Facebook Reports Fourth Quarter and Full Year 2012 Results

          Facebook Reports Fourth Quarter and Full Year 2012 Results

PR Newswire

MENLO PARK, Calif., Jan. 30, 2013

MENLO PARK, Calif., Jan. 30, 2013 /PRNewswire/ --Facebook, Inc. (NASDAQ: FB)
today reported financial results for the fourth quarter and full year ended
December 31, 2012.

"In 2012, we connected over a billion people and became a mobile company,"
said Mark Zuckerberg, Facebook founder and CEO. "We enter 2013 with good
momentum and will continue to invest to achieve our mission and become a
stronger, more valuable company."

Fourth Quarter and Full Year 2012 Financial Summary

In millions, except
percentages and per share Q4'11        Q4'12         FY'11        FY'12
amounts
Revenue                   $  1,131   $  1,585    $  3,711   $  5,089
Income from Operations
 GAAP                   $    548  $    523   $  1,756   $    538
 Non-GAAP               $    624  $    736   $  1,980   $  2,261
Operating Margin
 GAAP                   48%          33%           47%          11%
 Non-GAAP               55%          46%           53%          44%
Net Income
 GAAP                 $    302  $     64  $  1,000   $     53
 Non-GAAP              $    360  $    426   $  1,164   $  1,317
Diluted Earnings per
Share (EPS)
 GAAP                 $   0.14  $   0.03   $   0.46  $   0.01
 Non-GAAP              $   0.15  $   0.17   $   0.50  $   0.53

Fourth Quarter 2012 Operational Highlights

  oMonthly active users (MAUs) were 1.06 billion as of December 31, 2012, an
    increase of 25% year-over-year
  oDaily active users (DAUs) were 618 million on average for December 2012,
    an increase of 28% year-over-year
  oMobile MAUs were 680 million as of December 31, 2012, an increase of 57%
    year-over-year
  oMobile DAUs exceeded web DAUs for the first time in the fourth quarter of
    2012

Recent Business Highlights

  oMobile revenue represented approximately 23% of advertising revenue for
    the fourth quarter of 2012, up from approximately 14% of advertising
    revenue in the third quarter of 2012
  oFacebook launched Graph Search Beta, a structured search tool that enables
    users for the first time to find people, places, photos and other content
    that has been shared on Facebook
  oLaunched Facebook for Android 2.0, completely rebuilt to deliver improved
    stability and faster performance and opened Facebook Messenger to anyone
    with a telephone number

Fourth Quarter 2012 Financial Highlights

Revenue – Revenue for the fourth quarter totaled $1.585 billion, an increase
of 40%, compared with $1.13 billion in the fourth quarter of 2011.

  oRevenue from advertising was $1.33 billion, representing 84% of total
    revenue and a 41% increase from the same quarter last year. Excluding the
    impact of year-over-year changes in foreign exchange rates, advertising
    revenue would have increased by 43%.
  oPayments and other fees revenue for the fourth quarter was $256 million.
    As planned, in the fourth quarter of2012 the company recognized revenue
    from four months of Payments transactions for accounting reasons detailed
    in our Form 10-Q filed on October 24, 2012. Adjusting for the $66 million
    of revenue in the extra month of December, Payments and other fees revenue
    would have been essentially flat year-over-year.

Costs and expenses – Fourth quarter costs and expenses were $1.06 billion, an
increase of 82% from the fourth quarter of 2011.Excluding share-based
compensation and related payroll tax expenses, non-GAAP costs and expenses
were $849 million, an increase of 67%.

Income from operations – For the fourth quarter, GAAP income from operations
was $523 million, compared to income from operations of $548 million for the
fourth quarter of 2011. Excluding share-based compensation and related payroll
tax expenses, non-GAAP income from operations for the fourth quarter was $736
million, compared to $624 million for the fourth quarter of 2011.

Operating margin – GAAP operating margin was 33% for the fourth quarter,
compared to 48% for thefourth quarter of 2011. Excluding share-based
compensation and related payroll tax expenses, non-GAAP operating margin was
46% for the fourth quarter, compared to 55% for the fourth quarter of 2011.

Income tax provision  – The GAAP income tax provision for the fourth quarter
was $441 million, representing an 87% effective tax rate. Excluding
share-based compensation expense and related payroll tax expenses, the
non-GAAP effective tax rate would have been approximately 41%.

Net income – GAAP net income for the fourth quarter was $64 million, compared
to net income of $302 million for the fourth quarter of 2011. GAAP EPS for the
fourth quarter was $0.03, compared to $0.14 for the same quarter in the prior
year. Excluding share-based compensation and related payroll tax expenses, and
income tax adjustments, non-GAAP net income for the fourth quarter was $426
million, or $0.17 per share, compared to $360 million and $0.15 per share for
the same quarter in the prior year.

Capital expenditures – Purchases of property and equipment for the fourth
quarter were $198 million. Additionally, $89 million of equipment was procured
or financed through capital leases during the fourth quarter of 2012.

Cash and marketable securities – As of December 31, 2012, cash and marketable
securities were $9.63 billion.

Webcast and Conference Call Information

Facebook will host a conference call to discuss the results at 2 p.m. PT / 5
p.m. ET today. The live webcast can be accessed at the Facebook Investor
Relations website at investor.fb.com, along with the company's earnings press
release, financial tables and slide presentation. Facebook intends to use the
investor.fb.com website as a means of disclosing material non-public
information and for complying with its disclosure obligations under Regulation
FD.

Following the call, a replay will be available at the same website. A
telephonic replay will be available for one week following the conference call
at +1 (404) 537-3406 or + 1 (855) 859-2056, conference ID 85750523.

About Facebook

Founded in 2004, Facebook's mission is to make the world more open and
connected. People use Facebook to stay connected with friends and family, to
discover what's going on in the world, and to share and express what matters
to them.

Contacts

Investors:
Deborah Crawford
investor@fb.com / investor.fb.com

Press:
Ashley Zandy
press@fb.com / newsroom.fb.com

Forward Looking Statements

This press release contains forward-looking statements regarding our future
prospects, new product benefits, business strategy and plans, which are
subject to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. These forward-looking statements are only predictions and
may differ materially from actual results due to a variety of factors
including: our ability to retain or increase users and engagement levels,
including mobile engagement and our ability to increase revenues and
engagement across a range of geographies; our ability to monetize our mobile
products; competition; our ability to expand and further monetize the Facebook
Platform; privacy concerns; security breaches; increases in the costs
necessary to grow and operate our business; and our ability to manage growth
and geographically-dispersed operations. These and other potential risks and
uncertainties that could cause actual results to differ from the results
predicted are more fully detailed under the caption "Risk Factors" in our
Quarterly Report on Form 10-Q for the quarter ended September 30, 2012 filed
with the SEC on October 24, 2012, which is available on our Investor Relations
website at investor.fb.com and on the SEC website at www.sec.gov. Additional
information will also be set forth in our Annual Report on Form 10-K for the
full year ended December 31, 2012. In addition, please note that the date of
this press release is January 30, 2013, and any forward-looking statements
contained herein are based on assumptions that we believe to be reasonable as
of this date. We undertake no obligation to update these statements as a
result of new information or future events.

Non-GAAP Financial Measures

To supplement our consolidated financial statements, which are prepared and
presented in accordance with GAAP, we use the following non-GAAP financial
measures: total revenue and advertising revenue excluding foreign exchange
effect, non-GAAP costs and expenses, non-GAAP income from operations; non-GAAP
net income; non-GAAP diluted shares; non-GAAP diluted earnings per share;
non-GAAP operating margin; and non-GAAP effective tax rate. The presentation
of these financial measures is not intended to be considered in isolation or
as a substitute for, or superior to, financial information prepared and
presented in accordance with GAAP. Investors are cautioned that there are
material limitations associated with the use of non-GAAP financial measures as
an analytical tool. In particular, many of the adjustments to our GAAP
financial measures reflect the exclusion of items, specifically share-based
compensation expense and payroll tax related to share-based compensation
expense and the related income tax effects, that are recurring and will be
reflected in our financial results for the foreseeable future. In addition,
these measures may be different from non-GAAP financial measures used by other
companies, limiting their usefulness for comparison purposes. We compensate
for these limitations by providing specific information regarding the GAAP
amounts excluded from these non-GAAP financial measures.

We believe these non-GAAP financial measures provide investors with useful
supplemental information about the financial performance of our business,
enable comparison of financial results between periods where certain items may
vary independent of business performance, and allow for greater transparency
with respect to key metrics used by management in operating our business.

We exclude the following items from one or more of our non-GAAP financial
measures:

Share-based compensation expense. We exclude share-based compensation expense
because we believe that the non-GAAP financial measures excluding this item
provide meaningful supplemental information regarding operational performance.
In particular, because of varying available valuation methodologies,
subjective assumptions and the variety of award types that companies can use
under FASB ASC Topic 718, we believe that providing non-GAAP financial
measures that exclude this expense allow investors the ability to make more
meaningful comparisons between our operating results and those of other
companies. Furthermore, our share-based compensation expense was materially
affected in the second quarter of 2012 due to the terms of our RSUs granted
prior to 2011, related to which we recognized $986 million in share-based
compensation expense in the period, despite the fact that these awards were
granted and earned over several years. Accordingly, we believe that excluding
this expense provides investors and management with greater visibility to the
underlying performance of our business operations, facilitates comparison of
our results with other periods, and may also facilitate comparison with the
results of other companies in our industry.

Payroll tax expense related to share-based compensation. We exclude payroll
tax expense related to share-based compensation expense because, without
excluding these tax expenses, investors would not see the full effect that
excluding that share-based compensation expense had on our operating results.
Furthermore, our payroll tax expense was substantially higher due to the terms
of our RSUs granted prior to 2011, where, despite the fact that these awards
were granted and earned over several years, we recognized $151 million in
payroll tax expense in 2012 with most of this being recognized in the second
quarter of 2012. In addition, these expenses are tied to the exercise or
vesting of underlying equity awards and the price of our common stock at the
time of vesting or exercise, which factors may vary from period to period
independent of the operating performance of our business. Similar to
share-based compensation expense, we believe that excluding this payroll tax
expense provides investors and management with greater visibility to the
underlying performance of our business operations and facilitates comparison
with other periods as well as the results of other companies.

Income tax effect of share-based compensation and related payroll tax
expenses. We believe excluding the income tax effect of non-GAAP adjustments
assists investors and management in understanding the tax provision related to
those adjustments and provides useful supplemental information regarding the
underlying performance of our business operations.

Assumed preferred stock conversion. As a result of our initial public
offering, all outstanding shares of preferred stock were automatically
converted into shares of Class B common stock. Consequently, non-GAAP diluted
shares and net income per share for periods prior to June 30, 2012 have been
calculated assuming this conversion, which we believe facilitates comparison
with prior periods.

Dilutive equity awards excluded from GAAP. In our calculation of non-GAAP
weighted average shares used to compute earnings per share attributable to
Class A and Class B common stockholders, we include unvested RSUs for the year
ended December 31, 2012 as well as for the three months and full year ended
December 31, 2011, the number of which is substantial due to the terms of RSUs
granted prior to 2011. We believe including these awards facilitates
comparison between periods.

Foreign exchange effect on revenue. We translate current quarter and full year
revenues using prior year exchange rates, which we believe is a useful metric
that facilitates comparison to our historical performance.

For more information on our non-GAAP financial measures and a reconciliation
of such measures to the nearest GAAP measure, please see the "Reconciliation
of Non-GAAP Results to Nearest GAAP Measures" table in this press release.



FACEBOOK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except for per share amounts)
(Unaudited)
                                   Three Months Ended     Year Ended
                                   December 31,           December 31,
                                   2011        2012       2011       2012
Revenue                          $  1,131  $         $         $ 
                                               1,585     3,711     5,089
Costs and expenses:
    Cost of revenue                247         398        860        1,364
    Research and development       124         297        388        1,399
    Marketing and sales            120         193        393        896
    General and administrative     92          174        314        892
           Total costs and         583         1,062      1,955      4,551
           expenses
Income from operations           548         523        1,756      538
Interest and other income
(expense), net
    Interest expense               (16)        (16)       (42)       (51)
    Other income (expense), net    (12)        (2)        (19)       7
Income before provision for       520         505        1,695      494
income taxes
Provision for income taxes       218         441        695        441
Net income                       $        $      $         $    
                                   302         64         1,000     53
Less: Net income attributable to  97          -          332        21
participating securities
Net income attributable to Class  $        $      $       $    
A and Class B common stockholders 205         64         668        32
Earnings per share attributable
to Class A and Class B
common stockholders:
    Basic                          $         $        $        $  
                                   0.15       0.03      0.52      0.02
    Diluted                        $         $        $        $  
                                   0.14       0.03      0.46      0.01
Weighted-average shares used to
compute earnings per share
attributable to Class A and Class
B common stockholders:
    Basic                          1,325       2,368      1,294      2,006
    Diluted                        1,519       2,506      1,508      2,166
Share-based compensation expense
included in costs & expenses:
    Cost of revenue                $       $      $      88
                                   3          9         9
    Research and development       42          124        114        843
    Marketing and sales            13          27         37         306
    General and administrative     18          24         57         335
           Total share-based       $       $       $       $ 
           compensation expense    76          184        217        1,572
Payroll tax related to
share-based compensation included
in costs & expenses:
    Cost of revenue                $       $      $      $    
                                   -           2         -          5
    Research and development       -           16         2          53
    Marketing and sales            -           4          1          20
    General and administrative     -           7          4          73
           Total                   $       $      $      $   
                                   -           29         7         151
Share-based compensation expense
related to Pre-2011 RSUs included
in costs & expenses:
    Cost of revenue                $       $      $      $    
                                   -           2         -          63
    Research and development       -           14         -          504
    Marketing and sales            -           4          -          216
    General and administrative     -           4          -          255
           Total                   $       $      $      $ 
                                   -           24         -          1,038
Payroll tax related to Pre-2011
RSUs included in costs & expenses:
    Cost of revenue                $       $      $      $    
                                   -           2         -          5
    Research and development       -           5          -          39
    Marketing and sales            -           3          -          18
    General and administrative     -           -          -          32
           Total                   $       $      $      $    
                                   -           10         -          94

FACEBOOK, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions)
(Unaudited)
                                      December 31,         December 31,
                                      2011                 2012
Assets
Current assets:
 Cash and cash equivalents            $       1,512  $       2,384
 Marketable securities                2,396                7,242
 Accounts receivable                  547                  719
 Income tax refundable                -                    451
 Prepaid expenses and other current   149                  471
 assets
       Total current assets           4,604                11,267
Property and equipment, net           1,475                2,391
Goodwill and intangible assets, net   162                  1,388
Other assets                          90                   57
Total assets                          $       6,331  $      15,103
Liabilities and stockholders' equity
Current liabilities:
 Accounts payable                     $            $        
                                      63                  65
 Platform partners payable            171                  169
 Accrued expenses and other current   296                  423
 liabilities
 Deferred revenue and deposits        90                   30
 Current portion of capital lease     279                  365
 obligations
       Total current liabilities      899                  1,052
Capital lease obligations, less       398                  491
current portion
Long-term debt                        -                    1,500
Other liabilities                     135                  305
       Total liabilities              1,432                3,348
Stockholders' equity
 Convertible preferred stock          615                  -
 Common stock and additional paid-in  2,684                10,094
 capital
 Accumulated other comprehensive      (6)                  2
 (loss) income
 Retained earnings                    1,606                1,659
       Total stockholders' equity     4,899                11,755
Total liabilities and stockholders'   $       6,331  $      15,103
equity



FACEBOOK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
                           Three Months Ended        Year Ended
                           December 31,              December 31,
                           2011         2012         2011         2012
Cash flows from operating
activities
 Net income                $    302  $        $  1,000   $     53
                                        64
   Adjustments to
   reconcile net income to
   net cash provided by
   operating activities:
   Depreciation and        103          224          323          649
   amortization
   Loss on write-off of    (2)          7            4            15
   equipment
   Share-based             76           184          217          1,572
   compensation
   Deferred income taxes   (1)          248          (30)         (186)
   Tax benefit from
   share-based award       28           179          433          1,033
   activity
   Excess tax benefit from
   share-based award       (28)         (179)        (433)        (1,033)
   activity
 Changes in assets and
 liabilities:
   Accounts receivable     (102)        (80)         (174)        (170)
   Income tax refundable   -            116          -            (451)
   Prepaid expenses and    89           (38)         (24)         (14)
   other current assets
   Other assets            20           2            (5)          2
   Accounts payable        (30)         (19)         6            1
   Platform partners       5            14           96           (2)
   payable
   Accrued expenses and
   other current           46           (2)          37           160
   liabilities
   Deferred revenue and    5            (55)         49           (60)
   deposits
   Other liabilities       (1)          16           50           43
Net cash provided by       510          681          1,549        1,612
operating activities
Cash flows from investing
activities
 Purchases of property and (185)        (198)        (606)        (1,235)
 equipment
 Purchases of marketable   (283)        (1,717)      (3,025)      (10,307)
 securities
 Sales of marketable       426          1,529        113          2,100
 securities
 Maturities of marketable  18           920          516          3,333
 securities
 Investments in
 non-marketable equity     (1)          1            (3)          (2)
 securities
 Acquisitions of
 businesses, net of cash
 acquired, and purchases   (19)         -            (24)         (911)
 of intangible and other
 assets
 Changes in restricted     1            -            6            (2)
 cash and deposits
Net cash used in investing (43)         535          (3,023)      (7,024)
activities
Cash flows from financing
activities
 Net proceeds from         -            -            998          6,760
 issuance of common stock
 Taxes paid related to net
 share settlement of       -            (2,862)      -            (2,862)
 equity awards
 Proceeds from exercise of 1            8            28           17
 stock options
 Proceeds from issuance of
 debt, net of issuance     -            1,496        -            1,496
 costs
 Repayment of long-term    -            -            (250)        -
 debt
 Proceeds from sale and    155          -            170          205
 lease-back transactions
 Principal payments on     (53)         (135)        (181)        (366)
 capital lease obligations
 Excess tax benefit from
 share-based award         28           179          433          1,033
 activity
Net cash provided by       131          (1,314)      1,198        6,283
financing activities
Effect of exchange rate
changes on cash and cash   8            4            3            1
equivalents
Net increase (decrease) in 606          (94)         (273)        872
cash and cash equivalents
Cash and cash equivalents  906          2,478        1,785        1,512
at beginning of period
Cash and cash equivalents  $  1,512   $  2,384   $  1,512   $  2,384
at end of period
Supplemental Cash Flow
Data
 Cash paid during the
 period for:
   Interest               $       $        $        $     38
                           9           8           28
   Income taxes           $        $       $    197  $    184
                           18           -
 Cash received during the
 period for:
   Income tax refunds      $       $    131  $       $    131
                            -                        -
 Non-cash investing and
 financing activities:
   Net change in accounts
   payable and accrued
   expenses and other      $        $        $    135  $   
   current liabilities     73           40                        (40)
   related to property and
   equipment additions
   Property and equipment  $        $    
   acquired under capital  80           89           $    473  $    340
   leases
   Fair value of shares
   issued related to       $                     $    
   acquisitions of         12           $     -  58           $    274
   businesses and other
   assets





Reconciliation of Non-GAAP Results to Nearest GAAP Measures
(In millions, except for number of shares)
(Unaudited)
                                      Three Months Ended   Year Ended
                                      December 31,         December 31,
                                      2011     2012        2011    2012
GAAP revenue                          $       $  1,585  $      $  5,089
                                      1,131               3,711
   Foreign exchange effect on 2012             23                  123
   revenue using 2011 rates
Revenue excluding foreign exchange             $  1,608          $  5,212
effect
GAAP revenue year-over-year change %           40%                 37%
Revenue excluding foreign exchange             42%                 40%
effect year-over-year change %
GAAP advertising revenue              $     $  1,329  $      $  4,279
                                      943                  3,154
   Foreign exchange effect on 2012
   advertising revenue using 2011              23                  123
   rates
Advertising revenue excluding foreign          $  1,352          $  4,402
exchange effect
GAAP advertising revenue                       41%                 36%
year-over-year change %
Advertising revenue excluding foreign
exchange effect year-over-year change          43%                 40%
%
GAAP costs and expenses               $     $  1,062  $      $  4,551
                                      583                  1,955
   Share-based compensation expense   (76)     (184)       (217)   (1,572)
   Payroll tax expenses related to    -        (29)        (7)     (151)
   share-based compensation
Non-GAAP costs and expenses           $     $        $      $  2,828
                                      507      849         1,731
GAAP income from operations           $     $        $      $    538
                                      548      523         1,756
   Share-based compensation expense   76       184         217     1,572
   Payroll tax expenses related to    -        29          7       151
   share-based compensation
Non-GAAP income from operations       $     $        $      $  2,261
                                      624      736         1,980
GAAP net income                       $     $       $      $    
                                      302      64          1,000  53
   Share-based compensation expense   76       184         217     1,572
   Payroll tax expenses related to    -        29          7       151
   share-based compensation
   Income tax adjustments             (18)     149         (60)    (459)
Non-GAAP net income                   $     $        $      $  1,317
                                      360      426         1,164
GAAP diluted shares                   1,519    2,506       1,508   2,166
   Assumed preferred stock conversion 545      -           548     203
   Dilutive equity awards excluded    286      -           276     110
   from GAAP^1
Non-GAAP diluted shares               2,350    2,506       2,332   2,479
GAAP diluted earnings per share       $      $         $     $   0.01
                                      0.14    0.03       0.46
   Net income attributable to         0.05     -           0.20    0.01
   participating securities
   Non-GAAP adjustments to net income 0.04     0.14        0.11    0.59
   Non-GAAP adjustments to diluted    (0.08)   -           (0.27)  (0.08)
   shares
Non-GAAP diluted earnings per share   $      $         $     $   0.53
                                      0.15    0.17       0.50
GAAP operating margin                 48%      33%         47%     11%
   Share-based compensation expense   7%       12%         6%      31%
   Payroll tax expenses related to    0%       2%          0%      3%
   share-based compensation
Non-GAAP operating margin             55%      46%         53%     44%
GAAP profit before tax                $     $        $      $    494
                                      520      505         1,695
GAAP provision for income taxes       218      441         695     441
GAAP effective tax rate               42%      87%         41%     89%
GAAP profit before tax                $     $        $      $    494
                                      520      505         1,695
Share-based compensation and related  76       213         224     1,723
payroll tax expenses
Non-GAAP profit before tax            $     $        $      $  2,217
                                      596      718         1,919
Non-GAAP provision for income taxes   236      292         755     900
Non-GAAP effective tax rate           40%      41%         39%     41%
^1 Gives effect to unvested RSUs in periods prior to our
IPO for comparability





SOURCE Facebook, Inc.
 
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