Company overview - Twitter, Inc. offers products and services for users, advertisers, developers and data partners. The Company's products and services include Twitter, Periscope, Promoted Tweets, Promoted Accounts and Promoted Trends. Its Twitter is a platform for public self-expression and conversation in real time. Periscope broadcasts can also be viewed through Twitter and on desktop or mobile Web browser. Its Promoted Products enable its advertisers to promote their brands, products and services, amplify their visibility and reach, and extend the conversation around their advertising campaigns. Promoted Accounts appear in the same format and place as accounts suggested by its Who to Follow recommendation engine, or in some cases, in Tweets in a user's timeline. Promoted Trends appear at the top of the list of trending topics for an entire day in a particular country or on a global basis. Its MoPub is a mobile-focused advertising exchange. Twitter Audience Platform is an advertising offering.

TWTR Details
 
Focusing on increasing operating leverage and cost controls: During Q1FY17, Twitter Inc (NYSE: TWTR) reported revenue decline of 8% year-over-year at $548 million, while GAAP net loss was at $62 million and non-GAAP net income was at $82 million for the quarter. Average monthly active users grew by 6% yoy to 328 million compared to 319 million in the previous quarter. Importantly, average daily active usage grew by 14% year-over-year, an acceleration from 11% in the fourth quarter. Further, the company has received positive early feedback from ad partners and witnessed the improved return on investment from audience growth and better pricing. During Q4FY16, the company streamed more than 800 hours of live premium video and reached 45 million unique viewers, an increase of 31% from the previous quarter. Moreover, TWTR is remain focused on initiatives to grow revenue by simplifying product portfolio, communicating progress to advertisers, and re-allocating resources to highest revenue generating priorities across segments.



Revenue trend; (Source: Company reports)

For Q2FY17, the company expects adjusted EBITDA to be between $95 million and $115 million, while adjusted EBITDA margin to be between 21% and 21.5%. Additionally, for the full year 2017, it expects total non-GAAP expenses to be flat to down 5% yoy, and capital expenditures to be between $300 million and $400 million.



Quarterly net income trend; (Source: Company reports)

Application of machine learning across the services:  During Q4FY16, Twitter made major strides in the Home timeline by launching several features designed to show people the most important Tweets first news and commentary they would have wanted to see but may have missed. It also improved the relevance of notifications to increase engagement and bring people back to Twitter. Notably, these changes improved retention for both monthly active and daily active usage, as well as increased Tweet impressions and time spent on the service. Further, to build on this progress, company expects to apply machine learning more broadly across the services in 2017. Machine learning is critical to identify and personalize content that people want to see and deliver it to them, faster. Additionally, to strengthen it has combined efforts to build a foundation of machine learning across consumer and revenue-generating products and create a more focused and data-driven approach to product development. The company also recognized the importance of simplifying and creating a single destination for people to discover what’s happening on Twitter.  Importantly, in Q1FY17, company launched Explore on iOS, which brings together trends, moments, search, and the best of live video, while intending to continue integrating new, dynamic, and personalized content into the Explore experience in 2017.



Source: Google

Investing in robust partnerships:Building on the success of custom Twitter Amplify program, it began a broad beta of Twitter Amplify open video in the US which will further increase its unique value to contributing content partners and advertising partners. Titter continues to improve the buying experience for advertisers and scale Twitter Amplify open video as it expanded the current beta to select international markets in H12017 and move toward general global availability by the end of 2017. It will also continue to innovate with live video product, introducing more partners in more countries, and continuing to scale pre-roll and mid-roll ad formats.  In addition, the company is confident of growing its data licensing revenue with a more brand-centric approach to channels, markets, products, and pricing. This approach will position both Twitter and its key channel partners for greater growth and monetization. Currently, the company is investing in deeper partnerships with a few select solution providers (including Sprinklr, Sprout Social, and Conversocial) to help brands realize greater value from data and platforms. However, revenue growth is expected to lag audience growth in 2017 and could now be further impacted by escalating competition for digital ad spending and the re-evaluation of revenue product feature portfolio, which could result in the de-emphasis of certain product features.



Twitter Amplify program for advertisers, (Source: Google)

Video ad format is evolving as the largest revenue generating business: During the fourth quarter, the company improved the buying experience for video advertisers with the launch of reservation buying and the ability to buy video ads on a CPM basis.  The company also delivered dynamic ad insertion with 15- and 30-second ads across a wide range of live events, including NFL, TNF, the presidential debates, the Melbourne Cup, and Bloomberg daily shows. Further, live video ads are attractive to advertisers with sound on with completion rates are over 95%. Live video ads have been a key differentiator with advertisers, especially when packaged with Twitter Amplify video product, and have contributed significantly to year-over-year growth in video-related advertising revenue. As it re-evaluates revenue product features and roadmaps, applying the same focused approach that drove renewed monthly and daily active usage growth in 2016 to simplify portfolio and buying process for advertisers. Further, company is investing in product features that differentiate Twitter and capitalize on unique value proposition for advertisers, including video and more organic ad formats.



Source: Google web
 
FY16 was the transformative year:FY16 was a year of transformation for Twitter as disciplined execution across strategic priorities resulted in improved audience engagement growth, and achieved greater operating leverage as it streamlined cost structure and increased focused on profitability. During 2016 revenue grew by 14.0% yoy to $2.5 billion led by 13.0% yoy growth in advertising revenue as the mobile advertising contributed to 89% of total advertising revenue and data licensing & other revenue grew by 26% yoy to $281.6 million. On geography wise, international revenue and U.S revenue reported 25%, 8% yoy growth respectively at $964.8 million and $1.56 billion. While reported net loss of $457 million in GAAP terms, non-GAAP net income stood at $406 million for the same period. Adjusted EBITDA grew by 35.0% yoy to $751 million and EBITDA margin stood at 30.0% against 25.0% in 2015. Moreover, the company continued to make meaningful progress in reducing annual stock-based compensation (SBC) expense on both an absolute basis and as a percentage of revenue as it declined 10% year-over-year and declined over 600 basis points year-over- year as a percent of revenue, reaching 24% in 2016 from 31% in 2015 and 45% in 2014. Company ended the 2016 with $3.8 billion in cash, cash equivalents, and marketable securities.



Profitability trends; (Source: Company reports)

Stock Performance: The shares of TWTR has risen 9.4% in last three months while it was up 19.5% in the last one year. The company could reduce the expenses by implementing cost control measures and minimizing losses in the past couple of years. Further, given the on-going investments in profit generating segments and new partnerships, we believe the financials will improve going forward, and accordingly give a “Buy” recommendation on the stock at the current price of $ 16.76


TWTR Daily chart; (Source: Thomson Reuters)

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