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October 27, 2015 Twitter Reports Third Quarter 2015 Results SAN FRANCISCO, California Twitter, Inc. (NYSE: TWTR) today announced financial results for the quarter ended September 30, Q3 revenue of
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October 27, 2015 Twitter Reports Third Quarter 2015 Results SAN FRANCISCO, California Twitter, Inc. (NYSE: TWTR) today announced financial results for the quarter ended September 30, Q3 revenue of $569 million, up 58% year-over-year, and above the previously forecast range of $545 million to $560 million. Excluding the impact of year-over-year changes in foreign exchange rates, revenue would have increased 64% Q3 GAAP net loss of $132 million and non-gaap net income of $67 million Q3 GAAP EPS of ($0.20) and non-gaap diluted EPS of $0.10 Q3 adjusted EBITDA of $142 million, up 108% year-over-year, and above the previously forecast range of $110 million to $115 million, representing an adjusted EBITDA margin of 25% We continued to see strong financial performance this quarter, as well as meaningful progress across our three areas of focus: ensuring more disciplined execution, simplifying our services, and better communicating the value of our platform, said Jack Dorsey, CEO of Twitter. We ve simplified our roadmap and organization around a few big bets across Twitter, Periscope, and Vine that we believe represent our largest opportunities for growth. Third Quarter 2015 Financial Summary (In thousands, except per share data) Three Months Ended Nine Months Ended September 30, September 30, GAAP Results Revenue $ 569,237 $ 361,266 $ 1,507,559 $ 923,924 Net loss $ (131,690) $ (175,464) $ (430,795) $ (452,468) Diluted net loss per share $ (0.20) $ (0.29) $ (0.66) $ (0.76) Non-GAAP Results Adjusted EBITDA $ 142,148 $ 68,326 $ 366,389 $ 159,406 Non-GAAP net income $ 66,984 $ 6,972 $ 162,010 $ 21,751 Non-GAAP diluted net income per share $ 0.10 $ 0.01 $ 0.23 $ 0.03 For additional information regarding the non-gaap financial measures discussed in this release, please see Non-GAAP Financial Measures and Reconciliation of GAAP to Non-GAAP Financial Measures below. Third Quarter 2015 Operational and Product Highlights Monthly Active Users Total average Monthly Active Users (MAUs) were 320 million for the third quarter, up 11% year-over-year, and compared to 316 million in the previous quarter. Excluding SMS Fast Followers, MAUs 1 were 307 million for the third quarter, up 8% year-over-year, and compared to 304 million in the previous quarter. Mobile MAUs represented approximately 80% of total MAUs. Consumer Products Twitter launched Highlights on Android, Music on Vine, and landscape view and web profiles for Periscope. We introduced an updated version of the logged-out Twitter.com desktop home page. We also removed the 140-character limit on direct messages. Advertising Products Twitter launched video auto-play on all devices, expanded its self-service ads platform to over 200 countries and territories, and extended the offerings of the Twitter Audience Platform (formerly the Twitter Publisher Network) to include additional targeted objectives and new creative formats. For performance marketers, Twitter introduced new optimization and bidding enhancements. Twitter also introduced event targeting as well as ads editor, a new tool that enables advertisers to seamlessly create and edit numerous campaigns at once. Partnerships Twitter announced commerce partnerships with platforms that power e-commerce sites, including Bigcommerce, Demandware, and Shopify, and retailers and brands such as Best Buy, Adidas, and PacSun. These commerce partnerships are powered by Stripe Relay. Twitter partnered with Square to enable U.S. political donations through Tweets. Twitter also extended its existing agreement with Bloomberg to bring more Twitter data to financial professionals. Third Quarter 2015 Financial Highlights Revenue Revenue for the third quarter of 2015 totaled $569 million, an increase of 58% compared to $361 million in the same period in Excluding the impact of year-over-year changes in foreign exchange rates, revenue would have increased 64%. Advertising revenue totaled $513 million, an increase of 60% year-over-year. Excluding the impact of year-over-year changes in foreign exchange rates, advertising revenue would have increased 67%. Mobile advertising revenue was 86% of total advertising revenue. Data licensing and other revenue totaled $56 million, an increase of 37% year-over-year. U.S. revenue totaled $370 million, an increase of 54% year-over-year. International revenue totaled $199 million, an increase of 65% year-over-year. Net loss GAAP net loss was $132 million for the third quarter of 2015 compared to $175 million in the same period in GAAP net loss for the third quarter of 2015 included $166 million of stock-based compensation expense. Adjusted EBITDA Adjusted EBITDA was $142 million for the third quarter of 2015, an increase of 108% compared to $68 million in the same period in Non-GAAP net income Non-GAAP net income was $67 million for the third quarter of 2015 compared to $7 million in the same period in EPS Basic and diluted GAAP EPS was ($0.20) for the third quarter of 2015 compared to ($0.29) in the same period in Non-GAAP diluted EPS Non-GAAP diluted EPS was $0.10 for the third quarter of 2015 compared to $0.01 in the same period in Capital expenditures Purchases of property and equipment for the third quarter of 2015 were $106 million. Additionally, $14 million of equipment purchases were financed through capital leases during the third quarter of Cash, cash equivalents, and marketable securities As of September 30, 2015, cash, cash equivalents, and marketable securities were approximately $3.5 billion, compared to $3.6 billion as of June 30, Outlook Twitter's outlook for the fourth quarter of 2015 is as follows: Revenue is projected to be in the range of $695 million to $710 million. Adjusted EBITDA is projected to be in the range of $155 million to $175 million. GAAP expenses are projected to include the vast majority of the $5 million to $15 million of total restructuring charges expected from corporate restructuring activities. These charges are projected to be $10 million to $20 million in cash expenditures. GAAP expenses are lower than cash restructuring costs due to a credit related to non-cash stock-based compensation expense reversals for unvested stock awards. Capital expenditures are projected to be no more than $110 million. Stock-based compensation expense is projected to be in the range of $170 million to $180 million, excluding the impact of equity awards that may be granted in connection with potential future acquisitions. Note that Twitter's outlook for the fourth quarter of 2015 reflects foreign exchange rates as of October 15, Webcast and Conference Call Details Twitter will host a conference call today, Tuesday, October 27, 2015, at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time) to discuss financial results. The company will be following the conversation on Twitter about the earnings announcement. Tweet or use #TWTRearnings or $TWTR to have your questions considered during the Q&A portion of the conference call along with those submitted by conference call participants. Watch a live broadcast of the call on Periscope from account or tune in to a live webcast on the company s Investor Relations page at investor.twitterinc.com. The Investor Relations website will also have the company s financial results, supplemental slides, and an archived replay of the webcast. Twitter has used, and intends to continue to use, its Investor Relations website and the Twitter as means of disclosing material non-public information and for complying with its disclosure obligations under Regulation FD. About Twitter, Inc. Twitter (NYSE: TWTR) is a global platform for public self-expression and conversation in real time. By developing a fundamentally new way for people to consume, create, distribute, and discover content, Twitter enables any voice to echo around the world instantly and unfiltered. The service can be accessed at Twitter.com, on a variety of mobile devices, and via SMS. Available in more than 35 languages, Twitter has 320 million monthly active 3 users. For more information, visit about.twitter.com or Forward Looking Statements This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of Forward-looking statements generally relate to future events or Twitter's future financial or operating performance. In some cases, you can identify forwardlooking statements because they contain words such as may, will, should, expects, plans, anticipates, could, intends, target, projects, contemplates, believes, estimates, predicts, potential or continue or the negative of these words or other similar terms or expressions that concern Twitter's expectations, strategy, plans or intentions. Forward-looking statements in this press release include, but are not limited to, Twitter's strategies and business plans, Twitter's expectations regarding its revenue, adjusted EBITDA, capital expenditures and stock-based compensation expense for the fourth quarter Twitter's expectations and beliefs regarding these matters may not materialize, and actual results in future periods are subject to risks and uncertainties that could cause actual results to differ materially from those projected. These risks include the possibility that: Twitter's user base and engagement do not continue to grow; Twitter's new products and product features do not meet expectations; advertisers reduce or discontinue their spending on Twitter; data partners reduce or discontinue their purchases of data licenses from Twitter; and Twitter experiences expenses that exceed its expectations. The forward-looking statements contained in this press release are also subject to other risks and uncertainties, including those more fully described in Twitter's Annual Report on Form 10-K for the fiscal year ended December 31, 2014 and Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 filed with the Securities and Exchange Commission. Additional information will also be set forth in Twitter's Quarterly Report on Form 10-Q for the quarter ended September 30, The forward-looking statements in this press release are based on information available to Twitter as of the date hereof, and Twitter disclaims any obligation to update any forward-looking statements, except as required by law. Non-GAAP Financial Measures To supplement Twitter's financial information presented in accordance with generally accepted accounting principles in the United States, or GAAP, Twitter considers certain financial measures that are not prepared in accordance with GAAP, including revenue excluding foreign exchange effect, advertising revenue excluding foreign exchange effect, adjusted EBITDA, non-gaap net income, adjusted EBITDA margin and non-gaap diluted EPS. Twitter defines adjusted EBITDA as net loss adjusted to exclude stock-based compensation expense, depreciation and amortization expense, interest and other expenses, net and provision (benefit) for income taxes; and Twitter defines non-gaap net income as net loss adjusted to exclude stock-based compensation expense, amortization of acquired intangible assets, non-cash interest expense related to convertible notes, non-cash expense related to acquisitions and the income tax effects related to acquisitions. Adjusted EBITDA margin is calculated by dividing adjusted EBITDA by revenue. Twitter uses the non-gaap financial measures of adjusted EBITDA, non-gaap net income, adjusted EBITDA margin and non-gaap diluted EPS in evaluating its operating results and for financial and operational decisionmaking purposes. Twitter believes that adjusted EBITDA, non-gaap net income, adjusted EBITDA margin and non-gaap diluted EPS help identify underlying trends in its business that could otherwise be masked by the effect of the expenses that we exclude in adjusted EBITDA, non-gaap net income, adjusted EBITDA margin and non-gaap diluted EPS. Twitter also believes that adjusted EBITDA, non-gaap net income, adjusted EBITDA margin and non-gaap diluted EPS provide useful information about its operating results, enhance the overall understanding of Twitter's past performance and future prospects and allow for greater transparency with respect to key metrics used by Twitter's management in its financial and operational decision-making. Twitter 4 uses these measures to establish budgets and operational goals for managing its business and evaluating its performance. Twitter translated revenue and advertising revenue for the quarter and nine months ended September 30, 2015 using the prior year's monthly exchange rates for its settlement currencies other than the U.S. dollar, which Twitter believes is a useful metric that facilitates comparison to its historical performance. Twitter is presenting these non-gaap financial measures to assist investors in seeing Twitter's operating results through the eyes of management, and because it believes that these measures provide an additional tool for investors to use in comparing Twitter's core business operating results over multiple periods with other companies in its industry. These non-gaap financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. These non-gaap financial measures are not based on any standardized methodology prescribed by GAAP and are not necessarily comparable to similarly-titled measures presented by other companies. For future periods, Twitter is unable to provide a reconciliation of adjusted EBITDA to net loss as a result of the uncertainty regarding, and the potential variability of, depreciation and amortization expense, interest and other expenses, net and provision (benefit) for income taxes, that are expected to be incurred in the future. Contacts Investors: Dave Rivinus Press: Jim Prosser 5 TWITTER, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited) September 30, December 31, Assets Current assets: Cash and cash equivalents $ 876,432 $ 1,510,724 Short-term investments 2,612,762 2,111,154 Accounts receivable, net 536, ,454 Prepaid expenses and other current assets 237, ,521 Total current assets 4,263,559 4,255,853 Property and equipment, net 699, ,019 Intangible assets 147, ,011 Goodwill 1,123, ,570 Other assets 55,596 42,629 Total assets $ 6,289,064 $ 5,583,082 Liabilities and stockholders equity Current liabilities: Accounts payable $ 40,100 $ 53,241 Accrued and other current liabilities 294, ,233 Capital leases, short-term 93, ,320 Total current liabilities 427, ,794 Convertible notes 1,434,968 1,376,020 Capital leases, long-term 73, ,950 Deferred and other long-term tax liabilities, net 32,958 24,706 Other long-term liabilities 45,672 43,209 Total liabilities 2,014,901 1,956,679 Stockholders equity: Common stock 3 3 Additional paid-in capital 6,311,697 5,208,870 Accumulated other comprehensive loss (34,296) (10,024) Accumulated deficit (2,003,241) (1,572,446) Total stockholders equity 4,274,163 3,626,403 Total liabilities and stockholders equity $ 6,289,064 $ 5,583,082 6 TWITTER, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, Revenue $ 569,237 $ 361,266 $ 1,507,559 $ 923,924 Costs and expenses Cost of revenue 200, , , ,696 Research and development 207, , , ,828 Sales and marketing 208, , , ,511 General and administrative 57,545 51, , ,602 Total costs and expenses 674, ,697 1,890,416 1,364,637 Loss from operations (105,237) (161,431) (382,857) (440,713) Interest expense (25,239) (6,079) (73,995) (11,835) Other income (expense), net 1,948 (7,795) 10,378 (4,138) Loss before income taxes (128,528) (175,305) (446,474) (456,686) Provision (benefit) for income taxes 3, (15,679) (4,218) Net loss $ (131,690) $ (175,464) $ (430,795) $ (452,468) Net loss per share: Basic and diluted $ (0.20) $ (0.29) $ (0.66) $ (0.76) Weighted-average shares used to compute net loss per share: Basic and diluted 670, , , ,722 7 TWITTER, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, Cash flows from operating activities Net loss $ (131,690) $ (175,464) $ (430,795) $ (452,468) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 81,464 60, , ,737 Stock-based compensation expense 165, , , ,382 Amortization of discount on convertible notes 17,495 2,411 51,139 2,411 Provision for bad debt (2,985) 1, ,944 Deferred income tax 86 (2,000) (24,220) (9,737) Other adjustments 10,524 9,074 5,327 9,740 Changes in assets and liabilities, net of assets acquired and liabilities assumed from acquisitions: Accounts receivable (61,542) (40,620) (105,486) (77,833) Prepaid expenses and other assets (4,823) (123,481) (12,684) (140,710) Accounts payable 1,926 3,891 (9,511) 5,298 Accrued and other liabilities 25,292 9,022 60,452 98,714 Net cash provided by (used in) operating activities 101,668 (85,902) 283,828 38,478 Cash flows from investing activities Purchases of property and equipment (106,476) (38,762) (266,816) (132,839) Purchases of marketable securities (850,507) (578,401) (3,086,004) (1,617,415) Proceeds from maturities of marketable securities 883, ,656 2,225,255 1,522,582 Proceeds from sales of marketable securities 24, , ,168 Changes in restricted cash (2,840) (11,029) Business combinations, net of cash acquired (25,344) (30,981) (51,644) (163,477) Purchases of cost method investments and others (5,430) (1,300) (12,430) (1,700) Net cash used in investing activities (79,126) (136,071) (834,662) (235,710) Cash flows from financing activities Proceeds from issuance of convertible notes 1,800,000 1,800,000 Convertible notes initial issuance discount (27,475) (27,475) Purchases of convertible note hedges (387,450) (387,450) Proceeds from issuance of warrants 275, ,130 Taxes paid related to net share settlement of equity awards (2,398) (8,878) (16,168) Repayments of capital lease obligations (28,431) (32,190) (91,365) (75,076) Proceeds from exercise of stock options 1,488 9,120 8,450 25,027 Proceeds from issuances of common stock under employee stock purchase plan 21,600 21,224 Other financing activities 1,983 (1,500) 1,983 (2,662) Net cash provided by (used in) financing activities (27,358) 1,635,635 (68,210) 1,612,550 Net increase (decrease) in cash and cash equivalents (4,816) 1,413,662 (619,044) 1,415,318 Foreign exchange effect on cash and cash equivalents (2,059) (5,843) (15,248) (3,533) Cash and cash equivalents at beginning of period 883, ,976 1,510, ,010 Cash and cash equivalents at end of period $ 876,432 $ 2,252,795 $ 876,432 $ 2,252,795 Supplemental disclosures of non-cash investing and financing activities Common stock issued in connection with acquisitions $ $ 96,112 $ 516,538 $ 147,958 Equipment purchases under capital leases $ 13,692 $ 62,670 $ 24,236 $ 110,409 Changes in accrued equipment purchases $ (13,467) $ (29,252) $ (4,380) $ 14,345 8 TWITTER, INC. RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (In thousands, except per share data) (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, Non-GAAP net income and net income per share: Net loss $ (131,690) $ (175,464) $ (430,795) $ (452,468) Stock-based compensation expense 165, , , ,382 Amortization of acquired intangible assets 14,481 11,869 39,241 26,144 Non-cash interest expense related to convertible notes 17,495 2,411 51,139 2,411 Non-cash expense related to acquisitions Income tax effects related to acquisitions 777 (1,446) (22,370) (8,718) Non-GAAP net income $ 66,984 $ 6,972 $ 162,010 $ 21,751 GAAP diluted shares 670, , , ,722 Dilutive equity awards (1) 29,474 68,672 38,916 86,465 Non-GAAP diluted shares 700, , , ,187 Non-GAAP diluted net income per share $ 0.10 $ 0.01 $ 0.23 $ 0.03 Adjuste
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