Twitter issues light Q1 guidance, reports flat MAU growth; shares -10% (updated)

• Though Twitter (NYSE:TWTR) beat Q4 EPS estimates and posted in-line revenue, the company is guiding for Q1 revenue of $595M-$610M, below a $629.3M consensus.
• No full-year revenue guidance has been given. 2016 adjusted EBITDA margin is expected to be in a 25%-27% range vs. a reported 27% for 2015. Capex is expected to total $300M-$425M.
• Also: Q4 monthly active users (MAUs) totaled 320M, flat Q/Q, up 9% Y/Y, and below expectations. Excluding SMS Fast Follower users, MAUs fell by 2M Q/Q (while rising 6% Y/Y) to 305M.
• Twitter will stop including SMS Fast Follower users in its total MAU count in Q1. MAUs excluding SMS Fast Followers are said to have returned to Q3 levels this quarter; Twitter claims "positive impacts from our marketing initiatives" are boosting MAUs.
• Q4 top-line performance: Ad revenue rose 48% Y/Y to $710M, after having grown 60% in Q3. Data licensing/other revenue rose 48% to $70M, after growing 44% in Q3. U.S. revenue +47% to $463M; international revenue +51% to $247M. Mobile was 86% of ad revenue, the same as Q3. Forex had a 500 bps impact on ad revenue growth.
• Financials: Non-GAAP costs/expenses rose 52% Y/Y to $591M (surpassing revenue growth of 48%). On a GAAP basis, costs of revenue totaled $218M, R&D spend $210.1M, sales/marketing $277.2M, and G&A $72.4M. Twitter ended Q4 with $3.5B in cash and $1.5B in convertible debt.
• Metrics: Twitter asserts its total audience, which includes logged-out visitors, was above 800M in Q4. Direct messages (boosted by a character limit increase) rose 61% Y/Y, and (thanks to native autoplay video integration) video views rose 220x Y/Y. Active advertisers rose nearly 90% to 130K (still well below Facebook's 2M+). Mobile MAUs were 80% of total MAUs, even with Q3.
• Twitter's Q4 results, shareholder letter (.pdf)
• Update (4:45PM ET): The post has been updated to include additional details about Twitter's Q4. Shares are now down 4.1% after hours to $14.36.
• Update 2 (4:59PM ET): Mentioned in Twitter's shareholder letter: "We are going to fix the broken windows and confusing parts, like the .@name syntax and @reply rules, that we know inhibit usage and drive people away. We're going to improve the timeline to make sure you see the best Tweets, while preserving the timeliness we are known for ... We're going to improve onboarding flows to make sure you easily find both your contacts and your interests. We're going to make Tweeting faster while making Tweets more expressive with both text and visual media."
• Update 3 (5:34PM ET): Twitter is now down 1.1% after hours.

Comments

[Anyoption]

Surprise! Oh, wait.

[mannybon]

If TWTR were to cut cost 20% and do a buy back now it would give investors some hope. They beat 4 qtrs. in a row and yet Jack and his team still low ball going forward. I have never seen a comp miss the curve more than TWTR well maybe there are 2 comp YHOO also .

[CKMay]

TWTR really needs to open their platform up to developers better. Twitter could be a great alternative to Disqus if used as a comment tool on websites.

Even that change isn't worth their current market cap though. Still down from here.

[Francisco Franco]

It's not worth more struggle with many avoidable bugs; the tragic result of poor management.

[Marmotton]

Can anyone explain to me how TWTR is not down 50% after hours with the results they just posted and the weak guidance?! This makes no sense

[XRTrader]

Um, because the revenues were up 50% yoy, EPS ex-stock options was 0.16/share, and they revealed a decent strategy. On top of that the stock is already down 35% this year (i.e. in 5 weeks) - so, most of the bad news was baked in. I would not be surprised if it closed up tomorrow on "sell the rumor, buy the news" combined with short covering.

[User 42053446]

I think the reaction to the MAU is what's overshadowing the other good things in the earnings call. Saying that MAU effects the potential future of TWTR as it being useless is not fair.

That's like saying SA is useless because it only has 5 million users with an unknown amount of how many are active. Not True at all.....

[mannybon]

Because once again they low balled earnings. Rev up y/y and still low balling.

[KoacNation]

US maus went negative.
Negative,
They lost 1 million American accounts
American accounts are by FAR the most valuable to them
They lost $512 million in FY 2015

They guided for flat to down revs next quarter. (flat with this Q, down relative to estimates)

LNKD got crushed 45% for the same numbers, beating and guiding down.

It's an absolute miracle and gift to the longs that this didnt tank . . . yet.

What is there for a long to be excited about looking ahead to next quarter?
the LOSS of one million US accounts,
or
the flat guidance from this quarter and down guidance from estimates?

For months and months all we've heard is how Periscope is gonna juice up maus by the MILLIONS!

I'm sure some longs are happy I didnt get the tankage I wanted, but let's be intellectually honest, with this report, who is more likely to get their way going forward? The longs or the bears?

The overall market still has not capitulated, the wind is still at the bears' backs.

Still holding my 100 Jan 2017 $10 puts bought for .90. It's posted in real time for my "mythical" trades. (where did that guy go? The longs come and go in waves)

[CKMay]

Koac -

At what point are you going to stop trading puts on Twitter? From my perspective the puts are now sufficiently expensive that they don't appeal to me. I have to think there is a company out there that's boneheaded enough to buy TWTR at high single digits. That being the case, how much upside do you expect on your $10 strikes?

I told myself I'd exit when the puts implied a price around $12, so I've been out for a couple weeks. I'm actually hoping for over last hurrah that takes it back up to $20+ so I can make the trade again.

[KoacNation]

Mine are at $1.70ish or so right now, so there's some nice profit in there. I agree there's not too much room left to fall, the easy/low stress money has already been made, but as long as the overall market is dropping, I'm gonna hold on for a few more weeks. Not much longer. The spy futures are down .8% as I type this, so we will let it play out.

To be honest, if TWTR had fell to $12 or below this week, I was also going to sell or at least take a lot out via selling some puts against them, and maybe get back in if TWTR ran up in the Spring.

TWTR in the single digits may finally spark a buyout by someone who wants to shake things up and I'd hate to get my position wiped out by a buyout.

I've milked this thing as well as could be and it is almost time to leave it and focus on my TSLA put positions. I got into them about 9 months too soon, but they last month have been making it well worth the wait. Sitting on a lot more profits there than I am in this current TWTR position, so my attention in TWTR is starting to weaken

So short answer, I intend to hold them maybe a few more weeks. Wanna wait till the overall market shows signs of bottoming. But I'm gonna have a quick trigger finger.

I'm not so crazy as to think I can ride this down to $4!

[CKMay]

I'll miss you Koac. Good times on this position. I too have lost my enthusiasm for the TWTR articles because I've sucked this trade dry.

I have my sights set on LNKD now. Made a nice profit last week, sold after the drop, but now I'm back in. Also been riding Netflix down since $110.

I don't have the nerves for TSLA... that's an extreme cult stock, even for me.

See you on another trade!

[mannybon]

Need to bring down cost expenses 52% y/y more then the revenue of growth of 48%. Time to cut the work force at lest 20% and become lean and smart.

[Gayle Gregory Goodman]

Twitter Yahoo MySpace AOL on one side then on other Google Snapchat Instagram can't blame some companies being built out of tech bubble.

[Jfito]

Twitter will move up on M&A rumors.

[T C]

Well, at least there is no big jump or down

[TBDI]

close to their fair value of $10

[okzoolo]

U wish so you can buy... Do not think so. Too latr

[xxpocketsxx]

They should have called you to price their IPO !!

[Just_waiting_for_profit]

oh boy! this MAU issue. Financials don't matter anymore

[Brian Amiku]

when they went public they pitched this MAU number as a reason for justifying their high P/E multiple so investors will always hold it up as some metric of their performance even though it means absolutely nothing. So upcoming new IPOs be careful what rosy fancy metrics you put in prospectuses as it can end up as a noose around your proverbial neck

[Piptief]

Financials matter...problem is Twitter doesn't have any GAAP financials that are positive. Always mind the GAAP

[XRTrader]

Employee stock comp is very steep - accounting for nearly the entire difference between GAAP and non-GAAP. How much stock are they giving out? Crazy.

Financials otherwise with rev and EBITDA were actually reasonably strong. Team seems committed to addressing the ongoing issues. Listening to call now for more details.