Facebook (FB) Misses Q1 EPS by 3c, DAUs were 1.73 billion on average for March

Facebook (NASDAQ: FB) reported Q1 EPS of $1.71, $0.03 worse than the analyst estimate of $1.74. Revenue for the quarter came in at $17.74 billion versus the consensus estimate of $17.48 billion.

• Facebook daily active users (DAUs) – DAUs were 1.73 billion on average for March 2020, an increase of 11% year-over-year.
• Facebook monthly active users (MAUs) – MAUs were 2.60 billion as of March 31, 2020, an increase of 10% year-over-year.
• Family daily active people (DAP) – DAP was 2.36 billion on average for March 2020, an increase of 12% year-over-year.
• Family monthly active people (MAP) – MAP was 2.99 billion as of March 31, 2020, an increase of 11% year-over-year.
• Capital expenditures – Capital expenditures, including principal payments on finance leases, were $3.66 billion for the first quarter of 2020.
• Cash and cash equivalents and marketable securities – Cash and cash equivalents and marketable securities were $60.29 billion as of March 31, 2020. Following the end of the quarter, we entered into an agreement to invest in Jio Platforms Limited, a subsidiary of Reliance Industries Limited, for approximately $5.7 billion, and we paid the $5.0 billion settlement amount due under our modified consent order with the FTC, which took effect in April 2020.
• Headcount – Headcount was 48,268 as of March 31, 2020, an increase of 28% year-over-year.

Impact of COVID-19 on Outlook

Our business has been impacted by the COVID-19 pandemic and, like all companies, we are facing a period of unprecedented uncertainty in our business outlook. We expect our business performance will be impacted by issues beyond our control, including the duration and efficacy of shelter-in-place orders, the effectiveness of economic stimuli around the world, and the fluctuations of currencies relative to the U.S. dollar.

• Engagement – Our community metrics, including Facebook DAUs and MAUs and Family MAP and DAP, reflect increased engagement as people around the world sheltered in place and used our products to connect with the people and organizations they care about. We expect that we will lose at least some of this increased engagement when various shelter-in-place restrictions are relaxed in the future.
• Revenue – We experienced a significant reduction in the demand for advertising, as well as a related decline in the pricing of our ads, over the last three weeks of the first quarter of 2020. Due to the increasing uncertainty in our business outlook, we are not providing specific revenue guidance for the second quarter or full-year 2020, but rather a snapshot on revenue performance in the second quarter thus far. After the initial steep decrease in advertising revenue in March, we have seen signs of stability reflected in the first three weeks of April, where advertising revenue has been approximately flat compared to the same period a year ago, down from the 17% year-over-year growth in the first quarter of 2020. The April trends reflect weakness across all of our user geographies as most of our major countries have had some sort of shelter-in-place guidelines in effect.
• Total expenses – We expect to realize operational expense savings in certain areas such as travel, events, and marketing as well as from slower headcount growth in our business functions. However, we plan to continue to invest in product development and to recruit technical talent. In addition, we have committed over $300 million to date in investments to help our broader community during the crisis, which will have an impact on our financial performance this year. As a result, we expect total expenses in 2020 to be between $52-56 billion, down from the prior range of $54-59 billion. While this reflects a moderate reduction in the planned growth rate of total expenses, our overall expense growth in the face of expected revenue weakness will have a negative impact on 2020 operating margins.
• Capital expenditures – Our significant investments in infrastructure over the past four years have served us well during this period of high user engagement. We plan to continue to grow our capex investments to enhance and expand our global infrastructure footprint over the long term. In 2020, we expect capital expenditures to be approximately $14-16 billion, down from the prior range of $17-19 billion. This reduction reflects a significant decrease in our construction efforts globally related to shelter-in-place orders. Given the strong engagement growth and related demands on our infrastructure, this year's capex reduction should be viewed as a deferral into 2021 rather than savings.
• Tax rates – We expect our full-year 2020 tax rate will be in the high-teens, although we may see fluctuations in our quarterly rate depending on our financial results.

For earnings history and earnings-related data on Facebook (FB) click here.

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