10-QPeriod: Q3 FY2017

Meta Platforms, Inc. Quarterly Report for Q3 Ended Sep 30, 2017

Filed November 2, 2017For Securities:META

Summary

Meta Platforms, Inc. (META) reported robust financial performance for the third quarter and the first nine months ending September 30, 2017. Revenue surged by 47% year-over-year to $10.33 billion in Q3 and $27.68 billion for the nine-month period, primarily driven by a 49% increase in advertising revenue. This growth was fueled by higher ad prices and increased user engagement, with mobile advertising continuing to dominate, representing approximately 88% of total ad revenue in Q3. Despite significant investments in research and development and headcount, which grew by 47% year-over-year, the company maintained strong profitability. Income from operations reached $5.12 billion in Q3, and net income was $4.71 billion, resulting in diluted earnings per share of $1.59. The company ended the period with a strong liquidity position, holding $38.29 billion in cash and cash equivalents and marketable securities. Investments in infrastructure, including data centers and network equipment, are ongoing to support future growth.

Financial Highlights

48 data points
Beta

Revenue

$10.33B

86.0% Gross Margin

Net Income

$4.71B

45.6% Net Margin

EPS (Diluted)

$1.59

Total Assets

$79.00B

Cash & Equivalents

$7.20B

Free Cash Flow

$4.37B

Financial Statements
Beta
Revenue$10.33B
Cost of Revenue$1.45B
Gross Profit$8.88B
R&D Expenses$2.05B
Operating Expenses$5.21B
Operating Income$5.12B
Net Income$4.71B
EPS (Basic)$1.62
EPS (Diluted)$1.59
Shares Outstanding (Basic)2.90B
Shares Outstanding (Diluted)2.96B

Key Highlights

  • 1Revenue grew by 47% year-over-year for both the three and nine months ended September 30, 2017, reaching $10.33 billion and $27.68 billion, respectively.
  • 2Advertising revenue, the primary driver of growth, increased by 49% year-over-year, with mobile advertising representing approximately 88% of total ad revenue in Q3.
  • 3Daily Active Users (DAUs) and Monthly Active Users (MAUs) increased by 16% year-over-year, reaching 1.37 billion and 2.07 billion, respectively, as of September 2017.
  • 4Income from operations was $5.12 billion for the third quarter, and net income was $4.71 billion, with diluted EPS of $1.59.
  • 5Total costs and expenses increased by 33-47% across various categories due to investments in headcount, infrastructure, and product development.
  • 6The company maintained a strong liquidity position with $38.29 billion in cash and cash equivalents and marketable securities as of September 30, 2017.
  • 7Capital expenditures were $1.76 billion in the third quarter, with a full-year 2017 projection of approximately $7.0 billion, reflecting continued investment in infrastructure.

Frequently Asked Questions

The primary driver of Meta's revenue growth is its advertising business. Advertising revenue increased by 49% year-over-year for both the three and nine months ended September 30, 2017. This growth is largely attributed to an increase in the average price per ad and the continued shift of advertising spend to mobile devices, which represented approximately 88% of total advertising revenue in the third quarter of 2017.

Meta is making significant investments in its core products and long-term technology initiatives. This includes increased headcount, particularly in engineering and technical functions, as well as investments in data center capacity and office facilities to support growth. Consequently, total costs and expenses saw substantial increases, with Research and Development expenses up 33% and Cost of Revenue up 47% year-over-year for the third quarter. The company anticipates continued significant year-over-year expense growth in 2018.

Meta maintains a strong financial position. As of September 30, 2017, the company held $38.29 billion in cash and cash equivalents and marketable securities, an increase from the prior year. This liquidity is generated primarily from operations. The company also has a $2.0 billion revolving credit facility, of which none was drawn down as of the reporting date. There were no significant long-term debt obligations reported.

Yes, Meta disclosed involvement in ongoing legal proceedings, including securities class action lawsuits related to its IPO, which are scheduled for trial in early 2018. Additionally, the company is involved in a significant IRS tax examination concerning transfer pricing, with a potential additional tax liability estimated between $3.0 billion to $5.0 billion, plus interest and penalties. While Meta is contesting this, the outcome remains uncertain and could materially impact its financial position.