Twitter Q2 Revenues Light - User Growth Tops
July 23, 2020
Twitter reported financial results for its second quarter 2020.
The firm had a loss per share of $1.39. The
loss was driven by a $1.1 billion loss related to a noncash deferred tax asset.
The unusual tax item clouded expectation comparisons. On the revenue top line,
$683 million came in with $707 million expected.
Twitter did better on monetizable daily
active users (mDAUs) which came in at 186 million with only 172.8 million
"Our product work is paying off, with tremendous growth in audience and
engagement. We grew mDAU to 186 million, a 34% year over year increase in Q2,
the highest quarterly year-over-year growth rate we've delivered since we began
reporting mDAU growth," said Jack Dorsey, Twitter's CEO. "I also want to address
the security issue Twitter suffered last week. We moved quickly to address what
happened, and have taken additional steps to improve resiliency against targeted
social engineering attempts, implemented numerous safeguards to improve the
security of our internal systems, and are working with law enforcement. We
understand our responsibilities and are committed to earning the trust of all of
our stakeholders with our every action, including how we address this security
issue. We will continue to be transparent in sharing our learnings and
"Revenue was $683 million in Q2, down 19% year over year, reflecting moderate
recovery in advertising demand relative to the last three weeks of March.
Despite the pandemic, brands have found innovative ways to join the conversation
on Twitter to connect with their customers," said Ned Segal, Twitter's CFO. "We
have completed our ad server rebuild and are making progress accelerating our
performance ads roadmap. With a larger audience and progress in ads, we are even
better positioned to deliver for advertisers when the live events and product
launches that bring many people and advertisers to Twitter return to our lives."
Quarter 2020 Operational and Financial Highlights
otherwise stated, all financial results discussed below are
presented in accordance with generally accepted accounting
principles in the United States of America,
or GAAP. As supplemental information, we have provided certain non-GAAP
financial measures in this press release's supplemental tables, and
such supplemental tables include a reconciliation of these non-GAAP
measures to our GAAP results. The sum of individual metrics may not
always equal total amounts indicated due to rounding.
- Q2 revenue
totaled $683 million, a decrease
of 19% year-over-year or 18% on a constant currency basis.
revenue totaled $562 million,
down 23% year-over-year or 22% on a constant currency basis.
We previously noted that in Q1, widespread economic
disruption and a significant decrease in global advertising
spend as a result of the pandemic led to a 27% decline in
advertising revenue in the last three weeks of March. We saw
a gradual, moderate recovery relative to March levels
throughout most of Q2, with the exception of late May to
mid-June, when many brands slowed or paused spend in
reaction to US civil unrest. During the last three weeks of
June, advertising revenue declined 15% year over year.
Demand gradually improved once brands returned after the
- Total ad
engagements increased 3% year-over-year.
- Cost per
engagement (CPE) decreased 25% year-over-year.
licensing and other revenue totaled
$121 million, an increase of 6% year-over-year.
- US revenue
totaled $365 million, a
decrease of 20% year-over-year.
International revenue totaled $319
million, a decrease of 18% year-over-year or 17% on a
constant currency basis.
- Q2 costs and
expenses totaled $807 million, an
increase of 5% year over year. This resulted in an operating
loss of $124 million and -18%
operating margin, compared to operating income of
$76 million or 9% operating margin
in the same period of the previous year. Expense growth of 5%
was lower than growth in the low teens we expected at the
beginning of the quarter and reflects decisions we have made to
reduce spending, continued cost savings from restricted business
operations, and some of the challenges of growing headcount and
investing in our objectives in the current environment. As we
continue to adapt our operations and improve and increase
hiring, we intend to continue investing in our most important
work. We believe total costs and expenses will increase 10% or
more year over year in Q3.
compensation (SBC) expense grew 40% year over year to
$133 million and was approximately
19% of total revenue compared to 12% in the prior quarter. As a
reminder, stock-based compensation expense is closely tied to
headcount, timing of grants, and vesting. Due to these factors,
we expect to recognize more SBC expense in Q2 relative to other
quarters in 2020.
Q2 2019, we established a $1.1 billion
deferred tax asset and recognized an income tax benefit. In Q2
2020, we recognized a deferred tax asset valuation allowance of
$1.1 billion and a non-cash income
tax expense based primarily on cumulative taxable losses driven
primarily by COVID-19. This valuation allowance would be
reversed in the event, and to the extent, that it is more likely
than not that there will be sufficient taxable income to realize
the tax benefit. Depending on the extent and severity of
COVID-19's impact, we could have an additional valuation
allowance against deferred tax assets in a future period. As a
result of the valuation allowance, we incurred a net loss of
$1.2 billion in Q2, representing a
net margin of -180% and diluted EPS of
($1.56). Excluding the impact of the income tax expense
due to the establishment of the valuation allowance, Q2 adjusted
net loss was $127 million,
representing an adjusted net margin of -19% and adjusted diluted
EPS of ($0.16).
compares to net income of $1.1
billion, representing a net margin of 133% and
diluted EPS of $1.43 in the
same period of the previous year. Excluding the income tax
benefit related to the establishment of the deferred tax
asset mentioned above, adjusted net income was
$37 million, adjusted net
margin was 4% and adjusted diluted EPS was
$0.05 in the same period of
the previous year.
expenditures totaled $162 million,
compared to $135 million in the
same period last year, driven by investments we are making in
our infrastructure to support audience growth and product
innovation. We intend to increase capex in absolute dollars
sequentially in Q3. The increase will allow us to address our
near-term capacity needs and continue our buildout of a new data
center, contingent on improvements in the IT supply chain.
monetizable daily active users (mDAU) were 186 million for Q2,
compared to 139 million in the same period of the previous year
and compared to 166 million in the previous quarter.
- Average US
mDAU were 36 million for Q2, compared to 29 million in the
same period of the previous year and compared to 33 million
in the previous quarter.
international mDAU were 150 million for Q2, compared to 110
million in the same period of the previous year and compared
to 133 million in the previous quarter.