facebook initiating report
TRANSCRIPT
Company ReportMay 7, 2012
Facebook, Inc.Facebook - Initiating Coverage with a Buy Rating and $46 PT
BuyFBPrice NA
Price Target $46.00
Our CallAhead of Facebook’s (FB) highly anticipated IPO on Friday, May 18 (expectedprice range of $28 - $35), we are initiating coverage with a Buy rating. Our 1-year/2-year target prices are $46 (30x 2013 EBITDA estimate of $3.8B) and $59(30x 2014 EBITDA estimate of $5.0B), respectively.
The Next Google? FB’s highly coveted Reach, Engagement, Relevance andSocial Context. Just like Google did less than a decade ago, we believe Facebook isdisrupting the worldwide advertising market (~$600B), particularly its $68B sub-segment of online advertising (a market that is expected to reach $120B by 2015or CAGR of 13%). Driven by 1) Facebook’s leadership position in social media;2) its unparalleled reach (900 monthly active users); 3) highly engaged audience(526M daily active users); 4) growing ARPU (average revenue per user); 5) mobilemonetization potential; and 6) the wild card—China, we think FB can more thantriple its revenue and EBITDA over the next 4 to 5 years. Our estimates wouldbe achievable if FB increases its share of online advertising by only 300bps from5% in 2011 to close to 8% by 2016. In addition, we have very little contributionfrom mobile and China modeled currently and as such our estimates could proveconservative. Together, Mobile and China could add $1.5B in incremental revenueand $600 million in incremental EBITDA by 2015. Additionally, the market forvirtual/digital goods is expected to reach $14B by 2016, up from $9B in 2011(CAGR of 9%), according to NPD In-Stat. For advertisers, FB differentiates itselfwith its ability to provide a highly targeted audience (with 90% to 95% accuracy)and in a social context, which are highly desirable features.
Mobile advertising and China opportunities. The mobile advertising market iscurrently relatively small (was $1.5B in 2010) but is expected to grow rapidlyand reach $18B by 2015 or a CAGR of 64%, according to IDC. With 488Musers accessing FB through mobile devices, the company already has the reach onmobile. Facebook was the most downloaded app on Android and iPhone in themonth of January 2012. We see mobile monetization as a significant long-termgrowth opportunity for FB, but with some initial challenges. In addition, if FB isable to enter China, which has 23% of the world’s internet users, its growth couldaccelerate. The potential China opportunity is not reflected in our estimates butwe think could add $400 to $600M in incremental revenue and $125M to $300Min incremental EBITDA. That said, clearly this opportunity is neither a given norwithout its own unique set of challenges/hurdles.
Interactive Entertainment /Internet
Arvind Bhatia, CFA(214) [email protected]
Brett Strauser(214) [email protected]
Company DataRating BuyPrice NAPrice Target $46.0052-Week Range NA - NAMarket Capitalization (M) NAAvg. Daily Vol. (000) NADividend $0.00
Revenue ($M) 2011A 2012E 2013EFY 3,711.0 5,007.6 6,297.0
EBITDA (M) 2011A 2012E 2013EFY 2,297.0 2,871.4 3,772.8
FYE Dec 2011A 2012E 2013E
(Curr) (Curr) (Curr)EPS ($)Q1 (Mar) - 0.13A 0.14Q2 (Jun) - 0.13 0.17Q3 (Sept) - 0.13 0.17Q4 (Dec) - 0.17 0.21FY EPS - 0.56 0.69
Price Performance
Chart Data Not Available
Source: FactSet
Important Disclosures regarding Price Target Risks, Valuation Methodology, Regulation Analyst Certification,Investment Banking, Ratings Definitions, and potential conflicts of interest begin on Page I of the Appendix Section.
800 Shades Creek ParkwaySuite 700Birmingham, AL 35209205-949-3500Sterne, Agee & Leach Inc. is Member NYSE, FINRA, SIPC
TABLE OF CONTENTS
FINANCIAL MODELING FRAMEWORK………………………………………………..3
VALUATION ANALYSIS……………………….…………………………………………..5
KEY INVESTMENT POSITIVES………………………………..…………………………6
KEY INVESTMENT RISKS……………………………………………………………….16
COMPANY OVERVIEW…………………………………………………………………..19
FINANCIAL STATEMENTS………………………………………………………………23
TRENDS……………………………………………………………………………………..27
Page 2
May 7, 2012
IPO Details
Facebook is expected to sell 337.4M shares in its IPO at a price range of $28 to $35 per share.
This includes 180M new shares and 157M existing insider shares. The company expects to
receive $5.6B at the midpoint of the potential price range. If the IPO is priced at the upper end
of the price range and the over- allotment option is exercised (an additional 6M new shares,
44.6M existing shares), the gross proceeds to the company could be $6.5 billion. Founder and
CEO Mark Zuckerberg will exercise outstanding stock options of 60M shares, and of this, he
will sell 30.2M shares to satisfy taxes related to the above option exercise. We estimate the
total number of shares outstanding (fully diluted) post the IPO will be 2.74 billion. In other
words, the company’s post-money market capitalization based on the IPO price range is $77B
to $96B.
Risks
Key risks to FB include 1) slower-than-expected growth; 2) competitive threats from
companies like Google; 3) regulatory risks; 4) risks associated with entering new international
markets, etc.; 5) regulatory/legislative changes that may limit Facebook’s ability to provide
user information to advertisers, etc. In addition, we have not had a chance to interact with
management prior to this report, and as such, the report relies heavily on publicly available
data and our industry contacts. Also, IPOs are inherently risky given the stock has no history
of trading publicly.
Our Financial Modeling Framework
We believe over the next five years, FB can grow its revenue at a CAGR of at least 25% and
adjusted EBITDA (ex stock-based compensation) 25% to 30%. Additionally, we note our
model assumes only modest leverage on fixed costs. For the most part, our total operating
costs (ex stock-based compensation) are assumed to grow in line to slightly higher than
revenue growth. This is because we believe FB will continue to invest heavily in the coming
years to continually improve user experience. Said differently, we believe the underlying
earnings power and growth rates are somewhat muted by the near to intermediate
investments. Our 5-year (2011-2016) revenue CAGR of 25% is based on traffic (MAUs)
increasing 12% on average and the rest from higher ARPU over time.
Our financial modeling framework assumes:
A) Increasing internet user penetration worldwide.
B) Increasing Facebook penetration of internet users.
C) Increasing engagement of Facebook users.
D) Higher ARPU
E) Modest leverage on fixed costs.
The tables below show that at the end of 2011, Facebook had a worldwide penetration rate of
roughly 48% of internet users, including 66% in the U.S., 46% in Europe, 42% in Asia and
47% in the rest of the world. First, we expect the worldwide internet user base to grow at a
CAGR of 8% in the next 5 years. Second, we expect Facebook to achieve greater penetration
in each of its markets. We believe Facebook could achieve a worldwide penetration rate of
57% by 2016 (up 900 bps versus 2011), including 76% in the U.S., 56% in Europe, 52% in
Asia and 57% in the rest of the world.
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May 7, 2012
Combining the increased internet user base and the higher market penetration rates discussed
above implies Facebook can grow its MAUs to 1.5 billion by 2016, up from 845 million at the
end of 2011 or a CAGR of 12%. This is slower than the historical MAU growth simply due to
the law of large numbers. Facebook’s MAU growth in the past three years has averaged 80%,
including 148% in 2009, 69% in 2010 and 39% in 2011. Revenue growth over the same
period has averaged 139%. This has been result of several factors including the ability to
generate more ads, charge higher prices per ad and the benefit of payment and fee revenue
from developers since the implementation of the 30% tax on developers since 2010, etc.
Internet FB Penetration
Total Internet Facebook user Of Internet
Population Users users Penetration users-- 2011
MM MM MM % %
US & Canada 347 273 179 79% 66%
Europe 816 501 229 61% 46%
Asia (Ex China) 2542 504 212 20% 42%
Rest of World 1887 477 225 25% 47%
Total 5593 1754 845 31% 48%
China 1337 513 0 38% 0%
Source: 1. http://www.internetworldstats.com/stats.htm
2. Facebook
3. Sterne Agee Estimates
Facebook Penetration Rates: Dec 31, 2011
Internet FB Penetration
Total Internet Facebook user Of Internet
Population Users users Penetration users-- 2016
MM MM MM % %
US & Canada 365 305 231 84% 76%
Europe 858 591 329 69% 56%
Asia (Ex China) 2672 930 484 35% 52%
Rest of World 1984 799 457 40% 57%
Total 5878 2624 1501 45% 57%
5 Yr CAGR 1% 8% 12%
China 1371 595 0 43%
Source: 1. http://www.internetworldstats.com/stats.htm
2. Facebook
3. Sterne Agee Estimates
Facebook Penetration Rate Estimates: Dec 31, 2016
Page 4
May 7, 2012
Source: Company Reports and Sterne Agee Estimates
Valuation – 1-Year Target Price of $46; 2-Year Target Price of $59
We believe over the next 12 months, FB shares can trade at 30x our 2013 adjusted EBITDA
estimate of $3.8B, which implies Enterprise Value of $114B and market cap of $124B
(including $10B in estimated pro-forma cash post IPO) and value per share of $46 (using pro-
forma shares outstanding of 2.7B). Extending this same exercise another year (30x our 2014
EBITDA estimate of $5B), yields a 2-year target price of $59. Our forward EBITDA multiple
is clearly a premium to the company’s peer group. However, we believe investors will be
willing to pay this premium as FB is still in the early stages of disrupting a $600B market.
1 6 12 58
145
360
608
845
1,027
1,175
1,301
1,415 1,501
-
200
400
600
800
1,000
1,200
1,400
1,600
2004 2005 2006 2007 2008 2009 2010 2011 2012E 2013E 2014E 2015E 2016E
Facebook MAUs (millions): 2004 - 2016)
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May 7, 2012
KEY INVESTMENT POSITIVES
Large Addressable Market for Worldwide Advertising
We believe Facebook is in the early innings of revolutionizing the $600 billion worldwide
advertising market, particularly the sub-segment of online advertising. Online advertising
spending is expected to reach $120B by 2015, up from $68B in 2010 or a CAGR of 12%.
This growth rate is 3x the expected growth rate of traditional advertising during the same
period due to the ongoing secular shift from offline to online advertising. Furthermore, social
media is quickly gaining share within online advertising as marketers see value in reaching
their audiences in a more relevant and social context. As the leading social network
worldwide, Facebook is well positioned to address this large and rapidly growing market.
Facebook’s highly coveted Reach, Relevance, Engagement and Social Context
With more than 900 million monthly active users (MAUs) as of March 31, 2012, FB is the
world’s largest online social network and the world’s most trafficked website, according to
Comscore (SCOR - $19.10 - Not Rated) Media Metrix, followed by Google (GOOG -
$596.97 – Not Rated) and Microsoft (MSFT - $30.98 - Not Rated). MAUs were up a strong
33% Y/Y and 7% sequentially at the end of 1Q’12. FB’s stated goal is to reach almost every
one of the nearly 2 billion people on the Internet. While FB’s reach is clearly enormous, its
engagement metrics are even more impressive. During 1Q’12, FB averaged 526 million daily
active users (DAU), up 41% Y/Y and 9% sequentially. Average DAUs as a % of average
MAUs, which is another measure of engagement, were up 250bps Y/Y and 150 bps
sequentially, reaching 60.3% in 1Q. Additionally, nearly 76% of these daily users were active
on FB for at least six of the last seven days during March 2012. Yet another way to measure
engagement, in January, 2012, FB users spent on average 20 minutes daily on the website, up
14% Y/Y. The total minutes per day on FB increased 57% Y/Y to 10.5 billion minutes in
January 2012. There are 3.2B likes and comments posted on FB daily, which also shows how
involved and engaged the audience is. In terms of relevance, FB is able to provide target
audience to advertisers with 90% to 95% accuracy given that users’ identity on FB is mostly
authentic (5% to 6% of accounts are estimated to be fake/duplicates). This is significantly
higher than the industry average of 30%. We believe this is an important reason FB will be
able to increase its ARPU, going forward. In terms of social context, FB has been able to
show a 50% increase in ad recall for targeted ads, based on 79 different advertising campaigns
conducted on Facebook.
5 Yr CAGR
2010 2015E 2010-2015E
Online Advertising ($BB) 68 120 12%
Offline Advertising ($BB) 520 630 4%
Total ($BB) 588 750 5%
Online % Share of Total 12% 16%
Source: Facebook
Worldwide Advertising Market
Page 6
May 7, 2012
Facebook's Reach
Source: Company Reports and Sterne Agee
Source: Company Reports and Sterne Agee
196
242
305
360
432
482
550
608
681
738
800
845
901
0
100
200
300
400
500
600
700
800
900
1000
Mar '09 Jun '09 Sep '09 Dec '09 Mar '10 Jun '10 Sep '10 Dec '10 Mar '11 Jun '11 Sep '11 Dec '11 Mar '12
Worldwide MAUs (millions)
0
100
200
300
400
500
600
700
800
900
1000
Mar '09
Jun '09
Sep '09
Dec '09
Mar '10
Jun '10
Sep '10
Dec '10
Mar '11
Jun '11
Sep '11
Dec '11
Mar '12
Worldwide MAU Mix
Rest of World
Asia
Europe
US & Canada
Page 7
May 7, 2012
Source: Company Reports and Sterne Agee
User Engagement
Source: Company Reports and Sterne Agee
0
50
100
150
200
250
300
Mar '09
Jun '09
Sep '09
Dec '09
Mar '10
Jun '10
Sep '10
Dec '10
Mar '11
Jun '11
Sep '11
Dec '11
Mar '12
Worldwide MAU Growth
US & Canada
Europe
Asia
Rest of World
93108
145
185
235257
294
328
371
416
457483
526
0
100
200
300
400
500
600
Mar '09 Jun '09 Sep '09 Dec '09 Mar '10 Jun '10 Sep '10 Dec '10 Mar '11 Jun '11 Sep '11 Dec '11 Mar '12
Worldwide DAUs (millions)
Page 8
May 7, 2012
Source: Company Reports and Sterne Agee
Source: Company Reports and Sterne Agee
0
100
200
300
400
500
600
Mar '09
Jun '09
Sep '09
Dec '09
Mar '10
Jun '10
Sep '10
Dec '10
Mar '11
Jun '11
Sep '11
Dec '11
Mar '12
Worldwide DAU Mix
Rest of World
Asia
Europe
US & Canada
0
20
40
60
80
100
120
140
160
Mar '09
Jun '09
Sep '09
Dec '09
Mar '10
Jun '10
Sep '10
Dec '10
Mar '11
Jun '11
Sep '11
Dec '11
Mar '12
Worldwide DAU Growth
US & Canada
Europe
Asia
Rest of World
Page 9
May 7, 2012
Source: Company Reports and Sterne Agee
Source: Company Reports and Sterne Agee
40%
45%
50%
55%
60%
65%
70%
Jun '09 Sep '09 Dec '09 Mar '10 Jun '10 Sep '10 Dec '10 Mar '11 Jun '11 Sep '11 Dec '11 Mar '12
Worldwide User Engagement (DAU as % of MAU)
30%
35%
40%
45%
50%
55%
60%
65%
70%
75%
Jun '09
Sep '09
Dec '09
Mar '10
Jun '10
Sep '10
Dec '10
Mar '11
Jun '11
Sep '11
Dec '11
Mar '12
User Engagement by Region (DAU as % of MAU)
US & Canada
Europe
Asia
Rest of World
Page 10
May 7, 2012
Mobile Advertising Opportunity
According to IDC, the global market for mobile advertising will reach nearly $18B by 2015,
up from $1.5B in 2010 or a CAGR of 64%. With 488 million MAUs using Facebook mobile
products in the month of March 2012, FB clearly has the reach on mobile platforms as well.
Furthermore, the Facebook mobile app was the most downloaded app on Android and iPhone
in the month of January 2012, according to Neilsen. Facebook has only just begun showing
sponsored stories in Facebook users’ mobile News Feeds and mobile advertising could be a
significant opportunity for Facebook in the future, especially as smartphone use continues to
grow rapidly. We see mobile monetization as a significant long-term growth opportunity for
FB, but with some initial challenges. For example, it is not yet clear if most of the mobile
advertising growth will be incremental or will cannibalize online advertising. Still, if the
mobile advertising market develops, as anticipated, and FB garners a 5% share by 2015, it
could generate incremental revenue of ~$1B and incremental EBITDA of $300-$500M.
Source: Company Reports and Sterne Agee
2010 2015 (Est.) CAGR
Market Size ($BB) $1.5 $18.0 64%
FB Market Share 0% 5%
FB Mobile Advertising Revenue $0.0 $0.9
Source: Company Reports, IDC, and Sterne Agee
Facebook's Mobile Advertising Opportunity
3550
75101
129155
196
245
288
325
376
432
488
0
100
200
300
400
500
600
Mar '09
Jun '09
Sep '09
Dec '09
Mar '10
Jun '10
Sep '10
Dec '10
Mar '11
Jun '11
Sep '11
Dec '11
Mar '12
Worldwide Mobile MAUs (millions)
Page 11
May 7, 2012
Source: Company Reports and Sterne Agee
China
Facebook is currently not in China, which has 23% of the world’s internet users. The potential
China opportunity is not reflected in our current estimates but we think could add $400-
$600M in incremental revenue and $125M to $300M in incremental EBITDA. This is based
on the assumption that FB could penetrate 42% of China’s estimated 500M internet users, a
penetration rate similar to that in other parts of Asia. Furthermore, it assumes relatively low
annual ARPU of $2.00 to $3.00, again similar to ARPU rates in other parts of Asia and much
lower than the West, where annual ARPUs are in the $12 (US/Canada) to $6 (Europe) range.
Clearly, this opportunity is neither a given nor without its own unique set of
challenges/hurdles. However, the potential opportunity is large and lucrative.
0
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1000
Mar '09
Jun '09
Sep '09
Dec '09
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Dec '10
Mar '11
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Dec '11
Mar '12
Increasing Mobile MAU penetration
Mobile MAUs
FB User Base Potential in China
2011 Total Potential Potential
Total Internet Internet FB FB
Population Users Penetration Penetration Users
(MM) (MM) (%) (%) (MM)
1337 513 38% 42% 216
FB Revenue/EBITDA Potential in China
ARPU Revenue EBITDA Margin EBITDA
($) ($MM) (%) ($MM)
Low $2.00 $432 30% $130
High $3.00 $648 50% $324
Sources: http://www.internetworldstats.com/stats.htm
Company Reports, Sterne Agee Estimates
Facebook's China Potential
Page 12
May 7, 2012
Virtual Goods Market provides diversification
In the most recent quarter, while 82% of FB’s revenue was generated through advertising, the
other 18% was from payments from its developer partners such as Zynga (ZNGA - $8.33 –
Underperform), which pay FB a 30% cut of their revenue. This provides diversification to the
FB business model. The market for virtual/digital goods (think virtual seeds in Farmville) is
expected to reach $14B by 2016, up from $9B in 2011 (CAGR of 9%). Currently, most of the
revenue in this segment is generated from payments from social game developers, and in
particular from Zynga. FB takes a 30% cut of revenue generated by Zynga and other
developers on FB. In 1Q’12, Zynga represented 11% of FB’s revenue, down from 13% in the
year-ago period. The agreement between Zynga and Facebook expires in May 2015. We
expect FB’s revenue from Payments to grow at a CAGR of 20% over the next five years.
Source: Company Reports and Sterne Agee
Source: Company Reports and Sterne Agee
0
100
200
300
400
500
600
700
800
900
1000
Mar '10 Jun '10 Sep '10 Dec '10 Mar '11 Jun '11 Sep '11 Dec '11 Mar '12
Revenue by Segment (millions)
Advertising
Payments and other fees
0
200
400
600
800
1000
1200
Mar '10 Jun '10 Sep '10 Dec '10 Mar '11 Jun '11 Sep '11 Dec '11 Mar '12
Revenue Mix by Segment
Payments and other fees
Advertising
Page 13
May 7, 2012
Source: Company Reports and Sterne Agee
Source: Company Reports and Sterne Agee
Geographic Diversification
In the most recent quarter, FB generated 50% of its total revenue from the U.S./Canada.
Europe generated 31% of total revenue while Asia/Rest of the World accounted for 11%/8%,
respectively, of total revenue. In terms of advertising revenue alone, FB generated less than
half (48%) of its advertising revenue in the U.S./Canada. Another 31% of advertising revenue
was generated in Europe, followed by Asia at 11% and Rest of the World at 9%. Over the
next five years, we expect revenues to continue to diversify further. By the end of 2016, we
think U.S. will likely represent only 35% of total revenue, Europe 28%, Asia 21% and the
Rest of the World 16%. We note that ARPU (average revenue per user) is much higher in the
0
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600
Mar '10 Jun '10 Sep '10 Dec '10 Mar '11 Jun '11 Sep '11 Dec '11 Mar '12
Revenue by Region
US & Canada
Europe
Asia
Rest of World
0
200
400
600
800
1000
1200
Mar '10 Jun '10 Sep '10 Dec '10 Mar '11 Jun '11 Sep '11 Dec '11 Mar '12
Revenue Mix by Region
Rest of World
Asia
Europe
US & Canada
Page 14
May 7, 2012
West. For the most recent 12 months, ARPU was nearly $12 in the US/Canada, nearly $6 in
Europe, $2 in Asia and $1.50 in the Rest of the World. We expect traffic growth to be faster
outside the U.S. and we expect ARPU to be up in each territory over time. We note ARPU
trends in Europe have been under some pressure lately due to the ongoing recession.
Third-party integration
Facebook continues to make major investments to enable developers to create applications
and websites that integrate with the Facebook Platform. This integration allows third-party
developers to reach more users by tapping into the viral aspects of such an integration.
Additionally, an increasing number of businesses manage a Facebook fan page, which creates
a free, direct communication channel with customers. Facebook’s impressive web penetration
across multiple sectors of the global economy has allowed it to further entrench itself and has
given strength to the platform’s network effect.
Page 15
May 7, 2012
KEY INVESTMENT RISKS
Potential Hurdles for Facebook in China
As the experience of other U.S. internet companies such as eBay (EBAY - $39.44 - Not
Rated), Amazon (AMZN - $223.99 - Not Rated) and Google has shown, entering China can
be treacherous. Challenges range from compliance with regulatory authorities to failing to
address the cultural nuances of the Chinese market. eBay entered China in 2003 through the
acquisition of EachNet, which was a leading B2C company in China at the time.
Subsequently, EachNet lost most of its market share even as other local players were able to
grow significantly. Amazon entered China through the acquisition of Joyo and has had some
success but arguably not as much as some had hoped. Google, of course, ran into issues with
Chinese regulatory authorities due to its unwillingness to censor searches. In addition to the
inherent challenges of entering a new market, Facebook will also have to contend with the
multiple licensing authorities such as Ministry of Culture, General Administration of Press
and Publication (GAPP), The Ministry of Information Industry etc.
Hyper Growth is over
Facebook is clearly going to face the law of large numbers when it comes to traffic. Facebook
already has 901M MAUs or nearly 1 of every 2 internet users. While we expect Facebook to
benefit from an increasing base of internet users and to be able to achieve higher penetration
rates of internet users, the hyper growth of past years is unlikely to be matched simply due to
the law of large numbers. For example, we have modeled MAUs to increase 26% in 2012
versus 48% in 2011 and 88% in 2010. However, we believe Facebook will be able to grow its
revenue above its traffic growth rate, as a result of higher ARPU, driven by more ads and
higher prices per ad, etc.
Recent sequential decline in revenue
FB reported Y/Y revenue growth of 45% in 1Q’12 (March), which was a slowdown from Y/Y
growth of 55% in 4Q’11 and 104% in 3Q’11. Sequentially, 1Q’12 revenue declined 6%,
including advertising revenue, which declined 8% sequentially. This has understandably
raised concerns. However, we attribute this to a seasonal slowdown, particularly after a very
strong December quarter when revenue increased 19% sequentially. We note that in 1Q’11
FB also saw a seasonal dip in advertising revenue, which declined 3% sequentially followed
by strong momentum in the June quarter when advertising revenue was up 22% sequentially.
Page 16
May 7, 2012
Recent decline in Payments & Other Fees revenue
For the first time since Facebook implemented the Facebook credits system, revenue from its
Payments and Other Fees segment declined sequentially. Since this revenue stream comes
from the fee Facebook retains on Facebook Credit transactions, and since the majority of
these transactions to date have been for purchasing virtual goods in social games by
publishers such as Zynga, a sequential decline in revenue from this segment could signal a
slowdown in social gaming. However, we think any declines in social gaming-related
revenues will be offset as more developers begin to accept Facebook credits as a payment
mechanism for their products and services.
Increasing competition
Facebook competes with other social networking and traditional websites for a share of users’
time, and ultimately, a share of overall internet marketing expenditures. Additionally, FB
faces competition regarding hiring and retaining talented employees. Any website with a large
user base, high engagement, and high average time spent on the site would be considered a
competitor to Facebook. Some of Facebook’s key U.S. competitors are Google+, Linkedin
(LNKD - $117.30 – Not Rated) Twitter, Pinterest, Tumblr, and to a certain extent, Microsoft
(although MSFT is also an investor in FB). Overseas, FB’s main competitors are Mixi in
Japan, Orkut in India and Brazil, Cyworld in Korea and vKontakte in Russia. In China, once
FB enters the market, it will face competition from established players such as RenRen
(RENN - $6.70 - Not Rated), Sina and Tencent. Below, we show a comparison of FB with
GOOG.
Mar '10 Jun '10 Sep '10 Dec '10 Mar '11 Jun '11 Sep '11 Dec '11 Mar '12
Advertising $0.86 $0.93 $0.87 $1.13 $0.99 $1.09 $1.04 $1.15 $1.00
Payments $0.01 $0.02 $0.03 $0.13 $0.15 $0.17 $0.20 $0.23 $0.21
Total $0.87 $0.94 $0.91 $1.26 $1.14 $1.26 $1.24 $1.37 $1.21
Y/Y % Chg
Advertising 16% 18% 19% 1% 1%
Payments 1055% 995% 512% 72% 47%
Total 31% 34% 37% 9% 7%
Sequential % Chg
Advertising 8% -6% 30% -12% 10% -5% 10% -13%
Payments 21% 115% 304% 10% 15% 20% 13% -6%
Total 8% -4% 39% -10% 11% -1% 11% -12%
Seasonality & Mix Seasonality & Mix
Source: Company reports and Sterne Agee Estimates
Seasonality in Monetization Trends
Page 17
May 7, 2012
Source: Company Reports and Sterne Agee
Note: FB Revenue for IPO year through year 5 is based on Sterne Agee Estimates. Google is based on actuals
Source: Company Reports and Sterne Agee
Note: FB EBITDA for IPO year through year 5 is based on Sterne Agee Estimates. Google is based on actuals
Competition for Users’ Time
The likelihood of a direct FB competitor becoming successful is low. However, much of
Facebook’s value comes from the amount of time users spend on the platform. Pinterest and
Instagram have shown us that the barriers to entry are low for a developer to create a
disruptive platform that takes market share in terms of a user’s time. Also, Vertical-specific
social networks may compete for user hours and may have higher marketing ROI/easier to
measure ROI, which means more marketing $ spent on competing niche networks and less on
FB.
$0
$5,000
$10,000
$15,000
$20,000
$25,000
Year Before
IPO
IPO Year 2 Year 3 Year 4 Year 5
FB vs. GOOG Revenue GrowthGOOG IPO year: 2004
FB IPO year: 2012
$0$1,000$2,000$3,000$4,000$5,000$6,000$7,000$8,000$9,000
Year Before
IPO
IPO Year 2 Year 3 Year 4 Year 5
FB vs. GOOG EBITDA GrowthGOOG IPO year: 2004
FB IPO year: 2012
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May 7, 2012
COMPANY OVERVIEW
Background
Founded in 2004, Facebook is a social network that allows its users to connect with their
friends, family, acquaintances, favorite brands, organizations, and public figures, and allows
them to share and express their lives in various ways. Other beneficiaries of Facebook’s
services include developers and advertisers.
Developers can integrate with the Facebook platform through use of developments tools and
APIs to build personalized, social, and engaging products and tap into Facebook’s more than
900M users. Upon the successful integration of a third-party application or website with
Facebook, developers can leverage Facebook’s social distribution channels to drive traffic to
their own products. Facebook created a consistent payment mechanism for developers, giving
users a single payment account to be used for the purchase of virtual and physical goods
offered by third parties on the Facebook Platform. We believe the ease of use and security
offered by Facebook’s payment infrastructure increases a user’s propensity to purchase from a
third party, thereby increasing the total number of transactions on the Facebook platform. In
exchange for offering this payment mechanism, Facebook retains a negotiated fee from
developers (Roughly 30%, or similar to Apple’s iTunes/AppStore model [AAPL - $565.25 –
Buy, WU]).
Advertisers can engage with subsets of users on Facebook based on information users have
provided such as their age, location, gender, interests, and more. Advertisers can increase the
relevancy of their advertisements by leveraging the information users have provided to
Facebook. Facebook’s robust advertising engine allows advertisers to be highly specific
regarding their target audience. Advertisers can also incorporate social context into their
advertisements such as an endorsement from a user’s friend. Users may be more receptive to a
particular advertisement if they see that a friend is a fan of the brand or product being offered.
Advertisers also benefit from managing a Facebook Page, which provides a free, direct
communication channel with customers or potential customers. When an advertiser creates
content on its Facebook Page, users who have “liked” the page will receive the content on
their news feed.
Facebook is free for its users and generates revenue through advertising and through retaining
a portion of revenue generated by third-party developers on the platform. FB derived 82% of
its revenue from advertising in the most recent quarter, down from 87% in the year-ago
period. The other 18% was derived from payments from its partners such as Zynga and other.
FB received a 30% cut of its partner’s gross revenue generated on the FB platform. Zynga
represented 11% of the overall revenue for FB in the most recent quarter, down from 13% in
the year-ago period.
Key Products for Users
Timeline. Timeline is the name of the new and improved Facebook Profile page. The types of
information displayed on the timeline include a user’s interests, photos, education, work
history, relationship status, and contact information. A user can control the information share,
and with whom they want to share it.
News Feed. This is the continuously updated aggregation of stories about friends, business or
other pages a user is connected to on Facebook. It organizes updates chronologically. Types
of updates shown on a news feed include posts, photos, event updates, etc.
Photos and Videos. Facebook and its subsidiary, Instagram, are the most popular photo
uploading services on the web. Users can upload an unlimited number of high resolution
photos, create photo albums, and share them with the audience of their choosing. Users can
also upload and share videos. Users have control over privacy settings for uploaded content,
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May 7, 2012
making them visible to everyone or only select people. Users can tag friends in their photos
and videos, which then appends that photo or video to the tagged person’s profile.
Messages. Facebook’s messaging products include email, chat, and text messaging.
Groups. Facebook groups are shared pages for groups of users to discuss common interests,
post photos, or engage in other shared activities. Groups can control privacy settings to
specify whether the group is public or private.
Lists. Lists allow users to sub-divide and categorize their friend groups. This allows users to
reach or exclude certain people when they share information on Facebook.
Events. Events allow users to organize gatherings, manage invitations, and send event
notifications and reminders to their friends.
Places. This allows users to share their current location and see where their friends are. Users
can let their friends know where they are by “checking in” to places and tagging friends who
are with them. Users can also view comments their friends have made about places they visit.
Subscribe. Similar to Twitter, Subscribe allows users to follow the updates from people not
included in their list of friends, including celebrities and other public figures.
Ticker. Ticker is a live stream of the real-time activities of a user’s friends and the pages to
which a user is connected.
Notifications. This is Facebook’s alert system, informing a user of a new friend request,
message, or that they have been tagged in a photo, etc. Notifications are a key engagement-
driver for Facebook users.
Facebook Pages. A Facebook page is as public profile that allows anyone including artists,
public figures, businesses, brands, organizations, and charities to create a presence on
Facebook and engage with the Facebook community.
Key Products for Developers
Open Graph. The open graph gives developers a way to allow users of their app or website
to share their activities with their Facebook friends. An example of this integration is the way
Spotify gives users the option of letting their Facebook friends see what music they’re
listening to.
Social Plugins. Social plugins are another way for developers to integrate their sites/apps
with Facebook to benefit from the viral effects such an integration can provide. The term
plugin refers to the ease of development integration (i.e. plugins require developers to
incorporate only a single line of HTML code).
Like button. Gives users a 1-click method for sharing content from a third-party website to
Facebook for their friends to see.
Recommendations. This allows a website to display to Facebook users what their friends
have recommended.
Single sign-on registration and log-in. This allows users to long onto third-party websites
using their FB login credentials, eliminating the need to remember multiple usernames and
passwords.
Comments. This allows users to post their views, questions, and critiques on any piece of
content on a website.
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May 7, 2012
Payments. Facebook provides developers with an efficient and secure online payment
infrastructure. In exchange for offering this service, Facebook retains a 30% fee on all
transactions. To date, the majority of Facebook’s payments revenue has been generated by the
purchase of virtual goods in social games.
Apps on Facebook. The Facebook Platform has enabled social apps to facilitate the sharing
and discovery of games, music, news, television programming, and everyday interests such as
cooking, fitness, and travel.
Desktop Apps. Developers can build applications that run directly on the user’s PC.
Developers can add a social element by integrating with Facebook.
Mobile Apps. Developers can integrate their mobile apps with Facebook’s social and
personalization capabilities.
Platform-Integrated websites. Websites can integrate with Facebook using simple social
plug-ins such as the Like button, recommendations, and more. Facebook integration has
proven to be an effective strategy for new websites to gain popularity.
Key Products for Advertisers
Facebook Ads. Facebook has a simple, self-service advertising engine. Facebook gives
marketers the ability to concentrate their ads to a particular segment of the Facebook userbase,
or they can launch more broadly targeted advertisements. Facebook ads have a standard
format on Facebook, providing consistency for users and advertisers.
Sponsored Stories. Sponsored stories allow marketers to more broadly promote stories they
publish to their Facebook page , and also to amplify the reach of stories created by users’
interactions with the page.
Facebook Ad System. Advertisers can create campaigns to target Facebook users based on
their age, location, gender, relationship status, educational history, workplace, and interests.
Ad Analytics and FB Insights. FB gives advertisers the ability to track and optimize their
campaign performance. These analytics allow advertisers to see which ads were displayed and
clicked on. FB Insights allows advertisers with FB pages to view information about the
performance of their page and related posts, such as which posts generated the highest user
engagement via clicks, likes, or shares.
Management
Mark Zuckerberg (27) CEO, Founder, Controlling Stockholder Mark Zuckerberg is the company’s founder and has served as its CEO and as a member of the
board of directors since July 2004. Mr. Zuckerberg has served as Chairman of the board of
directors since January 2012 and is the company’s largest and controlling stockholder. Mr.
Zuckerberg attended Harvard University where he studied computer science.
Sheryl K. Sandberg (42) Chief Operating Officer Sheryl Sandberg has served as the company’s Chief Operating Officer since March 2008.
From November 2001 to March 2008, Ms. Sandberg served in various positions at Google,
Inc., most recently as Vice President, Global Online Sales & Operations. Ms. Sandberg also is
a former Chief of Staff of the U.S. Treasury Department and previously served as a consultant
with McKinsey & Company, a management consulting company, and as an economist with
The World Bank. In addition, Ms. Sandberg has been a member of the board of directors of
the Walt Disney Company since December 2009. Ms. Sandberg holds an A.B. in economics
from Harvard University and an M.B.A. from Harvard Business School.
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May 7, 2012
David A. Ebersman (42) CFO David Ebersman has served as the company’s Chief Financial Officer since September 2009.
Prior to joining Facebook, Mr. Ebersman served in various positions at Genentech, Inc., a
biotechnology company, including as its Chief Financial Officer from March 2005 and as an
Executive Vice President from January 2006 until April 2009, following Genentech’s
acquisition by F. Hoffmann-La Roche Ltd. in March 2009. Prior to joining Genentech, Mr.
Ebersman was a research analyst at Oppenheimer & Company, Inc., an investment company.
In addition, Mr. Ebersman has been a member of the board of directors of Ironwood
Pharmaceuticals, Inc. since July 2009. Mr. Ebersman holds an A.B. in economics and
international relations from Brown University.
David B. Fischer (39) VP of Marketing and Business Partnerships David Fischer joined the company in April 2010 and serves as its Vice President, Marketing
and Business Partnerships. From July 2002 to March 2010, Mr. Fischer served in various
positions at Google, including most recently as its Vice President, Global Online Sales &
Operations. Prior to joining Google, Mr. Fischer served as Deputy Chief of Staff of the U.S.
Treasury Department and was an associate editor at the U.S. News World Report, L.P., a
news magazine company. Mr. Fischer holds a B.A. in government from Cornell University
and an M.B.A. from the Stanford University Graduate School of Business.
Mike Schroepfer (37) VP of Engineering Mike Schroepfer has served as the company’s Vice President of Engineering since September
2008. From December 2005 to August 2008, Mr. Schroepfer served as Vice President of
Engineering at Mozilla Corporation, an Internet company. Prior to Mozilla, Mr. Schroepfer
served in various positions at Sun Microsystems, Inc., an information technology company,
including as Chief Technology Officer of its data center automation division. He also co-
founded CenterRun, Inc., a developer of application provisioning software, which was
acquired by Sun Microsystems. In addition, Mr. Schroepfer has been a member of the board
of directors of Ancestry.com Inc. since January 2011. Mr. Schroepfer holds a B.S. and an
M.S. in computer science from Stanford University.
Theodore W. Ullyot (44) VP, General Counsel, and Secretary Theodore Ullyot has served as the company’s Vice President, General Counsel, and Secretary
since October 2008. From May 2008 to October 2008, Mr. Ullyot was a partner at Kirkland &
Ellis LLP, a law firm. From October 2005 to April 2008, Mr. Ullyot served as Executive Vice
President and General Counsel of ESL Investments, Inc., a private investment firm. Prior to
joining ESL Investments, Mr. Ullyot served in the federal executive branch under President
George W. Bush, including as Chief of Staff at the U.S. Justice Department and as a Deputy
Assistant to the President. Earlier in his career, Mr. Ullyot was an associate general counsel at
AOL Time Warner, Inc. and served as a law clerk for U.S. Supreme Court Justice Antonin
Scalia and for Judge Michael Luttig of the U.S. Court of Appeals for the Fourth Circuit. Mr.
Ullyot holds an A.B. in History from Harvard University and a J.D. from the University of
Chicago.
Page 22
May 7, 2012
INCOME STATEMENT ($ In Millions) - FY End: December
Facebook Annual Earnings Model: Sterne AgeeArvind Bhatia, CFA (214) 702 - 4001
2010A 2011A 2012E 2013E 2014E 2015E 2016E
Advertising Revenue 1,869$ 3,154$ 4,145$ 5,238$ 6,562$ 8,173$ 10,070$
Payments and other fees revenues 106$ 557$ 863$ 1,059$ 1,189$ 1,295$ 1,372$
Revenue ($MM) 1,975$ 3,711$ 5,008$ 6,297$ 7,751$ 9,469$ 11,442$
Y/Y % Chg-- Advertising Revenue 69% 31% 26% 25% 25% 23%
Y/Y % Chg-- Payments Revenue 425% 55% 23% 12% 9% 6%
Y/Y % Chg-- Revenue 88% 35% 26% 23% 22% 21%
Sequential Change -- Advertising Revenue
Sequential Change -- Payments Revenue
Sequential Change -- Revenue
Costs and Expenses
Cost of revenue 493 851 1,247 1,522 1,762 2,102 2,502
Gross Profits 1,482 2,860 3,761 4,775 5,989 7,367 8,940
Gross Margin 75% 77.1% 75.1% 76% 77% 78% 78%
YOY Chg (bps) 374 203 (197) 73 144 54 33
Marketing and sales 184 384 644 812 972 1,102 1,214
% of Revenue 9% 10% 13% 13% 13% 12% 11%
Research and development 134 274 457 632 742 822 902
% of Revenue 7% 7% 9% 10% 10% 9% 8%
General and administrative 113 228 378 498 578 658 738
Total Operating Expenses 431 886 1,479 1,942 2,292 2,582 2,854
Income from operations (EBIT) 1,051 1,974 2,281 2,833 3,696 4,785 6,086
Dep & Amort costs included in costs above 139 323 590 940 1,260 1,480 1,640
Adjusted EBITDA (ex Stock based comp) 1,190$ 2,297$ 2,871$ 3,773$ 4,956$ 6,265$ 7,726$
% Y/Y Growth 93% 25% 31% 31% 26% 23%
% Sequential Growth
Adjusted EBITDA Margin 60% 62% 57% 60% 64% 66% 68%
Incremental Adjusted EBITDA Margin 69% 64% 44% 70% 81% 76% 74%
Other expense, net
Interest expense 22 42 -50 -100 -100 -100 -100
Other income (expense), net (2) (19) 0 0 0 0 0
ProForma Pre Tax Income (ex SBC) 1,027 1,913 2,331 2,933 3,796 4,885 6,186
Assumed Normalized Taxes (Tax Rate of 35%) 359 670 816 1,026 1,329 1,710 2,165
Pro Forma Net Income (Ex SBC) 1,243 1,515 1,906 2,468 3,175 4,021
ProForma Fully Diluted Shares Outstanding 2,698 2,769 2,797 2,825 2,854
Pro Forma Fully Diluted EPS (ex SBC) $0.56 $0.69 $0.88 $1.12 $1.41
Source: Company Reports and Sterne Agee Estimates
Page 23
May 7, 2012
INCOME STATEMENT ($ In Millions) - FY End: December
Facebook Quarterly Earnings Model: Sterne AgeeArvind Bhatia, CFA (214) 702 - 4001
2010A 1Q:11A 2Q:11A 3Q:11A 4Q:11A 2011A 1Q:12A 2Q:12E 3Q:12E 4Q:12E 2012E 1Q:13E 2Q:13E 3Q:13E 4Q:13E 2013E
Advertising Revenue 1,869$ 637$ 776$ 798$ 943$ 3,154$ 872$ 1,021$ 1,044$ 1,208$ 4,145$ 1,123$ 1,288$ 1,321$ 1,506$ 5,238$
Payments and other fees revenues 106$ 94$ 119$ 156$ 188$ 557$ 186$ 194$ 227$ 256$ 863$ 243$ 240$ 276$ 299$ 1,059$
Revenue ($MM) 1,975$ 731$ 895$ 954$ 1,131$ 3,711$ 1,058$ 1,215$ 1,271$ 1,464$ 5,008$ 1,367$ 1,528$ 1,597$ 1,805$ 6,297$
Y/Y % Chg-- Advertising Revenue 87% 83% 77% 44% 69% 37% 32% 31% 28% 31% 29% 26% 27% 25% 26%
Y/Y % Chg-- Payments Revenue 1780% 1388% 818% 147% 425% 98% 63% 45% 36% 55% 31% 23% 22% 17% 23%
Y/Y % Chg-- Revenue 112% 107% 104% 55% 88% 45% 36% 33% 29% 35% 29% 26% 26% 23% 26%
Sequential Change -- Advertising Revenue -3% 22% 3% 18% -8% 17% 2% 16% -7% 15% 3% 14%
Sequential Change -- Payments Revenue 24% 27% 31% 21% -1% 4% 17% 13% -5% -1% 15% 8%
Sequential Change -- Revenue 0% 22% 7% 19% -6% 15% 5% 15% -7% 12% 5% 13%
Costs and Expenses
Cost of revenue 493 167 207 233 244 851 273 303 328 343 1,247 358 373 388 403 1,522
Gross Profits 1,482 564 688 721 887 2,860 785 912 943 1,121 3,761 1,009 1,155 1,209 1,402 4,775
Gross Margin 75% 77% 77% 76% 78% 77.1% 74% 75% 74% 77% 75.1% 74% 76% 76% 78% 76%
YOY Chg (bps) 374 614 257 363 (105) 203 (296) (181) (139) (186) (197) (39) 52 152 111 73
Marketing and sales 184 68 92 108 116 384 136 156 171 181 644 188 198 208 218 812
% of Revenue 9% 9% 10% 11% 10% 10% 13% 13% 13% 12% 13% 14% 13% 13% 12% 13%
Research and development 134 53 64 75 82 274 93 108 123 133 457 143 153 163 173 632
% of Revenue 7% 7% 7% 8% 7% 7% 9% 9% 10% 9% 9% 10% 10% 10% 10% 10%
General and administrative 113 48 61 54 65 228 72 92 102 112 378 117 122 127 132 498
Total Operating Expenses 431 169 217 237 263 886 301 356 396 426 1,479 448 473 498 523 1,942
Income from operations (EBIT) 1,051 395 471 484 624 1,974 484 556 547 695 2,281 561 682 711 879 2,833
Dep & Amort costs included in costs above 139 51 323 110 130 160 190 590 205 225 245 265 940
Adjusted EBITDA (ex Stock based comp) 1,190$ 446$ 2,297$ 594$ 686$ 707$ 885$ 2,871$ 766$ 907$ 956$ 1,144$ 3,773$
% Y/Y Growth 93% 25% 29% 32% 35% 29% 31%
% Sequential Growth -13% 18% 5% 20%
Adjusted EBITDA Margin 60% 62% 56% 56% 56% 60% 57% 56% 59% 60% 63% 60%
Incremental Adjusted EBITDA Margin 69% 64% 45% 44% 70%
Other expense, net
Interest expense 22 42 (12.5) (12.5) (12.5) (12.5) -50 -25 -25 -25 -25 -100
Other income (expense), net (2) (19) - - - - 0 0 0 0 0
ProForma Pre Tax Income (ex SBC) 1,027 1,913 497 569 559 707 2,331 586 707 736 904 2,933
Assumed Normalized Taxes (Tax Rate of 35%) 359 670 174 199 196 247 816 205 247 258 316 1,026
Pro Forma Net Income (Ex SBC) 1,243 323 370 364 460 1,515 381 459 479 588 1,906
ProForma Fully Diluted Shares Outstanding 2,558 2,738 2,745 2,752 2,698 2,759 2,766 2,773 2,780 2,769
Pro Forma Fully Diluted EPS (ex SBC) $0.13 $0.13 $0.13 $0.17 $0.56 $0.14 $0.17 $0.17 $0.21 $0.69
Source: Company Reports and Sterne Agee Estimates
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May 7, 2012
FACEBOOK BALANCE SHEET
FY End: December ($ in millions)
2010A 2011A 1Q:12A
Assets
Current assets
Cash and equivalents 1,785$ 1,512$ 1,282$
Marketable securities - 2,396 2,628
Accounts Receivable 373 547 482
Prepaid expenses 88 149 302
Total current assets 2,246 4,604 4,694
Property and equipment, net 574 1,475 1,855
Goodwill and intagible assets, net 96 162 189
Other assets 74 90 121
Total assets 2,990$ 6,331$ 6,859$
Liabilities and stockholder's equity
Current liabilities
Accounts payable 29 63 129
Platform partners payable 75 171 178
Accrued expenses and other current liabilities 137 296 337
Deferred revenue and deposits 42 90 93
Current portion of capital lease obligations 106 279 302
Total current liabilities 389 899 1,039
Capital lease obligations, less current portion 117 398 404
Long-term debt 250 - -
Other liabilities 72 135 144
Total liabilities 828$ 1,432$ 1,587$
Stockholders' equity
Convertible preferred stock 615 615 615
Common stock - - -
Additional paid-in capital 947 2,684 2,853
Accumulated other comprehensive loss (6) (6) (7)
Retained earnings 606 1,606 1,811
Total stockholders' equity 2,162 4,899 5,272
Total liabilities and stockholders' equity 2,990$ 6,331$ 6,859$
Source: Company Reports
Page 25
May 7, 2012
FACEBOOK STATEMENT OF CASH FLOWS
FY End: December ($ in millions)
2009A 2010A 2011A 1Q:12A
Cash flows from operating activities
Net income 229$ 606$ 1,000$ 205$
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 78 139 323 110
Loss on write-off of equipment 1 3 4 1
Share-based compensation 27 20 217 103
Tax benefit from share-based award activity 50 115 433 54
Excess tax benefit from share-based award activity (51) (115) (433) (54)
Changes in assets and liabilities:
Accounts receivable (112) (209) (174) 65
Prepaid expenses and other current assets (30) (38) (31) (28)
Other assets (59) 17 (32) (32)
Accounts payable (7) 12 6 (3)
Platform partners payable — 75 96 7
Accrued expenses and other current liabilities 27 20 38 2
Deferred revenue and deposits 1 37 49 3
Other liabilities 1 16 53 8
Net cash provided by operating activities 155$ 698$ 1,549$ 441$
Cash flows from investing activities
Purchases of property and equipment (33) (293) (606) (453)
Purchases of marketable securities — — (3,025) (876)
Maturities of marketable securities — — 516 567
Sales of marketable securities — — 113 69
Investments in non-marketable equity securities — — (3) (1)
Acquisitions of business, net of cash acquired, and purchases of intangible and other assets 3 (22) (24) (25)
Change in restricted cash and deposits (32) (9) 6 (1)
Net cash used in investing activities (62)$ (324)$ (3,023)$ (720)$
Cash flows from financing activities
Net proceeds from issuance of convertible preferred stock 200 — — -
Net proceeds from issuance of common stock — 500 998 -
Proceeds from exercise of stock options 9 6 28 5
Proceeds from (repayments of) long-term debt — 250 (250) -
Proceeds from sale and lease-back transactions 31 — 170 62
Principal payments on capital lease obligations (48) (90) (181) (71)
Excess tax benefit from share-based award activity 51 115 433 54
Net cash provided by financing activities 243$ 781$ 1,198$ 50$
Effect of exchange rate changes on cash and cash equivalents — (3) 3 (1)
Net increase (decrease) in cash and cash equivalents 336 1,152 (273) (230)
Cash and cash equivalents at beginning of period 297 633 1,785 1,512
Cash and cash equivalents at end of period 633$ 1,785$ 1,512$ 1,282$
Source: Company Reports
Page 26
May 7, 2012
TRENDS
Page 27
May 7, 2012
Reach
1Q:09A 2Q:09A 3Q:09A 4Q:09A 1Q:10A 2Q:10A 3Q:10A 4Q:10A 1Q:11A 2Q:11A 3Q:11A 4Q:11A 1Q:12A
EOP MAUs
US & Canada 68 81 99 112 130 137 144 154 163 169 176 179 188
Europe 71 85 101 117 138 151 167 183 201 212 221 229 241
Asia (Ex China) 22 32 48 62 81 96 113 138 156 174 196 212 230
Rest of World 35 44 57 69 83 98 126 133 161 183 207 225 242
Total 196 242 305 360 432 482 550 608 681 738 800 845 901
Net Sequential MAUs Adds
US & Canada 13 18 13 18 7 7 10 9 6 7 3 9
Europe 14 16 16 21 13 16 16 18 11 9 8 12
Asia (Ex China) 10 16 14 19 15 17 25 18 18 22 16 18
Rest of World 9 13 12 14 15 28 7 28 22 24 18 17
Total 46 63 55 72 50 68 58 73 57 62 45 56
Sequential MAU % Growth
US & Canada 19% 22% 13% 16% 5% 5% 7% 6% 4% 4% 2% 5%
Europe 20% 19% 16% 18% 9% 11% 10% 10% 5% 4% 4% 5%
Asia 45% 50% 29% 31% 19% 18% 22% 13% 12% 13% 8% 8%
Rest of World 26% 30% 21% 20% 18% 29% 6% 21% 14% 13% 9% 8%
Total 23% 26% 18% 20% 12% 14% 11% 12% 8% 8% 6% 7%
Source of Sequential MAU Growth
US & Canada 28% 29% 24% 25% 14% 10% 17% 12% 11% 11% 7% 16%
Europe 30% 25% 29% 29% 26% 24% 28% 25% 19% 15% 18% 21%
Asia 22% 25% 25% 26% 30% 25% 43% 25% 32% 35% 36% 32%
Rest of World 20% 21% 22% 19% 30% 41% 12% 38% 39% 39% 40% 30%
Total 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
EOP MAU YOY % Growth
US & Canada 91% 69% 45% 38% 25% 23% 22% 16% 15%
Europe 94% 78% 65% 56% 46% 40% 32% 25% 20%
Asia 268% 200% 135% 123% 93% 81% 73% 54% 47%
Rest of World 137% 123% 121% 93% 94% 87% 64% 69% 50%
Total 120% 99% 80% 69% 58% 53% 45% 39% 32%
EOP MAU Mix
US & Canada 35% 33% 32% 31% 30% 28% 26% 25% 24% 23% 22% 21% 21%
Europe 36% 35% 33% 33% 32% 31% 30% 30% 30% 29% 28% 27% 27%
Asia 11% 13% 16% 17% 19% 20% 21% 23% 23% 24% 25% 25% 26%
Rest of World 18% 18% 19% 19% 19% 20% 23% 22% 24% 25% 26% 27% 27%
Total 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
Average MAUs YOY % Growth
US & Canada 79% 56% 41% 31% 24% 23% 19% 16%
Europe 85% 71% 61% 51% 43% 36% 29% 22%
Asia 228% 161% 128% 106% 86% 77% 63% 50%
Rest of World 129% 122% 106% 93% 90% 74% 67% 59%
Total 109% 89% 74% 63% 55% 49% 42% 35%
Full Year MAU % Growth Y/Y 88% 48%
Source: Company reports and Sterne Agee estimates
Page 28
May 7, 2012
Reach
2Q:12E 3Q:12E 4Q:12E 1Q:13E 2Q:13E 3Q:13E 4Q;13E 1Q:14E 2Q:14E 3Q:14E 4Q:14E 1Q:15E 2Q:15E 3Q:15E 4Q:15E 1Q:16E 2Q:16E 3Q:16E 4Q:16E
EOP MAUs
US & Canada 192 196 200 203 206 209 212 215 217 220 222 224 225 227 228 229 229 230 231
Europe 249 257 265 271 277 283 289 293 297 301 305 309 313 317 321 323 325 327 329
Asia (Ex China) 245 260 275 290 305 320 335 350 365 380 395 408 421 434 447 457 467 477 484
Rest of World 257 272 287 300 313 326 339 349 359 369 379 389 399 409 419 429 439 449 457
Total 943 985 1027 1064 1101 1138 1175 1207 1238 1270 1301 1330 1358 1387 1415 1438 1461 1483 1501
Net Sequential MAUs Adds
US & Canada 4 4 4 3 3 3 3 3 3 3 3 2 2 2 2 1 1 1 0
Europe 8 8 8 6 6 6 6 4 4 4 4 4 4 4 4 2 2 2 2
Asia (Ex China) 15 15 15 15 15 15 15 15 15 15 15 13 13 13 13 10 10 10 7
Rest of World 15 15 15 13 13 13 13 10 10 10 10 10 10 10 10 10 10 10 8
Total 42 42 42 37 37 37 37 31.5 31.5 31.5 31.5 28.5 28.5 28.5 28.5 22.8 22.8 22.8 17.7
Sequential MAU % Growth
US & Canada 2% 2% 2% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 0% 0% 0% 0%
Europe 3% 3% 3% 2% 2% 2% 2% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1%
Asia 7% 6% 6% 5% 5% 5% 5% 4% 4% 4% 4% 3% 3% 3% 3% 2% 2% 2% 2%
Rest of World 6% 6% 6% 5% 4% 4% 4% 3% 3% 3% 3% 3% 3% 3% 2% 2% 2% 2% 2%
Total 5% 4% 4% 4% 3% 3% 3% 3% 3% 3% 2% 2% 2% 2% 2% 2% 2% 2% 1%
Source of Sequential MAU Growth
US & Canada 10% 10% 10% 8% 8% 8% 8% 8% 8% 8% 8% 5% 5% 5% 5% 3% 3% 3% 3%
Europe 19% 19% 19% 16% 16% 16% 16% 13% 13% 13% 13% 14% 14% 14% 14% 9% 9% 9% 11%
Asia 36% 36% 36% 41% 41% 41% 41% 48% 48% 48% 48% 46% 46% 46% 46% 44% 44% 44% 42%
Rest of World 36% 36% 36% 35% 35% 35% 35% 32% 32% 32% 32% 35% 35% 35% 35% 44% 44% 44% 44%
Total 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
EOP MAU YOY % Growth
US & Canada 14% 11% 12% 8% 7% 7% 6% 6% 5% 5% 5% 4% 4% 3% 3% 2% 2% 2% 1%
Europe 17% 16% 16% 12% 11% 10% 9% 8% 7% 6% 6% 5% 5% 5% 5% 5% 4% 3% 3%
Asia 41% 33% 30% 26% 24% 23% 22% 21% 20% 19% 18% 17% 15% 14% 13% 12% 11% 10% 8%
Rest of World 40% 31% 28% 24% 22% 20% 18% 16% 15% 13% 12% 11% 11% 11% 11% 10% 10% 10% 9%
Total 28% 23% 22% 18% 17% 16% 14% 13% 12% 12% 11% 10% 10% 9% 9% 8% 8% 7% 6%
EOP MAU Mix
US & Canada 20% 20% 19% 19% 19% 18% 18% 18% 18% 17% 17% 17% 17% 16% 16% 16% 16% 16% 15%
Europe 26% 26% 26% 25% 25% 25% 25% 24% 24% 24% 23% 23% 23% 23% 23% 22% 22% 22% 22%
Asia 26% 26% 27% 27% 28% 28% 29% 29% 29% 30% 30% 31% 31% 31% 32% 32% 32% 32% 32%
Rest of World 27% 28% 28% 28% 28% 29% 29% 29% 29% 29% 29% 29% 29% 29% 30% 30% 30% 30% 30%
Total 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
Average MAUs YOY % Growth
US & Canada 14% 12% 12% 10% 8% 7% 6% 6% 6% 5% 5% 4% 4% 3% 3% 3% 2% 2% 1%
Europe 19% 17% 16% 14% 12% 11% 10% 9% 8% 7% 6% 5% 5% 5% 5% 5% 4% 4% 3%
Asia 44% 36% 31% 28% 25% 24% 22% 21% 20% 19% 18% 17% 16% 15% 14% 13% 11% 10% 9%
Rest of World 45% 36% 29% 26% 23% 21% 19% 17% 15% 14% 12% 12% 11% 11% 11% 10% 10% 10% 9%
Total 30% 25% 22% 20% 17% 16% 15% 14% 13% 12% 11% 10% 10% 9% 9% 8% 8% 7% 7%
Full Year MAU % Growth Y/Y 26% 16% 12% 9% 7%
Source: Company reports and Sterne Agee estimates
Page 29
May 7, 2012
Engagement1Q:09A 2Q:09A 3Q:09A 4Q:09A 1Q:10A 2Q:10A 3Q:10A 4Q:10A 1Q:11A 2Q:11A 3Q:11A 4Q:11A 1Q:12A
DAUs
US & Canada 35 40 53 64 82 85 92 99 105 117 124 126 129
Europe 35 39 50 63 79 85 94 107 120 127 135 143 152
Asia 9 13 20 29 39 45 54 64 72 85 98 105 119
Rest of World 14 16 22 29 35 42 54 58 74 87 100 109 126
Total 93 108 145 185 235 257 294 328 371 416 457 483 526
Sequential Growth
US & Canada 14% 33% 21% 28% 4% 8% 8% 6% 11% 6% 2% 2%
Europe 11% 28% 26% 25% 8% 11% 14% 12% 6% 6% 6% 6%
Asia 44% 54% 45% 34% 15% 20% 19% 13% 18% 15% 7% 13%
Rest of World 14% 38% 32% 21% 20% 29% 7% 28% 18% 15% 9% 16%
Total 16% 34% 28% 27% 9% 14% 12% 13% 12% 10% 6% 9%
DAU Mix
US & Canada 38% 37% 37% 35% 35% 33% 31% 30% 28% 28% 27% 26% 25%
Europe 38% 36% 34% 34% 34% 33% 32% 33% 32% 31% 30% 30% 29%
Asia 10% 12% 14% 16% 17% 18% 18% 20% 19% 20% 21% 22% 23%
Rest of World 15% 15% 15% 16% 15% 16% 18% 18% 20% 21% 22% 23% 24%
Total 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
DAU % of Avg MAU
US & Canada 51% 54% 59% 61% 68% 64% 65% 66% 66% 70% 72% 71% 70%
Europe 49% 50% 54% 58% 62% 59% 59% 61% 63% 62% 62% 64% 65%
Asia 41% 48% 50% 53% 55% 51% 52% 51% 49% 52% 53% 51% 54%
Rest of World 40% 41% 44% 46% 46% 46% 48% 45% 50% 51% 51% 50% 54%
Total 47% 49% 53% 56% 59% 56% 57% 57% 58% 59% 59% 59% 60.3%
Source: Company reports and Sterne Agee estimates
Page 30
May 7, 2012
Engagement2Q:12E 3Q:12E 4Q:12E 1Q:13E 2Q:13E 3Q:13E 4Q;13E 1Q:14E 2Q:14E 3Q:14E 4Q:14E 1Q:15E 2Q:15E 3Q:15E 4Q:15E 1Q:16E 2Q:16E 3Q:16E 4Q:16E
DAUs
US & Canada 135 138 141 143 145 148 150 152 154 156 158 159 161 162 163 164 165 165 166
Europe 161 166 172 176 181 185 190 193 196 200 203 206 209 213 216 218 220 222 224
Asia 132 140 149 159 169 179 189 199 209 220 230 240 250 260 270 278 286 295 302
Rest of World 139 147 156 163 171 179 187 194 200 206 213 220 226 233 240 247 253 260 266
Total 567 591 618 642 666 691 716 738 760 782 804 825 846 867 889 907 925 943 958
Sequential Growth
US & Canada 5% 2% 2% 2% 2% 2% 2% 1% 1% 1% 1% 1% 1% 1% 1% 0% 0% 0% 0%
Europe 6% 3% 3% 3% 3% 2% 2% 2% 2% 2% 2% 2% 2% 2% 2% 1% 1% 1% 1%
Asia 11% 6% 7% 6% 6% 6% 6% 5% 5% 5% 5% 4% 4% 4% 4% 3% 3% 3% 2%
Rest of World 10% 6% 6% 5% 5% 5% 4% 3% 3% 3% 3% 3% 3% 3% 3% 3% 3% 3% 2%
Total 8% 4% 5% 4% 4% 4% 4% 3% 3% 3% 3% 3% 3% 3% 2% 2% 2% 2% 2%
DAU Mix
US & Canada 24% 23% 23% 22% 22% 21% 21% 21% 20% 20% 20% 19% 19% 19% 18% 18% 18% 18% 17%
Europe 28% 28% 28% 27% 27% 27% 27% 26% 26% 26% 25% 25% 25% 25% 24% 24% 24% 24% 23%
Asia 23% 24% 24% 25% 25% 26% 26% 27% 28% 28% 29% 29% 30% 30% 30% 31% 31% 31% 32%
Rest of World 24% 25% 25% 25% 26% 26% 26% 26% 26% 26% 26% 27% 27% 27% 27% 27% 27% 28% 28%
Total 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
DAU % of Avg MAU
US & Canada 70% 70% 70% 70% 71% 71% 71% 71% 71% 71% 71% 71% 71% 71% 72% 72% 72% 72% 72%
Europe 65% 65% 65% 65% 65% 65% 66% 66% 66% 66% 66% 67% 67% 67% 67% 67% 68% 68% 68%
Asia 54% 54% 54% 55% 55% 56% 56% 57% 57% 58% 58% 59% 59% 60% 60% 61% 61% 62% 62%
Rest of World 54% 54% 54% 54% 55% 55% 55% 55% 56% 56% 56% 56% 57% 57% 57% 57% 58% 58% 58%
Total 61.5% 61.3% 61% 61% 62% 62% 62% 62% 62% 62% 63% 63% 63% 63% 63% 64% 64% 64% 64%
Source: Company reports and Sterne Agee estimates
Page 31
May 7, 2012
Monetization ARPU = Revenue/Average MAU for the period
1Q:09A 2Q:09A 3Q:09A 4Q:09A 1Q:10A 2Q:10A 3Q:10A 4Q:10A 1Q:11A 2Q:11A 3Q:11A 4Q:11A 1Q:12A
Advertising ARPU
US & Canada 1.73$ 1.82$ 1.85$ 2.41$ 2.09$ 2.37$ 2.29$ 2.60$ 2.28$
Europe 0.75$ 0.89$ 0.82$ 1.15$ 1.07$ 1.19$ 1.13$ 1.36$ 1.17$
Asia 0.31$ 0.35$ 0.34$ 0.42$ 0.38$ 0.45$ 0.48$ 0.47$ 0.45$
Rest of World 0.16$ 0.23$ 0.21$ 0.32$ 0.30$ 0.35$ 0.36$ 0.37$ 0.34$
Total 0.86$ 0.93$ 0.87$ 1.13$ 0.99$ 1.09$ 1.04$ 1.15$ 1.00$
YoY $ Chg Advtg ARPU
US & Canada 0.37$ 0.55$ 0.44$ 0.19$ 0.19$
Europe 0.32$ 0.30$ 0.31$ 0.21$ 0.09$
Asia 0.07$ 0.10$ 0.13$ 0.04$ 0.07$
Rest of World 0.14$ 0.12$ 0.15$ 0.05$ 0.04$
Total 0.13$ 0.17$ 0.17$ 0.02$ 0.01$
Payments ARPU
US & Canada 0.04$ 0.04$ 0.08$ 0.36$ 0.39$ 0.46$ 0.50$ 0.59$ 0.58$
Europe -$ 0.01$ 0.03$ 0.10$ 0.12$ 0.15$ 0.21$ 0.24$ 0.23$
Asia -$ -$ 0.01$ 0.04$ 0.04$ 0.05$ 0.09$ 0.10$ 0.09$
Rest of World -$ -$ 0.01$ 0.02$ 0.02$ 0.02$ 0.04$ 0.04$ 0.03$
Total 0.01$ 0.02$ 0.03$ 0.13$ 0.15$ 0.17$ 0.20$ 0.23$ 0.21$
YoY $ Chg Payments ARPU
US & Canada 0.35$ 0.42$ 0.43$ 0.24$ 0.19$
Europe 0.12$ 0.14$ 0.18$ 0.15$ 0.11$
Asia 0.04$ 0.05$ 0.08$ 0.06$ 0.05$
Rest of World 0.02$ 0.02$ 0.03$ 0.02$ 0.01$
Total 0.13$ 0.15$ 0.17$ 0.10$ 0.07$
Total ARPU
US & Canada 1.77$ 1.87$ 1.93$ 2.77$ 2.49$ 2.84$ 2.79$ 3.19$ 2.86$
Europe 0.75$ 0.89$ 0.84$ 1.25$ 1.19$ 1.33$ 1.34$ 1.60$ 1.40$
Asia 0.31$ 0.35$ 0.35$ 0.46$ 0.42$ 0.50$ 0.56$ 0.56$ 0.53$
Rest of World 0.16$ 0.23$ 0.22$ 0.33$ 0.32$ 0.38$ 0.40$ 0.40$ 0.37$
Total 0.87$ 0.94$ 0.91$ 1.26$ 1.14$ 1.26$ 1.24$ 1.37$ 1.21$
YoY $ Change in ARPU
US & Canada 0.72$ 0.97$ 0.87$ 0.43$ 0.38$
Europe 0.44$ 0.44$ 0.50$ 0.36$ 0.20$
Asia 0.11$ 0.15$ 0.21$ 0.10$ 0.11$
Rest of World 0.16$ 0.15$ 0.18$ 0.07$ 0.05$
Total 0.27$ 0.32$ 0.34$ 0.11$ 0.08$
$ per DAU
US & Canada 2.61$ 0.97$ 0.92$ 1.26$ 1.06$ 1.13$ 1.05$ 1.17$ 4.07$
Europe 1.22$ 1.52$ 1.43$ 2.04$ 1.91$ 2.17$ 2.15$ 2.52$ 2.16$
Asia 0.56$ 0.69$ 0.69$ 0.91$ 0.86$ 0.96$ 1.06$ 1.10$ 0.99$
Rest of World 0.34$ 0.50$ 0.46$ 0.74$ 0.64$ 0.75$ 0.78$ 0.80$ 0.69$
Total 1.46$ 1.67$ 1.59$ 2.23$ 1.97$ 2.15$ 2.09$ 2.34$ 2.01$
Source: Company Reports and Sterne Agee Estimates
Page 32
May 7, 2012
Monetization
2Q:12E 3Q:12E 4Q:12E 1Q:13E 2Q:13E 3Q:13E 4Q;13E 1Q:14E 2Q:14E 3Q:14E 4Q:14E 1Q:15E 2Q:15E 3Q:15E 4Q:15E 1Q:16E 2Q:16E 3Q:16E 4Q:16E
Advertising ARPU
US & Canada 2.56$ 2.49$ 2.81$ 2.50$ 2.79$ 2.73$ 3.06$ 2.76$ 3.06$ 3.01$ 3.35$ 3.06$ 3.37$ 3.32$ 3.68$ 3.40$ 3.72$ 3.68$ 4.05$
Europe 1.28$ 1.23$ 1.47$ 1.29$ 1.41$ 1.38$ 1.63$ 1.45$ 1.59$ 1.56$ 1.82$ 1.66$ 1.80$ 1.78$ 2.05$ 1.90$ 2.05$ 2.05$ 2.33$
Asia 0.52$ 0.55$ 0.55$ 0.54$ 0.62$ 0.67$ 0.68$ 0.68$ 0.77$ 0.83$ 0.85$ 0.86$ 0.96$ 1.02$ 1.05$ 1.08$ 1.18$ 1.26$ 1.30$
Rest of World 0.39$ 0.41$ 0.42$ 0.41$ 0.47$ 0.50$ 0.52$ 0.52$ 0.59$ 0.63$ 0.66$ 0.67$ 0.75$ 0.80$ 0.84$ 0.85$ 0.95$ 1.01$ 1.06$
Total 1.11$ 1.08$ 1.20$ 1.07$ 1.19$ 1.18$ 1.30$ 1.19$ 1.32$ 1.32$ 1.45$ 1.36$ 1.49$ 1.51$ 1.64$ 1.57$ 1.71$ 1.74$ 1.88$
YoY $ Chg Advtg ARPU
US & Canada 0.19$ 0.20$ 0.21$ 0.22$ 0.23$ 0.24$ 0.25$ 0.26$ 0.27$ 0.28$ 0.29$ 0.30$ 0.31$ 0.32$ 0.33$ 0.34$ 0.35$ 0.36$ 0.37$
Europe 0.09$ 0.10$ 0.11$ 0.12$ 0.13$ 0.14$ 0.15$ 0.16$ 0.17$ 0.18$ 0.19$ 0.20$ 0.21$ 0.22$ 0.23$ 0.24$ 0.25$ 0.26$ 0.27$
Asia 0.07$ 0.08$ 0.09$ 0.10$ 0.11$ 0.12$ 0.13$ 0.14$ 0.15$ 0.16$ 0.17$ 0.18$ 0.19$ 0.20$ 0.21$ 0.22$ 0.23$ 0.24$ 0.25$
Rest of World 0.04$ 0.05$ 0.06$ 0.07$ 0.08$ 0.09$ 0.10$ 0.11$ 0.12$ 0.13$ 0.14$ 0.15$ 0.16$ 0.17$ 0.18$ 0.19$ 0.20$ 0.21$ 0.22$
Total 0.02$ 0.04$ 0.06$ 0.08$ 0.08$ 0.10$ 0.10$ 0.12$ 0.13$ 0.14$ 0.15$ 0.17$ 0.17$ 0.19$ 0.19$ 0.21$ 0.21$ 0.23$ 0.23$
Payments ARPU
US & Canada 0.62$ 0.63$ 0.70$ 0.66$ 0.69$ 0.70$ 0.74$ 0.69$ 0.71$ 0.72$ 0.77$ 0.72$ 0.74$ 0.75$ 0.80$ 0.74$ 0.77$ 0.78$ 0.82$
Europe 0.23$ 0.28$ 0.30$ 0.28$ 0.27$ 0.32$ 0.33$ 0.30$ 0.29$ 0.34$ 0.35$ 0.32$ 0.31$ 0.34$ 0.35$ 0.32$ 0.31$ 0.34$ 0.35$
Asia 0.06$ 0.10$ 0.10$ 0.09$ 0.06$ 0.10$ 0.10$ 0.09$ 0.06$ 0.10$ 0.10$ 0.09$ 0.06$ 0.10$ 0.10$ 0.09$ 0.06$ 0.10$ 0.10$
Rest of World 0.02$ 0.04$ 0.04$ 0.04$ 0.03$ 0.04$ 0.04$ 0.04$ 0.03$ 0.04$ 0.04$ 0.04$ 0.03$ 0.04$ 0.04$ 0.04$ 0.03$ 0.04$ 0.04$
Total 0.21$ 0.24$ 0.25$ 0.23$ 0.22$ 0.25$ 0.26$ 0.23$ 0.22$ 0.25$ 0.26$ 0.23$ 0.22$ 0.24$ 0.25$ 0.23$ 0.22$ 0.24$ 0.25$
YoY $ Chg Payments ARPU
US & Canada 0.16$ 0.13$ 0.11$ 0.09$ 0.07$ 0.07$ 0.05$ 0.03$ 0.03$ 0.03$ 0.03$ 0.03$ 0.03$ 0.03$ 0.03$ 0.03$ 0.03$ 0.03$ 0.03$
Europe 0.08$ 0.07$ 0.06$ 0.05$ 0.04$ 0.04$ 0.03$ 0.02$ 0.02$ 0.02$ 0.02$ 0.02$ 0.02$ -$ -$ -$ -$ -$ -$
Asia 0.02$ 0.01$ 0.01$ 0.00$ 0.00$ 0.00$ 0.00$ 0.00$ 0.00$ 0.00$ 0.00$ 0.00$ 0.00$ 0.00$ 0.00$ 0.00$ 0.00$ 0.00$ 0.00$
Rest of World 0.00$ 0.00$ 0.00$ 0.00$ 0.00$ 0.00$ 0.00$ 0.00$ 0.00$ 0.00$ 0.00$ 0.00$ 0.00$ 0.00$ 0.00$ 0.00$ 0.00$ 0.00$ 0.00$
Total 0.04$ 0.03$ 0.03$ 0.02$ 0.01$ 0.01$ 0.00$ (0.00)$ (0.00)$ 0.00$ 0.00$ 0.00$ 0.00$ (0.00)$ (0.00)$ (0.00)$ (0.00)$ (0.00)$ (0.00)$
Total ARPU
US & Canada 3.18$ 3.12$ 3.51$ 3.17$ 3.48$ 3.42$ 3.80$ 3.45$ 3.77$ 3.73$ 4.12$ 3.78$ 4.11$ 4.08$ 4.48$ 4.14$ 4.48$ 4.46$ 4.87$
Europe 1.50$ 1.51$ 1.78$ 1.57$ 1.68$ 1.70$ 1.96$ 1.75$ 1.87$ 1.90$ 2.17$ 1.97$ 2.10$ 2.12$ 2.41$ 2.22$ 2.36$ 2.38$ 2.68$
Asia 0.58$ 0.65$ 0.66$ 0.63$ 0.69$ 0.77$ 0.78$ 0.77$ 0.83$ 0.92$ 0.95$ 0.95$ 1.02$ 1.12$ 1.16$ 1.16$ 1.25$ 1.36$ 1.40$
Rest of World 0.42$ 0.45$ 0.46$ 0.44$ 0.50$ 0.54$ 0.56$ 0.55$ 0.62$ 0.67$ 0.70$ 0.70$ 0.78$ 0.84$ 0.88$ 0.89$ 0.98$ 1.05$ 1.10$
Total 1.32$ 1.32$ 1.45$ 1.31$ 1.41$ 1.43$ 1.56$ 1.43$ 1.54$ 1.57$ 1.71$ 1.59$ 1.72$ 1.75$ 1.90$ 1.80$ 1.93$ 1.98$ 2.13$
YoY $ Change in ARPU
US & Canada 0.35$ 0.33$ 0.32$ 0.31$ 0.30$ 0.31$ 0.30$ 0.29$ 0.30$ 0.31$ 0.32$ 0.33$ 0.34$ 0.35$ 0.36$ 0.37$ 0.38$ 0.39$ 0.40$
Europe 0.17$ 0.17$ 0.17$ 0.17$ 0.17$ 0.18$ 0.18$ 0.18$ 0.19$ 0.20$ 0.21$ 0.22$ 0.23$ 0.22$ 0.23$ 0.24$ 0.25$ 0.26$ 0.27$
Asia 0.08$ 0.09$ 0.09$ 0.10$ 0.11$ 0.12$ 0.13$ 0.14$ 0.15$ 0.16$ 0.17$ 0.18$ 0.19$ 0.20$ 0.21$ 0.22$ 0.23$ 0.24$ 0.25$
Rest of World 0.04$ 0.05$ 0.06$ 0.07$ 0.08$ 0.09$ 0.10$ 0.11$ 0.12$ 0.13$ 0.14$ 0.15$ 0.16$ 0.17$ 0.18$ 0.19$ 0.20$ 0.21$ 0.22$
Total 0.06$ 0.08$ 0.08$ 0.10$ 0.09$ 0.11$ 0.11$ 0.12$ 0.13$ 0.14$ 0.15$ 0.17$ 0.18$ 0.18$ 0.19$ 0.20$ 0.21$ 0.22$ 0.23$
$ per DAU
US & Canada 4.48$ 4.39$ 4.94$ 4.46$ 4.89$ 4.81$ 5.34$ 4.84$ 5.28$ 5.22$ 5.75$ 5.28$ 5.73$ 5.68$ 6.23$ 5.77$ 6.23$ 6.19$ 6.76$
Europe 2.29$ 2.30$ 2.70$ 2.38$ 2.54$ 2.56$ 2.95$ 2.64$ 2.81$ 2.85$ 3.25$ 2.94$ 3.13$ 3.14$ 3.55$ 3.28$ 3.47$ 3.50$ 3.92$
Asia 1.04$ 1.17$ 1.17$ 1.12$ 1.21$ 1.34$ 1.36$ 1.32$ 1.42$ 1.57$ 1.60$ 1.58$ 1.69$ 1.84$ 1.89$ 1.89$ 2.01$ 2.17$ 2.24$
Rest of World 0.75$ 0.81$ 0.83$ 0.80$ 0.89$ 0.96$ 1.00$ 0.98$ 1.09$ 1.18$ 1.23$ 1.23$ 1.35$ 1.46$ 1.52$ 1.54$ 1.68$ 1.79$ 1.88$
Total 2.14$ 2.15$ 2.37$ 2.13$ 2.29$ 2.31$ 2.52$ 2.30$ 2.48$ 2.52$ 2.73$ 2.54$ 2.72$ 2.78$ 2.99$ 2.83$ 3.02$ 3.09$ 3.32$
Source: Company Reports and Sterne Agee Estimates
Page 33
May 7, 2012
Revenue1Q:09A 2Q:09A 3Q:09A 4Q:09A 1Q:10A 2Q:10A 3Q:10A 4Q:10A 1Q:11A 2Q:11A 3Q:11A 4Q:11A 1Q:12A
US & Canada
Advertising 209$ 243$ 260$ 359$ 332$ 394$ 395$ 462$ 419$
Payments and other fees 5$ 6$ 11$ 53$ 62$ 77$ 87$ 105$ 106$
Total 214$ 249$ 271$ 412$ 394$ 471$ 482$ 567$ 525$
YOY Growth
Advertising 59% 62% 52% 29% 26%
Payments and other fees 1140% 1183% 691% 98% 71%
Total 84% 89% 78% 38% 33%
Mix
Advertising 98% 98% 96% 87% 84% 84% 82% 81% 80%
Payments and other fees 2% 2% 4% 13% 16% 16% 18% 19% 20%
Total 100% 100% 100% 100% 100% 100% 100% 100% 100%
Sequential Growth
Advertising 16% 7% 38% -8% 19% 0% 17% -9%
Payments and other fees 20% 83% 382% 17% 24% 13% 21% 1%
Total 16% 9% 52% -4% 20% 2% 18% -7%
Europe
Advertising 96$ 128$ 130$ 201$ 206$ 245$ 245$ 306$ 274$
Payments and other fees -$ 1$ 4$ 17$ 23$ 30$ 45$ 55$ 54$
Total 96$ 129$ 134$ 218$ 229$ 275$ 290$ 361$ 328$
YOY Growth
Advertising 115% 91% 88% 52% 33%
Payments and other fees nm 2900% 1025% 224% 135%
Total 139% 113% 116% 66% 43%
Mix
Advertising 100% 99% 97% 92% 90% 89% 84% 85% 84%
Payments and other fees 0% 1% 3% 8% 10% 11% 16% 15% 16%
Total
Sequential Growth
Advertising 33% 2% 55% 2% 19% 0% 25% -10%
Payments and other fees nm 300% 325% 35% 30% 50% 22% -2%
Total 34% 4% 63% 5% 20% 5% 24% -9%
Asia
Advertising 22$ 31$ 36$ 53$ 56$ 74$ 88$ 95$ 99$
Payments and other fees -$ -$ 1$ 5$ 6$ 8$ 16$ 20$ 19$
Total 22$ 31$ 37$ 58$ 62$ 82$ 104$ 115$ 118$
YOY Growth
Advertising 155% 139% 144% 79% 77%
Payments and other fees nm nm 1500% 300% 217%
Total 182% 165% 181% 98% 90%
Mix
Advertising 100% 100% 97% 91% 90% 90% 85% 83% 84%
Payments and other fees 0% 0% 3% 9% 10% 10% 15% 17% 16%
Total 100% 100% 100% 100% 100% 100% 100% 100% 100%
Sequential Growth
Advertising 41% 16% 47% 6% 32% 19% 8% 4%
Payments and other fees nm nm 400% 20% 33% 100% 25% -5%
Total 41% 19% 57% 7% 32% 27% 11% 3%
Rest of World
Advertising 12$ 21$ 24$ 41$ 44$ 61$ 71$ 79$ 79$
Payments and other fees -$ -$ 1$ 2$ 3$ 4$ 7$ 8$ 8$
Total 12$ 21$ 25$ 43$ 47$ 65$ 78$ 87$ 87$
YOY Growth
Advertising 267% 190% 196% 93% 80%
Payments and other fees nm nm 600% 300% 167%
Total 292% 210% 212% 102% 85%
Mix
Advertising 100% 100% 96% 95% 94% 94% 91% 91% 91%
Payments and other fees 0% 0% 4% 5% 6% 6% 9% 9% 9%
Total 100% 100% 100% 100% 100% 100% 100% 100% 100%
Sequential Growth
Advertising 75% 14% 71% 7% 39% 16% 11% 0%
Payments and other fees nm nm 100% 50% 33% 75% 14% 0%
Total 75% 19% 72% 9% 38% 20% 12% 0%
Source: Company Reports and Sterne Agee Estimates
Page 34
May 7, 2012
Revenue2Q:12E 3Q:12E 4Q:12E 1Q:13E 2Q:13E 3Q:13E 4Q;13E 1Q:14E 2Q:14E 3Q:14E 4Q:14E 1Q:15E 2Q:15E 3Q:15E 4Q:15E 1Q:16E 2Q:16E 3Q:16E 4Q:16E
US & CanadaAdvertising 487$ 483$ 557$ 504$ 571$ 566$ 644$ 589$ 660$ 656$ 739$ 682$ 755$ 751$ 836$ 776$ 851$ 846$ 932$
Payments and other fees 118$ 122$ 138$ 134$ 140$ 145$ 157$ 147$ 154$ 158$ 170$ 160$ 166$ 169$ 181$ 170$ 176$ 178$ 190$
Total 605$ 605$ 695$ 638$ 711$ 711$ 801$ 736$ 814$ 814$ 910$ 841$ 921$ 920$ 1,017$ 946$ 1,027$ 1,025$ 1,122$
YOY Growth
Advertising 24% 22% 20% 20% 17% 17% 16% 17% 16% 16% 15% 16% 14% 14% 13% 14% 13% 13% 12%
Payments and other fees 53% 41% 32% 26% 19% 18% 13% 10% 10% 9% 9% 8% 8% 7% 6% 6% 6% 5% 5%
Total 28% 26% 23% 22% 18% 17% 15% 15% 14% 15% 14% 14% 13% 13% 12% 12% 11% 11% 10%
Mix
Advertising 81% 80% 80% 79% 80% 80% 80% 80% 81% 81% 81% 81% 82% 82% 82% 82% 83% 83% 83%
Payments and other fees 19% 20% 20% 21% 20% 20% 20% 20% 19% 19% 19% 19% 18% 18% 18% 18% 17% 17% 17%
Total 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
Sequential Growth
Advertising 16% -1% 15% -9% 13% -1% 14% -9% 12% -1% 13% -8% 11% -1% 11% -7% 10% -1% 10%
Payments and other fees 11% 4% 13% -3% 5% 3% 8% -6% 4% 3% 8% -6% 4% 2% 7% -6% 3% 2% 6%
Total 15% 0% 15% -8% 11% 0% 13% -8% 11% 0% 12% -8% 10% 0% 11% -7% 9% 0% 9%
Europe
Advertising 313$ 312$ 384$ 345$ 387$ 386$ 465$ 423$ 468$ 467$ 551$ 508$ 559$ 562$ 655$ 611$ 665$ 668$ 763$
Payments and other fees 55$ 70$ 79$ 75$ 73$ 89$ 96$ 87$ 84$ 101$ 107$ 98$ 95$ 106$ 113$ 103$ 99$ 110$ 116$
Total 369$ 383$ 464$ 420$ 460$ 475$ 561$ 510$ 552$ 568$ 659$ 606$ 654$ 668$ 768$ 714$ 764$ 778$ 880$
YOY Growth
Advertising 28% 27% 26% 26% 23% 23% 21% 22% 21% 21% 19% 20% 20% 20% 19% 20% 19% 19% 17%
Payments and other fees 84% 56% 44% 39% 32% 27% 20% 16% 16% 14% 12% 13% 13% 5% 5% 5% 4% 4% 3%
Total 34% 32% 29% 28% 25% 24% 21% 21% 20% 20% 17% 19% 19% 18% 17% 18% 17% 16% 15%
Mix
Advertising 85% 82% 83% 82% 84% 81% 83% 83% 85% 82% 84% 84% 85% 84% 85% 86% 87% 86% 87%
Payments and other fees 15% 18% 17% 18% 16% 19% 17% 17% 15% 18% 16% 16% 15% 16% 15% 14% 13% 14% 13%
Total
Sequential Growth
Advertising 14% 0% 23% -10% 12% 0% 21% -9% 11% 0% 18% -8% 10% 0% 17% -7% 9% 0% 14%
Payments and other fees 2% 27% 13% -6% -3% 22% 7% -9% -4% 20% 6% -9% -3% 12% 6% -9% -4% 11% 6%
Total 12% 4% 21% -9% 9% 3% 18% -9% 8% 3% 16% -8% 8% 2% 15% -7% 7% 2% 13%
Asia
Advertising 122$ 140$ 148$ 154$ 185$ 209$ 223$ 234$ 275$ 308$ 328$ 345$ 396$ 438$ 464$ 486$ 547$ 595$ 625$
Payments and other fees 15$ 24$ 28$ 24$ 19$ 30$ 34$ 30$ 23$ 36$ 40$ 35$ 27$ 42$ 46$ 39$ 30$ 46$ 50$
Total 138$ 164$ 175$ 178$ 204$ 240$ 256$ 263$ 298$ 344$ 368$ 380$ 423$ 479$ 510$ 525$ 576$ 641$ 675$
YOY Growth
Advertising 65% 59% 56% 56% 51% 50% 51% 52% 49% 47% 47% 48% 44% 42% 41% 41% 38% 36% 35%
Payments and other fees 89% 53% 38% 28% 26% 24% 23% 21% 20% 19% 18% 17% 16% 15% 14% 13% 12% 11% 9%
Total 68% 58% 53% 51% 48% 46% 46% 48% 46% 44% 44% 44% 42% 39% 38% 38% 36% 34% 32%
Mix
Advertising 89% 85% 84% 86% 91% 87% 87% 89% 92% 90% 89% 91% 94% 91% 91% 93% 95% 93% 93%
Payments and other fees 11% 15% 16% 14% 9% 13% 13% 11% 8% 10% 11% 9% 6% 9% 9% 7% 5% 7% 7%
Total 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
Sequential Growth
Advertising 24% 14% 6% 4% 20% 13% 6% 5% 18% 12% 7% 5% 15% 10% 6% 5% 12% 9% 5%
Payments and other fees -20% 61% 13% -12% -22% 59% 12% -13% -23% 58% 11% -13% -23% 56% 10% -14% -24% 55% 9%
Total 17% 19% 7% 2% 15% 17% 7% 3% 13% 15% 7% 3% 11% 13% 6% 3% 10% 11% 5%
Rest of World
Advertising 98$ 109$ 119$ 120$ 145$ 160$ 174$ 178$ 209$ 230$ 248$ 255$ 296$ 323$ 348$ 362$ 412$ 448$ 480$
Payments and other fees 6$ 10$ 11$ 10$ 8$ 12$ 13$ 12$ 9$ 14$ 15$ 14$ 11$ 16$ 17$ 16$ 12$ 18$ 19$
Total 104$ 119$ 129$ 130$ 153$ 173$ 187$ 190$ 219$ 244$ 263$ 270$ 307$ 339$ 365$ 378$ 424$ 466$ 499$
YOY Growth
Advertising 61% 54% 50% 51% 48% 47% 47% 49% 45% 43% 42% 44% 41% 41% 41% 42% 39% 39% 38%
Payments and other fees 51% 39% 33% 29% 28% 24% 22% 21% 20% 17% 15% 15% 16% 14% 13% 13% 14% 13% 12%
Total 60% 53% 49% 49% 46% 45% 45% 46% 43% 41% 40% 42% 40% 39% 39% 40% 38% 37% 37%
Mix
Advertising 94% 92% 92% 92% 95% 93% 93% 93% 96% 94% 94% 95% 96% 95% 95% 96% 97% 96% 96%
Payments and other fees 6% 8% 8% 8% 5% 7% 7% 7% 4% 6% 6% 5% 4% 5% 5% 4% 3% 4% 4%
Total 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
Sequential Growth
Advertising 24% 11% 9% 1% 21% 11% 9% 2% 18% 10% 8% 3% 16% 9% 8% 4% 14% 9% 7%
Payments and other fees -24% 61% 9% -3% -25% 56% 7% -4% -25% 52% 6% -4% -25% 50% 5% -5% -24% 48% 5%
Total 20% 14% 9% 0% 17% 13% 8% 2% 15% 11% 8% 3% 14% 11% 8% 4% 12% 10% 7%
Source: Company Reports and Sterne Agee Estimates
Page 35
May 7, 2012
APPENDIX SECTIONIMPORTANT DISCLOSURES:
Regulation Analyst Certification:I, Arvind Bhatia and Brett Strauser, hereby certify the views expressed in this research report accurately reflect my personal views aboutthe subject security(ies) or issuer(s). I further certify that no part of my compensation was, is, or will be, directly or indirectly, relatedto the specific recommendations or views expressed by me in this report.
Research Disclosures:Sterne, Agee & Leach, Inc. makes a market in the following subject companies Apple Inc. and Zynga Inc..
Sterne, Agee & Leach, Inc.'s research analysts receive compensation that is based upon various factors, including Sterne, Agee & Leach,Inc.'s total revenues, a portion of which is generated by investment banking activities.
Sterne Agee & Leach, Inc. expects to receive or intends to seek compensation for investment banking services from the subject companyand/or companies in the next three months.
Price Target Risks & Related Risk Factors:Investment risks associated with the achievement of the price target include, but are not limited to, a company's failure to achieveSterne, Agee & Leach, Inc., earnings and revenue estimates; unforeseen macroeconomic and/or industry events that adversely affectdemand for a company's products or services; product obsolescence; changes in investor sentiment regarding the specific company orindustry; intense and rapidly changing competitive pressures; the continuing development of industry standards; the company's abilityto recruit and retain competent personnel; and adverse market conditions. For a complete discussion of the risk factors that couldaffect the market price of a company's shares, refer to the most recent Form 10-Q or 10-K that a company has filed with the SecuritiesExchange Commission.
Company Specific Risks:Risks. Key risks to FB include 1) slower-than-expected growth; 2) competitive threats from companies like Google; 3) regulatory risks;4) risks associated with entering new international markets etc.
Valuation Methodology:Methodology for assigning ratings and target prices includes qualitative and quantitative factors including an assessment of industrysize, structure, business trends and overall attractiveness; management effectiveness; competition; visibility; financial condition; andexpected total return, among other factors. These factors are subject to change depending on overall economic conditions or industryor company-specific occurrences. Sterne, Agee & Leach, Inc., analysts base valuations on a combination of forward looking earningsmultiples, price-to-revenue multiples, and enterprise-value-to-revenue ratios. Sterne, Agee & Leach, Inc., believes this accurately reflectsthe strong absolute value of earnings, the strong earnings growth rate, the inherent profitability, and adjusted balance sheet factors.Additional company-specific valuation methodology is available through Sterne, Agee & Leach, Inc.
Definition of Investment Ratings:BUY: We expect this stock to outperform the industry over the next 12 months.
NEUTRAL: We expect this stock to perform in line with the industry over the next 12 months.
UNDERPERFORM: We expect this stock to underperform the industry over the next 12 months.
RESTRICTED: Restricted list requirements preclude comment.
Ratings Distribution:
IB Serv./ Past 12Mos.Rating Category Count Percent Count PercentBuy 228 49.78% 12 5.26%Neutral 201 43.89% 6 2.99%Underperform 29 6.33% 0 0.00%
ADDITIONAL INFORMATION AVAILABLE UPON REQUEST: Contact Robert Hoehn at 1-212-338-4731.
Other Disclosures:
Appendix Section, Page I
May 7, 2012
Opinions expressed are our present opinions only. This material is based upon information that we consider reliable, but we do notrepresent that it is accurate or complete, and it should not be relied upon as such. Sterne, Agee & Leach, Inc., its affiliates, or one ormore of its officers, employees, or consultants may, at times, have long or short or options positions in the securities mentioned hereinand may act as principal or agent to buy or sell such securities.
Copyright © 2012 Sterne, Agee & Leach, Inc. All Rights Reserved.
Appendix Section, Page II
May 7, 2012
To receive price charts or other disclosures on the companies mentioned in this report, please visit our website at https://sterneagee.bluematrix.com/sellside/Disclosures.action or contact Sterne, Agee & Leach, Inc. toll-free at (800) 240-1438 or(205) 949-3689.
Appendix Section, Page III
May 7, 2012
Email Address for Sterne Agee Employees: first initial + last [email protected] (e.g., [email protected])
Founded in 1901, Sterne Agee has been providing investors like you with high-quality investment opportunities for over a century. During the early years, our founders prominently established themselves in the financial securities industry in the southeastern United States. Today, we have expanded to serve all regions of the country. Sterne, Agee is headquartered in Birmingham, Alabama with offices in 22 states. Sterne Agee is one of the largest independent firms in the country. Sterne, Agee & Leach, Inc. is a division of Sterne Agee Group, Inc., which also includes The Trust Company of Sterne, Agee & Leach, Inc.; Sterne Agee Asset Management, Inc.; Sterne Agee Clearing, Inc.; and Sterne Agee Financial Services, Inc.—www.sterneagee.com
EQUITY CAPITAL MARKETS
Ryan Medo Managing Dir., Eq. Cap. Mkts. (205) 949-3623 William McIlroy Director, Equity Products (212) 338-4781
INSTITUTIONAL SALES Steve Pokorny Head of Institutional Sales (214) 702-4020
INSTITUTIONAL TRADING JT Cacciabaudo Head of Trading (212) 763-8288
EQUITY RESEARCH
Robert Hoehn Director of Research (212) 338-4731
CONSUMER
Apparel Retailing & Toys Margaret Whitfield SVP, Sr. Analyst (973) 519-1019 Tom Nikic, CFA Analyst (212) 338-4784
Interactive Entertainment / Internet Arvind Bhatia, CFA Mng. Dir. (214) 702-4001 Brett Strauser Analyst (214) 702-4009
Footwear & Apparel Sam Poser Mng. Dir. (212) 763-8226 Ben Shamsian Associate (212) 338-4721
Leisure & Entertainment David Bain Mng. Dir. (949) 721-6651 Sherry Yin Associate (949) 721-6651
Restaurants Lynne Collier Mng. Dir. (214) 702-4045 Philip May Analyst (214) 702-4004
ENERGY
Exploration & Production Tim Rezvan, CFA Sr. Analyst (212) 338-4736
Ryan Mueller Analyst (212) 338-4732 Truman Hobbs Associate (212) 338-4767
Oilfield Services & Equipment Stephen D. Gengaro Mng. Dir. (646) 376-5331 Grant Fox Analyst (212) 338-4723 Tripp Schoff Associate (646) 376-5325
FINANCIAL SERVICES
Asset Management Jason Weyeneth, CFA SVP, Sr. Analyst (212) 763-8293 Charles Warren Analyst (646) 376-5309
Banks & Thrifts Matthew Kelley Mng. Dir. (207) 699-5800 Mike I. Shafir SVP, Sr. Analyst (212) 763-8239 Matthew Breese Analyst (207) 699-5800 Brett Rabatin, CFA SVP, Sr. Analyst (877) 457-8625 Kenneth James Analyst (615) 760-1474 Nathan Race Associate (615) 760-1477 Peyton Green Mng. Dir. (877) 492-2663 Zachary Wollam Analyst (615) 760-1468 Todd L. Hagerman Mng. Dir. (212) 338-4744 Robert Greene Analyst (212) 763-8296
Life Insurance John M. Nadel Mng. Dir. (212) 338-4717 Alex Levine Analyst (212) 338-4748
Mortgage Finance & Specialty Finance Henry J. Coffey, Jr., CFA Mng. Dir. (615) 760-1472 Jason Weaver VP, Sr. Analyst (615) 760-1475 Calvin Hotrum Analyst (615) 760-1476
FINANCIAL SERVICES (CONT.)
Property/Casualty Insurance Dan Farrell Mng. Dir. (212) 338-4782 Nitin Chhabra, FCAS Analyst (212) 338-4779
INDUSTRIALS
Aerospace & Defense Peter Arment Mng. Dir. (646) 376-5336 Josh W. Sullivan Analyst (646) 376-5337
Auto, Auto Parts and Auto Retailers Michael P. Ward, CFA Mng. Dir. (646) 376-5375 Ali-Ahmad Faghri Associate (646) 376-5304
Coal, Metals & Mining, Engineering & Construction Michael S. Dudas, CFA Mng. Dir. (646) 376-5329 Satyadeep Jain Analyst (646) 376-5357 Patrick Uotila, CPA Analyst (646) 376-5358
Construction Materials & Diversified Industrials Todd Vencil, CFA SVP, Sr. Analyst (804) 282-7385 Kevin Bennett, CFA Analyst (804) 282-4506
HEALTHCARE
Pharmaceutical Services Greg T. Bolan Mng. Dir. (615) 760-1469 Himanshu Rastogi, PhD, CFA Analyst (615) 760-1478
TECHNOLOGY
Data Networking and Storage Alex Kurtz Mng. Dir (415) 402-6015 Amelia Harris Analyst (415) 402-6018
Financial Technology Greg Smith Mng. Dir (818) 615-2029 Jennifer Dugan Analyst (415) 402-6051
Hardware, Mobile Devices, IT Supply Chain Shaw Wu SVP, Sr. Analyst (415) 362-7431
LED Supply Chain Andrew Huang Mng. Dir. (415) 362-6143 John Shen Associate (415) 402-6052
Semiconductors Vijay Rakesh Mng. Dir. (312) 525-8431 Troy Cowdrey Associate (312) 525-8430
TRANSPORTATION, SERVICES & EQUIPMENT
Jeffrey A. Kauffman Mng. Dir. (212) 338-4765 Sal Vitale VP, Analyst (212) 338-4766