Facebook Reports Fourth Quarter and Full Year 2018 Results

MENLO PARK, Calif., Jan. 30, 2019 /PRNewswire/ -- Facebook, Inc. (Nasdaq: FB) today reported financial results for the quarter and full year ended December 31, 2018.

"Our community and business continue to grow," said Mark Zuckerberg, Facebook founder and CEO. "We've fundamentally changed how we run our company to focus on the biggest social issues, and we're investing more to build new and inspiring ways for people to connect."

Fourth Quarter and Full Year 2018 Financial Highlights


                                                                       
          
            Three Months Ended          Year-over-Year %            
         
              Year Ended           Year-over-Year %
                                                                                 December 31,                           Change                        December 31,                          Change




     
              In millions, except percentages and per share amounts     2018                           2017                              2018                    2017




     Revenue:



        Advertising                                                            $
            16,640                                    $
       12,779                           30
        %                            $
       55,013           $
       39,942 38
         %



        Payments and other fees                                            274                                   193                            42
          %                           825                              711    16
     %




     Total revenue                                                      16,914                                12,972                            30
          %                        55,838                           40,653    37
     %



     Total costs and expenses                                            9,094                                 5,620                            62
          %                        30,925                           20,450    51
     %




     Income from operations                                                     $
            7,820                                     $
       7,352                            6
        %                            $
       24,913           $
       20,203 23
         %



     
              Operating margin                                            46                                    57                                                           45                         50
                                                                              %                                    %                                                           %                         %



     Provision for income taxes(1)                                              $
            1,089                                     $
       3,194                               (66)                             $
       3,249            $
       4,660      (30)
                                                                                                                                                                               %                                                                    %



     
              Effective tax rate
              (1)                            14                                    43                                                                                 13                   23
                                                                              %                                    %                                                                                   %                   %



     Net income(1)                                                              $
            6,882                                     $
       4,268                           61
        %                            $
       22,112           $
       15,934 39
         %



     Diluted Earnings per Share (EPS)(1)                                         $
            2.38                                      $
       1.44                           65
        %                              $
       7.57             $
       5.39 40
         %




              (1)              In December 2017, the 2017 Tax
                                  Cuts and Jobs Act was enacted
                                  and significantly impacted
                                  U.S. tax law. As a result of
                                  this legislation, our fourth
                                  quarter and full year 2017
                                  provision for income taxes
                                  increased by $2.27 billion,
                                  which impacted our effective
                                  tax rate, net income and
                                  diluted EPS for such periods.
                                  Our diluted EPS decreased by
                                  $0.77 for both the fourth
                                  quarter and full year 2017.

Fourth Quarter and Full Year 2018 Operational and Other Financial Highlights

    --  Daily active users (DAUs) - DAUs were 1.52 billion on average for
        December 2018, an increase of 9% year-over-year.
    --  Monthly active users (MAUs) - MAUs were 2.32 billion as of December 31,
        2018, an increase of 9% year-over-year.
    --  Mobile advertising revenue - Mobile advertising revenue represented
        approximately 93% of advertising revenue for the fourth quarter of 2018,
        up from approximately 89% of advertising revenue in the fourth quarter
        of 2017.
    --  Capital expenditures - Capital expenditures were $4.37 billion and
        $13.92 billion for the fourth quarter and full year 2018, respectively.
    --  Cash and cash equivalents and marketable securities - Cash and cash
        equivalents and marketable securities were $41.11 billion at the end of
        the fourth quarter of 2018.
    --  Headcount - Headcount was 35,587 as of December 31, 2018, an increase of
        42% year-over-year.

In addition, we estimate that around 2.7 billion people now use Facebook, Instagram, WhatsApp, or Messenger (our "Family" of services) each month, and more than 2 billion people use at least one of our Family of services every day on average.

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 6461349.

Transcripts of conference calls with publishing equity research analysts held today will also be posted to the investor.fb.com website.

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 products and changes to existing products as well as other new business initiatives; our emphasis on user growth and engagement and the user experience over short-term financial results; maintaining and enhancing our brand and reputation; our ongoing safety, security, and content review efforts; competition; risks associated with government actions that could restrict access to our products or impair our ability to sell advertising in certain countries; litigation and government inquiries; 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 October 31, 2018, 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 Annual Report on Form 10-K for the year ended December 31, 2018. In addition, please note that the date of this press release is January 30, 2019, 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 months and year ended December 31, 2018 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, net. We subtract net 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. Free cash flow is not intended to represent our residual cash flow available for discretionary expenditures.

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                            Year Ended
                                                                                                                      December 31,                             December 31,



                                                                                                           2018                                  2017              2018                2017




     
                Revenue                                                                                        $
              16,914                    $
            12,972                    $
        55,838  $
        40,653



     
                Costs and expenses:



     Cost of revenue                                                                                     2,796                                   1,611                      9,355                  5,454



     Research and development                                                                            2,855                                   1,949                     10,273                  7,754



     Marketing and sales                                                                                 2,467                                   1,374                      7,846                  4,725



     General and administrative                                                                            976                                     686                      3,451                  2,517




     Total costs and expenses                                                                            9,094                                   5,620                     30,925                 20,450




     
                Income from operations                                                                 7,820                                   7,352                     24,913                 20,203



     Interest and other income (expense), net                                                              151                                     110                        448                    391




     Income before provision for income taxes                                                            7,971                                   7,462                     25,361                 20,594



     Provision for income taxes                                                                          1,089                                   3,194                      3,249                  4,660




     
                Net income                                                                                      $
              6,882                     $
            4,268                    $
        22,112  $
        15,934




     Less: Net income attributable to participating securities                                               -                                      2                          1                     14




     
                Net income attributable to Class A and Class B common stockholders                              $
              6,882                     $
            4,266                    $
        22,111  $
        15,920




     
                Earnings per share attributable to Class A and Class B common



     
                stockholders:



     Basic                                                                                                         $
              2.40                      $
            1.47                      $
        7.65    $
        5.49




     Diluted                                                                                                       $
              2.38                      $
            1.44                      $
        7.57    $
        5.39




     
                Weighted average shares used to compute earnings per share



     
                attributable to Class A and Class B common stockholders:



     Basic                                                                                               2,872                                   2,907                      2,890                  2,901




     Diluted                                                                                             2,886                                   2,954                      2,921                  2,956




     
                Share-based compensation expense included in costs and expenses:



     Cost of revenue                                                                                                 $
              82                        $
            50                       $
        284     $
        178



     Research and development                                                                              675                                     587                      3,022                  2,820



     Marketing and sales                                                                                   130                                     106                        511                    436



     General and administrative                                                                             84                                      71                        335                    289




     Total share-based compensation expense                                                                         $
              971                       $
            814                     $
        4,152   $
        3,723


                                                                                                                   
              
                FACEBOOK, INC.


                                                                                                       
              
                CONDENSED CONSOLIDATED BALANCE SHEETS


                                                                                                                   
              
                (In millions)


                                                                                                                    
              
                (Unaudited)


                                                                                                                                                        December 31, 2018              December 31, 2017




     
                Assets



     Current assets:


                                                              
     Cash and cash equivalents                                                                                 $
        10,019                                     $
       8,079


                                                              
     Marketable securities                                                                              31,095                                 33,632


                                                                Accounts receivable, net of allowances of $229 and $189 as of
                                                                 December 31,


                                                              
     2018 and 2017, respectively                                                                         7,587                                  5,832


                                                              
     Prepaid expenses and other current assets                                                           1,779                                  1,020



                                                              
     Total current assets                                                                               50,480                                 48,563



     Property and equipment, net                                                                                      24,683                                                                      13,721



     Intangible assets, net                                                                                            1,294                                                                       1,884



     Goodwill                                                                                                         18,301                                                                      18,221



     Other assets                                                                                                      2,576                                                                       2,135




     
                Total assets                                                                                                                        $
              97,334                                        $
     84,524






     
                Liabilities and stockholders' equity



     Current liabilities:


                                                              
     Accounts payable                                                                                             $
        820                                       $
       380


                                                              
     Partners payable                                                                                      541                                    390


                                                              
     Accrued expenses and other current liabilities                                                      5,509                                  2,892


                                                              
     Deferred revenue and deposits                                                                         147                                     98



                                                              
     Total current liabilities                                                                           7,017                                  3,760



     Other liabilities                                                                                                 6,190                                                                       6,417



                                                              
     Total liabilities                                                                                  13,207                                 10,177



     Commitments and contingencies



     Stockholders' equity:


                                                              
     Common stock and additional paid-in capital                                                        42,906                                 40,584


                                                              
     Accumulated other comprehensive loss                                                                (760)                                 (227)


                                                              
     Retained earnings                                                                                  41,981                                 33,990



                                                              
     Total stockholders' equity                                                                         84,127                                 74,347




     
                Total liabilities and stockholders' equity                                                                                          $
              97,334                                        $
     84,524


                                                                                                                 
          
                FACEBOOK, INC.


                                                                                                             
     
        CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


                                                                                                                 
          
                (In millions)


                                                                                                                  
          
                (Unaudited)


                                                                                                                                                  Three Months Ended                     
       
                Year Ended
                                                                                                                                         December 31,                                         December 31,

                                                                                                                                                                                                  ---

                                                                                                                       2018                                          2017*          2018                                  2017*

                                                                                                                                                                                                                          ---


     
                Cash flows from operating activities



     Net income                                                                                                               $
              6,882                                          $
       4,268                            $
         22,112  $
      15,934



     Adjustments to reconcile net income to net cash provided by operating



     activities:



         Depreciation and amortization                                                                               1,225                                                     853                                       4,315          3,025



         Share-based compensation                                                                                      971                                                     814                                       4,152          3,723



         Deferred income taxes                                                                                         201                                                   (225)                                        286          (377)



         Other                                                                                                        (19)                                                      5                                        (64)            24



     Changes in assets and liabilities:



        Accounts receivable                                                                                        (1,564)                                                (1,374)                                    (1,892)       (1,609)



        Prepaid expenses and other current assets                                                                      198                                                     441                                       (690)         (192)



        Other assets                                                                                                  (60)                                                     26                                       (159)           154



        Accounts payable                                                                                               133                                                      50                                         221             43



        Partners payable                                                                                                41                                                      73                                         157             95



        Accrued expenses and other current liabilities                                                                 378                                                     215                                       1,417            309



        Deferred revenue and deposits                                                                                   33                                                     (7)                                         53              4



        Other liabilities                                                                                            (735)                                                  2,531                                       (634)         3,083




     
                Net cash provided by operating activities                                                          7,684                                                   7,670                                      29,274         24,216



     
                Cash flows from investing activities



     Purchases of property and equipment, net                                                                      (4,366)                                                (2,262)                                   (13,915)       (6,733)



     Purchases of marketable securities                                                                            (1,997)                                                (5,272)                                   (14,656)      (25,682)



     Sales of marketable securities                                                                                  1,254                                                   1,795                                      12,358          9,444



     Maturities of marketable securities                                                                             1,381                                                     760                                       4,772          2,988



     Acquisitions of businesses, net of cash acquired, and purchases of intangible assets                                -                                                   (17)                                      (137)         (122)



     Other investing activities, net                                                                                  (21)                                                    (7)                                       (25)          (13)




     
                Net cash used in investing activities                                                            (3,749)                                                (5,003)                                   (11,603)      (20,118)



     
                Cash flows from financing activities



     Taxes paid related to net share settlement of equity awards                                                     (545)                                                  (885)                                    (3,208)       (3,246)



     Repurchases of Class A common stock                                                                           (3,500)                                                  (958)                                   (12,879)       (1,976)



     Net change in overdraft in cash pooling entities                                                                  500                                                                                                500



     Other financing activities, net                                                                                     4                                                       1                                          15           (13)




     
                Net cash used in financing activities                                                            (3,541)                                                (1,842)                                   (15,572)       (5,235)




     
                Effect of exchange rate changes on cash, cash equivalents, and 
            
     restricted cash           (14)                                                     40                                       (179)           232




     Net increase (decrease) in cash, cash equivalents, and restricted cash                                            380                                                     865                                       1,920          (905)



     Cash, cash equivalents, and restricted cash at beginning of the period                                          9,744                                                   7,339                                       8,204          9,109




     
                Cash, cash equivalents, and restricted cash at end of the period                                           $
              10,124                                          $
       8,204                            $
         10,124   $
      8,204






     
                Reconciliation of cash, cash equivalents, and restricted cash to the



     
                condensed consolidated balance sheets



     Cash and cash equivalents                                                                                               $
              10,019                                          $
       8,079                            $
         10,019   $
      8,079



     Restricted cash, included in prepaid expenses and other current assets                                             10                                                      18                                          10             18



     Restricted cash, included in other assets                                                                          95                                                     107                                          95            107




     
                Total cash, cash equivalents, and restricted cash                                                          $
              10,124                                          $
       8,204                            $
         10,124   $
      8,204



               *Prior-period information has been
                retrospectively adjusted due to our
                adoption of ASU No. 2016-18,
                Statement of Cash Flows, Restricted
                Cash (Topic 230) on January 1,
                2018.


                                                                                             
          
                FACEBOOK, INC.


                                                                                         
     
         CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


                                                                                              
          
                (In millions)


                                                                                               
          
                (Unaudited)


                                                                                                                            Three Months Ended                           Year Ended
                                                                                                                   December 31,                           December 31,

                                                                                                                                                              ---

                                                                                                   2018                                          2017*        2018                    2017*

                                                                                                                                                                                      ---


     
                Supplemental cash flow data



     Cash paid during the period for:



     Interest                                                                                                $
              1                             
            $                                 $
        1  
     $




     Income taxes, net                                                                                   $
              1,034                                           $
              324           $
        3,762      $
         2,117




     Non-cash investing and financing activities:



     Net change in prepaids and liabilities related to property and equipment additions                    $
              306                                          $
              (44)            $
        918        $
         495




     Settlement of acquisition-related contingent consideration liability                     
          $                                                
            $                           
     $                 $
         102




     Change in unsettled repurchases of Class A common stock                                                $
              44                                            $
              74              $
        51         $
         94



               *Prior-period information has been
                retrospectively adjusted due to our
                adoption of ASU No. 2016-18,
                Statement of Cash Flows, Restricted
                Cash (Topic 230) on January 1,
                2018.


                                                                                    
       
         Reconciliation of GAAP to Non-GAAP Results


                                                                                      
       
           (In millions, except percentages)


                                                                                          
         
                (Unaudited)


                                                                                                                      Three Months Ended              
       
                Year Ended
                                                                                                             December 31,                                 December 31,

                                                                                                                                                              ---

                                                                                                      2018                               2017           2018                             2017




              GAAP revenue                                                                                  $
              16,914                               $
              12,972                        $
        55,838 $
     40,653



              Foreign exchange effect on 2018 revenue using 2017 rates                                348                                                                 (401)




              Revenue excluding foreign exchange effect                                                     $
              17,262                                                               $
     55,437


    GAAP revenue year-over-year change %                                                    30
            %                                                         37
            %


    Revenue excluding foreign exchange effect year-over-year change %                       33
            %                                                         36
            %



              GAAP advertising revenue                                                                      $
              16,640                               $
              12,779                        $
        55,013 $
     39,942



              Foreign exchange effect on 2018 advertising revenue using 2017 rates                    347                                                                 (401)




              Advertising revenue excluding foreign exchange effect                                         $
              16,987                                                               $
     54,612


    GAAP advertising revenue year-over-year change %                                        30
            %                                                         38
            %


    Advertising revenue excluding foreign exchange effect year-over-year change %           33
            %                                                         37
            %





              Net cash provided by operating activities                                                      $
              7,684                                $
              7,670                        $
        29,274 $
     24,216



              Purchases of property and equipment, net                                            (4,366)                                    (2,262)                             (13,915)                 (6,733)




              Free cash flow                                                                                 $
              3,318                                $
              5,408                        $
        15,359 $
     17,483

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SOURCE Facebook