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Pandemic Brings Twitter Record Use, but a Shortfall in Revenue

As the world scrambled to find out about Covid-19, Twitter got its biggest ever surge in usage. Thursday morning, the internet service reported that its daily average users jumped by 14 million, or 24%, in the first quarter.

But the company (ticker: TWTR) says the pandemic dampened advertising growth and revenue for the quarter ended in March rose just 3% over the prior year, leaving Twitter with a slight operating loss. Wall Street had expected a modest profit.

“There really was a surge in March as people came to the service to learn about Covid-19,” Chief Executive Jack Dorsey said on an early morning conference call. But use leveled off toward the quarter’s end and advertising suffered as lockdowns curtailed the real-world events that drive many Twitter conversations, Dorsey said. The suspension of most professional sports really hurt.

Investors were disappointed in Twitter’s revenue shortfall, and the stock was off 3.4% Thursday morning to $29.97. The S&P 500 was down 0.8%.

Revenue in the quarter was $808 million, with $682 million in advertising sales increasing just $3 million from the prior year. Wall Street had hoped for revenue of about $865 million. Ad sales have softened across the internet with the Covid recession. Yet Twitter has been under pressure from investors to catch up with Facebook (FB) and Google (GOOG) in converting its traffic to revenue. On March 9, it agreed to add directors to its board from the investment firms Silver Lake Partners and Elliott Management.

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Thursday’s report highlighted the company’s efforts to increase ad sales and trim spending. Ad impressions increased in the quarter. New tools will make it easier for advertisers to initiate campaigns, Twitter said, and prompt direct response from viewers.

But the pandemic’s closing of public events abruptly reduced ad sales after March 11, and Twitter suffered a quarterly operating loss of $7 million, or 1% of revenue. Its net loss was $8 million, or 1 cent a share. Operating cash flow was $247 million, compared with $352 million a year earlier.

The company has suspended guidance for the year and reduced its hiring. Instead of increasing expenses by 20%, it now expects cost growth in the low-teens for the current quarter ending in June.

There is plenty of money on Twitter’s balance sheet. It ended the quarter with $7.7 billion in cash, boosted by a $1 billion convertible note issued to Silver Lake in March. Twitter said it would use the money to help fund up to $2 billion in stock repurchases.

Write to Bill Alpert at william.alpert@barrons.com

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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