Facebook Inc (FB) Earnings Call Transcript: 2014 Q3

We expect our full year 2014 total gap expenses including cost of revenue of stock compensation and the amortization of intangibles will grow approximately 45% to 50% versus the full year 2013. This increase from our prior range of 30% to 35% is primarily due to the impact of the WhatsApp acquisition on stock based compensation charges on the Q4. We continue to expect that our full year 2014 total non-gap expenses including cost of revenue but excluding stock compensation and amortization of intangibles will likely grow in the neighborhood of 30% to 35% versus the full year 2013. Turning now to revenue.

We expect that the total revenue in Q4 will grow in the range of 40% to 47% versus the same quarter of last year. Please, keep in mind that Q4 of 2013 was our first holiday season with the roll out of news feed ads at scalp which makes it more difficult for comparison. For taxes we anticipate the gap tax rate in Q4 will be approximately 45% to 50% which is higher than the current rate due to large non-deductible stock base compensation charges related to the closing of the WhatsApp transaction. Our Q4 non-gap tax rate should be similar to our Q3 rate. For share cap, we expect that our fourth quarter fully deluded share cap will be approximately 2.8 billion shares taking into account the shares that we issued upon the closing of WhatsApp deal. We expect that our 2014 cap tax will be at the low end of our prior USD 2 B to USD 2.5 B cap tax guidance.

And lastly while it is relatively early I wanted to provide some preliminary color of our expense outlet for 2015. As Mark discussed in his remarks we believe that we have very substantial growth opportunities in front of us and we have planned to invest aggressively to capitalize on those opportunities. As such we plan on 2015 being a significant investmentyear. Our current expectation is a total cost in expenses on a gap bases, inclusive a stock base compensation charges related to the recent transactions, are likely to increase of 55% to 75% compared to the full year 2014. On a non-gap basis, we expect total cost increase approximately 50% to 70% compared to 2014. Tax rates for 2015 should be similar to our Q4 rates on both gap and non-gap basis.

In summary, we are very pleased with the growth of our network. The great momentum we continue to see in our app business and the significant investments for making to drive near term and long term growth. We have large opportunities ahead of us and we are focused on capitalizing on those to achieve our mission and drive long term shareholder value. With that Operator, let’s open up the call for questions.