Well would you look at that, Twitter (TWTR 31.43, +4.52 +16.8%) moves to two-and-a-half year highs after the company reported its first ever GAAP profitability in its Q4 report this morning. Despite losing monthly active users in the U.S., shares of Twitter move markedly higher as the Q4 beat and guidance struck an upbeat note for investors.
Cementing its move off April 2017 lows, shares of Twitter have been on an impressive run since the Q3 report (Oct 26), up better than 70% since that time. Today’s earnings of $0.19 and revenues of $731.6 million drive home the point that Twitter has distanced itself from the struggles of the spring of 2016 when shares fell to $13.72.
Still, the Q4 print was not perfect, as Twitter saw monthly active users (MAUs) increase 4% to 330 million compared to last year, but U.S. MAUs fell about 1 million quarter-over-quarter. Highly publicized, Twitter’s struggle with ‘bots’, fake accounts impacted user accounts; users were also impacted by seasonality and the change to Safari’s third-party app integration, which affected about 2 million MAU in Q4 (roughly 1 million in the US and 1 million in international markets).
Coming back earnings, Twitter made some headway in advertising as the company’s revenues in this area were $644 million, up 1% year-over-year as total ad engagements were up 75% year-over-year with cost per engagement dropping 42% compared to a year ago. Owned and operated advertising revenues were $593 million in Q4, up 7% compared to last year while data licensing and other revenues amounted to $87 million in the period.
As mentioned, Twitter also achieved GAAP profitability for the first time and delivered its highest ever GAAP net income, adjusted EBITDA, and adjusted EBITDA margins in Q4. Specifically, GAAP net income in Q4 was $91 million with adjusted EBITDA of $308 million. GAAP net margins in Q4 reached 12% and adjusted EBITDA margins reached 42%, achieving the company’s long-term target range of 40-45% for the first time.
Twitter also gave some Q1 and FY18 guidance in the press release. The company sees adjusted EBITDA between $185-205 million in Q1, adjusted EBITDA margins of 33-34% and stock-based compensation expense in the range of $100-110 million. For FY18, Twitter sees capital expenditures between $365-450 million and stock-based compensation in the range of $350-450 million.
All told, Twitter’s cost cuts and incremental ad gains seem to have paid off in Q4. The user stagnation was somewhat expected as the company continues to combat malicious activity on the platform. Twitter does expect to be GAAP profitable for the year 2018, and with the unrelenting goal to keep adding more users and driving engagement, its paramount for Twitter to resist the siren song that plagued it in the past – stalling user growth.
Shares of Social Media (SOCL) peers Facebook (FB -2.1%), Snap (SNAP -8.0% -- reported earnings on Tuesday), and Tencent (TCEHY -1.7%) all trade in the red.