Even Trump’s Spectacular Tweets Don’t Help
Twitter, which has been laying off people and subletting large sections of its office space in San Francisco to other companies, reported today that neither the election campaign – despite the closely followed tweet storms of presidential contenders Donald Trump, Bernie Sanders, and to a lesser extent Hilary Clinton and other candidates – nor the even more closely followed tweets of President Elect Trump produced visible results on its fourth-quarter revenues and earnings. earth
Twitter now has reported net losses – as accounted for under the required Generally Accepted Accounting Principles (GAAP) – every year of its existence. Pretty soon it adds up: Over the past four years, those losses amounted to $2.2 billion.
One of its own key metrics, monthly average users (MAU), inched up 4% globally to 319 million. But in the US, where election and post-election brouhaha should have boosted the metric, it remained stubbornly flat sequentially, at 67 million and was up only 3% year-over-year.
Which was bitterly disappointing for some analysts who’d expected this election brouhaha, and particularly Trump’s spectacular tweets that reverberate around the world, to perform some miracles, if not for democracy, then at least for Twitter Inc.
In the same vein, and despite the election brouhaha on Twitter, US revenues in Q4, at $440 million, fell 5% year-over-year.
There was some revenue growth, but outside the US: international revenues rose 12% to $277 million. So total revenue in Q4 inched up less than 1% to $717 million. Alas, advertising revenues, Twitter’s primary source of revenues, fell 0.4% to $638 million.
On an annual basis, year-over-year revenue growth has plunged. And given Q4 revenue “growth” of less than 1%, growth may well disappear entirely or even turn negative in the near future (more on that in a moment when Twitter says that it won’t give a revenue outlook).
Total annual revenue growth:
- 2012: 198%
- 2013: 109.8% (Twitter’s IPO took place in November that year)
- 2014: 111.0%
- 2015: 58.1%
- 2016: 14.0%
Twitter is fond of using its own accounting methods because GAAP is just too brutal. So portraying its financial results under its own accounting methods, Twitter shows a “non-GAAP income” in Q4 of $119 million or $0.16 a share, and a full-year “non-GAAP income” of $405 million.
It uses a lot of stock-based compensation to pay its employees, which dilutes shareholders and comes at shareholder expense, who by golly have been beaten up enough. But then Twitter accounting says that paying employees this way isn’t actually an expense and so it ignores it along with some other inconvenient expenses.
Based on its own home-made accounting method, Twitter produced annual “non-GAAP” profits of $750 million over the four years.
- 2013: -$34 million
- 2014: +$101 million
- 2015: +277 million
- 2016: +406 million
But based on GAAP, it has lost money – lots of money – every year. In Q4 it had a net loss of $167 million, or $0.23 a share. Here are the annual net losses over the past four years, for a combined total of $2.2 billion.
GAAP earnings, um, losses:
- 2013: -$645 million
- 2014: -$578 million
- 2015: -$521 million
- 2016: -$457 million ($0.65 a share)
In this way, Twitter’s non-GAAP accounting methods have inflated its four-year profits by nearly $3 billion. Kudos!
What does Twitter have to say about its glorious performance? Here’s co-founder and part-time CEO Jack Dorsey (among his other gigs are CEO and Chairman of Square): “2016 was a transformative year as we reset and focused on why people use Twitter.”
Which is precisely the biggest problem: not enough people can figure out why on earth they should use Twitter.
Perhaps because it sees big trouble in its advertising revenues, Twitter refused to give revenue guidance for 2017. It’s better not to predict a revenue downturn outright. But it gave some hints:
Advertising revenue growth may be further impacted by escalating competition for digital ad spending and Twitter’s re-evaluation of its revenue product feature portfolio, which could result in the de-emphasis of certain product features.
Twitter shares (TWTR) plunged 10.7% to $16.72 at the moment. They’ve been in this range for over a year, after having spiked to $73 within less than two months of its IPO in November 2013. Plunges have become a regular occurrence with Twitter shares, and today’s is far from the largest. But after each plunge, folks think that things will get better soon, that Trump or some other miracle will come along and single-handedly pull Twitter out of its funk, and they bid up the shares, only to see them get hammered down again. I expect this time-honored principle to continue.
But there opportunities even in dire times. Here’s what the experts of the “restructuring industry” see. Read… The Growth Industry in 2017? Debt Restructuring & Bankruptcy!