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Twitter (TWTR) Q4 Earnings Rise Y/Y, Ad Revenues Recover

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Twitter (TWTR - Free Report) reported fourth-quarter 2020 adjusted earnings of 27 cents per share that increased 80% year over year. The Zacks Consensus Estimate for earnings was pegged at 30 cents per share for the reported quarter.

Revenues increased 28% year over year to $1.28 billion attributed to a global, broad-based recovery in advertising revenues and beat the Zacks Consensus Estimate by 8.7%.

User Details

Average monetizable daily active users (mDAU) grew 27% year over year to 192 million, driven by global conversation around current events and ongoing product improvements.

Average mDAU grew 5 million sequentially, reflecting increased retention across new and recently reactivated accounts due to the ongoing impact of product improvements, including continued increases in relevance across notifications, search, Explore, and the Home timeline.

Average U.S. mDAU was 37 million, up 21% from the year-ago quarter and increased 1 million sequentially. Average international mDAU was 155 million, rising 28% from the year-ago quarter and 3 million sequentially.

Twitter, Inc. Price, Consensus and EPS Surprise

Twitter, Inc. Price, Consensus and EPS Surprise

Twitter, Inc. price-consensus-eps-surprise-chart | Twitter, Inc. Quote

In the fourth quarter of 2020, Twitter launched its transient Fleets feature for iOS and Android users worldwide. Once posted, Fleets can be viewed for 24 hours before they disappear.

The company stated that tests in Brazil, Italy, India, and South Korea have shown that people with Fleets are more likely to Tweet and they create more content in the form of Fleets, Tweets, and Direct Messages than people without Fleets, resulting in measurable increases in both original content production and the number of new content producers.

Topics, launched in fourth-quarter 2019, also drove growth attributed to increased personalization, notifications for new customers about Topics they might want to follow, and an expanded variety of Topics — including an expanded catalogue of TV shows. Twitter stated that as of Dec 31, 2020, there were more than 6,000 Topics, up from over 5,100 Topics in the previous quarter.

Notably, ahead of the presidential elections in the United States, Twitter applied labels, warnings, and additional restrictions on Tweets that included potentially misleading information from Oct 27 to Nov 11, and attempted to get ahead of potentially misleading information by showing everyone on Twitter in the United States a series of prebunk prompts, reminding people that election results were likely to be delayed, and that voting by mail is safe and legitimate.

Additionally, the company announced a multiyear global video content deal with Comcast’s (CMCSA - Free Report) NBCUniversal that will provide people on Twitter with premium content across NBCU properties from key events such as the Golden Globes, Latin American Music Awards, the E! People’s Choice Awards, and the Macy’s Thanksgiving Day Parade, as well as must-see sports content from NBC Sports, Telemundo Deportes, Sky Sports, and GOLF Channel.

Moreover, building on the enormous success of the #VMAStanCam, ViacomCBS’ (VIAC - Free Report) MTV Entertainment Group created the first-ever #CMTFanCam exclusively on Twitter for the 2020 CMT Music Awards to go along with live streams, on-demand video highlights, and voice Tweets from artists on Twitter during the TV broadcast.

Twitter has been focusing on reducing abuse on its platform. The company has improved its ability to proactively identify and remove abusive content from the platform.

Revenue Details

U.S. revenues (57% of revenues) increased 24% year over year to $732.8 million. International revenues (43% of revenues) increased 34% to $556.1 million.

Japan remained the company’s second-largest market in the reported quarter. Revenues from Japan (14% of total revenues) increased 26% to $176 million.

Advertising revenues increased 31% to $1.15 billion mostly driven by strong brand advertiser demand in the United States for most of the quarter, which partially offset a dip in advertiser spend during a short period bracketing the presidential election on Nov 3. This was followed by a strong resumption in demand that continued through the holidays.

U.S. advertising revenues totaled $646 million, up 27% year over year. International ad revenues increased 35% to $509 million.

The company’s advertising revenues witnessed a broad-based global rebound, driven by a larger audience, an upswing in advertiser sentiment for digital ads in general and for Twitter’s solutions in particular, and the resumption of more events and product launches.

Total ad engagements increased 35%, driven by strong growth in ad impressions due to growing audience and increased demand for ads.

During the quarter, Twitter selected DoubleVerify (DV) and Integral Ad Science (IAS) to be the company’s preferred partners for providing independent reporting on the context in which ads appear on Twitter.

However, cost per engagement (CPE) decreased 3%, which was largely a function of supply opportunities outstripping demand.

Data licensing and other revenues increased 9% from the year-ago quarter to $134 million driven by continued growth in Developer and Enterprise Solutions (DES).

Operating Details

Twitter’s total costs and expenses were $1.04 million, up 21% on a year-over-year basis driven by higher sales-related expenses, headcount growth, and infrastructure costs.

Research and development expenses grew 25% to $248 million, primarily due to higher personnel-related costs. Sales and marketing expenses grew 1% to $244 million, primarily due to increased outside services and higher sales related expenses. General and administrative expenses grew 12% to $112 million, primarily due to higher personnel-related costs offset by lower travel expenses.

Adjusted EBITDA increased 11.9% year over year to $294 million.

The company reported operating income of $252 million, or 20% of total revenues, compared with operating income of $153 million or 15% in the year-ago quarter.

Balance Sheet

As of Dec 31, 2020, Twitter had $7.47 billion in cash, cash equivalents and marketable securities compared with $7.68 billion as of Sep 30, 2020.

In the fourth quarter, adjusted free cash flow was $38 million compared with $127 million in the year-ago quarter.

Net cash provided by operating activities in the quarter was $330 million, an increase from $277 million in the same period last year.

Outlook

For the first quarter of 2021, the company expects total revenues to be between $940 million and $1.04 billion. GAAP operating income is expected to be between a loss of $50 million and break even.

For the full year, the company expects capital expenditures to be between $900 million and $950 million.

Twitter expects mid-single digit growth in data licensing and other revenues in 2021 besides more than 20% growth in headcount and over 25% growth in total costs and expenses.

Zacks Rank & Stock to Consider

Currently, Twitter has a Zacks Rank #3 (Hold).

Cohu, Inc. (COHU - Free Report) is a better-ranked stock in the broader technology sector, carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Cohu is set to report quarterly results on Feb 11.

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