Wall Street is Not a-Twitter Over Yesterday’s Earnings Call


ADOTAS — Twitter’s Q4 earnings call exceeded expectations in revenues and earnings, but apparently set off  alarms due to the slow growth of its user base and record quarterly net losses.

Here are the report’s financial highlights and lowlights:

  • Q4 revenue of $243 million, up 116% year-over-year
  • Q4 net loss of $511 million and non-GAAP net income of $10 million
  • Q4 GAAP EPS of ($1.41) and non-GAAP EPS of $0.02
  • Q4 adjusted EBITDA of $45 million, representing an adjusted EBITDA margin of 18%
  • Full year revenue of $665 million, up 110% year-over-year
  • Full year net loss of $645 million and non-GAAP net loss of $34 million
  • Full year GAAP EPS of ($3.41) and non-GAAP EPS of ($0.18)
  • Full year adjusted EBITDA of $75 million, representing an adjusted EBITDA margin of 11%

“Twitter finished a great year with our strongest financial quarter to date,” said Dick Costolo, CEO of Twitter. “We are the only platform that is public, real-time, conversational and widely distributed and I’m excited by the number of initiatives we have underway to further build upon the Twitter experience.”

But the negatives in the report — especially in terms of the user numbers — caused Twitter’s stock to drop around 24% by time the NYSE opened this morning. Its stock price was hovering around the $51 mark in early trading this morning.

“Monthly active users were 241 million,” writes Jim Edwards of Business Insider. “The company added only 9 million more users since the last quarter — that is very weak progress. Only 1 million users were added in the U.S. Worse, timeline views (a measure of how engaged users are with Twitter) actually declined sequentially.”

“In many areas, these results were above analysts’ expectations,” said Dr. Sotirios Paroutis, Associate Professor of Strategic Management, Warwick Business School. “Yet investors have not been impressed sending the share price down from around $66 to as low as $54 in after-hours trading after the results were published. Inevitably, the market is evaluating Twitter not in isolation but in relation to Facebook, which posted record quarterly results a few days ago. In other words, while Twitter is doing well, it needs to do better — and faster — to keep its advertisers, users and investors interested – or as its CEO, Dick Costolo, admitted during the call to investors, “We simply need to make Twitter a better Twitter’.”

Edwards speculates that Twitter’s immediate future “will be all about increasing average revenue per user and revenue per 1,000 timeline views (that’s a specific measure that Twitter uses to gauge how much money it can make from running ads in people’s tweet streams.) It will not, pointedly, be about challenging Facebook for dominance of social media. Twitter is a niche social media platform — a niche of a quarter million users, granted — but does not look right now as if it is going to break out of its core base of social media power-users.”


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