Twitter Q1 flies past estimates with sales of $787M and EPS of $0.25, but MAUs drop to 330M

Social networking and media platform Twitter today reported its results for the first quarter of the year, and it’s a tough one. The company said that revenues came in at $787 million, up 18 percent on a year ago; with net income of $191 million and earnings per share of $0.25. However, monthly active users continue to colourant a challenging graphic (no surprise that MAUs are a dying metric for the company). Twitter says MAUs were 330 million in Q1, a drop of 6 million users compared to a year ago, although up 9 million on last quarter.

Monetizable daily active users — Twitter’s brand-new and preferred metric for user numbers — were 134 million in the quarter, up 11 percent on a year ago. (Note: the earlier 28 million figure we used here was US-only.)

Still, on the financial side, this is a tough set of results for the company. Going into today, average analyst expectations were for Twitter to post about $775 million in sales ($742-$815 million range) on an eps of $0.15 per share ($0.10-$0.20 range). Twitter itself last quarter said it expected Q1 revenues to be between just $715 million and $775 million, with operating income between $5 million and $35 million.

Shares are up 7.15 percent so far in pre-mart trading.

With those numbers relatively stabilised, Twitter is putting more focus on trying to enhance its actual product in the two areas where it has been considered weak: the ability for people to use Twitter when it gets noisy and active; and the general “health” of content management, around harassment and fake news.

For the former, it’s been tinkering with a prototype app named
twttr, and for the latter, it’s been adding more rules that it is proactively enforcing, which it says has led to “helping [Twitter] remove 2.5 times more of this content since launch.”

The “initial focus” of the twttr app up to now has been to focus on conversations and how to make them easier to follow. This implies that the app could stay around for some moment to come and become the testing ground for much more, including Twitter’s increasing forays into video and other content and how it manages evil actors on the platform: in other words, aspects of the service potentially represent opportunities for growth and monetization — or otherwise urgently need attention because if they don’t get resolved they will ultimately hinder both.

This is the last quarter that Twitter is reporting monthly active users, as it makes a switch instead to reporting “mDAUs”, or monetizeable daily active users, which it claims is a more exact representation of how the business is growing. MAUs have not been an impressive metric for the company over the years, with one of Twitter’s strongest criticisms being that its user growth is stagnating. Given that the platform has a tough surge of usage around precise events, the average usage on days will work out stronger than that of usage on a monthly period.

As is the case with Facebook, a majority of Twitter’s users (but not revenues, see below) are coming from outside its home country of the US, where mDAUs were 28 million, compared to mDAUs of 105 million internationally.

Last quarter, while reporting a relatively tough set of Q4 earnings, we noted that Twitter’s stock dropped on that weak advice, which represented a big drop from Q4 at a moment (Q1) when many expect Twitter to report its strongest numbers.

As a point of comparison, a year ago in Q1 2018, Twitter posted revenues of $665 million, on an eps of $0.16 per share, both blowing past Wall road estimates with sales up 21 percent year-on-year.

Drilling down into where money is coming from for the company, the US is still Twitter’s biggest mart in terms of revenues, if not users.

The US accounted for $432 million, or 55 percent, of Twitter’s revenues, with global revenues at $355 million. To note, Twitter noted that the US is current the motor of its revenue growth, where figures were up 25 percent on last year (while global was only up 11 percent). Japan, it noted, continued to represent Twitter’s second-largest mart, contributing $136 million to Q1 revenues.

It will be fascinating to see how and if Twitter addresses that: since global represents such an enormous part of its user base, monetizing it more effectively could really give the company a boost. (Indeed, this is something that was brought up a couple of times on the call as well, when CFO Ned Segal pointed out that not all formats have worked as well in some markets as in others and that they are continuing to tinker with this.)

In terms of what is actually making money for the company, advertising continues to be Twitter’s biggest money cow. Of its $787 million in Q1 revenues, $679 million, or just over 86 percent, comes from advertising. That’s been a consistent proportion: ad revenues were up 18 percent, just like overall revenues. As with other social platforms, video is giving advertising a boost at Twitter. It specifically singled out Video Website Cards and in-stream pre-roll ads.

Data licensing and unspecified “other revenue” was $107 million, up 20 percent, and it sounds like Twitter isn’t expecting big growth in this venue. “DES continues to see brand-new customer opportunities and use cases as well as smaller customers adopting our self-service APIs… however, we are now largely through our multiyear enterprise renewal cycle in DES. As a result, many of our largest partners are now at mart pricing and data licensing revenue growth is likely to moderate for the full year,” it noted.

More to come from the call.


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