Meta Platform’s ($META) Q2 & 1H FY2022 Results – Key Highlights

Meta Platform’s ($META) Q2 & 1H FY2022 Results – Key Highlights

On 27 July 2022, Meta Platforms Inc. (NASDAQ:META), previously known as Facebook Inc., released its financial results for the second quarter ended 30 June 2022 (i.e. Q2 FY2022.) 

This post was originally posted here. The writer, Lim Jun Yuan is a veteran community member and blogger on InvestingNote, with a username known as @ljunyuan and has close to 2000 followers.

Apart from Facebook, the company also owns Instagram and WhatsApp. It also produces hardware such as Meta Quest (VR headset), and Meta Portal (smart video calling touch screen display.)

In this post, you’ll find a review of its financial performance (Q2 FY2021 vs. Q2 FY2022, and 1H FY2021 vs. 1H FY2022), cash flow position (1H FY2021 vs. 1H FY022), outlook by the CFO for the third quarter, and also whether or not its current traded price is considered to be ‘cheap’/’expensive’.

Financial Performance (Q2 FY2021 vs. Q2 FY2022):

  • Meta Platforms reports its business under 2 business segments – first is Family of Apps, which includes (i) Advertising: where revenue is generated by displaying ad products on Facebook, Instagram, Messenger, and third-party affiliated websites/mobile apps; (ii) Other Revenue: where it comprises of net fees received from developers using the company’s payment infrastructure and revenue from other sources; (ii) Reality Labs – where revenue comes from the delivery of its consumer hardware products including Meta Quest (VR headset), Meta Portal (smart video calling touch screen display), and wearables, as well as related software and content.
  • Revenue from Advertising dipped by 1.5%, as a result of a 14% decrease in the average price per ad, driven by a reduction in advertising demand, and an unfavourable foreign exchange impact. 
  • Revenue from Reality Labs skyrocketed 48.2%, primarily driven by increases in the volume of its consumer hardware products sold. 
  • Cost of sales declined 3.8% mostly related to a $472m reduction in its estimated losses on purchase commitments due to an announced price increase on its Meta Quest 2, offset by increases in operational expenses related to its data centres and technical infrastructure.
  • As a result of a drop in income from operations (due to a 43% jump in R&D expenses from higher payroll and related expenses, 10% increase in marketing and sales from an increase in payroll and related expenses and marketing and promotional expenses, 53% jump in general and administrative expenses due to increases in legal-related costs, as well as payroll and related expenses), along with net unrealised losses recognised for its equity investments, its net profit fell by 35.7%. 

Financial Performance (1H FY2021 vs. 1H FY2022):

  • All 3 revenue contributors (in ‘Advertising’, ‘Other Revenue’ and ‘Reality Labs’) saw improvements, which led to its total revenue to record a year-on-year improvement of 2.7% to $56,729m.
  • However, due to an increase in cost of sales (from increases in operational expenses related to its data centres and technical infrastructure), R&D (from a 39% growth in employee headcount in its engineering and other technical function to support the company’s continued investment in its family of products and Reality Labs), marketing and sales (by 13% due to a 15% increase in employee headcount to support its marketing and sales functions), general and administrative (which jumped by 49%, due to a 34% increase in employee headcount in its general and administrative functions), a 30% decline in its interest income, and also a 58% decline in its other income, its net profit fell by 28.9% to $14,152m.
  • Gross and net profit margin also dipped by 0.6pp and 11.1pp respectively. 

Cash Flow Position (1H FY2021 vs. 1H FY2022):

  • Net cash flow from operating activities saw a 3.1% improvement compared to last year due to a decrease in cash payments of income taxes, along with an increase in cash collected from its customers, partially offset by a decrease in net income and an increase in payments to its vendors as a result of higher operating spending and timing of payments. 
  • As at end of 30 June 2022, company remains in a net cash position – even though it has declined by 18.4%. 

Outlook by the CFO David Wehner for Q3 FY2022:

“We expect third quarter 2022 total revenue to be in the range of $26-28.5 billion. This outlook reflects a continuation of the weak advertising demand environment we experienced throughout the second quarter, which we believe is being driven by broader macroeconomic uncertainty. We also anticipate third quarter Reality Labs revenue to be lower than second quarter revenue. Our guidance assumes foreign currency will be an approximately 6% headwind to year-over-year total revenue growth in the third quarter, based on current exchange rates.”

Is Meta Platforms’ Current Traded Price Considered ‘Cheap’ / ‘Expensive’? 

Disclaimer: At the time of writing, I am a shareholder of Meta Platforms Inc., with my invested price averaged at $190.50.

Once again, this article is a guest post and was originally posted on ljunyuan‘s profile on InvestingNote. 

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