Tune in to Twitter Q2’20 earnings Q&A with @jack & @nedsegal at 8am ET / 5am PT! Listen 🔉via @TwitterIR or
investor.twitterinc.com/events.cfm $TWTR
investor.twitterinc.com/events.cfm $TWTR
Tweet us your questions during our Q2'20 earnings call @TwitterIR using $TWTR. We want to hear from you!
Time for the dry, but important disclaimer... $TWTR
First, a note about last week. Twitter suffered a very public and disappointing security issue. We moved quickly to address what happened and took add'l steps to improve resiliency against targeted social engineering attempts. $TWTR
We've implemented safeguards to improve the security of our internal systems & are working with law enforcement as they conduct their investigations. $TWTR
We understand our responsibilities and are committed to earning the trust of all of our stakeholders with our every action, including how we address this security issue. We will continue to be transparent in sharing our learnings and remediations. $TWTR
Let's turn to the Q2'20 highlights... $TWTR
Avg monetizable DAU grew 34% y/y to 186 million, driven by global conversation around current events & ongoing product improvements. This marks the highest quarterly y/y growth rate we’ve delivered since reporting mDAU growth. We have 20M more avg mDAUs in Q2'20 vs. Q1'20. $TWTR
We completed our ad server rebuild & are making progress accelerating performance ads roadmap starting w/ Mobile Application Promotion (MAP), including our acquisition of CrossInstall. $TWTR
Revenue was $683 million in Q2, down 19% y/y, reflecting moderate recovery in advertising demand relative to the last three weeks of March. $TWTR
Total costs & expenses grew 5% y/y to $807 million, as we continue to balance targeted headcount growth w/ further reducing lower priority investments. We incurred an operating loss of $124 million. $TWTR
On mDAU: Growth continued to accelerate in Q2 & to be broad-based, with double-digit growth rates in all top 10 markets. We grew US mDAU by 24% and international mDAU by 37%. $TWTR
The mDAU increase was primarily driven by external factors - shelter in place, conversations around COVID-19, etc. We also continue to benefit from ongoing product improvements. We believe mDAU growth would still have been strong in absence of external factors. $TWTR
Our work to serve the conversation around COVID-19, to help people find trusted sources of information, to better organize and surface topics and interests, and to deliver virtual watch parties for movie launches and virtual concerts helped us serve our larger audience. $TWTR
We also continue to benefit from ongoing product improvements, including continued increases in relevance of notifications, Search, Explore, and the Home timeline. $TWTR
Audience and engagement surged in the last few weeks of Q1 as the COVID-19 pandemic became global and we maintained this larger audience in Q2. $TWTR
The higher usage of our service presents tremendous opportunity to serve the public conversation & be where people go to see what’s happening. It gives us confidence in our ability to deliver consumer value; we'll keep working hard to make Twitter part of their daily lives. $TWTR
One of our goals is to make it easier for people to find content, follow & join conversations. We grew Topics people can follow to >4,100. By end of Q2, 50 million accounts followed Topics. We also launched features to help people discover Lists related to their interests. $TWTR
Another important goal is to make it easier to follow and participate in conversations. We’re experimenting with giving people the ability to Tweet with their voice... $TWTR
...and providing people controls that allow them to choose who can reply to their Tweets. $TWTR
We expanded Fleets to three more markets - Italy, India and South Korea. We also launched the ability to easily see all Retweets with Comments for any Tweet. $TWTR
While many sports and live entertainment events have been cancelled or delayed, we’re continuing to amplify conversations around digital movie & TV launches and virtual concerts. $TWTR
We held virtual watch parties for ESPN's docuseries #TheLastDance about Michael Jordan and the Chicago Bulls with live post-shows on Twitter. The parties sparked over 11 million Tweets; the live post-shows had over 8 million views. $TWTR
We collaborated with Global Citizen to live stream the #TogetherAtHome concert that supported the World Health Organization, which generated over 10 million views, over 2.2 million Tweets and opportunities for brands to connect with what's happening. $TWTR
To celebrate the return of golf, we partnered w/ the PGA Tour on a Twitter Multicast for the Charles Schwab Challenge 1st round to showcase athletes, celebs & other personalities with their own live stream & commentary, along w/ PGA TOUR LIVE Featured Groups coverage.
Health continues to be an important priority for us, w/ our work centered on reducing abuse, combating misinformation, and protecting the integrity of civic-related conversations. We’re refining our prediction models and launching add'l tools to reduce abuse & hate speech. $TWTR
We remain focused on detecting, verifying, and annotating misleading information, as well as measuring the impressions of misleading information on Twitter. $TWTR
We stepped up annotation of Tweets that fell under our misleading information policies; we estimate these efforts prevented 68 million unannotated impressions that would have occurred had we not intervened. $TWTR
As a part of our Health work, we aggressively targeted misinformation and toxic or abusive content relating to COVID-19. $TWTR
In Q2, we shipped 40 automations & tooling improvements to support COVID-19 content review. Since intro of our COVID-19 coverage, we removed ~15,000 Tweets, challenged 4.5 million accounts. 160+ million people have visited the COVID-19 page, a total of over 2 billion times. $TWTR
On revenue products: In Q2, we completed our ad server rebuild, which re-architects and modernizes our ad server to support faster product development, increase stability, and help us scale our advertising business. We're already seeing significant benefits. $TWTR
We see a path to driving more direct response advertising on Twitter in 2020 and beyond through MAP and further personalizing the experience on Twitter. An improved MAP & more DR ad formats could increase addressable market & diversify our customer base. $TWTR
We're also making progress w/ our direct response roadmap, including improving measurement, prediction, data tools, and updated formats for advertisers. We completed our first pilot and launched a second pilot to test portions of our improved offering w/ few advertisers. $TWTR
We began rolling out an advanced mobile measurement pgm which shares non-EU/UK device level data w/ MAP advertisers to better measure their Twitter campaigns. We've improved our prediction and ad ranking models for MAP and are seeing early improvements in app installs. $TWTR
We also launched the beta of our Video Carousel Card, a key component of the ad formats portfolio needed for us to drive better performance. Early test results have been positive. $TWTR
Our acquisition of CrossInstall will accelerate key work streams in direct response. CrossInstall strengthens our ads-focused team, adds a successful demand-side platform, should help us build performance products & increase value of MoPub to mobile app developers. $TWTR
We're also in early stages of exploring add'l potential revenue products that complement our advertising business, which may include subscriptions & others. It is very early; we do not expect any revenue against these in 2020. $TWTR
On revenue: Total revenue was $683 million in Q2, down 19% due to a decline in advertising revenue across most markets. US revenue was $365 million, a decrease of 20%. Total int'l revenue was $319 million, a decrease of 18%. $TWTR
Total ad revenue was $562 million, a decrease of 23%. We previously noted that in Q1, widespread economic disruption and a significant decrease in global advertising spend as a result of the pandemic led to a 27% decline in ad revenue in the last three weeks of March. $TWTR
We saw a gradual, moderate recovery relative to March levels throughout most of Q2, with the exception of late May to mid-June, when many brands slowed or paused spend in reaction to US civil unrest. $TWTR
During the last three weeks of June, advertising revenue declined 15% year over year. Demand gradually improved once brands returned after the protests subsided. $TWTR
By region, Q2 US ad revenue was $283 million, a decrease of 25%, reflecting brand spend pauses related to the pandemic and US civil unrest. Int'l ad rev was $279 million, down 20%. Int'l markets typically have a higher mix of direct response, which overall performed better. $TWTR
By product, video ad formats declined y/y but continued to be the majority of our ad revenue in Q2. We saw a mix shift from brand-oriented ad formats to direct response products such as website clicks and MAP. $TWTR
By sales channel, large to mid-tier customers continue to represent a sizable majority of our advertising revenue. Brands have found innovative ways to join in on the conversation and connect with their customers despite the pandemic. $TWTR
Our self-serve channel for small and mid-sized businesses (SMB) remains relatively small, but we’ve had success in identifying and growing advertising dollars with many SMB advertisers. This remains a significant opportunity for Twitter that can now be better resourced. $TWTR
Data licensing and other revenue totaled $121 million, an increase of 6% after a strong first half of renewals from many of our largest Data and Enterprise Solutions (DES) customers. We continue to expect this growth to moderate over the course of 2020. $TWTR
Ad metrics: Total ad engagements increased 3%, resulting primarily from audience growth offset by a mix shift to ad formats with lower clickthrough rates. $TWTR
Cost per engagement (CPE) decreased 25%, driven by like-for-like price decreases across most ad formats and lower demand. $TWTR
Turning now to expenses...$TWTR
Total costs and expenses (which include cost of revenue and all operating expenses) grew to $807 million in Q2. $TWTR
The 5% expense growth was lower than the low teens we expected, and reflects decisions we made to reduce spending, cost savings from restricted business operations & some of the challenges of growing headcount and investing in the current environment. $TWTR
As we continue to adapt our operations and improve and increase hiring, we intend to continue investing in our most important work. We believe total costs and expenses will increase 10% or more y/y in Q3. $TWTR
Expenses by key function: Cost of revenue grew 4% to $288 million primarily driven by infrastructure-related expenses, higher personnel-related costs and higher traffic acquisition costs, offset by a decrease in revenue share expenses. $TWTR
R&D expenses grew 36% to $216 million, primarily due to higher personnel-related costs as we continue to focus our investments on engineering, product, and design, and higher allocated facilities and supporting overhead expenses. $TWTR
Sales & marketing expenses decreased 14% to $207 million, primarily due to reduced marketing campaigns, customer events, and travel. $TWTR
General and administrative expenses grew 9% to $96 million, primarily due to higher personnel-related costs, offset by higher facilities and supporting overhead expenses allocated to other functions. $TWTR
Stock-based compensation (SBC) expense grew 40% to $133 million and was ~19% of total revenue vs. 12% in Q1. SBC expense is closely tied to headcount, timing of grants & vesting. Due to these, we expect to recognize more SBC expense in Q2 vs. in other quarters in 2020. $TWTR
We ended Q2 with more than 5,200 employees worldwide, including approximately 60 from the CrossInstall acquisition. $TWTR
We incurred an operating loss of $124 million, or -18% of total revenue, compared to operating income of $76 million or 9% for the same period in 2019. The decrease in year-over-year operating income is primarily due to lower revenue and higher personnel-related costs. $TWTR
In Q2'19, we established a $1.1 billion deferred tax asset & recognized an income tax benefit. $TWTR
In Q2'20, we recognized a deferred tax asset valuation allowance of $1.1 billion & a non-cash income tax expense based primarily on cumulative taxable losses driven primarily by COVID-19. $TWTR
This valuation allowance would be reversed in the event, and to the extent, that it is more likely than not that there will be sufficient taxable income to realize the tax benefit. $TWTR
Depending on the extent and severity of COVID-19’s impact, we could have an additional valuation allowance against deferred tax assets in a future period. $TWTR
As a result of the valuation allowance, we incurred a net loss of $1.2 billion in Q2, representing a net margin of -180% and diluted EPS of ($1.56). $TWTR
Excl. the impact of the income tax expense due to the valuation allowance, Q2 adjusted net loss was $127 million, adjusted net margin of -19% & adjusted diluted EPS of ($0.16), $TWTR
This compares to prior Q2 net income of $1.1 billion, net margin of 133% & diluted EPS of $1.43. Excl. the income tax benefit related to the deferred tax asset, adjusted net income in prior Q2 was $37 million, adjusted net margin was 4% and adjusted diluted EPS was $0.05. $TWTR
We ended Q2 w/ approx. $7.8 billion in cash, cash equivalents, and marketable securities. $TWTR
Net cash provided by operating activities in the quarter was $201 million, a decrease from $339 million in the same period last year. $TWTR
Capital expenditures totaled $162 million, compared to $135 million in the same period last year, driven by investments we are making in our infrastructure to support audience growth and product innovation. $TWTR
We intend to increase capex in absolute dollars sequentially in Q3. The increase will allow us to address our near-term capacity needs and continue our buildout of a new data center, contingent on improvements in the IT supply chain. $TWTR
Adjusted free cash flow was $39 million, compared to $204 million in the same period last year. We did not repurchase any of our shares in Q2. $TWTR
Twitter Q2'20 earnings Q&A with @jack & @nedsegal is starting soon. Listen via event.on24.com/wcc/r/2402322/…
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Have questions? Tweet us your Qs: @TwitterIR using $TWTR
Correction on the mDAU image included earlier in this thread: this is the image that includes Q2'20 mDAUs. $TWTR
