Facebook Q3 Investor Deck

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


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


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


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 *

*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

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
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)
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

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