Facebook Reports Fourth Quarter and Full Year 2013 Results

PR Newswire

MENLO PARK, Calif., Jan. 29, 2014 /PRNewswire/ -- Facebook, Inc. (FB) today reported financial results for the fourth quarter and full year ended December 31, 2013.

"It was a great end to the year for Facebook," said Mark Zuckerberg, Facebook founder and CEO. "We're looking forward to our next decade and to helping connect the rest of the world."

Fourth Quarter and Full Year 2013 Financial Summary                                                          



Three Months Ended December 31,


Year Ended December 31,

In millions, except percentages and per share amounts

2012


2013


2012


2013

Revenue

$ 1,585


$ 2,585


$ 5,089


$ 7,872

Income from Operations








GAAP

$ 523


$ 1,133


$ 538


$ 2,804

Non-GAAP

$ 736


$ 1,459


$ 2,261


$ 3,803

Operating Margin








GAAP

33%


44%


11%


36%

Non-GAAP

46%


56%


44%


48%

Net Income








GAAP

$ 64


$ 523


$ 53


$ 1,500

Non-GAAP

$ 426


$ 780


$ 1,317


$ 2,202

Diluted Earnings per Share (EPS)








GAAP

$ 0.03


$ 0.20


$ 0.01


$ 0.60

Non-GAAP

$ 0.17


$ 0.31


$ 0.53


$ 0.88

 Full Year 2013 Business Highlights

  • Revenue for the full year 2013 was $7.87 billion, an increase of 55% year-over-year.
  • Income from operations for the full year 2013 was $2.80 billion.
  • Net income for the full year 2013 was $1.50 billion.
  • Free cash flow for the full year of 2013 was $2.85 billion.
  • Daily active users (DAUs) were 757 million on average for December 2013, an increase of 22% year-over-year.
  • Mobile DAUs were 556 million on average for December 2013, an increase of 49% year-over-year.
  • Monthly active users (MAUs) were 1.23 billion as of December 31, 2013, an increase of 16% year-over-year.
  • Mobile MAUs were 945 million as of December 31, 2013, an increase of 39% year-over-year. 

Fourth Quarter 2013 Financial Highlights

Revenue – Revenue for the fourth quarter of 2013 totaled $2.59 billion, an increase of 63%, compared with $1.59 billion in the fourth quarter of 2012. 

  • Revenue from advertising was $2.34 billion, a 76% increase from the same quarter last year.
  • Mobile advertising revenue represented approximately 53% of advertising revenue for the fourth quarter of 2013, up from approximately 23% of advertising revenue in the fourth quarter of 2012.
  • Payments and other fees revenue was $241 million for the fourth quarter of 2013.

Costs and expenses – GAAP costs and expenses for the fourth quarter of 2013 were $1.45 billion, an increase of 37% from the fourth quarter of 2012, driven primarily by increased headcount and infrastructure expense. Excluding share-based compensation and related payroll tax expenses, non-GAAP costs and expenses were $1.13 billion in the fourth quarter of 2013, up 33% compared to $849 million for the fourth quarter of 2012.

Income from operations – For the fourth quarter of 2013, GAAP income from operations was $1.13 billion, compared to $523 million in the fourth quarter of 2012. Excluding share-based compensation and related payroll tax expenses, non-GAAP income from operations for the fourth quarter of 2013 was $1.46 billion, up 98% compared to $736 million for the fourth quarter of 2012.

Operating margin – GAAP operating margin was 44% for the fourth quarter of 2013, compared to 33% in the fourth quarter of 2012. Excluding share-based compensation and related payroll tax expenses, non-GAAP operating margin was 56% for the fourth quarter of 2013, compared to 46% for the fourth quarter of 2012.

Provision for income taxes – GAAP income tax expense for the fourth quarter of 2013 was $607 million, representing a 54% effective tax rate. Excluding share-based compensation and related payroll tax expenses, the non-GAAP effective tax rate would have been approximately 46%.

Net income and EPS – For the fourth quarter of 2013, GAAP net income was $523 million, compared to $64 million for the fourth quarter of 2012. Excluding share-based compensation and related payroll tax expenses and income tax adjustments, non-GAAP net income for the fourth quarter of 2013 was $780 million, up 83% compared to $426 million for the fourth quarter of 2012. GAAP diluted EPS was $0.20 in the fourth quarter of 2013, compared to $0.03 in the fourth quarter of 2012. Excluding share-based compensation and related payroll tax expenses and income tax adjustments, non-GAAP diluted EPS for the fourth quarter of 2013 was $0.31, up 82% compared to $0.17 in the fourth quarter of 2012.

Capital expenditures – Capital expenditures for the fourth quarter of 2013 were $483 million.

Cash and marketable securities – Cash and marketable securities were $11.45 billion at the end of 2013. 

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 uses 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 25168884.

About Facebook

Founded in 2004, Facebook's mission is to give people the power to share and 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:
Tucker Bounds
press@fb.com / newsroom.fb.com

Forward Looking Statements

This press release contains forward-looking statements regarding our future business expectations, 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; our reliance on advertising revenue; our ability to continue to monetize our mobile products; risks associated with new product development and their introduction as well as other new business initiatives; our emphasis on user growth and engagement and the user experience over short-term financial results; competition; litigation; privacy and regulatory concerns; security breaches; 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 filed with the SEC on November 1, 2013, 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, 2013. In addition, please note that the date of this press release is January 29, 2014, 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: revenue excluding foreign exchange effect 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; non-GAAP effective tax rate; and free cash flow. 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 allows investors the ability to make more meaningful comparisons between our operating results and those of other companies. 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 share-based compensation expense had on our operating results. 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 IPO in May 2012, all outstanding shares of preferred stock were automatically converted into shares of Class B common stock. Consequently, non-GAAP diluted shares and earnings per share for the year ended December 31, 2012 have been calculated assuming this conversion for periods prior to the IPO, which we believe facilitates comparison between 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, 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 revenue for the current quarter and full year ended December 31, 2013 using prior year exchange rates, which we believe is a useful metric that facilitates comparison to our historical performance.

Purchases of property and equipment; Property and equipment acquired under capital leases. We subtract both purchases of property and equipment and property and equipment acquired under capital leases in our calculation of free cash flow because we believe that these two items collectively represent the amount of property and equipment we need to procure to support our business, regardless of whether we finance such property or equipment with a capital lease. We believe that this methodology can provide useful supplemental information to help investors better understand underlying trends in our business.

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 INCOME

(In millions, except for per share amounts)

(Unaudited)


Three Months Ended
December 31,


Year Ended
December 31,


2012


2013


2012


2013

Revenue

$ 1,585


$ 2,585


$ 5,089


$ 7,872

Costs and expenses:








   Cost of revenue

398


491


1,364


1,875

   Research and development

297


408


1,399


1,415

   Marketing and sales

193


292


896


997

   General and administrative

174


261


892


781

         Total costs and expenses

1,062


1,452


4,551


5,068

Income from operations

523


1,133


538


2,804

Interest and other income (expense), net:








   Interest expense

(16)


(7)


(51)


(56)

   Other income (expense), net

(2)


4


7


6

Income before provision for income taxes

505


1,130


494


2,754

Provision for income taxes

441


607


441


1,254

Net income

$      64


$    523


$      53


$ 1,500

Less: Net income attributable to participating securities

-


3


21


9

Net income attributable to Class A and Class B common stockholders

$      64


$    520


$      32


$ 1,491

Earnings per share attributable to Class A and Class B common stockholders:








   Basic

$   0.03


$   0.21


$   0.02


$   0.62

   Diluted

$   0.03


$   0.20


$   0.01


$   0.60

Weighted average shares used to compute earnings per share attributable to Class A and Class B common stockholders:








   Basic

2,368


2,458


2,006


2,420

   Diluted

2,506


2,558


2,166


2,517

Share-based compensation expense included in costs and expenses:








   Cost of revenue

$        9


$      11


$      88


$      42

   Research and development

124


172


843


604

   Marketing and sales

27


42


306


133

   General and administrative

24


48


335


127

         Total share-based compensation expense

$    184


$    273


$ 1,572


$    906

Payroll tax expenses related to share-based compensation included in costs and expenses:








   Cost of revenue

$        2


$       -


$        5


$        1

   Research and development

16


4


53


30

   Marketing and sales

4


1


20


8

   General and administrative

7


48


73


54

         Total payroll tax expenses related to share-based compensation

$      29


$      53


$    151


$      93

 

 

FACEBOOK, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions)

(Unaudited)


December 31,
2012


December 31,
2013

Assets




Current assets:





Cash and cash equivalents

$                     2,384


$                     3,323


Marketable securities

7,242


8,126


Accounts receivable

719


1,109


Income tax refundable

451


51


Prepaid expenses and other current assets

471


461



Total current assets

11,267


13,070

Property and equipment, net

2,391


2,882

Goodwill and intangible assets, net

1,388


1,722

Other assets

57


221

Total assets

$                   15,103


$                   17,895





Liabilities and stockholders' equity




Current liabilities:





Accounts payable

$                          65


$                          87


Developer partners payable

169


181


Accrued expenses and other current liabilities

423


555


Deferred revenue and deposits

30


38


Current portion of capital lease obligations

365


239



Total current liabilities

1,052


1,100





Capital lease obligations, less current portion

491


237

Long-term debt

1,500


Other liabilities

305


1,088



Total liabilities

3,348


2,425





Stockholders' equity





Common stock and additional paid-in capital

10,094


12,297


Accumulated other comprehensive income

2


14


Retained earnings

1,659


3,159



Total stockholders' equity

11,755


15,470

Total liabilities and stockholders' equity

$                   15,103


$                   17,895

 

 

FACEBOOK, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)


Three Months Ended
December 31,


Year Ended
December 31,


2012


2013


2012


2013

Cash flows from operating activities








Net income

$     64


$    523


$       53


$ 1,500

Adjustments to reconcile net income to net cash provided by operating activities:








Depreciation and amortization

224


274


649


1,011

Lease abandonment expense

1


9


8


117

Loss on disposal or write-off of equipment

7


17


15


56

Share-based compensation

184


273


1,572


906

Deferred income taxes

248


(58)


(186)


(37)

Tax benefit from share-based award activity

179


325


1,033


602

Excess tax benefit from share-based award activity

(179)


(324)


(1,033)


(609)

  Changes in assets and liabilities:








Accounts receivable

(80)


(233)


(170)


(378)

Income tax refundable

116


(44)


(451)


400

Prepaid expenses and other current assets

(38)


(34)


(14)


(45)

Other assets

2


(107)


2


(142)

Accounts payable

(19)


43


1


26

Developer partners payable

14


10


(2)


12

Accrued expenses and other current liabilities

(3)


67


152


(38)

Deferred revenue and deposits

(55)


2


(60)


8

Other liabilities

16


488


43


833

  Net cash provided by operating activities

681


1,231


1,612


4,222

Cash flows from investing activities








  Purchases of property and equipment

(198)


(483)


(1,235)


(1,362)

  Purchases of marketable securities

(1,717)


(3,069)


(10,307)


(7,433)

  Sales of marketable securities

1,529


555


2,100


2,988

  Maturities of marketable securities

920


609


3,333


3,563

  Investments in non-marketable equity securities

1


-


(2)


(1)

  Acquisitions of businesses, net of cash acquired, and purchases of intangible assets

-


(131)


(911)


(368)

  Change in restricted cash and deposits

-


(15)


(2)


(11)

  Net cash provided by (used in) investing activities

535


(2,534)


(7,024)


(2,624)

Cash flows from financing activities








  Net proceeds from issuance of common stock

-


1,478


6,760


1,478

  Taxes paid related to net share settlement of equity awards

(2,862)


(183)


(2,862)


(889)

  Proceeds from exercise of stock options

8


6


17


26

  Proceeds from long-term debt, net of issuance cost

1,496


-


1,496


-

  Repayment of long-term debt

-


-


-


(1,500)

  Proceeds from sale and lease-back transactions

-


-


205


-

  Principal payments on capital lease obligations

(135)


(100)


(366)


(391)

  Excess tax benefit from share-based award activity

179


324


1,033


609

  Net cash (used in) provided by financing activities

(1,314)


1,525


6,283


(667)

Effect of exchange rate changes on cash and cash equivalents

4


1


1


8

Net (decrease) increase in cash and cash equivalents

(94)


223


872


939

Cash and cash equivalents at beginning of period

2,478


3,100


1,512


2,384

Cash and cash equivalents at end of period

$   2,384


$ 3,323


$     2,384


$ 3,323

Supplemental cash flow data








  Cash paid during the period for:








Interest

$       8


$        5


$       38


$      38

Income taxes

$        -


$      21


$     184


$      82

      Cash received during the period for:








Refund of income taxes

$   131


$        2


$     131


$    421

  Non-cash investing and financing activities:








Net change in accounts payable and accrued expenses and other current liabilities related to property and equipment additions

$     40


$      22


$      (40)


$      53

Property and equipment acquired under capital leases

$     89


$         -


$     340


$      11

Fair value of shares issued related to acquisitions of businesses and other assets

$        -


$         -


$     274


$      77

 

 


Reconciliation of Non-GAAP Results to Nearest GAAP Measures

(In millions, except percentages and per share amounts)

(Unaudited)


Three Months Ended
December 31,


Year Ended
December 31,


2012


2013


2012


2013

GAAP revenue

$ 1,585


$ 2,585


$  5,089


$ 7,872

   Foreign exchange effect on 2013 revenue using 2012 rates



2




22

Revenue excluding foreign exchange effect



$ 2,587




$ 7,894

GAAP revenue year-over-year change %



63%




55%

Revenue excluding foreign exchange effect year-over-year change %



63%




55%

GAAP advertising revenue

$ 1,329


$ 2,344


$  4,279


$ 6,986

   Foreign exchange effect on 2013 advertising revenue using 2012 rates



2




22

Advertising revenue excluding foreign exchange effect



$ 2,346




$ 7,008

GAAP advertising revenue year-over-year change %



76%




63%

Advertising revenue excluding foreign exchange effect year-over-year change %



77%




64%

GAAP costs and expenses

$ 1,062


$ 1,452


$  4,551


$ 5,068

   Share-based compensation expense

(184)


(273)


(1,572)


(906)

   Payroll tax expenses related to share-based compensation

(29)


(53)


(151)


(93)

Non-GAAP costs and expenses

$    849


$ 1,126


$  2,828


$ 4,069

GAAP income from operations

$    523


$ 1,133


$     538


$ 2,804

  Share-based compensation expense

184


273


1,572


906

  Payroll tax expenses related to share-based compensation

29


53


151


93

Non-GAAP income from operations

$    736


$ 1,459


$  2,261


$ 3,803

GAAP net income

$      64


$    523


$       53


$ 1,500

   Share-based compensation expense

184


273


1,572


906

   Payroll tax expenses related to share-based compensation

29


53


151


93

   Income tax adjustments

149


(69)


(459)


(297)

Non-GAAP net income

$    426


$    780


$  1,317


$ 2,202

GAAP diluted shares

2,506


2,558


2,166


2,517

   Assumed preferred stock conversion1

-


-


203


-

   Dilutive equity awards excluded from GAAP1

-


-


110


-

Non-GAAP diluted shares

2,506


2,558


2,479


2,517

GAAP diluted earnings per share

$   0.03


$   0.20


$    0.01


$   0.60

   Net income attributable to participating securities

-


-


0.01


-

   Non-GAAP adjustments to net income

0.14


0.11


0.59


0.28

   Non-GAAP adjustments to diluted shares

-


-


(0.08)


-

Non-GAAP diluted earnings per share

$   0.17


$   0.31


$    0.53


$   0.88

GAAP operating margin

33%


44%


11%


36%

   Share-based compensation expense

12%


11%


31%


12%

   Payroll tax expenses related to share-based compensation

2%


2%


3%


1%

Non-GAAP operating margin

46%


56%


44%


48%

GAAP income before provision for income taxes

$    505


$ 1,130


$     494


$ 2,754

GAAP provision for income taxes

441


607


441


1,254

GAAP effective tax rate

87%


54%


89%


46%

GAAP income before provision for income taxes

$    505


$ 1,130


$     494


$ 2,754

Share-based compensation and related payroll tax expenses

213


326


1,723


999

Non-GAAP income before provision for income taxes

$    718


$ 1,456


$  2,217


$ 3,753

Non-GAAP provision for income taxes

292


676


900


1,551

Non-GAAP effective tax rate

41%


46%


41%


41%

Net cash provided by operating activities

$    681


$ 1,231


$  1,612


$ 4,222

   Purchases of property and equipment

(198)


(483)


(1,235)


(1,362)

   Property and equipment acquired under capital leases

(89)


-


(340)


(11)

Free cash flow

$    394


$    748


$       37


$ 2,849

1Gives effect to assumed preferred stock conversion and other dilutive equity awards prior to our IPO for comparability

 

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