10-QPeriod: Q2 FY2018

Meta Platforms, Inc. Quarterly Report for Q2 Ended Jun 30, 2018

Filed July 26, 2018For Securities:META

Summary

Meta Platforms, Inc. (META) reported strong financial results for the second quarter and the first six months of 2018. Revenue saw a significant increase of 42% year-over-year to $13.23 billion for the quarter and 45% to $25.20 billion for the six-month period, driven primarily by a 42% rise in advertising revenue. This growth was fueled by increases in both the average price per ad and the number of ads delivered, with mobile advertising continuing its dominance, representing approximately 91% of total advertising revenue. The company demonstrated robust user growth, with Daily Active Users (DAUs) increasing by 11% year-over-year to 1.47 billion and Monthly Active Users (MAUs) growing by 11% to 2.23 billion. Despite significant investments in research and development, infrastructure, and headcount (up 47% year-over-year), operating income grew by 33% to $5.86 billion for the quarter, leading to a net income of $5.11 billion and diluted EPS of $1.74. The company ended the period with a strong liquidity position, holding $42.31 billion in cash and cash equivalents and marketable securities.

Financial Highlights

49 data points
Beta

Revenue

$13.23B

83.3% Gross Margin

Net Income

$5.11B

38.6% Net Margin

EPS (Diluted)

$1.74

Total Assets

$90.29B

Cash & Equivalents

$11.67B

Free Cash Flow

$2.84B

Financial Statements
Beta
Revenue$13.23B
Cost of Revenue$2.21B
Gross Profit$11.02B
R&D Expenses$2.52B
Operating Expenses$7.37B
Operating Income$5.86B
Net Income$5.11B
EPS (Basic)$1.76
EPS (Diluted)$1.74
Shares Outstanding (Basic)2.90B
Shares Outstanding (Diluted)2.93B

Key Highlights

  • 1Revenue grew 42% year-over-year to $13.23 billion in Q2 2018, driven by a 42% increase in advertising revenue.
  • 2Daily Active Users (DAUs) increased by 11% year-over-year to 1.47 billion, and Monthly Active Users (MAUs) grew by 11% to 2.23 billion.
  • 3Income from operations increased 33% to $5.86 billion for the quarter.
  • 4Net income rose to $5.11 billion, with diluted earnings per share (EPS) of $1.74.
  • 5Total costs and expenses increased significantly, with Cost of Revenue up 79% and R&D up 31%, reflecting investments in infrastructure, headcount, and long-term initiatives.
  • 6Capital expenditures were $3.46 billion for the quarter, with full-year 2018 capital expenditure guidance of approximately $15 billion.
  • 7Cash and cash equivalents and marketable securities stood at $42.31 billion as of June 30, 2018, reflecting strong operational cash flow generation.

Frequently Asked Questions

The primary driver of revenue growth was advertising revenue, which increased by 42% year-over-year. This growth was attributed to an increase in both the average price per ad (up 17%) and the number of ads delivered (up 21%). Mobile advertising continued to be a dominant contributor, accounting for approximately 91% of total advertising revenue.

Total costs and expenses increased by 49.7% year-over-year for the quarter, growing faster than revenue. Key expense categories that saw significant increases included Cost of Revenue (up 79%), Research and Development (up 31%), and Marketing and Sales (up 65%). These increases were driven by investments in data centers, infrastructure, headcount growth (47% year-over-year), and long-term technology initiatives.

As of June 30, 2018, Meta Platforms had $42.31 billion in cash and cash equivalents and marketable securities. This represents a slight increase from December 31, 2017, driven by strong cash flow from operations, which offset significant capital expenditures and share repurchases.

Yes, the company is facing multiple putative class action and derivative lawsuits related to data misuse by a developer, as well as inquiries from the FTC and other government agencies in the US and Europe. While the company believes these lawsuits are without merit, it acknowledges that these actions could potentially lead to substantial losses, though the amount is currently unestimable. Additionally, ongoing tax audits, particularly regarding transfer pricing with foreign subsidiaries, pose a potential risk for significant tax liabilities.