Social media stocks like Twitter (NYSE: TWTR) have been in the news recently as they went to court to present their side of the story regarding Russian involvement in the US elections. Twitter also made some news earlier last month when it delivered a quarterly performance that outpaced market expectations. But the worst is hardly over for the company.
Twitter’s Financials
For the third quarter, Twitter’s revenue fell 4% over the year to $590 million driven by an 18% decline in the US advertising revenues to $264 million. Total advertising revenues for the company fell 8% to $503 million. Its net loss narrowed to $21 million in the quarter, compared with a loss of $103 million a year ago. Adjusted EBITDA increased 14% to $207 million, or $0.10 per share, due to a reduction in R&D and marketing costs. The market was looking for revenues of $586 million and an adjusted EPS of $0.06.
Among operating metrics, Twitter’s average monthly active users grew 4% to 330 million in the quarter with US MAUs growing 4% to 69 million. International subscriber base improved 4.4% over the year to 261 million. Twitter also disclosed that it had been incorrectly reporting users so far as it was including users of some third-party apps. The restatement of the said figures reduced the monthly user count by 2 million for the second quarter.
Advertising metrics also reported an improvement with total ad engagements growing 99% over the year, with an increased focus on video ad impressions. Ad metrics were also helped by better targeting and ad relevance. Average Cost Per Engagement fell 54% over the year due to a bigger contribution of video ad engagements.
Twitter is hopeful of turning GAAP profitable in the current quarter. It expects an adjusted EBITDA of $220-$240 million, capital expenditures of less than $110 million, and stock-based compensation expense of $90-$100 million.
Twitter’s Video Focus
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