Alphabet Inc. (GOOGL) SEC Filing 10-K Annual report for the fiscal year ending Sunday, December 31, 2017

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Exhibit 99.1

Alphabet Announces Fourth Quarter and Fiscal Year 2017 Results
MOUNTAIN VIEW, Calif. – February 1, 2018 – Alphabet Inc. (NASDAQ: GOOG, GOOGL) today announced financial results for the quarter and fiscal year ended December 31, 2017.
"Our business is driving great growth, with 2017 revenues of $110.9 billion, up 23% year on year, and fourth quarter revenues of $32.3 billion, up 24% year on year. Our full year operating income growth continues to underscore our core strength, and on top of this, we continue to make substantial investments for the long-term in exciting new businesses," said Ruth Porat, CFO of Alphabet.
Q4 2017 financial highlights
In order to facilitate comparison of current quarter performance to prior periods, this summary table highlights the impact of the U.S. Tax Cuts and Jobs Act (Tax Act):
Q4 2017 summary results reflecting the impact of the Tax Act
 
Including
(GAAP) .

 
Excluding

Revenues

$32,323

 

$32,323

Operating income

$7,664

 

$7,664

Provision for income taxes

$11,038

 

$1,181

Net (loss) income

($3,020
)
 

$6,837

Effective tax rate
138
%
 
15
%
Diluted EPS

($4.35
)
 

$9.70

The following summarizes our consolidated financial results for the quarters ended December 31, 2016 and 2017 (in millions, except for per share information, effective tax rate, and number of employees; unaudited), reported on a GAAP basis including the impact of the Tax Act (except for constant currency revenues information):
 
Three Months Ended December 31, 2016
 
Three Months Ended December 31, 2017
Revenues

$26,064

 

$32,323

Increase in revenues year over year
22
%
 
24
%
Increase in constant currency revenues year over year
24
%
 
24
%
 
 
 
 
Operating income

$6,639

 

$7,664

Operating margin
25
%
 
24
%
 
 
 
 
Net income (loss)

$5,333

 

($3,020
)
Diluted EPS

$7.56

 

($4.35
)
Diluted shares (in thousands)
700,221

 
694,604

 
 
 
 
Effective tax rate
22
%
 
138
%
Number of employees
72,053

 
80,110



The following information was filed by Alphabet Inc. on Thursday, February 1, 2018 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-K Annual Report statement of earnings and operation as management may choose to highlight particular information in the press release.

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Click a sentiment analysis snippet below from Alphabet Inc.'s Management Discussions to find these positive and negative remarks within their 10-K Annual report:
  • goog_10k_2018-02-06_120_96
    Revenue - Product
    Our EMEA revenues from 2016 to 2017 were unfavorably impacted, primarily as a result of an unfavorable impact from hedging losses, slightly offset by a favorable impact from foreign currency exchange rates.
  • goog_10k_2018-02-06_185_152
    Financial - Expense
    The costs of our foreign exchange hedging activities recognized in other income expense, net, are primarily a function of the notional amount of the option and forward contracts and their related duration, the movement of foreign exchange rates relative to the contract prices, the volatility of foreign exchange rates and forward points.
  • goog_10k_2018-02-06_191_385
    Financial - Earnings
    Our future effective tax rate could be adversely affected by earnings being lower than anticipated in countries that have lower statutory rates and higher than anticipated in countries that have higher statutory rates, the net gains and losses recognized by legal entities on certain hedges and related hedged intercompany and other transactions under our foreign exchange risk management program, changes in the valuation of our deferred tax assets or liabilities, or changes in tax laws, regulations, or accounting principles, as well as certain discrete items.
  • goog_10k_2018-02-06_14_265
    Revenue - Product
    The portion of our revenues that we derive from non-advertising revenues is increasing and may impact margins.
  • goog_10k_2018-02-06_126_106
    Revenue - Product
    Our revenues from Other Americas from 2015 to 2016 were unfavorably impacted, primarily as a result of an unfavorable impact from foreign currency exchange rates, slightly offset by a favorable impact from hedging benefits.
  • goog_10k_2018-02-06_184_151
    Financial - Income
    This increase was primarily driven by an increase in interest income and decreased losses on non-marketable investments, partially offset by increased losses from our foreign currency transactions and impairments for certain assets.
  • goog_10k_2018-02-06_166_134
    Financial - Expense
    In addition, there was an increase in compensation expenses, including SBC, and facilities-related costs of $853 million, largely resulting from a 6% increase in headcount.
  • goog_10k_2018-02-06_121_98
    Revenue - Product
    Our EMEA revenues from 2015 to 2016 were unfavorably impacted, primarily as a result of an unfavorable impact from foreign currency exchange rates, offset by a favorable impact from hedging benefits.
  • goog_10k_2018-02-06_217_400
    Revenue - Product
    Net cash used in investing activities increased slightly from 2016 to 2017 primarily due to increases in purchases of marketable securities and increases in purchases of property and equipment, offset by increases in the maturities and sales of marketable securities, decreases in cash collateral paid related to securities lending, and increase in proceeds received from collections of notes receivables.
  • goog_10k_2018-02-06_193_166
    Revenue - Product
    These seasonal trends have caused, and will likely continue to cause, fluctuations in our quarterly results, including fluctuations in sequential revenue growth rates.
  • goog_10k_2018-02-06_158_127
    Financial - Expense
    The increase was primarily due to an increase in compensation expenses, including SBC, and facilities-related costs of $1,886 million, largely resulting from a 16% increase in headcount.
  • goog_10k_2018-02-06_177_143
    Financial - Expense
    The increase was primarily due to increases in labor and facilities-related costs of $460 million, and stock-based compensation expense of $421 million, both largely resulting from a 15% increase in general and administrative headcount
  • goog_10k_2018-02-06_93_80
    Revenue - Product
    The increase was primarily driven by revenues from sales of Nest branded hardware, Fiber internet and TV services, and Verily licensing and R&D services.
  • goog_10k_2018-02-06_159_130
    Financial - Expense
    The increase was primarily due to an increase in stock-based compensation expense of $667 million and an increase in labor and facilities-related costs of $326 million, both largely as a result of a 16% increase in R&D headcount, partially offset by higher expenses resulting from project milestones in Other Bets in 2015.
  • goog_10k_2018-02-06_15_19
    Revenue - Product
    A number of our Other Bets initiatives are in their initial development stages, and as such, the sources of revenues from these businesses could change over time and the revenues could be volatile.
  • goog_10k_2018-02-06_100_87
    Revenue - Product
    Our international revenues are favorably impacted as the U.S. dollar weakens relative to other foreign currencies, and unfavorably impacted as the U.S. dollar strengthens relative to other foreign currencies.
  • goog_10k_2018-02-06_71_59
    Revenue - Product
    We also experienced growth in YouTube revenue driven primarily by video advertising across TrueView with a growing contribution from ad buying on DoubleClick Bid Manager, as well as improvements in ad formats and delivery.
  • goog_10k_2018-02-06_145_121
    Financial - Expense
    The increase in other cost of revenues of $4,524 million was primarily due to increases in 1 data center costs including depreciation, labor, energy, bandwidth, and other equipment costs as a result of business growth, 2 content acquisition costs as a result of increased activities related to YouTube, 3 hardware costs associated with new hardware launches, and 4 stock-based compensation.
  • goog_10k_2018-02-06_218_401
    MA - Other
    Net cash used in investing activities increased from 2015 to 2016 primarily due to increases in purchases of marketable securities, increases in cash collateral paid related to securities lending and increases in spend related to acquisitions, partially offset by increases in maturities and sales of marketable securities and decreases in purchases of non-marketable investments.
  • goog_10k_2018-02-06_86_76
    Revenue - Product
    The increase was primarily driven by revenues from Google Cloud offerings, hardware sales, and revenues from Google Play, largely relating to in-app purchases revenues which we recognize net of payout to developers.
  • goog_10k_2018-02-06_60_300
    Revenue - Product
    growth rates of revenues from Google properties, including YouTube, compared to growth rates of revenues from Google Network Members properties
  • goog_10k_2018-02-06_214_192
    Financial - Cash Flow
    Additionally, the timing of tax payments and refunds had a favorable impact to our cash flows from operations for 2016 compared to 2015.
  • goog_10k_2018-02-06_94_82
    Revenue - Product
    These increases were primarily driven by sales of Nest branded hardware and revenues from Fiber internet and TV services.
  • goog_10k_2018-02-06_70_53
    Other - Other
    The number of paid clicks through our advertising programs on Google properties increased from 2016 to 2017 due to growth in YouTube engagement ads, increases in mobile search queries, improvements we have made in ad formats and delivery, and continued global expansion of our products, advertisers and user base.
  • goog_10k_2018-02-06_158_128
    Financial - Expense
    In addition, there was an increase in depreciation and equipment-related expenses of $569 million.
  • goog_10k_2018-02-06_229_199
    Other - Other
    Represents one-time transition tax payable related to known amounts of cash taxes payable in future years as a result of the Tax Act.
  • goog_10k_2018-02-06_249_256
    Financial - Income
    If any impairment is considered other-than-temporary, we will write down the asset to its fair value and record the corresponding charge as other income expense, net.
  • goog_10k_2018-02-06_249_255
    Financial - Debt
    For marketable debt securities, we also consider whether 1 it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis, and 2 the amortized cost basis cannot be recovered as a result of credit losses.
  • goog_10k_2018-02-06_143_116
    Revenue - Product
    The increase in the aggregate TAC rate was also partially offset by a favorable revenue mix shift from Google Network Members properties to Google properties.
  • goog_10k_2018-02-06_88_315
    Revenue - Product
    the growth in revenues from Google Play, primarily relating to in-app purchases revenues which we recognize net of payout to developers, hardware sales, and Google Cloud offerings.
  • goog_10k_2018-02-06_5_261
    Revenue - Product
    The continuing shift from an offline to online world has contributed to the growth of our business since inception, resulting in increasing revenues, and we expect that this online shift will continue to benefit our business.
  • goog_10k_2018-02-06_72_61
    Other - Other
    The number of paid clicks through our advertising programs on Google properties increased from 2015 to 2016 due to growth in the adoption of YouTube engagement ads, improvements we have made in ad formats and delivery, and continued global expansion of our products, advertisers, and user base across all platforms, particularly mobile.
  • goog_10k_2018-02-06_152_360
    Revenue - Product
    Relative revenue growth rates of Google properties and our Google Network Members properties.
  • goog_10k_2018-02-06_176_138
    Financial - Expense
    General and administrative expenses decreased $113 million from 2016 to 2017.
  • goog_10k_2018-02-06_71_58
    Other - Other
    The growth was primarily driven by increases in mobile search most notably due to ongoing improvements in ad formats and delivery launched during 2016.
  • goog_10k_2018-02-06_126_107
    Revenue - Geography
    The foreign exchange impact was due to the U.S. dollar strengthening relative to certain currencies including the Argentine peso, Canadian dollar, Brazilian real, and the Mexican peso.
  • goog_10k_2018-02-06_167_136
    Financial - Expense
    The increase was primarily due to an increase in advertising and promotional expenses of $679 million, largely due to increases in marketing and promotion-related expenses for our hardware products.
  • goog_10k_2018-02-06_166_133
    Financial - Expense
    The increase was primarily due to an increase in advertising and promotional expenses of $1,266 million, largely resulting from increases in marketing and promotion-related expenses for our hardware products, Cloud offerings, and YouTube.
  • goog_10k_2018-02-06_134_347
    Financial - Expense
    Inventory related costs for hardware we sell.
  • goog_10k_2018-02-06_178_144
    Financial - Expense
    , as well as increases in other miscellaneous expenses.
  • goog_10k_2018-02-06_158_126
    Financial - Expense
    R&D expenses increased $2,677 million from 2016 to 2017.
  • goog_10k_2018-02-06_159_129
    Financial - Expense
    R&D expenses increased $1,666 million from 2015 to 2016.
  • goog_10k_2018-02-06_177_142
    Financial - Expense
    General and administrative expenses increased $849 million from 2015 to 2016.
  • goog_10k_2018-02-06_213_397
    Revenue - Product
    Net cash provided by operating activities increased from 2016 to 2017 primarily due to increases in cash received from advertising revenues and Google other revenues net of payouts to app developers, offset by increases in cash paid for cost of revenues, operating expenses, and income taxes.
  • goog_10k_2018-02-06_159_131
    Financial - Expense
    In addition, there was an increase in depreciation and equipment-related expenses of approximately $388 million and an increase in professional services of $267 million due to additional expenses incurred for consulting, outsourced services, and temporary services.
  • goog_10k_2018-02-06_145_119
    Financial - Expense
    Cost of revenues increased $6,974 million from 2015 to 2016 due to various factors including traffic acquisition costs, data center costs, content acquisition costs, and hardware costs.
  • goog_10k_2018-02-06_94_83
    Revenue - Product
    There was also an increase in revenues from
  • goog_10k_2018-02-06_244_414
    MA - Other
    of assets acquired and liabilities assumed, management makes significant estimates and assumptions, especially with respect to intangible assets.
  • goog_10k_2018-02-06_165_371
    Financial - Expense
    Compensation expenses, including SBC, and facilities-related costs for employees engaged in sales and marketing, sales support, and certain customer service functions.
  • goog_10k_2018-02-06_248_250
    Financial - Cash Flow
    An impairment loss would be recognized when estimated undiscounted future cash flows generated from the assets are less than their carrying amount.
  • goog_10k_2018-02-06_15_18
    Financial - Earnings
    The margins on these non-advertising businesses vary significantly and may be lower than the margins on our advertising business.
  • goog_10k_2018-02-06_86_75
    Revenue - Product
    Our Google other revenues increased $4,197 million from 2016 to 2017.
  • goog_10k_2018-02-06_80_71
    Revenue - Product
    Our Google Network Members properties revenues increased $565 million from 2015 to 2016.
  • goog_10k_2018-02-06_78_66
    Revenue - Product
    Our Google Network Members properties revenues increased $1,989 million from 2016 to 2017.
  • goog_10k_2018-02-06_69_49
    Revenue - Product
    Our Google properties revenues increased $14,003 million from 2016 to 2017.
  • goog_10k_2018-02-06_93_79
    Revenue - Product
    Our Other Bets revenues increased $394 million from 2016 to 2017.
  • goog_10k_2018-02-06_239_224
    Other - Other
    Although we believe we have adequately reserved for our uncertain tax positions, no assurance can be given that the final tax outcome of these matters will not be different.
  • goog_10k_2018-02-06_237_217
    Revenue - Geography
    Effective in 2018, the Tax Act reduces the U.S. statutory tax rate from 35% to 21% and creates new taxes on certain foreign-sourced earnings and certain related-party payments, which are referred to as the global intangible low-taxed income tax and the base erosion tax, respectively.
  • goog_10k_2018-02-06_190_159
    Revenue - Geography
    Effective in 2018, the Tax Act reduces the U.S. statutory tax rate from 35% to 21% and creates new taxes on certain foreign-sourced earnings and certain related-party payments, which are referred to as the global intangible low-taxed income tax and the base erosion tax, respectively.
  • goog_10k_2018-02-06_11_264
    Revenue - Product
    As users in developing economies increasingly come online, our revenues from international markets continue to increase and movements in foreign exchange rates impact such revenues.
  • goog_10k_2018-02-06_128_341
    Financial - Expense
    The cost of revenues related to revenues generated from ads placed on Google Network Members properties are significantly higher than the costs of revenues related to revenues generated from ads placed on Google properties because most of the advertiser revenues from ads served on Google Network Members properties are paid as TAC to our Google Network Members.
  • goog_10k_2018-02-06_71_57
    Revenue - Product
    Our Google properties revenues increased $11,428 million from 2015 to 2016 and also increased as a percentage of Google segment revenues.
  • goog_10k_2018-02-06_87_77
    Revenue - Product
    Our Google other revenues increased $2,926 million from 2015 to 2016 and increased as a percentage of Google segment revenues.
  • goog_10k_2018-02-06_94_81
    Revenue - Product
    Our Other Bets revenues increased $364 million from 2015 to 2016 and increased as a percentage of consolidated revenues.
  • goog_10k_2018-02-06_233_205
    Other - Other
    In some cases, we could reasonably have used different accounting policies and estimates.
  • goog_10k_2018-02-06_202_180
    MA - Other
    We believe that our sources of funding will be sufficient to satisfy our currently anticipated cash requirements including capital expenditures, working capital requirements, potential acquisitions and other liquidity requirements through at least the next 12 months.
  • goog_10k_2018-02-06_69_51
    Other - Other
    We also experienced growth in YouTube driven primarily by video advertising, as well as growth in desktop search due to improvements in ad formats and delivery.
  • goog_10k_2018-02-06_229_202
    Other - Other
    At this time, we are unable to make a reasonably reliable estimate of the timing of payments for uncertain tax positions in individual years beyond 12 months due to uncertainties in the timing of tax audit outcomes.
  • goog_10k_2018-02-06_23_270
    Revenue - Product
    Google segment revenues of $109.7 billion with revenue growth of 23% year over year and Other Bets revenues of $1.2 billion with revenue growth of 49% year over year.
  • goog_10k_2018-02-06_69_52
    Revenue - Geography
    The growth was partially offset by the general strengthening of the U.S. dollar compared to certain foreign currencies.
  • goog_10k_2018-02-06_71_60
    Revenue - Geography
    The growth was partially offset by the general strengthening of the U.S. dollar compared to certain foreign currencies.
  • goog_10k_2018-02-06_201_171
    Revenue - Geography
    On December 22, 2017, the Tax Act was enacted and we recorded a tax liability for the one-time transition tax on accumulated foreign subsidiary earnings of $10.2 billion, of which $890 million and $9.3 billion were presented within income tax payable, current and income tax payable, non-current, respectively, on our Consolidated Balance Sheets as of December 31, 2017.
  • goog_10k_2018-02-06_28_274
    Other - Other
    Effective tax rate was 53%.
  • goog_10k_2018-02-06_186_383
    Financial - Income
    We expect that other income expense, net, will fluctuate in dollar amount in future periods as it is largely driven by market dynamics.
  • goog_10k_2018-02-06_8_263
    Revenue - Product
    Users are increasingly using multiple devices and modalities to access our products and services, and our advertising revenues are increasingly coming from mobile and other new formats.
  • goog_10k_2018-02-06_81_74
    Financial - Expense
    The decrease in cost-per-click paid by our advertisers from 2015 to 2016 resulted from changes in the product mix of Google Network Members advertising revenues, ongoing product and policy changes, changes in property and device mix, geographic mix, and relative fluctuations of the U.S. dollar compared to certain foreign currencies.
  • goog_10k_2018-02-06_222_405
    Financial - Debt
    Net cash used in financing activities increased from 2015 to 2016 primarily driven by decreases in proceeds from issuance of debt, and increases in the repurchases of capital stock and net payments related to stock-based award activities, partially offset by a decrease in debt repayments.
  • goog_10k_2018-02-06_142_113
    Revenue - Product
    The increase in TAC to Google Network Members was a result of an increase in Google Network Members properties revenues and the associated TAC rate.
  • goog_10k_2018-02-06_238_222
    Financial - Income
    Those adjustments may materially impact the provision for income taxes and the effective tax rate in the period in which the adjustments are made.
  • goog_10k_2018-02-06_20_24
    Other - Other
    Our employees are among our best assets and are critical for our continued success.
  • goog_10k_2018-02-06_123_340
    Revenue - Geography
    was due to the U.S. dollar strengthening relative to the Japanese yen, partially offset by the impact of the U.S. dollar weakening relative to the Australian dollar, Indian rupee, South Korean won, and Taiwanese dollar.

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Exhibit 12.01 - COMPUTATION OF EARNINGS TO FIXED CHARGE RATIOS

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Exhibit 14.01 - CODE OF CONDUCT OF THE REGISTRANT AS AMENDED

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Exhibit 21.01 - SUBSIDIARIES OF THE REGISTRANT

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Exhibit 23.01 - CONSENT OF ERNST & YOUNG LLP, INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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Exhibit 31.01 - CERTIFICATION OF CEO PURSUANT TO EXCHANGE ACT RULES 13A-14(A) AND 15D-14(A)

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Exhibit 31.02 - CERTIFICATION OF CFO PURSUANT TO EXCHANGE ACT RULES 13A-14(A) AND 15D-14(A)

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Exhibit 32.01 - CERTIFICATIONS OF CEO AND CFO PURSUANT TO 18 U.S.C. SECTION 1350

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  • Form Type: Annual
  • Number of times amended: 0
  • Accession Number: 0001652044-18-000007
  • Submitted to the SEC: Monday, February 5, 2018 8:46:29 PM EST
  • Accepted by the SEC: Tuesday, February 6, 2018
  • Fiscal Year ending: December 2017
  • Industry: Computer Programming Data Processing