Facebook Reports Fourth Quarter and Full Year 2020 Results

- January 27th, 2021

Facebook, Inc. today reported financial results for the quarter and full year ended December 31, 2020. “We had a strong end to the year as people and businesses continued to use our services during these challenging times,” said Mark Zuckerberg Facebook founder and CEO. “I’m excited about our product roadmap for 2021 as we build new and meaningful ways to create economic opportunity, build community and help …

– Facebook, Inc. (Nasdaq: FB) today reported financial results for the quarter and full year ended December 31, 2020.

“We had a strong end to the year as people and businesses continued to use our services during these challenging times,” said Mark Zuckerberg , Facebook founder and CEO. “I’m excited about our product roadmap for 2021 as we build new and meaningful ways to create economic opportunity, build community and help people just have fun.”

Fourth Quarter and Full Year 2020 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

2020

2019

2020

2019

Revenue:

Advertising

$

27,187

$

20,736

31%

$

84,169

$

69,655

21%

Other

885

346

156%

1,796

1,042

72%

Total revenue

28,072

21,082

33%

85,965

70,697

22%

Total costs and expenses

15,297

12,224

25%

53,294

46,711

14%

Income from operations

$

12,775

$

8,858

44%

$

32,671

$

23,986

36%

Operating margin

46%

42%

38%

34%

Provision for income taxes

$

1,836

$

1,820

1%

$

4,034

$

6,327

(36)%

Effective tax rate

14%

20%

12%

25%

Net income

$

11,219

$

7,349

53%

$

29,146

$

18,485

58%

Diluted earnings per share (EPS)

$

3.88

$

2.56

52%

$

10.09

$

6.43

57%

Fourth Quarter and Full Year 2020 Operational and Other Financial Highlights

  • Facebook daily active users (DAUs) – DAUs were 1.84 billion on average for December 2020 , an increase of 11% year-over-year.
  • Facebook monthly active users (MAUs) – MAUs were 2.80 billion as of December 31, 2020 , an increase of 12% year-over-year.
  • Family daily active people (DAP) – DAP was 2.60 billion on average for December 2020 , an increase of 15% year-over-year.
  • Family monthly active people (MAP) – MAP was 3.30 billion as of December 31, 2020 , an increase of 14% year-over-year.
  • Capital expenditures – Capital expenditures, including principal payments on finance leases, were $4.82 billion and $15.72 billion for the fourth quarter and full year of 2020, respectively.
  • Cash and cash equivalents and marketable securities – Cash and cash equivalents and marketable securities were $61.95 billion as of December 31, 2020 .
  • Headcount – Headcount was 58,604 as of December 31, 2020 , an increase of 30% year-over-year.

In January 2021 , the Board of Directors authorized incremental share repurchases of up to an additional $25 billion of our shares of Class A common stock. This authorization is in addition to the previously authorized repurchases of up to $34 billion of our shares of Class A common stock. As of the end of 2020, $8 .6 billion remained on the previous share repurchase authorization.

CFO Outlook Commentary

We continue to face significant uncertainty as we manage through a number of cross currents in 2021.

We believe our business has benefited from two broad economic trends playing out during the pandemic. The first is the ongoing shift towards online commerce. The second is the shift in consumer demand towards products and away from services. We believe these shifts provided a tailwind to our advertising business in the second half of 2020 given our strength in product verticals sold via online commerce and our lower exposure to service verticals like travel. Looking forward, a moderation or reversal in one or both of these trends could serve as a headwind to our advertising revenue growth.

At the same time, in the first half of 2021, we will be lapping a period of growth that was negatively impacted by reduced advertising demand during the early stages of the pandemic. As a result, we expect year-over-year growth rates in total revenue to remain stable or modestly accelerate sequentially in the first and second quarters of 2021. In the second half of the year, we will lap periods of increasingly strong growth, which will significantly pressure year-over-year growth rates.

We also expect to face more significant ad targeting headwinds in 2021. This includes the impact of platform changes, notably iOS 14, as well as the evolving regulatory landscape. While the timing of the iOS 14 changes remains uncertain, we would expect to see an impact beginning late in the first quarter.

There is also continuing uncertainty around the viability of transatlantic data transfers in light of recent European regulatory developments, and like other companies in our industry, we are closely monitoring the potential impact on our European operations as these developments progress.

We expect 2021 total expenses to be in the range of $68 -73 billion, unchanged from our prior outlook. This is driven by investments in technical and product talent as well as continued growth in infrastructure costs.

We continue to expect 2021 capital expenditures to be in the range of $21 -23 billion, driven by data centers, servers, network infrastructure, and office facilities. Our outlook includes spend that was delayed from 2020 due to the impact of the pandemic on our construction efforts.

We continue to expect our full-year 2021 tax rate to be in the high-teens.

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 about.fb.com/news/ 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 3993495.

Transcripts of conference calls with publishing equity research analysts held today will also be posted to the investor.fb.com website.

About Facebook

Founded in 2004, Facebook’s mission is to give people the power to build community and bring the world closer together. People use Facebook’s apps and technologies to connect with friends and family, find communities and grow businesses.

Contacts

Investors:
Deborah Crawford
investor@fb.com / investor.fb.com

Press:
Ryan Moore
press@fb.com / about.fb.com/news/

Forward-Looking Statements

This press release contains forward-looking statements regarding our future business expectations. These forward-looking statements are only predictions and may differ materially from actual results due to a variety of factors including: the impact of the COVID-19 pandemic on our business and financial results; our ability to retain or increase users and engagement levels; our reliance on advertising revenue; our dependency on data signals and mobile operating systems, networks, and standards that we do not control; risks associated with new products and changes to existing products as well as other new business initiatives; our emphasis on community growth and engagement and the user experience over short-term financial results; maintaining and enhancing our brand and reputation; our ongoing privacy, safety, security, and content review efforts; competition; risks associated with government actions that could restrict access to our products or impair our ability to sell advertising in certain countries; litigation and government inquiries; privacy and regulatory concerns; risks associated with acquisitions; security breaches; and our ability to manage growth and geographically-dispersed operations. These and other potential risks and uncertainties that could cause actual results to differ from the results predicted are more fully detailed under the caption “Risk Factors” in our Quarterly Report on Form 10-Q filed with the SEC on October 30, 2020 , which is available on our Investor Relations website at investor.fb.com and on the SEC website at www.sec.gov . Additional information will also be set forth in our Annual Report on Form 10-K for the year ended December 31, 2020. In addition, please note that the date of this press release is January 27, 2021, and any forward-looking statements contained herein are based on assumptions that we believe to be reasonable as of this date. We undertake no obligation to update these statements as a result of new information or future events.

Non-GAAP Financial Measures

To supplement our condensed consolidated financial statements, which are prepared and presented in accordance with generally accepted accounting principles in the United States (GAAP), we use the following non-GAAP financial measures: revenue excluding foreign exchange effect, advertising revenue excluding foreign exchange effect and free cash flow. The presentation of these financial measures is not intended to be considered in isolation or as a substitute for, or superior to, financial information prepared and presented in accordance with GAAP. Investors are cautioned that there are material limitations associated with the use of non-GAAP financial measures as an analytical tool. In addition, these measures may be different from non-GAAP financial measures used by other companies, limiting their usefulness for comparison purposes. We compensate for these limitations by providing specific information regarding the GAAP amounts excluded from these non-GAAP financial measures.

We believe these non-GAAP financial measures provide investors with useful supplemental information about the financial performance of our business, enable comparison of financial results between periods where certain items may vary independent of business performance, and allow for greater transparency with respect to key metrics used by management in operating our business.

We exclude the following items from our non-GAAP financial measures:

Foreign exchange effect on revenue . We translated revenue for the three months and full year ended December 31, 2020 using the prior year’s monthly exchange rates for our settlement or billing currencies other than the U.S. dollar, which we believe is a useful metric that facilitates comparison to our historical performance.

Purchases of property and equipment; Principal payments on finance leases. We subtract both purchases of property and equipment and principal payments on finance leases in our calculation of free cash flow because we believe that these two items collectively represent the amount of property and equipment we need to procure to support our business, regardless of whether we procure such property or equipment with a finance lease. We believe that this methodology can provide useful supplemental information to help investors better understand underlying trends in our business. Free cash flow is not intended to represent our residual cash flow available for discretionary expenditures.

For more information on our non-GAAP financial measures and a reconciliation of GAAP to non-GAAP measures, please see the “Reconciliation of GAAP to Non-GAAP Results” table in this press release.

FACEBOOK, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In millions, except for per share amounts)

(Unaudited)

Three Months Ended December 31,

Twelve Months Ended December 31,

2020

2019

2020

2019

Revenue

$

28,072

$

21,082

$

85,965

$

70,697

Costs and expenses:

Cost of revenue

5,210

3,492

16,692

12,770

Research and development

5,208

3,877

18,447

13,600

Marketing and sales

3,280

3,026

11,591

9,876

General and administrative

1,599

1,829

6,564

10,465

Total costs and expenses

15,297

12,224

53,294

46,711

Income from operations

12,775

8,858

32,671

23,986

Interest and other income, net

280

311

509

826

Income before provision for income taxes

13,055

9,169

33,180

24,812

Provision for income taxes

1,836

1,820

4,034

6,327

Net income

$

11,219

$

7,349

$

29,146

$

18,485

Earnings per share attributable to Class A and Class B

common stockholders:

Basic

$

3.94

$

2.58

$

10.22

$

6.48

Diluted

$

3.88

$

2.56

$

10.09

$

6.43

Weighted-average shares used to compute earnings per

share attributable to Class A and Class B common

stockholders:

Basic

2,850

2,853

2,851

2,854

Diluted

2,890

2,871

2,888

2,876

Share-based compensation expense included in costs and

expenses:

Cost of revenue

$

120

$

90

$

447

$

377

Research and development

1,361

931

4,918

3,488

Marketing and sales

175

147

691

569

General and administrative

128

105

480

402

Total share-based compensation expense

$

1,784

$

1,273

$

6,536

$

4,836

FACEBOOK, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions)

(Unaudited)

December 31,
2020

December 31,
2019

Assets

Current assets:

Cash and cash equivalents

$

17,576

$

19,079

Marketable securities

44,378

35,776

Accounts receivable, net of allowances of $114 and $92 as of December 31, 2020 and

2019, respectively

11,335

9,518

Prepaid expenses and other current assets

2,381

1,852

Total current assets

75,670

66,225

Equity investments

6,234

86

Property and equipment, net

45,633

35,323

Operating lease right-of-use assets, net

9,348

9,460

Intangible assets, net

623

894

Goodwill

19,050

18,715

Other assets

2,758

2,673

Total assets

$

159,316

$

133,376

Liabilities and stockholders’ equity

Current liabilities:

Accounts payable

$

1,331

$

1,363

Partners payable

1,093

886

Operating lease liabilities, current

1,023

800

Accrued expenses and other current liabilities

11,152

11,735

Deferred revenue and deposits

382

269

Total current liabilities

14,981

15,053

Operating lease liabilities, non-current

9,631

9,524

Other liabilities

6,414

7,745

Total liabilities

31,026

32,322

Commitments and contingencies

Stockholders’ equity:

Common stock and additional paid-in capital

50,018

45,851

Accumulated other comprehensive income (loss)

927

(489)

Retained earnings

77,345

55,692

Total stockholders’ equity

128,290

101,054

Total liabilities and stockholders’ equity

$

159,316

$

133,376

FACEBOOK, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

Three Months Ended
December 31,

Twelve Months Ended
December 31,

2020

2019

2020

2019

Cash flows from operating activities

Net income

$

11,219

$

7,349

$

29,146

$

18,485

Adjustments to reconcile net income to net cash provided by

operating activities:

Depreciation and amortization

1,863

1,468

6,862

5,741

Share-based compensation

1,784

1,273

6,536

4,836

Deferred income taxes

(377)

(395)

(1,192)

(37)

Other

62

(6)

118

39

Changes in assets and liabilities:

Accounts receivable

(3,059)

(1,697)

(1,512)

(1,961)

Prepaid expenses and other current assets

225

577

135

47

Other assets

(25)

(26)

(34)

41

Accounts payable

(56)

112

(17)

113

Partners payable

278

289

178

348

Accrued expenses and other current liabilities

2,218

861

(1,054)

7,300

Deferred revenue and deposits

(3)

41

108

123

Other liabilities

(89)

(763)

(527)

1,239

Net cash provided by operating activities

14,040

9,083

38,747

36,314

Cash flows from investing activities

Purchases of property and equipment

(4,613)

(4,100)

(15,115)

(15,102)

Purchases of marketable securities

(5,737)

(4,758)

(33,930)

(23,910)

Sales of marketable securities

2,008

2,163

11,787

9,565

Maturities of marketable securities

3,260

3,104

13,984

10,152

Purchases of equity investments

(59)

(6,361)

(61)

Acquisitions of businesses, net of cash acquired, and purchases of

intangible assets

(5)

(445)

(388)

(508)

Other investing activities

(27)

(36)

Net cash used in investing activities

(5,173)

(4,036)

(30,059)

(19,864)

Cash flows from financing activities

Taxes paid related to net share settlement of equity awards

(1,121)

(627)

(3,564)

(2,337)

Repurchases of Class A common stock

(1,928)

(1,296)

(6,272)

(4,202)

Principal payments on finance leases

(205)

(141)

(604)

(552)

Net change in overdraft in cash pooling entities

48

37

24

(223)

Other financing activities

2

124

15

Net cash used in financing activities

(3,206)

(2,025)

(10,292)

(7,299)

Effect of exchange rate changes on cash, cash equivalents, and

restricted cash

314

177

279

4

Net increase (decrease) in cash, cash equivalents, and restricted cash

5,975

3,199

(1,325)

9,155

Cash, cash equivalents, and restricted cash at beginning of the period

11,979

16,080

19,279

10,124

Cash, cash equivalents, and restricted cash at end of the period

$

17,954

$

19,279

$

17,954

$

19,279

Reconciliation of cash, cash equivalents, and restricted cash to the condensed

consolidated balance sheets

Cash and cash equivalents

$

17,576

$

19,079

$

17,576

$

19,079

Restricted cash, included in prepaid expenses and other current

assets

241

8

241

8

Restricted cash, included in other assets

137

192

137

192

Total cash, cash equivalents, and restricted cash

$

17,954

$

19,279

$

17,954

$

19,279

FACEBOOK, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

Three Months Ended December 31,

Twelve Months Ended December 31,

2020

2019

2020

2019

Supplemental cash flow data

Cash paid for income taxes

$

1,107

$

2,654

$

4,229

$

5,182

Non-cash investing activities:

Acquisition of businesses in accrued expenses and

other current liabilities and other liabilities

$

118

$

$

118

$

Property and equipment in accounts payable and

accrued expenses and other current liabilities

$

2,201

$

1,887

$

2,201

$

1,887

Reconciliation of GAAP to Non-GAAP Results

(In millions, except percentages)

(Unaudited)

Three Months Ended December 31,

Twelve Months Ended December 31,

2020

2019

2020

2019

GAAP revenue

$

28,072

$

21,082

$

85,965

$

70,697

Foreign exchange effect on 2020 revenue using 2019

rates

(339)

120

Revenue excluding foreign exchange effect

$

27,733

$

86,085

GAAP revenue year-over-year change %

33%

22%

Revenue excluding foreign exchange effect year-over-

year change %

32%

22%

GAAP advertising revenue

$

27,187

$

20,736

$

84,169

$

69,655

Foreign exchange effect on 2020 advertising revenue

using 2019 rates

(332)

129

Advertising revenue excluding foreign exchange effect

$

26,855

$

84,298

GAAP advertising revenue year-over-year change %

31%

21%

Advertising revenue excluding foreign exchange effect

year-over-year change %

30%

21%

Net cash provided by operating activities

$

14,040

$

9,083

$

38,747

$

36,314

Purchases of property and equipment

(4,613)

(4,100)

(15,115)

(15,102)

Principal payments on finance leases

(205)

(141)

(604)

(552)

Free cash flow (1)

$

9,222

$

4,842

$

23,028

$

20,660

(1)

Free cash flow in the full year ended December 31, 2020 reflects the $5.0 billion FTC settlement that was paid in April 2020.

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