Facebook Reports Third Quarter 2019 Results
 
MENLO PARK, Calif. – October 30, 2019 – Facebook, Inc. (Nasdaq: FB) today reported financial results for the quarter ended
September 30, 2019
.

"We had a good quarter and our community and business continue to grow," said Mark Zuckerberg, Facebook founder and CEO. "We are focused on making progress on major social issues and building new experiences that improve people's lives around the world."


Third Quarter 2019 Financial Highlights
 
Three Months Ended September 30,
 
Year-over-Year % Change
In millions, except percentages and per share amounts
2019
 
2018
 
Revenue:
 
 
 
 
 
   Advertising
$
17,383

 
$
13,539

 
28
%
   Payments and other fees
269

 
188

 
43
%
Total revenue
17,652

 
13,727

 
29
%
Total costs and expenses
10,467

 
7,946

 
32
%
Income from operations
$
7,185

 
$
5,781

 
24
%
Operating margin
41
%
 
42
%
 

Provision for income taxes
$
1,238

 
 
 
 
Effective tax rate
17
%
 
 
 


Net income
$
6,091

 
$
5,137

 
19
%
Diluted earnings per share (EPS)
$
2.12

 
$
1.76

 
20
%


Third Quarter 2019 Operational and Other Financial Highlights

Daily active users (DAUs) – DAUs were 1.62 billion on average for September 2019, an increase of 9% year-over-year.
Monthly active users (MAUs) – MAUs were 2.45 billion as of September 30, 2019, an increase of 8% year-over-year.
Mobile advertising revenue – Mobile advertising revenue represented approximately 94% of advertising revenue for the third quarter of 2019, up from approximately 92% of advertising revenue in the third quarter of 2018.
Capital expenditures – Capital expenditures, including principal payments on finance leases, were $3.68 billion for the third quarter of 2019.
Cash and cash equivalents and marketable securities – Cash and cash equivalents and marketable securities were $52.27 billion as of September 30, 2019.
Headcount – Headcount was 43,030 as of September 30, 2019, an increase of 28% year-over-year.
In addition, we estimate that around 2.2 billion people now use Facebook, Instagram, WhatsApp, or Messenger (our "Family" of services) every day on average, and around 2.8 billion people use at least one of our Family of services each month.



1



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 9647087.

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
investor@fb.com / investor.fb.com

Press:
Bertie Thomson
press@fb.com / newsroom.fb.com

2



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 July 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 September 30, 2019. In addition, please note that the date of this press release is October 30, 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 nine months ended September 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.

3



FACEBOOK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In millions, except for per share amounts)
(Unaudited)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Revenue
$
17,652

 
$
13,727

 
$
49,615

 
$
38,924

Costs and expenses:
 
 
 
 
 
 
 
Cost of revenue
3,155

 
2,418

 
9,279

 
6,559

Research and development
3,548

 
2,657

 
9,722

 
7,418

Marketing and sales
2,416

 
1,928

 
6,850

 
5,379

General and administrative
1,348

 
943

 
8,636

 
2,475

Total costs and expenses
10,467

 
7,946

 
34,487

 
21,831

Income from operations
7,185

 
5,781

 
15,128

 
17,093

Interest and other income, net
144

 
131

 
515

 
297

Income before provision for income taxes
7,329

 
5,912

 
15,643

 
17,390

Provision for income taxes
1,238

 
775

 
4,507

 
2,160

Net income
$
6,091

 
$
5,137

 
$
11,136

 
$
15,230

Less: Net income attributable to participating securities

 

 

 
(1
)
Net income attributable to Class A and Class B common stockholders
$
6,091

 
$
5,137

 
$
11,136

 
$
15,229

Earnings per share attributable to Class A and Class B common stockholders:
 
 
 
 
 
 
 
Basic
$
2.13

 
$
1.78

 
$
3.90

 
$
5.26

Diluted
$
2.12

 
$
1.76

 
$
3.87

 
$
5.20

Weighted-average shares used to compute earnings per share attributable to Class A and Class B common stockholders:
 
 
 
 
 
 
 
Basic
2,854

 
2,885

 
2,855

 
2,895

Diluted
2,874

 
2,913

 
2,875

 
2,931

Share-based compensation expense included in costs and expenses:
 
 
 
 
 
 
 
Cost of revenue
$
91

 
$
72

 
$
287

 
$
202

Research and development
907

 
748

 
2,557

 
2,347

Marketing and sales
148

 
133

 
421

 
380

General and administrative
103

 
87

 
297

 
251

Total share-based compensation expense
$
1,249

 
$
1,040

 
$
3,562

 
$
3,180





4



FACEBOOK, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions)
(Unaudited)
 
 
 
September 30, 2019
 
December 31, 2018
Assets
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
$
15,979

 
$
10,019

 
Marketable securities
36,290

 
31,095

 
Accounts receivable, net of allowances of $301 and $229 as of September 30, 2019 and December 31, 2018, respectively
7,673

 
7,587

 
Prepaid expenses and other current assets
2,137

 
1,779

 
 
Total current assets
62,079

 
50,480

Property and equipment, net
32,284

 
24,683

Operating lease right-of-use assets, net
8,403

 

Intangible assets, net
853

 
1,294

Goodwill
18,338

 
18,301

Other assets
2,461

 
2,576

Total assets
$
124,418

 
$
97,334

 
 
 
 
 
 
Liabilities and stockholders' equity
 
 
 
Current liabilities:
 
 
 
 
Accounts payable
$
860

 
$
820

 
Partners payable
590

 
541

 
Operating lease liabilities, current
776

 

 
Accrued expenses and other current liabilities
10,877

 
5,509

 
Deferred revenue and deposits
225

 
147

 
 
Total current liabilities
13,328

 
7,017

Operating lease liabilities, non-current
8,356

 

Other liabilities
8,735

 
6,190

 
 
Total liabilities
30,419

 
13,207

Commitments and contingencies
 
 
 
Stockholders' equity:
 
 
 
 
Common stock and additional paid-in capital
45,059

 
42,906

 
Accumulated other comprehensive loss
(849
)
 
(760
)
 
Retained earnings
49,789

 
41,981

 
 
Total stockholders' equity
93,999

 
84,127

Total liabilities and stockholders' equity
$
124,418

 
$
97,334




5



FACEBOOK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Cash flows from operating activities
 
 
 
 
 
 
 
Net income
$
6,091

 
$
5,137

 
$
11,136

 
$
15,230

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
 
 
 
   Depreciation and amortization
1,416

 
1,107

 
4,273

 
3,090

   Share-based compensation
1,249

 
1,040

 
3,562

 
3,180

   Deferred income taxes
175

 
30

 
358

 
83

   Other
30

 
3

 
44

 
19

Changes in assets and liabilities:
 
 
 
 
 
 
 
   Accounts receivable
(328
)
 
(489
)
 
(264
)
 
(328
)
   Prepaid expenses and other current assets
(360
)
 
8

 
(527
)
 
(889
)
   Other assets

 
(40
)
 
66

 
(99
)
   Operating lease right-of-use assets
(1,179
)
 

 
(2,890
)
 

   Accounts payable
89

 
37

 
2

 
88

   Partners payable
39

 
63

 
59

 
116

   Accrued expenses and other current liabilities
457

 
350

 
6,439

 
1,044

   Deferred revenue and deposits
31

 
24

 
82

 
20

   Operating lease liabilities, non-current
1,276

 

 
2,914

 

   Other liabilities
321

 
226

 
1,977

 
102

Net cash provided by operating activities
9,307

 
7,496

 
27,231

 
21,656

Cash flows from investing activities
 
 
 
 
 
 
 
Purchases of property and equipment, net
(3,532
)
 
(3,343
)
 
(11,002
)
 
(9,614
)
Purchases of marketable securities
(7,397
)
 
(4,375
)
 
(19,152
)
 
(12,658
)
Sales of marketable securities
2,946

 
2,492

 
7,402

 
11,104

Maturities of marketable securities
2,943

 
1,053

 
7,048

 
3,391

Other investing activities, net
(10
)
 
(75
)
 
(124
)
 
(141
)
Net cash used in investing activities
(5,050
)
 
(4,248
)
 
(15,828
)
 
(7,918
)
Cash flows from financing activities
 
 
 
 
 
 
 
Taxes paid related to net share settlement of equity awards
(591
)
 
(905
)
 
(1,710
)
 
(2,663
)
Repurchases of Class A common stock
(1,148
)
 
(4,256
)
 
(2,906
)
 
(9,379
)
Principal payments on finance leases
(144
)
 

 
(411
)
 

Net change in overdraft in cash pooling entities
(141
)
 

 
(260
)
 

Other financing activities, net
5

 
3

 
14

 
11

Net cash used in financing activities
(2,019
)
 
(5,158
)
 
(5,273
)
 
(12,031
)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash
(156
)
 
(14
)
 
(174
)
 
(167
)
Net increase (decrease) in cash, cash equivalents, and restricted cash
2,082

 
(1,924
)
 
5,956

 
1,540

Cash, cash equivalents, and restricted cash at beginning of the period
13,998

 
11,668

 
10,124

 
8,204

Cash, cash equivalents, and restricted cash at end of the period
$
16,080

 
$
9,744

 
$
16,080

 
$
9,744

 
 
 
 
 
 
 
 
Reconciliation of cash, cash equivalents, and restricted cash to the condensed consolidated balance sheets
 
 
 
 
 
 
 
Cash and cash equivalents
$
15,979

 
$
9,637

 
$
15,979

 
$
9,637

Restricted cash, included in prepaid expenses and other current assets
7

 
7

 
7

 
7

Restricted cash, included in other assets
94

 
100

 
94

 
100

Total cash, cash equivalents, and restricted cash
$
16,080

 
$
9,744

 
$
16,080

 
$
9,744


6




FACEBOOK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Supplemental cash flow data
 
 
 
 
 
 
 
Cash paid during the period for:
 
 
 
 
 
 
 
Interest
$
4

 
$

 
$
9

 
$

Income taxes, net
$
832

 
$
447

 
$
2,528

 
$
2,728

Non-cash investing activities:
 
 
 
 
 
 
 
Net change in prepaids and liabilities related to property and equipment
$
144

 
$
382

 
$
(59
)
 
$
613

Property and equipment in accounts payable and accrued liabilities
$
1,850

 
$
1,504

 
$
1,850

 
$
1,504






7



Reconciliation of GAAP to Non-GAAP Results
(In millions, except percentages)
(Unaudited)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
GAAP revenue
$
17,652

 
$
13,727

 
$
49,615

 
$
38,924

Foreign exchange effect on 2019 revenue using 2018 rates
297

 
 
 
1,374

 
 
Revenue excluding foreign exchange effect
$
17,949

 
 
 
$
50,989

 
 
GAAP revenue year-over-year change %
29
%
 
 
 
27
%
 
 
Revenue excluding foreign exchange effect year-over-year change %
31
%
 
 
 
31
%
 
 
GAAP advertising revenue
$
17,383

 
$
13,539

 
$
48,919

 
$
38,373

Foreign exchange effect on 2019 advertising revenue using 2018 rates
295

 
 
 
1,370

 
 
Advertising revenue excluding foreign exchange effect
$
17,678

 
 
 
$
50,289

 
 
GAAP advertising revenue year-over-year change %
28
%
 
 
 
27
%
 
 
Advertising revenue excluding foreign exchange effect year-over-year change %
31
%
 
 
 
31
%
 
 
 
 
 
 
 
 
 
 
Net cash provided by operating activities
$
9,307

 
$
7,496

 
$
27,231

 
$
21,656

Purchases of property and equipment, net
(3,532
)
 
(3,343
)
 
(11,002
)
 
(9,614
)
Principal payments on finance leases
(144
)
 

 
(411
)
 

Free cash flow
$
5,631

 
$
4,153

 
$
15,818

 
$
12,042







8

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