Twitter Posts Disappointing Revenue and Forecast
April 26 2016 - 05:20PM
Dow Jones News
Twitter Inc.'s long-awaited turnaround is still a work in
progress.
The social media company on Tuesday showed few signs that it has
resuscitated growth, while revenue increased at a slower rate
compared with a year earlier. Shares dropped 11% to $15.84 after
hours.
Twitter's revenue increased 36% to $594.5 million for the period
ended March 31, compared with $435.9 million the previous year,
when it jumped 74%. Analysts surveyed by Thomson Reuters on average
had estimated Twitter would post revenue of $607.8 million.
The company also posted a downbeat forecast for second-quarter
revenue, saying it sees its top line ranging from $590 million to
$610 million—significantly lower than the $678 million analysts had
expected, according to Thomson Reuters.
At the same time, Twitter scraped together 5 million net new
users in the first quarter, bringing its global logged-in audience
to 310 million, up 1.6% from the prior quarter. While the company
managed to stop last quarter's declining user numbers from becoming
a troubling trend, the meager bump in growth is far from
comforting. If anything, it underlines the steep challenge facing
CEO Jack Dorsey, the co-founder who returned on a permanent basis
in October to right the ship.
Since his return, Mr. Dorsey's has dealt with a sudden exodus of
veteran senior executives, a move that can be construed as a
blessing in disguise because it allowed the new CEO to fill the
ranks with his own trusted lieutenants. He has started making
changes to the board, replacing two longtime members—Silicon Valley
heavyweight Peter Currie and Hollywood executive Peter Chernin—with
Hugh Johnston, the CFO at PepsiCo Inc. and Martha Lane Fox, a
serial entrepreneur in Britain.
Earlier this month, Twitter emerged as the surprise winner in a
bid to stream 10 National Football League games, a deal that Morgan
Stanley estimated could attract roughly 1.1 million viewers a game
but unlikely to drive significant user growth because it requires
users to radically change their viewing behavior.
Last quarter, Mr. Dorsey and his management team laid out the
company's priorities for the current year. At the top of the list
was to fix the "broken windows" that cost them new users trying to
learn how to use Twitter.
Twitter continues to tweak its product to make it easier to
use—though few, if any, of those changes in the latest quarter were
aimed at getting rid of the "confusing parts," as Mr. Dorsey put it
last quarter. One change came in February when Twitter gave users
the option to see more of the "best" tweets they missed while they
were gone at the top of the timeline when they signed back in, a
feature that was intended to help existing users see the most
interesting tweets faster.
According to eMarketer, Twitter will earn $2.61 billion in total
digital ad revenue world-wide this year. The research firm said it
adjusted its estimate down from the $2.95 billion it had predicted
in the third quarter of 2015 because of the stalled user
growth.
Twitter is forecast to grab a 7.9% share of world-wide social
network ad spending this year, according to eMarketer. In
comparison, Facebook Inc., which has nearly 1.6 billion monthly
active users, is forecast to claim 67.9%.
Twitter remains unprofitable. It posted a loss of $79.7 million,
or 12 cents a share, compared with a year-ago loss of $162.4
million, or 25 cents a share. Excluding certain expenses, Twitter
said it would have earned 15 cents a share, up from 7 cents a year
earlier. Analysts had expected earnings of 10 cents a share on that
basis.
Write to Yoree Koh at yoree.koh@wsj.com
(END) Dow Jones Newswires
April 26, 2016 17:05 ET (21:05 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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