Reports 20% Year-over-Year Growth in Monetizable Daily Active Usage (mDAU) and Total Revenue of $1.04 Billion
SAN FRANCISCO, California - Twitter, Inc. (NYSE: TWTR) today announced financial results for its first quarter 2021.
“People turn to Twitter to see and talk
about what’s happening, and we are helping them find their interests more quickly while making it easier to follow and participate in conversations,” said Jack Dorsey, Twitter’s CEO. “Average monetizable DAU (mDAU) reached 199 million, up 20% year over year and up 7 million sequentially, driven by ongoing product improvements and global conversation around current events.”
“Q1 was a solid start to 2021, with total revenue of $1.04 billion up 28% year-over-year, reflecting accelerating year-over-year growth in MAP revenue and brand advertising that improved throughout the quarter,” said Ned Segal, Twitter’s CFO. “Advertisers continue to benefit from updated ad formats, improved measurement, and new brand safety controls, contributing to 32% year-over-year growth in ad revenue in Q1.”
First Quarter 2021 Operational and Financial
Highlights
Except as otherwise stated, all financial results discussed below are presented in accordance with generally accepted accounting principles in the United States of America, or GAAP. As supplemental information, we have provided certain non-GAAP financial measures in this press release’s supplemental tables, and such supplemental tables include a reconciliation of these non-GAAP measures to our GAAP results. The sum of individual metrics may not always equal total amounts indicated due to rounding.
•Q1 revenue totaled $1.04 billion, an increase of 28% year-over-year.
◦Advertising revenue totaled $899 million, an increase of 32%, or 30% on a constant currency basis.
▪Total
ad engagements increased 11% year-over-year.
▪Cost per engagement (CPE) increased 19% year-over-year.
◦Data licensing and other revenue totaled $137 million, an increase of 9% year-over-year.
◦US revenue totaled $556 million, an increase of 19% year-over-year.
◦International revenue totaled $480 million, an increase of 41%, or 38% on a constant currency basis.
•Q1 costs and expenses totaled $984 million, an increase of 21% year-over-year. This resulted in operating income of $52 million and 5% operating margin, compared to an operating loss of $7 million or -1% in the same period of
the previous year.
•Stock-based compensation (SBC) expense grew 13% year over year to $111 million and was approximately 11% of total revenue.
•Q1 net income was $68 million, representing a net margin of 7% and diluted EPS of $0.08. This compares to a net loss of $8 million, a net margin of -1% and diluted EPS of -$0.01 in the same period of the previous year.
•Net cash provided by operating activities in the quarter was $390 million, compared to $247 million in the same period last year. Capital expenditures totaled $179 million, compared to $121 million in the same period last year, driven by infrastructure investments in data center build-outs to support audience
growth and product innovation.
•Average monetizable daily active users (mDAU) were 199 million for Q1, compared to 166 million in the same period of the previous year and compared to 192 million in the previous quarter.
◦Average US mDAU were 38 million for Q1, compared to 33 million in the same period of the previous year and compared to 37 million in the previous quarter.
◦Average international mDAU were 162 million for Q1, compared to 133 million in the same period of the previous year and compared to 155 million in the previous quarter.
1
Outlook
We
are attracting more great people to Twitter than ever before and investing in our highest priorities to deliver on our long-term goals across consumer product, revenue product, and platform. As a result, we now expect headcount growth to more closely mirror expense growth in 2021, with headcount -- and total costs and expenses -- growing 25% or more on a year-over-year basis in 2021, ramping in absolute dollars over the course of the year.
As a reminder, SBC expense is closely tied to headcount, the timing of grants, and vesting, and we typically see a significant sequential increase in Q2 driven by the timing of refresh grants in the early part of the year. As such, we expect to report a sequential increase in SBC expense of $60 million or more in Q2. Expected full-year SBC expense has also increased to approximately $600 million, from our previous range of $525 million to $575 million, reflecting increased
hiring and retention grants.
We continue to expect total revenue to grow faster than expenses in 2021, assuming the global pandemic continues to improve and that we see modest impact from the rollout of changes associated with iOS 14.5. How much faster will depend on various factors, including our execution on our direct response roadmap and macroeconomic factors.
For Q2’21:
•Total revenue is expected to be between $980 million and $1.08 billion.
•GAAP operating loss is expected to be between $170 million and $120 million.
For FY21:
•Stock-based compensation expense is expected to be approximately
$600 million.
•Capital expenditures are expected to be between $900 million and $950 million.
Note that our outlook for Q2 and the full year 2021 reflects foreign exchange rates as of April 2021.
For more information regarding the non-GAAP financial measures discussed in this press release, please see "Non-GAAP Financial Measures" and the reconciliations of these non-GAAP financial measures to the most directly comparable financial measures calculated in accordance with GAAP below.
Appendix
First Quarter 2021 Webcast and Conference Call Details
Twitter
will host a conference call today, Thursday, April 29, 2021, at 3pm Pacific Time (6pm Eastern Time) to discuss financial results for the first quarter of 2021. The company will be following the conversation about the earnings announcement on Twitter. To have your questions considered during the Q&A, Tweet your question to @TwitterIR using $TWTR. To listen to a live audio webcast, please visit the company’s Investor Relations page at investor.twitterinc.com. Twitter has used, and intends to continue to use, its Investor Relations website and the Twitter accounts of @jack, @nedsegal, @Twitter, and @TwitterIR
as means of disclosing material nonpublic information and for complying with its disclosure obligations under Regulation FD.
Second Quarter Earnings Release Details
Twitter expects to release financial results for the second quarter of 2021 on July 22, 2021, after market close. Twitter will host a conference call on the same day to discuss these financial results at 3pm Pacific Time (6pm Eastern Time).
About Twitter, Inc. (NYSE: TWTR)
Twitter (NYSE: TWTR) is what’s happening and what people are talking about right now. To learn more, visit about.twitter.com and follow @Twitter. Let’s talk.
A Note About Metrics
Twitter defines monetizable
daily active usage or users (mDAU) as people, organizations, or other accounts who logged in or were otherwise authenticated and accessed Twitter on any given day through twitter.com or Twitter applications that are able to show ads. Average mDAU for a period represents the number of mDAU on each day of such period divided by the number of days for such period. Changes in mDAU are a measure of changes in the size of our daily logged in or otherwise authenticated active total accounts. To calculate the year-over-year change in mDAU, we subtract the average mDAU for the three months ended in the previous year from the average mDAU for the same three months ended in the current year and divide the result by the average mDAU for the three months ended in the previous year. Additionally, our calculation of mDAU is not based on any standardized industry methodology and is not necessarily calculated in the same manner or comparable to similarly titled measures presented by
other companies.
Similarly, our measures of mDAU growth and engagement may differ from estimates published by third parties or from similarly titled metrics of our competitors due to differences in methodology.
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The numbers of mDAU presented in our earnings materials are based on internal company data. While these numbers are based on what we believe to be reasonable estimates for the applicable period of measurement, there are inherent challenges in measuring usage and engagement across our large number of total accounts around the world. Furthermore, our metrics may be impacted by our information quality efforts, which are our overall efforts to reduce malicious activity on the service, inclusive of
spam, malicious automation, and fake accounts. For example, there are a number of false or spam accounts in existence on our platform. We have performed an internal review of a sample of accounts and estimate that the average of false or spam accounts during the first quarter of 2021 represented fewer than 5% of our mDAU during the quarter. The false or spam accounts for a period represents the average of false or spam accounts in the samples during each monthly analysis period during the quarter. In making this determination, we applied significant judgment, so our estimation of false or spam accounts may not accurately represent the actual number of such accounts, and the actual number of false or spam accounts could be higher than we have estimated. We are continually seeking to improve our ability to estimate the total number of spam accounts and eliminate them from the calculation of our mDAU, and have made improvements in our spam detection capabilities that have
resulted in the suspension of a large number of spam, malicious automation, and fake accounts. We intend to continue to make such improvements. After we determine an account is spam, malicious automation, or fake, we stop counting it in our mDAU, or other related metrics. We also treat multiple accounts held by a single person or organization as multiple mDAU because we permit people and organizations to have more than one account. Additionally, some accounts used by organizations are used by many people within the organization. As such, the calculations of our mDAU may not accurately reflect the actual number of people or organizations using our platform.
In addition, geographic location data collected for purposes of reporting the geographic location of our mDAU is based on the IP address or phone number associated with the account when an account is initially registered on Twitter. The IP address or phone
number may not always accurately reflect a person’s actual location at the time they engaged with our platform. For example, someone accessing Twitter from the location of the proxy server that the person connects to rather than from the person’s actual location.
We regularly review and may adjust our processes for calculating our internal metrics to improve their accuracy.
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 1934. Forward-looking statements generally relate to future events or Twitter's future financial or operating performance. In some cases, you can identify forward-looking
statements because they contain words such as "may,""will,""should,""expects,""plans,""anticipates,""going to,""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, priorities, plans, or intentions. Forward-looking statements in this press release include, but are not limited to, statements regarding Twitter’s future financial and operating performance, including its outlook and guidance, the impact of the COVID-19 pandemic and the timing of recovery from the pandemic on Twitter’s operations and personnel, on commercial activity and advertiser demand across Twitter’s platform,
and on Twitter’s operating results, as well as on worldwide and regional economies; the impact of the rollout of iOS 14.5 on Twitter’s business and operating results; Twitter’s expectations and strategies regarding the growth of its revenue, including the drivers of such growth, audience, and engagement (including, in each case, any potential impact of COVID-19), advertiser base and spending, and allocation of resources; and Twitter’s expectations regarding future capital expenditures, headcount growth and other expenses, including its SBC expenses. Twitter's expectations and beliefs regarding these matters may not materialize, and actual results in future periods are subject to risks and uncertainties, including changes in our plans or assumptions, that could cause actual results to differ materially from those projected. These risks include the possibility that: the COVID-19 pandemic and related impacts will continue to adversely impact our business, financial condition,
and operating results and the achievement of our strategic objectives, as well as the markets in which we operate and worldwide and regional economies; Twitter's total accounts and engagement do not grow or decline; Twitter’s strategies, priorities, or plans take longer to execute than anticipated; Twitter's new products and product features do not meet expectations or fail to drive mDAU growth; advertisers continue to 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, 2020, 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 fiscal quarter ended March 31, 2021. 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.
3
Non-GAAP Financial Measures
To supplement Twitter's financial information presented in accordance with generally accepted accounting principles in the United States of America, or GAAP, Twitter considers
certain financial measures that are not prepared in accordance with GAAP, including revenues excluding foreign exchange effect, which we refer to as on a constant currency basis, non-GAAP income before income taxes, non-GAAP provision for (benefit from) income taxes, non-GAAP net income (loss), non-GAAP diluted net income (loss) per share, adjusted EBITDA, non-GAAP costs and expenses, and adjusted free cash flow. In order to present revenues on a constant currency basis for the fiscal quarter ended March 31, 2021, Twitter translated the applicable measure using the prior year's monthly exchange rates for its settlement currencies other than the US dollar. Twitter defines non-GAAP income before income taxes as income (loss) before income taxes 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, impairment (gain) on investments in privately held companies, restructuring charges, and one-time non-recurring gain, if any; Twitter defines non-GAAP provision for (benefit from) income taxes as the current and deferred income tax expense commensurate with the non-GAAP measure of profitability using the estimated annual effective tax rate, which is dependent on the jurisdictional mix of earnings; and Twitter defines non-GAAP net income (loss) as net income (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, impairment (gain) on investments in privately held companies, restructuring charges, and one-time non-recurring gain, if any, and adjustment to income tax expense based on the non-GAAP measure of profitability using the estimated annual effective tax rate, which is dependent on the jurisdictional mix
of earnings. Non-GAAP diluted net income (loss) per share is calculated by dividing non-GAAP net income (loss) by non-GAAP diluted share count. Non-GAAP diluted share count is GAAP basic share count plus potential common stock instruments such as stock options, RSUs, shares to be purchased under employee stock purchase plan, unvested restricted stock, the conversion feature of convertible senior notes, and warrants. Twitter defines adjusted EBITDA as net income (loss) adjusted to exclude stock-based compensation expense, depreciation and amortization expense, interest and other expense, net, provision for (benefit from) income taxes, restructuring charges, and one-time non-recurring gain, if any. Twitter defines non-GAAP costs and expenses as total costs and expenses adjusted to exclude stock-based compensation expense, amortization of acquired intangible assets, non-cash expense related to acquisitions, restructuring charges, and one-time non-recurring gain, if any.
Adjusted free cash flow is GAAP net cash provided by operating activities less capital expenditures (i.e., purchases of property and equipment including equipment purchases that were financed through finance leases, less proceeds received from the disposition of property and equipment).
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.
Twitter believes that revenues on a constant currency basis, non-GAAP income before income taxes, non-GAAP provision for (benefit from) income taxes, non-GAAP net income (loss), non-GAAP diluted net income (loss) per share,
adjusted EBITDA, and non-GAAP costs and expenses 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 uses these measures to establish budgets and operational goals for managing its business and evaluating its performance.
Twitter believes that revenues on a constant currency basis is a useful metric that facilitates comparison to its historical performance. Twitter believes that non-GAAP net income (loss), non-GAAP diluted net income (loss) per share, adjusted EBITDA, and non-GAAP costs and expenses help identify underlying trends in its business that could otherwise be masked by expenses and one-time gains or charges, or the effects of the income tax benefits related to
the establishment of deferred tax assets and the tax provisions from the establishment of a valuation allowance against deferred tax assets described above, which are non-operating benefits and expenses.
In addition, Twitter believes that adjusted free cash flow provides useful information to management and investors about the amount of cash from operations and that it is typically a more conservative measure of cash flows. However, adjusted free cash flow does not necessarily represent funds available for discretionary use and is not necessarily a measure of its ability to fund its cash needs.
4
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.
Non-cash interest expense related to convertible notes (1)
—
21,504
Impairment on investments in privately-held companies
—
8,003
Non-GAAP
income before income taxes
168,984
116,916
Non-GAAP provision for income taxes
27,773
29,508
Non-GAAP net income
$
141,211
$
87,408
GAAP
basic shares
795,633
780,688
Dilutive equity awards (2)
76,554
9,987
Non-GAAP diluted shares (3)
872,187
790,675
Non-GAAP
diluted net income per share
$
0.16
$
0.11
Adjusted EBITDA:
Net income (loss)
$
68,005
$
(8,396)
Stock-based
compensation expense
110,873
97,903
Depreciation and amortization expense
131,052
120,649
Interest and other expense (income), net
2,178
8,092
Benefit
from income taxes
(18,001)
(7,139)
Adjusted EBITDA
$
294,107
$
211,109
Stock-based
compensation expense by function:
Cost of revenue
$
8,732
$
5,756
Research and development
65,156
60,587
Sales
and marketing
21,171
18,839
General and administrative
15,814
12,721
Total stock-based compensation expense
$
110,873
$
97,903
Amortization
of acquired intangible assets by function:
Cost of revenue
$
6,499
$
5,041
Research and development
1,508
—
Sales
and marketing
100
—
Total amortization of acquired intangible assets
$
8,107
$
5,041
Non-GAAP
costs and expenses:
Total costs and expenses
$
983,836
$
815,080
Less: stock-based compensation expense
(110,873)
(97,903)
Less:
amortization of acquired intangible assets
(8,107)
(5,041)
Total non-GAAP costs and expenses
$
864,856
$
712,136
Adjusted
free cash flow:
Net cash provided by operating activities
$
390,184
$
246,767
Less: purchases of property and equipment
(181,181)
(122,667)
Plus:
proceeds from sales of property and equipment
1,835
1,623
Adjusted free cash flow
$
210,838
$
125,723
(1)
The Company adopted the new accounting standard update to simplify the accounting for convertible debt on January 1, 2021 using the modified retrospective method. The adoption eliminates the non-cash interest expense related to the conversion features of the convertible notes beginning in the first quarter of 2021.
(2) Gives effect to potential common stock instruments such as stock options, RSUs, shares to be issued under ESPP, unvested restricted stocks and warrants. There is no dilutive effect of the notes or the related hedge and warrant transactions in the three months ended March 31, 2020. Dilutive equity awards in the three months ended March
31, 2021 reflect the dilutive effect of the convertible notes upon adoption of the new accounting standard update to simplify the accounting for convertible debt as of January 1, 2021.
(3) GAAP dilutive shares are the same as non-GAAP dilutive shares for the three months ended March 31, 2021.
9
TWITTER, INC.
RECONCILIATION
OF GAAP REVENUE TO NON-GAAP CONSTANT CURRENCY REVENUE
Revenue, advertising revenue, data licensing and other revenue, international revenue and international advertising revenue excluding foreign exchange effect (1):
Revenue
$
1,036
$
808
Foreign
exchange effect on 2021 revenue using 2020 rates
