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Facebook Q3 Investor Deck
 

Facebook Q3 Investor Deck

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Insights and reporting from Facebook's Q3 investor presentation. Useful data fodder here for people.

Insights and reporting from Facebook's Q3 investor presentation. Useful data fodder here for people.

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    Facebook Q3 Investor Deck Facebook Q3 Investor Deck Presentation Transcript

    • Quarterly Earnings Slides Q3 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 Asia Europe 526 US & Canada 457 100 483 109 126 552 139 584 152 618 161 153 665 180 699 195 728 208 167 181 189 105 119 129 141 143 154 160 169 179 182 188 135 152 124 126 129 130 132 135 139 142 144 Q3'11 Q4'11 Q1'12 Q2'12 Q3'12 Q4'12 Q1'13 Q2'13 Q3'13 98 DAUs / MAUs Q3'11 Q4'11 Q1'12 Q2'12 Q3'12 Q4'12 Q1'13 Q2'13 Q3’13 57% 57% 58% 58% 58% 59% 60% 61% 61% Please see Facebook's most recent Form 10-Q filed with the SEC for definitions of user activity used to determine the number of our DAUs, MAUs, and mobile MAUs. The number of 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
    • Monthly Active Users (MAUs) In Millions Rest of World Asia 1,007 Europe US & Canada 800 207 845 225 901 245 1,056 955 268 288 304 1,110 327 277 298 319 1,155 1,189 346 362 339 351 196 212 234 255 221 229 239 246 253 261 269 272 276 176 179 183 186 189 193 195 198 199 Q3'11 Q4'11 Q1'12 Q2'12 Q3'12 Q4'12 Q1'13 Q2'13 Q3'13 Please see Facebook's most recent Form 10-Q filed with the SEC for definitions of user activity used to determine the number of our DAUs, MAUs, and mobile MAUs. The number of 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
    • Mobile Daily Active Users (Mobile DAUs) In Millions 469 507 425 374 329 Q3'12 Q4'12 Q1'13 Q2'13 Q3'13 Mobile DAUs are defined as users who accessed Facebook through our mobile apps or our mobile website during a given day. The number of mobile DAUs do not include Instagram users unless they would otherwise qualify as such users based on their other activities on Facebook. 5
    • Mobile Monthly Active Users (Mobile MAUs) In Millions 819 874 751 680 376 Q3'11 432 Q4'11 488 Q1'12 543 Q2'12 604 Q3'12 Q4'12 Q1'13 Q2'13 Q3'13 Please see Facebook's most recent Form 10-Q filed with the SEC for definitions of user activity used to determine the number of our DAUs, MAUs, and mobile MAUs. The number of 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 254 219 189 157 126 Q3'12 Q4'12 Q1'13 Q2'13 Q3'13 Mobile-only MAUs are defined as users who accessed Facebook solely through mobile apps or our mobile website during a given month. 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 $2,016 Payments and other fees Advertising $1,813 $214 $1,585 $1,131 $954 $188 $156 $1,184 $1,058 $192 $1,262 $256 * Q3'11 $1,458 $213 $176 $186 $1,798 $1,599 $1,329 $798 $218 $943 $872 Q4'11 Q1'12 $992 Q2'12 $1,086 Q3'12 Q4'12 $1,245 Q1'13 Q2'13 Q3'13 *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 $2,016 Rest of World Asia $1,813 Europe $167 $954 $78 $104 $213 $1,585 US & Canada $1,131 $87 $115 $361 $290 $1,058 $87 $118 $328 $1,184 $113 $135 $346 $482 $567 $525 $590 Q3'11 Q4'11 Q1'12 Q2'12 $1,262 $198 $440 Q3'12 $278 $247 $538 $505 $423 $341 $637 $159 $197 $130 $154 $1,458 $238 $780 Q4'12 $679 Q1'13 $848 Q2'13 $962 Q3'13 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 condensed consolidated financial statements where revenue is geographically apportioned based on the location of the marketer or developer. 9
    • Advertising Revenue by User Geography $1,798 In Millions $1,599 Rest of World Asia Europe $1,329 US & Canada $1,086 $798 $71 $88 $245 $943 $79 $95 $306 $872 $79 $99 $274 $992 $104 $115 $294 $395 $462 $419 $479 Q3'11 Q4'11 Q1'12 Q2'12 $120 $133 $156 $168 $374 $295 $538 Q3'12 $202 $1,245 $255 $225 $150 $176 $229 $482 $451 $367 $631 $552 Q4'12 Q1'13 $721 Q2'13 $832 Q3'13 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 condensed 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 $256 $11 Rest of World Asia $30 Europe US & Canada $156 $7 $16 $188 $8 $20 $55 $186 $8 $19 $192 $9 $20 $54 $52 $45 $176 $10 $21 $87 Q3'11 $105 $106 Q4'11 Q1'12 Q2'12 $218 $9 $23 $54 $56 $127 $127 $130 Q1'13 Q2'13 Q3'13 $46 $149 $111 $214 $11 $22 $56 $66 $213 $9 $21 $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 condensed 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 $1.54 Payments* $1.29 Advertising $1.37 $0.26 $1.60 $1.29 $1.15 Q4'12 $1.87 $0.20 Q1'13 $1.96 $0.20 Q3'12 $1.41 $1.38 $1.67 Q1'13 Q2'13 $0.10 $0.64 $0.07 $0.75 $0.07 $1.76 Q3'13 Q3'12 $3.50 $0.65 $3.30 $4.19 $3.67 $2.85 Rest of World $0.69 $0.50 Q4'12 $0.78 $0.65 $0.65 Q3'13 Asia $0.21 $4.32 $1.53 $2.87 Q2'13 $4.85 $4.08 $3.40 $0.58 $0.08 $1.46 $0.19 $0.53 $0.18 $1.18 $0.19 $0.20 Q3'12 Europe $1.35 $0.25 $0.18 $1.11 $1.71 $1.60 US & Canada $1.72 $0.58 $0.57 Q4'12 Q1'13 $0.68 Q2'13 $0.81 $0.07 $0.74 Q3'13 $0.47 $0.04 $0.43 Q3'12 $0.56 $0.04 $0.53 Q4'12 $0.50 $0.03 $0.48 Q1'13 $0.63 $0.03 $0.60 Q2'13 $0.67 $0.03 $0.65 Q3'13 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 condensed consolidated financial statements where revenue is geographically apportioned based on the location of the marketer or developer. Please see Facebook’s Form 10-Q for the quarter ended September 30, 2013 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. 12
    • Share-Based Compensation Expense $1,106 In Millions Pre-2011 RSUs Post-2011 RSUs Options & Other $986 $179 $28 $103 $184 $24 $170 $9 $135 Q1'13 $70 $76 $59 $74 $97 $113 $138 $137 Q3'11 Q4'11 Q1'12 Q2'12 Q3'12 Q4'12 $224 $17 $239 $14 $175 $193 Q2'13 Q3'13 13
    • Expenses as a % of Revenue Share-based compensation + Payroll tax related to share-based compensation All other expenses Research & Development Cost of Revenue 28% Q3'12 24% Q4'12 28% Q1'13 26% 25% Q2'13 25% 20% 19% 18% 9% 9% 9% 9% 10% 11% 10% 10% Q3'12 Q4'12 Q1'13 Q2'13 Q3'13 25% Q3'13 General & Administrative Marketing & Sales 15% 12% 14% 12% 10% 12% 13% Q3'12 Q4'12 Q1'13 Q2'13 13% 19% 11% 25% 25% 19% 8% 26% 12% 12% 11% 12% 10% 10% 9% Q3'13 Q3'12 Q4'12 10% 8% 10% 8% 7% Q1'13 Q2'13 Q3'13 14
    • Income (Loss) from Operations GAAP Income (Loss) from Operations (in millions) $414 $548 $381 $377 $523 $373 $562 $736 ($743) Q3'11 Q4'11 Q1'12 Q2'12 Q3'12 Q4'12 Q1'13 Q2'13 Q3'13 Non-GAAP Income from Operations (in millions) $484 Q3'11 $624 Q4'11 $485 $515 $525 Q1'12 Q2'12 Q3'12 $736 Q4'12 $563 Q1'13 $794 Q2'13 $987 Q3'13 Non-GAAP income (loss) from operations excludes share-based compensation expense, payroll tax expenses related to share-based compensation, and related income tax adjustments—see the Appendix for a reconciliation of this non-GAAP measure to GAAP income (loss) from operations. 15
    • Operating Margin GAAP Operating Margin 43% 48% 30% 33% 26% 31% 37% Q2'12 Q3'12 Q4'12 Q1'13 Q2'13 Q3'13 46% 43% 42% Q1'12 Q2'12 Q3'12 36% (63%) Q3'11 Q4'11 Q1'12 Non-GAAP Operating Margin 51% Q3'11 55% Q4'11 46% Q4'12 39% Q1'13 44% Q2'13 49% Q3'13 Non-GAAP operating margin excludes share-based compensation expense, payroll tax expenses related to share-based compensation, and related income tax adjustments—see the Appendix for a reconciliation of this non-GAAP measure to GAAP operating margin. 16
    • Effective Tax Rate GAAP Effective Tax Rate ($ in millions) GAAP (loss) income before provision for income taxes GAAP (provision for) benefit from income taxes Effective Tax Rate Q2 2012 $ (765) 608 79% Q3 2012 $ 372 (431) 116% Q4 2012 $ 505 (441) 87% Q1 2013 353 (134) 38% Q2 2013 545 (212) 39% FY 2011 1,695 (695) 41% FY 2012 494 (441) 89% Q2 2012 493 198 40% Q3 2012 520 209 40% Q4 2012 718 292 41% Q1 2013 543 231 43% Q2 2013 777 289 37% FY 2011 1,919 755 39% FY 2012 2,217 900 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 Q3’12 through Q4’12 GAAP 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—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) $227 $302 $205 $64 ($157) Q3'11 Q4'11 Q1'12 Q2'12 $219 $333 $425 Q2'13 Q3'13 ($59) Q3'12 Q4'12 Q1'13 Non-GAAP Net Income (in millions) $273 Q3'11 $360 $287 $295 $311 Q4'11 Q1'12 Q2'12 Q3'12 $426 Q4'12 $312 Q1'13 $488 Q2'13 $621 Q3'13 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. 18
    • Diluted EPS GAAP Diluted EPS $0.10 $0.14 $0.09 $0.09 $0.13 $0.17 $0.03 ($0.02) Q3'11 Q4'11 Q1'12 ($0.08) Q2'12 Q3'12 Q4'12 Q1'13 Q2'13 Q3'13 Non-GAAP Diluted EPS $0.25 $0.12 Q3'11 $0.15 Q4'11 $0.12 $0.12 $0.12 Q1'12 Q2'12 Q3'12 $0.17 Q4'12 $0.19 $0.12 Q1'13 Q2'13 Q3'13 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 and equipment $1,288 $1,079 $251 $890 $11 $473 $1,235 $510 $1,037 $879 $217 $606 $293 2012 2013 YTD 2010 2011 2012 Annual 20
    • Appendix
    • Reconciliations Income 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 Q3'11 414 70 $ 484 Q4'11 548 76 $ 624 Q1'12 381 103 1 $ 485 Q2'12 (743) 1,106 152 $ 515 Q3'12 377 179 (31) $ 525 Q4'12 523 184 29 $ 736 Q1'13 373 170 20 $ 563 Q2'13 562 224 8 $ 794 Q3'13 736 239 12 $ 987 Operating Margins GAAP operating margin Share-based compensation expense Payroll tax expenses related to share-based compensation Non-GAAP operating margin Q3'11 43% 7% 0% 51% Q4'11 48% 7% 0% 55% Q1'12 36% 10% 0% 46% Q2'12 (63%) 93% 13% 43% Q3'12 30% 14% (2%) 42% Q4'12 33% 12% 2% 46% Q1'13 26% 12% 1% 39% Q2'13 31% 12% 0% 44% Q3'13 37% 12% 1% 49% 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 Q3'11 227 70 (24) $ 273 Q4'11 302 76 (18) $ 360 Q1'12 205 103 1 (22) $ 287 Q2'12 (157) 1,106 152 (806) $ 295 Q3'12 (59) 179 (31) 222 $ 311 Q4'12 64 184 29 149 $ 426 Q1'13 219 170 20 (97) $ 312 Q2'13 333 224 8 (77) $ 488 Q3'13 425 239 12 (55) $ 621 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 Q3'11 0.10 0.05 0.03 (0.06) $ 0.12 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 (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 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 $ $ $ Q3'12 372 431 116% 372 148 520 209 40% $ $ $ 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% 726 251 977 356 36% FY2012 $ 494 441 89% $ 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 Q3'11 565 136 102 $ 327 $ 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 $ 24
    • Limitations of Key Metrics and Other Data The numbers for our key metrics, daily active users (DAUs), monthly active users (MAUs), mobile MAUs, and average revenue per user (ARPU), and certain other metrics such as mobile DAUs and 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 during the nine months ended September 30, 2013. We also seek to identify “false” accounts, which we divide into two categories: (1) usermisclassified 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. During the nine months ended September 30, 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. We have worked with third parties to develop models to analyze user data by age in the United States. These models suggest that usage by U.S. teens overall continues to be stable, but that there has recently been a decline in DAU among younger U.S. teens. 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 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 and DAU numbers, 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 this overstatement was 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 numbers of DAUs, MAUs, mobile DAUs, mobile MAUs, and mobile-only MAUs discussed 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. 26