Despite all eyes on the slighlty better than expected MAUs (310m vs 308m exp.), Twitter is being clubbed like a baby seal after-hours as it has slashed Q2 revenue:
- *TWITTER SEES 2Q REV. $590M TO $610M, EST. $677.1M
Most crucially, Twitter explains, “Revenue came in at the low end of our guidance range because brand marketers did not increase spend as quickly as expected in the first quarter.” Which also does not exactly bode well for the overall ad spend market.
Some other key points from the CEO:
We see a clear opportunity to increase our share of brand budgets over time. We have a strong product roadmap designed to tap into incremental brand-oriented online video budgets, and will deliver additional features for advertisers later this year — including more detailed demographic targeting and verification, and reach and frequency planning and purchasing.
This is what Twitter would like the market to focus on: the sequential growth in users:
The market sadly is not seeing it, and instead is looking at the following: the company’s poor guidance which sees Revenue next quarter to be about 10% below consensus estimate of $677.
OUTLOOK For Q2, we expect:
- Revenue to be in the range of $590 to $610 million;
- Adjusted EBITDA to be in the range of $145 to $155 million;
- Stock-based compensation expense to be in the range of $165 to $175 million;
- GAAP share count to be in the range of 700 to 705 million shares;
- Non-GAAP share count to be in the range of 710 to 720 million shares.
For FY 2016, we expect:
- Capital expenditures to be $300 to $425 million;
- Adjusted EBITDA margin in the range of 25-27%.
Note that our outlook for Q2 and full year of 2016 reflects foreign exchange rates as of April 15, 2016.
Meanwhile, Twitter continues its favorite pastime of converting massive GAAP losses into non-GAAP profits by adding back $151 million in stock-based compensation
Some other key highlights:
Advertising Metrics
Total ad engagements grew 208% year-over-year, an acceleration in growth compared to Q4 2015,
driven once again by the adoption of auto-play video, increases in ad load versus the prior year period,
and improvements in click through rate in select ad formats. The average cost per ad engagement fell
56% year-over-year, again primarily due to the move to auto-play video. Cost per ad engagement for
direct response and app install ad formats was up nicely year-over-year, as we have made noticeable
improvements in targeting, measurement, and creative capabilities for those formats.
Costs & Adjusted EBITDA
Non-GAAP total expenses in Q1 grew 26% year-over-year to $490 million. The increase was driven by higher traffic acquisition costs from non-O&O advertising revenue, infrastructure costs, sales and marketing, and employee-related and overhead expenses. Traffic acquisition costs were 57% of non-advertising revenue in the quarter, vs. 64% in Q1 2015 and 61% in Q4 2015. Stock based compensation expense was $151 million in the quarter, $9 million below the low end of our forecasted range of $160 to $170 million. This also marks the fourth consecutive quarter of absolute decline in stock based compensation expense. Adjusted EBITDA was $180 million in Q1, $20 million ahead of the high end of our guidance range of $150 to $160 million. Adjusted EBITDA margin on GAAP revenue was 30%, approximately 600 basis points better than that of Q1 2015 and 300 basis points better on a
sequential basis. Total employees were approximately 3,800 at the end of the period, reflecting slower
than expected hiring.
Balance Sheet
We ended the quarter with $3.6 billion in cash, cash equivalents and marketable securities. Free cash
flow in the period was $99 million.
Audience
Total MAU was 310 million for the quarter, which compares favorably to the 305 million reported for Q4
2015. Growth was driven by both seasonality and marketing initiatives.
Investors are not happy:
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