Facebook Q1 2015 Results

Facebook Q1 2015 Results

investor.fb.com

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-Pacific Europe US & Canada

665

180

699

195

936

728

208

757

216

802

829

864

890

256

263

280

233

244

242

253

270

200

216

167

181

189

228

179

182

188

195

203

206

212

217

225

139

142

144

147

150

152

155

157

161

Q1'13

Q2'13

Q3'13

Q4'13

Q1'14

Q2'14

Q3'14

Q4'14

Q1'15

Q1'13

Q2'13

Q3’13

Q4'13

Q1'14

Q2'14

Q3'14

Q4'14

Q1'15

60%

61%

61%

62%

63%

63%

64%

64%

65%

DAUs / MAUs

Please see Facebook's most recent quarterly or annual report filed with the SEC for definitions of user activity used to determine the number of our DAUs, mobile DAUs, MAUs, and mobile MAUs. The number of DAUs, mobile DAUs, MAUs, and mobile MAUs do not include Instagram or WhatsApp users unless they would otherwise qualify as such users, respectively, based on their other activities on Facebook.

3

Mobile Daily Active Users (Mobile DAUs) In Millions

798

745 703 654 609 556 469

507

425

Q1'13

Q2'13

Q3'13

Q4'13

Q1'14

Q2'14

Q3'14

Q4'14

Q1'15

Please see Facebook's most recent quarterly or annual report filed with the SEC for definitions of user activity used to dete rmine the number of our DAUs, mobile DAUs, MAUs, and mobile MAUs. The number of DAUs, mobile DAUs, MAUs, and mobile MAUs do not include Instagram or WhatsApp users unless they would otherwise qualify as such users, respectively, based on their other activities on Facebook.

4

Monthly Active Users (MAUs) In Millions Rest of World Asia-Pacific Europe US & Canada

1,110 327

1,155 346

1,189 362

1,228 376

1,276

1,317

1,350

1,393

1,441

453

395

411

423

436

410

426

449

471

319

339

351

368

390

269

272

276

282

289

292

296

301

307

195

198

199

201

202

204

206

208

210

Q1'13

Q2'13

Q3'13

Q4'13

Q1'14

Q2'14

Q3'14

Q4'14

Q1'15


5

Mobile Monthly Active Users (Mobile MAUs) In Millions

1,248 1,189 1,070

1,124

1,008 945 819

874

751

Q1'13

Q2'13

Q3'13

Q4'13

Q1'14

Q2'14

Q3'14

Q4'14

Q1'15


6

Mobile-Only Monthly Active Users (Mobile-Only MAUs) In Millions

581 526 456 399 341 296 254 219 189

Q1'13

Q2'13

Q3'13

Q4'13

Q1'14

Q2'14

Q3'14

Q4'14

Q1'15

Mobile-only MAUs are defined as users who accessed Facebook solely through mobile apps or mobile versions of our website, or use d our Messenger app, in the last 30 days of the given quarter. The number of mobile-only MAUs do not include Instagram or WhatsApp users unless they would otherwise qualify as such users based on their other activities on Facebook.

7

Revenue In Millions Payments and Other Fees Advertising

$3,851

$257

$226

$3,203 $2,910 $2,585

$2,502

$241

$237

$3,543

$246

$234

$2,016

$1,458 $213 *

$1,813 $214

$218

$3,594 $2,676

$1,599

$2,344

$2,265

Q4'13

Q1'14

$3,317

$2,957

$1,798

$1,245

Q1'13

Q2'13

Q3'13

8

Q2'14

Q3'14

Q4'14

Q1'15

Revenue by User Geography In Millions Rest of World Asia-Pacific Europe US & Canada

$3,851 $403

$354

$3,203 $2,910

$2,016 $1,458 $159 $197

$1,813 $213 $247 $505

$238 $278

$2,585

$2,502

$347

$311

$271

$431

$341

$354

$727

$353

$3,543

$554 $542

$492 $1,030 $908 $844

$824 $698

$538

$423 $679

$848

$962

Q1'13

Q2'13

Q3'13

$1,206

$1,179

$1,308

Q4'13

Q1'14

Q2'14

$1,864

$1,739

Q4'14

Q1'15

$1,514

Q3'14

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 In Millions Rest of World Asia-Pacific Europe US & Canada

$3,594 $394

$2,344 $300 $1,798

$1,245 $150 $176

$1,599

$229

$202 $225

$255

$451

$318

$2,265 $262

$336

Q1'13

$531 $343

$333

$524

$469 $960

$408

$855 $783

$757 $658

$631

$482

$367 $552

$346

$2,957 $2,676

$3,317

$721

$832

Q2'13

Q3'13

$1,068

$1,039

$1,175

Q4'13

Q1'14

Q2'14

$1,709

$1,592

Q4'14

Q1'15

$1,362

Q3'14


10

Payments & Other Fees Revenue by User Geography In Millions Rest of World Asia-Pacific Europe US & Canada

$241 $213

$214

$218

$9

$11

$9

$21

$22

$237

$11

$234

$9

$23

$21

$11

$23

$23

$69

$67

$67

$56

$54

$56

$127

$127

$130

$138

$140

$133

Q1'13

Q2'13

Q3'13

Q4'13

Q1'14

Q2'14

$246 $10

$23

$257 $9

$23

$8

$18 $61

$70

$152

$155

$147

Q3'14

Q4'14

Q1'15

$53


11

$226

Average Revenue per User (ARPU) Payments and Other Fees Advertising

Worldwide

US & Canada $2.81

$2.24 $2.00

$0.18

$2.40

$0.19

$2.50 $5.85

$0.19

Q1'14

Europe $2.44

$2.84

$2.87

$0.23

$0.21

$0.23

Q3'14

$1.08

$0.17

$0.93

$2.61

$2.66

Q2'14

Q3'14

$2.81 $0.88

Q4'14

Q1'15

Q1'14

$0.70

$0.74

$0.66

$8.26

$2.34 $5.16

Q4'14

Q1'15

Q1'14

$5.79

$6.64

Q2'14

Q3'14

Q4'14

$7.62

Q1'15

Rest of World $1.18

$1.27 $0.05

$0.94

$1.18 $0.04

$0.06

$0.06

$0.70

$0.86

$0.85

$0.03

$0.02

$0.02

$0.80 $0.02

$0.02

$0.06

$3.22

Q1'14

Q2'14

$2.99

$0.23

$2.21

$2.06

$2.22

Asia-Pacific

$3.45

$6.44

$8.32

$0.69

$2.62 $1.81

$0.75

$7.39

$0.16

$0.18

$9.00

$1.02

Q2'14

$1.12

Q3'14

$1.21

Q4'14

$1.14

Q1'15

$0.83

$0.82

Q2'14

Q3'14

$0.92 $0.78

$0.68

Q1'14

Q4'14

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 most recent quarterly or annual report filed with the SEC for the definition of ARPU. 12

12

Q1'15

Expenses as a % of Revenue Amortization of intangibles Share-based compensation + payroll tax expenses related to share-based compensation All other expenses

Cost of Revenue 18%

18% Q1'14

Research & Development 18%

16%

16%

15% Q2'14

Q3'14

17%

15% Q4'14

18%

17% Q1'15

Marketing & Sales 12%

12%

30%

18%

16%

18%

17%

19%

8%

8%

8%

10%

9%

11%

11%

13%

Q1'14

Q2'14

Q3'14

Q4'14

Q1'15

8%

9%

8%

1%

2%

1%

General & Administrative 16%

13%

29%

3% 3%

17% 7%

3% 2%

1%

7%

2%

1%

11%

10%

10%

11%

12%

5%

5%

6%

6%

6%

Q1'14

Q2'14

Q3'14

Q4'14

Q1'15

Q1'14

Q2'14

Q3'14

Q4'14

Q1'15

13

Income from Operations In Millions GAAP Income from Operations $1,390

$1,133

$1,397

$1,133

$1,075

$933

$736 $562 $373

Q1'13

Q2'13

Q3'13

Q4'13

Q1'14

Q2'14

Q3'14

Q4'14

Q1'15

Non-GAAP Income from Operations $2,219

$596

Q1'13

$830

Q2'13

$1,498

$1,415

Q4'13

Q1'14

$1,753

$1,820

Q2'14

Q3'14

$1,840

$1,024

Q3'13

Q4'14

Non-GAAP income from operations excludes share-based compensation expense, payroll tax expenses related to share-based compensation, and amortization of intangibles— see the Appendix for a reconciliation of this non-GAAP measure to GAAP income from operations.

14

Q1'15

Operating Margin GAAP Operating Margin

26%

Q1'13

31%

Q2'13

37%

Q3'13

44%

43%

48%

44% 29%

26%

Q1'15

Q4'13

Q1'14

Q2'14

Q3'14

Q4'14

58%

57%

60%

57%

58%

Q4'13

Q1'14

Q2'14

Q3'14

Q4'14

Non-GAAP Operating Margin

41%

Q1'13

46%

Q2'13

51%

Q3'13

Non-GAAP operating margin excludes share-based compensation expense, payroll tax expenses related to share-based compensation, and amortization of intangibles— see the Appendix for a reconciliation of this non-GAAP measure to GAAP operating margin.

15

52%

Q1'15

Effective Tax Rate GAAP Effective Tax Rate ($ in millions) GAAP income before provision for income taxes

Q1'13 $

353

Q2'13 $

545

Q3'13 $

726

Q4'13 $

1,130

Q1'14 $

1,075

Q2'14 $

1,386

Q3'14 $

1,336

Q4'14 $

1,114

Q1'15 $

932

GAAP provision for income taxes

134

212

301

607

433

595

530

413

420

GAAP Effective Tax Rate

38 %

39 %

41 %

54 %

40 %

43 %

40 %

37 %

45 %

Non-GAAP Effective Tax Rate ($ in millions) Non-GAAP income before provision for income taxes

Q1'13 $

576

Q2'13 $

813

Q3'13 $ 1,014

Q4'13 $

1,495

Q1'14 $

1,415

Q2'14 $

1,749

Q3'14 $

1,759

Q4'14 $

2,200

Q1'15 $ 1,839

Non-GAAP provision for income taxes

241

294

348

681

489

627

610

682

650

Non-GAAP Effective Tax Rate

42 %

36 %

34 %

46 %

35 %

36 %

35 %

31 %

35 %

Non-GAAP effective tax rate excludes share-based compensation expense, payroll tax expenses related to share-based compensation, amortization of intangibles, and related income tax adjustments. See the Appendix A for a reconciliation of this non-GAAP measure to GAAP effective tax rate.

16

Net Income In Millions GAAP Net Income $791

$219

Q1'13

$333

Q2'13

$425

Q3'13

$523

Q4'13

$806

$642

$701 $512

Q1'14

Q2'14

Q3'14

Q4'14

Q1'15

Non-GAAP Net Income $1,518

$335

Q1'13

$519

Q2'13

$666

Q3'13

$814

$926

Q4'13

Q1'14

$1,121

$1,149

Q2'14

Q3'14

$1,189

Q4'14

Q1'15

Non-GAAP net income excludes share-based compensation expense, payroll tax expenses related to share-based compensation, amortization of intangibles, and related income tax adjustments—see the Appendix for a reconciliation of this non-GAAP measure to GAAP net income.

17

Diluted Earnings Per Share GAAP Diluted Earnings Per Share $0.30

$0.30

$0.25

$0.25

$0.20 $0.09

Q1'13

$0.13

Q2'13

$0.18

$0.17

Q3'13

Q4'13

Q1'14

Q2'14

Q3'14

Q4'14

Q1'15

Non-GAAP Diluted Earnings Per Share $0.54

$0.21

$0.27

$0.32

$0.35

Q4'13

Q1'14

$0.43

$0.43

Q2'14

Q3'14

$0.42

$0.13

Q1'13

Q2'13

Q3'13

Q4'14

Non-GAAP diluted earnings per share excludes share-based compensation expense, payroll tax expenses related to share -based compensation, amortization of intangibles, and related income tax adjustments—see the Appendix for a reconciliation of this non-GAAP measure to GAAP diluted earnings per share.

18

Q1'15

Capital Investments In Millions Property and equipment acquired under capital leases Purchases of property and equipment

$1,831 $1,575

$340

$1,373

$1,831 $502

$1,235

$1,362

$363 $502 $363

Q1'14

Q1'15

2012

Quarterly

2013 Annual

19

2014

Appendix

Reconciliations Income from Operations (in millions) GAAP income from operations Share-based compensation expense Payroll tax expenses related to share-based compensation Amortization of intangible assets Non-GAAP income from operations

Operating Margin GAAP operating margin Share-based compensation expense Payroll tax expenses related to share-based compensation Amortization of intangible assets Non-GAAP operating margin

Net Income (in millions) GAAP net income Share-based compensation expense

Q1'13

Q2'13

Q3'13

Q4'13

Q1'14

Q2'14

Q3'14

Q4'14

Q1'15

$ 373

$ 562

$ 736

$ 1,133

$ 1,075

$ 1,390

$ 1,397

$ 1,133

$ 933

170

224

239

273

274

314

353

896

703

20

8

12

53

25

8

11

13

25

33

36

37

39

41

41

59

177

179

$ 596

$ 830

$ 1,024

$ 1,498

$ 1,415

$ 1,753

$ 1,820

$ 2,219

$ 1,840

Q3'13

Q4'13

Q1'14

Q2'14

Q3'14

Q4'14

Q1'15

Q1'13

Q2'13

26 %

31 %

37 %

44 %

43 %

48 %

44 %

29 %

26 %

12 %

12 %

12 %

11 %

11 %

11 %

11 %

23 %

20 %

1%

0%

1%

2%

1%

0%

0%

0%

1%

2%

2%

2%

2%

2%

1%

2%

5%

5%

41 %

46 %

51 %

58 %

57 %

60 %

57 %

58 %

52 %

Q1'13

Q2'13

Q3'13

Q4'13

Q1'14

Q2'14

Q3'14

Q4'14

Q1'15

$ 219

$ 333

$ 425

$ 523

$ 642

$ 791

$ 806

$ 701

$ 512

170

224

239

273

274

314

353

896

703

Payroll tax expenses related to share-based compensation

20

8

12

53

25

8

11

13

25

Amortization of intangible assets

33

36

37

39

41

41

59

177

179

(107)

(82)

(47)

(74)

(56)

(33)

(80)

(269)

(230)

Income tax adjustments Non-GAAP net income

Diluted Earnings Per Share GAAP diluted earnings per share Non-GAAP adjustments to net income Non-GAAP diluted earnings per share

$ 335

Q1'13 $ 0.09

$ 519

Q2'13 $ 0.13

$ 666

$ 814

$ 926

$ 1,121

$ 1,149

$ 1,518

$ 1,189

Q3'13

Q4'13

Q1'14

Q2'14

Q3'14

Q4'14

Q1'15

$ 0.17

$ 0.20

$ 0.25

$ 0.30

$ 0.30

$ 0.25

$ 0.18

0.04

0.08

0.10

0.12

0.10

0.13

0.13

0.29

0.24

$ 0.13

$ 0.21

$ 0.27

$ 0.32

$ 0.35

$ 0.43

$ 0.43

$ 0.54

$ 0.42

21

Reconciliations (continued) ($ in millions)

Q1'13

Q2'13

Q3'13

Q4'13

Q1'14

Q2'14

Q3'14

Q4'14

Q1'15

GAAP income before provision for income taxes

353

545

726

1,130

1,075

1,386

1,336

1,114

932

GAAP provision for income taxes

134

212

301

607

433

595

530

413

420

GAAP effective tax rate GAAP income before provision for income taxes Share-based compensation and related payroll tax expenses Amortization of intangibles Non-GAAP income before provision for income taxes Non-GAAP provision for income taxes Non-GAAP effective tax rate

38 %

39 %

$ 353

$ 545

190

232

41 % $

54 %

40 %

43 %

40 %

37 %

726

$ 1,130

$ 1,075

$ 1,386

$ 1,336

$ 1,114

251

326

299

322

364

909

45 % $

932 728

33

36

37

39

41

41

59

177

179

$ 576

$ 813

$ 1,014

$ 1,495

$ 1,415

$ 1,749

$ 1,759

$ 2,200

$ 1,839

241

294

348

681

489

627

610

682

650

42 %

36 %

34 %

22

46 %

35 %

36 %

35 %

31 %

35 %

Reconciliations (continued) Free Cash Flow (in millions) Net cash provided by operating activities

Q1'13 $

Purchases of property and equipment

$

327

Property and equipment acquired under capital leases Free Cash Flow

719

Q2'13

11 $

381

$

1,322

Q3'13 $

950

Q4'13 $

1,231

Q1'14 $

1,285

Q2'14 $

1,341

Q3'14 $

1,248

Q4'14 $

1,583

Q1'15 $

1,700

268

284

483

363

469

482

517

502

-

-

-

-

-

-

-

-

1,054

$

23

666

$

748

$

922

$

872

$

766

$

1,066

$

1,198

Limitations of Key Metrics and Other Data The numbers for our key metrics, which include our daily active users (DAUs), mobile DAUs, monthly active users (MAUs), mobile MAUs, and average revenue per user (ARPU), as well as certain other metrics such as mobile-only 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. We estimate, for example, that "duplicate" accounts (an account that a user maintains in addition to his or her principal account) may have represented less than 5% of our worldwide MAUs in 2014. 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. In 2014, for example, we estimate user-misclassified and undesirable accounts may have represented less than 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 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 im prove our ability to identify duplicate or false accounts and estimate the total number of such accounts, and such estimates may change due to improvements or changes in our methodology.

24

24

Limitations of Key Metrics and Other Data (continued) 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. Accordingly, our understanding of usage by age group may not be complete. Some of our metrics 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. 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 selfdisclosed 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. Our estimates for revenue by user location and revenue by user device are also affected by these factors. We regularly review our processes for calculating these metrics, and from time to time we may discover inaccuracies in our metrics or make adjustments to improve their accuracy, including adjustments that may result in the recalculation of our historical metrics. We believe that any such inaccuracies or adjustments are immaterial unless otherwise stated. In addition, our DAU and MAU 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, mobile DAUs, MAUs, mobile MAUs, mobile-only DAUs and mobile-only MAUs discussed in this presentation, as well as ARPU, do not include users of Instagram or WhatsApp unless they would otherwise qualify as such users, respectively, based on their other activities on Facebook.

25

25

Facebook Q1 2015 Results

investor.fb.com