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Facebook records strong engagement though slower growth in Q1

Facebook reported more engagement on its social network as people were confined to their homes during the coronavirus pandemic. This resulted in strong growth metrics but the company cautioned that some of this engagement should lessen in the future as in-place restrictions ease. Revenues went up in the quarter but growth was affected by less demand for advertising, plus a related decline in the pricing of ads. The company will therefore give no specific guidance for the second quarter, just a “snapshot” of how it is faring so far.

Revenues for the quarter lifted 18 percent from the year before to USD 17.737 billion, the operating profit leaped to USD 5.893 billion from 3.317 billion while the net profit doubled to USD 4.902 billion from 2.429 billion, with diluted earnings per share going to USD 1.71 from 0.85. Total costs and expenses went 1 percent higher to USD 11.844 million while the tax rate just about halved to 16 percent from 30 percent.

The number of daily active users increased 11 percent year-on-year to 1.73 billion in March, from 1.666 billion in the previous quarter. Monthly active users rose 10 percent in the year to 2.60 billion, just ahead of the 2.50 billion recorded in Q4.

The ‘family’ of services – Facebook, Instagram, WhatsApp and Messenger – attracted around 2.36 billion per day on average in March, up 12 percent year-on-year, and from 2.26 billion in Q4. Per month, the number went to 2.99 billion, up 11 percent from the year earlier, and from 2.89 billion quarter-on-quarter.

Facebook had a cash position of USD 60.29 billion at end March. The company noted its recent agreement to invest USD 5.7 billion in Reliance’s Jio Platforms, saying it has paid the USD 5.0 billion settlement amount due. Heacount advanced 28 percent from the year before to 48,268.

April “snapshot”

Looking more closely at the effects of the covid-19 epidemic and at Q2 so far, Facebook noted that ad spend recovered somewhat in the first three weeks of April from its initial steep fall in March. Ad revenue in April has so far been flat year-on-year, compared to 17 percent year-on-year growth in Q1. The April trend reflects general weakness especially in those areas in the world where stay-at-home guidelines are in effect.

Total expenses saw savings in some areas such as travel, events and marketing but Facebook intends to invest in product development and to recruit more talent, on top of financial commitments (USD 300 million to date) to help during the pandemic. As a result, total expenses in 2020 are now expected at USD 52-56 billion, down from the prior range of 54-59 billion. Still, overall expense growth, in the face of expected revenue weakness, will have a negative impact on operating margins for the full year.

Capex for the full year is seen at USD 14-16 billion, down from the previous range of 17-19 billion. The reduced number reflects a decrease in construction efforts, but Facebook said the reduction should be viewed as a deferral into 2021 rather than savings.


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