Facebook Reports Second Quarter 2020 Results
MENLO PARK, Calif., July 30, 2020 /PRNewswire/ -- Facebook, Inc. (Nasdaq: FB) today reported financial results for the quarter ended June 30, 2020.
"We're glad to be able to provide small businesses the tools they need to grow and be successful online during these challenging times," said Mark Zuckerberg, Facebook founder and CEO. "And we're proud that people can rely on our services to stay connected when they can't always be together in person."
Second Quarter 2020 Financial Highlights
Three Months Ended June 30, Year-
over-
Year %
In millions,
except
percentages and
per share
amounts 2020 2019 (1) Change
Revenue:
Advertising $
18,321 $
16,624 10%
Other 366 262 40%
Total revenue 18,687 16,886 11%
Total costs and
expenses 12,724 12,260 4%
Income from
operations $
5,963 $
4,626 29%
Operating margin 32% 27%
Provision for
income taxes $
953 $
2,216 (57)%
Effective tax
rate 16% 46%
Net income $
5,178 $
2,616 98%
Diluted earnings
per share (EPS) $
1.80 $
0.91 98%
_________________________
(1) Includes an additional $2.0 billion legal expense
related to our settlement with the U.S. Federal Trade
Commission (FTC) and a $1.1 billion income tax expense
due to the Altera Ninth Circuit Opinion, both accrued
in the second quarter of 2019.
Second Quarter 2020 Operational and Other Financial Highlights
-- Facebook daily active users (DAUs) - DAUs were 1.79 billion on average
for June 2020, an increase of 12% year-over-year.
-- Facebook monthly active users (MAUs) - MAUs were 2.70 billion as of June
30, 2020, an increase of 12% year-over-year.
-- Family daily active people (DAP) - DAP was 2.47 billion on average for
June 2020, an increase of 15% year-over-year.
-- Family monthly active people (MAP) - MAP was 3.14 billion as of June 30,
2020, an increase of 14% year-over-year.
-- Capital expenditures - Capital expenditures, including principal
payments on finance leases, were $3.36 billion for the second quarter of
2020.
-- Cash and cash equivalents and marketable securities - Cash and cash
equivalents and marketable securities were $58.24 billion as of June 30,
2020. On July 7, 2020, we paid approximately $5.8 billion at the
then-current exchange rate for our investment in Jio Platforms Limited.
-- Headcount - Headcount was 52,534 as of June 30, 2020, an increase of 32%
year-over-year.
Impact of COVID-19 on Outlook
Our business has been impacted by the COVID-19 pandemic and, like all companies, we are facing a period of unprecedented uncertainty in our business outlook. We expect our business performance will be impacted by issues beyond our control, including the duration and efficacy of shelter-in-place orders, the effectiveness of economic stimuli around the world, and the fluctuations of currencies relative to the U.S. dollar.
-- Engagement - Facebook DAUs and MAUs in the second quarter of 2020
reflect increased engagement as people around the world sheltered in
place and used our products to connect with the people and organizations
they care about. More recently, we are seeing signs of normalization in
user growth and engagement as shelter-in-place measures have eased
around the world, particularly in developed markets where Facebook's
penetration is higher. Looking forward, as shelter-in-place restrictions
continue to ease, we expect the number of Facebook DAUs and MAUs to be
flat or slightly down in most regions in the third quarter of 2020
compared to the second quarter of 2020.
-- Revenue - In the first three weeks of July, our year-over-year ad
revenue growth rate was approximately in-line with our second quarter
2020 year-over-year ad revenue growth rate of 10%. We expect our full
quarter year-over-year ad revenue growth rate for the third quarter of
2020 will be roughly similar to this July performance. There are several
factors contributing to this outlook, including:
-- First, continued macroeconomic uncertainty, including the pace of
recovery and the prospects for additional economic stimulus;
-- Second, our expectation that some of the recent surge in community
engagement will normalize as regions reopen;
-- Third, the impact from certain advertisers pausing spend on our
platforms related to the current boycott, which is reflected in our
July trends; and
-- Lastly, headwinds related to ad targeting and measurement, including
the impact of regulation, such as the California Consumer Privacy
Act, as well as headwinds from expected changes to mobile operating
platforms, which we anticipate will be increasingly significant as
the year progresses.
-- Total expenses - We expect total expenses in 2020 to be in the range of
$52-55 billion, narrowed slightly from the prior range of $52-56
billion.
-- Capital expenditures - We expect full-year 2020 capital expenditures to
be approximately $16 billion, at the high end of our prior $14-16
billion range, as we have resumed data center construction efforts
earlier than expected. However, a great deal of uncertainty remains in
our outlook, and our full year capital expenditures will depend on how
the pandemic impacts our ability to construct data centers and refresh
equipment.
-- Tax rates - We expect our full-year 2020 tax rate to be in the
mid-teens, although we may see fluctuations in our quarterly rate
depending on our financial results.
Webcast and Conference Call Information
Facebook will host a conference call to discuss the results at 3 p.m. PT / 6 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 3783991.
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's apps and technologies to connect with friends and family, find communities and grow businesses.
Contacts
Investors:
Deborah Crawford
investor@fb.com / investor.fb.com
Press:
Ryan Moore
press@fb.com / newsroom.fb.com
Forward-Looking Statements
This press release contains forward-looking statements regarding our future business expectations. These forward-looking statements are only predictions and may differ materially from actual results due to a variety of factors including: the impact of the COVID-19 pandemic on our business and financial results; our ability to retain or increase users and engagement levels; our reliance on advertising revenue; our dependency on data signals and 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 community growth and engagement and the user experience over short-term financial results; maintaining and enhancing our brand and reputation; our ongoing privacy, 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 April 30, 2020, 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, 2020. In addition, please note that the date of this press release is July 30, 2020, 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, 2020 using the prior year's monthly exchange rates for our settlement or billing 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; Principal payments on finance leases. We subtract both net purchases of property and equipment and principal payments on finance leases in our calculation of free cash flow because we believe that these two items collectively represent the amount of property and equipment we need to procure to support our business, regardless of whether we procure such property or equipment with a finance lease. 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 June 30, Six Months Ended June 30,
---
2020 2019 (1) 2020 2019 (1)
Revenue $
18,687 $
16,886 $
36,423 $
31,963
Costs and expenses:
Cost of revenue 3,829 3,307 7,288 6,123
Research and development 4,462 3,315 8,477 6,175
Marketing and sales 2,840 2,414 5,627 4,434
General and administrative 1,593 3,224 3,175 7,288
Total costs and expenses 12,724 12,260 24,567 24,020
Income from operations 5,963 4,626 11,856 7,943
Interest and other income,
net 168 206 136 371
Income before provision for
income taxes 6,131 4,832 11,992 8,314
Provision for income taxes 953 2,216 1,911 3,269
Net income $
5,178 $
2,616 $
10,081 $
5,045
Earnings per share attributable to Class
A and Class B
common stockholders:
Basic $
1.82 $
0.92 $
3.54 $
1.77
Diluted $
1.80 $
0.91 $
3.51 $
1.76
Weighted-average shares used to compute
earnings per
share attributable to Class A and Class
B common
stockholders:
Basic 2,850 2,855 2,851 2,855
Diluted 2,879 2,875 2,876 2,873
Share-based compensation expense
included in costs
and expenses:
Cost of revenue $
117 $
109 $
211 $
196
Research and development 1,261 927 2,260 1,650
Marketing and sales 187 160 336 273
General and administrative 130 107 223 194
Total share-based
compensation expense $
1,695 $
1,303 $
3,030 $
2,313
_________________________
(1) Includes $2.0 billion and $5.0 billion legal
expenses accrued related to our settlement with the
FTC in the second quarter and the first six months of
2019, respectively, and $1.1 billion of cumulative
income tax expense related to the Altera Ninth Circuit
Opinion.
FACEBOOK, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions)
(Unaudited)
June 30, 2020 December 31, 2019
Assets
Current assets:
Cash and cash
equivalents $
21,045 $
19,079
Marketable
securities 37,195 35,776
Accounts
receivable, net
of allowances of
$365 and $206 as
of June 30, 2020
and
December 31,
2019,
respectively 7,483 9,518
Prepaid expenses
and other
current assets 2,407 1,852
Total current assets 68,130 66,225
Property and equipment, net 39,006 35,323
Operating lease right-of-use
assets, net 9,429 9,460
Intangible assets, net 859 894
Goodwill 19,029 18,715
Other assets 3,238 2,759
---
Total assets $
139,691 $
133,376
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $
920 $
1,363
Partners payable 729 886
Operating lease
liabilities,
current 899 800
Accrued expenses
and other
current
liabilities 8,496 11,735
Deferred revenue
and deposits 264 269
Total current liabilities 11,308 15,053
Operating lease liabilities, non-
current 9,633 9,524
Other liabilities 8,303 7,745
---
Total liabilities 29,244 32,322
Commitments and contingencies
Stockholders' equity:
Common stock and
additional paid-
in capital 47,805 45,851
Accumulated other
comprehensive
loss (142) (489)
Retained earnings 62,784 55,692
Total stockholders' equity 110,447 101,054
Total liabilities and stockholders'
equity $
139,691 $
133,376
FACEBOOK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Three Months Ended June 30, Six Months Ended June 30,
---
2020 2019 2020 2019
---
Cash flows from operating activities
Net income $
5,178 $
2,616 $
10,081 $
5,045
Adjustments to reconcile net income to
net cash provided by
operating activities:
Depreciation and
amortization 1,704 1,502 3,301 2,857
Share-based compensation 1,695 1,303 3,030 2,313
Deferred income taxes 214 1 690 184
Other 43 9 49 14
Changes in assets and liabilities:
Accounts receivable (122) (1,006) 1,924 64
Prepaid expenses and other
current assets (325) (252) (353) (168)
Other assets 3 24 (15) 65
Accounts payable (56) 8 (100) (87)
Partners payable 11 20 (158) 20
Accrued expenses and other
current liabilities (3,995) 2,827 (3,016) 5,982
Deferred revenue and
deposits 15 55 (1) 51
Other liabilities (487) 1,508 (554) 1,584
---
Net cash provided by
operating activities 3,878 8,615 14,878 17,924
Cash flows from investing activities
Purchases of property and
equipment, net (3,255) (3,633) (6,813) (7,470)
Purchases of marketable
securities (6,179) (5,152) (14,063) (11,755)
Sales of marketable
securities 2,617 2,944 5,381 4,456
Maturities of marketable
securities 3,224 1,895 7,868 4,105
Acquisitions of businesses, net of cash
acquired, and purchases of
intangible assets (339) (3) (372) (53)
Other investing activities,
net (245) (61) (288) (61)
---
Net cash used in investing
activities (4,177) (4,010) (8,287) (10,778)
Cash flows from financing activities
Taxes paid related to net
share settlement of equity
awards (753) (606) (1,444) (1,119)
Repurchases of Class A
common stock (1,369) (1,144) (2,618) (1,758)
Principal payments on
finance leases (109) (142) (209) (267)
Net change in overdraft in
cash pooling entities 63 58 (17) (119)
Other financing activities,
net 16 4 114 9
Net cash used in financing
activities (2,152) (1,830) (4,174) (3,254)
Effect of exchange rate changes on cash,
cash equivalents, and
restricted cash 93 26 (127) (18)
---
Net increase (decrease) in
cash, cash equivalents, and
restricted cash (2,358) 2,801 2,290 3,874
Cash, cash equivalents, and
restricted cash at
beginning of the period 23,927 11,197 19,279 10,124
---
Cash, cash equivalents, and
restricted cash at end of
the period $
21,569 $
13,998 $
21,569 $
13,998
===
Reconciliation of cash, cash equivalents,
and restricted cash to
the condensed consolidated balance sheets
Cash and cash equivalents $
21,045 $
13,877 $
21,045 $
13,877
Restricted cash, included in
prepaid expenses and other
current assets 308 9 308 9
Restricted cash, included in
other assets 216 112 216 112
Total cash, cash
equivalents, and restricted
cash $
21,569 $
13,998 $
21,569 $
13,998
===
FACEBOOK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Three Months Ended June 30, Six Months Ended June 30,
---
2020 2019 2020 2019
---
Supplemental cash flow data
Cash paid for income taxes,
net $
1,041 $
1,014 $
1,250 $
1,696
Non-cash investing activities:
Acquisition of businesses and other
investments in
accrued expenses and other
liabilities $
316
$ $
316
$ -
Property and equipment in accounts
payable and
accrued liabilities $
1,592 $
1,667 $
1,592 $
1,667
Reconciliation of GAAP to Non-GAAP Results
(In millions, except percentages)
(Unaudited)
Three Months Ended June 30, Six Months Ended June 30,
---
2020 2019 2020 2019
GAAP revenue $
18,687 $
16,886 $
36,423 $
31,963
Foreign exchange effect on
2020 revenue using 2019
rates 297 573
Revenue
excluding
foreign
exchange
effect $
18,984 $
36,996
GAAP revenue
year-over-
year change % 11% 14%
Revenue excluding foreign
exchange effect year-over-
year change % 12% 16%
GAAP
advertising
revenue $
18,321 $
16,624 $
35,760 $
31,536
Foreign exchange effect on
2020 advertising revenue
using 2019
rates 295 571
Advertising
revenue
excluding
foreign
exchange
effect $
18,616 $
36,331
GAAP
advertising
revenue year-
over-year
change % 10% 13%
Advertising revenue excluding
foreign exchange effect
year-over-
year change % 12% 15%
Net cash
provided by
operating
activities $
3,878 $
8,615 $
14,878 $
17,924
Purchases of
property and
equipment, net (3,255) (3,633) (6,813) (7,470)
Principal
payments on
finance leases (109) (142) (209) (267)
---
Free cash flow
(1) $
514 $
4,840 $
7,856 $
10,187
===
______________________
(1) Free cash flow in the second quarter and the first
six months of 2020 reflects the $5.0 billion FTC
settlement that was paid in April 2020.
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SOURCE Facebook
