) reported first quarter 2013 non-GAAP earnings of 12 cents per
share, which remained flat on a year-over-year basis. However,
including stock-based compensation and payroll taxes, Facebook
earned 9 cents a share and beat the Zacks Consensus Estimate by a
Revenues for the quarter (excluding foreign exchange effect)
jumped 38.2% year over year to $1.46 billion, ahead of the Zacks
Consensus Estimate of $1.44 billion. Strong advertising revenues
that surged 43.1% and a 14.5% jump in payments and other fees
revenues drove the year-over-year growth. More importantly,
mobile ad revenues comprised 30% of total ad revenues.
During the quarter, Facebook launched several new advertising
products (Lookalike Audiences, Managed Custom Audiences and
Partner Categories) for marketers. Moreover, integration with
) iOS and
) Android platform continued during the quarter. Facebook also
announced the acquisition of Parse, which provides platform
service for mobile apps.
Facebook's average revenue per user (ARPU) increased 12.0%
year over year $1.35. Ad impressions jumped 39% year over year
while average price per ad increased 3% from the year-ago
quarter, primarily driven by product changes.
Average price in the developed countries continued to increase
strongly, with the U.S. and Canada increasing 25% from the
year-ago quarter, primarily attributable to higher engagement and
performance of news feed ads.
During the quarter, Facebook's Monthly Active Users (MAU)
improved 23% year over year to 1.11 billion. Mobile MAUs surged
54.0% year over year to 751 million. During the same period,
Daily Active Users (DAU) increased 26% year over year to 665
Facebook's operating margin was 38.5% compared with 45.8%
reported in the year-ago quarter. This significant decline was
primarily driven by higher costs, which was 61.2% of total
revenue, much higher than 54.2% in the year-ago quarter. This
strong year-over-year growth in total costs were driven by
headcount growth and costs incurred for infrastructure
Net income (excluding stock-based compensation, payroll tax
expense and income tax expense) improved 8.7% from the year-ago
quarter to $312.0 million in the reported quarter.
Facebook ended the quarter with cash & cash equivalents
and marketable securities of $9.47 billion compared with $9.63
billion in the previous quarter. The company generated $441.0
million of cash flow from operations in the quarter compared with
$681.0 million in the previous quarter.
Facebook expects to continue investments on improving quality,
engagement and value of its ads, which will further boost
advertiser demand in 2013. Total expenses are expected to
increase approximately 50.0% in 2013.
We believe that Facebook has significant growth opportunities
in the online advertising format. Facebook's massive user base
and its ability to track personal details over time make it a
formidable force in the online ad market. Facebook can use this
massive database to help advertisers target relevant ads going
forward. The company's expansion in the mobile segment is
However, a volatile macroeconomic environment and increased
investments to expand mobile offerings are expected to hurt
margins in the near term. Competition from Google and
) could also pose headwinds for the company in the near term.
Currently, Facebook has a Zacks Rank #1 (Strong Buy).
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