) surged 28.5% ($10.98) in after-hours trading, after the company
reported impressive second-quarter 2014 results driven by strong
user growth. Twitter's monthly active users (MAUs) grew 24% year
over year and 6.3% quarter over quarter to 271 million in the
Twitter reported loss of 24 cents per share, wider than 32 cents
posted in the year-ago quarter and slightly wider than 23 cents
incurred in the previous quarter. Loss per share was much narrower
than the Zacks Consensus Estimate.
Including stock-based compensation, amortization of acquired
intangible assets and income tax effects related to acquisitions,
Twitter reported earnings of 21 cents in the quarter.
Revenues soared 124.1% year over year and 24.6% quarter over
quarter to $312.2 million, which comfortably beat the Zacks
Consensus Estimate of $280.0 million. The strong year-over-year
growth was driven by 129% surge in advertising revenues (89% of
Robust growth in advertising revenues was driven by 250%
year-over-year and 4% quarter-over-quarter surge in ad engagements.
Timeline views increased 15% year over year and 11% sequentially to
Advertising revenue per thousand timeline views jumped 100% year
over year and 11% sequentially to reach $1.60 in the reported
Mobile advertising revenues were 81% of total advertising revenue
in the quarter, up from 67% in the year-ago quarter. Mobile MAUs
(78% of total MAUs) jumped 29% year over year to 211 million.
Strong advertiser demands were seen during FIFA World Cup in
Brazil. Twitter enjoyed a larger and more involved audience not
only around the world but in the U.S. as well. Twitter included
many features to cater to soccer fans: real-time scoring, push
notifications, event and match timelines and a voting ballot
To boost customer engagement, Twitter launched features such as new
web profiles and allowed users to send private messages within
Data licensing and other revenues soared 90% year over year to
$35.0 million. This was driven by robust performance by MoPub,
Twitter's integrated ad exchange and the Gnip data licensing
Twitter earned 33% of revenues from international markets. Revenues
rose a phenomenal 168% year over year and 45.7% quarter over
quarter to $102 million in the reported quarter.
Twitter launched a number of new products for advertisers that
include mobile app promotions and website cards. The company
expanded its advertising tools in international markets by
launching self service ad platform for small and medium sized
businesses in Spain, Israel and South Africa.
Adjusted earnings before interest, tax, depreciation &
amortization (EBITDA) were $54.1 million compared with $9.6 million
in the year-ago quarter. EBITDA jumped 46.5% sequentially.
Total cost & expenses (excluding amortization of acquired
intangible assets) surged to $454.0 million from $175.0 million in
the year-ago quarter. This massive year-over-year growth in costs
was primarily due to higher research & development (up $112.7
million), sales and marketing (up $92.8 million) and general &
administrative expense (up $26.6 million) in the quarter.
Sequentially, total cost & expenses (excluding amortization of
acquired intangible assets) increased 21.6% due to higher R&D
(18.6%), S&M (32%) and G&A (15.4%).
Twitter reported operating loss of $141.8 million (including
stock-based compensation but excluding amortization of acquired
intangible assets) compared with the loss of $35.6 million in the
year-ago quarter and $123.2 million in the previous quarter.
Net income (excluding stock-based compensation, amortization of
acquired intangible assets and income tax effects related to
acquisitions) was $14.6 million or 2 cents compared with a loss of
$16.4 million or 12 cents in the year-ago quarter and $0.2 million
or break-even in the previous quarter.
Balance Sheet & Cash Flow
At the end of Jun 30, 2014, cash and cash equivalents (short-term
investments) were $2.10 billion compared with $2.18 billion at the
end of Mar 31, 2014. Cash flow from operating activities was $81.7
million compared with $7.0 million at the end of the last quarter.
Twitter project revenues to be in the range of $330.0 to $340.0
million for the third quarter of 2014, much better than the Zacks
Consensus Estimate of $322.0 million. Adjusted EBITDA is
projected to be in the range of $40.0 to $45.0 million for the
Revenues are projected to be in the range of $1,310 to $1,330
million (up from $1,200 to $1,250 million) for fiscal 2014. The
mid-point of the guidance is higher than the Zacks Consensus
Estimate of $1,256.0 million.
Adjusted EBITDA is projected to be in the range of $210 to $230
million (up from $180 to $205 million) for the full year. Capital
expenditures are projected to be in the range of $330 to $390
We believe that new products and services will continue to attract
users in the long run. Twitter's ability to attract more
advertising revenues, despite facing significant competition from
), Yahoo! Inc.
) and market leader, Google
), will be something to watch out for in the near term.
We believe that the acquisitions of Cover, Gnip, TapCommerce, Namo
Media and CardSpring will expand Twitter's product portfolio and
monetization capability. Twitter's recent foray into e-Commerce by
testing the 'Buy Now' button is a significant positive, in our
Moreover, as spending on online advertising is expected to increase
manifold compared to traditional media, we believe that Twitter has
massive growth opportunity, due to its strong mobile products.
However, higher costs and continuing investments on product
development will hurt profitability.
Currently, Twitter has a Zacks Rank #3 (Hold).
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