FB
$170.54
Facebook
($.57)
(.33%)
Earnings Details
2nd Quarter June 2017
Wednesday, July 26, 2017 4:05:00 PM
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Summary

Facebook Beats

Facebook (FB) reported 2nd Quarter June 2017 earnings of $1.32 per share on revenue of $9.3 billion. The consensus earnings estimate was $1.13 per share on revenue of $9.2 billion. The Earnings Whisper number was $1.22 per share. Revenue grew 44.8% on a year-over-year basis.

Facebook Inc is a social networking website which builds products that creates utility for users, developers and advertisers.

Results
Reported Earnings
$1.32
Earnings Whisper
$1.22
Consensus Estimate
$1.13
Reported Revenue
$9.32 Bil
Revenue Estimate
$9.17 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Facebook Reports Second Quarter 2017 Results

Facebook, Inc. (FB) today reported financial results for the quarter ended June 30, 2017.

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"We had a good second quarter and first half of the year," said Mark Zuckerberg, Facebook founder and CEO. "Our community is now two billion people and we’re focusing on bringing the world closer together."

Second Quarter 2017 Financial Highlights

Three Months Ended
Year-over-
June 30,
Year %
Change
In millions, except percentages and per share amounts 2017
2016
Revenue:
Advertising
$
9,164
$
6,239
47
%
Payments and other fees
157
197
(20)
%
Total revenue
9,321
6,436
45
%
Total costs and expenses(1)
4,920
3,702
33
%
Income from operations(1)
$
4,401
$
2,734
61
%
Operating margin(1)
47
%
42
%
Provision for income taxes
$
594
Effective tax rate
13
%
Net income(1)
$
3,894
$
2,283
71
%
Diluted Earnings per Share (EPS)(1)
$
1.32
$
0.78
69
%
(1) In the fourth quarter of 2016, we elected to early adopt Accounting Standards Update No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvement to Employee Share-based Payment Accounting (ASU 2016-09). We were required to reflect any adoption adjustments as of January 1, 2016, the beginning of the annual period that included the interim period of adoption. As such, certain financial highlights data for the three months ended June 30, 2016 had been adjusted to reflect the impact of ASU 2016-09 adoption. See Note 1 -- Summary of Significant Accounting Policies (Note 1) in the notes to our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2016 for detailed adoption information.

Second Quarter 2017 Operational and Other Financial Highlights

Daily active users (DAUs) - DAUs were 1.32 billion on average for June 2017, an increase of 17% year-over-year.

Monthly active users (MAUs) - MAUs were 2.01 billion as of June 30, 2017, an increase of 17% year-over-year.

Mobile advertising revenue - Mobile advertising revenue represented approximately 87% of advertising revenue for the second quarter of 2017, up from approximately 84% of advertising revenue in the second quarter of 2016.

Capital expenditures - Capital expenditures for the second quarter of 2017 were $1.44 billion.

Cash and cash equivalents and marketable securities - Cash and cash equivalents and marketable securities were $35.45 billion at the end of the second quarter of 2017.

-- Headcount - Headcount was 20,658 as of June 30, 2017, an increase of 43% year-over-year.

Webcast and Conference Call Information

Facebook will host a conference call to discuss the results at 2 p.m. PT / 5 p.m. ET today. The live webcast of Facebook’s earnings conference call can be accessed at investor.fb.com, along with the earnings press release, financial tables, and slide presentation. Facebook uses the investor.fb.com and newsroom.fb.com websites as well as Mark Zuckerberg’s Facebook Page (https://www.facebook.com/zuck) as means of disclosing material non-public information and for complying with its disclosure obligations under Regulation FD.

Following the call, a replay will be available at the same website. A telephonic replay will be available for one week following the conference call at +1 (404) 537-3406 or +1 (855) 859-2056, conference ID 40144952.

About Facebook

Founded in 2004, Facebook’s mission is to give people the power to build community and bring the world closer together. People use Facebook to stay connected with friends and family, to discover what’s going on in the world, and to share and express what matters to them.

Contacts

Investors: Deborah Crawford investor@fb.com / investor.fb.com

Press: Vanessa Chan press@fb.com / newsroom.fb.com

Forward Looking Statements

This press release contains forward-looking statements regarding our future business expectations, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are only predictions and may differ materially from actual results due to a variety of factors including: our ability to retain or increase users and engagement levels; our reliance on advertising revenue; our dependency on mobile operating systems, networks, and standards that we do not control; risks associated with new product development and their introduction as well as other new business initiatives; our emphasis on user growth and engagement and the user experience over short-term financial results; competition; litigation; privacy and regulatory concerns; risks associated with acquisitions; security breaches; and our ability to manage growth and geographically-dispersed operations. These and other potential risks and uncertainties that could cause actual results to differ from the results predicted are more fully detailed under the caption "Risk Factors" in our Quarterly Report on Form 10-Q filed with the SEC on May 4, 2017, which is available on our Investor Relations website at investor.fb.com and on the SEC website at www.sec.gov. Additional information will also be set forth in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2017. In addition, please note that the date of this press release is July 26, 2017, and any forward-looking statements contained herein are based on assumptions that we believe to be reasonable as of this date. We undertake no obligation to update these statements as a result of new information or future events.

Non-GAAP Financial Measures

To supplement our condensed consolidated financial statements, which are prepared and presented in accordance with generally accepted accounting principles in the United States (GAAP), we use the following non-GAAP financial measures: revenue excluding foreign exchange effect, advertising revenue excluding foreign exchange effect and free cash flow. The presentation of these financial measures is not intended to be considered in isolation or as a substitute for, or superior to, financial information prepared and presented in accordance with GAAP. Investors are cautioned that there are material limitations associated with the use of non-GAAP financial measures as an analytical tool. In addition, these measures may be different from non-GAAP financial measures used by other companies, limiting their usefulness for comparison purposes. We compensate for these limitations by providing specific information regarding the GAAP amounts excluded from these non-GAAP financial measures.

We believe these non-GAAP financial measures provide investors with useful supplemental information about the financial performance of our business, enable comparison of financial results between periods where certain items may vary independent of business performance, and allow for greater transparency with respect to key metrics used by management in operating our business.

We exclude the following items from our non-GAAP financial measures:

Foreign exchange effect on revenue. We translated revenue for the three and six months ended June 30, 2017 using the prior year’s monthly exchange rates for our settlement currencies other than the U.S. dollar, which we believe is a useful metric that facilitates comparison to our historical performance.

Purchases of property and equipment. We subtract purchases of property and equipment in our calculation of free cash flow because we believe that this methodology can provide useful supplemental information to help investors better understand underlying trends in our business.

For more information on our non-GAAP financial measures and a reconciliation of GAAP to non-GAAP measures, please see the "Reconciliation of GAAP to Non-GAAP Results" table in this press release.

FACEBOOK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In millions, except for per share amounts)
(Unaudited)
Three Months Ended
Six Months Ended
June 30,
June 30,
2017
2016(1)
2017
2016(1)
Revenue
$
9,321
$
6,436
$
17,353
$
11,818
Costs and expenses:
Cost of revenue
1,237
917
2,395
1,755
Research and development
1,919
1,471
3,753
2,814
Marketing and sales
1,124
901
2,181
1,728
General and administrative
640
413
1,295
778
Total costs and expenses
4,920
3,702
9,624
7,075
Income from operations
4,401
2,734
7,729
4,743
Interest and other income, net
87
20
168
78
Income before provision for income taxes
4,488
2,754
7,897
4,821
Provision for income taxes
594
471
938
800
Net income
$
3,894
$
2,283
$
6,959
$
4,021
Less: Net income attributable to participating securities
4
7
10
13
Net income attributable to Class A and Class B common stockholders
$
3,890
$
2,276
$
6,949
$
4,008
Earnings per share attributable to Class A and Class B common stockholders:
Basic
$
1.34
$
0.80
$
2.40
$
1.41
Diluted
$
1.32
$
0.78
$
2.36
$
1.38
Weighted average shares used to compute earnings per share attributable to Class A and Class B common stockholders:
Basic
2,900
2,856
2,895
2,850
Diluted
2,951
2,921
2,950
2,912
Share-based compensation expense included in costs and expenses:
Cost of revenue
$
47
$
29
$
81
$
51
Research and development
787
631
1,457
1,217
Marketing and sales
120
95
216
177
General and administrative
78
62
145
118
Total share-based compensation expense
$
1,032
$
817
$
1,899
$
1,563
(1) We elected to early adopt ASU 2016-09 in the fourth quarter of 2016. Our condensed consolidated statements of income for the three and six months ended June 30, 2016 had been adjusted to reflect the impact of ASU 2016-09 adoption. See Note 1 in the notes to our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2016 for detailed adoption information.
FACEBOOK, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions)
(Unaudited)
June 30, 2017 December 31, 2016
Assets
Current assets:
Cash and cash equivalents
$
6,252
$
8,903
Marketable securities
29,200
20,546
Accounts receivable, net of allowances for doubtful accounts of $90 and $94 as of June 30, 2017 and December 31, 2016, respectively 3,897
3,993
Prepaid expenses and other current assets
1,455
959
Total current assets
40,804
34,401
Property and equipment, net
10,628
8,591
Intangible assets, net
2,186
2,535
Goodwill
18,129
18,122
Other assets
2,096
1,312
Total assets
$
73,843
$
64,961
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable
$
323
$
302
Partners payable
278
280
Accrued expenses and other current liabilities
2,626
2,203
Deferred revenue and deposits
88
90
Total current liabilities
3,315
2,875
Other liabilities
4,047
2,892
Total liabilities
7,362
5,767
Stockholders’ equity:
Common stock and additional paid-in capital
39,291
38,227
Accumulated other comprehensive loss
(370)
(703)
Retained earnings
27,560
21,670
Total stockholders’ equity
66,481
59,194
Total liabilities and stockholders’ equity
$
73,843
$
64,961
FACEBOOK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Three Months Ended
Six Months Ended
June 30,
June 30,
2017
2016(1)
2017
2016(1)
Cash flows from operating activities
Net income
$
3,894
$
2,283
$
6,959
$
4,021
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
728
585
1,400
1,137
Share-based compensation
1,032
817
1,899
1,563
Deferred income taxes
26
(101)
(58)
(178)
Other
8
6
12
19
Changes in assets and liabilities:
Accounts receivable
(386)
(492)
223
(225)
Prepaid expenses and other current assets
(212)
(150)
(577)
(257)
Other assets
51
(11)
82
4
Accounts payable
(28)
(41)
(38)
(39)
Partners payable
(7)
17
(10)
14
Accrued expenses and other current liabilities
96
432
157
414
Deferred revenue and deposits
6
25
(4)
23
Other liabilities
152
295
373
646
Net cash provided by operating activities
5,360
3,665
10,418
7,142
Cash flows from investing activities
Purchases of property and equipment
(1,444)
(995)
(2,715)
(2,127)
Purchases of marketable securities
(7,145)
(6,509)
(14,137)
(9,635)
Sales of marketable securities
2,236
2,145
3,998
4,158
Maturities of marketable securities
899
366
1,498
903
Acquisitions of businesses, net of cash acquired, and purchases of intangible assets (8)
(19)
(8)
(20)
Change in restricted cash and deposits
22
41
33
74
Net cash used in investing activities
(5,440)
(4,971)
(11,331)
(6,647)
Cash flows from financing activities
Taxes paid related to net share settlement of equity awards
(724)
--
(1,495)
--
Principal payments on capital lease and other financing obligations
--
--
--
(312)
Repurchases of Class A common stock
(150)
--
(378)
--
Other financing activities, net
5
4
12
6
Net cash (used in) provided by financing activities
(869)
4
(1,861)
(306)
Effect of exchange rate changes on cash and cash equivalents
97
(46)
123
12
Net (decrease) increase in cash and cash equivalents
(852)
(1,348)
(2,651)
201
Cash and cash equivalents at beginning of period
7,104
6,456
8,903
4,907
Cash and cash equivalents at end of period
$
6,252
$
5,108
$
6,252
$
5,108
FACEBOOK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Three Months Ended
Six Months Ended
June 30,
June 30,
2017
2016(1)
2017
2016(1)
Supplemental cash flow data
Cash paid during the period for:
Interest
$
--
$
--
$
--
$
11
Income taxes, net
$
695
$
237
$
1,359
$
407
Non-cash investing and financing activities:
Net change in accounts payable, accrued expenses and other current liabilities, and other liabilities related to property and equipment additions $
183
$
37
$
157
$
89
Change in unsettled repurchases of Class A common stock
$
30
$
--
$
30
$
--
(1) We elected to early adopt ASU 2016-09 in the fourth quarter of 2016. Our condensed consolidated statements of cash flows for the three and six months ended June 30, 2016 had been adjusted to reflect the impact of ASU 2016-09 adoption. See Note 1 in the notes to our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2016 for detailed adoption information.
Reconciliation of GAAP to Non-GAAP Results
(In millions, except percentages)
(Unaudited)
Three Months Ended
Six Months Ended
June 30,
June 30,
2017
2016
2017
2016
GAAP revenue
$
9,321
$
6,436
$
17,353
$
11,818
Foreign exchange effect on 2017 revenue using 2016 rates
141
164
Revenue excluding foreign exchange effect
$
9,462
$
17,517
GAAP revenue year-over-year change %
45
%
47
%
Revenue excluding foreign exchange effect year-over-year change %
47
%
48
%
GAAP advertising revenue
$
9,164
$
6,239
$
17,021
$
11,440
Foreign exchange effect on 2017 advertising revenue using 2016 rates
141
163
Advertising revenue excluding foreign exchange effect
$
9,305
$
17,184
GAAP advertising revenue year-over-year change %
47
%
49
%
Advertising revenue excluding foreign exchange effect year-over-year change % 49
%
50
%
Net cash provided by operating activities(1)
$
5,360
$
3,665
$
10,418
$
7,142
Purchases of property and equipment
(1,444)
(995)
(2,715)
(2,127)
Free cash flow(1)
$
3,916
$
2,670
$
7,703
$
5,015
(1) We elected to early adopt ASU 2016-09 in the fourth quarter of 2016. Net cash provided by operating activities and free cash flow for the three and six months ended June 30, 2016 had been adjusted to reflect the impact of ASU 2016-09 adoption. See Note 1 in the notes to our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2016 for detailed adoption information.

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