Quarterly Earnings Slides Q4 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.
Monthly Active Users (MAUs) Millions of MAUs Rest of World Asia Europe US & Canada
680 608 133 138
161 156
739 183 174
800 207
845 225
901 245
1,007
955
288
268
1,056
304
277
298
196
212
234
255
229
239
246
253
261
183
201
212
221
154
163
169
176
179
183
186
189
193
Q4'10
Q1'11
Q2'11
Q3'11
Q4'11
Q1'12
Q2'12
Q3'12
Q4'12
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. 3
Daily Active Users (DAUs) Millions of DAUs Rest of World
526
Asia Europe
417
US & Canada
372 327 58 64
74 72
87 85
457 100
483 109
126
584
552
152
139
119
129
141
618 161
153
98
105
143
152
154
160
169
107
120
127
135
99
105
117
124
126
129
130
132
135
Q4'10
Q1'11
Q2'11
Q3'11
Q4'11
Q1'12
Q2'12
Q3'12
Q4'12
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%
DAUs / 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. 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. 4
Mobile Monthly Active Users (Mobile MAUs) Millions of Mobile MAUs 680 604 543 488 432 376 245
Q4'10
288
Q1'11
325
Q2'11
Q3'11
Q4'11
Q1'12
Q2'12
Q3'12
Q4'12
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.
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Mobile Only Monthly Active Users (Mobile Only MAUs) Millions of Mobile Only MAUs 157 126 102 83 58
Q4'11
Q1'12
Q2'12
Q3'12
Q4'12
Mobile Only MAUs are mobile MAUs that accessed Facebook solely through mobile apps or our mobile website.
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Revenue $5,089
Millions of Dollars
$1,585 $810
Payments and other fees Advertising
$256
$1,131 $895 $731
$731
$76
$94
$119
$954
$188
$1,184 $1,058
$3,711
$176
$557
$192
$186
$156 $1,329 $943
$655
$1,262
$776
$798
$872
$992
$1,974 $106
$1,086
$637
$4,279 $3,154
$1,868
Q4'10 Q1'11 Q2'11 Q3'11 Q4'11 Q1'12 Q2'12 Q3'12 Q4'12
Quarterly
2010
2011
2012
Annual
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Revenue by User Geography Millions of Dollars
$1,585
Rest of World Europe US & Canada
$731
$218
$229
$412
$47 $62
$394
$497
$167
Asia
$731 $43 $58
$5,089
$1,131 $895 $65 $82 $275
$471
$954 $78 $104
$87
$1,058 $113
$115
$135
$361
$290
$482
$1,184
$567
$87
$605
$1,262 $198
$3,711 $277
$130 $154
$363
$440
$1,455
$118 $328
$525
$346
$341
$1,974
$1,155
$101 $148
$590
$637
$780
Q4'10 Q1'11 Q2'11 Q3'11 Q4'11 Q1'12 Q2'12 Q3'12 Q4'12
$577
$2,532 $1,914
$1,146
2010
Quarterly
2011
2012
Annual
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.
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Advertising Revenue by User Geography Millions of Dollars
$1,329
Rest of World
$156
Asia
$1,086
Europe US & Canada
$655 $41 $53
$637 $44 $56
$201
$206
$359
$332
Q4'10
Q1'11
$943 $776 $61 $74
$798 $71 $88
$245
$245
$394
$395
Q2'11
Q3'11
$79 $95 $306
$992 $872
$104
$79 $99
$115
$274
$294
$120
$168
$133 $374 $295
$462
$419
$479
$538
Q4'11
Q1'12
Q2'12
Q3'12
$631
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 advertiser or developer.
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Payments & Other Revenue by User Geography Millions of Dollars
$256 $11
Rest of World
$30
Asia Europe US & Canada
$76 $2 $5 $17
$94 $3 $6 $23
$53
$62
Q4'10
Q1'11
$119 $4 $8
$156 $7 $16
$188 $8 $20
$186 $8 $19
$192 $9 $20
$55
$54
$52
$176 $10 $21
$66
$46
$45
$30 $149 $77
$87
Q2'11
Q3'11
$105
$106
$111
Q4'11
Q1'12
Q2'12
$99
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 advertiser or developer.
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Payments Revenue Recognition Timing Payments terms and conditions provide for a 30day 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.
June
Jul
Aug
Q 3 2012
Sept
Oct
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. 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.)
Nov
Q 4 2012
Dec
Jan
Feb
Mar
Q1 2013
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Average Revenue per User (ARPU) Worldwide $1.38
US & Canada
$1.54 $5.02
$1.28
$1.29
$3.20
$3.20
$5.32
$3.40 $4.08 $13.58
$2.90 $11.33
$3.97 $8.34
$1.21
Q4'11 Q1'12 Q2'12 Q3'12 Q4'12
Europe $1.60
2010
2011
Q4'11 Q1'12 Q2'12 Q3'12 Q4'12
2012
Asia
$1.71
$1.40 $1.43 $1.37
$5.46
$5.91
$2.35
$0.44
$0.41
2012
$0.47 $0.56
$1.49
2011
2012
2010
$1.50
$0.94
$0.69
Q4'11 Q1'12 Q2'12 Q3'12 Q4'12
$1.84
$0.37
$2.05
$0.56 $0.53 $0.55 $0.58
2010
2011
Rest of World
$3.75
Q4'11 Q1'12 Q2'12 Q3'12 Q4'12
2010
2011
2012
Q4'11 Q1'12 Q2'12 Q3'12 Q4'12
2010
2011
2012
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. 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. 12
Share-Based Compensation Expense $1,106
Millions of Dollars Pre-2011 RSUs Post-2011 RSUs Options & Other
$986
$64
$70
$76
$103
$6
$7
$58
$59
$74
$97
Q4'10
Q1'11
Q2'11
Q3'11
Q4'11
Q1'12
$179 $28
$184 $24
$113
$138
$137
Q2'12
Q3'12
Q4'12
Q4 2012 expenses are estimates and exclude any potential impact of future acquisitions.
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Expenses as a % of Revenue Share-based compensation + Payroll tax related to share-based compensation
Cost of Revenue
Research & Development 31%
26% 22%
22%
Q4'11
26%
Q1'12
25%
Q2'12
26%
25%
25%
24%
Q3'12
Q4'12
Marketing & Sales
14%
60%
19%
19%
11%
14%
7% Q4'11
9%
9%
11%
10%
Q1'12
Q2'12
Q3'12
Q4'12
General & Administrative
33%
11%
All other expenses
39%
13%
12%
9%
12%
11%
12%
10%
Q4'11
Q1'12
Q2'12
Q3'12
Q4'12
8%
10%
7%
8%
Q4'11
Q1'12
12%
11%
11%
10%
9%
Q2'12
Q3'12
Q4'12
We have reclassified certain prior period amounts in marketing and sales to general and administrative expense to conform to our current period presentation. These reclassifications did not affect revenue, total costs and expenses, income (loss) from operations, or net (loss) income.
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GAAP Income (Loss) from Operations & Margin Income (Loss) from Operations ($M) $437
$388
$407
$414
$548
$381
$377
$523
($743) Q4'10
Q1'11
Q2'11
Q3'11
Q4'11
45%
43%
48%
Q1'12
Q2'12
Q3'12
Q4'12
30%
33%
Q3'12
Q4'12
Operating Margin 60%
53%
36%
(63%) Q4'10
Q1'11
Q2'11
Q3'11
Q4'11
Q1'12
Q2'12
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Effective Tax Rate Q1 2012
(in millions)
Revenue
$
1,058
Costs and expenses: Cost of revenue Research and development Marketing and sales General and administrative Total costs and expenses
277 153 143 104 677
Income from operations
381
Interest and other income (expense), net Interest expense Other income (expense), net Income (loss) before provision for income taxes Provision for (benefit from) income taxes Net income (loss)
(13) 14 382 177 205
Effective Tax Rate
$
46%
Q2 2012 $
1,184
Q3 2012 $
367 705 392 463 1,927
$
1,262
Q4 2012 $
1,585
2011 $
3,711
2012 $
5,089
322 244 168 151 885
398 297 193 174 1,062
860 388 393 314 1,955
1,364 1,399 896 892 4,551
(743)
377
523
1,756
538
(10) (12) (765) (608) (157)
(11) 6 372 431 (59)
(16) (2) 505 441 64
(42) (19) 1,695 695 1,000
(51) 7 494 441 53
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
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GAAP Net Income (Loss) Millions of Dollars $302 $251
$233
$240
$227
$205
$64
($59) ($157) Q4'10
Q1'11
Q2'11
Q3'11
Q4'11
Q1'12
Q2'12
Q3'12
Q4'12
17
Non-GAAP Net Income Millions of Dollars $1,317 $1,164
$360
$426
Q4 2011 Q4 2012 Quarterly
2011
2012 Annual
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.
18
Capital Investments Millions of Dollars
$1,575
Property and equipment acquired
$340
under capital leases Purchases of property and equipment
$1,079
$473 $1,235
$510 $217 $606 $89 $56 $33
$293
2009
2010
2011
2012
Annual
19
Employees Period-end Headcount
4,619
3,200 2,127 1,218
2009
2010
2011
2012
Annual
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Appendix
Reconciliations
GAAP net income Share-based compensation expense Payroll tax expenses related to share-based compensation Income tax adjustments Non-GAAP net income
Three Months Ended December 31, 2011 2012 $ 302 $ 64 76 184 29 (18) 149 $ 360 $ 426
Year Ended December 31, 2011 2012 $ 1,000 $ 53 217 1,572 7 151 (60) (459) $ 1,164 $ 1,317
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Limitations of Key Metrics The 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 usermisclassified 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.
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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.
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