A Peek at Facebook’s Finances

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By USDR

Facebook, Inc. (NASDAQ: FB) recently reported financial results for the fourth quarter and full year ended December 31, 2014.

“We got a lot done in 2014. Our community continues to grow and we’re making progress towards connecting the world,” said Mark Zuckerberg, Facebook founder and CEO.

Fourth Quarter and Full Year 2014 Financial Summary

	Three Months Ended December 31,				Year Ended December 31,
In millions, except percentages and per share amounts	2014		2013		2014		2013
Revenue	$	3,851	$	2,585	$	12,466	$	7,872
Income from Operations
GAAP	$	1,133	$	1,133	$	4,994	$	2,804
Non-GAAP*	$	2,219	$	1,498	$	7,207	$	3,948
Operating Margin
GAAP	29%		44%		40%		36%
Non-GAAP*	58%		58%		58%		50%
Net Income
GAAP	$	701	$	523	$	2,940	$	1,500
Non-GAAP*	$	1,518	$	814	$	4,713	$	2,334
Diluted Earnings per Share (EPS)
GAAP	$	0.25	$	0.20	$	1.10	$	0.60
Non-GAAP*	$	0.54	$	0.32	$	1.77	$	0.93

* Non-GAAP information for the three months and the year ended December 31, 2013 has been updated to exclude amortization of intangible assets to conform to our current period presentation. See the table below titled “Reconciliation of Non-GAAP Results to Nearest GAAP Measures.”

Full Year 2014 Business Highlights

Revenue for the full year 2014 was $12.47 billion, an increase of 58% year-over-year.
Income from operations for the full year 2014 was $4.99 billion.
Net income for the full year 2014 was $2.94 billion.
Free cash flow for the full year 2014 was $3.63 billion.
Daily active users (DAUs) were 890 million on average for December 2014, an increase of 18% year-over-year.
Mobile DAUs were 745 million on average for December 2014, an increase of 34% year-over-year.
Monthly active users (MAUs) were 1.39 billion as of December 31, 2014, an increase of 13% year-over-year.
Mobile MAUs were 1.19 billion as of December 31, 2014, an increase of 26% year-over-year.

Fourth Quarter 2014 Financial Highlights

Revenue – Revenue for the fourth quarter of 2014 totaled $3.85 billion, an increase of 49%, compared with $2.59 billion in the fourth quarter of 2013. Excluding the impact of year-over-year changes in foreign exchange rates, revenue would have increased by 53%.

Revenue from advertising was $3.59 billion, a 53% increase from the same quarter last year. Excluding the impact of year-over-year changes in foreign exchange rates, revenue from advertising would have increased by 58%.
Mobile advertising revenue represented approximately 69% of advertising revenue for the fourth quarter of 2014, up from approximately 53% of advertising revenue in the fourth quarter of 2013.
Payments and other fees revenue was $257 million, a 7% increase from the same quarter last year.

Costs and expenses – GAAP costs and expenses for the fourth quarter of 2014 were $2.72 billion, an increase of 87% from the fourth quarter of 2013. Non-GAAP information for 2013 has been updated to exclude amortization of intangible assets to conform to our current period presentation. Excluding amortization of intangible assets, share-based compensation and related payroll tax expenses, non-GAAP costs and expenses were $1.63 billion in the fourth quarter of 2014, up 50% compared to $1.09 billion for the fourth quarter of 2013.

Income from operations – GAAP income from operations for the fourth quarter of each of 2014 and 2013 was $1.13 billion. Excluding amortization of intangible assets, share-based compensation and related payroll tax expenses, non-GAAP income from operations for the fourth quarter of 2014 was $2.22 billion, up 48% compared to $1.50 billion for the fourth quarter of 2013.

Operating margin – GAAP operating margin was 29% for the fourth quarter of 2014, compared to 44% in the fourth quarter of 2013. Excluding amortization of intangible assets, share-based compensation and related payroll tax expenses, non-GAAP operating margin was 58% for the fourth quarter of each of 2014 and 2013.

Provision for income taxes – GAAP income tax expense for the fourth quarter of 2014 was $413 million, representing a 37% effective tax rate. Excluding amortization of intangible assets, share-based compensation and related payroll tax expenses, the non-GAAP effective tax rate would have been approximately 31%.

Net income and EPS – GAAP net income for the fourth quarter of 2014 was $701 million, up 34% compared to $523 million for the fourth quarter of 2013. Excluding amortization of intangible assets, share-based compensation and related payroll tax expenses, and income tax adjustments, non-GAAP net income for the fourth quarter of 2014 was $1.52 billion, up 86% compared to $814 million for the fourth quarter of 2013. GAAP diluted EPS was $0.25 in the fourth quarter of 2014, up 25% compared to $0.20 in the fourth quarter of 2013. Excluding amortization of intangible assets, share-based compensation and related payroll tax expenses, and income tax adjustments, non-GAAP diluted EPS for the fourth quarter of 2014 was $0.54, up 69% compared to $0.32 in the fourth quarter of 2013.

Capital expenditures – Capital expenditures for the fourth quarter of 2014 were $517 million.

Cash and cash equivalents and marketable securities – Cash and cash equivalents and marketable securities were $11.20 billionat the end of the fourth quarter of 2014.

Free cash flow – Free cash flow for the fourth quarter of 2014 was $1.07 billion.

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.