Facebook Reports Second Quarter 2019 Results

FB stock

This Post Was Syndicated Under License Via QuoteMedia

MENLO PARK, Calif., July 24, 2019 /PRNewswire/ — Facebook, Inc. (Nasdaq: FB) today reported financial results for the quarter ended June 30, 2019.

“We had a strong quarter and our business and community continue to grow,” said Mark Zuckerberg, Facebook founder and CEO. “We are investing in building stronger privacy protections for everyone and on delivering new experiences for the people who use our services.”

Second Quarter 2019 Financial Highlights

 

Three Months Ended June 30,

 

Year-over-Year %

In millions, except percentages and per share amounts

2019*

 

2018

 

Change

Revenue:

         

   Advertising

$

16,624

   

$

13,038

   

28

%

   Payments and other fees

262

   

193

   

36

%

Total revenue

16,886

   

13,231

   

28

%

Total costs and expenses

12,260

   

7,368

   

66

%

Income from operations

$

4,626

   

$

5,863

   

(21)

%

Operating margin

27

%

 

44

%

   

Provision for income taxes

$

2,216

         

Effective tax rate

46

%

       

Net income

$

2,616

   

$

5,106

   

(49)

%

Diluted earnings per share (EPS)

$

0.91

   

$

1.74

   

(48)

%

 

*Includes an additional $2.0 billion legal expense related to the U.S. Federal Trade Commission (FTC) settlement and a $1.1 billion income tax expense due to the developments in Altera Corp. v. Commissioner, as discussed below. As the FTC expense is not expected to be tax-deductible, it had no effect on our provision for income taxes. Excluding these expenses, our operating margin would have been 12 percentage points higher, our effective tax rate would have been 30 percentage points lower and our diluted EPS would have been $1.08 higher.

Second Quarter 2019 Operational and Other Financial Highlights

  • Daily active users (DAUs) – DAUs were 1.59 billion on average for June 2019, an increase of 8% year-over-year.
  • Monthly active users (MAUs) – MAUs were 2.41 billion as of June 30, 2019, an increase of 8% year-over-year.
  • Mobile advertising revenue – Mobile advertising revenue represented approximately 94% of advertising revenue for the second quarter of 2019, up from approximately 91% of advertising revenue in the second quarter of 2018.
  • Capital expenditures – Capital expenditures, including principal payments on finance leases, were $3.78 billion for the second quarter of 2019.
  • Cash and cash equivalents and marketable securities – Cash and cash equivalents and marketable securities were $48.60 billion at the end of the second quarter of 2019.
  • Headcount – Headcount was 39,651 as of June 30, 2019, an increase of 31% year-over-year.

In addition, we estimate that more than 2.1 billion people now use Facebook, Instagram, WhatsApp, or Messenger (our “Family” of services) every day on average, and more than 2.7 billion people use at least one of our Family of services each month.

In July 2019, we entered into a settlement and modified consent order to resolve the inquiry of the FTC into our platform and user data practices. Among other matters, our settlement with the FTC requires us to pay a penalty of $5.0 billion and to significantly enhance our practices and processes for privacy compliance and oversight. In particular, we have agreed to implement a comprehensive expansion of our privacy program, including substantial management and board of directors oversight, stringent operational requirements and reporting obligations, and a process to regularly certify our compliance with the privacy program to the FTC. In the second quarter of 2019, we recorded an additional $2.0 billion accrual in connection with our settlement with the FTC, which is included in accrued expenses and other current liabilities on our condensed consolidated balance sheet.

On June 7, 2019, a three-judge panel from the Ninth Circuit Court of Appeals issued an opinion in Altera Corp. v. Commissioner which reversed a United States Tax Court decision regarding the treatment of share-based compensation expense in a cost sharing arrangement and resulted in a cumulative income tax expense of $1.11 billion recorded in the second quarter of 2019.

Other Matters

The online technology industry and our company have received increased regulatory scrutiny in the past quarter. In June 2019, we were informed by the FTC that it had opened an antitrust investigation of our company. In addition, in July 2019, the Department of Justice announced that it will begin an antitrust review of market-leading online platforms.

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 1484548.

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
[email protected] / investor.fb.com

Press:
Vanessa Chan
[email protected] / 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: 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 April 25, 2019, 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, 2019. In addition, please note that the date of this press release is July 24, 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 and six months ended June 30, 2019 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,

 
 

2019*

 

2018

 

2019*

 

2018

 

Revenue

$

16,886

   

$

13,231

   

$

31,963

   

$

25,197

   

Costs and expenses:

               

Cost of revenue

3,307

   

2,214

   

6,123

   

4,141

   

Research and development

3,315

   

2,523

   

6,175

   

4,761

   

Marketing and sales

2,414

   

1,855

   

4,434

   

3,450

   

General and administrative

3,224

   

776

   

7,288

   

1,532

   

Total costs and expenses

12,260

   

7,368

   

24,020

   

13,884

   

Income from operations

4,626

   

5,863

   

7,943

   

11,313

   

Interest and other income, net

206

   

5

   

371

   

165

   

Income before provision for income taxes

4,832

   

5,868

   

8,314

   

11,478

   

Provision for income taxes

2,216

   

762

   

3,269

   

1,385

   

Net income

$

2,616

   

$

5,106

   

$

5,045

   

$

10,093

   

Less: Net income attributable to participating securities

   

   

   

1

   

Net income attributable to Class A and Class B common stockholders

$

2,616

   

$

5,106

   

$

5,045

   

$

10,092

   

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

               

Basic

$

0.92

   

$

1.76

   

$

1.77

   

$

3.48

   

Diluted

$

0.91

   

$

1.74

   

$

1.76

   

$

3.43

   

Weighted average shares used to compute earnings per share attributable to Class A and

               

Class B common stockholders:

               

Basic

2,855

   

2,895

   

2,855

   

2,900

   

Diluted

2,875

   

2,930

   

2,873

   

2,939

   

Share-based compensation expense included in costs and expenses:

               

Cost of revenue

$

109

   

$

74

   

$

196

   

$

130

   

Research and development

927

   

881

   

1,650

   

1,599

   

Marketing and sales

160

   

139

   

273

   

248

   

General and administrative

107

Enter Your E-mail Address To Subscribe

* indicates required
 

   

92

   

194

   

164

   

Total share-based compensation expense

$

1,303

   

$

1,186

   

$

2,313

   

$

2,141

   
 

*Includes $2.0 billion and $5.0 billion of legal expenses accrued within general and administrative expense related to the FTC settlement 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 matter.

 

FACEBOOK, INC.

 

CONDENSED CONSOLIDATED BALANCE SHEETS

 

(In millions)

 

(Unaudited)

 
     

June 30, 2019

 

December 31, 2018

 

Assets

       

Current assets:

       
 

Cash and cash equivalents

$

13,877

   

$

10,019

   
 

Marketable securities

34,719

   

31,095

   
 

Accounts receivable, net of allowances of $295 and $229 as of June 30, 2019 and

           
 

December 31, 2018, respectively

7,513

   

7,587

   
 

Prepaid expenses and other current assets

1,852

   

1,779

   
   

Total current assets

57,961

   

50,480

   

Property and equipment, net

29,999

   

24,683

   

Operating lease right-of-use assets, net

7,272

   

   

Intangible assets, net

994

   

1,294

   

Goodwill

18,334

   

18,301

   

Other assets

2,446

   

2,576

   

Total assets

$

117,006

   

$

97,334

   
             

Liabilities and stockholders’ equity

       

Current liabilities:

       
 

Accounts payable

$

655

   

$

820

   
 

Partners payable

560

   

541

   
 

Operating lease liabilities, current

688

   

   
 

Accrued expenses and other current liabilities

10,878

   

5,509

   
 

Deferred revenue and deposits

198

   

147

   
   

Total current liabilities

12,979

   

7,017

   

Operating lease liabilities, non-current

7,122

   

   

Other liabilities

8,143

   

6,190

   
   

Total liabilities

28,244

   

13,207

   

Commitments and contingencies

       

Stockholders’ equity:

       
 

Common stock and additional paid-in capital

44,277

   

42,906

   
 

Accumulated other comprehensive loss

(483)

   

(760)

   
 

Retained earnings

44,968

   

41,981

   
   

Total stockholders’ equity

88,762

   

84,127

   

Total liabilities and stockholders’ equity

$

117,006

   

$

97,334

   

 

FACEBOOK, INC.

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

(In millions)

 

(Unaudited)

 
 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 
 

2019

 

2018

 

2019

 

2018

 

Cash flows from operating activities

               

Net income

$

2,616

   

$

5,106

   

$

5,045

   

$

10,093

   

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

               

   Depreciation and amortization

1,502

   

1,034

   

2,857

   

1,983

   

   Share-based compensation

1,303

   

1,186

   

2,313

   

2,141

   

   Deferred income taxes

1

   

101

   

184

   

54

   

   Other

9

   

10

   

14

   

18

   

Changes in assets and liabilities:

               

   Accounts receivable

(1,006)

   

(627)

   

64

   

161

   

   Prepaid expenses and other current assets

(252)

   

(535)

   

(168)

   

(898)

   

   Other assets

24

   

(77)

   

65

   

(59)

   

   Operating lease right-of-use assets, net

(521)

   

   

(1,711)

   

   

   Accounts payable

8

   

49

   

(87)

   

50

   

   Partners payable

20

   

51

   

20

   

53

   

   Accrued expenses and other current liabilities

2,827

   

(17)

   

5,982

   

690

   

   Deferred revenue and deposits

55

   

   

51

   

(4)

   

   Operating lease liabilities, non-current

556

   

   

1,638

   

   

   Other liabilities

1,473

   

18

   

1,657

   

(124)

   

Net cash provided by operating activities

8,615

   

6,299

   

17,924

   

14,158

   

Cash flows from investing activities

               

Purchases of property and equipment, net

(3,633)

   

(3,459)

   

(7,470)

   

(6,272)

   

Purchases of marketable securities

(5,152)

   

(4,261)

   

(11,755)

   

(8,283)

   

Sales of marketable securities

2,944

   

4,282

   

4,456

   

8,612

   

Maturities of marketable securities

1,895

   

1,071

   

4,105

   

2,338

   

Other investing activities, net

(64)

   

(16)

   

(114)

   

(66)

   

Net cash used in investing activities

(4,010)

   

(2,383)

   

(10,778)

   

(3,671)

   

Cash flows from financing activities

               

Taxes paid related to net share settlement of equity awards

(606)

   

(927)

   

(1,119)

   

(1,758)

   

Repurchases of Class A common stock

(1,144)

   

(3,349)

   

(1,758)

   

(5,123)

   

Principal payments on finance leases

(142)

   

   

(267)

   

   

Net change in overdraft in cash pooling entities

58

   

   

(119)

   

   

Other financing activities, net

4

   

4

   

9

   

7

   

Net cash used in financing activities

(1,830)

   

(4,272)

   

(3,254)

   

(6,874)

   

Effect of exchange rate changes on cash, cash equivalents, and restricted cash

26

   

(186)

   

(18)

   

(149)

   

Net increase (decrease) in cash, cash equivalents, and restricted cash

2,801

   

(542)

   

3,874

   

3,464

   

Cash, cash equivalents, and restricted cash at beginning of the period

11,197

   

12,210

   

10,124

   

8,204

   

Cash, cash equivalents, and restricted cash at end of the period

$

13,998

   

$

11,668

   

$

13,998

   

$

11,668

   
                 

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

               

consolidated balance sheets

               

Cash and cash equivalents

$

13,877

   

$

11,552

   

$

13,877

   

$

11,552

   

Restricted cash, included in prepaid expenses and other current assets

9

   

11

   

9

   

11

   

Restricted cash, included in other assets

112

   

105

   

112

   

105

   

Total cash, cash equivalents, and restricted cash

$

13,998

   

$

11,668

   

$

13,998

   

$

11,668

   

 

FACEBOOK, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

2019

 

2018

 

2019

 

2018

Supplemental cash flow data

             

Cash paid during the period for:

             

Interest

$

3

   

$

   

$

6

   

$

 

Income taxes, net

$

1,014

   

$

1,545

   

$

1,696

   

$

2,281

 

Non-cash investing activities:

             

Net change in prepaids and liabilities related to property and equipment

$

111

   

$

(198)

   

$

(203)

   

$

231

 

Property and equipment in accounts payable and accrued liabilities

$

1,667

   

$

1,146

   

$

1,667

   

$

1,146

 

 

Reconciliation of GAAP to Non-GAAP Results

(In millions, except percentages)

(Unaudited)

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

2019

 

2018

 

2019

 

2018

GAAP revenue

$

16,886

   

$

13,231

   

$

31,963

   

$

25,197

 

Foreign exchange effect on 2019 revenue using 2018 rates

574

       

1,077

     

Revenue excluding foreign exchange effect

$

17,460

       

$

33,040

     

GAAP revenue year-over-year change %

28

%

     

27

%

   

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

32

%

     

31

%

   

GAAP advertising revenue

$

16,624

   

$

13,038

   

$

31,536

   

$

24,833

 

Foreign exchange effect on 2019 advertising revenue using 2018 rates

572

       

1,075

     

Advertising revenue excluding foreign exchange effect

$

17,196

       

$

32,611

     

GAAP advertising revenue year-over-year change %

28

%

     

27

%

   

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

32

%

     

31

%

   
               

Net cash provided by operating activities

$

8,615

   

$

6,299

   

$

17,924

   

$

14,158

 

Purchases of property and equipment, net

(3,633)

   

(3,459)

   

(7,470)

   

(6,272)

 

Principal payments on finance leases

(142)

   

   

(267)

   

 

Free cash flow

$

4,840

   

$

2,840

   

$

10,187

   

$

7,886

 

 

Cision View original content:http://www.prnewswire.com/news-releases/facebook-reports-second-quarter-2019-results-300890561.html

SOURCE Facebook

If You Liked This Article Click To Share