10-QPeriod: Q1 FY2018

Meta Platforms, Inc. Quarterly Report for Q1 Ended Mar 31, 2018

Filed April 26, 2018For Securities:META

Summary

Meta Platforms, Inc. (META) reported strong financial performance for the first quarter of 2018, with revenue reaching $11.97 billion, a substantial 49% increase year-over-year. This growth was primarily driven by a 50% surge in advertising revenue, which now constitutes approximately 91% of total advertising revenue from mobile devices, up from 85% in the prior year period. The company also demonstrated robust user growth, with daily active users (DAUs) increasing by 13% to 1.45 billion and monthly active users (MAUs) growing by 13% to 2.20 billion. Despite significant investments in areas like safety, security, video content, and long-term technology initiatives, which contributed to a 22% increase in R&D expenses, Meta maintained healthy profitability. Net income rose to $4.99 billion, translating to diluted earnings per share of $1.69. The company's strong operational cash flow generation, coupled with a healthy cash and marketable securities balance of $43.96 billion, provides a solid financial foundation. However, ongoing legal proceedings, particularly those related to data privacy and misuse, as well as significant tax uncertainties, represent key risks that investors should monitor.

Financial Highlights

48 data points
Beta

Revenue

$11.97B

83.9% Gross Margin

Net Income

$4.99B

41.7% Net Margin

EPS (Diluted)

$1.69

Total Assets

$88.94B

Cash & Equivalents

$12.21B

Free Cash Flow

$5.05B

Financial Statements
Beta
Revenue$11.97B
Cost of Revenue$1.93B
Gross Profit$10.04B
R&D Expenses$2.24B
Operating Expenses$6.52B
Operating Income$5.45B
Net Income$4.99B
EPS (Basic)$1.72
EPS (Diluted)$1.69
Shares Outstanding (Basic)2.91B
Shares Outstanding (Diluted)2.94B

Key Highlights

  • 1Revenue increased by 49% year-over-year to $11.97 billion, driven by a 50% surge in advertising revenue.
  • 2Mobile advertising revenue accounted for approximately 91% of total advertising revenue, up from 85% in Q1 2017.
  • 3Daily Active Users (DAUs) grew 13% year-over-year to 1.45 billion, and Monthly Active Users (MAUs) grew 13% to 2.20 billion.
  • 4Net income increased to $4.99 billion, with diluted Earnings Per Share (EPS) of $1.69.
  • 5The company continued significant investments in R&D, with expenses growing 22% year-over-year.
  • 6Total cash and cash equivalents and marketable securities stood at $43.96 billion as of March 31, 2018.
  • 7Meta is facing multiple lawsuits and government inquiries related to data privacy and misuse, the outcomes of which are uncertain.

Frequently Asked Questions

Meta's primary source of revenue is advertising, which accounted for approximately 99% of total revenue in Q1 2018. Advertising revenue grew by 50% year-over-year to $11.8 billion, fueled by an increase in demand, a 39% rise in average price per ad, and a growing number of active marketers on its platforms. The shift towards mobile advertising continues to be a significant driver, representing 91% of total advertising revenue.

Meta is investing heavily in its core products (Facebook, Instagram, Messenger, WhatsApp), long-term technology initiatives (AI, VR/AR), and scaling its operations. This is reflected in a 22% increase in Research and Development expenses, driven by headcount growth in engineering and technical roles. Cost of revenue also saw a significant increase of 66%, primarily due to higher operational expenses for data centers and technical infrastructure, and increased partnership costs. Marketing and sales expenses also grew substantially by 51%.

Meta is facing significant legal and regulatory risks. Notably, multiple class action lawsuits and government inquiries (including from the FTC and international bodies) have been filed concerning the misuse of user data by developers. While the company is defending itself vigorously, the outcomes are uncertain and could potentially lead to substantial losses, fines, or changes in business practices. Additionally, Meta has significant unrecognized tax benefits related to transfer pricing disputes with the IRS, which could result in material tax liabilities if the IRS prevails.

Meta maintains a strong liquidity position with $43.96 billion in cash and cash equivalents and marketable securities as of March 31, 2018. The company generated $7.86 billion in cash from operations. Key uses of cash included significant capital expenditures ($2.81 billion) for infrastructure, and substantial share repurchases ($1.91 billion) under its authorized program, which was further increased by $9.0 billion in April 2018.