• Facebook reported an 11% increase in revenue in Q2 to $18.7 billion. Although this was   the slowest growth recorded since its 2012 IPO, it was well ahead of   consensus estimates of $17.4 billion. Looking   ahead, Facebook is projecting revenue growth of about 10% in Q3.

  • Facebook   reported EPS of $1.80 representing an increase of 90% and well ahead of   estimates of $1.39 per share.

  • Perhaps   most impressively, Facebook reported record free cash flow of $7.3 billion   compared to $5.3 billion in Q2 2019. On a trailing twelve-month basis,   Facebook generated over $22.5 billion in free cash flow putting the company   on a free cash multiple of 29x.

  • Facebook daily active users were 1.79 billion on average for June   2020, an increase of 12% year-over-year. Monthly active users were 2.70   billion, an increase of 12% year-over-year. This is an astonishing figure   suggesting that 23% of the global population are active users of the various   Facebook platforms on a daily basis. As a reminder, Facebook also owns   Instagram and the messaging service platform Whatsapp.

  • The results are especially impressive when one considers that there   currently is a boycott by more than 1,100 major companies that have objected   to hate speech, violent content and misinformation on Facebook’s various   digital platforms. Facebook has resolved to deal with the issues, and we are   confident that they have the financial muscle to overcome this obstacle.   Given the sheer penetration levels of Facebook we also doubt whether major   companies can afford to boycott the various Facebook platforms indefinitely.   Facebook currently has more than 9 million active advertisers, the majority   of which are small businesses.

  • Although Facebook faces significant regulatory headwinds as well as increased scrutiny from advertisers, we still feel that the company has significant scope to grow especially in emerging markets where average revenue per user is a fraction of that in developed markets. With nearly 25% of the world population accessing a Facebook application daily, we feel that the current 30x free cash flow multiple is not overly excessive and are happy to hold the company in our global portfolios.