The world’s biggest online networking site Facebook Inc. (NASDAQ:FB) posted impressive financial results for the quarter ending 31st December 2015.
Net Income Increased 123%
Facebook’s net income for the December 2015 quarter was US$1.5 billion, which is a 123% increase on the December 2014 quarter. The company’s revenue increased 52% for the quarter, to US$5.8 billion. It earned US$5.6 billion from advertisements, while mobile advertising revenue made up for 80% of the revenue.
Facebook made US$3.73 revenue per user, out of which US$3.6 was earned through advertisements. The company also improved its operating margin by 12%, compared to the September 2015 quarter.
Headwinds from Strong USD
Facebook stated that the strengthening of the US dollar had an unfavourable impact on its revenue in the fourth quarter as the company estimates that its revenue would have been US$320 million higher if the currency remained constant. Operations in the US and Canada and Asia-Pacific regions have been the strongest regions with ad revenue growth of 64% and 57% respectively. While the other regions showed significant growth, the earnings were impacted by currency headwinds.
Expenses Rose 21%
Q4 total expenses were recorded at US$3.3 billion, which is a 21% spike over the previous quarter. Facebook has introduced stock-based compensation charges regarding the WhatsApp transaction. Overall capital expenditure for the year was US$2.5 billion, which is a 37% increase compared to FY14. Facebook’s capital expenditure increased as the company invested in servers, data centres, and network infrastructure and office facilities. The balance sheet showed US$18.4 billion in cash and investments.
Declining Trends in PC Usage
Facebook mentioned that its average ad impressions increased for the first time on a year over year basis, which was driven by an increase in mobile ad impressions. On the other hand, the number of ad impressions on personal computers decreased, mainly due to the decline in PC usage.
Outlook for FY16
Facebook underlined that 2016 will be another ‘significant investment year’ for the company. It anticipates its expenses to grow a further 30% to 40% during the 2016 year. The company also forecasted its capital expenditure to be in the range of $4.0-$4.5 billion.
Facebook’s Chief Operating Officer, Sheryl Sandberg commented on Facebook’s strategy: “We continue to make progress on our three priorities – capitalizing on the shift to mobile, growing the number of marketers using our ad products, and making our ads more relevant and effective.”
The company’s better than expected results have sent FB up 12% in the after-hours trade, as at 3:41 PM (AEDT). The stock has a market cap of $275.3 billion and has gained 23% over the past 12 months.
Author: Matthew Dibb
Jan 28, 2016
Matthew has an extensive track record in equity markets and derivative advisory. Spanning a career in several investment banks and prviate wealth groups including Macquarie Bank, his specialist knowledge relates to capital market advisory and equity market analytics. Matthew has a diploma in Financial Advisory, Applied Finance and is ADA 1 & 2 accredited.