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Facebook Reports Third Quarter 2012 Results

October 23, 2012

MENLO PARK, Calif., Oct. 23, 2012 /PRNewswire/ — Facebook, Inc. (NASDAQ: FB) today reported financial results for the third quarter, which ended September 30, 2012.

“As proud as I am that a billion people use Facebook each month, I’m also really happy that over 600 million people now share and connect on Facebook every month using mobile devices,” said Mark Zuckerberg, Facebook founder and CEO. “People who use our mobile products are more engaged, and we believe we can increase engagement even further as we continue to introduce new products and improve our platform. At the same time, we are deeply integrating monetization into our product teams in order to build a stronger, more valuable company.”

    Third Quarter 2012 Financial Summary

    In millions, except percentages
     and per share amounts               Q3'12         Q3'11
                                         -----         -----

    Revenue                                    $1,262         $954
    Income from Operations
       GAAP                                      $377         $414
       Non-GAAP                                  $525         $484
    Operating Margin
       GAAP                                        30%          43%
       Non-GAAP                                    42%          51%
    Net Income (Loss)
        GAAP                                     $(59)        $227
        Non-GAAP                                 $311         $273
    Diluted Earnings (Loss) per Share
     (EPS)
        GAAP                                   $(0.02)       $0.10
       Non-GAAP                                 $0.12        $0.12

Third Quarter 2012 Operational Highlights

  • Monthly active users (MAUs) were 1.01 billion as of September 30, 2012, an increase of 26% year-over-year
  • Daily active users (DAUs) were 584 million on average for September 2012, an increase of 28% year-over-year
  • Mobile MAUs were 604 million as of September 30, 2012, an increase of 61% year-over-year

Recent Business Highlights

Product

  • Completely rebuilt Facebook for iOS for faster and more reliable performance
  • Updated Messenger for Android and iOS and made Facebook Camera available in 18 languages
  • Continued to make it easy for mobile developers to build with Facebook
    • New Software Development Kits (SDKs) for iOS and Android
    • Deep integration into iOS 6.0
  • Launched Facebook Gifts, a way to send gifts to celebrate the special moments millions of people share on Facebook each day

Advertising

  • Launched several new advertising products, such as Custom Audiences, Facebook Exchange, Offers, and mobile app install ads
  • Generated 14% of advertising revenue during the third quarter from mobile

Corporate

  • Connected 1 billion people since founding the company eight years ago
  • Created Facebook Stories, a new website to share the stories of people using Facebook in extraordinary ways at www.facebookstories.com
  • Closed Instagram acquisition
  • Opened first international engineering office in London

Third Quarter 2012 Financial Highlights

Revenue - Revenue for the third quarter totaled $1.26 billion, an increase of 32%, compared with $954 million in the third quarter of 2011. Excluding the impact of year-over-year changes in foreign exchange rates, revenue would have increased by 38%.

  • Revenue from advertising was $1.09 billion, representing 86% of total revenue and a 36% 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%.
  • Payments and other fees revenue for the third quarter was $176 million, a 13% increase over the same quarter in the prior year and a 9% decline sequentially from the second quarter of 2012.

Costs and expenses – Third quarter costs and expenses were $885 million, an increase of 64% from the third quarter of 2011. Excluding share-based compensation and related payroll tax expenses, non-GAAP costs and expenses were $737 million, an increase of 57%.

Income from operations – For the third quarter, GAAP income from operations was $377 million, compared to income from operations of $414 million for the third quarter of 2011. Excluding share-based compensation and related payroll tax expenses, non-GAAP income from operations for the third quarter was $525 million, compared to $484 million for the third quarter of 2011.

Operating margin - GAAP operating margin was 30% for the third quarter of 2012, compared to 43% for the third quarter of 2011. Excluding share-based compensation and related payroll tax expenses, non-GAAP operating margin was 42% for the third quarter of 2012, compared to 51% for the third quarter of 2011.

Income tax provision - The GAAP income tax provision for the third quarter was $431 million, representing a 116% effective tax rate, driven by share-based compensation expense, a portion of which is not tax-deductible. Excluding share-based compensation expense and related payroll tax expenses, the non-GAAP effective tax rate would have been approximately 40%.

Net income (loss) - GAAP income before provision for income taxes was $372 million. After the provision for income taxes, GAAP net loss for the third quarter was $59 million, compared to net income of $227 million for the third quarter of 2011. GAAP EPS for third quarter of 2012 was ($0.02), compared to $0.10 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 was $311 million or $0.12 per share, compared to $273 million and $0.12 per share for the same quarter in the prior year.

Capital expenditures - Purchases of property and equipment for the quarter were $171 million. Additionally, $161 million of equipment was procured or financed through capital leases during the third quarter of 2012.

Cash and marketable securities – As of September 30, 2012, cash and marketable securities were $10.5 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.

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 30503033.

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
+1 (650) 384-2083
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 business strategy and plans as well as expectations of future growth and engagement, all of 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; our ability to expand the Facebook Platform; competition; privacy 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 for the quarter ended June 30, 2012 filed with the SEC, 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 Quarterly Report on Form 10-Q for the quarter ended September 30, 2012. In addition, please note that the date of this press release is October 23, 2012, 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 a cumulative $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 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 $84 million in payroll tax expense in the nine months ended September 30, 2012, with most of this expense being recognized in the second quarter of 2012 and a partially offsetting credit recognized in third 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 securities and other 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 for the three and nine months ended September 30, 2012, we give effect to antidilutive RSUs and stock options that are excluded from GAAP weighted average shares due to our reporting of a net loss. We also include unvested RSUs in the nine months ended September 30, 2012 as well as in the three and nine months ended September 30, 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 total revenue and advertising revenue. We translate current quarter 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           Nine Months Ended
                                                                        September 30,               September 30,
                                                                        -------------               -------------
                                                                                    2011                          2012                  2011            2012
                                                                                    ----                          ----                  ----            ----

     Revenue                                                  $954                       $1,262                           $2,580             $3,504

     Costs and expenses:
               Cost of revenue                                  236                          322                              613                967
                Research and
                development                                     108                          244                              264              1,102
                Marketing and
                sales                                           114                          168                              272                703
                General and
                administrative                                   82                          151                              222                717
                                                                ---                          ---                              ---                ---
                                 Total costs and expenses                            540                           885                 1,371           3,489
                                                                                     ---                           ---                 -----           -----

     Income from
      operations                                               414                          377                            1,209                 15

     Interest and other
      income (expense),
      net
               Interest expense                                 (10)                         (11)                             (26)               (35)
                Other income
                (expense), net                                  (25)                           6                               (7)                 9
                                                                ---                          ---                              ---                ---
     Income (loss) before
      provision for
      income taxes                                             379                          372                            1,176                (11)
     Provision for income
      taxes                                                    152                          431                              478                  -
                                                               ---                          ---                              ---                ---
     Net income (loss)                                        $227                         $(59)                            $698               $(11)
                                                              ----                         ----                             ----               ----
     Less: Net income
      attributable to
      participating
      securities                                                77                            -                              235                  -
                                                               ---                          ---                              ---                ---
     Net income (loss)
      attributable to
      Class A and Class B
      common                                                  $150                         $(59)                            $463               $(11)
                                                              ====                         ====                             ====               ====
     stockholders

     Earnings (loss) per
      share attributable
      to Class A and
      Class B
     common stockholders
               Basic                                          $0.11                       $(0.02)                           $0.36             $(0.01)
                                                              =====                       ======                            =====             ======
               Diluted                                        $0.10                       $(0.02)                           $0.32             $(0.01)
                                                              =====                       ======                            =====             ======

     Weighted-average
     shares used to
     compute earnings
     (loss)
     per share
     attributable to
     Class A and Class B
     common stockholders
               Basic                                          1,316                        2,420                            1,283              1,884
               Diluted                                        1,520                        2,420                            1,507              1,884

     Share-based
      compensation
      expense included in
      costs & expenses
               Cost of revenue                                   $3                           $8                               $6                 79
                Research and
                development                                      33                          114                               72                719
                Marketing and
                sales                                            13                           28                               24                279
                General and
                administrative                                   21                           29                               39                311
                                                                ---                          ---                              ---                ---
                                  Total share-based compensation
                                  expense                                            $70                          $179                  $141          $1,388
                                                                                     ===                          ====                  ====          ======

     Payroll tax related
      to share-based
      compensation
      included in costs &
      expenses
               Cost of revenue                              $     -                          $(3)                       $       -                 $3
                Research and
                development                                       -                          (12)                               2                 36
                Marketing and
                sales                                             -                           (9)                               1                 16
                General and
                administrative                                    -                           (7)                               4                 67
                                                                ---                          ---                              ---                ---
                                 Total                                           $     -                          $(31)                   $7            $122
                                                                                 =======                          ====                   ===            ====

     Share-based
     compensation
     expense related to
     Pre-2011 RSUs
     included in costs &
     expenses:
               Cost of revenue                              $     -                           $1                        $       -                $61
                Research and
                development                                       -                           17                                -                490
                Marketing and
                sales                                             -                            4                                -                212
                General and
                administrative                                    -                            6                                -                251
                                                                ---                          ---                              ---                ---
                                 Total                                           $     -                           $28             $       -          $1,014
                                                                                 =======                           ===             =========          ======

     Payroll tax related
     to Pre-2011 RSUs
     included in costs &
     expenses
               Cost of revenue                              $     -                          $(3)                       $       -                 $3
                Research and
                development                                       -                          (12)                               -                 34
                Marketing and
                sales                                             -                           (9)                               -                 15
                General and
                administrative                                    -                           (7)                               -                 32
                                                                ---                          ---                              ---                ---
                                 Total                                           $     -                          $(31)            $       -             $84
                                                                                 =======                          ====             =========             ===

                                       FACEBOOK, INC.
                           CONDENSED CONSOLIDATED BALANCE SHEETS
                                       (In millions)
                                        (Unaudited)

                                                       December 31,         September 30,
                                                                      2011                   2012
                                                                      ----                   ----
    Assets
    Current assets
    --------------
               Cash and cash
               equivalents                                          $1,512                 $2,478
              --------------
               Marketable
               securities                                            2,396                  7,974
               Accounts
               receivable                                              547                    635
               Income tax
               refundable                                                -                    567
               Prepaid expenses
               and other
               current assets                                          149                    631
                                                                       ---
              Total current assets                                   4,604                 12,285

    Property and equipment, net                                      1,475                  2,289
    Goodwill and intangible assets, net                                162                  1,423
    Other assets                                                        90                     41
                                                                       ---                    ---
    Total assets                                                    $6,331                $16,038
                                                                    ======                =======

    Liabilities and stockholders' equity
    Current liabilities
              Accounts payable                                         $63                    $59
               Platform partners
               payable                                                 171                    155
               Accrued expenses
               and other
               current
               liabilities                                             296                    409
               Deferred revenue
               and deposits                                             90                     85
              -----------------
               Current portion
               of capital lease
               obligations                                             279                    372
              ----------------                                         ---                    ---
              Total current liabilities                                899                  1,080
              -------------------------

    Capital lease obligations, less
     current portion                                                   398                    530
    Other liabilities                                                  135                    254
                                                                       ---                    ---
              Total liabilities                                      1,432                  1,864

    Stockholders' equity
    --------------------
               Convertible
               preferred stock                                         615                      -
               Common stock and
               additional paid-
               in capital                                            2,684                 12,585
               Accumulated other
               comprehensive
               loss                                                     (6)                    (6)
              Retained earnings                                      1,606                  1,595
                                                                     -----
              Total stockholders' equity                             4,899                 14,174
                                                                     -----                 ------
    Total liabilities and stockholders'
     equity                                                         $6,331                $16,038
                                                                    ======                =======

                                                                                       FACEBOOK, INC.
                                                                       CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                                                        (In millions)
                                                                                         (Unaudited)

                                                                Three Months Ended               Nine Months Ended
                                                                   September 30,                   September 30,
                                                                   -------------                   -------------
                                                                               2011                             2012                              2011                             2012
                                                                               ----                             ----                              ----                             ----

    Cash flows from operating activities
    ------------------------------------
                         Net income (loss)                                     $227                             $(59)                             $698                             $(11)
                         -----------------
                          Adjustments to reconcile net income
                          (loss) to net cash provided by
                          operating activities:
                         -----------------------------------
                         Depreciation and amortization                           97                              176                               220                              425
                         -----------------------------
                         Loss on write-off of equipment                           -                                4                                 6                                8
                         ------------------------------
                         Share-based compensation                                70                              179                               141                            1,388
                         ------------------------
                         Deferred income taxes                                  (15)                             (60)                              (29)                            (434)
                         ---------------------
                          Tax benefit from share-based award
                          activity                                               50                              473                               405                              854
                         -----------------------------------
                          Excess tax benefit from share-
                          based award activity                                  (50)                            (473)                             (405)                            (854)
                         -------------------------------
                          Changes in assets
                          and liabilities:
                         -----------------
                         Accounts receivable                                    (44)                             (50)                              (72)                             (90)
                         -------------------
                         Income tax refundable                                    -                                -                                 -                             (567)
                         ---------------------
                          Prepaid expenses and other current
                          assets                                                113                               31                              (113)                              24
                         -----------------------------------
                         Other assets                                           (19)                               9                               (25)                               -
                         ------------
                         Accounts payable                                        29                               28                                36                               20
                         ----------------
                         Platform partners payable                               53                               (1)                               91                              (16)
                         -------------------------
                          Accrued expenses and other current
                          liabilities                                            12                              (27)                               (9)                             162
                         -----------------------------------
                         Deferred revenue and deposits                           24                                -                                44                               (5)
                         -----------------------------
                         Other liabilities                                       18                               20                                51                               27
                         -----------------                                      ---                              ---                               ---                              ---
    Net cash provided by operating activities                                   565                              250                             1,039                              931
    -----------------------------------------

    Cash flows from investing activities
    ------------------------------------
                          Purchases of
                          property and
                          equipment                                            (136)                            (171)                             (421)                          (1,037)
                         -------------
                          Purchases of
                          marketable
                          securities                                           (850)                          (1,633)                           (2,742)                          (8,590)
                         -------------
                          Sales of
                          marketable
                          securities                                             95                              443                                95                              571
                         -----------
                          Maturities of
                          marketable
                          securities                                             90                            1,307                                90                            2,413
                         --------------
                          Investments in
                          non-marketable
                          equity
                          securities                                             (1)                               -                                (2)                              (3)
                         ---------------
                          Acquisition of
                          businesses, net
                          of cash
                          acquired, and
                          purchases of
                          intangible and
                          other assets                                           (1)                            (336)                               (5)                            (911)
                          Changes in
                          restricted cash
                          and deposits                                            8                                1                                 5                               (2)
                         ----------------                                       ---                              ---                               ---                              ---
    Net cash used in investing activities                                      (795)                            (389)                           (2,980)                          (7,559)
    -------------------------------------

    Cash flows from financing activities
    ------------------------------------
                          Net proceeds from
                          issuance of
                          common stock                                            -                               (1)                              998                            6,760
                         -----------------
                          Proceeds from
                          exercise of
                          stock options                                           3                                -                                27                                9
                         --------------
                          Repayment of
                          long-term debt                                          -                                -                              (250)                               -
                         ---------------
                          Proceeds from
                          sale and lease-
                          back
                          transactions                                            7                              123                                15                              205
                         ----------------
                          Principal
                          payments on
                          capital lease
                          obligations                                           (46)                             (88)                             (128)                            (231)
                         --------------
                          Excess tax
                          benefit from
                          share-based
                          award activity                                         50                              473                               405                              854
                         ---------------                                        ---                              ---                               ---                              ---
    Net cash provided by financing activities                                    14                              507                             1,067                            7,597
    -----------------------------------------                                   ---                              ---                             -----                            -----

    Effect of exchange rate changes on cash and cash
     equivalents                                                                 (9)                              12                                (5)                              (3)

    ---
    Net increase (decrease) in cash and cash equivalents                       (225)                             380                              (879)                             966
    ----------------------------------------------------
    Cash and cash equivalents at beginning of period                          1,131                            2,098                             1,785                            1,512
    ------------------------------------------------                          -----                            -----                             -----                            -----
    Cash and cash equivalents at end of period                                 $906                           $2,478                              $906                           $2,478
    ------------------------------------------                                 ====                           ======                              ====                           ======

    Supplemental Cash Flow Data
    ---------------------------
                          Cash paid during
                          the period for:
                         -----------------
                         Interest                                                $6                              $11                               $19                              $30
                         --------
                         Income taxes                                            $3                               $2                              $179                             $184
                         ------------
                          Non-cash
                          investing and
                          financing
                          activities:
                          Net change in accounts payable and
                          accrued expenses and other current
                          liabilities related to property
                          and equipment additions                                $6                             $(21)                              $62                             $(80)
                          Property and equipment acquired
                          under capital leases                                 $102                             $161                              $393                             $251
                         --------------------------------
                          Fair value of shares issued related
                          to acquisitions of businesses and
                          other assets                                           $2                             $250                               $46                             $275

               Reconciliation of Non-GAAP Results to Nearest GAAP Measures
                       (In millions, except for number of shares)
                                       (Unaudited)

                                                                  Three Months Ended           Nine Months Ended
                                                                     September 30,               September 30,
                                                                     -------------               -------------
                                                                                  2011                          2012            2011          2012
                                                                                  ----                          ----            ----          ----

     GAAP revenue                      $954                                     $1,262                        $2,580          $3,504
       Foreign
                           exchange
                           effect on
                           Q3'12 revenue
                           using Q3'11
                           rates                                                           52
                                                                                          ---
      Revenue excluding
      foreign exchange
      effect                                                                    $1,314

      GAAP revenue year-
        over-year change
                       %                                                            32%
       Revenue excluding
        foreign exchange
            effect year-
        over-year change
                       %                                                            38%

      GAAP advertising
      revenue                          $798                                     $1,086                        $2,211          $2,950
       Foreign
                           exchange
                           effect on
                           Q3'12
                           advertising
                           revenue using
                           Q3'11 rates                                                     52
                                                                                          ---
      Advertising
      revenue excluding
      foreign exchange
      effect                                                                    $1,138

        GAAP advertising
           revenue year-
        over-year change
                       %                                                            36%
             Advertising
       revenue excluding
        foreign exchange
            effect year-
        over-year change
                       %                                                            43%

      GAAP costs and
      expenses                         $540                                       $885                        $1,371          $3,489
                           Share-based
                           compensation
                           expense                         (70)                          (179)                          (141)         (1,388)
       Payroll tax
                           expenses
                           related to
                           share-based
                           compensation                      -                             31                             (7)           (122)
                                                           ---                            ---                            ---            ----
      Non-GAAP costs
      and expenses                     $470                                       $737                        $1,223          $1,979

      GAAP income from
      operations                       $414                                       $377                        $1,209             $15
                           Share-based
                           compensation
                           expense                          70                            179                            141           1,388
       Payroll tax
                           expenses
                           related to
                           share-based
                           compensation                      -                            (31)                             7             122
                                                           ---                            ---                            ---             ---
      Non-GAAP income
      from operations                  $484                                       $525                        $1,357          $1,525

      GAAP net income
      (loss)                           $227                                       $(59)                         $698            $(11)
                           Share-based
                           compensation
                           expense                          70                            179                            141           1,388
       Payroll tax
                           expenses
                           related to
                           share-based
                           compensation                      -                            (31)                             7             122
                           Income tax
                           adjustments                     (24)                           222                            (42)           (609)
                                                           ---                            ---                            ---            ----
      Non-GAAP net
      income                           $273                                       $311                          $804            $890

      GAAP diluted
      shares                          1,520                                      2,420                         1,507           1,884
                           Assumed
                           preferred
                           stock
                           conversion                      548                              -                            548             272
                           Dilutive
                           securities
                           excluded due
                           to net loss                       -                            159                              -             170
                           Other dilutive
                           equity awards
                           excluded from
                           GAAP(1)                         278                              -                            259             118
                                                           ---                            ---                            ---             ---
      Non-GAAP diluted
      shares                          2,346                                      2,579                         2,314           2,444

      GAAP diluted
      earnings (loss)
      per share                       $0.10                                     $(0.02)                        $0.32          $(0.01)
       Net income
                           attributable
                           to
                           participating
                           securities                     0.05                              -                          $0.14               -
                           Non-GAAP
                           adjustments
                           to net income                  0.03                           0.15                          $0.07            0.48
                           Non-GAAP
                           adjustments
                           to diluted
                           shares                        (0.06)                         (0.01)                        $(0.18)          (0.11)
                                                         -----                          -----                         ------           -----
      Non-GAAP diluted
      earnings per
      share                           $0.12                                      $0.12                         $0.35           $0.36

      GAAP operating
      margin                             43%                                        30%                           47%              0%
                           Share-based
                           compensation
                           expense                           7%                            14%                             5%             40%
       Payroll tax
                           expenses
                           related to
                           share-based
                           compensation                      0%                           (2%)                             0%              3%
                                                           ---                            ---                            ---             ---
      Non-GAAP
      operating margin                   51%                                        42%                           53%             44%

      GAAP profit (loss)
      before tax                       $379                                       $372                        $1,176            $(11)
      GAAP provision for
      benefit from
      income taxes                      152                                        431                           478               -
                                        ---                                        ---                           ---             ---
      GAAP effective tax
      rate                               40%                                       116%                           41%              0%

      GAAP profit (loss)
      before tax                       $379                                       $372                        $1,176            $(11)
      Share-based
      compensation and
      related payroll
      tax expenses                       70                                        148                           148           1,510
                                        ---                                        ---                           ---           -----
      Non-GAAP profit
      before tax                       $449                                       $520                        $1,324          $1,499
      Non-GAAP
      provision for
      income taxes                      176                                        209                           520             609
                                        ---                                        ---                           ---             ---
      Non-GAAP
      effective tax
      rate                               39%                                        40%                           39%             41%

      (1)Gives effect to unvested RSUs in periods prior to our IPO for
      comparability

SOURCE Facebook, Inc.


Source: PR Newswire