Delaware | 001- 35551 | 20-1665019 | ||
(State or Other Jurisdiction | (Commission | (IRS Employer | ||
of Incorporation) | File Number) | Identification No.) |
1601 Willow Road | ||
Menlo Park, California | 94025 | |
(Address of Principal Executive Offices) | (Zip Code) |
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Exhibit Number | Exhibit Title or Description | |
99.1 | Press release dated February 1, 2017 |
FACEBOOK, INC. | ||||
Date: | February 1, 2017 | By: | /s/ David Kling | |
Name: David Kling | ||||
Title: Vice President, Deputy General Counsel and Secretary |
Exhibit Number | Exhibit Title or Description | |
99.1 | Press release dated February 1, 2017 |
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(2) | 4,243 | 3,281 | 29 | % | 15,211 | 11,703 | 30 | % | |||||||||||||
Income from operations(2) | $ | 4,566 | $ | 2,560 | 78 | % | $ | 12,427 | $ | 6,225 | 100 | % | |||||||||
Operating margin(2) | 52 | % | 44 | % | 45 | % | 35 | % | |||||||||||||
Provision for income taxes(2) | $ | 965 | $ | 2,301 | |||||||||||||||||
Effective tax rate(2) | 21 | % | 18 | % | |||||||||||||||||
Net income(2) | $ | 3,568 | $ | 1,562 | 128 | % | $ | 10,217 | $ | 3,688 | 177 | % | |||||||||
Diluted Earnings per Share (EPS)(2) | $ | 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. |
• | 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. |
• | 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. |
• | 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. |
FACEBOOK, INC. | |||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF INCOME | |||||||||||||||
(In millions, except for per share amounts) | |||||||||||||||
(Unaudited) | |||||||||||||||
Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||
2016(1) | 2015 | 2016(1) | 2015 | ||||||||||||
Revenue | $ | 8,809 | $ | 5,841 | $ | 27,638 | $ | 17,928 | |||||||
Costs and expenses: | |||||||||||||||
Cost of revenue | 1,047 | 824 | 3,789 | 2,867 | |||||||||||
Research and development | 1,563 | 1,314 | 5,919 | 4,816 | |||||||||||
Marketing and sales | 1,118 | 772 | 3,772 | 2,725 | |||||||||||
General and administrative | 515 | 371 | 1,731 | 1,295 | |||||||||||
Total costs and expenses | 4,243 | 3,281 | 15,211 | 11,703 | |||||||||||
Income from operations | 4,566 | 2,560 | 12,427 | 6,225 | |||||||||||
Interest and other income/(expense), net | (33 | ) | (3 | ) | 91 | (31 | ) | ||||||||
Income before provision for income taxes | 4,533 | 2,557 | 12,518 | 6,194 | |||||||||||
Provision for income taxes | 965 | 995 | 2,301 | 2,506 | |||||||||||
Net income | $ | 3,568 | $ | 1,562 | $ | 10,217 | $ | 3,688 | |||||||
Less: Net income attributable to participating securities | 7 | 7 | 29 | 19 | |||||||||||
Net income attributable to Class A and Class B common stockholders | $ | 3,561 | $ | 1,555 | $ | 10,188 | $ | 3,669 | |||||||
Earnings per share attributable to Class A and Class B common stockholders: | |||||||||||||||
Basic | $ | 1.24 | $ | 0.55 | $ | 3.56 | $ | 1.31 | |||||||
Diluted | $ | 1.21 | $ | 0.54 | $ | 3.49 | $ | 1.29 | |||||||
Weighted average shares used to compute earnings per share attributable to Class A and Class B common stockholders: | |||||||||||||||
Basic | 2,882 | 2,825 | 2,863 | 2,803 | |||||||||||
Diluted | 2,938 | 2,878 | 2,925 | 2,853 | |||||||||||
Share-based compensation expense included in costs and expenses: | |||||||||||||||
Cost of revenue | $ | 32 | $ | 22 | $ | 113 | $ | 81 | |||||||
Research and development | 641 | 583 | 2,494 | 2,350 | |||||||||||
Marketing and sales | 96 | 84 | 368 | 320 | |||||||||||
General and administrative | 62 | 57 | 243 | 218 | |||||||||||
Total share-based compensation expense | $ | 831 | $ | 746 | $ | 3,218 | $ | 2,969 | |||||||
Payroll tax expenses related to share-based compensation included in costs and expenses: | |||||||||||||||
Cost of revenue | $ | — | $ | — | $ | 4 | $ | 2 | |||||||
Research and development | 12 | 22 | 69 | 56 | |||||||||||
Marketing and sales | 2 | 2 | 11 | 10 | |||||||||||
General and administrative | 3 | 2 | 14 | 9 | |||||||||||
Total payroll tax expenses related to share-based compensation | $ | 17 | $ | 26 | $ | 98 | $ | 77 | |||||||
Amortization of intangible assets included in costs and expenses: | |||||||||||||||
Cost of revenue | $ | 55 | $ | 55 | $ | 208 | $ | 187 | |||||||
Research and development | 7 | 9 | 34 | 39 | |||||||||||
Marketing and sales | 100 | 103 | 422 | 410 | |||||||||||
General and administrative | 21 | 24 | 87 | 94 | |||||||||||
Total amortization of intangible assets | $ | 183 | $ | 191 | $ | 751 | $ | 730 |
(1) | We elected to early adopt ASU 2016-09 in the fourth quarter of 2016. The impacts of adoption have been reflected in our condensed consolidated statements of income for the three months and year ended December 31, 2016. See "Adoption of New Accounting Guidance" above for additional information. |
FACEBOOK, INC. | |||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||||
(In millions) | |||||||||
(Unaudited) | |||||||||
December 31, 2016(1) | December 31, 2015 | ||||||||
Assets | |||||||||
Current assets: | |||||||||
Cash and cash equivalents | $ | 8,903 | $ | 4,907 | |||||
Marketable securities | 20,546 | 13,527 | |||||||
Accounts receivable, net of allowances for doubtful accounts of $94 and $68 as of December 31, 2016 and December 31, 2015, respectively | 3,993 | 2,559 | |||||||
Prepaid expenses and other current assets | 959 | 659 | |||||||
Total current assets | 34,401 | 21,652 | |||||||
Property and equipment, net | 8,591 | 5,687 | |||||||
Intangible assets, net | 2,535 | 3,246 | |||||||
Goodwill | 18,122 | 18,026 | |||||||
Other assets | 1,312 | 796 | |||||||
Total assets | $ | 64,961 | $ | 49,407 | |||||
Liabilities and stockholders' equity | |||||||||
Current liabilities: | |||||||||
Accounts payable | $ | 302 | $ | 196 | |||||
Partners payable | 280 | 217 | |||||||
Accrued expenses and other current liabilities | 2,203 | 1,449 | |||||||
Deferred revenue and deposits | 90 | 56 | |||||||
Current portion of capital lease obligations | — | 7 | |||||||
Total current liabilities | 2,875 | 1,925 | |||||||
Capital lease obligations, less current portion | — | 107 | |||||||
Other liabilities | 2,892 | 3,157 | |||||||
Total liabilities | 5,767 | 5,189 | |||||||
Stockholders' equity | |||||||||
Common stock and additional paid-in capital | 38,227 | 34,886 | |||||||
Accumulated other comprehensive loss | (703 | ) | (455 | ) | |||||
Retained earnings | 21,670 | 9,787 | |||||||
Total stockholders' equity | 59,194 | 44,218 | |||||||
Total liabilities and stockholders' equity | $ | 64,961 | $ | 49,407 |
(1) | We elected to early adopt ASU 2016-09 in the fourth quarter of 2016. The impacts of adoption have been reflected in our condensed consolidated balance sheet as of December 31, 2016. See "Adoption of New Accounting Guidance" above for additional information. |
FACEBOOK, INC. | |||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||||||||
(In millions) | |||||||||||||||
(Unaudited) | |||||||||||||||
Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||
2016(1) | 2015(1) | 2016(1) | 2015(1) | ||||||||||||
Cash flows from operating activities | |||||||||||||||
Net income | $ | 3,568 | $ | 1,562 | $ | 10,217 | $ | 3,688 | |||||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||||||
Depreciation and amortization | 614 | 543 | 2,342 | 1,945 | |||||||||||
Share-based compensation | 831 | 746 | 3,218 | 2,960 | |||||||||||
Deferred income taxes | (256 | ) | (123 | ) | (457 | ) | (795 | ) | |||||||
Tax benefit from share-based award activity | — | 566 | — | 1,721 | |||||||||||
Other | 7 | 3 | 30 | 17 | |||||||||||
Changes in assets and liabilities: | |||||||||||||||
Accounts receivable | (1,011 | ) | (568 | ) | (1,489 | ) | (973 | ) | |||||||
Prepaid expenses and other current assets | 155 | 1 | (159 | ) | (144 | ) | |||||||||
Other assets | (32 | ) | (7 | ) | 14 | (3 | ) | ||||||||
Accounts payable | 35 | 11 | 14 | 18 | |||||||||||
Partners payable | 47 | (23 | ) | 67 | 17 | ||||||||||
Accrued expenses and other current liabilities | 372 | 222 | 1,014 | 513 | |||||||||||
Deferred revenue and deposits | 14 | 9 | 35 | (9 | ) | ||||||||||
Other liabilities | 586 | 451 | 1,262 | 1,365 | |||||||||||
Net cash provided by operating activities | 4,930 | 3,393 | 16,108 | 10,320 | |||||||||||
Cash flows from investing activities | |||||||||||||||
Purchases of property and equipment | (1,269 | ) | (692 | ) | (4,491 | ) | (2,523 | ) | |||||||
Purchases of marketable securities | (4,974 | ) | (5,605 | ) | (22,341 | ) | (15,938 | ) | |||||||
Sales of marketable securities | 4,103 | 2,803 | 13,894 | 6,928 | |||||||||||
Maturities of marketable securities | 227 | 747 | 1,261 | 2,310 | |||||||||||
Acquisitions of businesses, net of cash acquired, and purchases of intangible assets | (41 | ) | (4 | ) | (123 | ) | (313 | ) | |||||||
Change in restricted cash and deposits | (21 | ) | 25 | 61 | 102 | ||||||||||
Net cash used in investing activities | (1,975 | ) | (2,726 | ) | (11,739 | ) | (9,434 | ) | |||||||
Cash flows from financing activities | |||||||||||||||
Principal payments on capital lease and other financing obligations | — | (12 | ) | (312 | ) | (119 | ) | ||||||||
Other financing activities, net | 4 | — | 2 | (20 | ) | ||||||||||
Net cash provided by (used in) financing activities | 4 | (12 | ) | (310 | ) | (139 | ) | ||||||||
Effect of exchange rate changes on cash and cash equivalents | (94 | ) | (56 | ) | (63 | ) | (155 | ) | |||||||
Net increase in cash and cash equivalents | 2,865 | 599 | 3,996 | 592 | |||||||||||
Cash and cash equivalents at beginning of period | 6,038 | 4,308 | 4,907 | 4,315 | |||||||||||
Cash and cash equivalents at end of period | $ | 8,903 | $ | 4,907 | $ | 8,903 | $ | 4,907 |
FACEBOOK, INC. | |||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||||||||
(In millions) | |||||||||||||||
(Unaudited) | |||||||||||||||
Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||
2016(1) | 2015(1) | 2016(1) | 2015(1) | ||||||||||||
Supplemental cash flow data | |||||||||||||||
Cash paid during the period for: | |||||||||||||||
Interest | $ | — | $ | 2 | $ | 11 | $ | 10 | |||||||
Income taxes, net | $ | 446 | $ | 71 | $ | 1,210 | $ | 270 | |||||||
Non-cash investing and financing activities: | |||||||||||||||
Net change in accounts payable, accrued expenses and other current liabilities, and other liabilities related to property and equipment additions | $ | (47 | ) | $ | (19 | ) | $ | 272 | $ | 88 | |||||
Promissory note payable issued in connection with an acquisition | $ | — | $ | — | $ | — | $ | 198 | |||||||
Settlement of contingent consideration liability | $ | — | $ | — | $ | 33 | $ | — |
(1) | We elected to early adopt ASU 2016-09 in the fourth quarter of 2016. The impacts of adoption, such as the recognition of excess tax benefits for awards that vested or settled in 2016 as a reduction to our provision for income taxes, have been reflected in our net income under net cash provided by operating activities for the three months and year ended December 31, 2016. Since we adopted the aspects of the cash flow presentation retrospectively, 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 "Adoption of New Accounting Guidance" above for additional information. |
Reconciliation of GAAP to Non-GAAP Results | |||||||||||||||
(In millions, except percentages and per share amounts) | |||||||||||||||
(Unaudited) | |||||||||||||||
Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
GAAP revenue | $ | 8,809 | $ | 5,841 | $ | 27,638 | $ | 17,928 | |||||||
Foreign exchange effect on 2016 revenue using 2015 rates | 36 | 270 | |||||||||||||
Revenue excluding foreign exchange effect | $ | 8,845 | $ | 27,908 | |||||||||||
GAAP revenue year-over-year change % | 51 | % | 54 | % | |||||||||||
Revenue excluding foreign exchange effect year-over-year change % | 51 | % | 56 | % | |||||||||||
GAAP advertising revenue | $ | 8,629 | $ | 5,637 | $ | 26,885 | $ | 17,079 | |||||||
Foreign exchange effect on 2016 advertising revenue using 2015 rates | 35 | 269 | |||||||||||||
Advertising revenue excluding foreign exchange effect | $ | 8,664 | $ | 27,154 | |||||||||||
GAAP advertising revenue year-over-year change % | 53 | % | 57 | % | |||||||||||
Advertising revenue excluding foreign exchange effect year-over-year change % | 54 | % | 59 | % | |||||||||||
GAAP costs and expenses(1) | $ | 4,243 | $ | 3,281 | $ | 15,211 | $ | 11,703 | |||||||
Share-based compensation expense(1) | (831 | ) | (746 | ) | (3,218 | ) | (2,969 | ) | |||||||
Payroll tax expenses related to share-based compensation | (17 | ) | (26 | ) | (98 | ) | (77 | ) | |||||||
Amortization of intangible assets | (183 | ) | (191 | ) | (751 | ) | (730 | ) | |||||||
Non-GAAP costs and expenses | $ | 3,212 | $ | 2,318 | $ | 11,144 | $ | 7,927 | |||||||
GAAP income from operations(1) | $ | 4,566 | $ | 2,560 | $ | 12,427 | $ | 6,225 | |||||||
Share-based compensation expense(1) | 831 | 746 | 3,218 | 2,969 | |||||||||||
Payroll tax expenses related to share-based compensation | 17 | 26 | 98 | 77 | |||||||||||
Amortization of intangible assets | 183 | 191 | 751 | 730 | |||||||||||
Non-GAAP income from operations | $ | 5,597 | $ | 3,523 | $ | 16,494 | $ | 10,001 | |||||||
GAAP net income(1) | $ | 3,568 | $ | 1,562 | $ | 10,217 | $ | 3,688 | |||||||
Share-based compensation expense(1) | 831 | 746 | 3,218 | 2,969 | |||||||||||
Payroll tax expenses related to share-based compensation | 17 | 26 | 98 | 77 | |||||||||||
Amortization of intangible assets | 183 | 191 | 751 | 730 | |||||||||||
Income tax adjustments(1) | (449 | ) | (260 | ) | (1,916 | ) | (946 | ) | |||||||
Non-GAAP net income | $ | 4,150 | $ | 2,265 | $ | 12,368 | $ | 6,518 | |||||||
GAAP and Non-GAAP diluted shares(1) | 2,938 | 2,878 | 2,925 | 2,853 | |||||||||||
GAAP diluted earnings per share(1) | $ | 1.21 | $ | 0.54 | $ | 3.49 | $ | 1.29 | |||||||
Non-GAAP adjustments to net income | 0.20 | 0.25 | 0.74 | 0.99 | |||||||||||
Non-GAAP diluted earnings per share | $ | 1.41 | $ | 0.79 | $ | 4.23 | $ | 2.28 | |||||||
GAAP operating margin(1) | 52 | % | 44 | % | 45 | % | 35 | % | |||||||
Share-based compensation expense(1) | 9 | % | 13 | % | 12 | % | 17 | % | |||||||
Payroll tax expenses related to share-based compensation | — | % | — | % | — | % | — | % | |||||||
Amortization of intangible assets | 2 | % | 3 | % | 3 | % | 4 | % | |||||||
Non-GAAP operating margin | 64 | % | 60 | % | 60 | % | 56 | % | |||||||
GAAP income before provision for income taxes(1) | $ | 4,533 | $ | 2,557 | $ | 12,518 | $ | 6,194 | |||||||
GAAP provision for income taxes(1) | 965 | 995 | 2,301 | 2,506 | |||||||||||
GAAP effective tax rate(1) | 21 | % | 39 | % | 18 | % | 40 | % | |||||||
GAAP income before provision for income taxes(1) | $ | 4,533 | $ | 2,557 | $ | 12,518 | $ | 6,194 | |||||||
Share-based compensation and related payroll tax expenses(1) | 848 | 772 | 3,316 | 3,046 |
Amortization of intangible assets | 183 | 191 | 751 | 730 | |||||||||||
Non-GAAP income before provision for income taxes | $ | 5,564 | $ | 3,520 | $ | 16,585 | $ | 9,970 | |||||||
Non-GAAP provision for income taxes | 1,414 | 1,255 | 4,217 | 3,452 | |||||||||||
Non-GAAP effective tax rate | 25 | % | 36 | % | 25 | % | 35 | % | |||||||
Net cash provided by operating activities(1) | $ | 4,930 | $ | 3,393 | $ | 16,108 | $ | 10,320 | |||||||
Purchases of property and equipment | (1,269 | ) | (692 | ) | (4,491 | ) | (2,523 | ) | |||||||
Free cash flow(1) | $ | 3,661 | $ | 2,701 | $ | 11,617 | $ | 7,797 |
(1) | In the fourth quarter of 2016, we elected to early adopt ASU 2016-09. The impacts of adoption have been reflected in certain results of operations and cash flows data for the three months and year ended December 31, 2016. In addition, certain cash flows data for the three months and year ended December 31, 2015 have been adjusted accordingly. See "Adoption of New Accounting Guidance" above for additional information. |