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Facebook's first-quarter 2013 earnings deck.

Facebook's first-quarter 2013 earnings deck.

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  • 1. Quarterly Earnings SlidesQ1 2013
  • 2. Non-GAAP MeasuresIn addition to U.S. GAAP financials, this presentation includes certain non-GAAP financial measures. Thesenon-GAAP measures are in addition to, not a substitute for or superior to, measures of financial performanceprepared in accordance with U.S. GAAP. A reconciliation of non-GAAP financial measures to the correspondingGAAP measures is provided in the appendix to this presentation.2
  • 3. 3Daily Active Users (DAUs)105 117 124 126 129 130 132 135 139120 127 135 143 152 154 160 169 179728598 105119 129 1411531677487100109126139152161180372417457483526552584618665Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q412 Q113DAUs / MAUsQ111 Q211 Q311 Q411 Q112 Q212 Q312 Q412 Q11355% 56% 57% 57% 58% 58% 58% 59% 60%Millions of DAUsRest of WorldAsiaEuropeUS & CanadaPlease see Facebooks Form 10-Q for the quarter ended March 31, 2013 for definitions of user activity used to determine the number of our MAUs, DAUs andmobile MAUs. The number of MAUs, DAUs, and mobile MAUs do not include Instagram users unless such users would otherwise qualify as MAUs, DAUs, andmobile MAUs based on activity that is shared back to Facebook.
  • 4. 4Monthly Active Users (MAUs)Please see Facebooks Form 10-Q for the quarter ended March 31, 2013 for definitions of user activity used to determine the number of our MAUs, DAUs andmobile MAUs. The number of MAUs, DAUs, and mobile MAUs do not include Instagram users unless such users would otherwise qualify as MAUs, DAUs, andmobile MAUs based on activity that is shared back to Facebook.163 169 176 179 183 186 189 193 195201 212 221 229 239 246 253 261 269156 174 196 212 234 255 277 298 3191611832072252452682883043276807398008459019551,0071,0561,110Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q412 Q113Millions of MAUsRest of WorldAsiaEuropeUS & Canada
  • 5. 5Mobile Monthly Active Users (Mobile MAUs)Millions of Mobile MAUsPlease see Facebooks Form 10-Q for the quarter ended March 31, 2013 for definitions of user activity used to determine the number of our MAUs, DAUsand 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.288325376432488543604680751Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q412 Q113
  • 6. 6Mobile Only Monthly Active Users (Mobile Only MAUs)Millions of Mobile Only MAUsMobile Only MAUs are mobile MAUs that accessed Facebook solely through mobile apps or our mobile website.83102126157189Q112 Q212 Q312 Q412 Q113
  • 7. Payments and other feesAdvertisingRevenueMillions of Dollars$637$776 $798$943$872$992$1,086$1,329$1,245$94$119$156$188$186$192$176$256$213$731$895$954$1,131$1,058$1,184$1,262$1,585$1,458Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q412 Q1137
  • 8. Rest of WorldAsiaEuropeUS & Canada8Revenue by User GeographyRevenue by user geography is geographically apportioned based on our estimation of the geographic location of our users when they perform arevenue-generating activity. This allocation differs from our revenue by geography disclosure in our consolidated financial statements whererevenue is geographically apportioned based on the location of the advertiser or developer.Millions of Dollars$394$471 $482$567 $525 $590 $637$780$679$229$275 $290$361$328$346$341$440$423$62$82$104$115$118$135$154$198$197$47$65$78$87$87$113$130$167$159$731$895$954$1,131$1,058$1,184$1,262$1,585$1,458Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q412 Q113
  • 9. Rest of WorldAsiaEuropeUS & Canada9Advertising Revenue by User GeographyRevenue by user geography is geographically apportioned based on our estimation of the geographic location of our users when they perform arevenue-generating activity. This allocation differs from our revenue by geography disclosure in our consolidated financial statements whererevenue is geographically apportioned based on the location of the advertiser or developer.$332$394 $395$462 $419 $479 $538$631$552$206$245 $245$306$274$294$295$374$367$56$74 $88$95$99$115$133$168$176$44$61 $71$79$79$104$120$156$150$637$776 $798$943$872$992$1,086$1,329$1,245Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q412 Q113Millions of Dollars
  • 10. $62$77 $87$105 $106 $111$99$149$127$23$30$45$55 $54 $52$46$66$56$6$8$16$20 $19 $20$21$30$21$3$4$7$8 $8 $9$10$11$9$94$119$156$188 $186 $192$176$256$213Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q412 Q113Rest of WorldAsiaEuropeUS & Canada10Payments & Other Revenue by User GeographyRevenue by user geography is geographically apportioned based on our estimation of the geographic location of our users when they perform arevenue-generating activity. This allocation differs from our revenue by geography disclosure in our consolidated financial statements whererevenue is geographically apportioned based on the location of the advertiser or developer.Millions of Dollars
  • 11. 11Average Revenue per User (ARPU)$1.17 $1.21 $1.18$1.46 $1.38$0.23 $0.21 $0.18$0.26$0.21$1.40 $1.43$1.37$1.71$1.60Q112 Q212 Q312 Q412 Q113Europe$0.44 $0.47 $0.50$0.58 $0.57$0.08 $0.08 $0.08$0.10 $0.07$0.53 $0.55 $0.58$0.69$0.64Q112 Q212 Q312 Q412 Q113AsiaRevenue 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 whererevenue is geographically apportioned based on the location of the advertiser or developer. Please see Facebook’s Form 10-Q for the quarterended March 31, 2013 for the definition of ARPU.$0.34$0.40 $0.43$0.53$0.48$0.03$0.03$0.04$0.04$0.03$0.37$0.44$0.47$0.56$0.50Q112 Q212 Q312 Q412 Q113Rest of World$1.00 $1.07 $1.11$1.29$1.15$0.21$0.21 $0.18$0.25$0.20$1.21$1.28 $1.29$1.54$1.35Q112 Q212 Q312 Q412 Q113Worldwide$2.32 $2.59 $2.87$3.30$2.85$0.58$0.60$0.53$0.78$0.65$2.90$3.20$3.40$4.08$3.50Q112 Q212 Q312 Q412 Q113US & CanadaPaymentsAdvertising
  • 12. Share-Based Compensation Expense12$58 $59 $74 $97 $113 $138 $137 $135$986$28 $24 $9$7$64 $70 $76$103$1,106$179 $184 $170Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q412 Q113(in millions)Pre-2011 RSUsPost-2011 RSUsOptions & Other
  • 13. 13Expenses as a % of Revenue12% 11% 12% 10% 12%14%33%13% 12% 14%Q112 Q212 Q312 Q412 Q113Marketing & Sales26% 25% 25% 24% 28%26%31%26% 25%28%Q112 Q212 Q312 Q412 Q113Cost of Revenue9% 9% 11% 10% 11%14%60%19% 19% 20%Q112 Q212 Q312 Q412 Q113Research & Development8% 11% 10% 9% 10%10%39%12% 11% 12%Q112 Q212 Q312 Q412 Q113General & AdministrativeShare-based compensation + Payroll tax related to share-based compensation All other expenses
  • 14. Income (Loss) from Operations$388 $407 $414$548$381($743)$377$523$373Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q412 Q113GAAP Income (Loss) from Operations (in millions)$396$477 $484$624$485 $515 $525$736$563Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q412 Q113Non-GAAP Income from Operations (in millions)14Non-GAAP income (loss) from operations excludes share-based compensation expense, payroll tax expenses related to share-basedcompensation, and related income tax adjustments—see the Appendix for a reconciliation of this non-GAAP measure to GAAP income (loss)from operations.
  • 15. 15Operating Margin54% 53% 51% 55%46% 43% 42% 46%39%Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q412 Q113Non-GAAP Operating Margin53% 45% 43% 48% 36%(63%)30% 33% 26%Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q412 Q113GAAP Operating MarginNon-GAAP operating margin excludes share-based compensation expense, payroll tax expenses related to share-based compensation, andrelated income tax adjustments—see the Appendix for a reconciliation of this non-GAAP measure to GAAP operating margin.
  • 16. 16Effective Tax RateQ2’12 through Q4’12 GAAP effective tax rates were influenced by significant share-based compensation expense resulting from our initial publicoffering, a portion of which is not tax-deductibleGAAP Effective Tax RateNon-GAAP Effective Tax RateQ1 Q2 Q3 Q4 Q1 FY FY($ in millions) 2012 2012 2012 2012 2013 2011 2012GAAP income (loss) before provision for income taxes 382 (765) 372 505 353 1,695 494GAAP provision for (benefit from) income taxes 177 (608) 431 441 134 695 441Effective Tax Rate 46% 79% 116% 87% 38% 41% 89%Q1 Q2 Q3 Q4 Q1 FY FY($ in millions) 2012 2012 2012 2012 2013 2011 2012Non-GAAP income before provision for income taxes 486 493 520 718 543 1,919 2,217Non-GAAP provision for income taxes 199 198 209 292 231 755 900Effective Tax Rate 41% 40% 40% 41% 43% 39% 41%
  • 17. 17Net Income (Loss)$233 $240 $227$302$205($157)($59)$64$219Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q412 Q113Non-GAAP net income excludes share-based compensation expense, payroll tax expenses related to share-based compensation, and relatedincome tax adjustments—see the Appendix for a reconciliation of this non-GAAP measure to GAAP net income.$247 $285 $273$360$287 $295 $311$426$312Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q412 Q113GAAP Net Income (Loss) (in millions)Non-GAAP Net Income (in millions)
  • 18. 18Diluted EPS$0.11 $0.11 $0.10$0.14$0.09($0.08)($0.02)$0.03$0.09Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q412 Q113$0.11 $0.12 $0.12$0.15$0.12 $0.12 $0.12$0.17$0.12Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q412 Q113GAAP Diluted EPSNon-GAAP Diluted EPSNon-GAAP diluted EPS excludes share-based compensation expense, payroll tax expenses related to share-based compensation, and relatedincome tax adjustments—see the Appendix for a reconciliation of this non-GAAP measure to GAAP diluted EPS.
  • 19. 19Capital InvestmentsMillions of DollarsProperty and equipment acquiredunder capital leasesPurchases of propertyand equipment$293$606$1,235$217$473$340$510$1,079$1,5752010 2011 2012AnnualQuarterly$453$327$38$11$491$338Q112 Q113
  • 20. Appendix
  • 21. 21ReconciliationsIncome from Operations (in millions) Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q412 Q113GAAP income (loss) from operations 388$ 407$ 414$ 548$ 381$ (743)$ 377$ 523$ 373$Share-based compensation expense 7 64 70 76 103 1,106 179 184 170Payroll tax expenses related to share-based compensation 1 6 - - 1 152 (31) 29 20Non-GAAP income from operations 396$ 477$ 484$ 624$ 485$ 515$ 525$ 736$ 563$Operating Margins Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q412 Q113GAAP operating margin 53% 45% 43% 48% 36% (63%) 30% 33% 26%Share-based compensation expense 1% 7% 7% 7% 10% 93% 14% 12% 12%Payroll tax expenses related to share-based compensation 0% 1% 0% 0% 0% 13% (2%) 2% 1%Non-GAAP operating margin 54% 53% 51% 55% 46% 43% 42% 46% 39%Net Income (Loss) (in millions) Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q412 Q113GAAP net income (loss) 233$ 240$ 227$ 302$ 205$ (157)$ (59)$ 64$ 219$Share-based compensation expense 7 64 70 76 103 1,106 179 184 170Payroll tax expenses related to share-based compensation 1 6 - - 1 152 (31) 29 20Income tax adjustments 6 (25) (24) (18) (22) (806) 222 149 (97)Non-GAAP net income 247$ 285$ 273$ 360$ 287$ 295$ 311$ 426$ 312$Diluted Share Count Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q412 Q113GAAP diluted shares 1,488 1,510 1,520 1,519 1,527 1,879 2,420 2,506 2,499Assumed preferred stock conversion 548 550 548 545 546 273 - - -Dilutive securities excluded due to net loss - - - - - 177 159 - -Dilutive equity awards excluded from GAAP1 245 277 278 286 233 122 - - -Non-GAAP diluted shares 2,281 2,337 2,346 2,350 2,306 2,451 2,579 2,506 2,499Diluted Earnings (Loss) Per Share Q111 Q211 Q311 Q411 Q112 Q212 Q312 Q412 Q113GAAP diluted earnings (loss) per share 0.11$ 0.11$ 0.10$ 0.14$ 0.09$ (0.08)$ (0.02)$ 0.03$ 0.09$Net income attributable to participating securities 0.05 0.05 0.05 0.05 0.04 - - - -Non-GAAP adjustments to net income 0.01 0.03 0.03 0.04 0.05 0.24 0.15 0.14 0.03Non-GAAP adjustments to diluted shares (0.06) (0.07) (0.06) (0.08) (0.06) (0.04) (0.01) - -Non-GAAP diluted earnings per share 0.11$ 0.12$ 0.12$ 0.15$ 0.12$ 0.12$ 0.12$ 0.17$ 0.12$
  • 22. 22Reconciliations (continued)Effective Tax Rate (in millions) Q112 Q212 Q312 Q412 Q113 FY2011 FY2012GAAP profit (loss) before tax 382$ (765)$ 372$ 505$ 353$ 1,695$ 494$GAAP provision for (benefit from) income taxes 177 (608) 431 441 134 695 441GAAP effective tax rate 46% 79% 116% 87% 38% 41% 89%GAAP profit (loss) before tax 382$ (765)$ 372$ 505$ 353$ 1,695$ 494$Share-based compensation and related payroll tax expenses 104 1,258 148 213 190 224 1,723Non-GAAP profit before tax 486$ 493$ 520$ 718$ 543$ 1,919$ 2,217$Non-GAAP provision for income taxes 199 198 209 292 231 755 900Non-GAAP effective tax rate 41% 40% 40% 41% 43% 39% 41%
  • 23. Limitations of Key MetricsThe numbers of our monthly active users (MAUs) and daily active users (DAUs) and average revenue per user (ARPU) arecalculated using internal company data based on the activity of user accounts. While these numbers are based on what webelieve to be reasonable estimates of our user base for the applicable period of measurement, there are inherent challengesin measuring usage of our products across large online and mobile populations around the world. For example, there may beindividuals who maintain one or more Facebook accounts in violation of our terms of service, despite our efforts to detectand suppress such behavior. We estimate, for example, that “duplicate” accounts (an account that a user maintains inaddition to his or her principal account) may have represented approximately 5.0% of our worldwide MAUs as of December31, 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 arepermitted on Facebook using a Page rather than a personal profile under our terms of service); and (2) undesirableaccounts, which represent user profiles that we determine are intended to be used for purposes that violate our terms ofservice, such as spamming. As of December 31, 2012, for example, we estimate user-misclassified accounts may haverepresented approximately 1.3% of our worldwide MAUs and undesirable accounts may have represented approximately0.9% of our worldwide MAUs. We believe the percentage of accounts that are duplicate or false is meaningfully lower indeveloped 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 judgmentin making this determination, such as identifying names that appear to be fake or other behavior that appears inauthentic tothe reviewers. As such, our estimation of duplicate or false accounts may not accurately represent the actual number of suchaccounts. We are continually seeking to improve our ability to identify duplicate or false accounts and estimate the totalnumber of such accounts, and such estimates may be affected by improvements or changes in our methodology.23
  • 24. Limitations of Key Metrics (continued)Some of our historical metrics through the second quarter of 2012 have also been affected by applications on certain mobiledevices that automatically contact our servers for regular updates with no user action involved, and this activity can causeour 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 typeof automatic mobile activity, and that this type of activity had a substantially smaller effect on our estimate of worldwideMAUs and mobile MAUs. The impact of this automatic activity on our metrics varies by geography because mobile usagevaries in different regions of the world. In addition, our data regarding the geographic location of our users is estimatedbased on a number of factors, such as the user’s IP address and self-disclosed location. These factors may not alwaysaccurately reflect the user’s actual location. For example, a mobile-only user may appear to be accessing Facebook from thelocation of the proxy server that the user connects to rather than from the user’s actual location. The methodologies used tomeasure user metrics may also be susceptible to algorithm or other technical errors. For example, in early June 2012, wediscovered an error in the algorithm we used to estimate the geographic location of our users that affected our attribution ofcertain user locations for the period ended March 31, 2012. While this issue did not affect our overall worldwide MAU andDAU numbers, it did affect our attribution of users to different geographic regions. We estimate that the number of MAUs asof March 31, 2012 for the United States & Canada region was overstated as a result of the error by approximately 3% andthis overstatement was offset by understatements in other regions. In addition, our estimates for revenue by user locationare also affected by these factors. We regularly review and may adjust our processes for calculating these metrics toimprove their accuracy. In addition, our MAU and DAU estimates will differ from estimates published by third parties due todifferences in methodology. For example, some third parties are not able to accurately measure mobile users or do not countmobile 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 unlesssuch users would otherwise quality as MAUs, DAUs, and mobile MAUs, respectively, based on activity that is shared back toFacebook.24