Twitter Beats Earnings Forecast, Will Cut 9 Percent of Workforce
A week after Twitter's attempts to sell slipped away, the social media company on Thursday reported better-than-expected third-quarter financials.
Analysts expect that management could outline Twitter's strategy to move forward as an independent company on an earnings conference call.
A key component of that strategy is likely becoming a leaner operation. To do that, Twitter has decided to cut 9 percent of its workforce, or around 350 people.
Last month, it looked like Twitter could have a new owner in time for its earnings results. After more than a year of slowing user growth, the company's stock had flagged, making it a prime acquisition target. At one time, SalesForce, Microsoft, Google and Disney were said to be exploring an acquisition. But many potential bidders backed away from a deal due to concerns over Twitter's high valuation, slowing growth and rampant harassment on the site.
Now, investors on today's conference call will be looking for CEO Jack Dorsey -- the co-founder who was reinstalled to run the company a little more than a year ago -- to outline a comprehensive plan for how he will grow the business independently. Dorsey, who also serves as CEO to payments company Square, has already made some changes to the platform, doing away with some anachronistic features that were confusing to new users and placing an emphasis on live including the streaming of football games and the presidential debates.
Twitter on Thursday reported adjusted third-quarter earnings of $92 million, 13 cents per share, on revenue of $616 million. During the same period last year, Twitter had brought in revenue of $569 million and earnings of 10 cents per share. For the latest quarter, Wall Street was expecting $606 million in quarterly revenue and adjusted earnings of 9 cents per share.
The company once again reported a loss, of $103 million, or 15 cents per share, on the basis of generally accepted accounting principles (GAAP), which publicly traded companies use for their earnings reports. Management said Thursday that the company plans to turn positive on a GAAP basis next year.
Twitter's user base, meanwhile, reached 317 million people, up 3 percent over the year-ago period and up from 313 million in the second quarter. Average daily active usage grew 7 percent over the year-ago period.
Last quarter, Twitter's monthly active users grew by 3 million to 313 million. While the company's audience does continue to grow, the slow rate at which it is growing has concerned investors who have watched as Instagram has overtaken it with 500 million monthly active users.
"Our strategy is directly driving growth in audience and engagement, with an acceleration in year-over-year growth for daily active usage, Tweet impressions and time spent for the second consecutive quarter," said Dorsey. "We see a significant opportunity to increase growth as we continue to improve the core service."
He added: "We have a clear plan, and we're making the necessary changes to ensure Twitter is positioned for long-term growth. The key drivers of future revenue growth are trending positive, and we remain confident in Twitter's future."
"We're getting more disciplined about how we invest in the business, and we set a company goal of driving toward GAAP profitability in 2017," said Twitter CFO Anthony Noto. "We intend to fully invest in our highest priorities and are de-prioritizing certain initiatives and simplifying how we operate in other areas. Over time, we will look to invest in additional areas, as justified by expected returns and business results."
And he said: "Our live strategy is showing great progress. We've received very positive feedback from partners, advertisers and people using the service, and we're pleased with the strong audience and engagement results."
Twitter estimates that it will incur approximately $10 million-$20 million of cash expenditures for severance as a result of the layoffs and $5 million-$10 million of non-cash expenditures, consisting primarily of stock-based compensation expense. Most of the pre-tax workforce restructuring charges will be taken in the fourth quarter.
Twitter shares closed Wednesday about even at $17.29.
Georg Szalai contributed to this report, originally published by The Hollywood Reporter.