Facebook's Q2 Earnings Slide Deck
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Facebook's Q2 Earnings Slide Deck Facebook's Q2 Earnings Slide Deck Presentation Transcript

  • Quarterly Earnings Slides Q2 2012
  • Safe HarborThis presentation contains forward-looking statements, which are subject to the safe harbor provisions ofthe Private Securities Litigation Reform Act of 1995. All statements other than statements of historicalfacts contained in this presentation, including statements regarding our estimates of future stock basedcompensation expense, are forward-looking statements. These forward-looking statements are onlypredictions and may differ materially from actual results due to a variety of factors, including variations inthe future price of our common stock as well as future grants and forfeitures of equity awards. In addition,please note that the date of this presentation is July 26, 2012, and any forward-looking statementscontained herein are based on assumptions that we believe to be reasonable as of this date. Weundertake no obligation to update these statements as a result of new information or future events.In 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 financialperformance prepared in accordance with U.S. GAAP. A reconciliation of non-GAAP financial measures tothe corresponding GAAP measures is provided in the appendix to this presentation. Please also see theappendix to this presentation for information concerning limitations of our key user metrics.
  • Monthly Active Users (MAUs)Millions of MAUs 955 Rest of World 901 Asia 845 Europe 800 268 US & Canada 739 245 680 225 207 608 183 550 161 133 234 255 482 212 126 196 174 98 156 138 113 96 221 229 239 246 201 212 167 183 151 144 154 163 169 176 179 183 186 137 Q210 Q310 Q410 Q111 Q211 Q311 Q411 Q112 Q212Please see Facebook’s final prospectus filed with the SEC on May 18, 2012 for definitions of user activity used to determine the number of ourMAUs, DAUs and mobile MAUs. In June 2012, we discovered an error in the algorithm we used to estimate the geographic location of ourusers that affected our attribution of certain user locations for the first quarter of 2012. The first quarter of 2012 user metrics above reflect areclassification to more correctly attribute users by geographic region. 3
  • Daily Active Users (DAUs) 552Millions of DAUs 526 Rest of World 483 457 139 Asia 126 Europe 417 109 372 100 US & Canada 87 327 119 129 74 105 293 58 98 257 85 54 72 42 64 54 152 154 45 135 143 127 107 120 85 94 105 117 124 126 129 130 85 92 99 Q210 Q310 Q410 Q111 Q211 Q311 Q411 Q112 Q212DAUs / MAUs Q210 Q310 Q410 Q111 Q211 Q311 Q411 Q112 Q212 53% 53% 54% 55% 56% 57% 57% 58% 58%Please see Facebook’s final prospectus filed with the SEC on May 18, 2012 for definitions of user activity used to determine the number ofour MAUs, DAUs and mobile MAUs. 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 thealgorithm error described in the MAU note on slide 3. These average numbers do not meaningfully differ from the average numbers whencalculated over a full month. 4
  • Mobile Monthly Active Users (Mobile MAUs)Millions of Mobile MAUs 543 488 432 376 325 288 245 196 155 Q210 Q310 Q410 Q111 Q211 Q311 Q411 Q112 Q212Please see Facebook’s final prospectus filed with the SEC on May 18, 2012 for definitions of user activity used to determine the number ofour MAUs, DAUs and mobile MAUs. 5
  • RevenueMillions of Dollars $1,184 Payments and other fees $1,131 Advertising $1,058 $192 $954 $188 $895 $186 $156 $731 $731 $119 $76 $94 $467 $432 $943 $992 $17 $872 $8 $776 $798 $655 $637 $424 $450 Q210 Q310 Q410 Q111 Q211 Q311 Q411 Q112 Q212 6
  • Revenue by User GeographyMillions of Dollars $1,184 $1,131 Rest of World $1,058 $113 $87 Asia $954 $87 $135 Europe $115 $895 $78 US & Canada $118 $65 $104 $731 $731 $82 $346 $361 $43 $47 $328 $58 $62 $275 $290 $467 $218 $229 $432 $25 $21 $37 $31 $129 $134 $567 $590 $482 $525 $471 $412 $394 $249 $271 Q210 Q310 Q410 Q111 Q211 Q311 Q411 Q112 Q212Revenue by user geography is geographically apportioned based on our estimation of the geographic location of our users whenthey perform a revenue-generating activity. This allocation differs from our revenue by geography disclosure in our consolidatedfinancial statements where revenue is geographically apportioned based on the location of the advertiser or developer. 7
  • Average Revenue per User (ARPU)US & Canada& Canada Europe $3.20 $3.20 $1.60 $1.40 $1.43 $2.77 $2.84 $2.80 $2.90 $1.33 $1.34 $2.49 $1.25 $1.19 $1.87 $1.93 $0.90 $0.84Q210 Q310 Q410 Q111 Q211 Q311 Q411 Q112 Q212 Q210 Q310 Q410 Q111 Q211 Q311 Q411 Q112 Q212Asia $0.56 $0.56 $0.55 Rest of World $0.44 $0.53 $0.40 $0.41 $0.50 $0.38 $0.37 $0.46 $0.33 $0.43 $0.31$0.36 $0.36 $0.23 $0.22Q210 Q310 Q410 Q111 Q211 Q311 Q411 Q112 Q212 Q210 Q310 Q410 Q111 Q211 Q311 Q411 Q112 Q212 Worldwide Q210 Q310 Q410 Q111 Q211 Q311 Q411 Q112 Q212 $0.94 $0.90 $1.26 $1.14 $1.26 $1.24 $1.38 $1.21 $1.28 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. 8
  • Share-Based Compensation Expense $1,106Millions of Dollars Pre-2011 RSUs Post-2011 RSUs Options & Other $986 ~ $180 ~ $185 $35 $30 $103 $64 $70 $76 $113 $135 $145 $5 $4 $6 $7 $58 $59 $74 $97 Q210 Q310 Q410 Q111 Q211 Q311 Q411 Q112 Q212 Q312E Q412EQ3 and Q4 2012 expenses are estimates and exclude any potential impact of future acquisitions. 9
  • Expenses as a % of Revenue Share-based compensation + Payroll tax related to share-based compensation All other expenses Cost of Revenue 31% Research & Development 60% 25% 26% 23% 22% 23% 24% 26% 25% 22% 14% 11% 11% 11% 7% 8% 7% 9% 9% Q211 Q311 Q411 Q112 Q212 Q211 Q311 Q411 Q112 Q212Marketing & Sales 33% 39% General & Administrative 12% 14% 11% 11% 9% 9% 8% 10% 9% 11% 9% 12% 11% 11% 7% 6% 7% 8%Q211 Q311 Q411 Q112 Q212 Q211 Q311 Q411 Q112 Q212We have reclassified certain prior period amounts in marketing and sales to general and administrative expense toconform to our current period presentation. These reclassifications did not affect revenue, total costs andexpenses, income (loss) from operations, or net (loss) income. 10
  • GAAP Income (loss) from Operations & MarginIncome (loss) from Operations ($M) $437 $548 $388 $407 $414 $381 $218 $216 $(743)Q210 Q310 Q410 Q111 Q211 Q311 Q411 Q112 Q212% of Revenue 51% 46% 60% 53% 48% 45% 43% 36% (63%)Q210 Q310 Q410 Q111 Q211 Q311 Q411 Q112 Q212 11
  • GAAP Net Income (loss)Millions of Dollars $302 $251 $240 $233 $227 $205 $129 $131 $(157)Q210 Q310 Q410 Q111 Q211 Q311 Q411 Q112 Q212 12
  • Non-GAAP Net IncomeMillions of Dollars $582 $531 $295 $285 Q2 2011 Q2 2012 1H11 1H12 Quarterly YTDNon-GAAP net income excludes share based compensation expense, related payroll tax expense and other incometax adjustments—see the Appendix for a reconciliation of this non-GAAP measure to GAAP net income. 13
  • Capital InvestmentsMillions of Dollars $1,079 Property and equipment acquired $956 under capital leases Purchases of property $90 $473 and equipment $576 $510 $291 $866 $217 $606 $89 $293 $285 $56 $33 2009 2010 2011 1H11 1H12 Annual YTD 14
  • EmployeesPeriod-end Headcount 3,976 3,200 2,661 2,127 1,218 2009 2010 2011 1H11 1H12 Annual YTD 15
  • Appendix
  • Reconciliations Three Months Ended Six Months Ended June 30, June 30, 2011 2012 2011 2012GAAP net income (loss) $ 240 $ (157) $ 471 $ 48 Share-based compensation expense 64 1,106 71 1,209 Payroll tax expenses related to share-based compensation 6 152 7 153 Income tax adjustments (25) (806) (18) (828)Non-GAAP net income $ 285 $ 295 $ 531 $ 582 17
  • Limitations of Key MetricsThe numbers of our MAUs and DAUs and average revenue per user (ARPU) are calculated using internalcompany data. While these numbers are based on what we believe to be reasonable estimates of our userbase for the applicable period of measurement, there are inherent challenges in measuring usage of ourproducts 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 ourefforts to detect and suppress such behavior. We estimate that “duplicate” accounts (an account that auser maintains in addition to his or her principal account) may have represented approximately 4.8% ofour worldwide MAUs as of June 30, 2012. We also seek to identify “false” accounts, which we divide intotwo categories: (1) user-misclassified accounts, where users have created personal profiles for abusiness, organization, or non-human entity such as a pet (such entities are permitted on Facebook usinga Page rather than a personal profile under our terms of service); and (2) undesirable accounts, whichrepresent user profiles that we determine are intended to be used for purposes that violate our terms ofservice, such as spamming. As of June 30, 2012, we estimate user-misclassified accounts may haverepresented approximately 2.4% of our worldwide MAUs and undesirable accounts may have representedapproximately 1.5% of our worldwide MAUs. We believe the percentage of accounts that are duplicate orfalse is meaningfully lower in developed markets such as the United States or Australia and higher indeveloping markets such as Indonesia and Turkey. However, these estimates are based on an internalreview 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 thereviewers. As such, our estimation of duplicate or false accounts may not accurately represent the actualnumber of such accounts. We are continually seeking to improve our ability to identify duplicate or falseaccounts and estimate the total number of such accounts, and such estimates may be affected byimprovements or changes in our methodology. 18
  • Limitations of Key Metrics (continued)Our metrics are also affected by applications on certain mobile devices that automatically contact ourservers for regular updates with no user action involved, and this activity can cause our system to countthe user associated with such a device as an active user on the day such contact occurs. For example, weestimate that less than 5% of our estimated worldwide DAUs as of December 31, 2011 and 2010 resultedfrom this type of automatic mobile activity, and that this type of activity had a substantially smallereffect on our estimate of worldwide MAUs and mobile MAUs. The impact of this automatic activity on ourmetrics 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, suchas the user’s IP address and self-disclosed location. These factors may not always accurately reflect theuser’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. Themethodologies used to measure user metrics may also be susceptible to algorithm or other technicalerrors. For example, in early June 2012, we discovered an error in the algorithm we use to estimate thegeographic location of our users that affected our attribution of certain user locations for the periodended March 31, 2012. While this issue did not affect our overall worldwide MAU number, it did affect ourattribution of users to different geographic regions. We estimate that the number of MAUs as of March31, 2012 for the United States and Canada region was overstated as a result of the error by approximately3% and these overstatements were offset by understatements in other regions. In addition, ourestimates for revenue by user location are also affected by these factors. We regularly review and mayadjust our processes for calculating these metrics to improve their accuracy. In addition, our MAU andDAU estimates will differ from estimates published by third parties due to differences in methodology.For example, some third parties do not count mobile users. 19