Facebook IPO: A look at FB’s Financial Statements

Facebook, the world’s biggest social networking site, is expected to have its initial public offering (IPO) on May 17, 2012. The company is poised to raise at least $5 billion, which would put the firm’s value at around $100 billion.

Those interested to prepare their own valuation of Facebook would find useful the following summary of the company’s statement of operations (also known as Income Statement) from the years 2007 until 2011. The document is based on the company’s filings to the U.S. Securities and Exchange Commission.

$1 billion net income in 2011

From incurring a net loss of $138 million in 2007, Facebook has now come a long way to become a billion-dollar company by booking net profits of $1 billion at the end of 2011.

Revenues grew by almost 25 times during the five-year period, from $153 million in 2007 to $3.7 billion in 2011.

Profits decline in 1st Quarter 2012

One month before the expected IPO, however, Facebook disappointed a few analysts and market watchers when it announced on April 23 that net income dipped 12%, from $233 million during the first quarter of 2011 to $205 million in the same quarter of 2012.

This despite revenues growing 45% year-on-year to $1.058 billion in the first quarter of 2011. The company blamed “seasonal trends” in advertising and the rising cost of its stock-based compensation.

901 million active users in 2012

Membership activity on Facebook, however, remains strong. Facebook reported that there are 901 million active users per month, making 3.2 billion likes and comments everyday and uploading 300 million photos per day.

Despite the profit decline, there is no doubt that a lot of people will still buy the Facebook stock come its IPO in May. But for a company that shows consistent growth in membership and member activity, the company has to prove to investors right before the IPO that it is able to manage its expenses well and that a solid and sustainable plan to increase revenues is in place.

Otherwise potential buyers might just be  in it for the short-term which could lead Facebook to suffer the same fate as daily deals site Groupon which disappointed early buyers and whose stock price is now only around $12.00 — far below its $20.00 IPO price.

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