Facebook Reports First Quarter 2020 Results
MENLO PARK, Calif., April 29, 2020 /PRNewswire/ -- Facebook, Inc. (Nasdaq: FB) today reported financial results for the quarter ended March 31, 2020.
"Our work has always been about helping you stay connected with the people you care about," said Mark Zuckerberg, Facebook founder and CEO. "With people relying on our services more than ever, we're focused on keeping people safe, informed and connected."
Response to COVID-19 Pandemic
In response to the COVID-19 pandemic, Facebook is supporting the global public health community's work to ensure everyone has access to accurate information. We are also working to address the long-term impacts of the crisis by supporting industries in need and making it easier for people to find and offer help in their communities. We have committed over $300 million to date in investments to help our broader community during the crisis, including creating a $100 million grant program to help small businesses and investing $100 million to support the news industry.
We launched a COVID-19 information center on Facebook to provide real-time information, health and well-being tips, and the ability to offer and ask for help. We are also matching $20 million in donations to support COVID-19 relief efforts, providing health organizations with free ads and tools to track the pandemic, offering Workplace to government and emergency organizations for free, and donating $25 million to support healthcare workers on the front lines.
To help people stay connected as a record number of people use our services, we are making our apps more efficient and adding capacity, while also prioritizing enhancements in key services, such as real-time video experiences and live game-streaming.
First Quarter 2020 Financial Highlights
Three Months Ended March 31, Year-over-Year %
Change
In millions, except percentages and per share amounts 2020 2019 (1)
Revenue:
Advertising $
17,440 $
14,912 17
%
Other 297 165 80
%
Total revenue 17,737 15,077 18
%
Total costs and expenses 11,844 11,760 1
%
Income from operations $
5,893 $
3,317 78
%
Operating margin 33 22
% %
Provision for income taxes $
959 $
1,053 (9)
%
Effective tax rate 16 30
% %
Net income $
4,902 $
2,429 102
%
Diluted earnings per share (EPS) $
1.71 $
0.85 101
%
_________________________
(1)
Includes a $3.0 billion legal
expense accrued in the first quarter of 2019 related to
our settlement with the U.S. Federal Trade Commission
(FTC).
First Quarter 2020 Operational and Other Financial Highlights
-- Facebook daily active users (DAUs) - DAUs were 1.73 billion on average
for March 2020, an increase of 11% year-over-year.
-- Facebook monthly active users (MAUs) - MAUs were 2.60 billion as of
March 31, 2020, an increase of 10% year-over-year.
-- Family daily active people (DAP) - DAP was 2.36 billion on average for
March 2020, an increase of 12% year-over-year.
-- Family monthly active people (MAP) - MAP was 2.99 billion as of March
31, 2020, an increase of 11% year-over-year.
-- Capital expenditures - Capital expenditures, including principal
payments on finance leases, were $3.66 billion for the first quarter of
2020.
-- Cash and cash equivalents and marketable securities - Cash and cash
equivalents and marketable securities were $60.29 billion as of March
31, 2020. Following the end of the quarter, we entered into an agreement
to invest in Jio Platforms Limited, a subsidiary of Reliance Industries
Limited, for approximately $5.7 billion, and we paid the $5.0 billion
settlement amount due under our modified consent order with the FTC,
which took effect in April 2020.
-- Headcount - Headcount was 48,268 as of March 31, 2020, an increase of
28% 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 - Our community metrics, including Facebook DAUs and MAUs and
Family MAP and DAP, 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. We expect that we will lose at
least some of this increased engagement when various shelter-in-place
restrictions are relaxed in the future.
-- Revenue - We experienced a significant reduction in the demand for
advertising, as well as a related decline in the pricing of our ads,
over the last three weeks of the first quarter of 2020. Due to the
increasing uncertainty in our business outlook, we are not providing
specific revenue guidance for the second quarter or full-year 2020, but
rather a snapshot on revenue performance in the second quarter thus far.
After the initial steep decrease in advertising revenue in March, we
have seen signs of stability reflected in the first three weeks of
April, where advertising revenue has been approximately flat compared to
the same period a year ago, down from the 17% year-over-year growth in
the first quarter of 2020. The April trends reflect weakness across all
of our user geographies as most of our major countries have had some
sort of shelter-in-place guidelines in effect.
-- Total expenses - We expect to realize operational expense savings in
certain areas such as travel, events, and marketing as well as from
slower headcount growth in our business functions. However, we plan to
continue to invest in product development and to recruit technical
talent. In addition, we have committed over $300 million to date in
investments to help our broader community during the crisis, which will
have an impact on our financial performance this year. As a result, we
expect total expenses in 2020 to be between $52-56 billion, down from
the prior range of $54-59 billion. While this reflects a moderate
reduction in the planned growth rate of total expenses, our overall
expense growth in the face of expected revenue weakness will have a
negative impact on 2020 operating margins.
-- Capital expenditures - Our significant investments in infrastructure
over the past four years have served us well during this period of high
user engagement. We plan to continue to grow our capex investments to
enhance and expand our global infrastructure footprint over the long
term. In 2020, we expect capital expenditures to be approximately $14-16
billion, down from the prior range of $17-19 billion. This reduction
reflects a significant decrease in our construction efforts globally
related to shelter-in-place orders. Given the strong engagement growth
and related demands on our infrastructure, this year's capex reduction
should be viewed as a deferral into 2021 rather than savings.
-- Tax rates - We expect our full-year 2020 tax rate will be in the
high-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 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 2865867.
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 Annual Report on Form 10-K filed with the SEC on January 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 March 31, 2020. In addition, please note that the date of this press release is April 29, 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 months ended March 31, 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 March 31,
2020 2019 (1)
Revenue $
17,737 $
15,077
Costs and expenses:
Cost of revenue 3,459 2,816
Research and development 4,015 2,860
Marketing and sales 2,787 2,020
General and administrative 1,583 4,064
Total costs and expenses 11,844 11,760
Income from operations 5,893 3,317
Interest and other income (expense), net (32) 165
Income before provision for income taxes 5,861 3,482
Provision for income taxes 959 1,053
Net income $
4,902 $
2,429
Earnings per share attributable to Class A and Class B common
stockholders:
Basic $
1.72 $
0.85
Diluted $
1.71 $
0.85
Weighted-average shares used to compute earnings per share attributable to
Class A and
Class B common stockholders:
Basic 2,851 2,856
Diluted 2,868 2,869
Share-based compensation expense included in costs and expenses:
Cost of revenue $
94 $
87
Research and development 999 723
Marketing and sales 149 113
General and administrative 93 87
Total share-based compensation expense $
1,335 $
1,010
_________________________
(1)
Includes a $3.0 billion legal
expense accrued in the first quarter of 2019 related to
our settlement with the FTC.
FACEBOOK, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions)
(Unaudited)
March 31, 2020 December 31, 2019
Assets
Current assets:
Cash and cash equivalents $
23,618 $
19,079
Marketable securities 36,671 35,776
Accounts receivable, net of allowances of $370 and $206 as of March
31, 2020 and
December 31, 2019, respectively 7,289 9,518
Prepaid expenses and other current assets 1,771 1,852
Total current assets 69,349 66,225
Property and equipment, net 37,127 35,323
Operating lease right-of-use assets, net 9,359 9,460
Intangible assets, net 838 894
Goodwill 18,811 18,715
Other assets 2,887 2,759
Total assets $
138,371 $
133,376
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $
829 $
1,363
Partners payable 712 886
Operating lease liabilities, current 835 800
Accrued expenses and other current liabilities 12,446 11,735
Deferred revenue and deposits 247 269
Total current liabilities 15,069 15,053
Operating lease liabilities, non-current 9,509 9,524
Other liabilities 8,489 7,745
Total liabilities 33,067 32,322
Commitments and contingencies
Stockholders' equity:
Common stock and additional paid-in capital 46,688 45,851
Accumulated other comprehensive loss (544) (489)
Retained earnings 59,160 55,692
Total stockholders' equity 105,304 101,054
Total liabilities and stockholders' equity $
138,371 $
133,376
FACEBOOK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Three Months Ended March 31,
2020 2019
Cash flows from operating activities
Net income $
4,902 $
2,429
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 1,597 1,355
Share-based compensation 1,335 1,010
Deferred income taxes 477 183
Other 6 6
Changes in assets and liabilities:
Accounts receivable 2,046 1,070
Prepaid expenses and other current assets (29) 84
Other assets (16) 41
Accounts payable (44) (96)
Partners payable (169) (1)
Accrued expenses and other current liabilities 980 3,154
Deferred revenue and deposits (16) (4)
Other liabilities (68) 77
Net cash provided by operating activities 11,001 9,308
Cash flows from investing activities
Purchases of property and equipment, net (3,558) (3,837)
Purchases of marketable securities (7,884) (6,603)
Sales of marketable securities 2,764 1,512
Maturities of marketable securities 4,644 2,210
Acquisitions of businesses, net of cash acquired, and purchases of intangible
assets (33) (50)
Other investing activities, net (42)
Net cash used in investing activities (4,109) (6,768)
Cash flows from financing activities
Taxes paid related to net share settlement of equity awards (690) (512)
Repurchases of Class A common stock (1,250) (613)
Principal payments on finance leases (100) (125)
Net change in overdraft in cash pooling entities (80) (177)
Other financing activities, net 98 4
Net cash used in financing activities (2,022) (1,423)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash (222) (44)
Net increase in cash, cash equivalents, and restricted cash 4,648 1,073
Cash, cash equivalents, and restricted cash at beginning of the period 19,279 10,124
Cash, cash equivalents, and restricted cash at end of the period $
23,927 $
11,197
Reconciliation of cash, cash equivalents, and restricted cash to the
condensed
consolidated balance sheets
Cash and cash equivalents $
23,618 $
11,076
Restricted cash, included in prepaid expenses and other current assets 137 10
Restricted cash, included in other assets 172 111
Total cash, cash equivalents, and restricted cash $
23,927 $
11,197
FACEBOOK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Three Months Ended March 31,
2020 2019
---
Supplemental cash flow data
Cash paid for income taxes, net $
209 $
682
Non-cash investing activities:
Acquisition of businesses in accrued expenses and other liabilities $
148
$
Property and equipment in accounts payable and accrued liabilities $
1,603 $
1,617
Reconciliation of GAAP to Non-GAAP Results
(In millions, except percentages)
(Unaudited)
Three Months Ended March 31,
2020 2019
GAAP revenue $
17,737 $
15,077
Foreign exchange effect on 2020 revenue using 2019 rates 275
Revenue excluding foreign exchange effect $
18,012
GAAP revenue year-over-year change % 18
%
Revenue excluding foreign exchange effect year-over-year change % 19
%
GAAP advertising revenue $
17,440 $
14,912
Foreign exchange effect on 2020 advertising revenue using 2019 rates 274
Advertising revenue excluding foreign exchange effect $
17,714
GAAP advertising revenue year-over-year change % 17
%
Advertising revenue excluding foreign exchange effect year-over-year change % 19
%
Net cash provided by operating activities $
11,001 $
9,308
Purchases of property and equipment, net (3,558) (3,837)
Principal payments on finance leases (100) (125)
Free cash flow $
7,343 $
5,346
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SOURCE Facebook
