7 ms·

Twitter Reports Second Quarter 2014 Results

70 points by antr 12y ago

austenallred 12y ago
That revenue number is an increase of 124% over the $139 million revenues from Twitter’s second quarter last year. So yes, Twitter still posted a $145 million loss, but if we extrapolate (never good business practice, but an interesting thought experiment) and they do the same next year, they will be profitable by 2015. It's unlikely that will happen, but there's light at the end of the tunnel.
- anu_gupta 12y ago
  If we extrapolate, we would need to take into account the fact that Twitter's losses tripled as their revenue doubled. That light might well be a train.
  - pitnips 12y ago
    There are a lot of one-time expenses involved with going public, so you'd have to strip those out of any extrapolation. But I'm not going anywhere near TWTR.
- silverbax88 12y ago
  Twitter is an example of a business that has not, at least not as of yet, even come close to showing a justification for their valuation...or really, even being a publicly traded company. I'm not saying it won't be, but there are companies that have gone public in the past two years with Billions (with a 'B') in revenue and solid profit margins where the stock is half of Twitter's share price, and those are much larger companies, similar share dilution, etc. I know it's play money on a digital board, but some fundamentals cannot be ignored.
  - reuven 12y ago
    Is Twitter really an example of a business? To be a business, you need to have higher income than expenses. So far, that has eluded Twitter -- and there's no indication that they are going to start spending less than they're making in the near future. Also, I can see them making money from advertising. And after that... what? I'm willing to believe and admit that Twitter is a game changer in many ways. But I'm far more skeptical of their ability to make money and survive. Clearly, Twitter's investors are bullish on Twitter's ability to make money. But if their optimism doesn't pan out soon, everyone with Twitter stock is going to be quite upset.
- rmrfrmrf 12y ago
  1999 would like a word with you.
thegenius 12y ago
if you read the 8k, they doubled revenues but more than tripled losses. all this nongaap bullshit. read the footnotes. they removed stock based compensation and depreciation. how in the hell are those non operational charges? stock soars. hrm... lets make it look like were profitable so our lottery tickets are worth more. no thanks
- free2rhyme214 12y ago
  I agree. Small companies can't get away with this. But if you raise over a billion apparently you can for awhile.
- vikramhaer 12y ago
  Both are non-cash expenses, so makes sense to consider financials without them when looking at GAAP vs. Non-GAAP. They're certainly operational charges, but somewhat distort P&L.
  - thegenius 12y ago
    I'm not even sure what you mean. They come out of shareholder equity, and all public companies use accrual and not cash-basis accounting. It makes zero sense to strip out those operational charges unless you want to appear profitable for some short-term benefit. I realize companies do this kind of crap. It absolutely does not make it right, and the folly of the stock market is just that: believing just because somebody said or did something that it is also correct, or that something is OK because it looks official on a SEC document.
    - vikramhaer 12y ago
      Not saying I disagree. I don't think people should be looking at GAAP vs. Non-GAAP if they don't understand that one vs. the other doesn't make the company more or less profitable. My point is it helps better understand the company from an operational perspective when very high SBC or D&A can significantly distort actual expenses.
      - 12y ago
pptr1 12y ago
From an investor standpoint I don't get why the stock is up 30%. I could understand if the stock was going to up 1-8%, but 30+%? Is it all the shorts covering? Is it the fact they brought in a wall street insider as CFO (Anthony Noto). Wall Street was expecting a loss of 1 cent per share, but they surprised on earnings of 2 cents a share. Not a huge surprise. Other things that irk me about the stock. Management, I don't feel a warm and fuzzy having a non founder has a CEO. Nothing that Dick Costello has done to show me he has any long term vision. They fired almost everyone is senior management. Which shows signs of instability. *I haven't seen any product innovations come out of twitter from a end user standpoint organically.
- jcdavis 12y ago
  Aftermarket activity is not a great indicator or what will happen the next day. I doubt it'll be up that much tomorrow
  - alexmr 12y ago
    It may be a little less, but the volume is high enough (35M+) to be fairly indicative of tomorrow's opening price.
  - arasmussen 12y ago
    Actually in the case of earnings reports released after hours, aftermarket activity is an outstanding indicator of what will happen tomorrow.
    - jonknee 12y ago
      Usually, but not always with fast moving momentum stocks like TWTR. The initial movement is triggered by algorithms that try and figure out if the earnings report was good or not. I remember an absolutely wild Facebook swing after an earnings statement that went from huge up to down the next day (once it was mentioned on the conference call that teen usage was down). There are going to be a ton of sellers tomorrow (if I had any shares I sure would), it will be interesting to watch. You know that some of the bears who got squeezed this afternoon are going to double down and be back on the hunt tomorrow.
amorphid 12y ago
I've never been particularly bullish on Twitter's ability to make money, mostly because their business model isn't obvious to me. That being said, the fact that they are going to exceed $1 billion in revenue is really impressive to me. I've heard various bearish news over the years: Rails doesn't scale, they will never make money, user growth is slowing, etc. For a company with so many people betting against them, they seem to be pretty good at overcoming challenge's! It won't surprise me to see them making the big bucks in a year or two. Good luck Twitter!
- hayksaakian 12y ago
  Their business model is advertising seems pretty obvious. Am I naïve?
  - adventured 12y ago
    No, you're correct. Their business model has to be and is going to be advertising, just as obviously as Facebook and Google's business models are. Facebook is printing immense profits now. It wasn't that long ago a lot of people were proclaiming that could never happen. That's not to say Twitter will do the same, but it's entirely plausibly they can reach a modestly profitable ad-based business model off a couple billion dollar sales basis (which it seems they will be able to reach).
    - jonknee 12y ago
      > Facebook is printing immense profits now. It wasn't that long ago a lot of people were proclaiming that could never happen. That's not to say Twitter will do the same, but it's entirely plausibly they can reach a modestly profitable ad-based business model off a couple billion dollar sales basis (which it seems they will be able to reach). I'm not sure I would say immense, but they are certainly making profit. Facebook makes a little more than half the profit of HP (which many HN users may have forgotten still exists). What is immense is its valuation of 80 times earnings even while the product is literally running out of humans left to be new users (let alone humans who have money).
discardorama 12y ago
"revenue doubled, but losses tripled".. There's a reason they brought in that Goldman Sachs guy. And it looks like he has delivered, extracting "profit" out of the numbers. I'd love to short the stock if I had the spare cash. But as they say, the market can stay irrational longer than you can stay solvent. :-( Also: how much of this jump is due to the World Cup?
- pptr1 12y ago
  Expected 1 cent per share loss vs 2 cents per share earnings. Not a huge surprise. I think this jump had everything to do with Noto.
- jonknee 12y ago
  You can always go for some far dated put options... Anything after the next earnings report will work if it's a fluke quarter from the World Cup.
- siculars 12y ago
  The funny thing about World Cup is that it happens every four years. Two for Olympics. World series, Stanley Cup and Super Bowl are every year. The bottom line is that people like twitter once they interact with it for any reason (like any of the above.) Once they are in they find a reason to stay. As more people around the world get mobile devices that can interact with Twitter, more people will start using Twitter (and Google and FB, etc.)
calpaterson 12y ago
Can someone who knows more than me explain why tech companies are including non-GAAP figures (that are more flattering)?
- kmfrk 12y ago
  For the very reason you suggest: http://www.bloombergview.com/articles/2013-10-04/an-accounting-lesson-for-twitter- http://www.bloombergview.com/articles/2013-10-04/an-accounti....
fizx 12y ago
You guys are all focusing on the financial numbers. The real news is that TWTR added 16M MAUs, when the bulls forecast 11M, and the bears forecast 6M.
- harlanlewis 12y ago
  Twitter MAU quarterly reporting growth hack: switch from spam account removal to spam account hellban.
taylorbuley 12y ago
Perhaps one of the ways Twitter was able to report MAU increases: subsidized data. Note the lack of geographic breakdown of whence these users came. http://adage.com/article/digital/twitter-facebook-rate-telecom-deals-abroad/293741/ http://adage.com/article/digital/twitter-facebook-rate-telec...
epa 12y ago
The most important figure to look at here is the cash flow statement. Consider that they are actually cash positive from operations, but are spending more than 1.5x the cash they get from operations on buying companies. Consider also that a lot of their staff are cashing out on their stock options which is the big reason for the GAAP to non-GAAP differences in net income.
- jonknee 12y ago
  > Consider also that a lot of their staff are cashing out on their stock options which is the big reason for the GAAP to non-GAAP differences in net income. They're giving away huge sums of investor equity to employees instead of having to pay them what they're worth, it's fair that this is recorded as an expense.
kbradero 12y ago
i keep wondering how they earn money to keep going (honest question)
olivermarks 12y ago
http://adage.com/article/digital/twitter-facebook-rate-telecom-deals-abroad/293741/ http://adage.com/article/digital/twitter-facebook-rate-telec... Twitter are doing the old Facebook scam of having telco's freebie data use in return for getting people hooked on posturing and heart on sleeve 'sharing'...
- walterbell 12y ago
  Unfortunately, a lot of tweets include links to non-Twitter sites, which would not be included in freebie data. Will be confusing and/or disappointing for users, putting them behind a glass wall of look-but-dont-read.
jcampbell1 12y ago
This report is worthless by itself. Who cares about Year-over-Year numbers for a high growth company. The results vs the previous quarter are most relevant. Sure, there is a holiday effect in Q4 for ad businesses, but the QoQ comparison is the only thing worth looking at.
markdown 12y ago
Millions of dollars, but try to send a DM with a link and you get "internal server error", just like you got a year ago.
rubyn00bie 12y ago
I'd just like to point out, their loss was pretty much solely the result of a $158 million dollar compensation expense. "Net loss – GAAP net loss was $145 million for the second quarter of 2014 compared to a net loss of $42 million in the same period last year. Twitter's GAAP net loss included $158 million of stock-based compensation expense." Thats probably why the "loss" is mostly irrelevant to the stock price increasing. Depending of course on what you think that business action means for the company. As well, growth is accelerating (increasing at the margins [i.e. The derivative of growth is increasing]). ... Make of it what you will, that's the magic (investing) part.
pierre 12y ago
What is the Goodwill line for (up from 363M in 2013 to 514M in 2014) under the current asset section? What does it mean?

70 points by antr 12y ago

That revenue number is an increase of 124% over the $139 million revenues from Twitter’s second quarter last year. So yes, Twitter still posted a $145 million loss, but if we extrapolate (never good business practice, but an interesting thought experiment) and they do the same next year, they will be profitable by 2015. It's unlikely that will happen, but there's light at the end of the tunnel.

anu_gupta 12y ago
If we extrapolate, we would need to take into account the fact that Twitter's losses tripled as their revenue doubled. That light might well be a train.
- pitnips 12y ago
  There are a lot of one-time expenses involved with going public, so you'd have to strip those out of any extrapolation. But I'm not going anywhere near TWTR.
silverbax88 12y ago
Twitter is an example of a business that has not, at least not as of yet, even come close to showing a justification for their valuation...or really, even being a publicly traded company. I'm not saying it won't be, but there are companies that have gone public in the past two years with Billions (with a 'B') in revenue and solid profit margins where the stock is half of Twitter's share price, and those are much larger companies, similar share dilution, etc. I know it's play money on a digital board, but some fundamentals cannot be ignored.
- reuven 12y ago
  Is Twitter really an example of a business? To be a business, you need to have higher income than expenses. So far, that has eluded Twitter -- and there's no indication that they are going to start spending less than they're making in the near future. Also, I can see them making money from advertising. And after that... what? I'm willing to believe and admit that Twitter is a game changer in many ways. But I'm far more skeptical of their ability to make money and survive. Clearly, Twitter's investors are bullish on Twitter's ability to make money. But if their optimism doesn't pan out soon, everyone with Twitter stock is going to be quite upset.
rmrfrmrf 12y ago
1999 would like a word with you.

thegenius 12y ago

if you read the 8k, they doubled revenues but more than tripled losses. all this nongaap bullshit. read the footnotes. they removed stock based compensation and depreciation. how in the hell are those non operational charges? stock soars. hrm... lets make it look like were profitable so our lottery tickets are worth more. no thanks

free2rhyme214 12y ago
I agree. Small companies can't get away with this. But if you raise over a billion apparently you can for awhile.
vikramhaer 12y ago
Both are non-cash expenses, so makes sense to consider financials without them when looking at GAAP vs. Non-GAAP. They're certainly operational charges, but somewhat distort P&L.
- thegenius 12y ago
  I'm not even sure what you mean. They come out of shareholder equity, and all public companies use accrual and not cash-basis accounting. It makes zero sense to strip out those operational charges unless you want to appear profitable for some short-term benefit. I realize companies do this kind of crap. It absolutely does not make it right, and the folly of the stock market is just that: believing just because somebody said or did something that it is also correct, or that something is OK because it looks official on a SEC document.
  - vikramhaer 12y ago
    Not saying I disagree. I don't think people should be looking at GAAP vs. Non-GAAP if they don't understand that one vs. the other doesn't make the company more or less profitable. My point is it helps better understand the company from an operational perspective when very high SBC or D&A can significantly distort actual expenses.
    - 12y ago

pptr1 12y ago

From an investor standpoint I don't get why the stock is up 30%. I could understand if the stock was going to up 1-8%, but 30+%? Is it all the shorts covering? Is it the fact they brought in a wall street insider as CFO (Anthony Noto). Wall Street was expecting a loss of 1 cent per share, but they surprised on earnings of 2 cents a share. Not a huge surprise. Other things that irk me about the stock. Management, I don't feel a warm and fuzzy having a non founder has a CEO. Nothing that Dick Costello has done to show me he has any long term vision. They fired almost everyone is senior management. Which shows signs of instability. *I haven't seen any product innovations come out of twitter from a end user standpoint organically.

jcdavis 12y ago
Aftermarket activity is not a great indicator or what will happen the next day. I doubt it'll be up that much tomorrow
- alexmr 12y ago
  It may be a little less, but the volume is high enough (35M+) to be fairly indicative of tomorrow's opening price.
- arasmussen 12y ago
  Actually in the case of earnings reports released after hours, aftermarket activity is an outstanding indicator of what will happen tomorrow.
  - jonknee 12y ago
    Usually, but not always with fast moving momentum stocks like TWTR. The initial movement is triggered by algorithms that try and figure out if the earnings report was good or not. I remember an absolutely wild Facebook swing after an earnings statement that went from huge up to down the next day (once it was mentioned on the conference call that teen usage was down). There are going to be a ton of sellers tomorrow (if I had any shares I sure would), it will be interesting to watch. You know that some of the bears who got squeezed this afternoon are going to double down and be back on the hunt tomorrow.

amorphid 12y ago

I've never been particularly bullish on Twitter's ability to make money, mostly because their business model isn't obvious to me. That being said, the fact that they are going to exceed $1 billion in revenue is really impressive to me. I've heard various bearish news over the years: Rails doesn't scale, they will never make money, user growth is slowing, etc. For a company with so many people betting against them, they seem to be pretty good at overcoming challenge's! It won't surprise me to see them making the big bucks in a year or two. Good luck Twitter!

hayksaakian 12y ago
Their business model is advertising seems pretty obvious. Am I naïve?
- adventured 12y ago
  No, you're correct. Their business model has to be and is going to be advertising, just as obviously as Facebook and Google's business models are. Facebook is printing immense profits now. It wasn't that long ago a lot of people were proclaiming that could never happen. That's not to say Twitter will do the same, but it's entirely plausibly they can reach a modestly profitable ad-based business model off a couple billion dollar sales basis (which it seems they will be able to reach).
  - jonknee 12y ago
    > Facebook is printing immense profits now. It wasn't that long ago a lot of people were proclaiming that could never happen. That's not to say Twitter will do the same, but it's entirely plausibly they can reach a modestly profitable ad-based business model off a couple billion dollar sales basis (which it seems they will be able to reach). I'm not sure I would say immense, but they are certainly making profit. Facebook makes a little more than half the profit of HP (which many HN users may have forgotten still exists). What is immense is its valuation of 80 times earnings even while the product is literally running out of humans left to be new users (let alone humans who have money).

discardorama 12y ago

"revenue doubled, but losses tripled".. There's a reason they brought in that Goldman Sachs guy. And it looks like he has delivered, extracting "profit" out of the numbers. I'd love to short the stock if I had the spare cash. But as they say, the market can stay irrational longer than you can stay solvent. :-( Also: how much of this jump is due to the World Cup?

pptr1 12y ago
Expected 1 cent per share loss vs 2 cents per share earnings. Not a huge surprise. I think this jump had everything to do with Noto.
jonknee 12y ago
You can always go for some far dated put options... Anything after the next earnings report will work if it's a fluke quarter from the World Cup.
siculars 12y ago
The funny thing about World Cup is that it happens every four years. Two for Olympics. World series, Stanley Cup and Super Bowl are every year. The bottom line is that people like twitter once they interact with it for any reason (like any of the above.) Once they are in they find a reason to stay. As more people around the world get mobile devices that can interact with Twitter, more people will start using Twitter (and Google and FB, etc.)

calpaterson 12y ago

Can someone who knows more than me explain why tech companies are including non-GAAP figures (that are more flattering)?

kmfrk 12y ago
For the very reason you suggest: http://www.bloombergview.com/articles/2013-10-04/an-accounting-lesson-for-twitter- http://www.bloombergview.com/articles/2013-10-04/an-accounti....

fizx 12y ago

You guys are all focusing on the financial numbers. The real news is that TWTR added 16M MAUs, when the bulls forecast 11M, and the bears forecast 6M.

harlanlewis 12y ago
Twitter MAU quarterly reporting growth hack: switch from spam account removal to spam account hellban.

taylorbuley 12y ago

Perhaps one of the ways Twitter was able to report MAU increases: subsidized data. Note the lack of geographic breakdown of whence these users came. http://adage.com/article/digital/twitter-facebook-rate-telecom-deals-abroad/293741/ http://adage.com/article/digital/twitter-facebook-rate-telec...

epa 12y ago

The most important figure to look at here is the cash flow statement. Consider that they are actually cash positive from operations, but are spending more than 1.5x the cash they get from operations on buying companies. Consider also that a lot of their staff are cashing out on their stock options which is the big reason for the GAAP to non-GAAP differences in net income.

jonknee 12y ago
> Consider also that a lot of their staff are cashing out on their stock options which is the big reason for the GAAP to non-GAAP differences in net income. They're giving away huge sums of investor equity to employees instead of having to pay them what they're worth, it's fair that this is recorded as an expense.

kbradero 12y ago

i keep wondering how they earn money to keep going (honest question)

olivermarks 12y ago

http://adage.com/article/digital/twitter-facebook-rate-telecom-deals-abroad/293741/ http://adage.com/article/digital/twitter-facebook-rate-telec... Twitter are doing the old Facebook scam of having telco's freebie data use in return for getting people hooked on posturing and heart on sleeve 'sharing'...

walterbell 12y ago
Unfortunately, a lot of tweets include links to non-Twitter sites, which would not be included in freebie data. Will be confusing and/or disappointing for users, putting them behind a glass wall of look-but-dont-read.

jcampbell1 12y ago

This report is worthless by itself. Who cares about Year-over-Year numbers for a high growth company. The results vs the previous quarter are most relevant. Sure, there is a holiday effect in Q4 for ad businesses, but the QoQ comparison is the only thing worth looking at.

markdown 12y ago

Millions of dollars, but try to send a DM with a link and you get "internal server error", just like you got a year ago.

rubyn00bie 12y ago

I'd just like to point out, their loss was pretty much solely the result of a $158 million dollar compensation expense. "Net loss – GAAP net loss was $145 million for the second quarter of 2014 compared to a net loss of $42 million in the same period last year. Twitter's GAAP net loss included $158 million of stock-based compensation expense." Thats probably why the "loss" is mostly irrelevant to the stock price increasing. Depending of course on what you think that business action means for the company. As well, growth is accelerating (increasing at the margins [i.e. The derivative of growth is increasing]). ... Make of it what you will, that's the magic (investing) part.

pierre 12y ago

What is the Goodwill line for (up from 363M in 2013 to 514M in 2014) under the current asset section? What does it mean?