Twitter (TWTR) Q1 2020 earnings

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Twitter released its first quarter 2020 results on Thursday that exceeded estimates despite an expected impact on its advertising business due to the coronavirus pandemic. Title rose 12% during pre-market trading on report news, but title fell more than 6% on call for results, with leaders showing little sign of recovery or stability during the current quarter in its advertising activity.

Here’s what Twitter reported:

  • Earnings per share (EPS): 11 cents
  • Returned: $ 808 million
  • Monetizable Daily Active Users (mDAU): 166 million

Wall Street expected earnings per share of 10 cents on revenues of $ 776 million, according to consensus estimates by Refinitiv. Monetizable Daily Active Users (mDAU) are projected to reach 164 million, according to StreetAccount estimates. However, it is difficult to compare the reported earnings to Twitter’s first-quarter analysts’ estimates, as the coronavirus pandemic continues to hit global economies and makes the impact of earnings difficult to assess.

After an initial spike, the stock went negative, with executives not reassuring analysts when the results were called, he saw signs of recovery. CFO Ned Segal said in a call to analysts that he said the sluggish ad spending at the end of March was a testament to what Twitter had experienced this month. In contrast, Google and Facebook said in their earnings reports this week that they saw signs of recovery and stability in the first weeks of April.

Segal said the company was affected by canceled and postponed events and said that by the end of March, spending on advertising fell more in the United States than in Asia. He added that when the Asian economy started to reopen, its impact on the region diminished in terms of advertising spending.

While live sporting events and some splashy product launches have been delayed, Twitter has had virtual experiences during the pandemic, Segal told CNBC’s Andrew Ross Sorkin on “Squawk Box”.

“Live events are a very important way for people to use the service, but it’s not just something planned,” he said. “It could be something like [ESPN documentary] “The Last Dance” where you basically have watch evenings on the service. “

Segal also told CNBC that Twitter is less exposed to travel industry cutbacks than other services, as many of its advertisers focus on product launches and film premieres.

The company withdrew its forecast for the current quarter at the end of March, accusing the coronavirus of a slowdown in advertising revenue which made it difficult to fix its results. While Twitter said at the time that it expected quarterly revenues to decline slightly year over year, Segal told analysts that it could see growth revenues because the deterioration at the end of March remained directionally “relatively stable” despite a “wide range of results” during the period from March 11 to March 31.

Twitter has not provided guidance for the second quarter and is still suspending its forecast for the full year, but noted that plans to build a new data center are likely to be delayed, which will affect spending on the Internet. investment in FY2020. He still expects stock-based compensation to increase sequentially by at least 25% in the second quarter.

The company said its mDAU growth was the strongest on a year-over-year basis at 24%. It has experienced double-digit growth in its top 10 markets, according to the letter to shareholders. At the end of March, Twitter said, “The absolute number of mDAUs has stabilized … as many people around the world have settled into new routines.”

Twitter said in the letter that its 3% revenue growth was due to “a solid start to the quarter which was affected by a general economic downturn related to COVID-19 in March”.

Total advertising revenue was $ 682 million, up about $ 3 million from last year. But the company said its advertising revenue should be viewed as two separate periods, with results from January to early March as planned and late March.

“To indicate the rapid change in advertising behavior, from March 11 (when many events around the world began to be canceled and we made homework mandatory for almost all of our employees worldwide) until March 31 March, our total advertising revenues decreased by about 27% over one year, “wrote the company in its letter to shareholders. “The slowdown we saw in March was particularly pronounced in the United States and the weakness of advertising in Asia began to subside as the restrictions on work and travel were gradually lifted. “

To deal with the pandemic, Twitter is shifting resources to focus on revenue-generating products, including its Mobile Application Promotion (MAP) product. It also cuts hiring and non-labor expense plans while continuing to invest in engineering, products, confidence and security.

After experiencing issues with its MAP product that negatively impacted its third quarter 2019 revenue, Segal said Twitter is still planning to complete rebuilding its ad server by the end of the second quarter of this year.

Before the pandemic, Jack Dorsey’s role as CEO was challenged by activist investment firm Elliott Management. The company wanted Dorsey to be removed in part due to her shared responsibility as managing director of Twitter and Square and her previous plans to move to Africa for several months. As the coronavirus spread worldwide, Dorsey said it was reconsidering its move to Africa and Twitter has made a deal with Elliott and Silver Lake, leaving Dorsey in place for the time being.

Bernstein analysts said earlier this month that Elliott and Silver Lake’s involvement would help catalyze innovation on Twitter, particularly in ad products. The agreement included a $ 1 billion investment in the company by Silver Lake.

But in the short term, analysts say, Twitter, like other digital advertising platforms, will likely suffer from declining ad revenue, even if engagement increases, as many brands are wary of advertising on linked content. coronaviruses.

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