Thread by @TwitterIR

Twitter’s Q4 & FY'20 shareholder letter is now available. Read it here: investor.twitterinc.com $TWTR

Tune in to Twitter Q4 & FY'20 earnings Q&A with @jack & @nedsegal at 6pm ET / 3pm PT! Listen 🔉 live at investor.twitterinc.com/events.cfm $TWTR

Tweet us your questions during our Q4 & FY'20 earnings call @TwitterIR using $TWTR. We want to hear from you!

Time for the dry, but important disclaimer... $TWTR

OK...are you ready for the Q4 & FY'20 highlights? $TWTR

Average monetizable DAU (mDAU) reached 192M, up 27% year over year and up 5M sequentially, driven by global conversation around current events and ongoing product improvements. $TWTR

Y/y growth in mDAU remained strong, with average mDAU of 192M in Q4, up 40M or 27%. We grew US mDAU by 21% and international mDAU by 28%. $TWTR

In 2020, growth from product improvements reached an all-time high, with additional benefit from increased global conversation around COVID-19, the run-up to US elections, and other current events. $TWTR

In Q4, we helped new and reactivated accounts build a more durable and sustainable connection with Twitter by using real-time signals around interest and intent to significantly improve content personalization and discovery in their first few days on Twitter. $TWTR

Early data suggests that these product improvements are enhancing the customer experience and resulted in improved retention, reduced churn and greater mDAU growth in Q4. $TWTR

Making it easier for people to find what they are looking for when they come to Twitter by better organizing content around Topics and Interests is an important part of our work. $TWTR

In Q4, we continued to grow the number of Topics people can follow to more than 6,000, with increased personalization, notifications for new customers about Topics they might want to follow, and an expanded variety of Topics. $TWTR

In 2021, we'll continue to build on our momentum by improving Topics to enhance the experience of new, light, & returning customers, continuing to invest in better Topic discovery, expanding the number of available Topics, & improving personalization of Tweets w/in a Topic. $TWTR

Another important goal is to make it easier to follow and participate in the public conversation. We launched Fleets globally in Q4 -- a low-pressure way to easily join the conversation with ephemeral fleeting thoughts. $TWTR

We’re also working on providing a new way to talk on Twitter — using your voice. We released our Spaces feature into early beta in late Q4, and we're excited about how this capability can change the way people have conversations on Twitter. $TWTR

We continue to enhance the global conversation on Twitter with live and on-demand video content, including short videos and highlights, across sports, entertainment, gaming, news, and politics. $TWTR

We recently announced a multi-year global video content deal with NBCUniversal that will provide people on Twitter with premium content across NBCU properties from key events. $TWTR

In addition, we continue to see innovation from content partners. We recently announced a partnership with WebMD that has brought unique video content to Twitter to help educate consumers on health topics. $TWTR

And without a red carpet for interviews or fans in the audience, building on the enormous success of the #VMAStanCam, ViacomCBS’ MTV Entertainment Group created the first-ever #CMTFanCam exclusively on Twitter for the 2020 CMT Music Awards. $TWTR

Health also continues to be a top priority. Our work to reduce abuse, combat misinformation, and protect the integrity of civic-related conversations has never been more important. $TWTR

In the months leading up to the US election, we announced a series of policy, enforcement and product changes to add context, encourage thoughtful consideration, and reduce the potential for misleading information. $TWTR

Some of those changes were very effective, and we will continue to build on them in the weeks and months ahead, while others were less effective and, as a result, have been discontinued. $TWTR

We made significant progress on our brand and direct response products in advance of the recent relaunch of our Mobile Application Promotion (MAP) offering. $TWTR

New ad formats, stronger attribution, and improved targeting resulted in a 31% year-over-year increase in total ad revenue and greater than 50% year-over-year growth in MAP revenue in Q4. $TWTR

We saw advertisers increase investments across both brand and direct response in Q4. MAP ads totaled more than $300M in FY20, roughly flat year over year, but increasing significantly over the course of 2020 and ending the year with revenue up more than 50% in Q4. $TWTR

On February 8, we announced the launch of our rebuilt MAP offering and website clicks objective. $TWTR

Our newest MAP offering reflects more than 30 product improvements across 5 key areas: campaign management, quality supply, ad formats, optimization, & measurement,... $TWTR

...collectively increasing mobile app impressions by 80% (based on growth in on-platform MAP ad impressions in Q4'20) & driving better performance for MAP advertisers. $TWTR

For website clicks, we introduced Twitter Click ID and improved conversion optimization. $TWTR

We made progress on a number of new ad formats across both brand and direct response in Q4, including: the launch of an extended beta for Branded Likes... $TWTR

...and the global release of single-destination Carousel ads, designed to deliver a more immersive and interactive experience and better performance. $TWTR

We delivered stronger attribution & measurement for brand & DR in Q4 w/ a new A/B testing tool. We partnered w/ Neustar for multi-touch attribution, helping advertisers better understand how exposure to an ad on Twitter contributes to an ultimate purchase decision. $TWTR

Building better performance products is an integral part of our long-term strategy and we see a clear path to driving more direct response advertising on Twitter over time. $TWTR

We're also actively working w/ key industry partners to advance brand safety as a central component of the advertising & measurement solutions on Twitter. $TWTR

In Q4, we announced that we selected DoubleVerify & Integral Ad Science to be our preferred partners for providing independent reporting on the context in which ads appear on Twitter. $TWTR

We also shared our commitment to pursue accreditation from all four of the Media Ratings Council’s (MRC) offered Accreditation Services: Viewability, Sophisticated Invalid Traffic Filtration, Audience Measurement, and Brand Safety. $TWTR

Turning to our financial and operational highlights. $TWTR

Total revenue for 2020 was ~$3.72B, up 7%. Ad revenue grew 7%, w/ US growing 6% & Int'l growing 8%. Data licensing & other revenue increased 9%, primarily reflecting strength in DES, particularly in the 1st half of the year when we completed many large, multiyear renewals. $TWTR

Total costs and expenses for 2020 grew 19% and totaled $3.69B, resulting in operating income of $27M. We finished close to the 20% growth we had planned for fiscal 2020 prior to COVID, in spite of the initial disruption & adjustments necessitated by the pandemic. $TWTR

Stock-based compensation (SBC) expenses for the year increased 26% to $475M and were 13% of revenue. We grew headcount by nearly 600 employees, or 14% in 2020, and ended the year with over 5,500 employees. $TWTR

For FY'20 we reported a net loss of $1.14B w/ -31% net margin & diluted EPS of -$1.44. $TWTR

Excl. a deferred tax asset valuation allowance of $1.10B & corresponding non-cash income tax expense based primarily on cumulative taxable losses driven primarily by COVID-19, the adj. net loss was $34M, w/ -1% adj. net margin , & adj. diluted EPS of -$0.04. $TWTR

FY'19 net income was $1.47B w/ 42% net margin + diluted EPS of $1.87. $TWTR

Excl. the income tax benefit from the establishment of deferred tax assets related to intra-entity transfers of intangible assets totaling $1.21B, adj. net income was $259M, w/ 7% adj. net margin + adj. diluted EPS of $0.33. $TWTR

Net cash from operating activities was $993M, down 24% from $1.30B in 2019. Capital expenditures in 2020 totaled $864M, up 62% from 2019. We generated $129M of adj. free cash flow in 2020 compared to $769M in 2019. $TWTR

Now moving on to Q4... $TWTR

Q4 was a strong finish to the year with revenue of $1.29B, up 28% year over year, reflecting better-than-expected performance across all major products and geographies. $TWTR

Strong revenue performance also drove better-than-expected profitability, with GAAP operating income of $252M and GAAP operating margin of 20%. $TWTR

Total revenue was $1.29B in Q4, up 28%, due to global, broad-based recovery in advertising revenue. US revenue was $733M, up 24%. Total int'l revenue was $556M, up 34%. Japan, our 2nd largest market, had revenue of $176M, up 26% compared to an increase of 3% in Q3. $TWTR

Total advertising revenue was $1.15B, up 31%. This was mostly driven by strong brand advertiser demand in the US for most of the quarter. $TWTR

We saw a dip in US advertiser spend during a short period bracketing the US presidential election on November 3, followed by a strong resumption in demand that continued through the holidays. $TWTR

By region, US advertising revenue totaled $646M, an increase of 27% compared to an increase of 11% last quarter, and international ad revenue was $509M, up 35% compared to an increase of 20% last quarter. $TWTR

By ad objective, brand remains the majority of our ad revenue. Sequential growth accelerated in both brand and performance products in Q4. $TWTR

By sales channel, large to mid-tier customers continue to represent a sizable majority of our advertising revenue. $TWTR

Data licensing and other revenue totaled $134M, up 9%, driven by growth in DES. We expect mid-single digit growth in data licensing and other revenue in FY21. $TWTR

Total ad engagements increased 35%, driven by strong growth in ad impressions due to our growing audience and increased demand for ads. Cost per engagement (CPE) decreased 3%, largely a function of supply opportunities outstripping demand. $TWTR

Next, let's move to expenses: Total costs & expenses (which include cost of revenue & all operating expenses) grew to $1.04B in Q4. Expense growth of 21% was in line with our expectations & driven by higher sales-related expenses, headcount growth, & infrastructure costs. $TWTR

Expenses by key function: Cost of revenue grew 38% to $433M, driven by traffic acquisition costs, revenue share from partnerships, & public cloud-related expenses.$TWTR

Research & development expenses grew 25% to $248M, primarily due to higher personnel-related costs as we continue to focus our investments on engineering, product, & design, & higher facilities & supporting overhead expenses. $TWTR

Sales & marketing expenses grew 1% to $244M, primarily due to increased outside services &higher sales-related expenses due to higher revenue, offset by lower personnel-related costs & travel & marketing expenses. $TWTR

General & administrative expenses grew 12% to $112M, primarily due to higher personnel-related costs, offset by lower travel expenses & lower facilities & related expenses. $TWTR

SBC expenses grew 27% to $128M and were approximately 10% of total revenue. $TWTR

Operating income was $252M, or 20% of total revenue, compared to operating income of $153M or 15% for the same period in 2019. The increase in year-over-year operating income is primarily due to the strong revenue we delivered. $TWTR

We delivered net income of $222M in Q4, representing a net margin of 17% and diluted EPS of $0.27. This compares to net income of $119M, representing a net margin of 12% and diluted EPS of $0.15 in the same period of the previous year. $TWTR

We ended the quarter with approximately $7.47B in cash, cash equivalents, and marketable securities. Net cash provided by operating activities in the quarter was $330M, an increase from $277M in the same period last year.

Capital expenditures totaled $292M, vs. $150M in Q4'19, driven by infrastructure investments in data center buildouts to support audience growth & product innovation. We reported adj. free cash flow of $38M, vs. adj. free cash flow of $127M in Q4'19. $TWTR

As a reminder, in early March we announced our intent to repurchase $2B of Twitter stock over time as a way to maintain an appropriate capital structure, offset stock dilution & return capital to shareholders. $TWTR

We initiated the repurchase program in Q4 & bought back a total of $251M of our stock during the quarter. Our pace in future quarters is likely to be lower and may vary based on the operating environment, our capital needs, and market conditions. $TWTR

Average mDAU was 192M, up 27%, primarily driven by ongoing product improvements & global conversation around current events. We grew US mDAU by 21% & international mDAU by 28%. $TWTR

In 2020, growth from product improvements reached an all-time high, with additional benefit from increased global conversation around COVID-19, the run-up to US elections, and other current events. $TWTR

By region: Average US mDAU was 37M for Q4, compared to 31M in the same period of the previous year and compared to 36M in Q3. Avg int'l mDAU was 155M for Q4, compared to 121M in the same period of the previous year and compared to 152M in Q3. $TWTR

We historically have not provided any perspective on current progress on mDAU. That said, our tremendous growth in 2020 & its impact on quarterly averages will impact growth rates in 2021 in ways that we believe merit explanation. Some context: $TWTR

-Q4’19 mDAU reached 152M, up 21%.
-When we withdrew 2020 guidance on March 23 due to COVID, we reported QTD mDAU of 164M, already up 23%
-We then reported final Q1’20 results on April 30 w/ mDAU of 166M, up 24%, which implies ~184M mDAU on avg. in final days of March $TWTR

-We continued to build off of that strong base with 186M mDAU in Q2’20, 187M mDAU in Q3’20 and 192M mDAU in Q4’20, up 34%, 29% and 27% respectively, reflecting improved retention from product improvements as well as ongoing engagement around current events. $TWTR

-We continued to build off of that strong base with 186M mDAU in Q2’20, 187M mDAU in Q3’20 and 192M mDAU in Q4’20, up 34%, 29% and 27% respectively, reflecting improved retention from product improvements as well as ongoing engagement around current events. $TWTR

Given the unusual circumstances this quarter, we wish to share that the increase in avg. absolute mDAU through the end of January was above the historical avg. from the last 4 years, & we expect to see mDAU growth of ~20% y/y in Q1 ‘21, despite 24% y/y mDAU growth in Q1’20. $TWTR

Looking beyond Q1, the significant pandemic-related surge we saw last year continues to create challenging comps, and may lead to quarterly growth rates in the low double digits on a year over year basis in Q2, Q3 and Q4, with the low point likely in Q2. $TWTR

We expect this will result in an average annual growth rate of ~20% from Q4’19 to Q4’21. There is no change to our ambition (announced in March of 2020) to grow mDAU at a compound annual growth rate of 20% or more from the base of 152M mDAU reported in Q4’19. $TWTR

As we enter 2021, our objectives are similar to previous years and our success will best be measured by our ability to grow our audience and deliver financial results in line with our guidance. $TWTR

We expect to grow headcount by more than 20% in 2021. Given the hiring & investment decisions made in 2020 & previous years, along w/ anticipated 2021 headcount growth, we expect total costs & expenses to grow 25% or more in 2021. $TWTR

Our investments also include the final buildout of a new data center in 2021, adding capacity to support audience and revenue growth. $TWTR

Assuming the global pandemic cont. to improve & we see modest impact from rollout of changes associated w/ iOS 14, we expect total rev. to grow faster than expenses in 2021. How much faster will depend on our execution on our direct response roadmap & macroeconomic factors. $TWTR

For Q1’21, we expect:
-Total revenue to be between $940M and $1.04B
-GAAP operating income to be between a loss of $50M and break even
$TWTR

For FY 2021, we expect:
-Stock-based compensation expense to be between $525M and $575M
-Capital expenditures to be between $900M and $950M
$TWTR