Facebook Reports First Quarter 2017 Results

May 3, 2017

MENLO PARK, Calif., May 3, 2017 /PRNewswire/ -- Facebook, Inc. (NASDAQ: FB) today reported financial results for the quarter ended March 31, 2017.

Founded in 2004, Facebook's mission is to make the world more open and connected. 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. (PRNewsFoto/Facebook, Inc.)

"We had a good start to 2017," said Mark Zuckerberg, Facebook founder and CEO. "We're continuing to build tools to support a strong global community."

First Quarter 2017 Financial Highlights

Facebook is no longer reporting non-GAAP expenses, income, tax rate, and earnings per share (EPS).


Three Months Ended
March 31,


Year-over-
Year %
Change

In millions, except percentages and per share amounts

2017


2016


Revenue:






   Advertising

$

7,857



$

5,201



51

%

   Payments and other fees

175



181



(3)

%

Total revenue

8,032



5,382



49

%

Total costs and expenses(1)

4,705



3,372



40

%

Income from operations(1)

$

3,327



$

2,010



66

%

Operating margin(1)

41

%


37

%



Provision for income taxes

$

344






Effective tax rate

10

%





Net income(1)

$

3,064



$

1,738



76

%

Diluted EPS(1)

$

1.04



$

0.60



73

%



(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 are required to reflect any adoption adjustments as of January 1, 2016, the beginning of the annual period that includes the interim period of adoption. As such, certain financial highlights data for the three months ended March 31, 2016, had been adjusted to include 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.

First Quarter 2017 Operational and Other Financial Highlights

  • Daily active users (DAUs) – DAUs were 1.28 billion on average for March 2017, an increase of 18% year-over-year.
  • Monthly active users (MAUs) – MAUs were 1.94 billion as of March 31, 2017, an increase of 17% year-over-year.
  • Mobile advertising revenue – Mobile advertising revenue represented approximately 85% of advertising revenue for the first quarter of 2017, up from approximately 82% of advertising revenue in the first quarter of 2016.
  • Capital expenditures – Capital expenditures for the first quarter of 2017 were $1.27 billion.
  • Cash and cash equivalents and marketable securities – Cash and cash equivalents and marketable securities were $32.31 billion at the end of the first quarter of 2017.
  • Headcount – Headcount was 18,770 as of March 31, 2017, an increase of 38% 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 93279401.

About Facebook

Founded in 2004, Facebook's mission is to give people the power to share and make the world more open and connected. 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 Annual Report on Form 10-K filed with the SEC on February 3, 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 March 31, 2017. In addition, please note that the date of this press release is May 3, 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 and 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 ended March 31, 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
March 31,


2017


2016(1)

Revenue

$

8,032



$

5,382


Costs and expenses:




Cost of revenue

1,159



838


Research and development

1,834



1,343


Marketing and sales

1,057



826


General and administrative

655



365


   Total costs and expenses

4,705



3,372


Income from operations

3,327



2,010


Interest and other income, net

81



56


Income before provision for income taxes

3,408



2,066


Provision for income taxes

344



328


Net income

$

3,064



$

1,738


Less: Net income attributable to participating securities

5



6


Net income attributable to Class A and Class B common stockholders

$

3,059



$

1,732


Earnings per share attributable to Class A and Class B common stockholders:




Basic

$

1.06



$

0.61


Diluted

$

1.04



$

0.60


Weighted average shares used to compute earnings per share attributable to Class A and Class B common stockholders:




Basic

2,891



2,843


Diluted

2,944



2,905


Share-based compensation expense included in costs and expenses:




Cost of revenue

$

34



$

22


Research and development

670



586


Marketing and sales

96



82


General and administrative

67



56


   Total share-based compensation expense

$

867



$

746




(1)

We elected to early adopt ASU 2016-09 in the fourth quarter of 2016. Our condensed consolidated statement of income for the three months ended March 31, 2016, had been adjusted to include 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)




March 31, 2017


December 31, 2016

Assets




Current assets:





Cash and cash equivalents

$

7,104



$

8,903



Marketable securities

25,202



20,546



Accounts receivable, net of allowances for doubtful accounts of $86 and $94 as of March 31, 2017 and December 31, 2016, respectively

3,415



3,993



Prepaid expenses and other current assets

1,209



959



     Total current assets

36,930



34,401


Property and equipment, net

9,462



8,591


Intangible assets, net

2,360



2,535


Goodwill

18,126



18,122


Other assets

1,836



1,312


Total assets

$

68,714



$

64,961








Liabilities and stockholders' equity




Current liabilities:





Accounts payable

$

170



$

302



Partners payable

278



280



Accrued expenses and other current liabilities

2,400



2,203



Deferred revenue and deposits

80



90



     Total current liabilities

2,928



2,875


Other liabilities

3,598



2,892



     Total liabilities

6,526



5,767


Stockholders' equity:





Common stock and additional paid-in capital

38,639



38,227



Accumulated other comprehensive loss

(626)



(703)



Retained earnings

24,175



21,670



     Total stockholders' equity

62,188



59,194


Total liabilities and stockholders' equity

$

68,714



$

64,961


 

FACEBOOK, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)


Three Months Ended
March 31,


2017


2016(1)

Cash flows from operating activities




Net income

$

3,064



$

1,738


Adjustments to reconcile net income to net cash provided by operating activities:




Depreciation and amortization

671



552


Share-based compensation

867



746


Deferred income taxes

(84)



(77)


Other

5



13


Changes in assets and liabilities:




Accounts receivable

609



267


Prepaid expenses and other current assets

(365)



(107)


Other assets

31



15


Accounts payable

(10)



2


Partners payable

(3)



(3)


Accrued expenses and other current liabilities

61



(18)


Deferred revenue and deposits

(10)



(2)


Other liabilities

222



351


Net cash provided by operating activities

5,058



3,477


Cash flows from investing activities




Purchases of property and equipment

(1,271)



(1,132)


Purchases of marketable securities

(6,992)



(3,126)


Sales of marketable securities

1,762



2,013


Maturities of marketable securities

599



537


Acquisitions of businesses, net of cash acquired, and purchases of intangible assets



(1)


Change in restricted cash and deposits

11



33


Net cash used in investing activities

(5,891)



(1,676)


Cash flows from financing activities




Taxes paid related to net share settlement of equity awards

(771)




Principal payments on capital lease and other financing obligations



(312)


Repurchases of Class A common stock

(228)




Other financing activities, net

7



2


Net cash used in financing activities

(992)



(310)


Effect of exchange rate changes on cash and cash equivalents

26



58


Net increase (decrease) in cash and cash equivalents

(1,799)



1,549


Cash and cash equivalents at beginning of period

8,903



4,907


Cash and cash equivalents at end of period

$

7,104



$

6,456


 

FACEBOOK, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)


Three Months Ended
March 31,


2017


2016(1)

Supplemental cash flow data




Cash paid during the period for:




Interest

$



$

11


Income taxes, net

$

664



$

170


Non-cash investing activities:




Net change in accounts payable, accrued expenses and other current liabilities,
and other liabilities related to property and equipment additions

$

(26)



$

52




(1)

We elected to early adopt ASU 2016-09 in the fourth quarter of 2016. Our condensed consolidated statements of cash flow for the three months ended March 31, 2016, had been adjusted to include 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
March 31,


2017


2016

GAAP revenue

$

8,032



$

5,382


   Foreign exchange effect on 2017 revenue using 2016 rates

22




Revenue excluding foreign exchange effect

$

8,054




GAAP revenue year-over-year change %

49

%



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

50

%



GAAP advertising revenue

$

7,857



$

5,201


   Foreign exchange effect on 2017 advertising revenue using 2016 rates

22




Advertising revenue excluding foreign exchange effect

$

7,879




GAAP advertising revenue year-over-year change %

51

%



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

51

%







Net cash provided by operating activities(1)

$

5,058



$

3,477


   Purchases of property and equipment

(1,271)



(1,132)


Free cash flow(1)

$

3,787



$

2,345




(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 months ended March 31, 2016, had been adjusted to include 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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SOURCE Facebook, Inc.