representing a 22% increase over the fourth quarter of 2004 and a 93% year-over-year increase. This revenue increase reflects strong traffic and monetization growth in the quarter as well as advertisers' growing recognition of the Internet as an effective advertising medium.

Google-Sites Revenues -- Google-owned sites generated $657
million or 52% of total revenues. This represents an increase of
116% over the first quarter of 2004.

The Google Network -- Revenues generated on Google's partner
sites, through AdSense programs, contributed $584 million, or 47%
of total revenues, a 75% increase over the Network revenues
generated in the same quarter last year.

TAC -- Traffic Acquisition Costs, the portion of revenues shared with Google's partners, increased to $462 million. This compares to total payments to partners of $271 million in the first quarter of 2004.

Income from Operations -- Income from operations in the first quarter, on a GAAP basis, was $443 million or 35.2% of revenues, and included a non-cash charge of $49 million for stock-based compensation. This compares to income from operations of $155 million or 23.8% of revenues in the first quarter of 2004, when the stock-based compensation charge was $76 million. This improvement in operating margins was primarily due to decreases in both stock-based compensation expense and TAC as a percentage of revenues.

Income Taxes -- Google recorded a provision for income taxes of $87 million in the first quarter of 2005, an effective tax rate of 19% as compared to a $92 million provision for income taxes and a 59% effective tax rate in the first quarter of 2004. The provision for income taxes in this year's first quarter was reduced by $49 million related to ISO disqualifying dispositions. The effective tax rate for the remainder of 2005 is expected to be less than 30%. However if future revenues recognized by Google's Irish subsidiary are not as proportionately great as expected, Google's effective tax rate will be higher than expected.

Net Income -- Net income on a GAAP basis increased to $369 million or 29.4% of revenues in the first quarter of 2005 as compared to $64 million or 9.8% of revenues in the first quarter of 2004. Earnings on a diluted per share basis were $1.29 in the first quarter of 2005 as compared to $0.24 in the first quarter of 2004.

Cash Flow -- Net cash provided by operating activities increased 155% to $530 million for the three months ended March 31, 2005 from $208 million in the three months ended March 31, 2004. Free cash flow is an alternative non-GAAP measure of liquidity to GAAP net cash provided by operating activities and is calculated as operating cash flows less capital expenditures. Capital expenditures were $142 million in the three months ended March 31, 2005 as compared to $86 million in the three months ended March 31, 2004. Free cash flow for the three months ended March 31, 2005 totaled approximately $387 million as compared to $122 million for the same period in 2004, an increase of 217%.

Adjusted EBITDA -- Adjusted EBITDA is defined as income before interest, taxes, depreciation, amortization, the non-cash stock-based compensation charge and in-process R&D. It is another alternative measure of liquidity to GAAP net cash provided by operating activities. Adjusted EBITDA increased to approximately $548 million in Q1 2005 (or 44% of revenues) from $255 million (or 39% of revenues) in Q1 2004.

The reconciliations of free cash flow and adjusted EBITDA to net cash provided by operating activities, the GAAP measure of liquidity, is set forth at the back of this release.

Cash -- As of March 31, 2005, Google had a cash, cash equivalents and marketable securities balance of $2.507 billion.

On a worldwide basis, Google employed 3,482 full time employees as of March 31, 2005, up from 3,021 as of December 31, 2004.

slipondajimmy

imagine that. ... And they still need to go after a site like froogles.com

ZuraX

Why shouldnt they? Its violating their trademark...

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slipondajimmy

well there is another thread to argue that

nametrekker

You can't argue with Google's ability to beat the market. Yahoo too. And Motorola and Nokia this week. So much for the rising tech bear - looks bully to me.

Digitalman

I thought google made more money from adsense than adwords.
But looks like the make more with the search engine than all the million websites running adsense.

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brianfast

froogles is a exact copy of froogle pretty much. If I were google I would sue

dpk87

Google reported record revenues of $1.256 billion

WOW! thats alot of revenue

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