Facebook Reports Second Quarter 2017 Results
MENLO PARK, Calif., July 26, 2017 /PRNewswire/ -- Facebook, Inc. (NASDAQ: FB) today reported financial results for the quarter ended June 30, 2017.
"We had a good second quarter and first half of the year," said Mark Zuckerberg, Facebook founder and CEO. "Our community is now two billion people and we're focusing on bringing the world closer together."
Second Quarter 2017 Financial Highlights
Three Months Ended Year-over-
June 30, Year %
Change
In
millions,
except
percentages
and per
share
amounts 2017 2016
---- ----
Revenue:
Advertising $9,164 $6,239 47%
Payments
and
other
fees 157 197 (20)%
--- ---
Total
revenue 9,321 6,436 45%
Total
costs
and
expenses(1) 4,920 3,702 33%
----- -----
Income
from
operations(1) $4,401 $2,734 61%
Operating
margin(1) 47% 42%
Provision
for
income
taxes $594
Effective
tax
rate 13%
Net
income(1) $3,894 $2,283 71%
Diluted
Earnings
per
Share
(EPS)(1) $1.32 $0.78 69%
(1) In the fourth quarter of 2016, we
elected to early adopt Accounting
Standards Update No. 2016-09,
Compensation - Stock Compensation
(Topic 718): Improvement to
Employee Share-based Payment
Accounting (ASU 2016-09). We were
required to reflect any adoption
adjustments as of January 1, 2016,
the beginning of the annual period
that included the interim period
of adoption. As such, certain
financial highlights data for the
three months ended June 30, 2016
had been adjusted to reflect the
impact of ASU 2016-09 adoption.
See Note 1 - Summary of
Significant Accounting Policies
(Note 1) in the notes to our
consolidated financial statements
in our Annual Report on Form 10-K
for the year ended December 31,
2016 for detailed adoption
information.
Second Quarter 2017 Operational and Other Financial Highlights
-- Daily active users (DAUs) - DAUs were 1.32 billion on average for June
2017, an increase of 17% year-over-year.
-- Monthly active users (MAUs) - MAUs were 2.01 billion as of June 30,
2017, an increase of 17% year-over-year.
-- Mobile advertising revenue - Mobile advertising revenue represented
approximately 87% of advertising revenue for the second quarter of 2017,
up from approximately 84% of advertising revenue in the second quarter
of 2016.
-- Capital expenditures - Capital expenditures for the second quarter of
2017 were $1.44 billion.
-- Cash and cash equivalents and marketable securities - Cash and cash
equivalents and marketable securities were $35.45 billion at the end of
the second quarter of 2017.
-- Headcount - Headcount was 20,658 as of June 30, 2017, an increase of 43%
year-over-year.
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 of Facebook's earnings conference call can be accessed at investor.fb.com, along with the earnings press release, financial tables, and slide presentation. Facebook uses the investor.fb.com and newsroom.fb.com websites as well as Mark Zuckerberg's Facebook Page (https://www.facebook.com/zuck) as means of disclosing material non-public information and for complying with its disclosure obligations under Regulation FD.
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 40144952.
About Facebook
Founded in 2004, Facebook's mission is to give people the power to build community and bring the world closer together. 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
investor@fb.com / investor.fb.com
Press:
Vanessa Chan
press@fb.com / newsroom.fb.com
Forward Looking Statements
This press release contains forward-looking statements regarding our future business expectations, 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; our reliance on advertising revenue; our dependency on mobile operating systems, networks, and standards that we do not control; risks associated with new product development and their introduction as well as other new business initiatives; our emphasis on user growth and engagement and the user experience over short-term financial results; competition; litigation; privacy and regulatory concerns; risks associated with acquisitions; 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 on Form 10-Q filed with the SEC on May 4, 2017, 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 June 30, 2017. In addition, please note that the date of this press release is July 26, 2017, 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 condensed consolidated financial statements, which are prepared and presented in accordance with generally accepted accounting principles in the United States (GAAP), we use the following non-GAAP financial measures: revenue excluding foreign exchange effect, advertising revenue excluding foreign exchange effect and free cash flow. 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 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 our non-GAAP financial measures:
Foreign exchange effect on revenue. We translated revenue for the three and six months ended June 30, 2017 using the prior year's monthly exchange rates for our settlement currencies other than the U.S. dollar, which we believe is a useful metric that facilitates comparison to our historical performance.
Purchases of property and equipment. We subtract purchases of property and equipment in our calculation of free cash flow because we believe that this methodology can provide useful supplemental information to help investors better understand underlying trends in our business.
For more information on our non-GAAP financial measures and a reconciliation of GAAP to non-GAAP measures, please see the "Reconciliation of GAAP to Non-GAAP Results" table in this press release.
FACEBOOK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In millions, except for per share amounts)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2017 2016(1) 2017 2016(1)
---- ------ ---- ------
Revenue $9,321 $6,436 $17,353 $11,818
Costs and expenses:
Cost of revenue 1,237 917 2,395 1,755
Research and
development 1,919 1,471 3,753 2,814
Marketing and sales 1,124 901 2,181 1,728
General and
administrative 640 413 1,295 778
--- --- ----- ---
Total costs and
expenses 4,920 3,702 9,624 7,075
----- ----- ----- -----
Income from operations 4,401 2,734 7,729 4,743
Interest and other
income, net 87 20 168 78
--- --- --- ---
Income before
provision for income
taxes 4,488 2,754 7,897 4,821
Provision for income
taxes 594 471 938 800
--- --- --- ---
Net income $3,894 $2,283 $6,959 $4,021
------ ------ ------ ------
Less: Net income
attributable to
participating
securities 4 7 10 13
--- --- --- ---
Net income
attributable to Class
A and Class B common
stockholders $3,890 $2,276 $6,949 $4,008
====== ====== ====== ======
Earnings per share attributable to
Class A and Class B common
stockholders:
Basic $1.34 $0.80 $2.40 $1.41
===== ===== ===== =====
Diluted $1.32 $0.78 $2.36 $1.38
===== ===== ===== =====
Weighted average shares used to
compute earnings per share
attributable to Class A and Class B
common stockholders:
Basic 2,900 2,856 2,895 2,850
===== ===== ===== =====
Diluted 2,951 2,921 2,950 2,912
===== ===== ===== =====
Share-based compensation expense
included in costs and expenses:
Cost of revenue $47 $29 $81 $51
Research and
development 787 631 1,457 1,217
Marketing and sales 120 95 216 177
General and
administrative 78 62 145 118
--- --- --- ---
Total share-based
compensation expense $1,032 $817 $1,899 $1,563
====== ==== ====== ======
(1) We elected to early adopt ASU
2016-09 in the fourth quarter
of 2016. Our condensed
consolidated statements of
income for the three and six
months ended June 30, 2016
had been adjusted to reflect
the impact of ASU 2016-09
adoption. See Note 1 in the
notes to our consolidated
financial statements in our
Annual Report on Form 10-K
for the year ended December
31, 2016 for detailed
adoption information.
FACEBOOK, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions)
(Unaudited)
June 30, 2017 December 31, 2016
------------- -----------------
Assets
Current assets:
Cash and cash
equivalents $6,252 $8,903
Marketable
securities 29,200 20,546
Accounts
receivable,
net of
allowances
for doubtful
accounts of
$90 and $94
as of June
30, 2017 and
December 31,
2016,
respectively 3,897 3,993
Prepaid
expenses and
other current
assets 1,455 959
-----
Total current
assets 40,804 34,401
Property and equipment, net 10,628 8,591
Intangible assets, net 2,186 2,535
Goodwill 18,129 18,122
Other assets 2,096 1,312
----- -----
Total assets $73,843 $64,961
======= =======
Liabilities and stockholders' equity
Current liabilities:
Accounts
payable $323 $302
Partners
payable 278 280
Accrued
expenses and
other current
liabilities 2,626 2,203
Deferred
revenue and
deposits 88 90
3,315 2,875
Total current
liabilities
Other liabilities 4,047 2,892
----- -----
7,362 5,767
Total
liabilities
Stockholders' equity:
Common stock
and
additional
paid-in
capital 39,291 38,227
Accumulated
other
comprehensive
loss (370) (703)
Retained
earnings 27,560 21,670
------
66,481 59,194
Total
stockholders'
equity
---
Total liabilities and
stockholders' equity $73,843 $64,961
======= =======
FACEBOOK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2017 2016(1) 2017 2016(1)
---- ------ ---- ------
Cash flows from operating activities
Net income $3,894 $2,283 $6,959 $4,021
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 728 585 1,400 1,137
Share-based compensation 1,032 817 1,899 1,563
Deferred income taxes 26 (101) (58) (178)
Other 8 6 12 19
Changes in assets and liabilities:
Accounts receivable (386) (492) 223 (225)
Prepaid expenses and other
current assets (212) (150) (577) (257)
Other assets 51 (11) 82 4
Accounts payable (28) (41) (38) (39)
Partners payable (7) 17 (10) 14
Accrued expenses and other
current liabilities 96 432 157 414
Deferred revenue and deposits 6 25 (4) 23
Other liabilities 152 295 373 646
--- --- --- ---
Net cash provided by operating
activities 5,360 3,665 10,418 7,142
Cash flows from investing activities
Purchases of property and
equipment (1,444) (995) (2,715) (2,127)
Purchases of marketable
securities (7,145) (6,509) (14,137) (9,635)
Sales of marketable securities 2,236 2,145 3,998 4,158
Maturities of marketable
securities 899 366 1,498 903
Acquisitions of businesses,
net of cash acquired, and
purchases of intangible
assets (8) (19) (8) (20)
Change in restricted cash and
deposits 22 41 33 74
Net cash used in investing
activities (5,440) (4,971) (11,331) (6,647)
Cash flows from financing activities
Taxes paid related to net
share settlement of equity
awards (724) - (1,495) -
Principal payments on capital
lease and other financing
obligations - - - (312)
Repurchases of Class A common
stock (150) - (378) -
Other financing activities,
net 5 4 12 6
--- ---
Net cash (used in) provided by
financing activities (869) 4 (1,861) (306)
---- --- ------ ----
Effect of exchange rate
changes on cash and cash
equivalents 97 (46) 123 12
--- --- --- ---
Net (decrease) increase in
cash and cash equivalents (852) (1,348) (2,651) 201
Cash and cash equivalents at
beginning of period 7,104 6,456 8,903 4,907
----- ----- ----- -----
Cash and cash equivalents at
end of period $6,252 $5,108 $6,252 $5,108
====== ====== ====== ======
FACEBOOK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2017 2016(1) 2017 2016(1)
---- ------ ---- ------
Supplemental cash flow data
Cash paid during the period for:
Interest $ - $ - $ - $11
=== === === === === === ===
Income taxes, net $695 $237 $1,359 $407
==== ==== ====== ====
Non-cash investing and financing
activities:
Net change in accounts
payable, accrued expenses
and other current
liabilities, and other
liabilities related to
property and equipment
additions $183 $37 $157 $89
==== === ==== ===
Change in unsettled
repurchases of Class A
common stock $30 $ - $30 $ -
=== === === === === ===
(1) We elected to early adopt ASU
2016-09 in the fourth quarter
of 2016. Our condensed
consolidated statements of
cash flows for the three and
six months ended June 30,
2016 had been adjusted to
reflect the impact of ASU
2016-09 adoption. See Note 1
in the notes to our
consolidated financial
statements in our Annual
Report on Form 10-K for the
year ended December 31, 2016
for detailed adoption
information.
Reconciliation of GAAP to Non-GAAP Results
(In millions, except percentages)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2017 2016 2017 2016
---- ---- ---- ----
GAAP revenue $9,321 $6,436 $17,353 $11,818
Foreign
exchange
effect on
2017 revenue
using 2016
rates 141 164
--- ---
Revenue
excluding
foreign
exchange
effect $9,462 $17,517
GAAP revenue
year-over-
year change % 45% 47%
Revenue
excluding
foreign
exchange
effect year-
over-year
change % 47% 48%
GAAP
advertising
revenue $9,164 $6,239 $17,021 $11,440
Foreign
exchange
effect on
2017
advertising
revenue using
2016 rates 141 163
--- ---
Advertising
revenue
excluding
foreign
exchange
effect $9,305 $17,184
GAAP
advertising
revenue year-
over-year
change % 47% 49%
Advertising
revenue
excluding
foreign
exchange
effect year-
over-year
change % 49% 50%
Net cash
provided by
operating
activities(1) $5,360 $3,665 $10,418 $7,142
Purchases of
property and
equipment (1,444) (995) (2,715) (2,127)
------ ---- ------ ------
Free cash
flow(1) $3,916 $2,670 $7,703 $5,015
(1) We elected to early adopt ASU
2016-09 in the fourth quarter
of 2016. Net cash provided by
operating activities and free
cash flow for the three and
six months ended June 30,
2016 had been adjusted to
reflect the impact of ASU
2016-09 adoption. See Note 1
in the notes to our
consolidated financial
statements in our Annual
Report on Form 10-K for the
year ended December 31, 2016
for detailed adoption
information.
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