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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________________________
FORM 10-Q
____________________________________________
(Mark One)
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2022
or
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period
from to
Commission File Number: 001-35551
____________________________________________
Meta Platforms, Inc.
(Exact name of registrant as specified in its charter)
____________________________________________
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Delaware |
20-1665019 |
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(State or other jurisdiction of incorporation or
organization) |
(I.R.S. Employer Identification Number) |
1601 Willow Road, Menlo Park, California 94025
(Address of principal executive offices and Zip Code)
(650) 543-4800
(Registrant's telephone number, including area code)
____________________________________________
Securities registered pursuant to Section 12(b) of the
Act:
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Title of each class |
Trading symbol(s) |
Name of each exchange on which registered |
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Class A Common Stock, $0.000006 par value |
META |
The Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 (Exchange Act) during the
preceding 12 months (or for such shorter period that the
registrant was required to file such reports),
and (2) has been subject to such filing requirements for
the past
90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted
electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§ 232.405 of this
chapter) during the preceding 12 months (or for such shorter period
that the registrant was required to submit such
files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, a
smaller reporting company, or an emerging growth company. See the
definitions of "large accelerated filer," "accelerated filer,"
"smaller reporting company," and "emerging growth company" in Rule
12b-2 of the Exchange Act.
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| Large
accelerated filer |
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☒ |
Accelerated filer |
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☐ |
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Non-accelerated filer |
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☐ |
Smaller reporting company |
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☐ |
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Emerging growth company |
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☐ |
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If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange
Act. |
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☐ |
Indicate
by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Indicate the number of shares outstanding of each of the issuer's
classes of Common Stock, as of the latest practicable
date.
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Class |
Number of Shares Outstanding |
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Class A Common Stock |
$0.000006 par value |
2,248,672,204 |
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shares outstanding as of October 21, 2022 |
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Class B Common Stock |
$0.000006 par value |
402,876,470 |
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shares outstanding as of October 21, 2022 |
Meta Platforms, Inc.
Form 10-Q
For the Quarterly Period Ended September 30, 2022
TABLE OF CONTENTS
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Page |
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Item 1. |
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Item 2. |
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Item 3. |
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Item 4. |
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Item 1. |
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Item 1A. |
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Item 2. |
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|
Item 6. |
|
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|
|
|
|
NOTE ABOUT FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking
statements. All statements contained in this Quarterly Report on
Form 10-Q other than statements of historical fact, including
statements regarding our future results of operations and financial
position, our business strategy and plans, and our objectives for
future operations, are forward-looking statements. The words
"believe," "may," "will," "estimate," "continue," "anticipate,"
"intend," "expect," and similar expressions are intended to
identify forward-looking statements. We have based these
forward-looking statements largely on our current expectations and
projections about future events and trends that we believe may
affect our financial condition, results of operations, business
strategy, short-term and long-term business operations and
objectives, and financial needs. These forward-looking statements
are subject to a number of risks, uncertainties and assumptions,
including those described in Part II, Item 1A, "Risk
Factors" in this Quarterly Report on Form 10-Q. Moreover, we
operate in a very competitive and rapidly changing environment. New
risks emerge from time to time. It is not possible for our
management to predict all risks, nor can we assess the impact of
all factors on our business or the extent to which any factor, or
combination of factors, may cause actual results to differ
materially from those contained in any forward-looking statements
we may make. In light of these risks, uncertainties and
assumptions, the future events and trends discussed in this
Quarterly Report on Form 10-Q may not occur and actual results
could differ materially and adversely from those anticipated or
implied in the forward‑looking statements.
We undertake no obligation to revise or publicly release the
results of any revision to these forward-looking statements, except
as required by law. Given these risks and uncertainties, readers
are cautioned not to place undue reliance on such forward‑looking
statements.
Unless expressly indicated or the context requires otherwise, the
terms "Meta," "company," "we," "us," and "our" in this document
refer to Meta Platforms, Inc., a Delaware corporation, and, where
appropriate, its subsidiaries. The term "Family" refers to our
Facebook, Instagram, Messenger, and WhatsApp products. For
references to accessing Meta's products on the "web" or via a
"website," such terms refer to accessing such products on personal
computers. For references to accessing Meta's products on "mobile,"
such term refers to accessing such products via a mobile
application or via a mobile-optimized version of our websites such
as m.facebook.com, whether on a mobile phone or
tablet.
LIMITATIONS OF KEY METRICS AND OTHER DATA
The numbers for our key metrics are calculated using internal
company data based on the activity of user accounts. We have
historically reported the numbers of our daily active users (DAUs),
monthly active users (MAUs), and average revenue per user (ARPU)
(collectively, our "Facebook metrics") based on user activity only
on Facebook and Messenger and not on our other products. Beginning
with our Annual Report on Form 10-K for the year ended
December 31, 2019, we also report our estimates of the numbers
of our daily active people (DAP), monthly active people (MAP), and
average revenue per person (ARPP) (collectively, our "Family
metrics") based on the activity of users who visited at least one
of Facebook, Instagram, Messenger, and WhatsApp (collectively, our
"Family" of products) during the applicable period of measurement.
We believe our Family metrics better reflect the size of our
community and the fact that many people are using more than one of
our products. As a result, over time we intend to report our Family
metrics as key metrics in place of DAUs, MAUs, and ARPU in our
periodic reports filed with the Securities and Exchange
Commission.
While these numbers are based on what we believe to be reasonable
estimates of our user base for the applicable period of
measurement, there are inherent challenges in measuring usage of
our products across large online and mobile populations around the
world. The methodologies used to measure these metrics require
significant judgment and are also susceptible to algorithm or other
technical errors. In addition, we are continually seeking to
improve our estimates of our user base, and such estimates may
change due to improvements or changes in our methodology. We
regularly review our processes for calculating these metrics, and
from time to time we discover inaccuracies in our metrics or make
adjustments to improve their accuracy, which can result in
adjustments to our historical metrics. Our ability to recalculate
our historical metrics may be impacted by data limitations or other
factors that require us to apply different methodologies for such
adjustments. We generally do not intend to update previously
disclosed Family metrics for any such inaccuracies or adjustments
that are within the error margins disclosed below.
In addition, our Family metrics and Facebook metrics estimates will
differ from estimates published by third parties due to differences
in methodology.
Family Metrics
Many people in our community have user accounts on more than one of
our products, and some people have multiple user accounts within an
individual product. Accordingly, for our Family metrics, we do not
seek to count the total number of user accounts across our products
because we believe that would not reflect the actual size of our
community. Rather, our Family metrics represent our estimates of
the number of unique people using at least one of Facebook,
Instagram, Messenger, and WhatsApp. We do not require people to use
a common identifier or link their accounts to use multiple products
in our Family, and therefore must seek to attribute multiple user
accounts within and across products to individual people. To
calculate these metrics, we rely upon complex techniques,
algorithms and machine learning models that seek to count the
individual people behind user accounts, including by matching
multiple user accounts within an individual product and across
multiple products when we believe they are attributable to a single
person, and counting such group of accounts as one person. These
techniques and models require significant judgment, are subject to
data and other limitations discussed below, and inherently are
subject to statistical variances and uncertainties. We estimate the
potential error in our Family metrics primarily based on user
survey data, which itself is subject to error as well. While we
expect the error margin for our Family metrics to vary from period
to period, we estimate that such margin generally will be
approximately 3% of our worldwide MAP. At our scale, it is very
difficult to attribute multiple user accounts within and across
products to individual people, and it is possible that the actual
numbers of unique people using our products may vary significantly
from our estimates, potentially beyond our estimated error margins.
As a result, it is also possible that our Family metrics may
indicate changes or trends in user numbers that do not match actual
changes or trends.
To calculate our estimates of Family DAP and MAP, we currently use
a series of machine learning models that are developed based on
internal reviews of limited samples of user accounts and calibrated
against user survey data. We apply significant judgment in
designing these models and calculating these estimates. For
example, to match user accounts within individual products and
across multiple products, we use data signals such as similar
device information, IP addresses, and user names. We also calibrate
our models against data from periodic user surveys of varying sizes
and frequency across our products, which are inherently subject to
error. The timing and results of such user surveys have in the past
contributed, and may in the future contribute, to changes in our
reported Family metrics from period to period. In addition, our
data limitations may affect our understanding of certain details of
our business and increase the risk of error for our Family metrics
estimates.
Our techniques and models rely on a variety of data signals from
different products, and we rely on more limited data signals for
some products compared to others. For example, as a result of
limited visibility into encrypted products, we have fewer data
signals from WhatsApp user accounts and primarily rely on phone
numbers and device information to match WhatsApp user accounts with
accounts on our other products. Similarly, although Messenger Kids
users are included in our Family metrics, we do not seek to match
their accounts with accounts on our other applications for purposes
of calculating DAP and MAP. Any loss of access to data signals we
use in our process for calculating Family metrics, whether as a
result of our own product decisions, actions by third-party browser
or mobile platforms, regulatory or legislative requirements, or
other factors, also may impact the stability or accuracy of our
reported Family metrics, as well as our ability to report these
metrics at all. Our estimates of Family metrics also may change as
our methodologies evolve, including through the application of new
data signals or technologies, product changes, or other
improvements in our user surveys, algorithms, or machine learning
that may improve our ability to match accounts within and across
our products or otherwise evaluate the broad population of our
users. In addition, such evolution may allow us to identify
previously undetected violating accounts (as defined
below).
We regularly evaluate our Family metrics to estimate the percentage
of our MAP consisting solely of "violating" accounts. We define
"violating" accounts as accounts which we believe are intended to
be used for purposes that violate our terms of service, including
bots and spam. In the fourth quarter of 2021, we estimated that
approximately 3% of our worldwide MAP consisted solely of violating
accounts. Such estimation is based on an internal review of a
limited sample of accounts, and we apply significant judgment in
making this determination. For example, we look for account
information and behaviors associated with Facebook and Instagram
accounts that appear to be inauthentic to the reviewers, but we
have limited visibility into WhatsApp user activity due to
encryption. In addition, if we believe an individual person has one
or more violating accounts, we do not include such person in our
violating accounts estimation as long as we believe they have one
account that does not constitute a violating account. From time to
time, we disable certain user accounts, make product changes, or
take other actions to reduce the number of violating accounts among
our users, which may also reduce our DAP and MAP estimates in a
particular period. We intend to disclose our estimates of the
percentage of our MAP consisting solely of violating accounts on an
annual basis. Violating accounts are very difficult to measure at
our scale, and it is possible that the actual number of violating
accounts may vary significantly from our estimates.
The numbers of Family DAP and MAP discussed in this Quarterly
Report on Form 10-Q, as well as ARPP, do not include users on our
other products, unless they would otherwise qualify as DAP or MAP,
respectively, based on their other activities on our Family
products.
Facebook Metrics
We regularly evaluate our Facebook metrics to estimate the number
of "duplicate" and "false" accounts among our MAUs. A duplicate
account is one that a user maintains in addition to his or her
principal account. We divide "false" accounts into two categories:
(1) user-misclassified accounts, where users have created
personal profiles for a business, organization, or non-human entity
such as a pet (such entities are permitted on Facebook using a Page
rather than a personal profile under our terms of service); and
(2) violating accounts, which represent user profiles that we
believe are intended to be used for purposes that violate our terms
of service, such as bots and spam. The estimates of duplicate and
false accounts are based on an internal review of a limited sample
of accounts, and we apply significant judgment in making this
determination. For example, to identify duplicate accounts we use
data signals such as identical IP addresses and similar user names,
and to identify false accounts we look for names that appear to be
fake or other behavior that appears inauthentic to the reviewers.
Any loss of access to data signals we use in this process, whether
as a result of our own product decisions, actions by third-party
browser or mobile platforms, regulatory or legislative
requirements, or other factors, also may impact the stability or
accuracy of our estimates of duplicate and false accounts. Our
estimates also may change as our methodologies evolve, including
through the application of new data signals or technologies or
product changes that may allow us to identify previously undetected
duplicate or false accounts and may improve our ability to evaluate
a broader population of our users. Duplicate and false accounts are
very difficult to measure at our scale, and it is possible that the
actual number of duplicate and false accounts may vary
significantly from our estimates.
In the fourth quarter of 2021, we estimated that duplicate accounts
may have represented approximately 11% of our worldwide MAUs. We
believe the percentage of duplicate accounts is meaningfully higher
in developing markets such as the Philippines and Vietnam, as
compared to more developed markets. In the fourth quarter of 2021,
we estimated that false accounts may have represented approximately
5% of our worldwide MAUs. Our estimation of false accounts can vary
as a result of episodic spikes in the creation of such accounts,
which we have seen originate more frequently in specific
countries
such as Indonesia, Nigeria, and Vietnam. From time to time, we
disable certain user accounts, make product changes, or take other
actions to reduce the number of duplicate or false accounts among
our users, which may also reduce our DAU and MAU estimates in a
particular period. We intend to disclose our estimates of the
number of duplicate and false accounts among our MAUs on an annual
basis.
The numbers of DAUs and MAUs discussed in this Quarterly Report on
Form 10-Q, as well as ARPU, do not include users on Instagram,
WhatsApp, or our other products, unless they would otherwise
qualify as DAUs or MAUs, respectively, based on their other
activities on Facebook.
User Geography
Our data regarding the geographic location of our users is
estimated based on a number of factors, such as the user's IP
address and self-disclosed location. These factors may not always
accurately reflect the user's actual location. For example, a user
may appear to be accessing Facebook from the location of the proxy
server that the user connects to rather than from the user's actual
location. The methodologies used to measure our metrics are also
susceptible to algorithm or other technical errors, and our
estimates for revenue by user location and revenue by user device
are also affected by these factors.
PART I—FINANCIAL INFORMATION
Item 1.Financial
Statements
META PLATFORMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except for number of shares and par
value)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
2022 |
|
December 31,
2021 |
|
Assets |
|
|
|
|
Current assets: |
|
|
|
|
Cash and cash equivalents |
$ |
14,308 |
|
|
$ |
16,601 |
|
|
Marketable securities |
27,468 |
|
|
31,397 |
|
|
Accounts receivable, net |
11,227 |
|
|
14,039 |
|
|
Prepaid expenses and other current assets |
5,312 |
|
|
4,629 |
|
|
Total current assets |
58,315 |
|
|
66,666 |
|
|
Non-marketable equity securities |
6,528 |
|
|
6,775 |
|
|
Property and equipment, net |
73,738 |
|
|
57,809 |
|
|
Operating lease right-of-use assets |
13,641 |
|
|
12,155 |
|
|
Intangible assets, net |
875 |
|
|
634 |
|
|
Goodwill |
20,268 |
|
|
19,197 |
|
|
Other assets |
5,529 |
|
|
2,751 |
|
|
Total assets |
$ |
178,894 |
|
|
$ |
165,987 |
|
|
|
|
|
|
|
Liabilities and stockholders' equity |
|
|
|
|
Current liabilities: |
|
|
|
|
Accounts payable |
$ |
3,871 |
|
|
$ |
4,083 |
|
|
Partners payable |
975 |
|
|
1,052 |
|
|
Operating lease liabilities, current |
1,291 |
|
|
1,127 |
|
|
Accrued expenses and other current liabilities |
16,036 |
|
|
14,312 |
|
|
Deferred revenue and deposits |
514 |
|
|
561 |
|
|
Total current liabilities |
22,687 |
|
|
21,135 |
|
|
Operating lease liabilities, non-current |
14,687 |
|
|
12,746 |
|
|
Long-term debt |
9,922 |
|
|
— |
|
|
Other liabilities |
7,504 |
|
|
7,227 |
|
|
Total liabilities |
54,800 |
|
|
41,108 |
|
|
Commitments and contingencies |
|
|
|
|
Stockholders' equity: |
|
|
|
|
Common stock, $0.000006 par value; 5,000 million Class A shares
authorized, 2,262 million and 2,328 million shares issued and
outstanding, as of September 30, 2022 and December 31, 2021,
respectively; 4,141 million Class B shares authorized, 403 million
and 413 million shares issued and outstanding, as of September 30,
2022 and December 31, 2021, respectively
|
— |
|
|
— |
|
|
Additional paid-in capital |
62,092 |
|
|
55,811 |
|
|
Accumulated other comprehensive loss |
(5,054) |
|
|
(693) |
|
|
Retained earnings |
67,056 |
|
|
69,761 |
|
|
Total stockholders' equity |
124,094 |
|
|
124,879 |
|
|
Total liabilities and stockholders' equity |
$ |
178,894 |
|
|
$ |
165,987 |
|
See Accompanying Notes to Condensed Consolidated Financial
Statements.
META PLATFORMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share amounts)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
Revenue |
$ |
27,714 |
|
|
$ |
29,010 |
|
|
$ |
84,444 |
|
|
$ |
84,258 |
|
|
Costs and expenses: |
|
|
|
|
|
|
|
|
Cost of revenue |
5,716 |
|
|
5,771 |
|
|
16,913 |
|
|
16,301 |
|
|
Research and development |
9,170 |
|
|
6,316 |
|
|
25,567 |
|
|
17,609 |
|
|
Marketing and sales |
3,780 |
|
|
3,554 |
|
|
10,688 |
|
|
9,656 |
|
|
General and administrative |
3,384 |
|
|
2,946 |
|
|
8,731 |
|
|
6,524 |
|
|
Total costs and expenses |
22,050 |
|
|
18,587 |
|
|
61,899 |
|
|
50,090 |
|
|
Income from operations |
5,664 |
|
|
10,423 |
|
|
22,545 |
|
|
34,168 |
|
|
Interest and other income (expense), net |
(88) |
|
|
142 |
|
|
125 |
|
|
413 |
|
|
Income before provision for income taxes |
5,576 |
|
|
10,565 |
|
|
22,670 |
|
|
34,581 |
|
|
Provision for income taxes |
1,181 |
|
|
1,371 |
|
|
4,123 |
|
|
5,496 |
|
|
Net income |
$ |
4,395 |
|
|
$ |
9,194 |
|
|
$ |
18,547 |
|
|
$ |
29,085 |
|
|
Earnings per share attributable to Class A and Class B common
stockholders: |
|
|
|
|
|
|
|
|
Basic |
$ |
1.64 |
|
|
$ |
3.27 |
|
|
$ |
6.86 |
|
|
$ |
10.27 |
|
|
Diluted |
$ |
1.64 |
|
|
$ |
3.22 |
|
|
$ |
6.82 |
|
|
$ |
10.11 |
|
|
Weighted-average shares used to compute earnings per share
attributable to Class A and Class B common
stockholders: |
|
|
|
|
|
|
|
|
Basic |
2,682 |
|
|
2,814 |
|
|
2,703 |
|
|
2,832 |
|
|
Diluted |
2,687 |
|
|
2,859 |
|
|
2,718 |
|
|
2,876 |
|
|
Share-based compensation expense included in costs and
expenses: |
|
|
|
|
|
|
|
|
Cost of revenue |
$ |
209 |
|
|
$ |
147 |
|
|
$ |
582 |
|
|
$ |
428 |
|
|
Research and development |
2,447 |
|
|
1,849 |
|
|
6,995 |
|
|
5,224 |
|
|
Marketing and sales |
260 |
|
|
218 |
|
|
766 |
|
|
631 |
|
|
General and administrative |
218 |
|
|
165 |
|
|
641 |
|
|
474 |
|
|
Total share-based compensation expense |
$ |
3,134 |
|
|
$ |
2,379 |
|
|
$ |
8,984 |
|
|
$ |
6,757 |
|
See Accompanying Notes to Condensed Consolidated Financial
Statements.
META PLATFORMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE
INCOME
(In millions)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
Net income |
$ |
4,395 |
|
|
$ |
9,194 |
|
|
$ |
18,547 |
|
|
$ |
29,085 |
|
|
Other comprehensive loss: |
|
|
|
|
|
|
|
|
Change in foreign currency translation adjustment, net of
tax |
(1,037) |
|
|
(424) |
|
|
(2,472) |
|
|
(856) |
|
|
Change in unrealized gain (loss) on available-for-sale investments
and other, net of tax |
(606) |
|
|
(68) |
|
|
(1,889) |
|
|
(278) |
|
|
Comprehensive income |
$ |
2,752 |
|
|
$ |
8,702 |
|
|
$ |
14,186 |
|
|
$ |
27,951 |
|
See Accompanying Notes to Condensed Consolidated Financial
Statements.
META PLATFORMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS'
EQUITY
(In millions)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2022 |
|
Three Months Ended September 30, 2021 |
|
Class A and Class B Common Stock |
|
Additional Paid-In Capital |
|
Accumulated Other Comprehensive Loss |
|
Retained Earnings |
|
Total Stockholders' Equity |
|
Class A and Class B Common Stock |
|
Additional Paid-In Capital |
|
Accumulated Other Comprehensive Income (Loss) |
|
Retained Earnings |
|
Total Stockholders' Equity |
|
Shares |
|
Par Value |
|
|
Shares |
|
Par Value |
|
|
Balances at beginning of period |
2,697 |
|
|
$ |
— |
|
|
$ |
59,929 |
|
|
$ |
(3,411) |
|
|
$ |
69,249 |
|
|
$ |
125,767 |
|
|
2,826 |
|
|
$ |
— |
|
|
$ |
52,845 |
|
|
$ |
285 |
|
|
$ |
85,097 |
|
|
$ |
138,227 |
|
|
Issuance of common stock |
14 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
11 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Shares withheld related to net share settlement |
(5) |
|
|
— |
|
|
(971) |
|
|
— |
|
|
(40) |
|
|
(1,011) |
|
|
(4) |
|
|
— |
|
|
(890) |
|
|
— |
|
|
(686) |
|
|
(1,576) |
|
|
Share-based compensation |
— |
|
|
— |
|
|
3,134 |
|
|
— |
|
|
— |
|
|
3,134 |
|
|
— |
|
|
— |
|
|
2,379 |
|
|
— |
|
|
— |
|
|
2,379 |
|
|
Share repurchases |
(41) |
|
|
— |
|
|
— |
|
|
— |
|
|
(6,548) |
|
|
(6,548) |
|
|
(40) |
|
|
— |
|
|
— |
|
|
— |
|
|
(14,372) |
|
|
(14,372) |
|
|
Other comprehensive loss |
— |
|
|
— |
|
|
— |
|
|
(1,643) |
|
|
— |
|
|
(1,643) |
|
|
— |
|
|
— |
|
|
— |
|
|
(492) |
|
|
— |
|
|
(492) |
|
|
Net income |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
4,395 |
|
|
4,395 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
9,194 |
|
|
9,194 |
|
|
Balances at end of period |
2,665 |
|
|
$ |
— |
|
|
$ |
62,092 |
|
|
$ |
(5,054) |
|
|
$ |
67,056 |
|
|
$ |
124,094 |
|
|
2,793 |
|
|
$ |
— |
|
|
$ |
54,334 |
|
|
$ |
(207) |
|
|
$ |
79,233 |
|
|
$ |
133,360 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2022 |
|
Nine Months Ended September 30, 2021 |
|
Class A and Class B Common Stock |
|
Additional Paid-In Capital |
|
Accumulated Other Comprehensive Loss |
|
Retained Earnings |
|
Total Stockholders' Equity |
|
Class A and Class B Common Stock |
|
Additional Paid-In Capital |
|
Accumulated Other Comprehensive Income (Loss) |
|
Retained Earnings |
|
Total Stockholders' Equity |
|
Shares |
|
Par Value |
|
|
Shares |
|
Par Value |
|
|
Balances at beginning of period |
2,741 |
|
|
$ |
— |
|
|
$ |
55,811 |
|
|
$ |
(693) |
|
|
$ |
69,761 |
|
|
$ |
124,879 |
|
|
2,849 |
|
|
$ |
— |
|
|
$ |
50,018 |
|
|
$ |
927 |
|
|
$ |
77,345 |
|
|
$ |
128,290 |
|
|
Issuance of common stock |
39 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
33 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Shares withheld related to net share settlement |
(14) |
|
|
— |
|
|
(2,703) |
|
|
— |
|
|
(235) |
|
|
(2,938) |
|
|
(12) |
|
|
— |
|
|
(2,441) |
|
|
— |
|
|
(1,566) |
|
|
(4,007) |
|
|
Share-based compensation |
— |
|
|
— |
|
|
8,984 |
|
|
— |
|
|
— |
|
|
8,984 |
|
|
— |
|
|
— |
|
|
6,757 |
|
|
— |
|
|
— |
|
|
6,757 |
|
|
Share repurchases |
(101) |
|
|
— |
|
|
— |
|
|
— |
|
|
(21,017) |
|
|
(21,017) |
|
|
(77) |
|
|
— |
|
|
— |
|
|
— |
|
|
(25,631) |
|
|
(25,631) |
|
|
Other comprehensive loss |
— |
|
|
— |
|
|
— |
|
|
(4,361) |
|
|
— |
|
|
(4,361) |
|
|
— |
|
|
— |
|
|
— |
|
|
(1,134) |
|
|
— |
|
|
(1,134) |
|
|
Net income |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
18,547 |
|
|
18,547 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
29,085 |
|
|
29,085 |
|
|
Balances at end of period |
2,665 |
|
|
$ |
— |
|
|
$ |
62,092 |
|
|
$ |
(5,054) |
|
|
$ |
67,056 |
|
|
$ |
124,094 |
|
|
2,793 |
|
|
$ |
— |
|
|
$ |
54,334 |
|
|
$ |
(207) |
|
|
$ |
79,233 |
|
|
$ |
133,360 |
|
See Accompanying Notes to Condensed Consolidated Financial
Statements.
META PLATFORMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, |
|
|
2022 |
|
2021 |
|
Cash flows from operating activities |
|
|
|
|
Net income |
$ |
18,547 |
|
|
$ |
29,085 |
|
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
|
Depreciation and amortization |
6,310 |
|
|
5,953 |
|
|
Share-based compensation |
8,984 |
|
|
6,757 |
|
|
Deferred income taxes |
(2,113) |
|
|
(139) |
|
|
Impairment related to leases and leasehold improvements |
413 |
|
|
— |
|
|
Other |
71 |
|
|
(161) |
|
|
Changes in assets and liabilities: |
|
|
|
|
Accounts receivable |
1,930 |
|
|
(1,072) |
|
|
Prepaid expenses and other current assets |
(693) |
|
|
(2,566) |
|
|
Other assets |
(160) |
|
|
(184) |
|
|
Accounts payable |
(666) |
|
|
560 |
|
|
Partners payable |
(12) |
|
|
(163) |
|
|
Accrued expenses and other current liabilities |
2,942 |
|
|
895 |
|
|
Deferred revenue and deposits |
(35) |
|
|
87 |
|
|
Other liabilities |
446 |
|
|
527 |
|
|
Net cash provided by operating activities |
35,964 |
|
|
39,579 |
|
|
Cash flows from investing activities |
|
|
|
|
Purchases of property and equipment |
(22,388) |
|
|
(13,290) |
|
|
Proceeds relating to property and equipment |
190 |
|
|
92 |
|
|
Purchases of marketable debt securities |
(8,885) |
|
|
(24,314) |
|
|
Sales of marketable debt securities |
9,333 |
|
|
15,331 |
|
|
Maturities of marketable debt securities |
1,562 |
|
|
9,318 |
|
|
|
|
|
|
Acquisitions of businesses and intangible assets |
(1,250) |
|
|
(330) |
|
|
Other investing activities |
(1) |
|
|
(206) |
|
|
Net cash used in investing activities |
(21,439) |
|
|
(13,399) |
|
|
Cash flows from financing activities |
|
|
|
|
Taxes paid related to net share settlement of equity
awards |
(2,938) |
|
|
(4,007) |
|
|
Repurchases of Class A common stock |
(21,093) |
|
|
(24,476) |
|
|
Proceeds from issuance of long-term debt, net |
9,921 |
|
|
— |
|
|
Principal payments on finance leases |
(615) |
|
|
(505) |
|
|
Net change in overdraft in cash pooling entities |
(250) |
|
|
15 |
|
|
Other financing activities |
(101) |
|
|
(13) |
|
|
Net cash used in financing activities |
(15,076) |
|
|
(28,986) |
|
|
Effect of exchange rate changes on cash, cash equivalents, and
restricted cash |
(1,063) |
|
|
(344) |
|
|
Net decrease in cash, cash equivalents, and restricted
cash |
(1,614) |
|
|
(3,150) |
|
|
Cash, cash equivalents, and restricted cash at beginning of the
period |
16,865 |
|
|
17,954 |
|
|
Cash, cash equivalents, and restricted cash at end of the
period |
$ |
15,251 |
|
|
$ |
14,804 |
|
|
|
|
|
|
|
Reconciliation of cash, cash equivalents, and restricted cash to
the condensed consolidated balance sheets |
|
|
|
|
Cash and cash equivalents |
$ |
14,308 |
|
|
$ |
14,496 |
|
|
Restricted cash, included in prepaid expenses and other current
assets |
232 |
|
|
195 |
|
|
Restricted cash, included in other assets |
711 |
|
|
113 |
|
|
Total cash, cash equivalents, and restricted cash |
$ |
15,251 |
|
|
$ |
14,804 |
|
See
Accompanying Notes to Condensed Consolidated Financial
Statements.
META PLATFORMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, |
|
2022 |
|
2021 |
|
Supplemental cash flow data |
|
|
|
|
Cash paid for income taxes, net |
$ |
4,647 |
|
|
$ |
7,919 |
|
|
Non-cash investing and financing activities: |
|
|
|
|
Property and equipment in accounts payable and accrued expenses and
other current liabilities |
$ |
4,130 |
|
|
$ |
2,635 |
|
|
|
|
|
|
Acquisition of businesses in accrued expenses and other current
liabilities and other liabilities |
$ |
294 |
|
|
$ |
73 |
|
|
Other current assets through financing arrangement in accrued
expenses and other current liabilities |
$ |
18 |
|
|
$ |
491 |
|
|
Repurchases of Class A common stock in accrued expenses and other
current liabilities |
$ |
265 |
|
|
$ |
1,223 |
|
See Accompanying Notes to Condensed Consolidated Financial
Statements.
META PLATFORMS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated
financial
statements have been prepared in accordance with generally accepted
accounting principles in the United States (GAAP) and
applicable rules and regulations of the Securities and Exchange
Commission regarding interim financial reporting. Certain
information and note disclosures normally included in the financial
statements prepared in accordance with GAAP have been condensed or
omitted pursuant to such rules and regulations. As such, the
information included in this quarterly report on Form 10-Q should
be read in conjunction with the consolidated financial statements
and accompanying notes included in our Annual Report on Form 10-K
for the year ended December 31, 2021.
The condensed consolidated balance sheet as of December 31,
2021 included herein was derived from the audited financial
statements as of that date, but does not include all disclosures
including notes required by GAAP.
The condensed consolidated financial statements include the
accounts of Meta Platforms, Inc., its subsidiaries where we have
controlling financial interests, and any variable interest entities
for which we are deemed to be the primary beneficiary. All
intercompany balances and transactions have been
eliminated.
The accompanying condensed consolidated financial statements
reflect all normal recurring adjustments that are necessary to
present fairly the results for the interim periods presented.
Interim results are not necessarily indicative of the results for
the full year ending December 31, 2022.
Use of Estimates
Preparation of condensed consolidated financial statements in
conformity with GAAP requires the use of estimates and judgments
that affect the reported amounts in the condensed consolidated
financial statements and accompanying notes. These estimates form
the basis for judgments we make about the carrying values of our
assets and liabilities, which are not readily apparent from other
sources. We base our estimates and judgments on historical
information and on various other assumptions that we believe are
reasonable under the circumstances. GAAP requires us to make
estimates and judgments in several areas, including, but not
limited to, those related to revenue recognition, valuation of
non-marketable equity securities, income taxes, loss contingencies,
including the ultimate resolution of litigation, regulatory
matters, and asserted and unasserted claims, valuation of
long-lived assets including goodwill, intangible assets, and
property and equipment, and their associated estimated useful
lives, valuation of purchase commitments, credit losses of
available-for-sale debt securities and accounts receivable, fair
value of financial instruments and fair value of leases. These
estimates are based on management's knowledge about current events,
interpretations of regulations, and expectations about actions we
may undertake in the future. Actual results could differ materially
from those estimates.
In connection with our periodic reviews of the estimated useful
lives of property and equipment, we extended the estimated average
useful lives of a majority of the servers and network assets from
four years to 4.5 years, effective the second quarter of 2022, as a
result of expected longer refresh cycles in our data centers. The
financial impact of this change in estimate was a reduction in
depreciation expense of $482 million and an increase in net
income of $394 million, or $0.14 per diluted share for the
nine months ended September 30, 2022. The impact from the
change in our estimates was calculated based on the servers and
network assets existing as of the effective date of the change and
applying the revised estimated useful lives
prospectively.
Significant Accounting Policies
There have been no material changes to our significant accounting
policies from our Annual Report on Form 10-K for the fiscal year
ended December 31, 2021, certain of which are further
discussed below.
Long-lived Assets
In the
third
quarter of 2022, we made a decision to sublease, early terminate,
or abandon several office buildings under operating leases to align
our real property lease arrangements with our anticipated operating
needs. As a result, we also began to review the related operating
lease right-of-use (ROU) assets and leasehold improvements for
impairment under Accounting Standards Codification (ASC)
Topic 360.
In connection with the above decision, in the three months ended
September 30, 2022, we recorded an impairment loss of
$413 million for operating lease ROU assets and leasehold
improvements. The impairment loss represents the amount by which
the carrying value exceeded the estimated fair value of these
assets. Of the total impairment loss, $33 million is included
in cost of revenue, $231 million in research and development,
$74 million in marketing and sales, and $75 million in
general and administrative on our condensed consolidated statements
of income during the three months ended September 30, 2022.
The impairment loss recorded under our Family of Apps (FoA) segment
was $338 million with the remaining $75 million
recognized in our Reality Labs (RL) segment. The fair values of the
impaired assets were estimated using discounted cash flow models
(income approach) based on market participant assumptions with
Level 3 inputs. The assumptions used in estimating fair value
include the expected downtime prior to the commencement of future
subleases, projected sublease income over the remaining lease
periods, and discount rates that reflect the level of risk
associated with receiving future cash flows.
As we continue to evaluate our real property lease arrangements, we
expect to reduce more office space and incur additional impairment
charges in the foreseeable future, which may have a material
adverse impact on our consolidated financial statements in the
aggregate.
Recently Adopted Accounting Pronouncements
On January 1, 2022, we early adopted Accounting Standards
Update (ASU) No. 2021-08,
Business Combinations (Topic 805): Accounting for Contract Assets
and Contract Liabilities from Contracts with Customers
(ASU 2021-08), which clarifies that an acquirer of a business
should recognize and measure contract assets and contract
liabilities in a business combination in accordance with ASC
Topic 606,
Revenue from Contracts with Customers.
The adoption of this new standard did not have a material impact on
our condensed consolidated financial statements.
On July 1, 2022, we early adopted ASU No. 2022-03,
Fair Value Measurement (Topic 820): Fair Value Measurement of
Equity Securities Subject to Contractual Sale Restrictions
(ASU 2022-03), which clarifies and amends the guidance of measuring
the fair value of equity securities subject to contractual
restrictions that prohibit the sale of the equity securities. The
adoption of this new standard did not have a material impact on our
condensed consolidated financial statements.
Accounting Pronouncements Not Yet Adopted
In November 2021, the Financial Accounting Standards Board (FASB)
issued ASU No. 2021-10,
Government Assistance (Topic 832): Disclosure by Business Entities
about Government Assistance
(ASU 2021-10), which requires the disclosure of government
assistance received by most business entities relating to:
(1) the types of government assistance received; (2) the
accounting for such assistance; and (3) the effect of the
assistance on a business entity's financial statements. This
guidance will be effective for our annual financial statements for
the year ended December 31, 2022. The adoption of this new
standard will not have a material impact on our condensed
consolidated financial statements.
Note 2. Revenue
Revenue disaggregated by revenue source and by segment consists of
the following (in millions). For comparative purposes, amounts in
the prior periods have been recast:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
Advertising |
$ |
27,237 |
|
|
$ |
28,276 |
|
|
$ |
82,387 |
|
|
$ |
82,294 |
|
|
Other revenue |
192 |
|
|
176 |
|
|
624 |
|
|
567 |
|
|
Family of Apps |
27,429 |
|
|
28,452 |
|
|
83,011 |
|
|
82,861 |
|
|
Reality Labs |
285 |
|
|
558 |
|
|
1,433 |
|
|
1,397 |
|
|
Total revenue |
$ |
27,714 |
|
|
$ |
29,010 |
|
|
$ |
84,444 |
|
|
$ |
84,258 |
|
Revenue disaggregated by geography, based on the addresses of our
customers, consists of the following (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
United States and Canada
(1)
|
$ |
11,966 |
|
|
$ |
12,668 |
|
|
$ |
35,931 |
|
|
$ |
36,716 |
|
|
Europe
(2)
|
5,996 |
|
|
7,018 |
|
|
19,284 |
|
|
20,622 |
|
|
Asia-Pacific |
6,797 |
|
|
6,592 |
|
|
20,480 |
|
|
19,370 |
|
|
Rest of World
(2)
|
2,955 |
|
|
2,732 |
|
|
8,749 |
|
|
7,550 |
|
|
Total revenue |
$ |
27,714 |
|
|
$ |
29,010 |
|
|
$ |
84,444 |
|
|
$ |
84,258 |
|
____________________________________
(1) United States revenue was
$11.29 billion and $11.88 billion for the three months
ended September 30, 2022 and 2021, respectively, and
$33.81 billion and $34.45 billion for the nine months
ended September 30, 2022 and 2021, respectively.
(2) Europe includes Russia and Turkey, and
Rest of World includes Africa, Latin America, and the Middle
East.
Our total deferred revenue was $513 million and
$596 million as of September 30, 2022 and
December 31, 2021, respectively. As of September 30,
2022, we expect $478 million of our deferred revenue to be
realized in less than a year.
Note 3. Earnings per Share
We compute earnings per share (EPS) of Class A and
Class B common stock using the two-class method. As the
liquidation and dividend rights for both Class A and
Class B common stock are identical, the undistributed earnings
are allocated on a proportionate basis to the weighted-average
number of common shares outstanding for the period.
Basic EPS is computed by dividing net income by the
weighted-average number of shares of our Class A and
Class B common stock outstanding. For the calculation of
diluted EPS, net income for basic EPS is adjusted by the effect of
dilutive securities, including awards under our equity compensation
plan.
In addition, the computation of the diluted EPS of Class A
common stock assumes the conversion of our Class B common
stock to Class A common stock, while the diluted EPS of
Class B common stock does not assume the conversion of those
shares to Class A common stock. Diluted EPS is computed by
dividing the resulting net income by the weighted-average number of
fully diluted common shares outstanding.
For the three and nine months ended September 30, 2022,
119 million and 93 million shares of Class A common
stock equivalents of restricted stock units (RSUs), respectively,
were excluded from the diluted EPS calculation as including them
would have an anti-dilutive effect. RSUs with anti-dilutive effect
were not material for the three and nine months ended September 30,
2021.
Basic and diluted EPS are the same for each class of common stock
because they are entitled to the same liquidation and dividend
rights.
The numerators and denominators of the basic and diluted EPS
computations for our common stock are calculated as follows (in
millions, except per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
|
Class A |
|
Class B |
|
Class A |
|
Class B |
|
Class A |
|
Class B |
|
Class A |
|
Class B |
|
Basic EPS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
$ |
3,729 |
|
|
$ |
666 |
|
|
$ |
7,782 |
|
|
$ |
1,412 |
|
|
$ |
15,736 |
|
|
$ |
2,811 |
|
|
$ |
24,588 |
|
|
$ |
4,497 |
|
|
Denominator |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in computation of basic earnings per share |
2,276 |
|
|
406 |
|
|
2,382 |
|
|
432 |
|
|
2,293 |
|
|
410 |
|
|
2,394 |
|
|
438 |
|
|
Basic EPS |
$ |
1.64 |
|
|
$ |
1.64 |
|
|
$ |
3.27 |
|
|
$ |
3.27 |
|
|
$ |
6.86 |
|
|
$ |
6.86 |
|
|
$ |
10.27 |
|
|
$ |
10.27 |
|
|
Diluted EPS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
$ |
3,729 |
|
|
$ |
666 |
|
|
$ |
7,782 |
|
|
$ |
1,412 |
|
|
$ |
15,736 |
|
|
$ |
2,811 |
|
|
$ |
24,588 |
|
|
$ |
4,497 |
|
|
Reallocation of net income as a result of conversion of Class B to
Class A common stock |
666 |
|
|
— |
|
|
1,412 |
|
|
— |
|
|
2,811 |
|
|
— |
|
|
4,497 |
|
|
— |
|
|
Reallocation of net income to Class B common stock |
— |
|
|
(1) |
|
|
— |
|
|
(22) |
|
|
— |
|
|
(16) |
|
|
— |
|
|
(69) |
|
|
Net income for diluted EPS |
$ |
4,395 |
|
|
$ |
665 |
|
|
$ |
9,194 |
|
|
$ |
1,390 |
|
|
$ |
18,547 |
|
|
$ |
2,795 |
|
|
$ |
29,085 |
|
|
$ |
4,428 |
|
|
Denominator |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in computation of basic earnings per share |
2,276 |
|
|
406 |
|
|
2,382 |
|
|
432 |
|
|
2,293 |
|
|
410 |
|
|
2,394 |
|
|
438 |
|
|
Conversion of Class B to Class A common stock |
406 |
|
|
— |
|
|
432 |
|
|
— |
|
|
410 |
|
|
— |
|
|
438 |
|
|
— |
|
|
Weighted-average effect of dilutive RSUs |
5 |
|
|
— |
|
|
45 |
|
|
— |
|
|
15 |
|
|
— |
|
|
44 |
|
|
— |
|
|
Shares used in computation of diluted earnings per
share |
2,687 |
|
|
406 |
|
|
2,859 |
|
|
432 |
|
|
2,718 |
|
|
410 |
|
|
2,876 |
|
|
438 |
|
|
Diluted EPS |
$ |
1.64 |
|
|
$ |
1.64 |
|
|
$ |
3.22 |
|
|
$ |
3.22 |
|
|
$ |
6.82 |
|
|
$ |
6.82 |
|
|
$ |
10.11 |
|
|
$ |
10.11 |
|
Note 4. Cash, Cash Equivalents, Marketable Securities, and
Restricted Cash
The following table sets forth the cash, cash equivalents, and
marketable securities by major security type, and restricted cash
(in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2022 |
|
December 31, 2021 |
|
Cash and cash equivalents: |
|
|
|
|
Cash |
$ |
6,160 |
|
|
$ |
7,308 |
|
|
Money market funds |
6,789 |
|
|
8,850 |
|
|
U.S. government securities |
752 |
|
|
25 |
|
|
U.S. government agency securities |
155 |
|
|
108 |
|
|
Certificates of deposit and time deposits |
435 |
|
|
250 |
|
|
Corporate debt securities |
17 |
|
|
60 |
|
|
Total cash and cash equivalents |
14,308 |
|
|
16,601 |
|
|
Marketable securities: |
|
|
|
|
Marketable debt securities: |
|
|
|
|
U.S. government securities |
9,303 |
|
|
10,901 |
|
|
U.S. government agency securities |
5,049 |
|
|
5,927 |
|
|
Corporate debt securities |
13,033 |
|
|
14,569 |
|
|
Total marketable debt securities |
27,385 |
|
|
31,397 |
|
|
Marketable equity securities |
83 |
|
|
— |
|
|
Total marketable securities |
27,468 |
|
|
31,397 |
|
|
Restricted cash: |
|
|
|
|
Restricted cash included in prepaid expenses and other current
assets |
232 |
|
|
149 |
|
|
Restricted cash included in other assets |
711 |
|
|
115 |
|
|
Total restricted cash |
943 |
|
|
264 |
|
|
Total cash, cash equivalents, marketable securities, and restricted
cash |
$ |
42,719 |
|
|
$ |
48,262 |
|
The following table summarizes our available-for-sale marketable
debt securities and cash equivalents with unrealized losses as of
September 30, 2022, aggregated by major security type and the
length of time that individual securities have been in a continuous
loss position (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2022 |
|
Less than 12 months |
|
12 months or greater |
|
Total |
|
Fair Value |
|
Unrealized Losses |
|
Fair Value |
|
Unrealized Losses |
|
Fair Value |
|
Unrealized Losses |
|
U.S. government securities |
$ |
7,418 |
|
|
$ |
(423) |
|
|
$ |
1,793 |
|
|
$ |
(119) |
|
|
$ |
9,211 |
|
|
$ |
(542) |
|
|
U.S. government agency securities |
2,117 |
|
|
(82) |
|
|
2,934 |
|
|
(270) |
|
|
5,051 |
|
|
(352) |
|
|
Corporate debt securities |
8,861 |
|
|
(653) |
|
|
3,869 |
|
|
(374) |
|
|
12,730 |
|
|
(1,027) |
|
|
Total |
$ |
18,396 |
|
|
$ |
(1,158) |
|
|
$ |
8,596 |
|
|
$ |
(763) |
|
|
$ |
26,992 |
|
|
$ |
(1,921) |
|
The gross unrealized gains on our marketable debt securities and
cash equivalents were not material as of September 30, 2022
and December 31, 2021. The gross unrealized losses were
$1.92 billion as of September 30, 2022, and not material
as of December 31, 2021, respectively. The increase in the
gross unrealized losses in the nine months ended September 30,
2022 is due to higher interest rates. The allowance for credit
losses on our marketable debt securities was not material as of
September 30, 2022 and December 31, 2021.
The following table classifies our marketable debt securities by
contractual maturities (in millions):
|
|
|
|
|
|
|
September 30, 2022 |
|
Due within one year |
$ |
4,116 |
|
|
Due after one year to five years |
23,269 |
|
|
Total |
$ |
27,385 |
|
Note 5. Non-marketable Equity Securities
Our non-marketable equity securities are investments in
privately-held companies without readily determinable fair values.
The following table summarizes our non-marketable equity securities
that were measured using measurement alternative and equity method
(in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2022 |
|
December 31, 2021 |
|
Non-marketable equity securities under measurement
alternative: |
|
|
|
|
Initial cost |
$ |
6,388 |
|
|
$ |
6,480 |
|
|
Cumulative upward adjustments |
293 |
|
|
311 |
|
|
Cumulative impairment/downward adjustments |
(186) |
|
|
(50) |
|
|
Carrying value |
6,495 |
|
|
6,741 |
|
|
Non-marketable equity securities under equity method |
33 |
|
|
34 |
|
|
Total |
$ |
6,528 |
|
|
$ |
6,775 |
|
As of September 30, 2022, we had $264 million of equity
investment in Giphy. Due to regulatory restrictions, we do not
control or exercise significant influence over Giphy. Based on a
regulatory decision announced by the United Kingdom Competition and
Markets Authority in October 2022, we plan to divest Giphy but we
may not be able to recover our carrying value in connection with
the divestiture.
Note 6. Fair Value Measurements
The following table summarizes our assets measured at fair value on
a recurring basis and the classification by level of input within
the fair value hierarchy (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurement at Reporting Date Using |
|
Description |
|
September 30, 2022 |
|
Quoted Prices in Active Markets for Identical Assets
(Level 1) |
|
Significant Other Observable Inputs
(Level 2) |
|
Significant Unobservable Inputs
(Level 3) |
|
Cash equivalents: |
|
|
|
|
|
|
|
|
|
Money market funds |
|
$ |
6,789 |
|
|
$ |
6,789 |
|
|
$ |
— |
|
|
$ |
— |
|
|
U.S. government securities |
|
752 |
|
|
752 |
|
|
— |
|
|
— |
|
|
U.S. government agency securities |
|
155 |
|
|
155 |
|
|
— |
|
|
— |
|
|
Certificates of deposit and time deposits |
|
435 |
|
|
— |
|
|
435 |
|
|
— |
|
|
Corporate debt securities |
|
17 |
|
|
— |
|
|
17 |
|
|
— |
|
|
Marketable securities: |
|
|
|
|
|
|
|
|
|
U.S. government securities |
|
9,303 |
|
|
9,303 |
|
|
— |
|
|
— |
|
|
U.S. government agency securities |
|
5,049 |
|
|
5,049 |
|
|
— |
|
|
— |
|
|
Corporate debt securities |
|
13,033 |
|
|
— |
|
|
13,033 |
|
|
— |
|
|
Marketable equity securities |
|
83 |
|
|
4 |
|
|
— |
|
|
79 |
|
|
Restricted cash equivalents |
|
586 |
|
|
586 |
|
|
— |
|
|
— |
|
|
Other assets |
|
194 |
|
|
— |
|
|
— |
|
|
194 |
|
|
Total |
|
$ |
36,396 |
|
|
$ |
22,638 |
|
|
$ |
13,485 |
|
|
$ |
273 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurement at Reporting Date Using |
|
Description |
|
December 31, 2021 |
|
Quoted Prices in Active Markets for Identical Assets
(Level 1) |
|
Significant Other Observable Inputs
(Level 2) |
|
Significant Unobservable Inputs
(Level 3) |
|
Cash equivalents: |
|
|
|
|
|
|
|
|
|
Money market funds |
|
$ |
8,850 |
|
|
$ |
8,850 |
|
|
$ |
— |
|
|
$ |
— |
|
|
U.S. government securities |
|
25 |
|
|
25 |
|
|
— |
|
|
— |
|
|
U.S. government agency securities |
|
108 |
|
|
108 |
|
|
— |
|
|
— |
|
|
Certificates of deposit and time deposits |
|
250 |
|
|
— |
|
|
250 |
|
|
— |
|
|
Corporate debt securities |
|
60 |
|
|
— |
|
|
60 |
|
|
— |
|
|
Marketable securities: |
|
|
|
|
|
|
|
|
|
U.S. government securities |
|
10,901 |
|
|
10,901 |
|
|
— |
|
|
— |
|
|
U.S. government agency securities |
|
5,927 |
|
|
5,927 |
|
|
— |
|
|
— |
|
|
Corporate debt securities |
|
14,569 |
|
|
— |
|
|
14,569 |
|
|
— |
|
|
Restricted cash equivalents |
|
71 |
|
|
71 |
|
|
— |
|
|
— |
|
|
Other assets |
|
160 |
|
|
— |
|
|
— |
|
|
160 |
|
|
Total |
|
$ |
40,921 |
|
|
$ |
25,882 |
|
|
$ |
14,879 |
|
|
$ |
160 |
|
We classify our cash equivalents and marketable debt securities
within Level 1 or Level 2 because we use quoted market
prices or alternative pricing sources and models utilizing market
observable inputs to determine their fair value. Our marketable
equity securities are publicly traded stocks measured at fair value
and classified within Level 1 or Level 3 in the fair
value hierarchy
because we use quoted prices for identical assets in active markets
or use significant unobservable inputs
to estimate their fair value.
Certain other assets are classified within Level 3 because
factors used to develop the estimated fair value are unobservable
inputs that are not supported by market activity.
Our non-marketable equity securities accounted for using the
measurement alternative are measured at fair value on a
non-recurring basis and are classified within Level 3 of the
fair value hierarchy because we use significant unobservable inputs
to estimate their fair value. Assets remeasured at fair value
within Level 3 during the nine months ended September 30,
2022 were not material. As of December 31, 2021, included in
the total $6.78 billion of non-marketable equity securities,
$913 million was remeasured at fair value within Level 3
during the year ended December 31, 2021. The gains and losses
that resulted from the remeasurements were not material for the
three and nine months ended September 30, 2022 and 2021,
respectively. For additional information, see Note 5 —
Non-marketable Equity Securities.
Note 7. Property and Equipment
Property and equipment, net consists of the following (in
millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2022 |
|
December 31, 2021 |
|
Land |
$ |
1,762 |
|
|
$ |
1,688 |
|
|
Servers and network assets |
31,438 |
|
|
25,584 |
|
|
Buildings |
25,313 |
|
|
22,531 |
|
|
Leasehold improvements |
6,625 |
|
|
5,795 |
|
|
Equipment and other |
5,375 |
|
|
4,764 |
|
|
Finance lease right-of-use assets |
2,995 |
|
|
2,840 |
|
|
Construction in progress |
23,623 |
|
|
14,687 |
|
|
Property and equipment, gross |
97,131 |
|
|
77,889 |
|
|
Less: Accumulated depreciation |
(23,393) |
|
|
(20,080) |
|
|
Property and equipment, net |
$ |
73,738 |
|
|
$ |
57,809 |
|
Construction in progress includes costs mostly related to
construction of data centers, network infrastructure, servers, and
office facilities. Depreciation expense on property and equipment
was $2.13 billion and $1.87 billion for the three months
ended September 30, 2022 and 2021, respectively, and
$6.17 billion and $5.59 billion for the nine months ended
September 30, 2022 and 2021, respectively. For additional
information regarding changes in the estimated useful life of our
servers and network assets, see Note 1 — Summary of
Significant Accounting Policies.
Note 8. Leases
We have entered into various non-cancelable operating lease
agreements mostly for our offices, data centers, colocations, and
land. We have also entered into various non-cancelable finance
lease agreements mostly for certain network infrastructure. Our
leases have original lease periods expiring between the remainder
of 2022 and 2093. Many leases include one or more options to renew.
We do not assume renewals in our determination of the lease term
unless the renewals are deemed to be reasonably assured. Our lease
agreements generally do not contain any material residual value
guarantees or material restrictive covenants.
The components of lease costs are as follows (in
millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
Finance lease cost: |
|
|
|
|
|
|
|
|
Amortization of right-of-use assets |
$ |
92 |
|
|
$ |
88 |
|
|
$ |
285 |
|
|
$ |
252 |
|
|
Interest |
4 |
|
|
4 |
|
|
12 |
|
|
11 |
|
|
Operating lease cost |
480 |
|
|
386 |
|
|
1,326 |
|
|
1,119 |
|
|
Variable lease cost and other, net |
87 |
|
|
68 |
|
|
263 |
|
|
194 |
|
|
Total lease cost |
$ |
663 |
|
|
$ |
546 |
|
|
$ |
1,886 |
|
|
$ |
1,576 |
|
In the three months ended September 30, 2022, we also recorded
$353 million impairment loss for operating lease ROU assets to
align our real property lease arrangements with our current
operating needs. See Note 1 — Summary of Significant
Accounting Policies for details.
Supplemental balance sheet information related to leases is as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2022 |
|
December 31, 2021 |
|
Weighted-average remaining lease term: |
|
|
|
|
Finance leases |
13.9 years |
|
13.9 years |
|
Operating leases |
12.7 years |
|
13.0 years |
|
Weighted-average discount rate: |
|
|
|
|
Finance leases |
2.8 |
% |
|
2.7 |
% |
|
Operating leases |
3.0 |
% |
|
2.8 |
% |
The following is a schedule, by years, of maturities of lease
liabilities as of September 30, 2022 (in
millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Leases |
|
Finance Leases |
|
The remainder of 2022 |
$ |
302 |
|
|
$ |
28 |
|
|
2023 |
1,775 |
|
|
68 |
|
|
2024 |
1,916 |
|
|
55 |
|
|
2025 |
1,630 |
|
|
47 |
|
|
2026 |
1,575 |
|
|
47 |
|
|
Thereafter |
12,612 |
|
|
452 |
|
|
Total undiscounted cash flows |
19,810 |
|
|
697 |
|
|
Less: Imputed interest |
(3,832) |
|
|
(116) |
|
|
Present value of lease liabilities |
$ |
15,978 |
|
|
$ |
581 |
|
|
|
|
|
|
|
Lease liabilities, current |
$ |
1,291 |
|
|
$ |
64 |
|
|
Lease liabilities, non-current |
14,687 |
|
|
517 |
|
|
Present value of lease liabilities |
$ |
15,978 |
|
|
$ |
581 |
|
The table above does not include lease payments that were not fixed
at commencement or lease modification. As of September 30,
2022, we have additional operating and finance leases, that have
not yet commenced, with lease obligations of approximately
$8.62 billion and $1.54 billion, respectively, mostly for
data centers, offices, and network infrastructure. These operating
and finance leases will commence between the remainder of 2022 and
2028 with lease terms of greater than one year to 30
years.
Supplemental cash flow information related to leases is as follows
(in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, |
|
2022 |
|
2021 |
|
Cash paid for amounts included in the measurement of lease
liabilities: |
|
|
|
|
Operating cash flows for operating leases |
$ |
1,197 |
|
|
$ |
1,040 |
|
|
Operating cash flows for finance leases |
$ |
11 |
|
|
$ |
11 |
|
|
Financing cash flows for finance leases |
$ |
615 |
|
|
$ |
505 |
|
|
Lease liabilities arising from obtaining right-of-use
assets: |
|
|
|
|
Operating leases |
$ |
3,565 |
|
|
$ |
2,921 |
|
|
Finance leases |
$ |
114 |
|
|
$ |
124 |
|
Note 9. Acquisitions, Goodwill, and Intangible Assets
During the nine months ended September 30, 2022, we completed
several business acquisitions with total cash consideration
transferred of $1.18 billion, which in aggregate was allocated
to $302 million of intangible assets, $1.10 billion of
goodwill, and $223 million of net liabilities assumed.
Goodwill generated from all business acquisitions completed was
primarily attributable to expected synergies and potential
monetization opportunities. The amount of goodwill generated that
was deductible for tax purposes was not material.
Acquisition-related costs were immaterial and were expensed as
incurred. Pro forma historical results of operations related to
these business acquisitions have not been presented because they
are not material to our condensed consolidated financial
statements, either individually or in aggregate. We have included
the financial results of these acquired businesses in our condensed
consolidated financial statements from their respective dates of
acquisition.
Changes in the carrying amount of goodwill by reportable segment
for the nine months ended September 30, 2022 are as follows
(in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Family of Apps |
|
Reality Labs |
|
Total |
|
Goodwill at December 31, 2021 |
$ |
18,458 |
|
|
$ |
739 |
|
|
$ |
19,197 |
|
|
Acquisitions |
773 |
|
|
329 |
|
|
1,102 |
|
|
Adjustments |
19 |
|
|
(50) |
|
|
(31) |
|
|
Goodwill at September 30, 2022 |
$ |
19,250 |
|
|
$ |
1,018 |
|
|
$ |
20,268 |
|
The following table sets forth the major categories of the
intangible assets and the weighted‑average remaining useful lives
for those assets that are not already fully amortized (in
millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2022 |
|
December 31, 2021 |
|
Weighted-Average Remaining Useful Lives
(in years) |
|
Gross Carrying Amount |
|
Accumulated Amortization |
|
Net Carrying Amount |
|
Gross Carrying Amount |
|
Accumulated Amortization |
|
Net Carrying Amount |
|
Acquired technology |
5.3 |
|
$ |
604 |
|
|
$ |
(255) |
|
|
$ |
349 |
|
|
$ |
1,412 |
|
|
$ |
(1,169) |
|
|
$ |
243 |
|
|
Acquired patents |
2.8 |
|
379 |
|
|
(300) |
|
|
79 |
|
|
827 |
|
|
(722) |
|
|
105 |
|
|
Trade names |
3.9 |
|
11 |
|
|
(2) |
|
|
9 |
|
|
644 |
|
|
(633) |
|
|
11 |
|
|
Other |
9.0 |
|
75 |
|
|
(19) |
|
|
56 |
|
|
176 |
|
|
(167) |
|
|
9 |
|
|
Total finite-lived assets |
|
|
1,069 |
|
|
(576) |
|
|
493 |
|
|
3,059 |
|
|
(2,691) |
|
|
368 |
|
|
Total indefinite-lived assets |
N/A |
|
382 |
|
|
— |
|
|
382 |
|
|
266 |
|
|
— |
|
|
266 |
|
|
Total intangible assets |
|
|
$ |
1,451 |
|
|
$ |
(576) |
|
|
$ |
875 |
|
|
$ |
3,325 |
|
|
$ |
(2,691) |
|
|
$ |
634 |
|
Amortization expense of intangible assets was
$45 million
and
$124 million
for the three months ended September 30, 2022 and 2021,
respectively, and $138 million and $364 million for the
nine months ended September 30, 2022 and 2021,
respectively.
As of September 30, 2022, expected amortization expense for
the unamortized finite-lived intangible assets for the next five
years and thereafter is as follows (in millions):
|
|
|
|
|
|
|
The remainder of 2022 |
$ |
45 |
|
|
2023 |
137 |
|
|
2024 |
110 |
|
|
2025 |
66 |
|
|
2026 |
32 |
|
|
Thereafter |
103 |
|
|
Total |
$ |
493 |
|
Note 10. Long-term Debt
In August 2022, we issued an aggregate of $10.0 billion
principal amount of fixed-rate senior unsecured notes in four
series (the “Notes”) in a private offering to qualified
institutional buyers and certain non-U.S. persons. The proceeds
from this offering, net of discounts and debt issuance costs, was
$9.92 billion. We intend to use the net proceeds from the
offering for general corporate purposes, which may include, but are
not limited to, capital expenditures, repurchases of outstanding
shares of our common stock, acquisitions, or investments. The Notes
of each series rank equally with each other and we are not subject
to any financial covenants. We may redeem each series of the Notes
at any time in whole or in part, at specified redemption prices. In
connection with the offering, we entered into a registration rights
agreement providing for the filing of a registration statement with
the Securities and Exchange Commission in order to exchange the
Notes for registered notes having substantially the same
terms.
The following table summarizes the Notes and the carrying amount of
our debt as of September 30, 2022 (in millions, except
percentages):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maturity |
|
Stated Interest Rate |
|
Effective Interest Rate |
|
September 30, 2022 |
|
2027 Notes |
2027 |
|
3.50% |
|
3.63% |
|
$ |
2,750 |
|
|
2032 Notes |
2032 |
|
3.85% |
|
3.92% |
|
3,000 |
|
|
2052 Notes |
2052 |
|
4.45% |
|
4.51% |
|
2,750 |
|
|
2062 Notes |
2062 |
|
4.65% |
|
4.71% |
|
1,500 |
|
|
Total face amount of long-term debt |
|
|
|
|
|
|
10,000 |
|
|
Unamortized discount and issuance costs, net |
|
|
|
|
|
|
(78) |
|
Long-term debt |
|
|
|
|
|
|
$ |
9,922 |
|
Interest on each of the Notes is payable semi-annually in arrears
in February and August of each year, commencing in February 2023.
The effective interest rates include the interest rates stated on
the Notes and amortization of the discounts and issuance costs. In
the three and nine months ended September 30, 2022, interest
expense recognized on the debt was not material.
The total estimated fair value of our outstanding debt was
$8.66 billion as of September 30, 2022. The fair value
was determined based on the closing trading price per $100 of the
Notes as of September 30, 2022 and is categorized accordingly
as Level 2 in the fair value hierarchy.
As of September 30, 2022, future principal payments for the
Notes, by year, are as follows (in millions):
|
|
|
|
|
|
|
Remainder of 2022 through 2026 |
$ |
— |
|
|
2027 |
2,750 |
|
|
Thereafter |
7,250 |
|
|
Total outstanding debt |
$ |
10,000 |
|
Note 11. Commitments and Contingencies
Guarantee
In 2018, we established a multi-currency notional cash pool for
certain of our entities with a third-party bank provider. Actual
cash balances are not physically converted and are not commingled
between participating legal entities. As part of the notional cash
pool agreement, the bank extends overdraft credit to our
participating entities as needed, provided that the overall
notionally pooled balance of all accounts in the pool at the end of
each day is at least zero. In the unlikely event of a default by
our collective entities participating in the pool, any overdraft
balances incurred would be guaranteed by Meta Platforms,
Inc.
Contractual Commitments
We have $22.35 billion of non-cancelable contractual
commitments as of September 30, 2022, which are primarily
related to our investments in servers, network infrastructure, and
consumer hardware products in Reality Labs. The following is a
schedule, by years, of non-cancelable contractual commitments as of
September 30, 2022 (in millions):
|
|
|
|
|
|
|
The remainder of 2022 |
$ |
7,200 |
|
|
2023 |
9,211 |
|
|
2024 |
1,922 |
|
|
2025 |
1,154 |
|
|
2026 |
295 |
|
|
Thereafter |
2,565 |
|
|
Total |
$ |
22,347 |
|
Additionally, as part of the normal course of business, we have
entered into multi-year agreements to purchase renewable energy
that do not specify a fixed or minimum volume commitment or to
purchase certain server components that do not specify a fixed or
minimum price commitment. We enter into these agreements in order
to secure either volume or price. Using the projected market prices
or expected volume consumption, the total estimated spend as of
September 30, 2022 is approximately $8.64 billion, a
majority of which is due beyond five years. The ultimate spend
under these agreements may vary and will be based on prevailing
market prices or actual volume purchased.
Legal and Related Matters
Beginning on March 20, 2018, multiple putative class actions
and derivative actions were filed in state and federal courts in
the United States and elsewhere against us and certain of our
directors and officers alleging violations of securities laws,
breach of fiduciary duties, and other causes of action in
connection with our platform and user data practices as well as the
misuse of certain data by a developer that shared such data with
third parties in violation of our terms and policies, and seeking
unspecified damages and injunctive relief. Beginning on
July 27, 2018, two putative class actions were filed in
federal court in the United States against us and certain of our
directors and officers alleging violations of securities laws in
connection with the disclosure of our earnings results for the
second quarter of 2018 and seeking unspecified damages. These two
actions subsequently were transferred and consolidated in the U.S.
District Court for the Northern District of California with the
putative securities class action described above relating to our
platform and user data practices. On September 25, 2019, the
district court granted our motion to dismiss the consolidated
putative securities class action, with leave to amend. On
November 15, 2019, a second amended complaint was filed in the
consolidated putative securities class action. On August 7,
2020, the district court granted our motion to dismiss the second
amended complaint, with leave to amend. On October 16, 2020, a
third amended complaint was filed in the consolidated putative
securities class action. On December 20, 2021, the district
court granted our motion to dismiss the third amended complaint,
with prejudice. On January 17, 2022, the plaintiffs filed a
notice of appeal of the order dismissing their case, and the appeal
is now pending before the U.S. Court of Appeals for the Ninth
Circuit. With respect to the multiple putative class actions filed
against us beginning on March 20, 2018 alleging fraud and
violations of consumer protection, privacy, and other laws in
connection with the same matters, several of the cases brought on
behalf of consumers in the United States were consolidated in the
U.S. District Court for the Northern District of California. On
September 9, 2019, the court granted, in part, and denied, in
part, our motion to dismiss
the consolidated putative consumer class action. On August 26,
2022, the parties reached a settlement in principle to resolve this
matter, which is subject to court approval. In addition, our
platform and user data practices, as well as the events surrounding
the misuse of certain data by a developer, became the subject of
U.S. Federal Trade Commission (FTC), state attorneys general, and
other government inquiries in the United States, Europe, and other
jurisdictions. We entered into a settlement and modified consent
order to resolve the FTC inquiry, which took effect in April 2020.
Among other matters, our settlement with the FTC required us to pay
a penalty of $5.0 billion which was paid in April 2020 upon
the effectiveness of the modified consent order. The state
attorneys general inquiry and certain government inquiries in other
jurisdictions remain ongoing. On July 16, 2021, a stockholder
derivative action was filed in Delaware Chancery Court against
certain of our directors and officers asserting breach of fiduciary
duty and related claims relating to our historical platform and
user data practices, as well as our settlement with the FTC. On
July 20, 2021, other stockholders filed an amended derivative
complaint in a related Delaware Chancery Court action, asserting
breach of fiduciary duty and related claims against certain of our
current and former directors and officers in connection with our
historical platform and user data practices. On
November 4, 2021, the lead plaintiffs filed a second
amended and consolidated complaint in the stockholder derivative
action. We believe the lawsuits described above are without merit,
and we are vigorously defending them.
We also notify the Irish Data Protection Commission (IDPC), our
lead European Union privacy regulator under the General Data
Protection Regulation (GDPR), of certain other personal data
breaches and privacy issues, and are subject to inquiries and
investigations by the IDPC and other European regulators regarding
various aspects of our regulatory compliance. For example, we are
currently subject to an IDPC inquiry regarding Meta Platforms
Ireland's ability to transfer European Union/European Economic Area
Facebook user data to the United States, which is described further
in "Legal Proceedings" contained in Part II, Item 1 of
this Quarterly Report on Form 10-Q. The GDPR is still a relatively
new law and draft decisions in investigations by the IDPC are
subject to review by other European privacy regulators as part of
the GDPR's consistency mechanism, which may lead to significant
changes in the final outcome of such investigations. As a result,
the interpretation and enforcement of the GDPR, as well as the
imposition and amount of penalties for non-compliance, are subject
to significant uncertainty. Although we are vigorously defending
our regulatory compliance, we have accrued significant amounts for
loss contingencies related to these inquiries and investigations in
Europe, and we believe there is a reasonable possibility that
additional accruals for losses related to these matters could be
material in the aggregate.
We are also subject to other government inquiries and
investigations relating to our business activities and disclosure
practices. For example, beginning in September 2021, we became
subject to government investigations and requests relating to a
former employee's allegations and release of internal company
documents concerning, among other things, our algorithms,
advertising and user metrics, and content enforcement practices, as
well as misinformation and other undesirable activity on our
platform, and user well-being. We have since received additional
requests relating to these and other topics. Beginning on
October 27, 2021, multiple putative class actions and
derivative actions were filed in the U.S. District Court for the
Northern District of California against us and certain of our
directors and officers alleging violations of securities laws,
breach of fiduciary duties, and other causes of action in
connection with the same matters, and seeking unspecified damages.
We believe these lawsuits are without merit, and we are vigorously
defending them.
On March 8, 2022, a putative class action was filed in the
U.S. District Court for the Northern District of California against
us and certain of our directors and officers alleging violations of
securities laws in connection with the disclosure of our earnings
results for the fourth quarter of 2021 and seeking unspecified
damages. We believe this lawsuit is without merit, and we are
vigorously defending it.
Beginning on August 15, 2018, multiple putative class actions
were filed against us alleging that we inflated our estimates of
the potential audience size for advertisements, resulting in
artificially increased demand and higher prices. The cases were
consolidated in the U.S. District Court for the Northern District
of California and seek unspecified damages and injunctive relief.
In a series of rulings in 2019, 2021, and 2022, the court dismissed
certain of the plaintiffs' claims, but permitted its fraud and
unfair competition claims to proceed. On March 29, 2022, the
court granted the plaintiffs' motion for class certification. On
June 21, 2022, the U.S. Court of Appeals for the Ninth Circuit
granted our petition for permission to appeal the district court's
class certification order, and the district court subsequently
stayed the case. We believe this lawsuit is without merit, and we
are vigorously defending it.
In addition, we are subject to litigation and other proceedings
involving law enforcement and other regulatory agencies, including
in particular in Brazil, Russia, and other countries in Europe, in
order to ascertain the precise scope of our legal obligations to
comply with the requests of those agencies, including our
obligation to disclose user information in
particular circumstances. A number of such instances have resulted
in the assessment of fines and penalties against us. We believe we
have multiple legal grounds to satisfy these requests or prevail
against associated fines and penalties, and we intend to vigorously
defend such fines and penalties.
With respect to the cases, actions, and inquiries described above,
we evaluate the associated developments on a regular basis and
accrue a liability when we believe a loss is probable and the
amount can be reasonably estimated. In addition, we believe there
is a reasonable possibility that we may incur a loss in some of
these matters. With respect to the matters described above that do
not include an estimate of the amount of loss or range of possible
loss, such losses or range of possible losses either cannot be
estimated or are not individually material, but we believe there is
a reasonable possibility that they may be material in the
aggregate.
We are also party to various other legal proceedings, claims, and
regulatory, tax or government inquiries and investigations that
arise in the ordinary course of business. For example, we are
subject to various litigation and government inquiries and
investigations, formal or informal, by competition authorities in
the United States, Europe, and other jurisdictions. Such
investigations, inquiries, and lawsuits concern, among other
things, our business practices in the areas of social networking or
social media services, digital advertising, and/or mobile or online
applications, as well as our acquisitions. For example, in June
2019 we were informed by the FTC that it had opened an antitrust
investigation of our company. On December 9, 2020, the FTC
filed a complaint against us in the U.S. District Court for the
District of Columbia alleging that we engaged in anticompetitive
conduct and unfair methods of competition in violation of
Section 5 of the Federal Trade Commission Act and
Section 2 of the Sherman Act, including by acquiring Instagram
in 2012 and WhatsApp in 2014 and by maintaining conditions on
access to our platform. In addition, beginning in the third quarter
of 2019, we became the subject of antitrust investigations by the
U.S. Department of Justice and state attorneys general. On
December 9, 2020, the attorneys general from 46 states,
the territory of Guam, and the District of Columbia filed a
complaint against us in the U.S. District Court for the District of
Columbia alleging that we engaged in anticompetitive conduct in
violation of Section 2 of the Sherman Act, including by
acquiring Instagram in 2012 and WhatsApp in 2014 and by maintaining
conditions on access to our platform. The complaint also alleged
that we violated Section 7 of the Clayton Act by acquiring
Instagram and WhatsApp. The complaints of the FTC and attorneys
general both sought a permanent injunction against our company's
alleged violations of the antitrust laws, and other equitable
relief, including divestiture or reconstruction of Instagram and
WhatsApp. On June 28, 2021, the court granted our motions to
dismiss the complaints filed by the FTC and attorneys general,
dismissing the FTC's complaint with leave to amend and dismissing
the attorneys general's case without prejudice. On July 28,
2021, the attorneys general filed a notice of appeal of the order
dismissing their case and that appeal is now pending before the
U.S. Court of Appeals for the District of Columbia Circuit. On
August 19, 2021, the FTC filed an amended complaint, and on
October 4, 2021, we filed a motion to dismiss this amended
complaint. On January 11, 2022, the court denied our motion to
dismiss the FTC's amended complaint. Multiple putative class
actions have also been filed in state and federal courts in the
United States and in the United Kingdom against us alleging
violations of antitrust laws and other causes of action in
connection with these acquisitions and/or other alleged
anticompetitive conduct, and seeking damages and injunctive relief.
Several of the cases brought on behalf of certain advertisers and
users in the United States were consolidated in the U.S. District
Court for the Northern District of California. On January 14,
2022, the court granted, in part, and denied, in part, our motion
to dismiss the consolidated actions. On March 1, 2022, a first
amended consolidated complaint was filed in the putative class
action brought on behalf of certain advertisers. We believe these
lawsuits are without merit, and we are vigorously defending them.
In addition, on July 27, 2022, the FTC filed a complaint
against us in the U.S. District Court for the Northern District of
California seeking to preliminarily enjoin our proposed acquisition
of Within Unlimited as an alleged violation of antitrust law. The
FTC subsequently filed a related complaint in their administrative
court seeking to permanently enjoin the transaction as a violation
of Section 7 of the Clayton Act, and seeking other relief as
well.
Additionally, we are required to comply with various legal and
regulatory obligations around the world. The requirements for
complying with these obligations may be uncertain and subject to
interpretation and enforcement by regulatory and other authorities,
and any failure to comply with such obligations could eventually
lead to asserted legal or regulatory action. With respect to these
other legal proceedings, claims, regulatory, tax, or government
inquiries and investigations, and other matters, asserted and
unasserted, we evaluate the associated developments on a regular
basis and accrue a liability when we believe a loss is probable and
the amount can be reasonably estimated. In addition, we believe
there is a reasonable possibility that we may incur a loss in some
of these other matters. We believe that the amount of losses or any
estimable range of possible losses with respect to these other
matters will not, either individually or in the aggregate, have a
material adverse effect on our business and condensed consolidated
financial statements.
The ultimate outcome of the legal and related matters described in
this section, such as whether the likelihood of loss is remote,
reasonably possible, or probable, or if and when the reasonably
possible range of loss is estimable, is inherently uncertain.
Therefore, if one or more of these matters were resolved against us
for amounts in excess of management's estimates of loss, our
results of operations and financial condition, including in a
particular reporting period in which any such outcome becomes
probable and estimable, could be materially adversely
affected.
For information regarding income tax contingencies, see
Note 13 — Income Taxes.
Indemnifications
In the normal course of business, to facilitate transactions of
services and products, we have agreed to indemnify certain parties
with respect to certain matters. We have agreed to hold certain
parties harmless against losses arising from a breach of
representations or covenants, or out of intellectual property
infringement or other claims made by third parties. These
agreements may limit the time within which an indemnification claim
can be made and the amount of the claim. In addition, we have
entered into indemnification agreements with our officers,
directors, and certain employees, and our certificate of
incorporation and bylaws contain similar indemnification
obligations.
It is not possible to determine the maximum potential amount under
these indemnification agreements due to the limited history of
prior indemnification claims and the unique facts and circumstances
involved in each particular agreement. Historically, payments made
by us under these agreements have not had a material impact on our
condensed consolidated financial statements. In our opinion, as of
September 30, 2022, there was not a reasonable possibility we
had incurred a material loss with respect to indemnification of
such parties. We have not recorded any liability for costs related
to indemnification through September 30, 2022.
Note 12. Stockholders' Equity
Share Repurchase Program
Our board of directors has authorized a share repurchase program of
our Class A common stock, which commenced in January 2017 and
does not have an expiration date. As of December 31, 2021,
$38.79 billion remained available and authorized for
repurchases under this program. During the nine months ended
September 30, 2022, we repurchased and subsequently retired
101 million shares of our Class A common stock for an
aggregate amount of $21.02 billion. As of September 30,
2022, $17.78 billion remained available and authorized for
repurchases.
The timing and actual number of shares repurchased under the
repurchase program depend on a variety of factors, including price,
general business and market conditions, and other investment
opportunities, and shares may be repurchased through open market
purchases or privately negotiated transactions, including through
the use of trading plans intended to qualify under Rule 10b5-1
under the Securities Exchange Act of 1934, as amended.
Share-based Compensation Plan
We have one active share-based employee compensation plan, the 2012
Equity Incentive Plan, which was amended in each of June 2016 and
February 2018 (Amended 2012 Plan). Our Amended 2012 Plan provides
for the issuance of incentive and nonqualified stock options,
restricted stock awards, stock appreciation rights, RSUs,
performance shares, and stock bonuses to qualified employees,
directors, and consultants. Shares that are withheld in connection
with the net settlement of RSUs or forfeited are added to the
reserves of the Amended 2012 Plan.
Effective January 1, 2022, there were 136 million shares
of our Class A common stock reserved for future issuance under
our Amended 2012 Plan. Pursuant to the automatic increase provision
under our Amended 2012 Plan, the number of shares reserved for
issuance increases automatically on January 1 of each of the
calendar years during the term of the Amended 2012 Plan, which will
continue through April 2026, by a number of shares of Class A
common stock equal to the lesser of (i) 2.5% of the total
issued and outstanding shares of our Class A common stock as
of the immediately preceding December 31st or (ii) a
number of shares determined by our board of directors.
The following table summarizes the activities for our unvested RSUs
for the nine months ended September 30, 2022:
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares |
|
Weighted-Average Grant Date Fair Value Per Share |
|
(in thousands) |
|
|
|
Unvested at December 31, 2021 |
98,848 |
|
|
$ |
244.32 |
|
|
Granted |
99,379 |
|
|
$ |
201.25 |
|
|
Vested |
(39,368) |
|
|
$ |
219.68 |
|
|
Forfeited |
(13,340) |
|
|
$ |
234.21 |
|
|
Unvested at September 30, 2022 |
145,519 |
|
|
$ |
222.49 |
|
The fair value as of the respective vesting dates of RSUs that
vested during the three months ended September 30, 2022 and
2021 was $2.59 billion and $4.10 billion, respectively,
and $7.77 billion and $10.58 billion during the nine
months ended September 30, 2022 and 2021, respectively. The
income tax benefit recognized related to awards vested during the
three months ended September 30, 2022 and 2021 was
$543 million and $881 million, respectively, and
$1.64 billion and $2.27 billion during the nine months
ended September 30, 2022 and 2021, respectively.
As of September 30, 2022, there was
$30.68 billion
of unrecognized share-based compensation expense related to RSU
awards. This unrecognized compensation expense is expected to be
recognized over a weighted-average period of approximately three
years based on vesting under the award service
conditions.
Note 13. Income Taxes
Our tax provision for interim periods is determined using an
estimated annual effective tax rate, adjusted for discrete items
arising in that quarter. In each quarter, we update the estimated
annual effective tax rate and make a year-to-date adjustment to the
provision. The estimated annual effective tax rate is subject to
significant volatility due to several factors, including our
ability to accurately predict the proportion of our income (loss)
before provision for income taxes in multiple jurisdictions, the
U.S. tax benefits from foreign derived intangible income, the
effects of tax law changes, the effects of acquisitions, and the
integration of those acquisitions.
Our gross unrecognized tax benefits were $10.55 billion and
$9.81 billion on September 30, 2022 and December 31,
2021, respectively. These unrecognized tax benefits were primarily
accrued for the uncertainties related to transfer pricing with our
foreign subsidiaries, which include licensing of intellectual
property, providing services and other transactions, as well as for
uncertainties with our research tax credits. If the gross
unrecognized tax benefits as of September 30, 2022 were
realized in a future period, this would result in a tax benefit of
$6.46 billion within our provision for income taxes at such
time. The amount of interest and penalties accrued was
$1.01 billion and $960 million as of September 30,
2022 and December 31, 2021, respectively. We expect to
continue to accrue unrecognized tax benefits for certain recurring
tax positions.
We are subject to taxation in the United States and various other
state and foreign jurisdictions. The material jurisdictions in
which we are subject to potential examination include the United
States and Ireland. We are under examination by the Internal
Revenue Service (IRS) for our 2014 through 2019 tax years. Our 2020
and subsequent tax years remain open to examination by the IRS and
the Irish Revenue Commissioners.
In July 2016, we received a Statutory Notice of Deficiency (Notice)
from the IRS related to transfer pricing with our foreign
subsidiaries in conjunction with the examination of the 2010 tax
year. While the Notice applies only to the 2010 tax year, the IRS
stated that it will also apply its position for tax years
subsequent to 2010 and has done so in years covered by the second
Notice described below. We do not agree with the
position
of the IRS and have filed a petition in the Tax Court challenging
the Notice. On January 15, 2020, the IRS's amendment to answer
was filed stating that it planned to assert at trial an adjustment
that is higher than the adjustment stated in the Notice. The first
session of the trial was completed in March 2020 and the final
trial session was completed in August 2022. We expect the Tax Court
to issue an opinion in 2024. Based on the
information provided, we believe that, if the IRS prevails in its
updated position, this could result in an additional
federal tax liability of an estimated, aggregate amount of up to
approximately $9.0 billion in excess of the amounts in our
originally filed U.S. return, plus interest and any penalties
asserted.
In March 2018, we received a second Notice from the IRS in
conjunction with the examination of our 2011 through 2013 tax
years. The IRS applied its position from the 2010 tax year to each
of these years and also proposed new adjustments related to other
transfer pricing with our foreign subsidiaries and certain tax
credits that we claimed. If the IRS prevails in its position for
these new adjustments, this could result in an additional federal
tax liability of up to approximately $680 million in excess of
the amounts in our originally filed U.S. returns, plus interest and
any penalties asserted. We do not agree with the positions of the
IRS in the second Notice and have filed a petition in the Tax Court
challenging the second Notice.
We have previously accrued an estimated unrecognized tax benefit
consistent with the guidance in ASC 740,
Income Taxes
(ASC 740), that is lower than the potential additional federal tax
liability from the positions taken by the IRS in the two Notices
and its
Pretrial Memorandum.
In addition, if the IRS prevails in its positions related to
transfer pricing with our foreign subsidiaries, the additional tax
that we would owe would be partially offset by a reduction in the
tax that we owe under the mandatory transition tax on accumulated
foreign earnings from the 2017 Tax Cuts and Jobs
Act.
As of September 30, 2022, we have not resolved these matters
and proceedings continue in the Tax Court.
We believe that adequate amounts have been reserved in accordance
with ASC 740 for any adjustments to the provision for income
taxes or other tax items that may ultimately result from these
examinations. The timing of the resolution, settlement, and closure
of any audits is highly uncertain, and it is reasonably possible
that the balance of gross unrecognized tax benefits could
significantly change in the next 12 months. Given the number
of years remaining that are subject to examination, we are unable
to estimate the full range of possible adjustments to the balance
of gross unrecognized tax benefits. If the tax authorities prevail
in the assessment of additional tax due, the assessed tax,
interest, and penalties, if any, could have a material adverse
impact on our financial position, results of operations, and cash
flows.
Note 14. Segment and Geographical Information
We report our financial results for our two reportable segments:
Family of Apps (FoA) and Reality Labs (RL). FoA includes Facebook,
Instagram, Messenger, WhatsApp, and other services. RL includes
augmented and virtual reality related consumer hardware, software,
and content. Our operating segments are the same as our reportable
segments.
Our Chief Executive Officer is our chief operating decision maker
(CODM), who allocates resources to and assesses the performance of
each operating segment using information about the operating
segment's revenue and income (loss) from operations. Our CODM does
not evaluate operating segments using asset or liability
information.
Revenue and costs and expenses are generally directly attributed to
our segments. These costs and expenses include certain product
development related operating expenses, costs associated with
partnership arrangements, consumer hardware product costs, content
costs, and legal-related costs. Indirect costs are allocated to
segments based on a reasonable allocation methodology, when such
costs are significant to the performance measures of the operating
segments. Indirect cost of revenue is allocated to our segments
based on usage, such as costs related to the operation of our data
centers and technical infrastructure. Indirect operating expenses,
such as facilities, information technology, certain shared research
and development activities, recruiting, and physical security
expenses, are mostly allocated based on headcount.
The following table sets forth our segment information of revenue
and income (loss) from operations (in millions).
For comparative purposes, amounts in the prior periods have been
recast:
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Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
Revenue: |
|
|
|
|
|
|
|
|
Family of Apps |
$ |
27,429 |
|
|
$ |
28,452 |
|
|
$ |
83,011 |
|
|
$ |
82,861 |
|
|
Reality Labs |
285 |
|
|
558 |
|
|
1,433 |
|
|
1,397 |
|
|
Total revenue |
$ |
27,714 |
|
|
$ |
29,010 |
|
|
$ |
84,444 |
|
|
$ |
84,258 |
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations: |
|
|
|
|
|
|
|
|
Family of Apps |
$ |
9,336 |
|
|
$ |
13,054 |
|
|
$ |
31,983 |
|
|
$ |
41,058 |
|
|
Reality Labs |
(3,672) |
|
|
(2,631) |
|
|
(9,438) |
|
|
(6,890) |
|
|
Total income from operations |
$ |
5,664 |
|
|
$ |
10,423 |
|
|
$ |
22,545 |
|
|
$ |
34,168 |
|
For information regarding revenue disaggregated by geography, see
Note 2 — Revenue.
The following table sets forth our long-lived assets by geographic
area, which consist of property and equipment, net and operating
lease right-of-use assets (in millions):
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|
September 30, 2022 |
|
December 31, 2021 |
|
United States |
$ |
73,195 |
|
|
$ |
55,497 |
|
|
Rest of the world
(1)
|
14,184 |
|
|
14,467 |
|
|
Total long-lived assets |
$ |
87,379 |
|
|
$ |
69,964 |
|
____________________________________
(1) No individual country, other than
disclosed above, exceeded 10% of our total long-lived assets for
any period presented.
Item 2.Management's
Discussion and Analysis of Financial Condition and Results of
Operations
You should read the following discussion of our financial condition
and results of operations in conjunction with our condensed
consolidated financial statements and the related notes included
elsewhere in this Quarterly Report on Form 10-Q and with our
audited consolidated financial statements included in our Annual
Report on Form 10-K for the year ended December 31, 2021, as
filed with the Securities and Exchange Commission. In addition to
our historical condensed consolidated financial information, the
following discussion contains forward-looking statements that
reflect our plans, estimates, and beliefs. Our actual results could
differ materially from those discussed in the forward-looking
statements. Factors that could cause or contribute to these
differences include those discussed below and elsewhere in this
Quarterly Report on Form 10-Q, particularly in Part II,
Item 1A, "Risk Factors." For a discussion of limitations in
the measurement of certain of our community metrics, see the
section entitled "Limitations of Key Metrics and Other Data" in
this Quarterly Report on Form 10-Q.
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
present revenue on a constant currency basis, which is a non-GAAP
financial measure. Revenue on a constant currency basis is
presented in the section entitled "—Revenue—Foreign
Exchange Impact on Revenue." To calculate revenue on a constant
currency basis, we translated revenue for the three and nine months
ended September 30, 2022 using the prior year's monthly
exchange rates for our settlement or billing currencies other than
the U.S. dollar.
This non-GAAP financial measure 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. This
measure may be different from non-GAAP financial measures used by
other companies, limiting its usefulness for comparison purposes.
Moreover, presentation of revenue on a constant currency basis is
provided for year-over-year comparison purposes, and investors
should be cautioned that the effect of changing foreign currency
exchange rates has an actual effect on our operating results. We
believe this non-GAAP financial measure provides investors with
useful supplemental information about the financial performance of
our business, enables comparison of financial results between
periods where certain items may vary independent of business
performance, and allows for greater transparency with respect to
key metrics used by management in operating our
business.
Executive Overview of Third Quarter Results
Our mission is to give people the power to build community and
bring the world closer together. All of our products, including our
apps, share the vision of helping to bring the metaverse to life.
In the third quarter of 2022, we continued to focus on our main
revenue growth priorities: (i) helping marketers use our
products to connect with consumers and (ii) making our ads
more relevant and effective. We also continued to invest in both
our family of apps and our metaverse efforts based on our company
priorities.
Our financial results and key community metrics for the
third
quarter of
2022
are set forth below. Our total revenue for the
third
quarter of
2022
was
$27.71 billion,
a decrease of 4% compared to the
third
quarter of 2021, primarily due to a
$1.79 billion
negative impact from the appreciation of the U.S. dollar relative
to other foreign currencies. Revenue on a constant currency basis
was
$29.50 billion
for the
third
quarter of
2022,
an increase of 2% compared to the
third
quarter of 2021. We continued to experience a reduction in
advertising demand during the
third
quarter of
2022,
which we believe was primarily driven by reduced marketer spending
as a result of a more challenging macroeconomic environment. In
addition, because the targeting and measurement challenges
associated with iOS changes had already begun in the third quarter
of 2021, the impact of these challenges on the year-over-year
change in revenue in the
third
quarter of
2022
was less significant compared to the prior period.
Consolidated and Segment Results
We report our financial results for our two reportable segments:
Family of Apps (FoA) and Reality Labs (RL). FoA includes Facebook,
Instagram, Messenger, WhatsApp, and other services. RL includes our
augmented and virtual reality related consumer hardware, software,
and content.
For comparative purposes, amounts in the prior periods have been
recast:
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|
|
|
|
|
Family of Apps |
|
Reality Labs |
|
Total |
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
%
change |
|
Three Months Ended September 30, |
|
% change |
|
Three Months Ended September 30, |
|
%
change |
|
|
|
|
|
2022 |
|
2021 |
|
|
2022 |
|
2021 |
|
|
2022 |
|
2021 |
|
|
|
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|
(in millions, except percentages) |
|
|
|
|
|
|
|
Revenue |
$ |
27,429 |
|
|
$ |
28,452 |
|
|
(4)% |
|
$ |
285 |
|
|
$ |
558 |
|
|
(49)% |
|
$ |
27,714 |
|
|
$ |
29,010 |
|
|
(4)% |
|
|
|
|
|
|
|
Costs and expenses |
$ |
18,093 |
|
|
$ |
15,398 |
|
|
18% |
|
$ |
3,957 |
|
|
$ |
3,189 |
|
|
24% |
|
$ |
22,050 |
|
|
$ |
18,587 |
|
|
19% |
|
|
|
|
|
|
|
Income (loss) from operations |
$ |
9,336 |
|
|
$ |
13,054 |
|
|
(28)% |
|
$ |
(3,672) |
|
|
$ |
(2,631) |
|
|
(40)% |
|
$ |
5,664 |
|
|
$ |
10,423 |
|
|
(46)% |
|
|
|
|
|
|
|
Operating margin |
34 |
% |
|
46 |
% |
|
|
|
(1,288) |
% |
|
(472) |
% |
|
|
|
20 |
% |
|
36 |
% |
|
|
|
|
|
|
|
|
•Net
income was $4.40 billion, with diluted earnings per share of
$1.64 for the three months ended September 30,
2022.
•Capital
expenditures, including principal payments on finance leases, were
$9.52 billion for the three months ended September 30,
2022.
•Effective
tax rate was 21% for the three months ended September 30,
2022.
•Cash,
cash equivalents, and marketable securities were
$41.78 billion as of September 30, 2022.
•Long-term
debt was $9.92 billion as of September 30,
2022.
•Headcount
was 87,314 as of September 30, 2022, an increase of 28%
year-over-year.
Family of Apps Metrics
•Family
daily active people (DAP) was 2.93 billion on average for
September 2022, an increase of 4% year-over-year.
•Family
monthly active people (MAP) was 3.71 billion as of
September 30, 2022, an increase of 4%
year-over-year.
•Facebook
daily active users (DAUs) were 1.98 billion on average for
September 2022, an increase of 3% year-over-year.
•Facebook
monthly active users (MAUs) were 2.96 billion as of
September 30, 2022, an increase of 2%
year-over-year.
•Ad
impressions delivered across our Family of Apps in the third
quarter of 2022 increased by 17% year-over-year, and the average
price per ad in the third quarter of 2022 decreased by 18%
year-over-year.
Developments in Advertising
Substantially all of our revenue is currently generated from
advertising on Facebook and Instagram. We rely on targeting and
measurement tools that incorporate data signals from user activity
on websites and services that we do not control in order to deliver
relevant and effective ads to our users. Our advertising revenue
has been, and we expect will continue to be, adversely affected by
reduced marketer spending as a result of limitations on our ad
targeting and measurement tools arising from changes to the
regulatory environment and third-party mobile operating systems and
browsers.
In particular, legislative and regulatory developments such as the
General Data Protection Regulation, ePrivacy Directive, and
California Consumer Privacy Act have impacted our ability to use
data signals in our ad products, and we expect these and other
developments such as the Digital Markets Act will have further
impact in the future. As a result, we have implemented, and we will
continue to implement, changes to our products and user data
practices, which reduce our ability to effectively target and
measure ads. In addition, mobile operating system and browser
providers, such as Apple and Google, have implemented product
changes and/or announced future plans to limit the ability of
websites and application developers to collect and use these
signals to target and measure advertising. For example, in 2021,
Apple made certain changes to its products and data use policies in
connection with changes to its iOS operating system that reduce our
and other iOS developers' ability to target and measure
advertising, which has negatively impacted, and we expect will
continue to negatively impact, the size of the budgets marketers
are willing to commit to us and other advertising
platforms.
To mitigate these developments, we are working to evolve our
advertising systems to improve the performance of our ad products.
We are developing privacy enhancing technologies to deliver
relevant ads and measurement capabilities while reducing the amount
of personal information we process, including by relying more on
anonymized or aggregated third-party data. In addition, we are
developing tools that enable marketers to share their data into our
systems, as well as ad products that generate more valuable signals
within our apps. Across all of these efforts, we are making
significant investments in artificial intelligence and machine
learning to improve our delivery, targeting, and measurement
capabilities. We are also engaging with others across our industry
to explore the possibility of new open standards for the private
and secure processing of data for advertising purposes. We expect
that some of these efforts will be long-term initiatives, and that
the regulatory and platform developments described above will
continue to adversely impact our advertising revenue for the
foreseeable future.
Other Business and Macroeconomic Conditions
Other global and regional business, macroeconomic, and geopolitical
conditions also have had, and we believe will continue to have, an
impact on our user growth and engagement and advertising revenue.
In particular, we believe advertising budgets have been pressured
by factors such as inflation, rising interest rates, and related
market uncertainty, which has led to reduced marketer spending. In
addition, competitive products and services have reduced some
users' engagement with our products and services. In response to
competitive pressures, we have introduced new features such as
Reels, which is growing in usage but is not currently monetized at
the same rate as our feed or Stories products. We also have seen
fluctuations and declines in the size of our active user base in
one or more markets from time to time. For example, in connection
with the war in Ukraine, access to Facebook and Instagram was
restricted in Russia and the services were then prohibited by the
Russian government, which adversely affected user growth and
engagement in the third quarter of 2022. These trends adversely
affected advertising revenue in the third quarter of 2022, and we
expect will continue to affect our advertising revenue in the
foreseeable future.
The COVID-19 pandemic has also impacted our business and results of
operations, with a varied impact on user growth and engagement, as
well as the demand for and pricing of our ads from period to
period. While we experienced a reduction in advertising demand and
a related decline in pricing during the onset of the pandemic, we
believe the pandemic subsequently contributed to an acceleration in
the growth of online commerce, and we experienced increasing demand
for advertising as a result of this trend. More recently, we
believe this growth has declined, and we saw continued softening of
advertising demand in the third quarter of 2022 as many activities
that shifted online during COVID-19 related lockdowns continued in
person. We may experience reduced advertising demand and related
declines in pricing in future periods to the extent this trend
continues, which could adversely affect our advertising revenue.
The impact of the pandemic on the demand for and pricing of our
advertising services, as well as on our overall results of
operations, remains uncertain for the foreseeable
future.
Investment Philosophy
In the third quarter of 2022, we continued to invest based on the
following company priorities: (i) continue making progress on
the major social issues facing the internet and our company,
including privacy, safety, and security; (ii) build new
experiences that meaningfully improve people's lives today and set
the stage for even bigger improvements in the future;
(iii) keep building our business by supporting the millions of
businesses that rely on our services to grow and create jobs; and
(iv) communicate more transparently about what we're doing and
the role our services play in the world.
We anticipate that investments in our servers, data center
capacity, network infrastructure, and headcount will continue to
drive expense growth in 2022, which will adversely affect our
operating margin and profitability. The majority of our investments
are directed toward developing our family of apps. In the nine
months ended September 30, 2022, 82% of our total costs and
expenses were recognized in FoA and 18% were recognized in RL. Our
FoA investments include expenses relating to headcount, data
centers and technical infrastructure as part of our efforts to
develop our apps and our advertising services. We are also making
significant investments in our metaverse efforts, including
developing virtual and augmented reality devices, software for
social platforms, neural interfaces, and other foundational
technologies for the metaverse. Our RL investments include expenses
relating to headcount and technology development across these
efforts. Many of our RL investments are directed toward long-term,
cutting-edge research and development for products for the
metaverse that are not on the market today and may only be fully
realized in the next decade. Although it is inherently difficult to
predict when and how the metaverse ecosystem will develop, we
expect our RL segment to continue to operate at a loss for the
foreseeable future, and our ability to support our metaverse
efforts is dependent on generating sufficient profits from other
areas of our business. We expect this will be a complex, evolving,
and long-term initiative. We are investing now because we believe
this
is the next chapter of the internet and will unlock monetization
opportunities for businesses, developers, and creators, including
around advertising, hardware, and digital goods.
Trends in Our Family Metrics
The numbers for our key Family metrics, our DAP, MAP, and average
revenue per person (ARPP), do not include users on our other
products unless they would otherwise qualify as DAP or MAP,
respectively, based on their other activities on our Family
products.
Trends in the number of people in our community affect our revenue
and financial results by influencing the number of ads we are able
to show, the value of our ads to marketers, the volume of Payments
transactions, as well as our expenses and capital expenditures.
Substantially all of our daily and monthly active people (as
defined below) access our Family products on mobile
devices.
•Daily
Active People (DAP).
We define a daily active person as a registered and logged-in user
of Facebook, Instagram, Messenger, and/or WhatsApp (collectively,
our "Family" of products) who visited at least one of these Family
products through a mobile device application or using a web or
mobile browser on a given day. We do not require people to use a
common identifier or link their accounts to use multiple products
in our Family, and therefore must seek to attribute multiple user
accounts within and across products to individual people. Our
calculations of DAP rely upon complex techniques, algorithms, and
machine learning models that seek to estimate the underlying number
of unique people using one or more of these products, including by
matching user accounts within an individual product and across
multiple products when we believe they are attributable to a single
person, and counting such group of accounts as one person. As these
techniques and models require significant judgment, are developed
based on internal reviews of limited samples of user accounts, and
are calibrated against user survey data, there is necessarily some
margin of error in our estimates. We view DAP, and DAP as a
percentage of MAP, as measures of engagement across our products.
For additional information, see the section entitled "Limitations
of Key Metrics and Other Data" in this Quarterly Report on Form
10-Q.
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DAP/MAP: |
79% |
79% |
79% |
79% |
78% |
79% |
79% |
79% |
79% |
Note: We report the numbers of DAP and MAP as specific amounts, but
these numbers are estimates of the numbers of unique people using
our products and are subject to statistical variances and errors.
While we expect the error margin for these estimates to vary from
period to period, we estimate that such margin generally will be
approximately 3% of our worldwide MAP. At our scale, it is very
difficult to attribute multiple user accounts within and across
products to individual people, and it is possible that the actual
numbers of unique people using our products may vary significantly
from our estimates, potentially beyond our estimated error margins.
For additional information, see the section entitled "Limitations
of Key Metrics and Other Data" in this Quarterly Report on Form
10-Q. In the first quarter of 2021, we updated our Family metrics
calculations to maintain calibration of our models against recent
user survey data, and we estimate such update contributed an
aggregate of approximately 60 million DAP to our reported
worldwide DAP in March 2021. In the third quarter of 2022, we
updated our Family metrics calculations to maintain calibration of
our models against recent user survey data, and we estimate such
update contributed an aggregate of approximately 30 million
DAP to our reported worldwide DAP in September 2022.
Worldwide DAP increased 4% to 2.93 billion on average during
September 2022 from 2.81 billion during September
2021.
•Monthly
Active People (MAP).
We define a monthly active person as a registered and logged-in
user of one or more Family products who visited at least one of
these Family products through a mobile device application or using
a web or mobile browser in the last 30 days as of the date of
measurement. We do not require people to use a common identifier or
link their accounts to use multiple products in our Family, and
therefore must seek to attribute multiple user accounts within and
across products to individual people. Our calculations of MAP rely
upon complex techniques, algorithms, and machine learning models
that seek to estimate the underlying number of unique people using
one or more of these products, including by matching user accounts
within an individual product and across multiple products when we
believe they are attributable to a single person, and counting such
group of accounts as one person. As these techniques and models
require significant judgment, are developed based on internal
reviews of limited samples of user accounts, and are calibrated
against user survey data, there is necessarily some margin of error
in our estimates. We view MAP as a measure of the size of our
global active community of people using our products. For
additional information, see the section entitled "Limitations of
Key Metrics and Other Data" in this Quarterly Report on Form
10-Q.
Note: We report the numbers of DAP and MAP as specific amounts, but
these numbers are estimates of the numbers of unique people using
our products and are subject to statistical variances and errors.
While we expect the error margin for these estimates to vary from
period to period, we estimate that such margin generally will be
approximately 3% of our worldwide MAP. At our scale, it is very
difficult to attribute multiple user accounts within and across
products to individual people, and it is possible that the actual
numbers of unique people using our products may vary significantly
from our estimates, potentially beyond our estimated error margins.
For additional information, see the section entitled "Limitations
of Key Metrics and Other Data" in this Quarterly Report on Form
10-Q. In the first quarter of 2021, we updated our Family metrics
calculations to maintain calibration of our models against recent
user survey data, and we estimate such update contributed an
aggregate of approximately 70 million MAP to our reported
worldwide MAP in March 2021. In the third quarter of 2022, we
updated our Family metrics calculations to maintain calibration of
our models against recent user survey data, and we estimate such
update contributed an aggregate of approximately 40 million
MAP to our reported worldwide MAP in September 2022.
As of September 30, 2022, we had 3.71 billion MAP, an
increase of 4% from 3.58 billion as of September 30,
2021.
•Average
Revenue Per Person (ARPP).
We define ARPP as our total revenue during a given quarter, divided
by the average of the number of MAP at the beginning and end of the
quarter. While ARPP includes all sources of revenue, the number of
MAP used in this calculation only includes users of our Family
products as described in the definition of MAP above. We estimate
that the share of revenue from users who are not also MAP was not
material.
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|
ARPP: |
$6.76 |
$8.62 |
$7.75 |
$8.36 |
$8.18 |
$9.39 |
$7.72 |
$7.91 |
$7.53 |
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|
|
|
|
|
|
|
Ad Revenue |
|
Non-Ad Revenue |
|
|
Note: Non-advertising revenue includes RL revenue generated from
the delivery of consumer hardware products and FoA Other revenue,
which consists of net fees we receive from developers using our
Payments infrastructure and revenue from various other
sources.
During the third quarter of 2022, worldwide ARPP was $7.53, a
decrease of 8% from the third quarter of 2021.
Trends in Our Facebook User Metrics
The numbers for our key Facebook metrics, our DAUs, MAUs, and
average revenue per user (ARPU), do not include users on Instagram,
WhatsApp, or our other products, unless they would otherwise
qualify as DAUs or MAUs, respectively, based on their other
activities on Facebook.
Trends in the number of users affect our revenue and financial
results by influencing the number of ads we are able to show, the
value of our ads to marketers, the volume of Payments transactions,
as well as our expenses and capital expenditures. Substantially all
of our daily and monthly active users (as defined below) access
Facebook on mobile devices.
•Daily
Active Users (DAUs).
We define a daily active user as a registered and logged-in
Facebook user who visited Facebook through our website or a mobile
device, or used our Messenger application (and is also a registered
Facebook user), on a given day. We view DAUs, and DAUs as a
percentage of MAUs, as measures of user engagement on
Facebook.
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DAU/MAU: |
66% |
66% |
66% |
66% |
66% |
66% |
67% |
67% |
67% |
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DAU/MAU: |
77% |
76% |
75% |
75% |
75% |
74% |
75% |
75% |
74% |
DAU/MAU: |
74% |
74% |
73% |
73% |
73% |
72% |
73% |
74% |
74% |
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DAU/MAU: |
62% |
62% |
62% |
62% |
63% |
63% |
64% |
64% |
64% |
DAU/MAU: |
65% |
65% |
65% |
65% |
66% |
65% |
66% |
66% |
66% |
Note: For purposes of reporting DAUs, MAUs, and ARPU by geographic
region, Europe includes all users in Russia and Turkey and Rest of
World includes all users in Africa, Latin America, and the Middle
East.
Worldwide DAUs increased 3% to 1.98 billion on average during
September 2022 from 1.93 billion during September 2021. Users
in India, Bangladesh, and Philippines represented the top three
sources of growth in DAUs during September 2022, relative to the
same period in 2021.
•Monthly
Active Users (MAUs).
We define a monthly active user as a registered and logged-in
Facebook user who visited Facebook through our website or a mobile
device, or used our Messenger application (and is also a registered
Facebook user), in the last 30 days as of the date of
measurement. MAUs are a measure of the size of our global active
user community on Facebook.
As of September 30, 2022, we had 2.96 billion MAUs, an
increase of 2% from September 30, 2021. Users in India, Bangladesh,
and Vietnam represented the top three sources of growth in the
third quarter of 2022, relative to the same period in
2021.
Trends in Our Monetization by Facebook User Geography
We calculate our revenue by user geography based on our estimate of
the geography in which ad impressions are delivered, virtual and
digital goods are purchased, or consumer hardware products are
shipped. We define ARPU as our total revenue in a given geography
during a given quarter, divided by the average of the number of
MAUs in the geography at the beginning and end of the quarter.
While ARPU includes all sources of revenue, the number of MAUs used
in this calculation only includes users of Facebook and Messenger
as described in the definition of MAU above. While the share of
revenue from users who are not also Facebook or Messenger MAUs has
grown over time, we estimate that revenue from users who are
Facebook or Messenger MAUs represents the substantial majority of
our total revenue. See "Average Revenue Per Person (ARPP)" above
for our estimates of trends in our monetization of our Family
products. The geography of our users affects our revenue and
financial results because we currently monetize users in different
geographies at different average rates. Our revenue and ARPU in
regions such as United States & Canada and Europe are
relatively higher primarily due to the size and maturity of those
online and mobile advertising markets. For example, ARPU in the
third quarter of 2022 in the United States & Canada region was
more than 11 times higher than in the Asia-Pacific
region.
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ARPU: |
$7.89 |
$10.14 |
$9.27 |
$10.12 |
$10.00 |
$11.57 |
$9.54 |
$9.82 |
$9.41 |
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ARPU: |
$39.63 |
$53.56 |
$48.03 |
$53.01 |
$52.34 |
$60.57 |
$48.29 |
$50.25 |
$49.13 |
ARPU: |
$12.41 |
$16.87 |
$15.49 |
$17.23 |
$16.50 |
$19.68 |
$15.35 |
$15.64 |
$14.23 |
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ARPU: |
$ |
3.67 |
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$ |
4.05 |
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$ |
3.94 |
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$ |
4.16 |
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$ |
4.30 |
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$ |
4.89 |
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$ |
4.47 |
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$ |
4.54 |
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$ |
4.42 |
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ARPU: |
$ |
2.22 |
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$ |
2.77 |
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$ |
2.64 |
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$ |
3.05 |
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$ |
3.14 |
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$ |
3.43 |
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$ |
3.14 |
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$ |
3.35 |
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$ |
3.21 |
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Ad Revenue |
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Non-Ad Revenue |
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Note: Non-advertising revenue includes RL revenue generated from
the delivery of consumer hardware products and FoA Other revenue,
which consists of net fees we receive from developers using our
Payments infrastructure and revenue from various other
sources.
Our revenue by user geography in the charts above is geographically
apportioned based on our estimation of the geographic location of
our users when they perform a revenue-generating activity. This
allocation differs from our revenue disaggregated by geography
disclosure in Note 2 — Revenue in our condensed consolidated
financial statements included in Part I, Item 1,
"Financial Statements" where revenue is geographically apportioned
based on the addresses of our customers.
During the third quarter of 2022, worldwide ARPU was $9.41, a
decrease of 6% from the third quarter of 2021. Over this period,
ARPU decreased by 14% in Europe and 6% in United States &
Canada, and increased by 3% in Asia-Pacific and 2% in Rest of
World. In addition, user growth was more rapid in geographies with
relatively lower ARPU, such as Asia-Pacific and Rest of World. We
expect that user growth in the future will be primarily
concentrated in those regions where ARPU is relatively lower, such
that worldwide ARPU may continue to increase at a slower rate
relative to ARPU in any geographic region, or potentially decrease
even if ARPU increases in each geographic region.
Components of Results of Operations
Revenue
Family of Apps (FoA)
Advertising.
We generate substantially all of our revenue from advertising. Our
advertising revenue is generated by displaying ad products on
Facebook, Instagram, Messenger, and third-party affiliated websites
or mobile applications. Marketers pay for ad products either
directly or through their relationships with advertising agencies
or resellers, based on the number of impressions delivered or the
number of actions, such as clicks, taken by users.
We recognize revenue from the display of impression-based ads in
the contracted period in which the impressions are delivered.
Impressions are considered delivered when an ad is displayed to a
user. We recognize revenue from the delivery of action-based ads in
the period in which a user takes the action the marketer contracted
for. The number of ads we show is subject to methodological changes
as we continue to evolve our ads business and the structure of our
ads products. In particular, the number of ads we show may vary by
product (for example, our video and Reels products are not
currently monetized at the same rate as our feed or Stories
products), and from time to time we increase or decrease the number
or frequency of ads we show as part of our product and monetization
strategies. We calculate price per ad as total advertising revenue
divided by the number of ads delivered, representing the effective
price paid per impression by a marketer regardless of their desired
objective such as impression or action. For advertising revenue
arrangements where we are not the principal, we recognize revenue
on a net basis.
Othe