Homework assignment
FB Financials
| CONSOLIDATED STATEMENTS OF INCOME - USD ($) | ||||||||
| shares in Millions, $ in Millions | ||||||||
| 20Q3 Annualized | % of Revenue | 31"-"Dec"-"19 | % of Revenue | 31"-"Dec"-"18 | % of Revenue | 31"-"Dec"-"17 | % of Revenue | |
| Revenue | $85,880 | $70,697 | $55,838 | $40,653 | ||||
| Year over Year Growth | 21.48% | 26.61% | 37.35% | |||||
| Costs and expenses: | ||||||||
| Cost of revenue | 16,776 | 19.5% | 12,770 | 18.1% | 9,355 | 16.8% | 5,454 | 13.4% |
| Research and development | 19,052 | 22.2% | 13,600 | 19.2% | 10,273 | 18.4% | 7,754 | 19.1% |
| Marketing and sales | 10,732 | 12.5% | 9,876 | 14.0% | 7,846 | 14.1% | 4,725 | 11.6% |
| General and administrative | 7,160 | 8.3% | 10,465 | 14.8% | 3,451 | 6.2% | 2,517 | 6.2% |
| Total costs and expenses | 53,720 | 62.6% | 46,711 | 30,925 | 20,450 | |||
| Income from operations | 32,160 | 23,986 | 24,913 | 20,203 | ||||
| Interest and other income, net | 372 | 826 | 448 | 391 | ||||
| Income before provision for income taxes (EBITDA) | 32,532 | 37.9% | 24,812 | 35.1% | 25,361 | 45.4% | 20,594 | 50.7% |
| Provision for income taxes | 8,296 | 9.7% | 6,327 | 3,249 | 4,660 | |||
| Tax as percent of EBITDA | 25.5% | 25.5% | 12.8% | 22.6% | ||||
| Net income | 24,236 | 18,485 | 22,112 | 15,934 | ||||
| Less: Net income attributable to participating securities | 0 | 0 | -1 | -14 | ||||
| Net income attributable to Class A and Class B common stockholders | $24,236 | $18,485 | $22,111 | $15,920 | ||||
| 28.22% | 26.15% | 39.60% | 39.16% | |||||
| Earnings per share attributable to Class A and Class B common stockholders: | ||||||||
| Basic (in dollars per share) | $6.48 | $7.65 | $5.49 | |||||
| Less: Net income attributable to participating securities | 0 | -1 | -14 | |||||
| Net income attributable to Class A and Class B common stockholders | $18,485 | $22,111 | $15,920 | |||||
| Earnings per share attributable to Class A and Class B common stockholders: | ||||||||
| Basic (in dollars per share) | $6.48 | $7.65 | $5.49 | |||||
| Diluted (in dollars per share) | $6.43 | $7.57 | $5.39 | |||||
| Weighted-average shares used to compute earnings per share attributable to Class A and Class B common stockholders: | ||||||||
| Basic (in shares) | 2,854 | 2,890 | 2,901 | |||||
| Diluted (in shares) | 2,876 | 2,921 | 2,956 | |||||
| Share-based compensation expense included in costs and expenses: | ||||||||
| Share-based compensation expense | $4,836 | $4,152 | $3,723 | |||||
| Cost of revenue | ||||||||
| Share-based compensation expense included in costs and expenses: | ||||||||
| Share-based compensation expense | 377 | 284 | 178 | |||||
| Research and development | ||||||||
| Share-based compensation expense included in costs and expenses: | ||||||||
| Share-based compensation expense | 3,488 | 3,022 | 2,820 | |||||
| Marketing and sales | ||||||||
| Share-based compensation expense included in costs and expenses: | ||||||||
| Share-based compensation expense | 569 | 511 | 436 | |||||
| General and administrative | ||||||||
| Share-based compensation expense included in costs and expenses: | ||||||||
| Share-based compensation expense | $402 | $335 | $289 | |||||
| Cost of revenue | ||||||||
| Share-based compensation expense included in costs and expenses: | ||||||||
| Share-based compensation expense | ||||||||
| 377 | 284 | 178 | ||||||
| Research and development | ||||||||
| Share-based compensation expense included in costs and expenses: | ||||||||
| Share-based compensation expense | ||||||||
| 3,488 | 3,022 | 2,820 | ||||||
| Marketing and sales | ||||||||
| Share-based compensation expense included in costs and expenses: | ||||||||
| Share-based compensation expense | ||||||||
| 569 | 511 | 436 | ||||||
| General and administrative | ||||||||
| Share-based compensation expense included in costs and expenses: | ||||||||
| Share-based compensation expense | ||||||||
| $402 | $335 | $289 | ||||||
FB Financials 20Q3
| FACEBOOK, INC. | |||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF INCOME | |||||||||||
| (In millions, except for per share amounts) | |||||||||||
| (Unaudited) | Three Months Ended | ||||||||||
| Sep 30, | Dec 31, | Mar 31, | Jun 30, | Sep 30, | Dec 31, | Mar 31, | Jun 30, | Sept 30, | 20Q3 Annualized | ||
| 2018 | 2018 | 2019* | 2019** | 2019 | 2019 | 2020 | 2020 | 2020*** | |||
| Revenue | $ 13,727 | $ 16,914 | $ 15,077 | $ 16,886 | $ 17,652 | $ 21,082 | $ 17,737 | $ 18,687 | $ 21,470 | 85,880 | |
| Costs and expenses: | |||||||||||
| Cost of revenue | 2,418 | 2,796 | 2,816 | 3,307 | 3,155 | 3,492 | 3,459 | 3,829 | 4,194 | 16,776 | |
| Research and development | 2,657 | 2,855 | 2,860 | 3,315 | 3,548 | 3,877 | 4,015 | 4,462 | 4,763 | 19,052 | |
| Marketing and sales | 1,928 | 2,467 | 2,020 | 2,414 | 2,416 | 3,026 | 2,787 | 2,840 | 2,683 | 10,732 | |
| General and administrative | 943 | 976 | 4,064 | 3,224 | 1,348 | 1,829 | 1,583 | 1,593 | 1,790 | 7,160 | |
| Total costs and expenses | 7,946 | 9,094 | 11,760 | 12,260 | 10,467 | 12,224 | 11,844 | 12,724 | 13,430 | 53,720 | |
| Income from operations | 5,781 | 7,820 | 3,317 | 4,626 | 7,185 | 8,858 | 5,893 | 5,963 | 8,040 | 32,160 | |
| Interest and other income (expense), net | 131 | 151 | 165 | 206 | 144 | 311 | (32) | 168 | 93 | 372 | |
| Income before provision for income taxes | 5,912 | 7,971 | 3,482 | 4,832 | 7,329 | 9,169 | 5,861 | 6,131 | 8,133 | 32,532 | |
| Provision for income taxes | 775 | 1,089 | 1,053 | 2,216 | 1,238 | 1,820 | 959 | 953 | 287 | 1,148 | 3.53% |
| Net income | $ 5,137 | $ 6,882 | $ 2,429 | $ 2,616 | $ 6,091 | $ 7,349 | $ 4,902 | $ 5,178 | $ 7,846 | 31,384 | |
| Earnings per share attributable to Class A and Class B common stockholders: | |||||||||||
| Basic | $ 1.78 | $ 2.40 | $ 0.85 | $ 0.92 | $ 2.13 | $ 2.58 | $ 1.72 | $ 1.82 | $ 2.75 | ||
| Diluted | $ 1.76 | $ 2.38 | $ 0.85 | $ 0.91 | $ 2.12 | $ 2.56 | $ 1.71 | $ 1.80 | $ 2.71 | ||
| Weighted-average shares used to compute earnings per share attributable to Class A and Class B common stockholders: | |||||||||||
| Basic | 2,885 | 2,872 | 2,856 | 2,855 | 2,854 | 2,853 | 2,851 | 2,850 | 2,850 | ||
| Diluted | 2,913 | 2,886 | 2,869 | 2,875 | 2,874 | 2,871 | 2,868 | 2,879 | 2,891 | ||
| Share-based compensation expense included in costs and expenses: | |||||||||||
| Cost of revenue | $ 72 | $ 82 | $ 87 | $ 109 | $ 91 | $ 90 | $ 94 | $ 117 | $ 116 | ||
| Research and development | 748 | 675 | 723 | 927 | 907 | 931 | 999 | 1,261 | 1,297 | ||
| Marketing and sales | 133 | 130 | 113 | 160 | 148 | 147 | 149 | 187 | 180 | ||
| General and administrative | 87 | 84 | 87 | 107 | 103 | 105 | 93 | 130 | 129 | ||
| Total share-based compensation expense | $ 1,040 | $ 971 | $ 1,010 | $ 1,303 | $ 1,249 | $ 1,273 | $ 1,335 | $ 1,695 | $ 1,722 | ||
| (1) | |||||||||||
| *Includes $3.0 billion legal expense accrued within general and administrative expense related to the ongoing U.S. Federal Trade Commission (FTC) matter as discussed in our press release furnished with our Report on Form 8-K dated April 24, 2019. As this expense is not expected to be tax-deductible, it had no effect on our provision for income taxes. Excluding this expense, our effective tax rate would have been 14 percentage points lower and our diluted EPS would have been $1.04 higher. | |||||||||||
| **Includes an additional $2.0 billion legal expense accrued in the second quarter of 2019 related to the FTC matter and $1.11 billion in income taxes due to the developments in Altera Corp. v. Commissioner as discussed in our press release furnished with our Report on Form 8-K dated July 24, 2019. As the FTC expense is not expected to be tax-deductible, it had no effect on our provision for income taxes. Excluding these expenses, our effective tax rate would have been 30 percentage points lower and our diluted EPS would have been $1.08 higher. | |||||||||||
| ***Includes a one-time income tax benefit of $913 million related to the effects of a tax election to capitalize and amortize certain research and development expenses for U.S. income tax purposes. Excluding this tax benefit, our effective tax rate would have been 11 percentage points higher and our diluted EPS would have been $0.31 lower. | |||||||||||
FB Stats
| Monthly Active Users | 2,700,000,000 | |
| Daily Active Users | 1,820,000,000 | |
| Percent using it daily | 74% | |
| Minutes per day on App | 38 | |
| Click-Through Rate | 2% | |
| Average Organic Reach | 5.20% | Of Likes |
| Use to follow Brands | 17% | |
| Use for F & F | 88% | |
| Only Access Through Mobile | 79% | |
| Andorid | 80% | |
| iOS | 14% | |
| Mobile Share of Ad Revenue | 94% | |
| US Social Referral Share to Ecommerce Sites | 80% | |
| Average Ad Clicks per Month per User | 11 | |
| Average CPC (Cost per Click) | $0.97 | |
| Average CPM (Cost per 1,000 impressions) | $7.19 | |
| Cost per like | $1.07 | |
| Cost per download | $5.47 | |
| Cost per action (including conversion) | $18.68 | |
| Number of Users Brands can Reach | 2,140,000,000 | |
| Video CTR 18 - 54 | 1.20% | |
| Video CTR 55 - 64 | 2.38% | |
| Video CTR 65+ | 3.42% | |
| Live Video engsagnement versus standard | 6x | |
| Average Conversion Rate | 9.21% | |
| https://adespresso.com/blog/facebook-statistics/ | ||
| Two ways to define cost: Overall spend, cost per result. | ||
| Campaign spending limit | ||
| Account spending limit | ||
| There are two primary things you get from a Facebook ad: | ||
| The ability to reach a certain number and type of people. | ||
| As many of the results you care about as possible from those people. | ||
| (as expressed by the type of boost/ad you choose on your Page or the optimization event choice you make in ad set creation) | ||
FB Business Model
| Facebook Metrics | |||||
| Users | 2,700,000,000 | ||||
| Revenue | $85,880,000,000 | ||||
| Revenue per User | $31.81 | ||||
| Advertising Customers | 9,000,000 | ||||
| Average Annual Contract Value (ACV) per customer | $9,542 | ||||
| Expenses | $53,720,000,000 | ||||
| EBITDA excluding interest | $32,160,000,000 | ||||
| Average Cost Per Customer | $5,969 | ||||
| Net Profit Per Customer | $3,573 | ||||
| Home Depot 2019 Spend on Facebook | $178,500,000 | ||||
| CPC (Cost per Click) | $0.97 | ||||
| CTR (Click Through Rate) | 9.21% | ||||
| CPA (Cost per action = Cost per Lead) | $18.68 | ||||
| CPM (Cost per 1,000) | $7.19 | ||||
| Marketing and Sales Expenses | $10,732,000,000 | ||||
| CAC (Customer Aquisition Cost) | $1,192 | Marketing and Sales Expenses / Number of Customers | |||
| LTV (Lifetime Value per customer) | $9,542 | Lifetime is one period, in this case 1 year | |||
| LTV / CAC | 8.0X | ||||
| Customer Value Calculation | |||||
| Average Sale Price | $100 | ||||
| NO Number of orders (conversions) | 10,000 | ||||
| Total Sales | $1,000,000 | ||||
| CR Conversion Rate from Click Throughs to Landing Page | 5% | ||||
| LR (Leads Required) = NO * CR | 200,000 | ||||
| CPC | $1 | ||||
| Cost for Advertising = LR * CPC | $200,000 | ||||
| Percent of Sales | 20.00% | ||||
| We provide leads to advertisers in the form of directing the user from an app or browser to the customer's chosen landing page in an app or browser. When Facebook users click on an advertisers ad on our platform, they are taken to the customer's site to buy or take other action. We charge the advertiser each time a user clicks through to their landing page. In 2019 we sold $7,885 on average to 9 million advertisers. It cost us $3,771 for production, development, marketing, and administration to make those advertisements yielding a gross profit of $4,084. | |||||
| We are the largest Social Media company in the world. In addition to enabling advertisers, we enable people to discover social, cultural, and political ideas and trends and connect with other like-minded people in groups to share and grow their interests and experiences. Our customers include all industries and organizations including brands, non-profits, political parties, govenrments, small businesses, consultants and many others. Because we have the largest number of users of any company in the world, we are the best place for a user to connect to the world, and for customers to advertise to users. | |||||
| We sell $7,855 of advertising to each customer. It costs us $3,771 for production, development, marketing, and administration to make those advertisements for each customer. , | |||||
| Summary Pro-Forma Income Statement | |||||
| 2019 | 2020 | ||||
| Revenue | #REF! | #REF! | |||
| YOY Revenue Growth | #REF! | 25% | |||
| Customers | 9,000,000 | 10,000,000 | |||
| ACV | #REF! | Percent of Revenue | Per Customer | #REF! | |
| Increase Per Year of Expenses Below | 30% | ||||
| Cost of Revenue | $12,770,000,000 | #REF! | $1,419 | $16,601,000,000 | #REF! |
| Gross Profit | #REF! | #REF! | #REF! | #REF! | #REF! |
| Research and development | $13,600,000,000 | #REF! | $1,511 | $17,680,000,000 | #REF! |
| Marketing and sales | $9,876,000,000 | #REF! | $1,097 | $12,838,800,000 | #REF! |
| General and administrative | $10,465,000,000 | #REF! | $1,163 | $13,604,500,000 | #REF! |
| Total Costs and Expenses | $33,941,000,000 | #REF! | $3,771 | $44,123,300,000 | #REF! |
| Income from Operations (EBITDA) | #REF! | #REF! | #REF! | #REF! | #REF! |