Below is transcript of the Google Inc (NASDAQ:GOOG)’s Fourth Quarter 2014 Earnings Conference Call, held on Thursday, January 29, 2015 at 4:30 p.m. EST. Castlerock Asset Management, Duquesne Capital and Joho Capital was among Google Inc (NASDAQ:GOOG) shareholders at the end of the third quarter.
Google Inc (NASDAQ:GOOG) is a global technology company. The Company’s business is primarily focused around key areas, such as search, advertising, operating systems and platforms, enterprise and hardware products. The Company generates revenue primarily by delivering online advertising. The Company provides its products and services in more than 100 languages and in more than 50 countries, regions, and territories.
Company Representatives:
Ellen West – Vice President & Investor Relations
Patrick Pichette – Senior Vice President & Chief Financial Officer
Omid Kordestani – Chief Business Officer & Special Advisor to the CEO.
Analysts:
Stephen Ju – Credit Suisse
Carlos Kirjner – Bernstein
Anthony DiClemente – Nomura
Eric Sheridan – UBS
Ross Sandler – Deutsche Bank
Benjamin Swinburne – Morgan Stanley
Douglas Anmuth – JP Morgan
Justin Post – Merrill Lynch
Mark Mahaney – RBC Capital Markets
Mark May – Citi.
Operator
Good day everyone and welcome to the Google, Inc. Fourth Quarter 2014 Earnings Conference Call. This call is being recorded. At this time I’d like to turn the call over to Ellen West, Vice President and Investor Relations. Please go ahead.
Ellen West – Vice President & Investor Relations
Thanks so much, Jamie. Good afternoon, everyone, and welcome to Google’s Fourth Quarter 2014 Earnings Conference Call. With us today are Patrick Pichette and Omid Kordestani. As you know, we distribute our earnings release through our Investor Relations website located at investor.googl.com. So please refer to our IR website for our earnings releases as well as the supplementary slides that accompany the call. This call is also being webcast from investor.google.com. A replay of the call will be available on our website later today.
Now, let me quickly cover the Safe Harbor. Some of the statements that we make today may be considered forward-looking including statements regarding Google’s future investments, our long term growth and innovation, the expected performance of our businesses and our expected level of capital expenditures. These statements involve a number of risks and uncertainties that could cause actual results to differ materially. Please note that these forward looking statements reflect our opinions only as of the date of this presentation and we undertake no obligation to revise or publicly release the results of any revisions to these forward looking statements in light of new information or future events. Please refer to our SEC filings for a more detailed description of the risk factors that may affect our results.
Please note that certain financial measures that we use on this call, such as operating income and operating margin, are expressed on a non-GAAP basis and have been adjusted to exclude charges related to stock based compensation and, as applicable, other special items. We have also adjusted our net cash provided by operating activities to remove capital expenditures, which we refer to as free cash flow. Our GAAP results and reconciliations of non-GAAP to GAAP measures can be found in our earnings press release. With that, I will now turn the call over to Patrick.
Patrick Pichette – Senior Vice President & Chief Financial Officer
Thanks, Ellen. And welcome to 2015 everyone. Before we get into the numbers, I’m going to give a brief overview of our performance this quarter, as the data is actually quite noisy to the P&L. So to start, let’s say that we saw continued strength in our core advertising business. This was really driven by a strong holiday and mobile performance from our sites line. We saw a great momentum in our programmatic business highlighted by our mobile display and our ads platform product. But we also faced a few real challenges as well.
On the revenue side, clearly as you heard out the strengthening of the U.S. dollar resulted in a gross negative currency impact of $616 million just into Q4. But thanks to our hedging program the net impact was actually attenuated, with a net revenue of impact of $468 million. Also on the other revenue line not only did we see that negative currency impact really impact the play growth particularly in Japan, but also while the Nexus 7 was very well received as a new phone, we had real issues and unable to secure sufficient inventory to meet the demand that we have forecasted. So, for both these factors in fact, we see lower other revenue growth this quarter. On the expense side, we had number of unusual charges to our operating expenses hit this quarter. I’ll provide you more details in a few minutes as we go through the conversation. But together these items added up to slightly over $300 million in expenses to our P&L.
