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Alphabet (GOOG) Posts Q4 EPS of $8.67, Tops Views

February 1, 2016 4:02 PM EST

(Updated - February 1, 2016 4:03 PM EST)

Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) reported Q4 EPS of $8.67, versus the analyst estimate of $8.08. Revenue for the quarter came in at $21.33 billion versus the consensus estimate of $20.77 billion.

"Our very strong revenue growth in Q4 reflects the vibrancy of our business, driven by mobile search as well as YouTube and programmatic advertising, all areas in which we’ve been investing for many years. We’re excited about the opportunities we have across Google and Other Bets to use technology to improve the lives of billions of people,” said Ruth Porat, CFO of Alphabet.

The following summarizes our full year segment results where Google is presented as a single segment and all other Alphabet businesses are combined as Other Bets (in millions; unaudited). For additional information on segment results, please see the tables captioned "Segment results" included at the end of this release.

Twelve Months Ended
December 31, 2014
Twelve Months Ended
December 31, 2015
Google segment revenues$65,674$74,541
Google operating income$19,011$23,425
Other Bets revenues$327$448
Other Bets operating loss($1,942)($3,567)

Q4 2015 consolidated financial summary

Revenues (in millions; unaudited):

Three Months Ended
December 31, 2015
Change from Q4 2014 to Q4 2015 (YoY)Change from Q3 2015 to Q4 2015 (QoQ)
Revenues$21,32918%14%
Constant currency revenues (YoY)$22,33024%N/A
Constant currency revenues (QoQ)$21,208N/A15%

Our revenues and constant currency revenues are reconciled in the financial tables following this release.

Costs and expenses

Cost of revenues, operating expenses, SBC expense, and depreciation, amortization, and impairment charges (in millions; unaudited):

Three Months Ended
December 31, 2014
Three Months Ended
December 31, 2015
Cost of revenues$6,921 $8,188
Cost of revenues as % of revenues38%38%
Operating expenses (other than cost of revenues)$6,783 $7,761
Operating expenses as % of revenues37%36%
SBC expense*$1,201 $1,436
Tax benefit related to SBC expense$(255) $(316)
Depreciation, amortization, and impairment charges$1,267 $1,404
*Excludes the impact from discontinued operations for the three months ended December 31, 2014 and expense for awards accounted for as stock-based compensation that will ultimately settle in cash.

Traffic acquisition costs (TAC) and operating income

TAC to Google Network Members and distribution partners, operating income, and SBC expense (in millions; unaudited):

Three Months Ended
December 31, 2014
Three Months Ended
December 31, 2015
TAC to Google Network Members$2,656 $2,864
TAC to Google Network Members as % of Google Network Members' revenues68%69%
TAC to distribution partners$968 $1,191
TAC to distribution partners as % of Google website revenues8%8%
Total TAC$3,624 $4,055
Total TAC as % of Google advertising revenues22%21%
Three Months Ended December 31, 2014 Three Months Ended December 31, 2015
Operating income, excluding SBC expense$6,301 $8,043
SBC expense$1,078 $1,271
Operating income$5,223

$6,772

Q4 2015 financial highlights
The following summarizes our consolidated financial results for the quarters ended December 31, 2014 and2015 (in millions, except for per share information; unaudited):
Three Months Ended December 31, 2014
Three Months Ended December 31, 2015
Revenues
$18,103
$21,329
Increase in revenues year over year
15
%
18
%
Increase in constant currency revenues year over year
18
%
24
%
GAAP operating income
$4,399
$5,380
GAAP operating margin
24
%
25
%
Non-GAAP operating income
$5,600
$6,816
Non-GAAP operating margin
31
%
32
%
GAAP net income*
$4,675
$4,923
Non-GAAP net income
$4,654
$6,043
GAAP diluted EPS for Class A and B common stock and Class C capital stock*
$6.79
$7.06
Non-GAAP diluted EPS for Class A and B common stock and Class C capital stock
$6.76
$8.67
Diluted shares (in thousands)
688,491
697,025
*For the three months ended December 31, 2014, GAAP net income and diluted EPS includes net income from discontinued operations.
Operating income, operating margin, net income, and earnings per share (EPS) are reported on a GAAP and non-GAAP basis. Non-GAAP operating income and non-GAAP operating margin exclude stock-based compensation (SBC) expense from continuing operations. Non-GAAP net income and non-GAAP diluted EPS exclude SBC expense from continuing operations, net of the related tax benefits, as well as the impact from net income from discontinued operations. These non-GAAP measures, as well as free cash flow, an alternative non-GAAP measure of liquidity, and non-GAAP constant currency revenues and growth, are described and reconciled to the corresponding GAAP measures at the end of this release.
The following summarizes our full year segment results where Google is presented as a single segment and all other Alphabet businesses are combined as Other Bets (in millions; unaudited). For additional information on segment results, please see the tables captioned "Segment results" included at the end of this release.
Twelve Months Ended December 31, 2014
Twelve Months Ended December 31, 2015
Google segment revenues
$65,674
$74,541
Google operating income
$19,011
$23,425
Other Bets revenues
$327
$448
Other Bets operating loss
($1,942
)
($3,567
)


Q4 2015 consolidated financial summary
Revenues (in millions; unaudited):
Three Months Ended December 31, 2015
Change from Q4 2014 to Q4 2015 (YoY)
Change from Q3 2015 to Q4 2015 (QoQ)
Revenues
$21,329
18
%
14
%
Constant currency revenues (YoY)
$22,330
24
%
N/A
Constant currency revenues (QoQ)
$21,208
N/A
15
%
Our revenues and constant currency revenues are reconciled in the financial tables following this release.
Costs and expenses
Cost of revenues, operating expenses, SBC expense, and depreciation, amortization, and impairment charges (in millions; unaudited):
Three Months Ended December 31, 2014
Three Months Ended December 31, 2015
Cost of revenues
$6,921
$8,188
Cost of revenues as % of revenues
38
%
38
%
Operating expenses (other than cost of revenues)
$6,783
$7,761
Operating expenses as % of revenues
37
%
36
%
SBC expense*
$1,201
$1,436
Tax benefit related to SBC expense
($255
)
($316
)
Depreciation, amortization, and impairment charges
$1,267
$1,404
*Excludes the impact from discontinued operations for the three months ended December 31, 2014 and expense for awards accounted for as stock-based compensation that will ultimately settle in cash.
Supplemental information (in millions, except for headcount data; unaudited)
Three Months Ended December 31, 2014
Three Months Ended December 31, 2015
Cash, cash equivalents, and marketable securities
$64,395
$73,066
Net cash provided by operating activities
$6,364
$6,415
Capital expenditures
$3,551
$2,100
Free cash flow
$2,813
$4,315
Effective tax rate (ETR)*
18
%
5
%
Headcount
53,600
61,814
*For Q4 2015, our effective tax rate reflects impact of certain one-time items in the U.S., specifically the resolution of a multi-year audit with an ETR impact of 9%, as well as the full year impact of the R&D tax credit with an ETR impact of 8%.


Q4 2015 Google segment summary
Revenues and monetization
Google segment revenues by source (in millions; unaudited):
Three Months Ended December 31, 2014
Three Months Ended December 31, 2015
Change from Q4 2014 to Q4 2015 (YoY)
Google segment
Google websites
$12,429
$14,936
20
%
Google Network Members' websites
3,880
4,142
7
%
Google advertising revenues*
16,309
19,078
17
%
Google other revenues
1,688
2,100
24
%
Google segment revenues
$17,997
$21,178
18
%
*Advertising revenues are generally reported on a gross basis, consistent with GAAP, without deducting TAC.
Paid clicks and cost-per-click information (unaudited):
Change from Q4 2014 to Q4 2015 (YoY)
Change from Q3 2015 to Q4 2015 (QoQ)
Aggregate paid clicks
31
%
17
%
Paid clicks on Google websites
40
%
22
%
Paid clicks on Google Network Members' websites
2
%
1
%
Aggregate cost-per-click
(13
)%
(5
)%
Cost-per-click on Google websites
(16
)%
(8
)%
Cost-per-click on Google Network Members' websites
(8
)%
7
%
Traffic acquisition costs (TAC) and operating income
TAC to Google Network Members and distribution partners, operating income, and SBC expense (in millions; unaudited):
Three Months Ended December 31, 2014
Three Months Ended December 31, 2015
TAC to Google Network Members
$2,656
$2,864
TAC to Google Network Members as % of Google Network Members' revenues
68
%
69
%
TAC to distribution partners
$968
$1,191
TAC to distribution partners as % of Google website revenues
8
%
8
%
Total TAC
$3,624
$4,055
Total TAC as % of Google advertising revenues
22
%
21
%
Three Months Ended December 31, 2014
Three Months Ended December 31, 2015
Operating income, excluding SBC expense
$6,301
$8,043
SBC expense
$1,078
$1,271
Operating income
$5,223
$6,772
Supplemental information (in millions; unaudited)
Three Months Ended December 31, 2014
Three Months Ended December 31, 2015
Capital expenditures
$3,755
$1,781
Depreciation, amortization, and impairment
$1,214
$1,313


Full year 2015 Other Bets summary
Revenues and operating results
Other Bets revenues, operating loss, and SBC expense (in millions; unaudited):
Twelve Months Ended December 31, 2014
Twelve Months Ended December 31, 2015
Other Bets revenues
$327
$448
Operating loss, excluding SBC expense
($1,595
)
($3,069
)
SBC expense
$347
$498
Operating loss
($1,942
)
($3,567
)
Supplemental information (in millions; unaudited)
Twelve Months Ended December 31, 2014
Twelve Months Ended December 31, 2015
Capital expenditures
$501
$869
Depreciation, amortization, and impairment
$148
$203
Stock repurchase
During the fourth quarter of 2015, we repurchased 2.4 million shares of Alphabet stock for an aggregate amount of $1.8 billion. In January 2016, the board of directors of Alphabet authorized the company to repurchase an additional 514 thousand shares, with a total remaining authorization for future purchases of approximately $3.7 billion. The authorization has no expiration date.

For earnings history and earnings-related data on Alphabet (GOOG) click here.



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