biz.yahoo.com/bw/050201/16016_1.html
News) today announced financial results for the quarter ended December 31, 2004. Google reports its revenues, consistent with GAAP, on a gross basis without deducting traffic acquisition costs ("TAC"), or the portion of revenues shared with our partners. Revenues and profits increased signif icantly, our execution was solid across the company and most importantly , our relationship with our users, partners and advertisers became even stronger," said Eric Schmidt, Google chief executive officer. "All of th is happened while we continued to innovate, expand around the world and make strategic, long-term investments." This revenues growth reflects strong traffic and monet ization growth in the quarter as well as advertisers' growing recognitio n of the Internet as an effective advertising medium. Google-Sites Revenues - Google-owned sites generated $530 million or 51% of total revenues. This represents an increase of 118% over the fourth quarter of 2003. The Google Network - Revenues generated on Google's partner sites, through AdSense programs, contributed $490 million, or 48% of total revenues, a 92% increase over the Network revenues generated in the same quarter last year. TAC - Traffic Acquisition Costs, the portion of revenues shared with Goog le's partners, increased to $378 million or 77% of Google Network revenu es. This compares to total payments to partners of $216 million in the f ourth quarter of 2003, or 85% of Google Network revenues. This improvement in operating margins was primarily due to decreases in stock -based compensation expense and traffic acquisition cost as a percentage of revenues. Income Taxes - Google recorded a provision for income taxes of $106 milli on in the fourth quarter, an effective tax rate of 34% as compared to a $62 million provision for income taxes and a 70 % effective tax rate in the fourth quarter of 2003. The provision for income taxes in the fourth quarter was reduced by $66 million related to certain items, $42 millio n due to ISO disqualifying dispositions and $24 million related to certa in stock-based compensation charges recognized prior to the IPO. The com pany expects its effective tax rate before these items to generally tren d lower over the long term to a rate below 35%. However, the company may experience volatility in its quarterly effective tax rates as a result of certain stock option activity. Google s aw growth throughout the year both in our domestic business and internat ionally, both on Google owned sites and on the Google Network. The company attribute s the rapid growth to increased visits to its sites and to its accumulat ed knowledge of how to more effectively and efficiently monetize that tr affic. This growth reflects growth in the number of partners in the network in both the AdSense for Search an d the AdSense for Content programs, as well as improved monetization of those programs. Excluding the effect of a third-quarter, 2004 non-cash, non-recurring charge asso ciated with a legal settlement, our operating income for the full year 2 004 increased 146% to $841 million, up from $342 million the prior year. Operating income as reported in both 2004 and 2003 was reduced by significant non-cash s tock-based compensation charges of $279 million and $229 million respect ively. Net Income - Net income for the year 2004 rose to $399 million from $106 million in 2003, an increase of 278%. Adjusting for the impact of the th ird quarter 2004 settlement charge and for certain tax benefits, net inc ome totaled $406 million in 2004. Cash Flow - Net cash provided by operating activities increased 147% to $ 977 million for the twelve months ended December 31, 2004 from $395 mill ion in 2003. Free cash flow is an alternative measure of liquidity to GA AP net cash provided by operating activities and is calculated as operat ing cash flows less capital expenditures. Capital expenditures were $319 million in the twelve months ended December 31, 2004 as compared to $17 7 million in the twelve months ended 2003. Free cash flow for the twelve months ended December 31, 2004 totaled $658 million as compared to $219 million for the same period in 2003, an increase of 200%. Adjusted EBITDA - Adjusted EBITDA is defined as EBITDA before the non-cas h stock-based compensation charge, the non-cash and non-recurring settle ment charge and in-process R&D. It is another alternative measure of liq uidity to GAAP net cash provided by operating activities. For the fourth quarter of 2004, adjusted EBITDA increased to $425 million from $321 million in the third quarter. The reconciliation of adjusted EBITDA to the GAAP mea sure of liquidity, net cash provided by operating activities, is set for th at the back of this release. On a worldwide basis, Google employed 3,021 full time employees as of Dec ember 31, 2004, up from 2,668 as of September 30, 2004.
This press release, the financ ial tables as well as other supplemental information including the recon ciliations of certain non-GAAP measures to their nearest comparable GAAP measures, are also available at that site. A replay of the call will be available beginning at 7:30 PM EDT through midnight Tuesday, February 1 5, by calling (888) 203-1112 in the United States or (719) 457-0820 for calls from outside the United States. The required confirmation code for the replay is 0676870. Forward looking statements This press release contains forward-looking statements that involve risks and uncertainties, including statements relating to the Google's market opportunity and future business prospects. Actual results may differ ma terially from the results predicted and reported results should not be c onsidered as an indication of future performance. Factors that could cau se actual results to differ from the results predicted are included in G oogle's quarterly reports on Form 10-Q and from time to time in other re ports filed by Google with the Securities and Exchange Commission. To supplement Google's consolidated financial statements presented in acc ordance with GAAP, Google uses non-GAAP measures of certain financial pe rformance and liquidity. These non-GAAP measures are comprised of income from operations, net income and net income per share before material no n-recurring and other items, as well as free cash flows and adjusted EBI TDA. Google's management believes that income from operations before mat erial non-recurring and other items and net income before material non-r ecurring and other items provide meaningful supplemental information reg arding the company's core operating results because they exclude amounts that are not necessarily related to those core results and are of a sub stantially non-recurring nature. Google's management believes that free cash flows and adjusted EBITDA provide meaningful supplemental informati on regarding liquidity. Google believes that both management and investo rs benefit from referring to these non-GAAP financial measures in assess ing the performance of Google's ongoing operations and liquidity and whe n planning and forecasting future periods. These non-GAAP financial meas ures also facilitate management's internal comparisons to Google's histo rical operating results and liquidity. Google computes its non-GAAP financial measures using the same consistent method from quarter to quarter and year to year. The accompanying table s have more details on the GAAP financial measures that are most directl y comparable to non-GAAP financial measures and the related reconciliati ons between these financial measures. This benefit is eliminated because it is a significant reduction to our provision for income taxes and it may or may not be "non-recurring" in terms of its significance. We cannot forecast the amount of reductions to our provision for income taxes, if any, related to ISO disqualifying dispositions that may occur in future periods.
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