Q2 2016 – Alphabet Earnings Call Summary

Alphabet

Below are my key takeaways from the Alphabet Q2 2016 Earnings Call on July 28:

Summary:

Revenue of $21.5B, up 21% over last year and up 6% sequentially, attributed mainly to mobile search, and solid growth in desktop and tablet search.  US revenue up 25% YoY to $10.0B, representing 46% of total.  UK revenue up 14% YoY to $1.9B and the rest of the world was up 19% YoY to $9.6B.

Employee headcount up to 66,575, with most new hires being engineers and product managers to support growth areas such as cloud and apps.

Traffic acquisition costs (TAC) are higher due to the increase in mobile because more mobile searches are subject to TAC.

Major push for live video.  In May, 3MM people watched the Champions League and Europa League finals live on YouTube.

Announced a new messaging app called Allo, its main feature being the built-in Google assistant and a new video chat app called Duo, which shows the caller before you even accept the call. Both will launch later this year.

Will compete in the home assistant space, with the likes of Amazon’s Echo, with its smart speaker called Google-Home.  Also coming later this year.

 

Financial Metrics:

  • Revenue: $21,500MM, +21% YoY, +25% YoY in Constant Currency
    • Q2 2015: $17,727MM, +11% YoY, +18% YoY in Constant Currency
  • GAAP Operating Income: $5,968MM
    • Q2 2015: $4,825MM
  • GAAP Operating Margin: 28%
    • Q2 2015: 27%
  • Non GAAP Operating Income: $7,471MM
    • Q2 2015: $5,957MM
  • Non GAAP Operating Margin: 35%
    • Q2 2015: 34%
  • GAAP Net Income: $4,877MM
    • Q2 2015: $3,931MM
  • Non-GAAP Net Income:  $5,864MM
    • Q2 2015: $4,829MM
  • GAAP Diluted EPS: $7.00
    • Q2 2015: $4.93
  • Non GAAP Diluted EPS: $8.42
    • Q2 2015: $6.99
  • Cash and Marketable Securities: $78,460MM
    • Q2 2015: $69,780MM
  • CAPEX: $2,123MM
    • Q2 2015: $2,515MM
  • Total TAC: $3,975MM
    • Q2 2015: $3,377MM
  • Total TAC as % of Google Ad Revenues: 21%
    • Q2 2015: 21%
  • TAC to Google Network Members$2,623MM
    • Q2 2015: $2,432MM
  • TAC as % of Google Network Members Revenues: 70%
    • Q 2015: 67%
  • TAC to Distribution Partners: $1,352MM
    • Q2 2015: $945MM
  • TAC as % of Google Website Revenues: 9%
    • Q2 2015: 8%

List of Key Properties:

Forward Thinking:

  • Continue to focus on innovation, enhance search experience and make improvements to ads, formats and tools
  • Will jump into the world of Virtual Reality this fall with Daydream
  • Will launch new messaging app in Allo and a video chat app in Duo
  • Will launch a home assistant speaker in Google-Home
  • Android 7.0 Nougat will be on new LG V20 smartphones in September

Links to Company Website:

Please comment below if there are data points from Alphabet you’d like me to include in their next Earnings Call Summary.

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