Facebook Declares First Quarter 2018

NEWS RELEASE:Facebook, Inc. (NASDAQ: FB) FAIRFIELD, CT – February 9, 2018 — Facebook, Inc. (NASDAQ: FB) today announced financial results for the fourth quarter and full year of 2017. DUDS: Revenue: $12.13 Billion (Q4…

Facebook Declares First Quarter 2018

NEWS RELEASE:Facebook, Inc. (NASDAQ: FB)

FAIRFIELD, CT – February 9, 2018 — Facebook, Inc. (NASDAQ: FB) today announced financial results for the fourth quarter and full year of 2017.

DUDS:

Revenue: $12.13 Billion (Q4 2017: $10.94 Billion)

EPS: $1.42 (Q4 2017: $1.04)

Deferred revenue related to third-party video ads: $101 Million (Q4 2017: $99 Million)

Income tax expense: $1.2 Billion (Q4 2017: $1.3 Billion)

For the fourth quarter of 2017, total revenue was $12.13 billion, an increase of 19% year-over-year. Daily active users were 1.2 billion and monthly active users were 2.01 billion as of 31 December 2017, an increase of 16% and 16%, respectively, compared to the same period in 2016. Mobile daily active users were 1.38 billion as of 31 December 2017, an increase of 19% compared to the same period in 2016. Mobile monthly active users were 1.44 billion as of 31 December 2017, an increase of 19% compared to the same period in 2016. Advertising revenue was $12.1 billion, an increase of 28% year-over-year.

Gross margin was 69% and operating margin was 44% for the fourth quarter of 2017.

Members:

Average daily active users were 1.59 billion on average for December 2017, an increase of 20% compared to December 2016.

Monthly active users were 2.01 billion as of 31 December 2017, an increase of 16% compared to December 2016. Mobile monthly active users were 1.4 billion as of 31 December 2017, an increase of 19% compared to December 2016.

Marketplaces:

Mobile daily active users were 543 million on average for December 2017, an increase of 26% compared to December 2016.

Facebook:

Global mobile advertising revenue was $9.39 billion in the fourth quarter of 2017, an increase of 39% compared to the fourth quarter of 2016.

Operating cash flow was $6.18 billion in the fourth quarter of 2017.

Free cash flow was $5.05 billion in the fourth quarter of 2017.

Inventory-related fair value changes in mobile game payments and other revenue: $469 Million in the fourth quarter of 2017, representing a headwind to revenue growth. In addition, effective October 31, 2017, we transitioned to a cash settle accounting policy for foreign currency positions held by third parties.

Deferred revenue related to third-party video ads: $101 million in the fourth quarter of 2017. This amount represents the fair value adjustment related to our monetization of video ads by third parties.

Accounting for equity-based compensation expenses and related tax effects (1): Facebook used the current stock price as the starting value for determining estimated fair value of equity-based compensation expenses and related tax effects, and current stock price as the ending value for the measurement period. As a result, the Company must retrospectively adjust its figures for all prior periods to be comparable. This change resulted in a reduction of expense of $115 million (Q4 2016: $49 million) in the fourth quarter of 2017 and a reduction of expense of $61 million (Q4 2016: $11 million) in 2016.

First-quarter and full-year outlook

Starting Q1 2018, the Company will report first-quarter revenue based on a monthly average number of MAUs, and non-GAAP operating income, non-GAAP operating margin, and non-GAAP effective tax rate. In addition, the Company expects a non-GAAP effective tax rate of 19% to 22% in 2018.

Non-GAAP EPS (in $ per share) for the first quarter of 2018: $0.54 to $0.59

Non-GAAP net income (in $ per share) for the first quarter of 2018: $5.6 billion to $6.0 billion

Non-GAAP operating income (in $ per share) for the first quarter of 2018: $6.4 billion to $6.9 billion

Non-GAAP effective tax rate for the first quarter of 2018: 19% to 22%

Capital expenditures

The Company’s calculation of free cash flow differs from the calculation by GAAP and the calculation used by other companies. Free cash flow represents cash flow from operations less purchases of property and equipment. Excluding the effects of foreign currency exchange rate fluctuations, the Company’s calculation of free cash flow would have increased by 24% in the fourth quarter of 2017. Free cash flow increased by 36% in 2017 compared to 2016.

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