Twitter (TWTR) Second Quarter Earnings and Revenue Slump Year Over Year, Advertising Demand Tepid – July 22, 2022

Twitter (TWTR Free Report) reported an adjusted loss of 8 cents per share in the second quarter of 2022, which was larger than Zacks’ consensus estimate of a loss of 6 cents per share. The company had reported earnings of 20 cents per share in the prior year quarter.

Revenue fell 1% year-over-year to $1.18 billion and was 10.6% below Zacks’ consensus estimate, reflecting industry headwinds from publicity associated with the macro environment as well as the uncertainty related to the impending acquisition of Twitter by an affiliate of Elon Musk.

Advertising revenue increased 2% year over year to $1.08 billion. Subscription and other revenue was $101 million, down 27% year-over-year, but up 5% year-over-year, excluding MoPub.

User details

Average monetizable daily active users (mDAUs) increased 16.6% year-over-year and 3.8% sequentially to 237.8 million. This increase is due to continuous product improvements and the global conversation around current events.

The average US mDAU was 41.5 million, up 14.7% on a yearly basis and 6.4% on a quarterly basis. The average international mDAU was 189.4 million, up 17% year-over-year and 3.6% sequentially.

Operation details

Twitter’s total costs and expenses were $1.52 billion, up 31% year-over-year. Costs related to the pending acquisition of Twitter were approximately $33 million in the second quarter of 2022. Severance costs were more than $19 million in the current quarter.

Research and development expenses jumped 51.7% to $454.9 million, mainly due to higher personnel costs.

Selling and marketing expenses increased 2.1% to $308.3 million, primarily due to higher marketing expenses, personnel expenses and sales commissions.

General and administrative expenses jumped 53.1% year-over-year to $216.6 million, mainly due to higher personnel costs and professional fees.

Adjusted EBITDA decreased 67.5% year over year to $111.7 million.

Operating loss was $344 million, representing an operating margin of (29%) compared to an operating profit of $30 million or an operating margin of 3% , at the same time last year.

Balance sheet

As of June 30, 2022, Twitter had $6.12 billion in cash, cash equivalents and short-term investments. The company had $6.26 billion in cash, cash equivalents and short-term investments as of March 31, 2022.

Net cash from operating activities in the reported quarter was $30 million, compared to $126 million in the prior quarter.

In the second quarter, adjusted free cash outflow was $123.9 million, compared to free cash outflow of $35 million in the prior quarter.

Post term development

Twitter has been in the spotlight since Elon Musk announced his intention to buy the social media platform. In April, Twitter announced that Elon Musk had purchased a 9.2% stake in the company, making him the largest shareholder. However, on July 12, Elon Musk pulled out of the $44 billion buyout deal, causing stock volatility to return.

Twitter has filed a lawsuit against Elon Musk, saying he is forced to complete his acquisition and put the company in financial danger. Twitter is preparing to hold a shareholder vote on the deal as early as mid-August, and Elon Musk is expected to close the deal within two days.

Zacks Ranking and Stocks to Consider

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

Twitter shares are down 8.6% year-to-date, underperforming Zacks Computer & Technology’s 38.9% decline.

Some higher ranked stocks in the IT & Technology sector include Agilysys (AGYS free report), Rapidly (FSLY free report) and Aspen Technology (AZPN Free Report), each carrying a Zacks Rank #2 (Buy), at present. You can see the full list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Agilysys, Fastly and Aspen Technology are scheduled to release their quarterly results on July 26, August 3 and August 8, respectively.

Zacks’ consensus estimate for Agilysis’s second-quarter 2022 earnings is pegged at 18 cents per share, unchanged for the past 30 days.

Zacks’ consensus estimate for Fastly’s second-quarter 2022 earnings is set at a loss of 16 cents per share, down 1 cent over the past 30 days.

Zacks’ consensus estimate for Aspen Technology’s second-quarter 2022 earnings is pegged at $2.20 per share, down 2.3% over the past 30 days.

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