Google Reports Fourth Quarter And Fiscal Year 2013 Results

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Google reported financial results for the quarter and fiscal year ended December 31, 2013.

Larry Page (CEO, Google): We made great progress across a wide range of product improvements and business goals. I’m also very excited about improving people’s lives even more with continued hard work on our user experiences. 

Q4 Financial Summary

Google reported consolidated revenues of $16.86 billion for the quarter ended December 31, 2013, an increase of 17% compared to the fourth quarter of 2012. In the fourth quarter of 2013, traffic acquisition costs (TAC) totaled $3.31 billion, or 24% of advertising revenues. 

Operating income in the fourth quarter of 2013 was $3.92 billion, or 23% of revenues. This compares to operating income of $3.39 billion, or 24% of revenues, in the fourth quarter of 2012.

Net income, including net loss from discontinued operations, in the fourth quarter of 2013 was $3.38 billion, compared to $2.89 billion in the fourth quarter of 2012.

EPS, including impact from net loss from discontinued operations, in the fourth quarter of 2013 was $9.90 on 341 million diluted shares outstanding, compared to $8.62 in the fourth quarter of 2012 on 335 million diluted shares outstanding.

Q4 Financial Highlights

Revenues and other information – On a consolidated basis, Google revenues for the quarter ended December 31, 2013 were $16.86 billion, an increase of 17% compared to the fourth quarter of 2012.

Google Segment Revenues – Google segment revenues were $15.72 billion, or 93% of consolidated revenues, in the fourth quarter of 2013, representing a 22% increase over fourth quarter 2012 Google segment revenues of $12.91 billion.

Google Sites Revenues – Google-owned sites generated segment revenues of $10.55 billion, or 67% of total Google segment revenues, in the fourth quarter of 2013. This represents a 22% increase over fourth quarter 2012 Google sites segment revenues of $8.64 billion.

Google Network Revenues – Google’s partner sites generated segment revenues of $3.52 billion, or 23% of total Google segment revenues, in the fourth quarter of 2013. This represents a 3% increase over fourth quarter 2012 Google network segment revenues of $3.44 billion.

Other Google Revenues – Other revenues from the Google segment were $1.65 billion, or 10% of total Google segment revenues, in the fourth quarter of 2013. This represents a 99% increase over fourth quarter 2012 other Google segment revenues of $829 million.

Google Segment International Revenues – Google segment revenues from outside of the United States totaled $8.77 billion, representing 56% of total Google segment revenues in the fourth quarter of 2013, compared to 56% in the third quarter of 2013 and 54% in the fourth quarter of 2012.

Google segment revenues from the United Kingdom totaled $1.50 billion, representing 10% of total Google segment revenues in the fourth quarter of 2013, compared to 10% in the fourth 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 31% over the fourth quarter of 2012 and increased approximately 13% over the third quarter of 2013.

Cost-Per-Click – Average cost-per-click, which includes clicks related to ads served on Google sites and the sites of its Network members, decreased approximately 11% over the fourth quarter of 2012 and decreased approximately 2% over the third quarter of 2013.

TAC – Traffic acquisition costs, the portion of revenues shared with Google’s partners, increased to $3.31 billion in the fourth quarter of 2013, compared to $3.08 billion in the fourth quarter of 2012. TAC as a percentage of advertising revenues was 24% in the fourth quarter of 2013, compared to 25% in the fourth quarter of 2012.

Motorola Mobile Segment Revenues – Motorola Mobile segment revenues were $1.24 billion, or 7% of consolidated revenues in the fourth quarter of 2013, compared to $1.51 billion, or 11% of consolidated revenues in the fourth 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 $4.13 billion, or 24% of revenues, in the fourth quarter of 2013, compared to $3.14 billion, or 22% of revenues, in the fourth quarter of 2012.

Operating Expenses – Operating expenses, other than cost of revenues, were $5.50 billion in the fourth quarter of 2013, or 33% of revenues, compared to $4.81 billion in the fourth quarter of 2012, or 33% of revenues.

Amortization Expenses – Amortization expenses of acquisition-related intangible assets were $279 million for the fourth quarter of 2013, compared to $289 million in the fourth quarter of 2012. Of the $279 million, $153 million was as a result of the acquisition of Motorola, of which $116 million was included in Google segment results and $37 million was included in Motorola Mobile segment results.

Operating Income – On a consolidated basis, operating income in the fourth quarter of 2013 was $3.92 billion, or 23% of revenues. This compares to operating income of $3.39 billion, or 24% of revenues, in the fourth quarter of 2012.   

Google Segment Operating Income – Google segment operating income in the fourth quarter of 2013 was $5.32 billion, or 34% of Google segment revenues. This compares to segment operating income of $4.42 billion in the fourth quarter of 2012, or 34% of Google segment revenues.

Motorola Mobile Segment Operating Loss – Motorola Mobile segment operating loss in the fourth quarter of 2013 was $384 million, or -31% of Motorola Mobile segment revenues. This compares to segment operating loss of $152 million, or -10% of Motorola Mobile segment revenues in the fourth quarter of 2012.

Interest and Other Income, Net – Interest and other income, net, was $125 million in the fourth quarter of 2013, compared to $152 million in the fourth quarter of 2012.

Income Taxes – Google’s effective tax rate was 16% for the fourth quarter of 2013.

Net Income – Consolidated net income in the fourth quarter of 2013 was $3.38 billion, compared to $2.89 billion in the fourth quarter of 2012.   

Cash Flow and Capital Expenditures – Net cash provided by operating activities in the fourth quarter of 2013 totaled $5.24 billion, compared to $4.67 billion in the fourth quarter of 2012. In the fourth quarter of 2013, capital expenditures were $2.26 billion, the majority of which was for production equipment, data-center construction, and real estate purchases. As always, Google says it expects to continue to make significant capital expenditures.

Cash – As of December 31, 2013, cash, cash equivalents, and marketable securities were $58.72 billion.

Headcount – On a worldwide basis, Google employed 47,756 full-time employees (43,862 in Google and 3,894 in Motorola Mobile) as of December 31, 2013, compared to 46,421 full-time employees (42,162 in Google and 4,259 in Motorola Mobile) as of September 30, 2013.

The Google board has approved a distribution of shares of the Class C capital stock as dividend to stockholders with a dividend record date of March 27, 2014 and a dividend payment date of April 2, 2014.

[Image courtesy: Google]