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Twitter Tops Analyst Estimates

February 7, 2019

Twitter reported financial results for its fourth quarter and fiscal year 2018. The firm's earnings per share came in at 31 cents ex-items against the 25 cents per share that was expected. As to revenue, the social platform company reported $909 million with only. $868.1 million expected. Twitter noted monthly active users (MAUs), excluding SMS users: 321 million with 321 million anticipated.

Looking forward to next quarter, Twitter guided revenue at $715 million to $775 million compared to estimates of $764.9 million.

Twitter's cash operating expenses are set to rise 20 percent year over year in 2019.

"2018 is proof that our long-term strategy is working. Our efforts to improve health have delivered important results, and new product features like a single switch to move between latest and most relevant Tweets have been embraced by the people who use Twitter," said Jack Dorsey, Twitter's CEO. "We enter this year confident that we will continue to deliver strong performance by focusing on making Twitter a healthier and more conversational service."

"Through our consistent strategy and solid execution, Q4 was a strong finish to the year. We're delivering great results with revenue up 24% year-over-year, steady sequential growth in total monetizable daily active users (mDAU) and revenue, along with GAAP profitability throughout the year," said Ned Segal, Twitter's CFO. "We're also continuing to demonstrate Twitter's unique value proposition for advertisers as the best place to launch something new or connect with what's happening."

Fiscal Year 2018 Operational and Financial Highlights

  • 2018 revenue exceeded $3 billion, an increase of 25% year-over-year. On a constant currency basis, revenue grew 24% year-over-year. Excluding TellApart (which contributed $45 million of revenue in the first three quarters of 2017 and was fully deprecated in Q4'17), total revenue grew 27% year-over-year.
  • 2018 GAAP costs and expenses totaled $2.6 billion, an increase of 8% year-over-year. Global headcount increased by almost 550 employees or 16% year-over-year, to more than 3,900 employees at year-end.
    • 2018 non-GAAP costs and expenses totaled $2.2 billion, an increase of 17% year-over-year.
  • 2018 GAAP net income was $1.2 billion, compared to a net loss of $108 million in the previous year, representing a GAAP net margin of 40% and GAAP diluted EPS of $1.56. Excluding the release of deferred tax asset valuation allowances of $845 million, we generated net income of $360 million, net margin of 12%, and diluted EPS of $0.47.
  • 2018 adjusted EBITDA was $1.2 billion, an increase of 39% year-over-year, representing an adjusted EBITDA margin of 39%, compared to an adjusted EBITDA of $863 million and adjusted EBITDA margin of 35% in 2017.

Fourth Quarter 2018 Operational and Financial Highlights

  • Q4 revenue totaled $909 million, an increase of 24% year-over-year or 26% on a constant currency basis.
    • Advertising revenue totaled $791 million, an increase of 23% year-over-year or 25% on a constant currency basis.
      • Total ad engagements increased 33% year-over-year.
      • Cost per engagement (CPE) decreased 7% year-over-year.
    • Data licensing and other revenue totaled $117 million, an increase of 35% year-over-year.
    • US revenue totaled $506 million, an increase of 24% year-over-year.
    • International revenue totaled $403 million, an increase of 24% year-over-year.Q4
  • GAAP costs and expenses totaled $702 million, an increase of 13% year-over-year. This resulted in GAAP operating income of $207 million and 23% operating margin.
    • Q4 non-GAAP costs and expenses totaled $618 million, an increase of 21% year-over-year.
  • Q4 GAAP net income was $255 million, compared to $91 million in the same period of the previous year, representing a GAAP net margin of 28% and GAAP diluted EPS of $0.33.
    • Q4 non-GAAP net income was $244 million compared to $141 million in the same period of the previous year, representing a non-GAAP net margin of 27% and non-GAAP diluted EPS of $0.31.
  • Q4 adjusted EBITDA was $397 million compared to $308 million in the same period of the previous year, representing an adjusted EBITDA margin of 44%.
  • Average monetizable daily active users (mDAU) were 126 million for Q4, compared to 115 million in the same period of the previous year and compared to 124 million in the previous quarter.
    • Average US mDAU were 27 million for Q4, compared to 25 million in the same period of the previous year and compared to 26 million in the previous quarter.
    • Average international mDAU were 99 million for Q4, compared to 89 million in the same period of the previous year and compared to 98 million in the previous quarter.
  • Average monthly active users (MAU) were 321 million for Q4, compared to 330 million in the same period of the previous year and compared to 326 million in the previous quarter.
    • Average US MAU were 66 million for Q4, compared to 68 million in the same period of the previous year and compared to 67 million in the previous quarter.
    • Average international MAU were 255 million for Q4, compared to 262 million in the same period of the previous year and compared to 259 million in the previous quarter.

Outlook

For Q1:

  • Total revenue to be between $715 million and $775 million
  • GAAP operating income to be between $5 million and $35 million

For FY 2019:

  • GAAP and cash operating expenses to be up approximately 20% year-over-year in 2019 as we support our existing priorities of health, conversation, revenue product and sales, and platform
  • Stock-based compensation expense to be in the range of $350 million to $400 million
  • Capital expenditures to be between $550 million and $600 million

Note that our outlook for Q1 and the full year 2019 reflects foreign exchange rates as of January 2019.

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