10-QPeriod: Q3 FY2020

Meta Platforms, Inc. Quarterly Report for Q3 Ended Sep 30, 2020

Filed October 30, 2020For Securities:META

Summary

Meta Platforms, Inc. (then Facebook, Inc.) reported strong financial results for the third quarter and the first nine months of 2020, driven by robust revenue growth in its advertising business. Revenue increased by 22% year-over-year for the third quarter to $21.47 billion and by 17% for the nine-month period to $57.89 billion. This growth was primarily fueled by an increase in the number of ads delivered, despite a slight decrease in average price per ad, which management attributed to the shift towards Stories ads and monetization in lower-cost geographies. The company also saw significant growth in its user base, with Facebook Daily Active Users (DAUs) reaching 1.82 billion and Family Daily Active People (DAP) reaching 2.54 billion on average for September 2020. This user engagement, coupled with the recovery in advertising demand post-Q2 pandemic dip, contributed to healthy income from operations of $8.04 billion and a net income of $7.85 billion for the third quarter. The company ended the period with a strong balance sheet, holding $55.62 billion in cash and cash equivalents and marketable securities.

Financial Statements
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Key Highlights

  • 1Revenue grew 22% year-over-year to $21.47 billion in Q3 2020, primarily driven by a 22% increase in advertising revenue.
  • 2Facebook DAUs increased 12% year-over-year to 1.82 billion on average for September 2020, while Family DAP increased 15% to 2.54 billion.
  • 3Income from operations was $8.04 billion, with an operating margin of 37% for Q3 2020.
  • 4Net income for Q3 2020 was $7.85 billion, translating to diluted EPS of $2.71.
  • 5The company made a significant equity investment in Jio Platforms Limited for $5.82 billion in July 2020.
  • 6Share repurchases totaled $4.36 billion for the nine months ended September 30, 2020, with $10.55 billion remaining authorized.
  • 7The company settled with the FTC, paying a $5.0 billion penalty in April 2020, and agreed to a $650 million settlement for a biometric privacy class action lawsuit.

Frequently Asked Questions

The primary driver of Meta Platforms' (then Facebook's) revenue growth in Q3 2020 was its advertising business, which saw a 22% year-over-year increase. This growth was attributed to an increase in the number of ads delivered, partially offset by a decrease in the average price per ad.

Meta Platforms (Facebook) experienced continued user growth. Facebook Daily Active Users (DAUs) increased by 12% year-over-year to 1.82 billion, and Facebook Monthly Active Users (MAUs) grew by 12% to 2.74 billion as of September 30, 2020. Across its family of products (Facebook, Instagram, Messenger, WhatsApp), Daily Active People (DAP) increased by 15% to 2.54 billion, and Monthly Active People (MAP) increased by 14% to 3.21 billion.

Meta Platforms (Facebook) paid a $5.0 billion penalty in April 2020 as part of a settlement with the U.S. Federal Trade Commission (FTC) regarding platform and user data practices. Additionally, the company agreed to a $650 million settlement for a class-action lawsuit concerning the 'tag suggestions' facial recognition feature.

Management noted that the COVID-19 pandemic has accelerated the shift of commerce from offline to online, boosting advertising demand. However, they also cautioned that this increased demand may not continue and could recede as the pandemic's effects subside. Future advertising revenue growth is expected to be influenced by the pandemic's impact on economic recovery, shifts in online commerce, and potential limitations on ad targeting and measurement tools due to regulatory changes and third-party mobile operating systems.