Alphabet : 10.26.2017 Alphabet Announces Third Quarter 2017 Results more

Alphabet Announces Third Quarter 2017 Results‌‌‌‌‌‌

MOUNTAIN VIEW, Calif. - October 26, 2017 - Alphabet Inc. (NASDAQ: GOOG, GOOGL) today announced financial results for the quarter ended September 30, 2017.

"We had a terrific quarter, with revenues up 24% year on year, reflecting strength across Google and Other Bets," said Ruth Porat, CFO of Alphabet. "Our momentum is a result of investments over many years in fantastic people, products and partnerships."

Q3 2017 financial highlights

The following summarizes our consolidated financial results for the quarters ended September 30, 2016 and 2017 (in millions, except for per share information, effective tax rate, and headcount; unaudited):

Three Months Ended September 30, 2016 Three Months Ended September 30, 2017

Revenues $22,451 $27,772

Increase in revenues year over year 20% 24%

Increase in constant currency revenues year over year 23% 24%

Operating income	$5,767	$7,782
Operating margin	26%	28%
Net income	$5,061	$6,732
Diluted EPS	$7.25	$9.57
Diluted shares (in thousands)	698,440	703,716

Effective tax rate (ETR) 16% 16%

Headcount 69,953 78,101

Q3 2017 supplemental information

Segment revenues and operating results (in millions; unaudited):

Three Months Ended September 30, 2016 Three Months Ended September 30, 2017

Google properties revenues $16,089 $19,723 Google Network Members' properties revenues 3,732 4,342

Google advertising revenues 19,821 24,065

Google other revenues 2,433 3,405

Google segment revenues $22,254 $27,470 Other Bets revenues $197 $302

Google operating income $6,774 $8,744

Other Bets operating loss ($861) ($812)

Traffic acquisition costs (TAC) to Google Network Members and distribution partners (in millions; unaudited):

Three Months Ended September 30, 2016 Three Months Ended September 30, 2017

TAC to Google Network Members $2,623 $3,101 TAC to Google Network Members as % of Google Network

Members' properties revenues 70%71%

TAC to distribution partners $1,559 $2,401 TAC to distribution partners as % of Google properties revenues 10% 12% Total TAC $4,182 $5,502

Total TAC as % of Google advertising revenues 21% 23% Paid clicks and cost-per-click information (unaudited):

Change from Q3 2016 to Q3 2017 (YoY) Change from Q2 2017 to Q3 2017 (QoQ)

Aggregate paid clicks 47 % 6%

Paid clicks on Google properties 55 % 7%

Paid clicks on Google Network Members' properties 10 % 2%

Aggregate cost-per-click (18)% 1%

Cost-per-click on Google properties (21)% 1%

Cost-per-click on Google Network Members' properties (5)% 0%

Webcast and conference call information

A live audio webcast of our third quarter 2017 earnings release call will be available at http://abc.xyz/investor. The call begins today at 1:30 PM (PT) / 4:30 PM (ET). This press release, including the reconciliations of certain non-GAAP measures to their nearest comparable GAAP measures, is also available on that site.

We also announce investor information, including news and commentary about our business and financial performance, SEC filings, notices of investor events and our press and earnings releases, on our investor relations website (http:// abc.xyz/investor).

Forward-looking statements

This press release may contain forward-looking statements that involve risks and uncertainties. Actual results may differ materially from the results predicted, and reported results should not be considered as an indication of future performance. The potential risks and uncertainties that could cause actual results to differ from the results predicted include, among others, those risks and uncertainties included under the captions "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2016 and our most recent Quarterly Report on Form 10-Q for the quarter ended June 30, 2017, which are on file with the SEC and are available on our investor relations website at http://abc.xyz/investor and on the SEC website at www.sec.gov. Additional information will also be set forth in our Quarterly Report on Form 10- Q for the quarter ended September 30, 2017. All information provided in this release and in the attachments is as of October 26, 2017, and we undertake no duty to update this information unless required by law.

About non-GAAP financial measures

To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we use the following non-GAAP financial measures: free cash flow; constant currency revenues; and constant currency revenue growth. The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.

We use these non-GAAP financial measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons. We believe that these non-GAAP financial measures provide meaningful supplemental information regarding our performance and liquidity by excluding certain items that may not be indicative of our recurring core business operating results, such as our revenues excluding the impact of foreign currency movements. We believe that both management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting, and analyzing future periods. These non-GAAP financial measures also

facilitate management's internal comparisons to our historical performance and liquidity as well as comparisons to our competitors' operating results. We believe these non-GAAP financial measures are useful to investors both because

(1) they allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making and (2) they are used by our institutional investors and the analyst community to help them analyze the health of our business.

For more information on these non-GAAP financial measures, please see the tables captioned "Reconciliation from net cash provided by operating activities to free cash flow" and "Reconciliation from GAAP revenues to non-GAAP constant currency revenues" included at the end of this release.

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Alphabet Inc.

CONSOLIDATED BALANCE SHEETS

(In millions, except share amounts which are reflected in thousands and par value per share amounts)

Current liabilities:

December 31, 2016	September 30, 2017
(unaudited)
Assets
Current assets:
Cash and cash equivalents	$ 12,918	$ 10,581
Marketable securities	73,415	89,562
Total cash, cash equivalents, and marketable securities	86,333	100,143
Accounts receivable, net of allowance of $467 and $625	14,137	15,295
Income taxes receivable, net	95	282
Inventory	268	765
Other current assets	4,575	2,860
Total current assets	105,408	119,345
Non-marketable investments	5,878	7,269
Deferred income taxes	383	505
Property and equipment, net	34,234	40,120
Intangible assets, net	3,307	2,883
Goodwill	16,468	16,731
Other non-current assets	1,819	2,683
Total assets	$ 167,497	$ 189,536

Liabilities and Stockholders' Equity

Accounts payable	$ 2,041	$ 2,674
Accrued compensation and benefits	3,976	4,022
Accrued expenses and other current liabilities	6,144	9,307
Accrued revenue share	2,942	3,200
Deferred revenue	1,099	1,269
Income taxes payable, net	554	221
Total current liabilities	16,756	20,693
Long-term debt	3,935	3,964
Deferred revenue, non-current	202	346
Income taxes payable, non-current	4,677	4,358
Deferred income taxes	226	151
Other long-term liabilities	2,665	2,924
Total liabilities	28,461	32,436

Commitments and contingencies

Stockholders' equity:

Convertible preferred stock, $0.001 par value per share, 100,000 shares authorized; no

shares issued and outstanding 0 0

Class A and Class B common stock, and Class C capital stock and additional paid-in capital, $0.001 par value per share: 15,000,000 shares authorized (Class A 9,000,000, Class B 3,000,000, Class C 3,000,000); 691,293 (Class A 296,992, Class B 47,437,

Class C 346,864) and 694,790 (Class A 298,263, Class B 47,054, Class C 349,473)

shares issued and outstanding 36,307 39,609

Accumulated other comprehensive loss (2,402)(746)

Retained earnings 105,131118,237

Total stockholders' equity 139,036 157,100

Total liabilities and stockholders' equity $ 167,497 $ 189,536