“Our community continues to grow and I’m pleased with the strong engagement we’re seeing driven by progress on our discovery engine and products like Reels,” said Mark Zuckerberg, Meta founder and CEO. “While we face near-term challenges on revenue, the fundamentals are there for a return to stronger revenue growth. We’re approaching 2023 with a focus on prioritization and efficiency that will help us navigate the current environment and emerge an even stronger company.”
Third Quarter 2022 Financial Highlights
Three Months Ended September 30, % Change In millions, except percentages and per share amounts 2022 2021 Revenue $ 27,714 $ 29,010 (4) % Costs and expenses 22,050 18,587 19 % Income from operations $ 5,664 $ 10,423 (46) % Operating margin 20 % 36 % Provision for income taxes $ 1,181 $ 1,371 (14) % Effective tax rate 21 % 13 % Net income $ 4,395 $ 9,194 (52) % Diluted earnings per share (EPS) $ 1.64 $ 3.22 (49) %
Third Quarter 2022 Operational and Other Financial Highlights
- Family daily active people (DAP) – DAP was 2.93 billion on average for September 2022, an increase of 4% year-over-year.
- Family monthly active people (MAP) – MAP was 3.71 billion as of September 30, 2022, an increase of 4% year-over-year.
- Facebook daily active users (DAUs) – DAUs were 1.98 billion on average for September 2022, an increase of 3% year-over-year.
- Facebook monthly active users (MAUs) – MAUs were 2.96 billion as of September 30, 2022, an increase of 2% year-over-year.
- Ad impressions and price per ad – In the third quarter of 2022, ad impressions delivered across our Family of Apps increased by 17% year-over-year and the average price per ad decreased by 18% year-over-year.
- Revenue – Revenue was $27.71 billion, a decrease of 4% year-over-year, and an increase of 2% year-over-year on a constant currency basis. Had foreign exchange rates remained constant with the third quarter of 2021, revenue would have been $1.79 billion higher.
- Costs and expenses – Total costs and expenses were $22.05 billion, an increase of 19% year-over-year. This includes an impairment loss of $413 million for certain operating leases as part of our ongoing work to align our office facilities footprint with our anticipated operating needs.
- Capital expenditures – Capital expenditures, including principal payments on finance leases, were $9.52 billion for the third quarter of 2022.
- Share repurchases – We repurchased $6.55 billion of our Class A common stock in the third quarter of 2022. As of September 30, 2022, we had $17.78 billion available and authorized for repurchases.
- Cash, cash equivalents, and marketable securities – Cash, cash equivalents, and marketable securities were $41.78 billion as of September 30, 2022.
- Long-term debt – Long-term debt was $9.92 billion as of September 30, 2022.
- Headcount – Headcount was 87,314 as of September 30, 2022, an increase of 28% year-over-year.
CFO Outlook Commentary
We expect fourth quarter 2022 total revenue to be in the range of $30-32.5 billion. Our guidance assumes foreign currency will be an approximately 7% headwind to year-over-year total revenue growth in the fourth quarter, based on current exchange rates.
To provide some context on the approach we are taking towards setting our 2023 budget, we are making significant changes across the board to operate more efficiently. We are holding some teams flat in terms of headcount, shrinking others and investing headcount growth only in our highest priorities. As a result, we expect headcount at the end of 2023 will be approximately in-line with third quarter 2022 levels.
We have increased scrutiny on all areas of operating expenses. However, these moves follow a substantial investment cycle so they will take time to play out in terms of our overall expense trajectory. Some steps, like the ongoing rationalization of our office footprint, will lead to incremental costs in the near term. This should set us up well for future years, when we expect to return to higher rates of revenue growth.
We expect 2022 total expenses to be in the range of $85-87 billion, updated from our prior outlook of $85-88 billion. This includes an estimated $900 million in additional charges related to consolidating our office facilities footprint that we expect to record in the fourth quarter of 2022. We anticipate our full-year 2023 total expenses will be in the range of $96-101 billion. This includes an estimated $2 billion in charges related to consolidating our office facilities footprint.
We expect the slight majority of our 2023 expense dollar growth to be driven by operating expenses, with the remaining growth coming from cost of revenue. We expect the percentage growth rate of 2023 operating expenses to decelerate meaningfully as we curtail non-headcount related expense growth and keep 2023 headcount roughly flat with current levels. Conversely, our growth in cost of revenue is expected to accelerate, driven by infrastructure-related expenses and, to a lesser extent, Reality Labs hardware costs driven by the launch of our next generation of our consumer Quest headset later next year.
Reality Labs expenses are included in our total expense guidance. We do anticipate that Reality Labs operating losses in 2023 will grow significantly year-over-year. Beyond 2023, we expect to pace Reality Labs investments such that we can achieve our goal of growing overall company operating income in the long run.
We expect 2022 capital expenditures, including principal payments on finance leases, to be in the range of $32-33 billion, updated from our prior range of $30-34 billion. For 2023, we expect capital expenditures to be in the range of $34-39 billion, driven by our investments in data centers, servers, and network infrastructure. An increase in AI capacity is driving substantially all of our capital expenditure growth in 2023.
Absent any changes to U.S. tax law, we expect our fourth quarter 2022 and our full-year 2023 tax rate to be similar to the third quarter 2022 rate.
In addition, as previously noted, we continue to monitor developments regarding the viability of transatlantic data transfers and their potential impact on our European operations.
Webcast and Conference Call Information
Meta will host a conference call to discuss the results at 2 p.m. PT / 5 p.m. ET today. The live webcast of Meta’s earnings conference call can be accessed at investor.fb.com, along with the earnings press release, financial tables, and slide presentation. Meta uses the investor.fb.com and about.fb.com/news/ websites as well as Mark Zuckerberg’s Facebook Page (facebook.com/zuck) and Instagram account (instagram.com/zuck) as means of disclosing material non-public information and for complying with its disclosure obligations under Regulation FD.
Following the call, a replay will be available at the same website. A telephonic replay will be available for one week following the conference call at +1 (800) 633-8284 or +1 (402) 977-9140, conference ID 22020741.
Transcripts of conference calls with publishing equity research analysts held today will also be posted to the investor.fb.com website.
Meta builds technologies that help people connect, find communities, and grow businesses. When Facebook launched in 2004, it changed the way people connect. Apps like Messenger, Instagram, and WhatsApp further empowered billions around the world. Now, Meta is moving beyond 2D screens toward immersive experiences like augmented and virtual reality to help build the next evolution in social technology.
This press release contains forward-looking statements regarding our future business plans and expectations. These forward-looking statements are only predictions and may differ materially from actual results due to a variety of factors including: the impact of macroeconomic conditions on our business and financial results, including as a result of the ongoing COVID-19 pandemic and geopolitical events; our ability to retain or increase users and engagement levels; our reliance on advertising revenue; our dependency on data signals and mobile operating systems, networks, and standards that we do not control; changes to the content or application of third-party policies that impact our advertising practices; risks associated with new products and changes to existing products as well as other new business initiatives, including our metaverse efforts; our emphasis on community growth and engagement and the user experience over short-term financial results; maintaining and enhancing our brand and reputation; our ongoing privacy, safety, security, and content review efforts; competition; risks associated with government actions that could restrict access to our products or impair our ability to sell advertising in certain countries; litigation and government inquiries; privacy, legislative, and regulatory concerns or developments; risks associated with acquisitions; security breaches; and our ability to manage our scale and geographically-dispersed operations. These and other potential risks and uncertainties that could cause actual results to differ from the results predicted are more fully detailed under the caption “Risk Factors” in our Quarterly Report on Form 10-Q filed with the SEC on July 28, 2022, which is available on our Investor Relations website at investor.fb.com and on the SEC website at www.sec.gov. Additional information will also be set forth in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2022. In addition, please note that the date of this press release is October 26, 2022, and any forward-looking statements contained herein are based on assumptions that we believe to be reasonable as of this date. We undertake no obligation to update these statements as a result of new information or future events.
Non-GAAP Financial Measures
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 use the following non-GAAP financial measures: revenue excluding foreign exchange effect, advertising revenue excluding foreign exchange effect, and free cash flow. The presentation of these financial measures 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. Investors are cautioned that there are material limitations associated with the use of non-GAAP financial measures as an analytical tool. In addition, these measures may be different from non-GAAP financial measures used by other companies, limiting their usefulness for comparison purposes. We compensate for these limitations by providing specific information regarding the GAAP amounts excluded from these non-GAAP financial measures.
We believe these non-GAAP financial measures provide investors with useful supplemental information about the financial performance of our business, enable comparison of financial results between periods where certain items may vary independent of business performance, and allow for greater transparency with respect to key metrics used by management in operating our business.
We exclude the following items from our non-GAAP financial measures:
Foreign exchange effect on revenue. 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, which we believe is a useful metric that facilitates comparison to our historical performance.
Purchases of property and equipment; Principal payments on finance leases. We subtract both purchases of property and equipment, net of proceeds and principal payments on finance leases in our calculation of free cash flow because we believe that these two items collectively represent the amount of property and equipment we need to procure to support our business, regardless of whether we procure such property or equipment with a finance lease. We believe that this methodology can provide useful supplemental information to help investors better understand underlying trends in our business. Free cash flow is not intended to represent our residual cash flow available for discretionary expenditures.
For more information on our non-GAAP financial measures and a reconciliation of GAAP to non-GAAP measures, please see the “Reconciliation of GAAP to Non-GAAP Results” table in this press release.
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
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
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 META PLATFORMS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In millions) (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 and 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 META PLATFORMS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions) (Unaudited) Three Months Ended
Nine Months Ended
2022 2021 2022 2021 Cash flows from operating activities Net income $ 4,395 $ 9,194 $ 18,547 $ 29,085 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,175 1,995 6,310 5,953 Share-based compensation 3,134 2,379 8,984 6,757 Deferred income taxes (1,097) (786) (2,113) (139) Impairment related to leases and leasehold improvements 413 — 413 — Other 104 (73) 71 (161) Changes in assets and liabilities: Accounts receivable (105) (555) 1,930 (1,072) Prepaid expenses and other current assets (830) (253) (693) (2,566) Other assets (27) 11 (160) (184) Accounts payable (22) 694 (666) 560 Partners payable 20 (30) (12) (163) Accrued expenses and other current liabilities 998 1,094 2,942 895 Deferred revenue and deposits (7) 78 (35) 87 Other liabilities 540 343 446 527 Net cash provided by operating activities 9,691 14,091 35,964 39,579 Cash flows from investing activities Purchases of property and equipment (9,375) (4,345) (22,388) (13,290) Proceeds relating to property and equipment 20 32 190 92 Purchases of marketable debt securities (2,597) (7,786) (8,885) (24,314) Sales of marketable debt securities 1,620 8,993 9,333 15,331 Maturities of marketable debt securities 649 2,991 1,562 9,318 Acquisitions of businesses and intangible assets (34) (71) (1,250) (330) Other investing activities 16 (144) (1) (206) Net cash used in investing activities (9,701) (330) (21,439) (13,399) Cash flows from financing activities Taxes paid related to net share settlement of equity awards (1,011) (1,576) (2,938) (4,007) Repurchases of Class A common stock (6,354) (13,457) (21,093) (24,476) Proceeds from issuance of long-term debt, net 9,921 — 9,921 — Principal payments on finance leases (163) (231) (615) (505) Net change in overdraft in cash pooling entities (191) 11 (250) 15 Other financing activities (55) — (101) (13) Net cash provided by (used in) financing activities 2,147 (15,253) (15,076) (28,986) Effect of exchange rate changes on cash, cash equivalents, and restricted cash (364) (215) (1,063) (344) Net increase (decrease) in cash, cash equivalents, and restricted cash 1,773 (1,707) (1,614) (3,150) Cash, cash equivalents, and restricted cash at beginning of the period 13,478 16,511 16,865 17,954 Cash, cash equivalents, and restricted cash at end of the period $ 15,251 $ 14,804 $ 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 $ 14,308 $ 14,496 Restricted cash, included in prepaid expenses and other current assets 232 195 232 195 Restricted cash, included in other assets 711 113 711 113 Total cash, cash equivalents, and restricted cash $ 15,251 $ 14,804 $ 15,251 $ 14,804 META PLATFORMS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions) (Unaudited) Three Months Ended
Nine Months Ended
2022 2021 2022 2021 Supplemental cash flow data Cash paid for income taxes, net $ 2,006 $ 1,625 $ 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 $ 4,130 $ 2,635 Acquisition of businesses in accrued expenses and other current
liabilities and other liabilities
$ 294 $ 73 $ 294 $ 73 Other current assets through financing arrangement in accrued
expenses and other current liabilities
$ 18 $ 491 $ 18 $ 491 Repurchases of Class A common stock in accrued expenses and
other current liabilities
$ 265 $ 1,223 $ 265 $ 1,223
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.
The following table presents our segment information of revenue and income (loss) from operations. For comparative purposes, amounts in the prior period have been recast:
Segment Information (In millions) (Unaudited) Three Months Ended
Nine Months Ended
2022 2021 2022 2021 Revenue: 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 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 Reconciliation of GAAP to Non-GAAP Results (In millions, except percentages) (Unaudited) Three Months Ended
Nine Months Ended
2022 2021 2022 2021 GAAP revenue $ 27,714 $ 29,010 $ 84,444 $ 84,258 Foreign exchange effect on 2022 revenue using 2021 rates 1,789 3,944 Revenue excluding foreign exchange effect $ 29,503 $ 88,388 GAAP revenue year-over-year change % (4) % — % Revenue excluding foreign exchange effect year-over-year change % 2 % 5 % GAAP advertising revenue $ 27,237 $ 28,276 $ 82,387 $ 82,294 Foreign exchange effect on 2022 advertising revenue using 2021 rates 1,776 3,919 Advertising revenue excluding foreign exchange effect $ 29,013 $ 86,306 GAAP advertising revenue year-over-year change % (4) % — % Advertising revenue excluding foreign exchange effect year-over-year change % 3 % 5 % Net cash provided by operating activities $ 9,691 $ 14,091 $ 35,964 $ 39,579 Purchases of property and equipment, net (9,355) (4,313) (22,198) (13,198) Principal payments on finance leases (163) (231) (615) (505) Free cash flow $ 173 $ 9,547 $ 13,151 $ 25,876