For the first time as a public company, Twitter has delivered an earnings report that investors absolutely love.
It delivered earnings per share of $0.02 on $312 million in revenue, which is up 124% year over year. Both of those soundly smashed expectations. Its revenue guidance for the current quarter was well ahead of expectations as well.
But Twitter has always done pretty well against revenue expectations. Where it has struggled is with usage statistics. This quarter, Twitter finally beat analysts' expectations.
It had 271 million monthly active users (MAUs) versus expectations of 267 million monthly active users. That's a 24% year-over-year jump in usage, and a 6% increase on a quarterly basis.
The earnings report sent Twitter shares sharply higher, up as much as 35% in after-hours trading.(Click Image To Enlarge)
The combination of better-than-expected revenue, EPS, and monthly usage has sent the stock to the moon. In after-hours trading the stock was up over 35% at one point.
This is a great report from Twitter, and it's hard to find much to be negative about. However, if you want to pooh-pooh the numbers you could say this is all about the World Cup, which boosted usage.
Twitter CEO Dick Costolo
On the earnings call, though, CEO Dick Costolo repeatedly emphasized that Twitter's monthly active user number was a reflection of changes to the product, not the World Cup. He said the World Cup drove engagement, but not usage.
If you really have your heart set on being negative, you might want to point out that this is all about expectations. Facebook, which has 1.3 billion users, added 41 million users last quarter. Twitter, with just 271 million users, added 16 million users.
Also, as Peter Kafka at Re/code points out, last quarter, monthly active users were up 25% on a year-over-year basis and everyone was negatively freaking out. This quarter, monthly active users were up 24%, and everyone is positively freaking out.
Here are the key numbers versus expectations:
- Revenue: $312 million versus $283.07 million expected
- EPS: $0.02 versus -$0.01 expected
- Monthly Active Users: 271 million versus ~267 million expected (based on five analysts polled by Bloomberg)
- Q3 revenue guidance: $330-$340 million versus expectations of $324 million
Here's a copy of Twitter's Second Quarter 2014 Earnings Report press release of July 29:
Here's a chart from BI Intelligence on user numbers:
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Twitter's user timeline views spiked due to the World Cup:
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Twitter's revenues also grew impressively. When compared with the previous two quarters when revenues were relatively flat -- $243 million and $250 million during Q4 2013 and Q1 2014 respectively, revenues for Q2 2014 increased by +24.8%:
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Twitter's advertising revenues per 1,000 timeline views in Q2 2014 increased impressively after a slight decline in Q1 2014:
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COMMENTARY: Twitter’s Q2 2014 earnings results far exceeded Wall Street’s expectations, and the company’s shares rose about 29 percent in after-hours trading.
Dick Costolo, Twitter’s chief executive, said in a conference call with analysts.
“During the World Cup, we delivered the kind of events experience that I’ve wanted to see from us for some time.”
The service was tailored to each game and each country’s fans, giving a more personalized experience than new users have typically encountered in the past.
Revenue soared 124 percent during the quarter compared to Q2 2013, and the average number of people using the microblogging service in its June quarter was up 6 percent from its March quarter.
However, Twitter reported a continued decline in how much people were using the service, as measured by timeline views, a measure the company invented.
Americans on average refreshed their Twitter feeds 792 times a month during the quarter, a drop from the first quarter and last year’s second quarter. Globally, timeline views were down 7 percent from a year ago, but up 4 percent from the first quarter as the company made a huge push to recruit new international users during the World Cup.
Despite the flat usage of the service, Twitter has demonstrated a striking ability to extract more advertising revenue from each user. For the quarter that ended June 30, the company reported revenue of $312 million, up from $139 million a year ago. Analysts had expected the company to post revenue of $283 million.
Mark Mahaney, an Internet analyst with RBC Capital Markets, said that, like Facebook, Twitter was just beginning to climb a steep revenue curve as advertisers discovered its ability to reach mobile users. “This can be a highly profitable business,” he said. “They’ll be able to dramatically increase their monetization just like Facebook did.”
Twitter reported a net loss of $145 million, or 24 cents a share, compared with a loss of $42 million, or 32 cents a share, a year ago.
Excluding certain stock-based compensation and acquisition costs, the company had a profit of $15 million, or 2 cents a share, compared with a net loss of $16 million, or 12 cents a share, a year ago. On that adjusted basis, analysts had expected the company to report a loss of 1 cent a share.
The World Cup illustrated Twitter’s greatest strength and its biggest weakness: As with the cable news networks, its traffic is dependent on surges of public interest around real-time events. Twitter said its users sent more than 672 million tweets during the entire tournament — more than during any other event in its history. But the company’s chief financial officer, Anthony Noto, attributed the drop in usage by Americans during the quarter to the lack of galvanizing events like the Super Bowl that occurred in the first quarter.
Debra Aho Williamson, a principal analyst with the research firm eMarketer, said.
“What you’re seeing now is a World Cup bump. The proof will be what their numbers look like next quarter, and the quarter after.”
Ever since it first sold stock to the public last November, Twitter has been struggling to find ways to make its service more engaging, especially to newcomers.
The average number of users in a given month, a crucial figure used by Wall Street to measure social networks, has grown by single-digit percentages from quarter to quarter since its stock offering.
As of June 30, Twitter said, it had 271 million monthly average users, up from 255 million as of March 31.
Below is the complete transcript of Twitter's Q2 2014 earnings conference call courtesy of Seeking Alpha:
Courtesy of an article dated July 29, 2014 appearing in Business Insider, an article dated July 29, 2014 appearing in the New York Times, an article dated July 29, 2014 appearing in Seeking Alpha, an article dated July 30, 2014 appearing in Quartz, an article dated July 29, 2014 appearing in ZDNet, an article dated dated July 29, 2014 appearing in TechCrunch, and an article dated July 29, 2014 appearing in Mashable
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