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Facebook Q1 2018 Earnings Slides [pdf]
- 100010735598198 9y agohttps://www.facebook.com/profile.php?id=100010735598198&hc_ref=ARTdzhwYUlbQAsZm6XiwvB6YF67TfovlZokb-JUaK0OHJo-NRi5dyToB5PTM201Vstc&fref=nf https://www.facebook.com/profile.php?id=100010735598198&hc_r...
- rdlecler1 9y agoFind it strange that Europe has 1.8x the users of the US but only 40% of the revenue.
- richardfeynman 9y agoClearly you don't work in advertising, my friend :-)
- myroon5 9y agoCare to elaborate?
- richardfeynman 9y agoThe costs to advertisers (per impression, click, action) are all much higher in the US market than EMEA.
- rdlecler1 9y agoYes, but why? Is there not an arbitrage opportunity here? Are European advertisers paying less? Are Americans more gullible?
- tehlike 9y agoGDP per capita. US/North America consumers earn & spend more.
- rdlecler1 9y agoNot quadruple.
- tehlike 9y ago"The GDP per capita (PPP) was $37,800 in 2015,[4] compared to $57,084 in the US." Definitely not quadruple, but taking into account a number of other things - like online spending - ecommerce etc, it's not hard to see. I also believe (no proof, gut feeling) the metrics are similar for appstore purchases.
- adventured 9y agoSome of that is because there's a vast economic gulf there. For reference, the EU minus the UK has a GDP per capita of about $33,000. The US is at $60,000. Europe as a whole (minus Turkey), has a GDP per capita of about $27,000. The total European economy is very similar in size to the US at roughly $20 trillion. There's $14.5 trillion inside the EU minus the UK, and about $5.5 trillion outside of it.
- m0meni 9y agoHow'd the effective tax rate from Q3'17 go from 10% to 43% in Q4'17, and then back to 11% in Q1'18?
- myroon5 9y agoProbably from one-time repatriation
- collinf 9y agoFrom the Q4 Earnings Report, it looks like it was a one-time tax on foreign earnings: > 2017 Tax Cuts and Jobs Act On December 22, 2017, the 2017 Tax Cuts and Jobs Act (the Tax Act) was enacted into law and the new legislation contains several key tax provisions that affected us, including a one-time mandatory transition tax on accumulated foreign earnings and a reduction of the corporate income tax rate to 21% effective January 1, 2018, among others. We are required to recognize the effect of the tax law changes in the period of enactment, such as determining the transition tax, remeasuring our U.S. deferred tax assets and liabilities, and reassessing the net realizability of our deferred tax assets and liabilities. In December 2017, the Securities and Exchange Commission (SEC) staff issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (SAB 118), which allows us to record provisional amounts during a measurement period not to extend beyond one year of the enactment date. As a result, our provision for income taxes increased by $2.27 billion and our diluted EPS decreased by $0.77 for both the fourth quarter and full year 2017. Since the Tax Act was passed late in the fourth quarter of 2017, and ongoing guidance and accounting interpretation are expected over the next 12 months, we consider the accounting of the transition tax, deferred tax re-measurements, and other items to be provisional due to the forthcoming guidance and our ongoing analysis of final year-end data and tax positions. We expect to complete our analysis within the measurement period in accordance with SAB 118. [link] https://investor.fb.com/investor-news/press-release-details/2018/Facebook-Reports-Fourth-Quarter-and-Full-Year-2017-Results/default.aspx https://investor.fb.com/investor-news/press-release-details/...
- wmblaettler 9y agoHow do you interpret an earnings slide? They seem to have a stronger Q4 YoY - presumably due to increased ad spending leading up to the holiday buying season, with a retraction every Q1. There was an 8% decline from Q4'16 to Q1'17 and only a 7% decline from Q4'17 to Q1'18.
- wmblaettler 9y agoSorry, the I misread the title, it's literally the "slides" (slide deck) of Q1 earnings. Not a observation on a decline in earnings.
- DisruptiveDave 9y agoGot a chuckle out of this. :)
- forkerenok 9y agoIt slid in January of last year as well. Is it a seasonal effect? (can't find FB's older figures.. I'm not good in digging up this kind of information)
- ForrestN 9y agoWhat if this is evidence that many people see Facebook as a bad habit, and start the new year determined to use it less?
- mcmoose75 9y agoEvery advertising-based business drops off q4->q1. There's a ton of ad spend for the holidays, and just not as much commercial activity in general in q1. The right way to compare it is 17q1->18q1, or 16Q4->17Q4, rather than QoQ growth.
- joeblau 9y agoI wonder if people make New Years resolutions to stop using Facebook and then relapse a few weeks in?
- d4l3k 9y agoMost of the income is coming from advertisers and not users. Presumably companies spend more money on advertising around the holiday season.
- wmblaettler 9y agoSlides means the slide deck, not an observation on growth or decline of earnings. I misread the title too.
- myroon5 9y agoI don't think this is specific to Facebook. Google, Amazon, Apple, and Microsoft all have less revenue around this time of year when compared to the previous quarter. I'd imagine consumption in general is just higher around the holidays. https://www.statista.com/statistics/267606/quarterly-revenue-of-google/ https://www.statista.com/statistics/267606/quarterly-revenue... https://www.statista.com/statistics/422035/facebooks-quarterly-global-revenue/ https://www.statista.com/statistics/422035/facebooks-quarter... https://www.statista.com/statistics/273963/quarterly-revenue-of-amazoncom/ https://www.statista.com/statistics/273963/quarterly-revenue... https://www.statista.com/statistics/272746/microsoft-corporations-revenue-by-fiscal-quarters/ https://www.statista.com/statistics/272746/microsoft-corpora... (keep in mind that Microsoft's fiscal calendar is different, so it ends up being the same time of year)
- alberth 9y agoSlide #3 & #5 are super interesting. US/Canada is ~10% MAU but generates ~50% of the overall revenue. I wonder why US generates so much revenue compared to its small user base
- DisruptiveDave 9y agoThe advertisers are there.
- samstave 9y agoThe richest country?
- gizmodo59 9y agoThis is true not just for Facebook. Consumer spending per person in US is very high compared to many other countries in the world. https://en.wikipedia.org/wiki/List_of_largest_consumer_markets https://en.wikipedia.org/wiki/List_of_largest_consumer_marke... The businesses that wants to run ads also spend a lot. Its also true for Enterprise Software to some extent. I work for an enterprise software company and despite having had a decade of presence and having been founded in Europe, 70% of our revenue is from USA. While I don't have numbers to back it up, personally from my experience, I see Americans spending a lot (sometimes more credit than savings itself) compared to other developed nations.
- JBReefer 9y agoPeople don't understand how much wealthier the US is than most of the Western World. I realize, and please don't harp on, the fact that healthcare and college aren't free here, but the median German makes the less money than the median income in all but 9 states, and it becomes substantially more unequal when you look at PPP. https://mises.org/wire/if-sweden-and-germany-became-us-states-they-would-be-among-poorest-states https://mises.org/wire/if-sweden-and-germany-became-us-state... Now, if you want to talk about Quality of Life, instead of per capita income, I think there's probably a lot more going for the EU - much lower crime, better infrastructure, less absurd politics, more vacation. I'd definitely live in Nice over Minnesota, and I love Minnesota.
- roddux 9y agoMy main takeaway from this is that #deleteFacebook has been a flash in the pan-- their active user count is still increasing across all regions. Also to note, FB only pay effectively 11% tax on some 12 billion dollars worth of revenue.
- loceng 9y agoWho knows what gaming mechanisms they could have in place to artificially inflate numbers, it could even be a third-party that somehow knows how much of an increase in user signups they need to stay on an upward course. With the level of bad acting linked to Cambridge Analytica, really anything is plausible if it's a method to maintain control via manipulating appearances, etc.
- unit91 9y agoMaybe. What you're describing would mean prison for anyone involved, though, which makes me skeptical. Not saying it's definitely false (I have no way of knowing), and certainly white-collar crime happens. But that would be a very high-stakes move.
- quickben 9y agoEh, did you read what WF was found doing recently? When money matters, at executive level, it doesn't really look like they care about law, human lives (that FB memo), etc.
- loceng 9y agoThat's what I'm saying though, up until a month ago I would have been more skeptical and err on the side of doubt too, however did you see the hidden camera recording of the Cambridge Analytica CEO by Channel 4's investigation? I imagine comments like his, and hopefully evidence can be found, that will lead to prison time for him and others. There are clearly very intelligent people and seemingly without a conscience, and who even admit that they would do things in untraceable ways, including in part under and between different company names; not a stretch to imagine activities happen on no books with no trackable gain given in exchange -- or even in plain sight however people erring on the side of doubt and disbelief. We have the evidence smacking us in the face every day though. The result of Cambridge Analytica's activities, seemingly along with Russia's help - directly or indirectly I'm not sure, is getting someone like Trump into office, along with apparently winning elections in other nations around the world. I'd say very high-stakes they're playing for, positioning someone in as President of the United States to align with Russian motives, along with the shit going on with Syria and nerve agents actively being used. It's certainly rallying the world to align for good, to align for accountability - against those who are acting bad.
- mbesto 9y ago$16B in FCF in 2017 Thats what you call "printing cash".
- spyspy 9y agoI've been long FB for a very long time now, and took the recent dip to grab some more. People can complain about Facebook in terms of privacy all they want, but as a company they are killing it.
- heedlessly3 9y agoi remember people saying that Apple hardware and software quality has dwindle over the past couple years. They might be right, however, their 2017 Q3 revenues hit a new record.
- tclancy 9y ago>People can complain about Facebook in terms of privacy all they want, but as a company they are killing it. Should make for a nice tombstone.
- spyspy 9y agoI think I'll survive.
- kgwgk 9y agoThe question is whether that can justify a valuation 30 times as large.
- adventured 9y agoThey're tracking to around a likely ~$23 billion in net income for 2018. That's a 20 PE three quarters out. That's for 50% sales growth, 63% net income growth. That's a bargain in this market. Microsoft has hardly net grown its income in a decade and it's sporting a 30 PE; nearly all of their valuation increase the last five years is multiple inflation. Coca Cola has a 30 PE ratio and nearly zero growth for a decade. The same for McDonald's. Boeing has a ~25 forward PE ratio for ~10% growth. Walmart is getting a mid 20s PE for barely any growth. The same pattern holds true across most of the traditional blue chips. It's even worse for other tech companies, the PE ratios there are hilariously inflated, from Workday or Salesforce to nVidia to Activision to Netflix & Amazon. If anything Facebook is considerably undervalued here vs the wider market. (note: I have no position in Facebook)
- soared 9y agoInteresting - Appendix claims 13% of MAUs are duplicate or fraudulent accounts.
- scolson 9y agoSo wait... In the US, my "value" to facebook is about $100 a year? (~24/q rounded up) Can I subscribe to facebook and opt out of all advertising and any data sharing exposure with third-parties? That is totally worth $8-10/mo to me. Edit: I get it. You don't like this idea, or you don't think it will work, or you don't think facebook's investors will like it (full disclosure: I am one). Why on earth should that stop me from putting my obviously flawed opinion out there that I am sick of being the product and I'd love to opt out of that process?
- bertil 9y agoI don’t think you risk much data exposure now. That’s, assuming that you are not using AirBnB, Uber or Tinder.
- pkaye 9y agoThe problem for Facebook is that it is really not worth that much for many users. Even if they charge $10/year many would dump it.
- scolson 9y agoI get many/most prefer to be the product than the customer. I, however, would love the option to switch.
- kgwgk 9y agoHave you also considered that the users who would love the option to switch for $100 may be worth much more to them?
- pkaye 9y agoI guess it wouldn't hurt to give options. I think Google has given this option for their ad network... I wonder how many people subscribe to that.
- scolson 9y ago
- whyenot 9y agoThe median salary package at FB is $240,430[1]. Now I understand how that is possible. 1. http://www.businessinsider.com/facebook-median-pay-240000-2017-2018-4 http://www.businessinsider.com/facebook-median-pay-240000-20... edit: salary package (salary, bonuses, and stock grants), not salary alone
- conanbatt 9y agoDang, thats a lot of money. Though last year was a great year for stocks in general, I wonder how much that would change in a bear market.
- coastal-fiesta 9y agoIs that truly salary? Or total compensation?
- erobbins 9y agoTC, almost certainly. Otherwise I need to quit and get rehired :)
- rb2k_ 9y agofrom the article: "That's total compensation, which includes salary, bonus, and stock grants."
- paxys 9y ago"Median pay package", which I assume includes base salary, bonuses, stock grants, insurance, and some dollar value for other benefits.
- whyenot 9y agofrom the article: salary, bonuses, and stock grants.
- objclxt 9y agoIt's a slightly misleading figure because it includes all the stock grants given in 2017. From the proxy statement: > we calculated as actual salary paid to our employees for 2017 [...], actual bonus or sales commission earned by our employees in 2017, and the value of equity awards granted to our employees in 2017 Specifically, if you joined in 2017 the value of your entire initial stock grant was used. This skews the median quite a bit. For example, if I joined Facebook in 2017 at $150,000 and received a $400,000 RSU stock grant vesting over four years my median annual income for the purposes of these SEC calculations was $550,000 (even though most of that is in stock vesting over the next four years).
- spiderPig 9y agoThat's crazy. Their net income is almost the same as Google's with 1/3rd the number of employees. I am surprised that they have 25k employees now, wow!
- snaveed 9y agoReported 2018 Q1 Net Income: Alphabet: $9.4 Billion [0] Facebook: $5.0 Billion [1] [0] https://abc.xyz/investor/pdf/2018Q1_alphabet_earnings_release.pdf https://abc.xyz/investor/pdf/2018Q1_alphabet_earnings_releas... [1] https://s21.q4cdn.com/399680738/files/doc_financials/2018/Q1/Q1-2018-Earnings-Presentation-(1).pdf https://s21.q4cdn.com/399680738/files/doc_financials/2018/Q1...
- acchow 9y agoAlphabet's net income will drop dramatically in the next quarter. Google's VC investments booked a ton of gains all-at-once in the quarter (due to an accounting change) which won't be recurring. About $2.4bn added to net income.
- anameaname 9y agoNet income is not that useful of a metric since both companies are still growing.
- et-al 9y agoMay we please rename this to "Slides of Facebook Q1 2018 Earnings [pdf]"? There's ambiguity in the current title with the idea of the earnings sliding (which they didn't).
- Rafuino 9y agoCan anyone explain why their operating margin is seemingly seasonal, improving through the year? And damn, that tax rate is insanely low. Looks like they're settling into around 10% effective tax. Average across profitable companies is ~25% according to an NYU study I linked to below. Damn. www.stern.nyu.edu/~adamodar/pc/datasets/taxrate.xls
- Piedmontese 9y agoMy uninformed guess would be the seasonality is related to holiday spending. Slides 5 and 6 show revenues by user location and Asia-pacific doesn't consistently spike in Q4, while N. America and Europe seem to follow this pattern. Either that or accounting practices that go way above my head...
- chipperyman573 9y agoAdvertising is generally seasonal as it's a lot more common for people to spend money around the holidays than it is for them to spend money in Q1. Therefore, fewer companies buy advertising in Q1 because the audience of people who will buy their product is smaller. There are a few exceptions to this rule (Mcdonalds, Coke, etc), and they only do that because their business model is essentially to advertise so much you think about them subconsciously. If they stopped advertising for 3 months, this trick would lose a lot of power. This isn't limited to ads btw, when I used to work at a restaurant we'd be noticeably slower during Q1 because people had less money saved (or were more aware of how much they have been spending lately). Similarly, when I worked retail our store "goals" were much lower as well (they usually picked up again late spring/early summer).
- lainga 9y agoIsn't it odd that DAUs/MAUs is consistently 66% in every quarter? Is this a property of the typical use patterns of Facebook, or something they estimated for SEC purposes? EDIT: Also interesting to me that US/NA makes up ~12% of users but ~60% of ad and payment revenue - a sort of downshifted Pareto principle.
- adventured 9y agoAlphabet sees a similar tilt. They got 47% of their revenue from the US in 2017. From what I've read I'd guess they have 200 million to 225m product users in the US market and probably 1.5 billion to 2b outside of it.
- jkw 9y agoAre instagram revenues included the revenue numbers? Are instagram dau included the dau numbers? If not, anyone know how to back out those metrics?
- jankassens 9y agoFrom a footnote on those slides: > The numbers for DAUs and MAUs do not include Instagram, WhatsApp, or Oculus users unless they would otherwise qualify as such users, respectively, based on their other activities on Facebook.
- lainga 9y agoFor DAU, not "unless they would otherwise qualify as such users" from their activity on Facebook, see footnote on slides 2 and 3
- deleted 9y ago[deleted]
- tintor 9y agoWhy is FB advertising revenue per user almost 3x higher in US&Canada vs Europe: $23.14 vs $8.01 Is it because of Europe being more restrictive on how much user data can be used for advertising?
- askl56 9y agoThe laws in the UK are already far more restrictive than our American cousins when it comes to advertising. “traffic data” and “location data" are already covered by the e-Privacy Directive 2002/58/EC. Source: http://resources.infosecinstitute.com/differences-privacy-laws-in-eu-and-us/ http://resources.infosecinstitute.com/differences-privacy-la...
- tehlike 9y agoIt has to do with (mostly, directly) with GDP per capita. American consumers earn & spend much more than europeans. NA also consumes much more than the rest of the world.
- DimitarIbra9 9y agothe lesson i learnt from this is don't read leftie's news or their fake news.
- dang 9y agoCould you please not post like this on Hacker News? https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html
- alex_young 9y agoWhat is your privacy worth to you? It's worth $100 / year to FB, and it probably costs you twice that much. (Assuming you live in the US.) The average US user is worth > $100 / year now (forward looking) in advertising revenue. Advertising works because it increases spending on products by some larger amount. Say this is 2x since there is significant risk and a lot of friction to overcome. This means that on average, a US person spends something like $200 a year because they saw ads on FBs network. This is simply astounding. Assuming 300m US users, this works out to $60b per year. Kind of the opposite of free.
- ktta 9y ago>This means that on average, a US person spends something like $200 a year because they saw ads on FBs network. As much as I hate ads, this is a very poor way of understanding how advertising works.
- deleted 9y ago[deleted]
- fergie 9y agoInteresting to note that usage and income peaked in late 2017, yet earnings per share continues to rise unabated. When there is too much shareholder pressure to extract money from struggling companies, those companies tend to struggle.
- oblio 9y agoPeaked? The yearly cycle peaks during Q4 because of the holiday season.
- thisisit 9y agoIn the meantime at the Sohn conference Jeffrey Gundlach said FB is a bubble: http://fortune.com/2018/04/23/facebook-bubble-gundlach/ http://fortune.com/2018/04/23/facebook-bubble-gundlach/
- petarb 9y agoWhat really got me is the average revenue per user in US & Canada is $23.59, compared to less than half of that for Europe ($8.12).
- throwaway84742 9y agoKey takeaway: Wall Street doesn’t care about manufactured outrage. At least not in the longer term.
- ytalp17 9y agocc
- deleted 9y ago[deleted]
- rippeltippel 9y agoTL;DL: 1) Revenues are inversely proportional to number of active users, hinting at cultural differences (e.g. US users may be more exposed to ads than EU users) 2) Overall income has fallen, but so have taxes and operating margin, leading to higher net income and earnings per share.