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Twitter's (TWTR) Q2 Earnings Beat Estimates, Ad Revenues Rise

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Twitter (TWTR - Free Report) reported second-quarter 2021 adjusted earnings of 20 cents per share that beat the Zacks Consensus Estimate by 185.7%. The company had reported a loss of $1.58 per share in the year-ago quarter.

Revenues surged 74% year over year to $1.19 billion and beat the Zacks Consensus Estimate by 12.1%. The top-line growth was driven by strength in brand advertising as well as accelerating year-over-year growth in Mobile App Promotion (MAP) revenues.

Advertising revenues surged 87% year over year to $1.05 billion.

U.S. advertising revenues totaled $562.3 million, up 98% year over year. International ad revenues increased 76% to $491.1 million. The company’s advertising revenues witnessed strong contributions from SMB customers, with revenues accelerating in double digits reflecting increased investments across sales and products with higher spending per advertiser.

Twitter benefited from strong advertiser demand as it continued to look for launching new products and services across a number of key verticals, including technology, auto, media & entertainment, and fashion.
 

Twitter, Inc. Price, Consensus and EPS Surprise

Twitter, Inc. Price, Consensus and EPS Surprise

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

 

Total ad engagements increased 32%, driven by strong growth in ad impressions due to growing audience and increased demand for ads.

Cost per engagement (CPE) increased 42%, primarily driven by the mix shift to lower funnel ad formats and like-for-like price increases across most ad formats.

User Details

Average monetizable daily active users (mDAU) grew 11% year over year to 206 million, driven by global conversation around current events and ongoing product improvements. Average mDAU grew 7 million sequentially.

Average U.S. mDAU was 37 million, up 3% from the year-ago quarter but decreased 1 million sequentially. Average international mDAU was 169 million, rising 12% year over year and 5 million sequentially.

In the second quarter, Twitter launched more than 2,500 new Topics. The company launched features like Tip Jar, Ticketed Spaces and Super Follows. Tip Jar enables people to directly support creators through tipping. Ticketed Spaces allow people to pay for access to exclusive live audio experiences and other exclusive content is available via monthly subscription through Super Follows. These features helped Twitter gain subscribers in the reported quarter.

The company introduced Twitter Blue in Canada and Australia, its first-ever consumer subscription offering.

Revenue Details

U.S. revenues (55% of revenues) surged 79% year over year to $653.1 million. International revenues (45% of revenues) soared 69% to $537.4 million.

Japan remained the company’s second-largest market in the reported quarter. Revenues from the country (13% of total revenues) increased 40% to $151 million.

Data licensing and other revenues increased 13% from the year-ago quarter to $137 million, driven by MoPub.

Operating Details

Twitter’s total costs and expenses were $970.2 million, up 18.8% on a year-over-year basis, driven by higher sales-related expenses, headcount growth and infrastructure costs.

Research and development expenses jumped 39.3% year over year to $192 million, primarily due to higher personnel-related costs. Sales and marketing expenses increased 49% to $265.4 million, primarily due to higher sales-related expenses. General and administrative expenses rose 49.4% to $116 million, primarily due to higher personnel-related costs offset by a decrease in supporting overhead expenses.

Adjusted EBITDA was $343.3 million against the year-ago quarter’s loss of $17.2 million.

Twitter reported GAAP operating income of $30.3 million against the year-ago quarter’s loss of $274 million.

Balance Sheet

As of Jun 30, 2021, Twitter had $8.61 billion in cash, cash equivalents and marketable securities compared with $8.81 billion as of Mar 31, 2021.

Net cash provided by operating activities in the reported quarter was $382 million, down from $390 million in the previous quarter.

In the second quarter, adjusted free cash flow was $105.8 million compared with $211 million in the previous quarter.

Outlook

For the third quarter of 2021, Twitter expects total revenues between $1.22 billion and $1.3 billion. GAAP operating income is expected between a loss of $50 million and break-even.

The company expects mDAU growth rates in the low-double digits on a year-over-year basis in the third and fourth quarters.

For 2021, Twitter expects headcount, along with total costs and expenses, to grow 30% or more with a focus on engineering and products. The company continues to expect total revenues to grow faster than expenses in 2021.

However, Apple’s (AAPL - Free Report) iOS 14.5 changes are expected to have a modest impact on Twitter’s performance.

For 2021, Twitter still expects capital expenditures between $900 million and $950 million.

Zacks Rank & Stock to Consider

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

Some better-ranked stocks in the broader technology sector are Advanced Micro Devices (AMD - Free Report) and Monolithic Power Systems (MPWR - Free Report) . Both carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

AMD and Monolithic Power Systems are set to report their quarterly earnings on Jul 27.