Google Results and Some Quick Analysis

The Google results are out, and the call starts in three minutes. Others will spend way more time on this than I will, but here are the highlights and some quick analysis.

Analysts were looking for $0.56 this quarter, and the company turned in a $0.45 on a diluted basis, adjusted for some non-recurring items. Q3 Adusted EBITDA was $321 mln vs First Call consensus estimate of $284.51 mln (range of estimates $263.2-302.15 mln); Google Q3 revenues were $503.0 mln (First Call consensus was $456.3 mln). In other words, results are better than consensus across the board, but posted EPS is somewhat lower than expected.

So, what gives? Well, once you adjust the adjusted EPS (fun, huh?) for “costless” stock options you end up with $0.70 a share — or 25% better than analysts were looking for.

Who said Google wouldn’t play the Wall Street game? Oh, they’re playin’ alright.

  • Google reported record revenues of $805.9 million for the quarter ended Sept. 30, 2004, up 105 percent year over year.
  • Income from operations, on a GAAP basis, was $11.1 million, or 1.4 percent of revenue for the quarter ended Sept. 30, 2004 compared to $66.6 million or 16.9 percent of revenue for the prior year’s quarter. Income from operations includes the effects of a non-recurring, non-cash charge of $201.0 million related to the previously announced settlement of warrant and patent disputes with Yahoo! Inc.
  • Without this non-recurring charge, Google would have realized income from operations of $212.1 million or 26.3 percent of revenues for the quarter ended Sept. 30, 2004, compared to $66.6 million or 16.9 percent of revenues in the prior year’s quarter.
  • Income from operations includes a $68.0 million non-cash stock-based compensation charge compared to a $73.8 million non-cash, stock-based compensation charge in the prior year’s quarter.
  • Net income on a GAAP basis in the third quarter of 2004 was $52.0 million or $0.19 per share on a diluted basis. Net income before certain non-recurring items was $125.0 million or $0.45 per share on a diluted basis. The non-recurring items are the settlement charge and its associated tax benefit, as well as a reduction to our provision for income taxes related to certain stock-based compensation charges recognized prior to the IPO.
  • Net cash provided by operating activities for the nine months ended Sept. 30, 2004 totaled $608.9 million as compared to $308.9 million last year during the same period, an increase of 97.1 percent.
  • Adjusted EBITDA, another liquidity measure, increased by approximately $44 million or 16 percent to $321 million (or 40 percent of revenues) in Q3 from $278 million (or 40 percent of revenues) in Q2.

[Update] Call has started, and the gang’s all here: Larry, Sergey, and Eric. Hilariously-dry  Investor 101 disclaimer is first ….

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