10-QPeriod: Q1 FY2019

Meta Platforms, Inc. Quarterly Report for Q1 Ended Mar 31, 2019

Filed April 25, 2019For Securities:META

Summary

Meta Platforms, Inc. (META) reported its first quarter 2019 results, showing robust revenue growth driven by its advertising business. Total revenue increased by 26% year-over-year to $15.08 billion, with advertising revenue growing by the same percentage to $14.91 billion. This growth was primarily fueled by an increase in the number of ads delivered, particularly on mobile devices, which accounted for approximately 93% of advertising revenue. A significant event impacting the quarter was the company's reasonable estimation of a probable loss related to the U.S. Federal Trade Commission (FTC) inquiry into its platform and user data practices, resulting in a $3.0 billion accrual. Despite this significant provision, the company continued to invest heavily in its core ecosystems (Facebook, Instagram, Messenger, WhatsApp), long-term technology initiatives (connectivity, AI, AR/VR), and infrastructure expansion, leading to a substantial increase in costs and expenses. Consequently, net income for the quarter was $2.43 billion, a decrease from $4.99 billion in the prior year, with diluted EPS at $0.85 compared to $1.69. The company maintained a strong liquidity position with $45.24 billion in cash and cash equivalents and marketable securities as of March 31, 2019. While user growth remained steady at 8% year-over-year for both daily and monthly active users, the company anticipates continued expense growth to outpace revenue growth throughout 2019.

Financial Highlights

49 data points
Beta

Revenue

$15.08B

81.3% Gross Margin

Net Income

$2.43B

16.1% Net Margin

EPS (Diluted)

$0.85

Total Assets

$109.48B

Cash & Equivalents

$11.20B

Free Cash Flow

$5.47B

Financial Statements
Beta
Revenue$15.08B
Cost of Revenue$2.82B
Gross Profit$12.26B
R&D Expenses$2.86B
Operating Expenses$11.76B
Operating Income$3.32B
Net Income$2.43B
EPS (Basic)$0.85
EPS (Diluted)$0.85
Shares Outstanding (Basic)2.86B
Shares Outstanding (Diluted)2.87B

Key Highlights

  • 1Revenue grew 26% year-over-year to $15.08 billion, driven by a 26% increase in advertising revenue to $14.91 billion.
  • 2A $3.0 billion accrual was recorded for a probable loss related to the FTC inquiry concerning platform and user data practices, with an estimated total range of $3.0 billion to $5.0 billion.
  • 3Net income decreased to $2.43 billion ($0.85 diluted EPS) from $4.99 billion ($1.69 diluted EPS) in the prior year, largely due to the FTC provision and increased operating expenses.
  • 4Total costs and expenses increased significantly by 80% to $11.76 billion, driven by substantial investments in data centers, infrastructure, headcount, and R&D.
  • 5Daily Active Users (DAUs) and Monthly Active Users (MAUs) both grew 8% year-over-year, reaching 1.56 billion and 2.38 billion, respectively, as of March 2019.
  • 6Cash and cash equivalents and marketable securities totaled $45.24 billion as of March 31, 2019, reflecting strong liquidity.
  • 7Capital expenditures were $3.96 billion for the quarter, with a full-year 2019 capital expenditure forecast of $17 billion to $19 billion.

Frequently Asked Questions

The primary driver of Meta's revenue growth in Q1 2019 was its advertising business. Total revenue increased by 26% year-over-year to $15.08 billion, with advertising revenue specifically growing by 26% to $14.91 billion. This growth was largely attributed to an increase in the number of ads delivered, especially on mobile devices, which accounted for approximately 93% of total advertising revenue.

The $3.0 billion accrual represents the company's reasonable estimation of a probable loss related to the ongoing inquiry by the U.S. Federal Trade Commission (FTC) into its platform and user data practices. The company estimates the range of loss for this matter to be between $3.0 billion and $5.0 billion. This provision had a significant impact on net income for the quarter.

Meta's total costs and expenses increased substantially by 80% year-over-year, reaching $11.76 billion in Q1 2019. This increase was driven by significant investments in expanding data center capacity, network infrastructure, office facilities, scaling headcount, and continued investments in safety, security, marketing, video content, and long-term technology initiatives. The company anticipates that expense growth will continue to outpace revenue growth throughout 2019.

Meta expects continued user growth, albeit at a slower rate than in previous periods. The company anticipates that expense growth will continue to exceed revenue growth in the remainder of 2019, impacting operating margins. Investments are focused on core ecosystems, messaging platforms, long-term technology, and infrastructure, which are expected to drive future value but contribute to higher near-term expenses.