Facebook Inc. (FB, Financial) witnessed a very good first quarter in terms of revenue. However, due to spending and negative foreign exchange impacts, the company faced a cut in profits. Most of the company's revenues were generated from outside the U.S., including Brazil, Western Europe, Canada and Australia. The company declared its first-quarter earnings on April 22. Though shares finished the regular session high, stock value fell after the earnings report was released.
Financial stats
The online networking site reported ad revenue increase of 46% in the first quarter 2015 to $3.54 billion. This amount, however, showed a slight lag as compared to last year's fourth-quarter growth of 53%. If there was no negative impact from the strong dollar, analysts estimated that the a growth would have even touched 55% in this quarter. In all probability, the ad growth would have been around 58% in the fourth quarter last year if not for the currency hit. Facebook has another reason to rejoice as the reported Monthly Active Users showed an increase of 4% quarter over quarter and an increase of 13% over the year. The number of mobile monthly active users also rose 24% to 1.25 billion over the year. The statistics for the same was 5% quarter over quarter. Last year, Mark Zuckerberg vowed to spend abundantly on new technologies in the next years. And he has kept his word. The expenses (non-GAAP) saw an increase of 57% over the year to $1.7 billion. The amount spend on Research and Development this year on a GAAP basis was around 30% of revenue as compared to the 18% spending last year. The internet giant also increased its spending in the sales and marketing department from the previous 13% last year to the current 17% this year. Similarly, G&A spending also rose from 7% to 8% this year.
Most of the revenue, ie. 49% was generated from U.S. and Canada. Not surprisingly enough, U.S. and Canada account for hardly 15% of the Monthly Active Users. The average revenue per user reported was $8.32 in US/ Canada while the global average revenue per user increased 25% year over year to $2.50. Free cash flow of the California-based company rose to $1.2 billion. On a positive note, the internet giant ended the first quarter without any debt and $12.4 billion in cash/investment.
Management talks
The first quarter has given a great start to the progress to be made in the years ahead, Mark Elliot Zuckerberg said. From a single blue app, the giant has evolved to a family of apps. Roughly 1.4 billion people around the world use Facebook, while 800 million use Whatsapp. 700 million people across the globe use Facebook Group products and 300 million people are on Instagram. Mr. Zuckerberg said that Facebook wants to give a chance for people to share their happy moments. Hence, they are trying to develop new and better tools to facilitate this. The 42% increment in revenue, 46% increment in advertising revenue and 73% of ad revenue coming from mobiles prove that the company is making progress in their mission to connect the world.
Investor’s take
Though investors expected the quarter to end on a positive note, they do not have a reason to complain as Facebook shares increased 5% after the close of business on April 17. Analysts, investors and shareholders expected more from the Internet giant than just meet the estimated EPS of 40 cents. Shareholders need not worry about the performance of their shares in the future as Facebook seems to be doing well in terms of the growth rate of monthly average users (MAU) as well as user engagement. The internet giant also saw great success in terms of its shift to mobile. Surely, Facebook is on a high and does not intend to slow down any time soon.
