UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Quarterly Period Ended June 30, 2004
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number: 000-50726
Google Inc.
(Exact name of registrant as specified in its charter)
| Delaware | 77-0493581 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) |
1600 Amphitheatre Parkway
Mountain View, CA 94043
(Address of principal executive offices)
(Zip code)
(650) 623-4000
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES ¨ NO x
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act) YES ¨ NO x
At July 31, 2004, the number of shares outstanding of the registrant’s Class A common stock, $0.001 par value, Class B common stock, $0.001 par value, and preferred stock was 12,398,854, 162,861,743 and 79,099,884, respectively.
Form 10-Q
For the Quarter Ended June 30, 2004
INDEX
| Page No. | ||||
| PART I. FINANCIAL INFORMATION | ||||
| Item 1 |
||||
| Consolidated Balance Sheets—June 30, 2004 (unaudited) and December 31, 2003 |
1 | |||
| Consolidated Statements of Income—Three and Six Months Ended June 30, 2004 and 2003 (unaudited) |
2 | |||
| Consolidated Statements of Cash Flows—Six Months Ended June 30, 2004 and 2003 (unaudited) |
3 | |||
| 4 | ||||
| Item 2 |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
17 | ||
| Item 3 |
50 | |||
| Item 4 |
51 | |||
| PART II. OTHER INFORMATION | ||||
| Item 1 |
53 | |||
| Item 2 |
Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities |
53 | ||
| Item 3 |
53 | |||
| Item 4 |
53 | |||
| Item 5 |
54 | |||
| Item 6 |
54 | |||
| 55 | ||||
| 56 | ||||
CONSOLIDATED BALANCE SHEETS
(in thousands, except par value)
| As of 2003 |
As of June 30, 2004 |
|||||||
| (unaudited) | ||||||||
| Assets |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 148,995 | $ | 254,698 | ||||
| Short-term investments |
185,723 | 293,989 | ||||||
| Accounts receivable, net of allowance of $4,670 and $5,611 |
154,690 | 191,187 | ||||||
| Income taxes receivable |
— | 45,047 | ||||||
| Deferred income taxes |
22,105 | 30,334 | ||||||
| Prepaid revenue share, expenses and other assets |
48,721 | 66,634 | ||||||
| Total current assets |
560,234 | 881,889 | ||||||
| Property and equipment, net |
188,255 | 320,718 | ||||||
| Goodwill |
87,442 | 87,442 | ||||||
| Intangible assets, net |
18,114 | 16,313 | ||||||
| Prepaid revenue share, expenses and other assets, non-current |
17,413 | 21,660 | ||||||
| Total assets |
$ | 871,458 | $ | 1,328,022 | ||||
| Liabilities, Redeemable Convertible Preferred Stock Warrant and Stockholders’ Equity |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 46,175 | $ | 61,830 | ||||
| Accrued compensation and benefits |
33,522 | 33,931 | ||||||
| Accrued expenses and other current liabilities |
26,411 | 41,054 | ||||||
| Accrued revenue share |
88,672 | 93,435 | ||||||
| Deferred revenue |
15,346 | 18,256 | ||||||
| Income taxes payable |
20,705 | — | ||||||
| Current portion of equipment leases |
4,621 | 3,751 | ||||||
| Total current liabilities |
235,452 | 252,257 | ||||||
| Long-term portion of equipment leases |
1,988 | 456 | ||||||
| Deferred revenue, long-term |
5,014 | 6,023 | ||||||
| Liability for stock options exercised early, long-term |
6,341 | 8,576 | ||||||
| Deferred income taxes |
18,510 | 42,199 | ||||||
| Other long-term liabilities |
1,512 | 1,512 | ||||||
| Commitments and contingencies |
||||||||
| Redeemable convertible preferred stock warrant |
13,871 | — | ||||||
| Stockholders’ equity: |
||||||||
| Convertible preferred stock, $0.001 par value, issuable in series: 164,782 and 164,782 shares authorized at December 31, 2003 and June 30, 2004, 71,662 and 79,099 shares issued and outstanding at December 31, 2003 and June 30, 2004, liquidation preference of $40,815 and $62,458 at December 31, 2003 and June 30, 2004 |
44,346 | 79,860 | ||||||
| Class A and Class B common stock, $0.001 par value: 700,000 shares authorized, 160,866 and 165,012 shares issued and outstanding, excluding 11,987 and 10,203 shares subject to repurchase at December 31, 2003 and June 30, 2004 |
161 | 165 | ||||||
| Additional paid-in capital |
725,219 | 956,882 | ||||||
| Note receivable from officer/stockholder |
(4,300 | ) | — | |||||
| Deferred stock-based compensation |
(369,668 | ) | (352,815 | ) | ||||
| Accumulated other comprehensive income |
1,660 | (1,481 | ) | |||||
| Retained earnings |
191,352 | 334,388 | ||||||
| Total stockholders’ equity |
588,770 | 1,016,999 | ||||||
| Total liabilities, redeemable convertible preferred stock warrant and stockholders’ equity |
$ | 871,458 | $ | 1,328,022 | ||||
See accompanying notes.
1
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
| Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||
| 2003 |
2004 |
2003 |
2004 |
|||||||||||
| (unaudited) | ||||||||||||||
| Revenues |
$ | 311,199 | $ | 700,212 | $ | 559,817 | $ | 1,351,835 | ||||||
| Costs and expenses: |
||||||||||||||
| Cost of revenues |
117,401 | 326,377 | 204,596 | 641,775 | ||||||||||
| Research and development |
17,492 | 45,762 | 29,997 | 80,781 | ||||||||||
| Sales and marketing |
24,822 | 56,777 | 42,589 | 104,681 | ||||||||||
| General and administrative |
12,535 | 25,577 | 22,562 | 47,083 | ||||||||||
| Stock-based compensation(1) |
34,165 | 74,761 | 70,583 | 151,234 | ||||||||||
| Total costs and expenses |
206,415 | 529,254 | 370,327 | 1,025,554 | ||||||||||
| Income from operations |
104,784 | 170,958 | 189,490 | 326,281 | ||||||||||
| Interest income (expense) and other, net |
766 | (1,498 | ) | 719 | (1,198 | ) | ||||||||
| Income before income taxes |
105,550 | 169,460 | 190,209 | 325,083 | ||||||||||
| Provision for income taxes |
73,382 | 90,397 | 132,241 | 182,047 | ||||||||||
| Net income |
$ | 32,168 | $ | 79,063 | $ | 57,968 | $ | 143,036 | ||||||
| Net income per share: |
||||||||||||||
| Basic |
$ | 0.24 | $ | 0.51 | $ | 0.44 | $ | 0.93 | ||||||
| Diluted |
$ | 0.12 | $ | 0.30 | $ | 0.23 | $ | 0.54 | ||||||
| Number of shares used in per share calculations: |
||||||||||||||
| Basic |
135,710 | 155,441 | 131,525 | 153,263 | ||||||||||
| Diluted |
257,361 | 266,263 | 253,024 | 265,223 | ||||||||||
(1) Stock-based compensation is allocated as follows (see Note 1): |
| |||||||||||||
| Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||
| 2003 |
2004 |
2003 |
2004 |
|||||||||||
| (unaudited) | ||||||||||||||
| Cost of revenues |
$ | 1,361 | $ | 2,546 | $ | 2,813 | $ | 7,622 | ||||||
| Research and development |
18,814 | 45,836 | 38,237 | 92,102 | ||||||||||
| Sales and marketing |
7,093 | 13,431 | 14,711 | 27,576 | ||||||||||
| General and administrative |
6,897 | 12,948 | 14,822 | 23,934 | ||||||||||
| $ | 34,165 | $ | 74,761 | $ | 70,583 | $ | 151,234 | |||||||
See accompanying notes.
2
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
| Six Months Ended June 30, |
||||||||
| 2003 |
2004 |
|||||||
| (unaudited) | ||||||||
| Operating activities |
||||||||
| Net income |
$ | 57,968 | $ | 143,036 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Depreciation and amortization of property and equipment |
15,885 | 49,824 | ||||||
| Amortization of warrants |
4,732 | 62 | ||||||
| Amortization of intangibles |
2,114 | 4,801 | ||||||
| In-process research and development |
— | 950 | ||||||
| Stock-based compensation |
70,583 | 151,234 | ||||||
| Changes in assets and liabilities, net of effects of acquisitions: |
||||||||
| Accounts receivable |
(34,174 | ) | (36,497 | ) | ||||
| Income taxes, net |
16,619 | 42,950 | ||||||
| Prepaid revenue share, expenses and other assets |
(13,750 | ) | (21,946 | ) | ||||
| Accounts payable |
10,727 | 15,642 | ||||||
| Accrued expenses and other liabilities |
6,232 | 11,866 | ||||||
| Accrued revenue share |
35,923 | 4,763 | ||||||
| Deferred revenue |
4,315 | 3,919 | ||||||
| Net cash provided by operating activities |
177,174 | 370,604 | ||||||
| Investing activities |
||||||||
| Purchases of property and equipment |
(60,553 | ) | (182,283 | ) | ||||
| Purchase of short-term investments |
(89,528 | ) | (471,081 | ) | ||||
| Maturities and sales of short-term investments |
97,474 | 361,908 | ||||||
| Acquisitions, net of cash acquired |
(39,452 | ) | (3,538 | ) | ||||
| Net cash used in investing activities |
(92,059 | ) | (294,994 | ) | ||||
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