July 27, 2012
Facebook Earnings Shy of Investor Expectations
Enid Burns for redOrbit.com — Your Universe Online
Facebook posted its earnings report for Q2 2012 this week - the first report since its IPO this past May. The social networking site posted a quarterly loss of $157 million, though much of that was due to one-time fees relating to the IPO.
Excluding the one-time costs, Facebook actually earned in line with analysts' estimates, according to a report by USA Today. Earnings came to $295 million for the quarter ending June 30, before the fees took a big bite out of the figure. Although some of those analyst estimates should have accounted for standard fees relating to the IPO.
The company incurred $1.93 billion in expenses, an increase of 295 percent. Of those expenses, $1.3 billion were share-based compensation and related payroll tax expenses in the fallout of the IPO.
Revenue totaled $1.18 billion for the second quarter of 2012, just ahead of industry analyst estimates of $1.15 billion.
Facebook's first financial report since its fumbled IPO should have been stronger. "It was the first quarterly report for Facebook as a public company. It's unusual for a company to miss estimates on its first quarter as a public company, says Jay Ritter, professor of finance at the University of Florida. When companies go public, they typically have a solid outlook at least for the first few months," it says in the USA Today article.
Stock prices fell in after-hours trading after Facebook's late-day earnings call. The stock closed at $26.84, which is $2.50 lower than closing on Wednesday and an 8.5 percent fall. As of Thursday's close of markets, Facebook stock was down 29 percent from its IPO price of $38 a share. After hours the stock dropped by $2.79 cents to $24.05. The 10 percent after-hours drop continued to widen as reports on the earnings surfaced. Some investors sold stock in advance of the earnings, expecting a report lower than forecasted.
Social networking sites have not fared well on the stock market. This week Zynga, publisher of online social games that run on Facebook and other sites, posted a $108 million loss for its second quarter earnings. Zynga put some of the blame for its losses on changes made to Facebook, which affected its user base.
Facebook continues to attract users. The company reports 955 million monthly active users as of June 30, an increase of 29 percent in year-over-year figures. Daily active users totaled 552 million on average for the month of June, a 32 percent year-over-year increase. Mobile saw the largest increase, 67 percent year-over-year, with 543 million monthly active users as of June 30.
Mobile has gotten some attention from Facebook over the past few months. Facebook recently broke out messaging and camera as separate apps from the main Facebook app on mobile phone platforms including Android and iPhone.
Costs for Facebook are on the rise. The Wall Street Journal points out that total costs and expenses excluding the IPO issues and stock compensation costs rose this past quarter. Facebook said marketing-and-sales expenses jumped to $392 million from $83 million, the Wall Street Journal reported. The article also states that general-and-administrative expenses rose to $463 million from $83 million. The company acquired mobile photo app company Instagram and made other acquisitions over the past few months, which could account for some of the expenditures.