Quarterly Earnings Slides Q4 2013
Non-GAAP Measures In addition to U.S. GAAP financials, this presentation includes certain non-GAAP financial measures. These non-GAAP measures are in addition to, not a substitute for or superior to, measures of financial performance prepared in accordance with U.S. GAAP. A reconciliation of non-GAAP financial measures to the corresponding GAAP measures is provided in the appendix to this presentation.
2
Daily Active Users (DAUs) In Millions Rest of World
665
Asia Europe US & Canada 526
483 109 105
126 119
552 139
584 152
618 161
180
699 195
728 208
757 216
167
181
189
200
129
141
153
169
179
182
188
195
143
152
154
160
126
129
130
132
135
139
142
144
147
Q4'11
Q1'12
Q2'12
Q3'12
Q4'12
Q1'13
Q2'13
Q3'13
Q4'13
DAUs / MAUs Q4'11
Q1'12
Q2'12
Q3'12
Q4'12
Q1'13
Q2'13
Q3’13
Q4'13
57%
58%
58%
58%
59%
60%
61%
61%
62%
Please see Facebook's most recent quarterly or annual report filed with the SEC for definitions of user activity used to determine the number of our DAUs, mobile DAUs, MAUs, and mobile MAUs. The number of DAUs, mobile DAUs, MAUs, and mobile MAUs do not include Instagram users unless they would otherwise qualify as such users, respectively, based on their other activities on Facebook.
3
Mobile Daily Active Users (Mobile DAUs) In Millions 556 469
507
425 374 266
Q1'12
293
Q2'12
329
Q3'12
Q4'12
Q1'13
Q2'13
Q3'13
Q4'13
Please see Facebook's most recent quarterly or annual report filed with the SEC for definitions of user activity used to determine the number of our DAUs, mobile DAUs, MAUs, and mobile MAUs. The number of DAUs, mobile DAUs, MAUs, and mobile MAUs do not include Instagram users unless they would otherwise qualify as such users, respectively, based on their other activities on Facebook.
4
Monthly Active Users (MAUs) In Millions Rest of World Asia Europe US & Canada
845 225
901 245
955 268
1,007 288
1,056 304
1,110 327
277
298
319
1,228
1,155
1,189
346
362
339
351
368
376
212
234
255
229
239
246
253
261
269
272
276
282
179
183
186
189
193
195
198
199
201
Q4'11
Q1'12
Q2'12
Q3'12
Q4'12
Q1'13
Q2'13
Q3'13
Q4'13
Please see Facebook's most recent quarterly or annual report filed with the SEC for definitions of user activity used to determine the number of our DAUs, mobile DAUs, MAUs, and mobile MAUs. The number of DAUs, mobile DAUs, MAUs, and mobile MAUs do not include Instagram users unless they would otherwise qualify as such users, respectively, based on their other activities on Facebook.
5
Mobile Monthly Active Users (Mobile MAUs) In Millions 945 819
874
751 680
432
Q4'11
488
Q1'12
543
Q2'12
604
Q3'12
Q4'12
Q1'13
Q2'13
Q3'13
Q4'13
Please see Facebook's most recent quarterly or annual report filed with the SEC for definitions of user activity used to determine the number of our DAUs, mobile DAUs, MAUs, and mobile MAUs. The number of DAUs, mobile DAUs, MAUs, and mobile MAUs do not include Instagram users unless they would otherwise qualify as such users, respectively, based on their other activities on Facebook.
6
Mobile-Only Monthly Active Users (Mobile-Only MAUs) In Millions 296 254 219 189 157
Q4'12
Q1'13
Q2'13
Q3'13
Q4'13
Mobile-only MAUs are defined as users who accessed Facebook solely through mobile apps or our mobile website in the last 30 days of the given quarter. The number of mobile-only MAUs do not include Instagram users unless they would otherwise qualify as such users based on their other activities on Facebook.
7
Revenue In Millions
$2,585
Payments and other fees
$241
Advertising
$2,016 $218
$1,813 $214
$1,585
$1,131 $188
$1,058 $186
$1,184 $192
$1,262
$256 *
$1,458 $213
$176
$2,344 $1,798
$1,599 $943
$872
Q4'11
Q1'12
$992
$1,086
Q2'12
Q3'12
$1,329
$1,245
Q4'12
Q1'13
Q2'13
Q3'13
Q4'13
*In the fourth quarter of 2012 we recognized revenue from four months of Payments transactions for accounting reasons detailed on pages 47 and 48 of our Form 10-K filed on February 1, 2013.
8
Revenue by User Geography In Millions $2,585
Rest of World
$311
Asia Europe
$2,016
US & Canada
$1,813 $1,585 $167 $1,131 $87 $115 $361
$1,058 $87 $118 $328
$1,184 $113 $135 $346
$1,262 $130 $154
$198 $440
$341
$567
$525
$590
$637
Q4'11
Q1'12
Q2'12
Q3'12
$238
$213 $1,458 $159 $197
$341
$278
$247
$727
$538
$505
$423
$780
$679
Q4'12
Q1'13
$962
$848
Q2'13
Q3'13
$1,206
Q4'13
Revenue by user geography is geographically apportioned based on our estimation of the geographic location of our users when they perform a revenuegenerating activity. This allocation differs from our revenue by geography disclosure in our consolidated financial statements where revenue is geographically apportioned based on the location of the marketer or developer.
9
Advertising Revenue by User Geography $2,344
In Millions
$300
Rest of World Asia Europe
$1,798
US & Canada
$1,599 $1,329
$943 $79 $95 $306 $462 Q4'11
$872 $79 $99 $274
$992 $104 $115 $294
$1,086 $120 $133 $295
$156 $168 $374
$229
$202 $1,245 $150 $176
$318
$255
$225
$658
$482
$451
$367
$419
$479
$538
$631
$552
Q1'12
Q2'12
Q3'12
Q4'12
Q1'13
$832
$721
Q2'13
Q3'13
$1,068
Q4'13
Revenue by user geography is geographically apportioned based on our estimation of the geographic location of our users when they perform a revenuegenerating activity. This allocation differs from our revenue by geography disclosure in our consolidated financial statements where revenue is geographically apportioned based on the location of the marketer or developer.
10
Payments & Other Fees Revenue by User Geography In Millions Rest of World
$256 $11 $30
Asia Europe US & Canada
$188 $8 $20
$186 $8 $19
$192 $9 $20
$55
$54
$52
$176 $10 $21
$66
$213 $9 $21
$214 $11 $22
$218 $9 $23
$241 $11 $23 $69
$56
$54
$56
$127
$127
$130
$138
Q1'13
Q2'13
Q3'13
Q4'13
$46 $149
$105
$106
$111
$99
Q4'11
Q1'12
Q2'12
Q3'12
* Q4'12
Revenue by user geography is geographically apportioned based on our estimation of the geographic location of our users when they perform a revenue-generating activity. This allocation differs from our revenue by geography disclosure in our consolidated financial statements where revenue is geographically apportioned based on the location of the marketer or developer. *In the fourth quarter of 2012 we recognized revenue from four months of Payments transactions for accounting reasons detailed on pages 47 and 48 of our Form 10-K filed on February 1, 2013. 11
Average Revenue per User (ARPU) Worldwide
US & Canada
$6.03
$2.14
Payments*
$0.20
Advertising
$1.54 $0.25
$1.35 $0.20
$1.60 $0.19
$1.72 $0.19
$4.08 $0.78
$4.32 $3.50
$0.65
$0.65
$0.65 $5.34
$1.94 $1.29
$1.15
Q4'12
$1.41
$1.53
Q2'13
Q3'13
Q1'13
Europe
$2.61
$3.30
Q4'13
Q4'12
Asia
$1.71 $0.26
$1.60
$0.20
$1.96 $0.20
$0.69 $0.10
$0.21
$0.64 $0.07
$0.75 $0.07
$0.81 $0.07
$2.36 $1.46
$1.38
Q4'12
Q1'13
$1.67
$1.76
Q2'13
Q3'13
Q4'13
$2.85
Q1'13
$4.19
$3.67
Q2'13
Q3'13
Q4'13
Rest of World
$0.25 $1.87
$0.69
$4.85
$0.58
$0.57
Q4'12
Q1'13
$0.68
$0.74
Q2'13
Q3'13
$0.03
$0.95 $0.06 $0.56 $0.04
$0.50 $0.03
$0.63 $0.03
$0.67 $0.03
$0.81
$0.88 $0.53
Q4'13
$0.84
Q4'12
$0.48
Q1'13
$0.60
Q2'13
$0.65
Q3'13
Q4'13
Revenue by user geography is geographically apportioned based on our estimation of the geographic location of our users when they perform a revenue-generating activity. This allocation differs from our revenue by geography disclosure in our consolidated financial statements where revenue is geographically apportioned based on the location of the marketer or developer. Please see Facebook’s most recent quarterly or annual report filed with the SEC for the definition of ARPU. *In the fourth quarter of 2012 we recognized revenue from four months of Payments transactions for accounting reasons detailed on pages 47 and 48 of our Form 10-K filed on February 1, 2013.
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Share-Based Compensation Expense In Millions
$1,106
Pre-2011 RSUs Post-2011 RSUs Options & Other
$986
$273
$76
$103
$179 $28
$184 $24
$170 $9
$113
$138
$137
$135
$74
$97
Q4'11
Q1'12
Q2'12
Q3'12
Q4'12
Q1'13
$224 $17
$239 $14
$11
$175
$193
$228
Q2'13
Q3'13
Q4'13
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Expenses as a % of Revenue Share-based compensation + Payroll tax related to share-based compensation
Research & Development
Cost of Revenue 25%
28%
26%
25% 19%
24%
Q4'12
28%
Q1'13
All other expenses
25%
Q2'13
25%
Q3'13
19%
Q4'13
15%
14%
10%
12%
13%
Q4'12
Q1'13
Q2'13
20%
9%
9%
10% Q4'12
19%
18%
16%
9%
9%
11%
10%
10%
9%
Q1'13
Q2'13
Q3'13
Q4'13
7%
General & Administrative
Marketing & Sales 12%
19%
12%
11%
11%
12%
10%
10%
9%
Q3'13
Q4'13
Q4'12
10%
8%
10%
10%
8%
7%
6%
Q1'13
Q2'13
Q3'13
Q4'13
14
Income (Loss) from Operations GAAP Income (Loss) from Operations (in millions)
$548
$381
Q4'11
Q1'12
($743) Q2'12
$377
$523
$373
Q3'12
Q4'12
Q1'13
$562
Q2'13
$736
Q3'13
$1,133
Q4'13
Non-GAAP Income from Operations (in millions) $1,459 $624
Q4'11
$485
$515
$525
Q1'12
Q2'12
Q3'12
$736
Q4'12
$563
Q1'13
$794
Q2'13
$987
Q3'13
Q4'13
Non-GAAP income from operations excludes share-based compensation expense and payroll tax expenses related to share-based compensation—see the Appendix for a reconciliation of this non-GAAP measure to GAAP income (loss) from operations.
15
Operating Margin GAAP Operating Margin 48%
36%
30%
33%
26%
31%
37%
44%
Q3'12
Q4'12
Q1'13
Q2'13
Q3'13
Q4'13
(63%) Q4'11
Q1'12
Q2'12
Non-GAAP Operating Margin 55%
Q4'11
46%
43%
42%
46%
Q1'12
Q2'12
Q3'12
Q4'12
39%
Q1'13
44%
Q2'13
49%
Q3'13
56%
Q4'13
Non-GAAP operating margin excludes share-based compensation expense and payroll tax expenses related to share-based compensation—see the Appendix for a reconciliation of this non-GAAP measure to GAAP operating margin.
16
Effective Tax Rate GAAP Effective Tax Rate ($ in millions) GAAP income before provision for income taxes GAAP provision for from income taxes Effective Tax Rate
Q4 2012 $ 505 441 87%
Q1 2013 $ 353 134 38%
Q2 2013 $ 545 212 39%
Q3 2013 $ 726 301 41%
Q4 2013 $ 1,130 607 54%
FY 2012 494 441 89%
FY 2013 2,754 1,254 46%
FY 2012 2,217 900 41%
FY 2013 3,753 1,551 41%
Non-GAAP Effective Tax Rate ($ in millions) Non-GAAP income before provision for income taxes Non-GAAP provision for income taxes Effective Tax Rate
Q4 2012 718 292 41%
Q1 2013 543 231 43%
Q2 2013 777 289 37%
Q3 2013 977 356 36%
Q4 2013 1,456 676 46%
Q4’12 GAAP effective tax rate was influenced by significant share-based compensation expense resulting from our initial public offering, a portion of which is not tax-deductible—see the Appendix for a reconciliation of this non-GAAP measure to GAAP effective tax rate.
17
Net Income (Loss) GAAP Net Income (Loss) (in millions)
$302
Q4'11
$205
Q1'12
$64 ($157)
($59)
Q2'12
Q3'12
Q4'12
$219
$333
$425
$523
Q1'13
Q2'13
Q3'13
Q4'13
Non-GAAP Net Income (in millions)
$360
$287
$295
$311
Q4'11
Q1'12
Q2'12
Q3'12
$426
Q4'12
$312
Q1'13
$488
Q2'13
$621
Q3'13
$780
Q4'13
Non-GAAP net income excludes share-based compensation expense, payroll tax expenses related to share-based compensation, and related income tax adjustments—see the Appendix for a reconciliation of this non-GAAP measure to GAAP net income (loss).
18
Diluted Earnings (Loss) Per Share GAAP Diluted EPS
$0.14
Q4'11
$0.09
Q1'12
$0.03 ($0.08) Q2'12
$0.09
$0.13
$0.17
$0.20
($0.02) Q3'12
Q4'12
Q1'13
Q2'13
Q3'13
Q4'13
Non-GAAP Diluted EPS
$0.15
Q4'11
$0.12
$0.12
$0.12
Q1'12
Q2'12
Q3'12
$0.17
Q4'12
$0.19
$0.25
$0.31
$0.12
Q1'13
Q2'13
Q3'13
Q4'13
Non-GAAP diluted EPS excludes share-based compensation expense, payroll tax expenses related to share-based compensation, and related income tax adjustments—see the Appendix for a reconciliation of this non-GAAP measure to GAAP diluted EPS.
19
Capital Investments In Millions $1,575
Property and equipment acquired under capital leases Purchases of property
$340
$1,373
and equipment
$1,079 $473 $1,235
$483 $287 $89 $198
$483
Q4'12
Q4'13 Quarterly
$1,362
$606
2011
2012
2013
Annual
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Appendix
Reconciliations Income (Loss) from Operations (in millions) GAAP income (loss) from operations Share-based compensation expense Payroll tax expenses related to share-based compensation Non-GAAP income from operations
Q4'11 548 76 $ 624
$
Q1'12 381 103 1 $ 485
$
Operating Margin GAAP operating margin Share-based compensation expense Payroll tax expenses related to share-based compensation Non-GAAP operating margin
Q4'11 48% 7% 0% 55%
Q1'12 36% 10% 0% 46%
Net Income (Loss) (in millions) GAAP net income (loss) Share-based compensation expense Payroll tax expenses related to share-based compensation Income tax adjustments Non-GAAP net income
Q4'11 302 76 (18) $ 360
Q1'12 205 103 1 (22) $ 287
Diluted Earnings (Loss) Per Share GAAP diluted earnings (loss) per share Net income attributable to participating securities Non-GAAP adjustments to net income (loss) Non-GAAP adjustments to diluted shares Non-GAAP diluted earnings per share
$
Q4'11 0.14 0.05 0.04 (0.08) $ 0.15
$
$
Q1'12 0.09 0.04 0.05 (0.06) $ 0.12
$
Q2'12 (743) 1,106 152 $ 515
$
Q3'12 377 179 (31) $ 525
$
Q4'12 523 184 29 $ 736
$
Q2'12 (63%) 93% 13% 43%
Q3'12 30% 14% (2%) 42%
Q4'12 33% 12% 2% 46%
Q2'12 (157) 1,106 152 (806) $ 295
Q3'12 (59) 179 (31) 222 $ 311
Q4'12 64 184 29 149 $ 426
$
Q2'12 (0.08) 0.24 (0.04) $ 0.12
$
$
Q3'12 (0.02) 0.15 (0.01) $ 0.12
$
$
Q4'12 0.03 0.14 $ 0.17
$
Q1'13 373 170 20 $ 563
$
Q2'13 562 224 8 $ 794
$
Q3'13 736 239 12 $ 987
Q4'13 $ 1,133 273 53 $ 1,459
FY2012 $ 538 1,572 151 $ 2,261
FY2013 $ 2,804 906 93 $ 3,803
$
Q1'13 26% 12% 1% 39%
Q2'13 31% 12% 0% 44%
Q3'13 37% 12% 1% 49%
Q4'13 44% 11% 2% 56%
FY2012 11% 31% 3% 44%
FY2013 36% 12% 1% 48%
Q1'13 219 170 20 (97) $ 312
Q2'13 333 224 8 (77) $ 488
Q3'13 425 239 12 (55) $ 621
Q4'13 523 273 53 (69) $ 780
FY2012 $ 53 1,572 151 (459) $ 1,317
FY2013 $ 1,500 906 93 (297) $ 2,202
Q4'13 0.20 0.11 $ 0.31
FY2012 $ 0.01 0.01 0.59 (0.08) $ 0.53
FY2013 $ 0.60 0.28 $ 0.88
$
Q1'13 0.09 0.03 $ 0.12
$
$
Q2'13 0.13 0.06 $ 0.19
$
$
Q3'13 0.17 0.08 $ 0.25
$
$
$
22
Reconciliations (continued) Effective Tax Rate (in millions) GAAP income before provision for income taxes GAAP provision for income taxes GAAP effective tax rate GAAP income before provision for income taxes Share-based compensation and related payroll tax expenses Non-GAAP income before provision for income taxes Non-GAAP provision for income taxes Non-GAAP effective tax rate
$
$ $
Q4'12 505 441 87% 505 213 718 292 41%
$
$ $
Q1'13 353 134 38% 353 190 543 231 43%
$
$ $
Q2'13 545 212 39% 545 232 777 289 37%
$
$ $
Q3'13 726 301 41%
Q4'13 $ 1,130 607 54%
FY2012 $ 494 441 89%
FY2013 $ 2,754 1,254 46%
726 251 977 356 36%
$ 1,130 326 $ 1,456 676 46%
$
$ 2,754 999 $ 3,753 1,551 41%
494 1,723 $ 2,217 900 41%
23
Reconciliations (continued) Free Cash Flow (in millions) Net cash provided by operating activities Purchases of property and equipment Property and equpiment acquired under capital leases Free Cash Flow
Q4'11 510 185 80 $ 245 $
Q1'12 441 453 38 $ (50) $
Q2'12 240 413 52 $ (225) $
Q3'12 250 171 161 $ (82) $
Q4'12 681 198 89 $ 394 $
Q1'13 719 327 11 $ 381 $
Q2'13 $ 1,322 268 $ 1,054
Q3'13 950 284 $ 666 $
Q4'13 $ 1,231 483 $ 748
FY2012 $ 1,612 1,235 340 $ 37
FY2013 $ 4,222 1,362 11 $ 2,849
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Limitations of Key Metrics and Other Data The numbers for our key metrics, which include our daily active users (DAUs), mobile DAUs, monthly active users (MAUs), mobile MAUs, and average revenue per user (ARPU), as well as certain other metrics such as mobile-only MAUs, are calculated using internal company data based on the activity of user accounts. While these numbers are based on what we believe to be reasonable estimates of our user base for the applicable period of measurement, there are inherent challenges in measuring usage of our products across large online and mobile populations around the world. For example, there may be individuals who maintain one or more Facebook accounts in violation of our terms of service, despite our efforts to detect and suppress such behavior. We estimate, for example, that “duplicate” accounts (an account that a user maintains in addition to his or her principal account) may have represented between approximately 4.3% and 7.9% of our worldwide MAUs in 2013. We also seek to identify “false” accounts, which we divide into two categories: (1) user-misclassified accounts, where users have created personal profiles for a business, organization, or non-human entity such as a pet (such entities are permitted on Facebook using a Page rather than a personal profile under our terms of service); and (2) undesirable accounts, which represent user profiles that we determine are intended to be used for purposes that violate our terms of service, such as spamming. In 2013, for example, we estimate user-misclassified accounts may have represented between approximately 0.8% and 2.1% of our worldwide MAUs and undesirable accounts may have represented between approximately 0.4% and 1.2% of our worldwide MAUs. We believe the percentage of accounts that are duplicate or false is meaningfully lower in developed markets such as the United States or the United Kingdom and higher in developing markets such as India and Turkey. However, these estimates are based on an internal review of a limited sample of accounts and we apply significant judgment in making this determination, such as identifying names that appear to be fake or other behavior that appears inauthentic to the reviewers. As such, our estimation of duplicate or false accounts may not accurately represent the actual number of such accounts. We are continually seeking to improve our ability to identify duplicate or false accounts and estimate the total number of such accounts, and such estimates may be affected by improvements or changes in our methodology. Due to inherent variability in such estimates at particular dates of measurement, we disclose these estimates as a range over a recent period.
25
Limitations of Key Metrics and Other Data (cont.) Our data limitations may affect our understanding of certain details of our business. For example, while user-provided data indicates a decline in usage among younger users, this age data is unreliable because a disproportionate number of our younger users register with an inaccurate age. In the third quarter of 2013, we worked with third parties to develop models to analyze user data by age in the United States. These models suggested that usage by U.S. teens overall was stable, but that DAUs among younger U.S. teens had declined. The data and models we are using are not precise and our understanding of usage by age group may not be complete. Some of our historical metrics through the second quarter of 2012 were also affected by applications on certain mobile devices that automatically contact our servers for regular updates with no user action involved, and this activity can cause our system to count the user associated with such a device as an active user on the day such contact occurs. For example, we estimate that less than 5% of our estimated worldwide DAUs as of December 31, 2011 and 2010 resulted from this type of automatic mobile activity, and that this type of activity had a substantially smaller effect on our estimate of worldwide MAUs and mobile MAUs. The impact of this automatic activity on our metrics varies by geography because mobile usage varies in different regions of the world. In addition, our data regarding the geographic location of our users is estimated based on a number of factors, such as the user’s IP address and self-disclosed location. These factors may not always accurately reflect the user’s actual location. For example, a mobile-only user may appear to be accessing Facebook from the location of the proxy server that the user connects to rather than from the user’s actual location. The methodologies used to measure user metrics may also be susceptible to algorithm or other technical errors. For example, in early June 2012, we discovered an error in the algorithm we used to estimate the geographic location of our users that affected our attribution of certain user locations for the period ended March 31, 2012. While this issue did not affect our overall worldwide DAU and MAU numbers, it did affect our attribution of users across different geographic regions. We estimate that the number of MAUs as of March 31, 2012 for the United States & Canada region was overstated as a result of the error by approximately 3% and this overstatement was offset by understatements in other regions. The number of such users for the period ended March 31, 2012 presented herein reflect the reclassification to more correctly attribute users by geographic region. Our estimates for revenue by user location are also affected by these factors. We regularly review and may adjust our processes for calculating these metrics to improve their accuracy. In addition, our MAU and DAU estimates will differ from estimates published by third parties due to differences in methodology. For example, some third parties are not able to accurately measure mobile users or do not count mobile users for certain user groups or at all in their analyses. The numbers of DAUs, mobile DAUs, MAUs, mobile MAUs, and mobile-only MAUs represented in these slides, as well as ARPU, do not include users of Instagram unless they would otherwise qualify as such users, respectively, based on their other activities on Facebook.
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