01—Abstract
Summary
Summary of the 10-K filed January 31, 2019. Cited figures are marked; the original filing is the authoritative source.
Meta Platforms, Inc. (formerly Facebook, Inc.) filed its 10-K for the fiscal year ended December 30, 2018, highlighting robust revenue growth driven primarily by its advertising business.
The company reported significant year-over-year increases in revenue and net income, underscoring the continued strength of its core platforms like Facebook and Instagram. Key investments are being directed towards expanding data center capacity, enhancing infrastructure, and pursuing long-term technology initiatives in areas such as AI and augmented/virtual reality. Despite strong financial performance, the company faces numerous risks and challenges.
These include intense competition across social media and advertising, increasing regulatory scrutiny concerning data privacy and content, and the potential for user engagement shifts. The report also emphasizes the company's ongoing investments in safety and security measures. Investors should note the company's dual-class share structure which concentrates voting power, and the potential impact of legal and regulatory challenges on future operations and financial results.
02—Key points
Key Highlights
- Revenue increased by 37% to $55.84 billion in 2018, driven by a 38% rise in advertising revenue.
- Net income grew by 39% to $22.11 billion, with diluted EPS of $7.57.
- Daily Active Users (DAUs) and Monthly Active Users (MAUs) grew by 9% year-over-year, reaching 1.52 billion and 2.32 billion respectively in December 2018.
- Mobile advertising revenue represented approximately 92% of total advertising revenue.
- The company significantly increased its capital expenditures, investing $13.92 billion in property and equipment.
- Meta Platforms' headcount grew by 42% to 35,587 employees by the end of 2018.
- Significant risks identified include intense competition, increasing regulatory scrutiny (especially around data privacy), and potential impacts of new technologies or platform changes on user engagement and advertising effectiveness.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2018, Meta Platforms, Inc. kept $0.40.
- Revenue$55.84B100.0%
- Cost of revenue−$9.36B16.8%
- Gross profit$46.48B83.2%
- Operating costs−$21.57B38.6%
- Operating income$24.91B44.6%
- Interest, other & tax−$2.80B5.0%
- Net income$22.11B39.6%
Where FY2018 revenue went
$55.84B- Net income: $22.11B, 40% of revenue
- Other operating costs: $11.30B, 20% of revenue
- R&D: $10.27B, 18% of revenue
- Cost of revenue: $9.36B, 17% of revenue
- Interest, other & tax: $2.80B, 5.0% of revenue
Kept 40% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2018filed January 31, 2019Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $55.84B$40.65B | +37.4% |
| Cost of Revenue | $9.36B$5.45B | +71.5% |
| Gross Profit | $46.48B$35.20B | +32.1% |
| R&D Expenses | $10.27B$7.75B | +32.5% |
| Operating Expenses | $30.93B$20.45B | +51.2% |
| Operating Income | $24.91B$20.20B | +23.3% |
| Interest Expense | $9.00M$6.00M | +50.0% |
| Net Income | $22.11B$15.93B | +38.8% |
| EPS (Basic) | $7.65$5.49 | +39.3% |
| EPS (Diluted) | $7.57$5.39 | +40.4% |
| Shares Outstanding (Basic) | 2.89B2.90B | −0.4% |
| Shares Outstanding (Diluted) | 2.92B2.96B | −1.2% |
05—Questions
Frequently Asked Questions
What is Meta Platforms' primary source of revenue?
Meta Platforms generates substantially all of its revenue from advertising. Marketers pay to display ads on its platforms like Facebook and Instagram, with revenue primarily driven by the number of ads delivered and the average price per ad.
What are the company's key growth drivers and investment areas?
The company's key growth drivers are its user base and their engagement, coupled with the effectiveness of its advertising products. Investments are focused on expanding data center capacity and infrastructure, growing its family of apps (Instagram, Messenger, WhatsApp), and long-term initiatives like AI and augmented/virtual reality.
What are the major risks and challenges highlighted in the filing?
The company identifies several key risks, including intense competition, the potential for user base or engagement decline, dependence on mobile operating systems and third-party platforms, regulatory scrutiny regarding privacy, data protection, and content, potential security breaches, and the need to maintain and enhance its brands. The concentration of voting power with the CEO is also noted as a factor.
How did regulatory changes, like GDPR, impact the company?
The filing mentions that GDPR, which took effect in May 2018, imposed new operational requirements for processing personal data in Europe and carries significant penalties for non-compliance. Meta implemented measures to comply, including service changes for minors and new user consent processes, which could affect operations and user engagement.
06—Continue