facebook q4 2012 investor slide deck
DESCRIPTION
Facebook's Q4 2012 financials.TRANSCRIPT
Quarterly Earnings SlidesQuarterly Earnings SlidesQuarterly Earnings SlidesQuarterly Earnings SlidesQ4 2012
Safe Harbor
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. Please also see the appendix to this
presentation for information concerning limitations of our key user metrics.
3
Monthly Active Users (MAUs)
Please see Facebook's Form 10-K for the year ended December 31, 2012 for definitions of user activity used to determine the number of our MAUs, DAUs and mobile MAUs. The number of MAUs, DAUs, and mobile MAUs do not include Instagram users unless such users would otherwise qualify as MAUs, DAUs, and mobile MAUs based on activity that is shared back to Facebook.
In 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 first quarter of 2012. The first quarter of 2012 user metrics reflect a reclassification to more correctly attribute users by geographic region.
154 163 169 176 179 183 186 189 193
183 201 212 221 229 239 246 253 261
138156
174196 212
234 255 277 298133
161183
207225
245268
288304
608
680739
800845
901955
1,0071,056
Q4'10 Q1'11 Q2'11 Q3'11 Q4'11 Q1'12 Q2'12 Q3'12 Q4'12
Millions of MAUsRest of World
Asia
Europe
US & Canada
4
Daily Active Users (DAUs)
99 105 117 124 126 129 130 132 135
107 120 127 135 143 152 154 160 16964
7285
98 105119 129 141
153
5874
87100
109126
139152
161
327
372
417457
483
526552
584618
Q4'10 Q1'11 Q2'11 Q3'11 Q4'11 Q1'12 Q2'12 Q3'12 Q4'12DAUs / MAUs
Q4'10 Q1'11 Q2'11 Q3'11 Q4'11 Q1'12 Q2'12 Q3'12 Q4'12
54% 55% 56% 57% 57% 58% 58% 58% 59%
Millions of DAUsRest of World
Asia
Europe
US & Canada
Please see Facebook's Form 10-K for the year ended December 31, 2012 for definitions of user activity used to determine the number of our MAUs, DAUs and mobile MAUs. The number of MAUs, DAUs, and mobile MAUs do not include Instagram users unless such users would otherwise qualify as MAUs, DAUs, and mobile MAUs based on activity that is shared back to Facebook.
For non-worldwide DAU user numbers presented for the periods marked March 31, 2012 and June 30, 2012, the figures represent an average of the first 25 days of the period and the last 27 days of the period, respectively, due to the algorithm error described in the MAU note on slide 3. These average numbers do not meaningfully differ from the average numbers when calculated over a full month.
5
Mobile Monthly Active Users (Mobile MAUs)
Millions of Mobile MAUs
Please see Facebook's Form 10-K for the year ended December 31, 2012 for definitions of user activity used to determine the number of our MAUs, DAUs and mobile MAUs. The number of MAUs, DAUs, and mobile MAUs do not include Instagram users unless such users would otherwise qualify as MAUs, DAUs, and mobile MAUs based on activity that is shared back to Facebook.
245 288
325 376
432
488
543
604
680
Q4'10 Q1'11 Q2'11 Q3'11 Q4'11 Q1'12 Q2'12 Q3'12 Q4'12
6
Mobile Only Monthly Active Users (Mobile Only MAUs)
Millions of Mobile Only MAUs
Mobile Only MAUs are mobile MAUs that accessed Facebook solely through mobile apps or our mobile website.
58
83
102
126
157
Q4'11 Q1'12 Q2'12 Q3'12 Q4'12
Payments and other fees
Advertising
7
Revenue
Millions of Dollars
$655 $637$776 $798
$943$872
$992$1,086
$1,329$76 $94
$119$156
$188$186
$192
$176
$256
$731 $731
$895$954
$1,131$1,058
$1,184$1,262
$1,585
Q4'10 Q1'11 Q2'11 Q3'11 Q4'11 Q1'12 Q2'12 Q3'12 Q4'12
$1,868
$3,154
$4,279$106
$557
$810
$1,974
$3,711
$5,089
2010 2011 2012
Quarterly Annual
Rest of World
Asia
Europe
US & Canada
8
Revenue by User Geography
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 advertiser or developer.
Millions of Dollars
$412 $394$471 $482
$567 $525 $590 $637$780
$218 $229
$275 $290
$361$328
$346$341
$440
$58 $62
$82$104
$115$118
$135$154
$198
$43 $47
$65$78
$87$87
$113$130
$167
$731 $731
$895$954
$1,131$1,058
$1,184$1,262
$1,585
Q4'10 Q1'11 Q2'11 Q3'11 Q4'11 Q1'12 Q2'12 Q3'12 Q4'12
Quarterly
$1,146
$1,914
$2,532$577
$1,155
$1,455
$148
$363
$605
$101
$277
$497
$1,974
$3,711
$5,089
2010 2011 2012
Annual
Rest of World
Asia
Europe
US & Canada
9
Advertising Revenue by User Geography
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 advertiser or developer.
$359 $332$394 $395
$462 $419$479
$538$631
$201 $206
$245 $245
$306$274
$294$295
$374
$53 $56
$74 $88
$95
$99
$115$133
$168
$41 $44
$61 $71
$79$79
$104
$120
$156
$655$637
$776 $798
$943$872
$992
$1,086
$1,329
Q4'10 Q1'11 Q2'11 Q3'11 Q4'11 Q1'12 Q2'12 Q3'12 Q4'12
Millions of Dollars
Rest of World
Asia
Europe
US & Canada
10
Payments & Other Revenue by User Geography
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 advertiser or developer.
Millions of Dollars
$53 $62$77 $87
$105 $106 $111$99
$149$17
$23
$30
$45
$55 $54 $52
$46
$66
$5
$6
$8
$16
$20 $19 $20
$21
$30
$2
$3
$4
$7
$8 $8 $9
$10
$11
$76$94
$119
$156
$188 $186 $192
$176
$256
Q4'10 Q1'11 Q2'11 Q3'11 Q4'11 Q1'12 Q2'12 Q3'12 Q4'12
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Payments Revenue Recognition Timing
� As of Q4 2012, we had 24 months of historical transactional information. As a result, starting in Q4 2012 we recorded all Payments revenues in the month the transaction occurs, net of estimated refunds or chargebacks.
� Payments terms and conditions provide for a 30-day claim period following a Payments transaction during which the customer may dispute the transaction.
� In Q3 2012 and prior, due to insufficient transaction history, Payments revenues were recognized after the claim period lapsed. � For example, transactions occurring in June
were recognized as revenue 30 days later, in July, and included in Q3 2012 revenue. Therefore, Q3 2012 revenue reflects transactions that occurred during the months of June, July and August.
Q 3 2012 Q 4 2012 Q1 2013
June Jul Aug Sept Oct Nov Jan MarFebDec
This change resulted in a one-time increase in Payments revenue in the fourth quarter as we recognized revenue from an extra month of payments transactions (those occurring in September through December.)
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Average Revenue per User (ARPU)
$1.60
$1.40 $1.43 $1.37
$1.71
Q4'11 Q1'12 Q2'12 Q3'12 Q4'12
Europe
$3.20
$2.90
$3.20$3.40 $4.08
Q4'11 Q1'12 Q2'12 Q3'12 Q4'12
US & Canada
$0.56 $0.53 $0.55 $0.58$0.69
Q4'11 Q1'12 Q2'12 Q3'12 Q4'12
Asia
Revenue by user geography is geographically apportioned based on our estimation of the geographic location of our users when they performa 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 advertiser or developer. The ARPU amount for US & Canada region in Q1 2012 reflects an adjustment based on the reclassification of certain users between geographical regions to more correctly attribute users by geographic region. Please see Facebook's Form 10-K for the year ended December 31, 2012 for definitions of ARPU and annual ARPU.
$1.38
$1.21
$1.28$1.29
$1.54
Q4'11 Q1'12 Q2'12 Q3'12 Q4'12
Worldwide
$0.41
$0.37
$0.44 $0.47 $0.56
Q4'11 Q1'12 Q2'12 Q3'12 Q4'12
2010 2011 2012 2010 2011 2012
2010 2011 2012 2010 2011 2012 2010 2011 2012
$3.97
$5.02$5.32
$11.33
$8.34
$13.58
$3.75
$5.46$5.91
$1.49
$2.05
$2.35
$0.94
$1.50
$1.84
Rest of World
Share-Based Compensation Expense
13
$58 $59 $74 $97 $113 $138 $137
$986
$28 $24
$6 $7
$64 $70 $76 $103
$1,106
$179 $184
Q4'10 Q1'11 Q2'11 Q3'11 Q4'11 Q1'12 Q2'12 Q3'12 Q4'12
Millions of DollarsPre-2011 RSUs
Post-2011 RSUs
Options & Other
Q4 2012 expenses are estimates and exclude any potential impact of future acquisitions.
14
Expenses as a % of Revenue
9% 12% 11% 12% 10%
11%14%
33%
13% 12%
Q4'11 Q1'12 Q2'12 Q3'12 Q4'12
Marketing & Sales
22%26% 25% 25% 25%
22%
26%
31%
26% 26%
Q4'11 Q1'12 Q2'12 Q3'12 Q4'12
Cost of Revenue
7% 9% 9% 11% 10%
11% 14%
60%
19% 19%
Q4'11 Q1'12 Q2'12 Q3'12 Q4'12
Research & Development
7% 8% 11% 10% 9%
8% 10%
39%
12% 11%
Q4'11 Q1'12 Q2'12 Q3'12 Q4'12
General & Administrative
We have reclassified certain prior period amounts in marketing and sales to general and administrative expense to conform to our current period presentation. These reclassifications did not affect revenue, total costs and expenses, income (loss) from operations, or net (loss) income.
Share-based compensation + Payroll tax related to share-based compensation All other expenses
15
GAAP Income (Loss) from Operations & Margin
$437 $388 $407 $414 $548
$381
($743)
$377 $523
Q4'10 Q1'11 Q2'11 Q3'11 Q4'11 Q1'12 Q2'12 Q3'12 Q4'12
Income (Loss) from Operations ($M)
60% 53% 45% 43% 48% 36%
(63%)
30% 33%
Q4'10 Q1'11 Q2'11 Q3'11 Q4'11 Q1'12 Q2'12 Q3'12 Q4'12
Operating Margin
16
Effective Tax Rate
(in millions) Q1 Q2 Q3 Q4
2012 2012 2012 2012 2011 2012
Revenue 1,058$ 1,184$ 1,262$ 1,585$ 3,711$ 5,089$
Costs and expenses:
Cost of revenue 277 367 322 398 860 1,364
Research and development 153 705 244 297 388 1,399
Marketing and sales 143 392 168 193 393 896
General and administrative 104 463 151 174 314 892
Total costs and expenses 677 1,927 885 1,062 1,955 4,551
Income from operations 381 (743) 377 523 1,756 538
Interest and other income (expense), net
Interest expense (13) (10) (11) (16) (42) (51)
Other income (expense), net 14 (12) 6 (2) (19) 7
Income (loss) before provision for income taxes 382 (765) 372 505 1,695 494
Provision for (benefit from) income taxes 177 (608) 431 441 695 441
Net income (loss) 205$ (157)$ (59)$ 64$ 1,000$ 53$
Effective Tax Rate 46% 79% 116% 87% 41% 89%
Q2 through Q4 effective tax rates were influenced by significant share-based compensation expense resulting from our initial public offering, a portion of which is not tax-deductible
17
GAAP Net Income (Loss)
$251 $233 $240 $227
$302
$205
($157)
($59)
$64
Q4'10 Q1'11 Q2'11 Q3'11 Q4'11 Q1'12 Q2'12 Q3'12 Q4'12
Millions of Dollars
18
Non-GAAP Net Income
Millions of Dollars
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.
Quarterly Annual
$360 $426
$1,164
$1,317
Q4 2011 Q4 2012 2011 2012
19
Capital Investments
Millions of DollarsProperty and equipment acquired
under capital leases
Purchases of property
and equipment
Annual
$33
$293
$606
$1,235
$56
$217
$473
$340
$89
$510
$1,079
$1,575
2009 2010 2011 2012
Period-end Headcount
20
Employees
Annual
1,218
2,127
3,200
4,619
2009 2010 2011 2012
AppendixAppendixAppendixAppendix
22
Reconciliations
2011 2012 2011 2012
GAAP net income 302$ 64$ 1,000$ 53$
Share-based compensation expense 76 184 217 1,572
Payroll tax expenses related to share-based compensation - 29 7 151
Income tax adjustments (18) 149 (60) (459)
Non-GAAP net income 360$ 426$ 1,164$ 1,317$
December 31, December 31,
Three Months Ended Year Ended
Limitations of Key MetricsThe numbers of our monthly active users (MAUs) and daily active users (DAUs) and average revenue per user
(ARPU) 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 approximately 5.0% of our worldwide MAUs as of December 31, 2012. 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. As of December 31, 2012, for example, we estimate user-
misclassified accounts may have represented approximately 1.3% of our worldwide MAUs and undesirable
accounts may have represented approximately 0.9% 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
Australia and higher in developing markets such as Indonesia 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.
23
Limitations of Key Metrics (continued)Some of our historical metrics through the second quarter of 2012 have also been 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 MAU number, it did affect our attribution of users to 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 these overstatements were offset by understatements in other
regions. In addition, 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 number of MAUs, DAUs, mobile MAUs, and ARPU discussed in these slides do not include users of Instagram
unless such users would otherwise quality as MAUs, DAUs, and mobile MAUs, respectively, based on activity that
is shared back to Facebook.
24