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Google reported financial results for the quarter ended September 30, 2013. Before we jump into the results, two quick factoids. As of September 30, 2013, Google is sitting on $56.52 billion of cash, cash equivalents, and marketable securities. The company employs 46,421 full-time employees (42,162 in Google and 4,259 in Motorola Mobile) compared to 44,777 full-time employees (40,178 in Google and 4,599 Motorola Mobile) as of June 30, 2013.

Larry Page (CEO, Google): Google had another strong quarter with $14.9 billion in revenue and great product progress. We are closing in on our goal of a beautiful, simple, and intuitive experience regardless of your device.

Q3 Financial Summary

Google reported consolidated revenues of $14.89 billion for the quarter ended September 30, 2013, an increase of 12% compared to the third quarter of 2012. In the third quarter of 2013, TAC totaled $2.97 billion, or 24% of advertising revenues.

Operating income in the third quarter of 2013 was $3.44 billion, or 23% of revenues. This compares to operating income of $2.74 billion, or 21% of revenues, in the third quarter of 2012.

Net income including net income from discontinued operations in the third quarter of 2013 was $2.97 billion, compared to $2.18 billion in the third quarter of 2012.

Earnings per share including impact from net income from discontinued operations in the third quarter of 2013 was $8.75 on 339 million diluted shares outstanding, compared to $6.53 in the third quarter of 2012 on 333 million diluted shares outstanding.

Q3 Financial Highlights

Revenues and other information – On a consolidated basis, Google revenues for the quarter ended September 30, 2013 were $14.89 billion, an increase of 12% compared to the third quarter of 2012.

Google Segment Revenues – Google segment revenues were $13.77 billion, or 92% of consolidated revenues, in the third quarter of 2013, representing a 19% increase over third quarter 2012 Google segment revenues of $11.53 billion.

  • Google Sites Revenues – Google-owned sites generated segment revenues of $9.39 billion, or 68% of total Google segment revenues, in the third quarter of 2013. This represents a 22% increase over third quarter 2012 Google sites segment revenues of $7.73 billion.
  • Google Network Revenues – Google’s partner sites generated segment revenues of $3.15 billion, or 23% of total Google segment revenues, in the third quarter of 2013, compared to $3.13 billion of Google network segment revenues in the third quarter of 2012.
  • Other Google Revenues – Other revenues from the Google segment were $1.23 billion, or 9% of total Google segment revenues, in the third quarter of 2013. This represents an 85% increase over third quarter 2012 other Google segment revenues of $666 million.

Google Segment International Revenues – Google segment revenues from outside of the United States totaled $7.67 billion, representing 56% of total Google segment revenues in the third quarter of 2013, compared to 55% in the second quarter of 2013 and 53% in the third quarter of 2012.

  • Google segment revenues from the United Kingdom totaled $1.39 billion, representing 10% of total Google segment revenues in the third quarter of 2013, compared to 11% in the third quarter of 2012.

Paid Clicks – Aggregate paid clicks, which include clicks related to ads served on Google sites and the sites of its network members, increased approximately 26% over the third quarter of 2012 and increased approximately 8% over the second quarter of 2013.

Cost-Per-Click – Average cost-per-click, which includes clicks related to ads served on Google sites and its network members, decreased approximately 8% over the third quarter of 2012 and decreased approximately 4% over the second quarter of 2013.

TAC – Traffic acquisition costs, the portion of revenues shared with Google’s partners, increased to $2.97 billion in the third quarter of 2013, compared to $2.77 billion in the third quarter of 2012. TAC as a percentage of advertising revenues was 24% in the third quarter of 2013, compared to 26% in the third quarter of 2012.

Motorola Mobile Segment Revenues – Motorola Mobile segment revenues were $1.18 billion, or 8% of consolidated revenues in the third quarter of 2013, compared to $1.78 billion, or 13% of consolidated revenues in the third quarter of 2012.

Other Cost of Revenues – Other cost of revenues, which is comprised primarily of manufacturing and inventory-related costs, data center operational expenses, amortization of intangible assets, and content acquisition costs, increased to $3.44 billion, or 23% of revenues, in the third quarter of 2013, compared to $3.19 billion, or 24% of revenues, in the third quarter of 2012.

Operating Expenses – Operating expenses, other than cost of revenues, were $5.04 billion in the third quarter of 2013, or 34% of revenues, compared to $4.61 billion in the third quarter of 2012, or 35% of revenues.

Amortization Expenses – Amortization expenses of acquisition-related intangible assets were $281 million for the third quarter of 2013, compared to $287 million in the third quarter of 2012. Of the $281 million, $153 million was as a result of the acquisition of Motorola, of which $116 million is included in Google segment results and $37 million is included in Motorola Mobile segment results.

Stock-Based Compensation (SBC) – In the third quarter of 2013, the total charge related to SBC was $886 million, compared to $750 million in the third quarter of 2012. Google estimates SBC charges for grants to employees prior to September 30, 2013 to be approximately $3.29 billion for 2013.

Operating Income – On a consolidated basis,  operating income in the third quarter of 2013 was $3.44 billion, or 23% of revenues. This compares to operating income of $2.74 billion, or 21% of revenues, in the third quarter of 2012. 

Google Segment Operating Income – Google segment operating income in the third quarter of 2013 was $4.64 billion, or 34% of Google segment revenues. This compares to segment operating income of $3.95 billion in the third quarter of 2012, or 34% of Google segment revenues.

  • Motorola Mobile Segment Operating Loss – Motorola Mobile segment operating loss in the third quarter of 2013 was $248 million, or -21% of Motorola Mobile segment revenues. This compares to segment operating loss of $192 million, or -11% of Motorola Mobile segment revenues in the third quarter of 2012.

Interest and Other Income, Net – Interest and other income, net, was $24 million in the third quarter of 2013, compared to $65 million in the third quarter of 2012.

Income Taxes – Google’s effective tax rate was 15% for the third quarter of 2013.

Net Income – Consolidated net income in the third quarter of 2013 was $2.97 billion, compared to $2.18 billion in the third quarter of 2012. EPS in the third quarter of 2013 was $8.75 on 339 million diluted shares outstanding, compared to $6.53 in the third quarter of 2012 on 333 million diluted shares outstanding.

Cash Flow and Capital Expenditures – Net cash provided by operating activities in the third quarter of 2013 totaled $5.08 billion, compared to $4.0 billion in the third quarter of 2012. In the third quarter of 2013, capital expenditures were $2.29 billion, the majority of which was for production equipment, data-center construction, and real estate purchases.

[Image couretesy: Google]