Facebook's Mobile Growth Trumps Growth Elsewhere, Margin Drifts Lower

Facebook, Inc. (NASDAQ: FB) is out with its fourth quarter earnings. The social media giant reported $0.17 in earnings per share on revenue of $1.585 billion. Thomson Reuters had estimates of $0.15 per share and sales of $1.53 billion. This represents 40% sales growth for Facebook in its fourth quarter.

Founding CEO Mark Zuckerberg is trying to sound more like a public company CEO than a social media geek. He said, “We enter 2013 with good momentum and will continue to invest to achieve our mission and become a stronger, more valuable company.” Zuckerberg did not offer any formal guidance in the press release. As of December 31, 2012, Facebook’s cash and marketable securities came to a sum of $9.63 billion.

Revenue from advertising was $1.33 billion, representing 84% of total revenue and a 41% increase from the same quarter last year. Payments and other fees revenue for the fourth quarter was $256 million. Monthly active users were up 25% to 1.06 billion and daily active users were up 28% to 618 million.

Mobile Monthly active users were up 57% to 680 million. Facebook said that its mobile daily active users exceeded web daily active users for the first time in the fourth quarter of 2012. Mobile revenue represented approximately 23% of advertising revenue, up from approximately 14% of advertising revenue in the prior sequential quarter.

Investors may raise some brows after seeing the margin compression, although some of this was known due to hiring and expense items. GAAP operating margin was 33% for the fourth quarter versus 48% for the fourth quarter of 2011. Excluding share-based compensation and related payroll tax expenses, non-GAAP operating margin was 46% versus 55% for the fourth quarter of 2011.

The company said, “Fourth quarter costs and expenses were $1.06 billion, an increase of 82% from the fourth quarter of 2011. Excluding share-based compensation and related payroll tax expenses, non-GAAP costs and expenses were $849 million, an increase of 67%… The GAAP income tax provision for the fourth quarter was $441 million, representing an 87% effective tax rate. Excluding share-based compensation expense and related payroll tax expenses, the non-GAAP effective tax rate would have been approximately 41%.”

Facebook shares closed up almost 1.5% at $31.24 on the day but shares are down about 4% at  $30.20 in the after-hours. Until the shares move from the conference call, we would consider this unfinished business.