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Twitter (TWTR) Q4 Earnings and Revenues Surpass Estimates

Zacks

Twitter TWTR reported fourth-quarter 2017 non-GAAP earnings per share of 19 cents, which came ahead of the Zacks Consensus Estimate of 14 cents and increased 72.7% year over year.

Revenues of $732 million increased 2% from the year-ago quarter and beat the consensus mark of $690 million.

The year-over-year increase in revenues was impressive, given the continuous decline in revenues in the first three quarters of 2017.

However, revenues for fiscal 2017 decreased 3% year over year to $2.4 billion, mostly due to winding of the TellApart business.

In fourth-quarter 2017, Twitter’s adjusted monthly average users (MAUs) totaled 330 million, flat sequentially but up 4% on a year-over-year basis. The increase was driven by a 2% rise in U.S. MAUs and 4% increase in international MAUs. However, on a sequential basis, U.S. MAUs decreased 1 million.

Daily average users (DAUs) were up 12% year over year, driven by double-digit growth in five out of top 10 global markets.

Quarterly Numbers in Details

Advertising revenues were up a marginal 1% in the quarter to $644 million. Ad engagements increased 75% year over year. However, cost per ad engagement was down 42%, given the shift to auto-play video, which has a lower cost-per-view compared to click-to-play.

Video ads continue to be the key driver backed by strength in Video Website Cards, Video App Cards, In-Stream Sponsorships, and In-Stream Video Ads. By channel, brand marketing continues to be the primary contributor to the company’s revenues.

Data licensing and other revenues increased 10% to $87 million, driven by data and enterprise solutions (DES). New tiered product and channel strategy helped it win new enterprise deals in fourth quarter.

Twitter earned nearly 44.5% of its revenues from international markets. International revenues increased 17% year over year to $326 million in the reported quarter while U.S. revenues decreased 8% year over year to $406 million.

The company believes that continued strength in Asia Pacific coupled with improvement in certain EMEA markets backed growth in international markets. Notably, Japan grew 34% year over year and generated 15% of total revenues.

In the quarter, total expenses declined 14% year over year to $511 million. Twitter’s adjusted EBITDA rose 43% to $308 million and adjusted EBITDA margin was 42%. For the first time, the company achieved its long-term EBITDA margin target range of 40-45%.

The company reported a pre-tax income of $93.5 million against a pre-tax loss of $162.2 million in the year-ago quarter.

Twitter, Inc. Price, Consensus and EPS Surprise

Twitter, Inc. Price, Consensus and EPS Surprise | Twitter, Inc. Quote

Balance Sheet & Cash Flow

As of Dec 31, 2017, cash and cash equivalents (short-term investments) were $4.4 billion compared with $4.3 billion at the end of Sep 30, 2017. For the quarter, cash flow from operations was $198.1 million and adjusted free cash flow was $135.3 million.

Outlook

For the current quarter, adjusted EBITDA is expected to be in the range of $185–$205 million while EBITDA margin is likely to be in a band of 33–34%.

For fiscal 2018, Twitter expects capital expenditures to be in the range of $375-$450 million.

Zacks Rank and Stocks to Consider

Twitter carries a Zacks Rank #2 (Buy).

Better-ranked stocks in the broader technology sector are Micron Technology Inc. MU, Lam Research Corporation LRCX and The Trade Desk Inc. TTD, all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Micron, Lam Research and The Trade Desk is projected to be 10%, 14.9% and 25%, respectively.

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