Facebook Q1 2017 Results
investor.fb.com
Daily Active Users (DAUs)
In Millions
1,284
Rest of World
Asia-Pacific
Europe
1,179
1,090
US & Canada
936
280
968
292
1,007
308
1,227
1,128
1,038
319
340
355
377
388
408
368
396
427
285
309
329
270
300
346
225
228
233
240
249
252
256
262
267
161
164
167
169
173
175
178
180
182
Q1'15
Q2'15
Q3'15
Q4'15
Q1'16
Q2'16
Q3'16
Q4'16
Q1'17
Q1'15
Q2'15
Q3'15
Q4'15
Q1'16
Q2'16
Q3'16
Q4'16
Q1'17
65%
65%
65%
65%
66%
66%
66%
66%
66%
DAUs / MAUs
Please see Facebook's most recent quarterly and annual reports filed with the SEC for definitions of user activity used to determine the number of our
DAUs and MAUs. The numbers for DAUs and MAUs do not include Instagram, WhatsApp, or Oculus users unless they would otherwise qualify as such
users, respectively, based on their other activities on Facebook.
2
Monthly Active Users (MAUs)
In Millions
1,936
Rest of World
Asia-Pacific
Europe
1,860
1,788
1,654
US & Canada
1,441
453
1,490
471
1,545
492
1,712
1,591
509
533
556
587
606
632
629
673
716
471
522
566
496
540
592
307
311
315
323
333
338
342
349
354
210
213
217
219
222
226
229
231
234
Q1'15
Q2'15
Q3'15
Q4'15
Q1'16
Q2'16
Q3'16
Q4'16
Q1'17
Please see Facebook's most recent quarterly and annual reports filed with the SEC for definitions of user activity used to determine the number of our
DAUs and MAUs. The numbers for DAUs and MAUs do not include Instagram, WhatsApp, or Oculus users unless they would otherwise qualify as such
users, respectively, based on their other activities on Facebook.
3
Revenue
In Millions
$8,809
Payments and Other Fees
Advertising
$180
$8,032
$175
$7,011
$6,436
$197
$5,841
$204
$195
$5,382
$181
$4,501
$4,042
$3,543
$8,629
$202
$7,857
$215
$226
$5,637
$3,317
Q1'15
$3,827
Q2'15
$6,239
$6,816
$5,201
$4,299
Q3'15
Q4'15
Q1'16
4
Q2'16
Q3'16
Q4'16
Q1'17
Revenue by User Geography
In Millions
$8,809
Rest of World
Asia-Pacific
Europe
$839
$784
US & Canada
$7,011
$6,436
$550
$3,543
$354
$542
$908
$4,501
$451
$848
$709
$1,456
$1,349
$692
$1,375
$614
$5,841
$4,042
$415
$8,032
$1,154
$5,382
$473
$1,025
$2,065
$1,905
$862
$1,605
$1,585
$1,307
$623
$1,085
$1,037
$4,556
$1,739
$1,967
$2,256
Q1'15
Q2'15
Q3'15
$2,987
$2,740
Q4'15
Q1'16
$3,212
Q2'16
$3,560
Q3'16
Revenue by user geography is geographically apportioned based on our estimation of the geographic location of our users when they perform a revenuegenerating activity. This allocation differs from our revenue by geography disclosure in our condensed consolidated financial statements where revenue is
geographically apportioned based on the location of the marketer or developer. We discovered an error in the algorithm we used to attribute our revenue by
user geography in late 2015. While this issue did not affect our overall worldwide revenue, it did affect our attribution of revenue to different geographic
regions. The fourth quarter of 2015 revenue by user geography for all regions was adjusted to reflect this reclassification.
5
Q4'16
$3,968
Q1'17
Advertising Revenue by User Geography
In Millions
$8,629
Rest of World
Asia-Pacific
Europe
$832
$776
US & Canada
$6,816
$6,239
$544
$3,317
$346
$524
$4,299
$444
$833
$694
$1,413
$1,337
$685
$1,361
$608
$5,637
$3,827
$409
$7,857
$1,137
$5,201
$467
$2,025
$1,009
$1,869
$849
$1,563
$1,545
$1,270
$605
$1,041
$987
$4,435
$855
$1,592
$1,826
$2,120
Q1'15
Q2'15
Q3'15
$2,847
$2,615
Q4'15
Q1'16
$3,077
Q2'16
$3,431
Q3'16
Revenue by user geography is geographically apportioned based on our estimation of the geographic location of our users when they perform a revenuegenerating activity. This allocation differs from our revenue by geography disclosure in our condensed consolidated financial statements where revenue is
geographically apportioned based on the location of the marketer or developer. We discovered an error in the algorithm we used to attribute our revenue by
user geography in late 2015. While this issue did not affect our overall worldwide revenue, it did affect our attribution of revenue to different geographic
regions. The fourth quarter of 2015 revenue by user geography for all regions was adjusted to reflect this reclassification.
6
Q4'16
$3,851
Q1'17
Payments & Other Fees Revenue by User Geography
In Millions
Rest of World
Asia-Pacific
Europe
US & Canada
$226
$8
$18
$215
$6
$202
$204
$18
$7
$6
$15
$53
$50
$44
$15
$197
$181
$6
$43
Q1'15
$141
Q2'15
$136
$140
Q3'15
Q4'15
$16
$13
$37
$147
$6
$195
$7
$17
$180
$7
$12
$40
$42
$175
$8
$14
$40
$36
$125
$135
$129
$121
$117
Q1'16
Q2'16
Q3'16
Q4'16
Q1'17
Revenue by user geography is geographically apportioned based on our estimation of the geographic location of our users when they perform a revenuegenerating activity. This allocation differs from our revenue by geography disclosure in our condensed consolidated financial statements where revenue is
geographically apportioned based on the location of the marketer or developer. We discovered an error in the algorithm we used to attribute our revenue by
user geography in late 2015. While this issue did not affect our overall worldwide revenue, it did affect our attribution of revenue to different geographic
regions. The fourth quarter of 2015 revenue by user geography was adjusted to reflect this reclassification.
7
Average Revenue per User (ARPU)
Payments and Other Fees
Advertising
US & Canada
Worldwide
$19.81
$14.34
$4.83
$3.32
$3.82
$4.01
$0.12
$0.11
$0.11
Europe
$5.98
$4.72
$4.72
$0.12
$0.12
Q1'16
Q2'16
Q3'16
$1.77
$5.86
$4.60
Q3'16
$11.86
Q4'16
Q1'17
Q1'16
$19.28
$13.74
$15.08
Q2'16
Q3'16
Q4'16
$16.56
Q1'17
$5.42
$1.56
Q2'16
$0.50
Rest of World
$0.10
$4.61
$4.14
$17.07
$0.57
$0.57
$4.73
Asia-Pacific
$0.11
Q1'16
$3.71
$0.09
$0.60
$0.53
$0.12
$3.98
$3.87
$3.21
$3.89
$0.10
$4.23
$12.43
$15.65
Q4'16
$5.32
Q1'17
$0.03
$1.89
$0.03
$2.07
$0.02
$1.98
$0.02
$1.54
$1.74
Q1'16
Q2'16
$1.86
$2.05
$1.41
$0.02
$1.13
$0.91
$1.96
Q3'16
8
Q4'16
Q1'17
Q1'16
$0.01
$0.01
$0.01
$0.01
$1.12
$1.20
$1.39
$1.25
Q2'16
Q3'16
Q4'16
Q1'17
$0.01
$0.90
$1.27
$1.21
Expenses as a % of Revenue
Cost of Revenue
Research & Development
25%
16%
14%
14%
12%
14%
Q1'16
Q2'16
Q3'16
Q4'16
Q1'17
Q1'16
Marketing & Sales
15%
Q1'16
14%
Q2'16
23%
22%
Q2'16
Q3'16
18%
23%
Q4'16
Q1'17
General & Administrative
13%
Q3'16
13%
Q4'16
13%
Q1'17
7%
6%
6%
6%
8%
Q1'16
Q2'16
Q3'16
Q4'16
Q1'17
In the fourth quarter of 2016, we elected to early adopt the Financial Accounting Standards Board (FASB)'s Accounting Standards Update No. 2016-09,
Compensation Stock Compensation (Topic 718): Improvement to Employee Share-based Payment Accounting (ASU 2016-09). As such, quarterly
expenses for and following 2016 include the impact of ASU 2016-09 adoption. See ASU 2016-09 Adoption in the Appendix for additional information.
9
Income from Operations
In Millions
$4,566
$3,327
$3,117
$2,734
$2,560
$2,010
$1,459
$1,273
$933
Q1'15
Q2'15
Q3'15
Q4'15
Q1'16
Q2'16
Q3'16
In the fourth quarter of 2016, we elected to early adopt ASU 2016-09. As such, quarterly income from operations for and following 2016 includes the
impact of ASU 2016-09 adoption. See ASU 2016-09 Adoption in the Appendix for additional information.
10
Q4'16
Q1'17
Operating Margin
52%
44%
42%
44%
41%
37%
31%
32%
Q2'15
Q3'15
26%
Q1'15
Q4'15
Q1'16
Q2'16
Q3'16
Q4'16
In the fourth quarter of 2016, we elected to early adopt ASU 2016-09. As such, quarterly operating margin for and following 2016 includes the impact of ASU
2016-09 adoption. See ASU 2016-09 Adoption in the Appendix for additional information.
11
Q1'17
Effective Tax Rate
($ in millions)
Income before provision for income taxes
Provision for income taxes
Effective Tax Rate
Q1'15
$
932
420
45%
Q2'15
$
1,273
Q3'15
$
554
1,432
536
44%
37%
Q4'15
$
2,557
995
39%
Q1'16
$
2,066
328
16%
Q2'16
$
2,754
471
17%
In the fourth quarter of 2016, we elected to early adopt ASU 2016-09. As such, quarterly effective tax rate for and following 2016 includes the impact of
ASU 2016-09 adoption. See ASU 2016-09 Adoption in the Appendix for additional information.
12
Q3'16
$
3,164
537
17%
Q4'16
$
4,533
965
21%
Q1'17
$
3,408
344
10%
Net Income
In Millions
$3,568
$3,064
$2,627
$2,283
$1,738
$1,562
$896
$719
$512
Q1'15
Q2'15
Q3'15
Q4'15
Q1'16
Q2'16
Q3'16
In the fourth quarter of 2016, we elected to early adopt ASU 2016-09. As such, quarterly net income for and following 2016 includes the impact of ASU
2016-09 adoption. See ASU 2016-09 Adoption in the Appendix for additional information.
13
Q4'16
Q1'17
Diluted Earnings Per Share
$1.21
$1.04
$0.90
$0.78
$0.60
$0.54
$0.31
$0.25
$0.18
Q1'15
Q2'15
Q3'15
Q4'15
Q1'16
Q2'16
Q3'16
In the fourth quarter of 2016, we elected to early adopt ASU 2016-09. As such, quarterly diluted earnings per share for and following 2016 include the
impact of ASU 2016-09 adoption. See ASU 2016-09 Adoption in the Appendix for additional information.
14
Q4'16
Q1'17
Capital Investments
In Millions
$4,491
$2,523
$1,271
$1,132
Q1'16
Q1'17
2015
Quarterly
2016
Annual
Capital investments for periods presented were related to purchases of property and equipment.
15
Appendix
ASU 2016-09 Adoption
In the fourth quarter of 2016, we elected to early adopt ASU 2016-09 which addresses, among other items, the accounting for income taxes and forfeitures, and cash flow presentation of sharebased compensation. We are required to reflect any adjustments as of January 1, 2016, the beginning of the annual period that includes the interim period of adoption. Upon adoption, excess
tax benefits generated when stock awards vest or settle are no longer recognized in equity but are instead recognized as a reduction to provision for income taxes. We also elected to account
for forfeitures as they occur, rather than estimate expected forfeitures. Cash flows related to excess tax benefits are required to be presented as an operating activity rather than a financing
activity. We adopted the aspects of the standard affecting the cash flow presentation retrospectively, and accordingly, cash flows for the prior periods have been reclassified to conform to the
current year presentation.
The adoption of ASU 2016-09 resulted in, among other items, (i) net cumulative-effect adjustment of $1.67 billion increase to retained earnings as of January 1, 2016, (ii) reduction to our provision
for income taxes of $214 million and $934 million, mostly related to the recognition of excess tax benefits for the fourth quarter and full year 2016, respectively, and (iii) adjustments to our
unaudited selected quarterly data previously reported for fiscal year 2016 as follows:
March 31, 2016
($ in millions)
As reported
June 30, 2016
As adjusted
As reported
September 30, 2016
As adjusted
As reported
As adjusted
Consolidated Balance Sheets Data:
Other assets
$
700
$
886
$
703
$
935
$
660
$
990
Total assets
$
52,075
$
52,262
$
55,739
$
55,968
$
59,674
$
60,007
Other liabilities
$
3,116
$
1,867
$
3,145
$
2,170
$
2,964
$
2,290
Total liabilities
$
4,925
$
3,674
$
5,356
$
4,373
$
5,559
$
4,886
Common stock and additional paid-in capital
$
36,129
$
35,673
$
37,405
$
36,494
$
38,756
$
37,391
Retained earnings
$
11,297
$
13,191
$
13,352
$
15,475
$
15,731
$
18,102
Three months ended
March 31, 2016
($ in millions)
As reported
Three months ended
June 30, 2016
As adjusted
As reported
Three months ended
September 30, 2016
As adjusted
As reported
As adjusted
Consolidated Statements of Income Data:
Share-based compensation included in costs and expenses
$
747
$
746
$
805
$
817
$
819
$
824
Total costs and expenses
$
3,373
$
3,372
$
3,690
$
3,702
$
3,889
$
3,894
Provision for income taxes
$
555
$
328
$
711
$
471
$
790
$
537
Net income
$
1,510
$
1,738
$
2,055
$
2,283
$
2,379
$
2,627
Effective tax rate
27%
16%
26%
17%
25%
17%
Basic EPS
$
0.53
$
0.61
$
0.72
$
0.80
$
0.83
$
Diluted EPS
$
0.52
$
0.60
$
0.71
$
0.78
$
0.82
$
Diluted weighted average shares outstanding
2,888
2,905
17
2,904
2,921
2,915
0.91
0.90
2,931
ASU 2016-09 Adoption (continued)
Three months ended
March 31, 2016
($ in millions)
As reported
Six months ended
June 30, 2016
As adjusted
As reported
Nine months ended
September 30, 2016
As adjusted
As reported
As adjusted
Consolidated Statements of Cash Flows Data:
Net cash provided by operating activities
$
2,983
$
Net cash provided by (used in) financing activities
$
184
$
18
$
6,181
$
(310) $
655
$
3,477
$
9,758
$
(306) $
1,106
$
7,142
11,178
(314)
Free Cash Flow Reconciliation
($ in millions)
Net cash provided by operating activities
Q1'15
$
Purchases of property and equipment
Free Cash Flow
2,123
Q2'15
$
502
$
1,621
2,266
Q3'15
$
549
$
1,717
2,538
Q4'15
$
780
$
1,758
3,393
Q1'16
$
692
$
2,701
3,477
Q2'16
$
3,665
1,132
$
2,345
$
995
$
2,670
In the fourth quarter of 2016, we elected to early adopt ASU 2016-09. Quarterly net cash provided by operating activities and free cash flows for all
periods presented were adjusted to include the impact from the adoption of ASU 2016-09. See ASU 2016-09 Adoption in this Appendix for additional
information.
Free Cash Flow (FCF) has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of other GAAP
financial measures, such as net cash provided by operating activities. Some of the limitations of FCF are: (i) FCF does not reflect our future contractual
commitments, and (ii) other companies in our industry present similarly titled measures differently than we do, limiting their usefulness as comparative
measures.
19
Q3'16
4,036
Q4'16
$
1,095
$
2,941
4,930
Q1'17
$
1,269
$
3,661
5,058
1,271
$
3,787
Limitations of Key Metrics and Other Data
The numbers for our key metrics, which include our daily active users (DAUs), monthly active users (MAUs), and average revenue per user (ARPU), are calculated using internal
company data based on the activity of user accounts. While these numbers are based on what we believe to be reasonable estimates of our user base for the applicable period
of measurement, there are inherent challenges in measuring usage of our products across large online and mobile populations around the world. In addition, we are continually
seeking to improve our estimates of our user base, and such estimates may change due to improvements or changes in our methodology. In 2016, we estimate that "duplicate"
accounts (an account that a user maintains in addition to his or her principal account) may have represented approximately 6% of our worldwide MAUs. We also seek to identify
"false" accounts, which we divide into two categories: (1) user-misclassified accounts, where users have created personal profiles for a business, organization, or non-human
entity such as a pet (such entities are permitted on Facebook using a Page rather than a personal profile under our terms of service); and (2) undesirable accounts, which
represent user profiles that we determine are intended to be used for purposes that violate our terms of service, such as spamming. In 2016, for example, we estimate usermisclassified and undesirable accounts may have represented approximately 1% of our worldwide MAUs. We believe the percentage of accounts that are duplicate or false is
meaningfully lower in developed markets such as the United States or United Kingdom and higher in developing markets such as India and Turkey. However, these estimates
are based on an internal review of a limited sample of accounts and we apply significant judgment in making this determination, such as identifying names that appear to be fake
or other behavior that appears inauthentic to the reviewers. Our estimates may change as our methodologies evolve, including through the application of new technologies, which
may allow us to identify previously undetected false or duplicate accounts and improve our ability to evaluate a broader population of our users. As such, our estimation of
duplicate or false accounts may not accurately represent the actual number of such accounts. Our data limitations may affect our understanding of certain details of our business. For example, while user-provided data indicates a decline in usage among younger users,
this age data is unreliable because a disproportionate number of our younger users register with an inaccurate age. Accordingly, our understanding of usage by age group may
not be complete.
In addition, our data regarding the geographic location of our users is estimated based on a number of factors, such as the user's IP address and self-disclosed location. These
factors may not always accurately reflect the user's actual location. For example, a user may appear to be accessing Facebook from the location of the proxy server that the
user connects to rather than from the user's actual location. The methodologies used to measure user metrics may also be susceptible to algorithm or other technical errors. Our
estimates for revenue by user location and revenue by user device are also affected by these factors. For example, we discovered an error in the algorithm we used to attribute
our revenue by user geography in late 2015. While this issue did not affect our overall worldwide revenue, it did affect our attribution of revenue to different geographic regions.
The fourth quarter of 2015 revenue by user geography and ARPU amounts were adjusted to reflect this reclassification.
We regularly review our processes for calculating these metrics, and from time to time we may discover inaccuracies in our metrics or make adjustments to improve their accuracy,
including adjustments that may result in the recalculation of our historical metrics. We believe that any such inaccuracies or adjustments are immaterial unless otherwise stated.
In addition, our DAU and MAU estimates will differ from estimates published by third parties due to differences in methodology.
The numbers of DAUs and MAUs discussed in this Quarterly Report on Form 10-Q, as well as ARPU, do not include Instagram, WhatsApp, or Oculus users unless they would
otherwise qualify as such users, respectively, based on their other activities on Facebook. In addition, other user engagement metrics included herein do not include Instagram,
WhatsApp, or Oculus unless otherwise specifically stated.
20
Facebook Q1 2017 Results
investor.fb.com