Facebook Reports Fourth Quarter and Full Year 2016 Results

2 Feb
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Facebook, Inc. today reported financial results for the fourth quarter and full year ended December 31, 2016.

“Our mission to connect the world is more important now than ever,” said Mark Zuckerberg, Facebook founder and CEO. “Our business did well in 2016, but we have a lot of work ahead to help bring people together.”

Fourth Quarter and Full Year 2016 Financial Highlights

Three Months Ended December 31,

Year-over-
Year %
Change

Year Ended December 31,

Year-over-
Year %
Change

In millions, except percentages and per share amounts

2016

2015

2016

2015

Revenue:

   Advertising

$ 8,629

$ 5,637

53 %

$ 26,885

$ 17,079

57 %

   Payments and other fees

180

204

(12)%

753

849

(11)%

Total revenue

8,809

5,841

51 %

27,638

17,928

54 %

Total costs and expenses

4,243

3,281

29 %

15,211

11,703

30 %

Income from operations

$ 4,566

$ 2,560

78 %

$ 12,427

$   6,225

100 %

Operating margin

52 %

44 %

45 %

35 %

Provision for income taxes

965

2,301

Effective tax rate

21 %

18 %

Net income

$ 3,568

$ 1,562

128 %

$ 10,217

$   3,688

177 %

Diluted Earnings per Share (EPS)

$   1.21

$   0.54

124 %

$     3.49

$     1.29

171 %

(1) 

The information in the Fourth Quarter and Full Year 2016 Financial Highlights table is presented in accordance with generally accepted accounting principles in the United States (GAAP). For non-GAAP financial information, see the table below titled “Reconciliation of GAAP to Non-GAAP Results.”

(2)   

In the fourth quarter of 2016, we elected to early adopt Accounting Standards Update No. 2016-09, Compensation-Stock Compensation (Topic 718): Improvement to Employee Share-based Payment Accounting (ASU 2016-09) which, among other items, requires us to record excess tax benefits as a reduction of the provision for income taxes in the income statements, whereas they were previously recognized in equity. We are required to reflect any adoption adjustments as of January 1, 2016, the beginning of the annual period that includes the interim period of adoption. As such, certain financial highlights data for the three months and year ended December 31, 2016 included the impact of the ASU 2016-09 adoption. See “Adoption of New Accounting Guidance” below for additional information.

Full Year 2016 Operational Highlights

  • Daily active users (DAUs) – DAUs were 1.23 billion on average for December 2016, an increase of 18% year-over-year.
  • Mobile DAUs – Mobile DAUs were 1.15 billion on average for December 2016, an increase of 23% year-over-year.
  • Monthly active users (MAUs) – MAUs were 1.86 billion as of December 31, 2016, an increase of 17% year-over-year.
  • Mobile MAUs – Mobile MAUs were 1.74 billion as of December 31, 2016, an increase of 21% year-over-year.

Fourth Quarter and Full Year 2016 Other Financial Highlights

  • Mobile advertising revenue – Mobile advertising revenue represented approximately 84% of advertising revenue for the fourth quarter of 2016, up from approximately 80% of advertising revenue in the fourth quarter of 2015.
  • Capital expenditures – Capital expenditures for the full year 2016 were $4.49 billion.
  • Cash and cash equivalents and marketable securities – Cash and cash equivalents and marketable securities were $29.45 billion at the end of the fourth quarter of 2016.

Adoption of New Accounting Guidance

We elected to early adopt ASU 2016-09 in the fourth quarter of 2016 which addresses, among other items, the accounting for income taxes and forfeitures, and cash flow presentation of share-based compensation. Upon adoption, excess tax benefits generated when stock awards vest or settle are no longer recognized in equity but are instead recognized as a reduction to provision for income taxes. We also elected to account for forfeitures as they occur, rather than estimate expected forfeitures. Under the new guidance, cash flows related to excess tax benefits are required to be presented as an operating activity rather than a financing activity. We are required to reflect any adjustments as of January 1, 2016, the beginning of the annual period that includes the interim period of adoption.

The adoption of ASU 2016-09 resulted in, among other items:

  • net cumulative-effect adjustment of $1.67 billion increase to retained earnings as of January 1, 2016, mostly related to the recognition of the previously unrecognized excess tax benefits, and
  • $934 million decrease in our full year 2016 provision for income taxes, or 7% decrease in our full year 2016 effective tax rate, mostly due to the recognition of excess tax benefits for awards that vested or settled in 2016 as a reduction to our provision for income taxes, whereas they previously were recognized in equity.

We adopted the aspects of the cash flow presentation retrospectively, and accordingly, to conform to the current year presentation, we reclassified $566 million and $1.72 billion of excess tax benefits under financing activities to operating activities for the fourth quarter and full year 2015, respectively. See supplemental earnings slides available on our investor website as well as our annual report on Form 10-K for the year ended December 31, 2016 to be filed with the SEC for additional detailed information regarding the impact of the early adoption.

Webcast and Conference Call Information

Facebook will host a conference call to discuss the results at 2 p.m. PT / 5 p.m. ET today. The live webcast of Facebook’s earnings conference call can be accessed at investor.fb.com, along with the earnings press release, financial tables and slide presentation. Facebook uses the investor.fb.com and newsroom.fb.com websites as well as Mark Zuckerberg’s Facebook Page (https://www.facebook.com/zuck) as means of disclosing material non-public information and for complying with its disclosure obligations under Regulation FD.

Following the call, a replay will be available at the same website. A telephonic replay will be available for one week following the conference call at +1 (404) 537-3406 or +1 (855) 859-2056, conference ID 39092359.