Tencent Technology News, according to foreign media reports, microblogging site Twitter today announced its fiscal 2017 fourth quarter and full year earnings results.
"The fourth quarter is a high season. "Our CEO Jack Dorsey said:" Our revenue has started to grow again. We have achieved our GAAP (Generally Accepted Accounting Principles) profitability target and increased our shipping pace to deliver five consecutive quarterly Digits DAU (Daily Active Users) Growth. I am very proud of the progress we made in 2017 and I am very confident about our future development. & rdquo;
Fourth Quarter 2017 Business and Financial Highlights
The company's earnings report, in the fourth quarter of 2017, its revenue was 732 million US dollars, an increase of 2% over the same period the previous year. GAAP quarterly net income of 91 million US dollars, net profit margin of 12%, earnings per share of 0.12 US dollars. In the same period a year earlier, its GAAP quarterly net loss was 167 million U.S. dollars, its net profit margin was -23% and its profit per share was -0.23 U.S. dollars.
Its non-GAAP quarterly net income of 141 million US dollars, equivalent to 0.19 US dollars per share profit. In the same period of the previous year, its non-GAAP net income was 78 million U.S. dollars, or about 0.11 U.S. dollars per share.
Its EBITDA was $ 308 million, or 42% of revenue, and EBITDA was $ 215 million, or 30%, of its total revenue in the same period last year.
In the fourth quarter of 2017, its average MAU (monthly active subscribers) was 330 million, unchanged from the previous quarter and up 4% from the previous year. The average DAU grew 12% YoY, achieving double digit growth for the fifth consecutive quarter.
2017 full year financial highlights
Twitter in 2017 annual revenue of 2.4 billion US dollars, down 3%. For the full year, GAAP net loss narrowed to $ 108 million and net profit margin was 4%. In 2016, GAAP net loss was $ 457 million and net profit margin was 18%. EBITDA for the full year was $ 863 million with a profit margin of 35%. In contrast, full year 2016 EBITDA was $ 751 million with a profit margin of 30%.
For the full year, stock-based compensation and expense fell by 29% from a year earlier to $ 434 million, accounting for 18% of total revenue. In contrast, stock-based compensation and expense for 2016 was $ 615 million, accounting for 24% of total revenue.
Net GAAP net cash generated from operating activities for the full year of 2017 was $ 831 million; an increase of $ 763 million from the previous year. Annual capital expenditures amounted to about 281 million U.S. dollars, a decrease of 12% over 2016. The company generated a full year adjusted cash amount of 550 million U.S. dollars, compared with 444 million U.S. dollars in 2016. It generated a total of 4.4 billion U.S. dollars in cash, cash equivalents and short-term securities in 2017.
"We are very pleased with our performance for the full year of 2017 and our revenue growth for the fourth quarter. "Ned Segal, Twitter CFO, said" In the fourth quarter of 2017, all of our revenue grew 2% YoY and our advertising revenue grew 7% YoY, thanks to Continuous improvement in user engagement, ongoing improvements in revenue products, increased advertiser returns, and better sales execution. We achieved a record quarterly GAAP net profit margin in the fourth quarter. This shows that we have clarified the priorities and have very good execution. & rdquo;
For the first quarter of 2018, Twitter expects:
EBITDA will be between 185 million and 205 million U.S. dollars.
EBITDA margin will be between 33% and 34%.
Based on stock compensation expenses will be 100 million to 110 million US dollars between.
For the year 2018, Twitter expects:
Stock-based compensation expenses will be between 350 million and 450 million U.S. dollars.
Capital expenditures will be between 375 million and 450 million U.S. dollars.
It is worth noting that Twitter's forecast for the full year of 2018 and the first quarter reflects the foreign exchange rate as of January 22, 2018. (Compilation / music)
Twitter executives read earnings: Japan and Asia Pacific business is particularly strong
Twitter today released its fourth quarter results for 2017 followed by an analyst conference call with CEO Jack Dorsey and CFO Ned Segal at the conference call, Introduced the company's business and financial position in the fourth quarter and answered questions from analysts on the spot.
The following is a summary of the conference call Q & A section:
Douglas Anmuth, an analyst at JPMorgan Chase: I have two questions. First, let me talk about what is the key factor in improving the relevance of your ads during the quarter, especially those related to the logic of advertising services , And what factors improved clickthrough rate? Second, here's your fifth consecutive quarter of double-digit growth in daily active users, and how do you see the daily growth of daily active users changing in the face of weaker monthly growth?
Dorsey: As for what factors led to the improvement of ROI and ad relevance, I think it is mainly due to the increase in the number of loyal audiences. We have seen that daily active users have maintained a steady YoY growth in 8 quarters, A quarter to maintain double-digit growth. We lowered the price, so the cumulative CPE decreased by 40%.
Our products perform well at relatively high CTR levels. We continue to provide differentiated services to our advertisers, so we can provide an audience with an influential audience and real-time relevance. We also made significant investments in measurement, so we improved our measurement capabilities and the tailor-made research done in the fourth quarter of 2017 increased 62% from a year earlier.
Siegel: Doug, we do not provide guidance on the growth in audience and engagement, but we do feel that the improvements we've made in the past few years should continue, and should be a factor driving the growth in audience and engagement.
Goldman Sachs analyst Heath Terry: We saw relatively steady monthly active users this quarter, and we know that you've taken steps to improve the quality of monthly active users on the platform, eliminate the robot, and actively implement some Security policy. 330 million active users in this quarter Compared with 330 million active users in last quarter, the quality is not higher? Taking into account the situation of user growth in 2018, will the measures taken around such trust and security affect the number of users reported?
Dorsey: This is a new term that we use in our earnings to give you an idea of how we think about the quality of information. Let me define it: We see the quality of information as a way of aggregating all the malicious activities in a service such as spam, malware, fake accounts, and so on.
In this approach, we have three main priorities. First, we will improve how to detect and correct automated content and malicious operations. We'll zoom in on quality content across all of our products, starting with a focus on search and trends, and then we'll provide more content to help people identify more authentic and trusted accounts and tweets. Therefore, we are studying the overall quality of the content and tweets for this service, and we are also researching the quality of our accounts.
Siegel: We mentioned in the earnings report, monthly active users increased by 4%. This is the 4% YoY YOY increase in monthly active users for the third consecutive quarter, mainly because we are constantly improving our products. We continue to focus on the growing use of Twitter as a day-to-day utility.
But when we think of monthly active users, we talked about two negative things in October. One is the change in the third-party application integration of Safari, which has caused a negative impact of 2 million, of which the United States accounted for 1 million, the international market accounted for 1 million; secondly, we see a typical seasonal impact, seasonal factors in the fourth quarter caused Negative impact.
We also saw the huge resistance Jack said the quality of information initiatives, we continue to work to improve the quality of information on Twitter and user quality. It is hard to predict how these informational quality initiatives can affect user accounts. Some of our efforts are to remove dormant accounts, but some people delete accounts on the day of registration, so they do not even become client accounts. There are other factors that also affect monthly and daily active users. Always trying to make the service better.
RW Baird Colin analyst Colin Sebastian: I hope you will be able to talk more about the promotion of Video Website Cards, which seems to be a rather significant increase in the fourth quarter. Contributor. For example, how much does it affect the growth in demand for pricing or driving more advertisers?
The second problem is related to expenditure. Could we conclude that after more than two years of paying attention, is not there any chance of rationalizing costs? Or, do you expect that the number of employees or expenditures in certain areas will increase?
Siegel: A video site card is a good example of investing in improved advertising, and these investments are beginning to pay off. We did see that advertising spending on Twitter increased as a result of video site cards and video application cards. These are two new advertising models that have been a positive catalyst for fourth quarter earnings growth. We prefer to think of these things as examples of how we can improve conversations and increase advertisers' investment in Twitter.
If you look at the growth in spending, you'll understand that we still have the opportunity to rationalize costs, but what we really focus on is investing in 2018 growth. We're investing in products, and we're investing in sales to ensure that we have the right people in the market to communicate with advertisers about the quality of information or the audience and the growth in engagement, to introduce what happens on the Twitter platform All the great things. Therefore, these investments should make spending and income more closely match, which is why this year's profit margin should be similar to 2017. Profit margins After more than a year of significant growth, we will expand from now on.
Anthony DiClemente, Evercore Analyst: Ned, would you please talk further about the specific benefits of seasonal factors from the advertising market, preferably quantifying them. Second, what is the performance of brand advertising and direct response advertising? You said that brand advertising is the biggest contributor to performance, and the future of brand advertising is sustainable compared to DR.
Siegel: We saw the strong momentum of the branding advertising business throughout the quarter, showing a seasonal strongness in the fourth quarter, but we feel that much of the things we saw in the fourth quarter were audience and engagement growth, and execution continued Improve and improve the ROI we provide for advertisers.
Whether it's Black Friday or major sporting events, these events are driving the growth of Twitter businesses, and we think their impact will last longer, and we are becoming an advertiser's all-weather partner, which is good for us .
The brand advertising business will continue to be the largest contributor, but we are also very pleased with the current progress of the DR business.
Deutsche Bank analyst Lloyd Walmsley: Ned, fourth-quarter earnings report that on average about 200 million people return to the Twitter platform every day. I wonder if this trend is sustainable? Will it continue after 2018?
Siegel: As we said during a conference call in October, more than 2 million people revisit Twitter every day. These people have not used Twitter services for 30 days or more. Two-thirds of them Have been to Twitter but have not done so for at least the last 30 days, so we had the opportunity to get them back to Twitter more often and have them stay as long as possible. The other one-third have never visited Twitter before.
These data have not changed for a long time. This is a great way to consider the health of each part of the platform and our continued ability to drive increased Twitter usage. We continue to focus on product improvements and we can continue to maintain this momentum.
Jack, would you like to talk about some of the work we did in product improvement?
Dorsey: We continue to focus on our core work is to let people know the world. We continue to benefit from applying machine learning and in-depth learning to the product arena, where people spend most of their time on these products.
We are expanding the scope of our application of these technologies, the application of these technologies to more surface areas, especially in the area of application discovery. So, as you may have noticed, there is a "Happening Now" module on your timeline. When we learn that you are interested in a team, for example, when the team is playing a game, we will put a notice at the top of your timeline, you can click on the match to see the score or the track Real-time statistics, as well as all the comments on this game.
We intend to build a more cohesive strategy around current affairs news events that includes all the dialogue, and if we have the chance, there may be live video, which is just the first step toward this strategy. In the past, we have talked a lot about topics and interests. This is what we really feel excited about. We think they really touch the core of what people think of Twitter as the platform of choice, and that is, they follow their interests and focus on what's going on. As a result, we are focusing more and more attention on 2018 to make it easier for users to keep track of their interests, topics and events.
Walmsley: CPE seems to have dropped, down 42% from a year earlier. Looks like the third quarter. Can you talk about how this indicator will change in the future?
Siegel: We do not provide such a guide, but you are right, CPE has been declining in 2017. This is largely driven by changes in the product mix, and our portfolio is now continuing to shift to video, our largest form of advertising, and continued to grow in the last quarter. CPE is an important factor in improving ROI.
The other part is that advertising engagement increased by 75% in the previous quarter. As advertisers get lower costs, higher clickthrough rates, more engagement with better ad models, more ad relevance, more audiences, and more engagement, advertisers will be able to tap into Twitter Get a higher return on investment. We see our CPM has been steady and we expect this trend to continue, and we try to think more about CPM than CPE or anything else.
Rich Greenfield, BTIG analyst: Jack, I do not think we should go visit the "Explore" tab, and I know a lot of people have said that why not put all the videos in one Under the label? If you're working well, show me the content and tweets I want to see, whether it's a tweet or video to the right of the news feed or tweets and videos I see when I scroll. Please talk about the progress you have made in product improvement over the past year by yourself and your company.
My second question seems that you have some very large-scale activities in the United States this year. However, from a global perspective, the Olympic Games and the Summer World Cup, which are opened later today, are the highlights. As you stand on the global stage When do you see these events will affect the company's quarterly results?
Dorsey: We have so many parts to serve our work, to provide people with information that truly meets their needs. One thing to note is that exploring labels is one way we test concepts and experiments, where we test new concepts and refine them. Through it, we are more confident about what we put on the timeline.
The "happening" module at the top of the timeline is an example of how we test and experiment with sporting events. As we learn more and more, as we become more confident in the signal, getting better at using techniques like machine learning and deep learning, you'll see more from "exploring" toward the timeline change. Our goal is to make the timeline more personal and closer to people, so you are right.
As we do a better job, you will see more on the timeline, and when you open the app, you spend most of your time on the timeline. This has been the focus of our attention for the past two years, and we've added more relevance to the timeline and notices. So, I think we did a good job in this area and in order to do that, we have to prepare the infrastructure accordingly.
We've been cleaning up a lot of these things to make sure we can build a system that allows us to apply machine learning to every surface area of the product and I'm pretty confident we can do that. We will move faster in 2018 to cleverly put tweets, events and accounts on people's timelines.
Siegel: You talked about the major events that will take place in 2018. I have two ideas. First, there are events at any given time that can be a positive catalyst for your business, including driving Twitter visits or user usage on Twitter, or growing conversations on Twitter. In the fourth quarter, we launched some events around such big events as the election and the NFL rugby match, and we're still proud of our 7% YoY growth in O & O advertising revenue.
Looking into the future, you are right, there are many major events this year to happen, which is a good opportunity for us. At the same time, we see that their impact is smaller than before because people think Twitter is an all-weather partner for advertisers, and people value longer rather than one day. As businesses and revenues become more globalized, these country-wide events continue to be a positive contributor to performance growth, but their impact on the business will be much smaller than in the past.
Justin Post, Bank of America Merrill Lynch analyst: Do you have any metrics or signals of what time you spend on Twitter? How do you think about the long-term profit model when you look at how much time or activity each user spends? Especially compared to Facebook and other social networks. Do you think there is much room for improvement in terms of ad loading and how you compare with Facebook?
Siegel: From the perspective of spending time per user, we feel good about our current state, but when we think about the audience, engagement and the best way to measure Twitter usage, what we really discuss and focus on is day The growth rate of active users, this indicator has been for five consecutive quarters to maintain double-digit growth. When we consider the degree of participation, we try not to focus on one of the indicators, because that may make us too concerned about a particular indicator and ignore the other indicators.
Regarding ad load, ad load in the fourth quarter is usually high due to seasonal demand. It sometimes falls in the first quarter. But as you take a step back, we think overall, our overall business is more demand-constrained rather than supply-constrained. Looking at the continued growth in click-through rates in the fourth quarter and the declining cost of participation per user, this has brought a better return on investment for advertisers and is a big driver for us.
UBS analyst Eric Sheridan: Now that Twitter is about to make a profit from GAAP, a lot of free cash is also released inside the company. How do you re-examine or consider the cash on your balance sheet? What is the best way to allocate capital through mergers and acquisitions or the consideration of returning capital to shareholders? I just want to have a holistic view of the company's current framework.
Siegel: We are very satisfied with the company's 550 million free cash flow generated. Every quarter we try to look at our capital structure to make sure that it is the best fit for the company's business and the opportunities we see, and that we have not changed our minds yet. All, Eric, we do not have any new information to share right now.
Investors ask via Twitter: Has the confusion of new users diminished since you expanded the push word limit?
Dorsey: We have completed the release of the new 280 character rule, which is now applied to all old and new users. I want to remind everyone that we should do this? One of the reasons is that we often see people typing more than 140 characters in tweets and simply giving up tweets. So, we want to try to give them more space, and we are observing whether the average length of the tweets will increase, but the result does not increase.
We found that people did reduce the number of tweets posted, and we also saw more engagement with users. We see more forwards and citations, and we see that people get more attention and response. So we believe this will minimize complexity and confusion on the Twitter platform. More generally, it is more important to make people more expressive and share their ideas; it turns out to be helpful to give people more room.
Mark May, Citi Global Markets Analyst: In the past year or two, you signed a number of co-op deals for live content. Could you talk about the impact these co-ops have on the company's ad business? Second, you expect spending to grow at a similar pace to revenue growth this year, but to correct expectations, I think it would be easier to have a first-half profit margin than a second-half profit margin. So my question is, will we continue to see in a short period of time that the rationalization of spending has a positive impact on the trend of profitability?
Dorsey: Let me answer your first question. So, it has had a positive impact on the advertising business. We see a lot of positive emotions on live streaming and streaming media, mainly because it is very fit with Twitter's values. People come to us to see what's going on in the world and learn what's going on based on their interests, and live video helps us to be the fastest-breaking news outlet and, more importantly, it creates a dialogue Relevant comments are displayed.
For us, one of the most important things is to continue to expand our live broadcast strategy in the direction of the event. As I said before, no matter what happens now, no matter what your interest in the topic and interest, you are You can quickly find the relevant conversations and comments. In some cases, we have one or more streams of live streams related to the topic, interests, or events, but you can always see conversations and expert comments anyway. Therefore, we will continue to see many benefits from this strategy. We are very pleased to see improvements and build on this foundation.
Siegel: As for the issue of spending, we give guidance for the quarter on EBITDA and profitability. In our seasonal business, as we continue to invest more in human resources, the spending base may continue to grow. We can only raise profit margins by raising our incomes, and you see the growth of revenue and profit margins during the seasonally strong period.
Looking back over the past year, we think our spending should be closer to income than in the past. I think what you are referring to is what I said when it comes to investing in 2018 growth, but that is not the case. We do not talk much about the quarterly spending and how they should work.
JMP Securities analyst Ronald Josey: I think you mentioned the investment in product sales, can we talk about it, with the efficiency is improving, the direct response is getting better, sales How is the amount of change?
Dorsey: We are very satisfied with the implementation of our sales team and the entire cooperative team, and we see a lot of strong momentum in this team. One of our most recent initiatives is to assign Matt Derella, vice president of worldwide revenue and operations, to lead all of our sales efforts and take on more responsibility for live streaming and content collaboration. So we're going to combine these strengths, something that Matt does for naturalization because he is very business-minded and will work with the product team to make sure that we're building on everyone on Twitter Cooperation. Therefore, I am very satisfied with our current location, implementation and all the disciplines that we carry out in the team.
Siegel: I added two points. We are investing in sales now because we see an opportunity to continue to improve our conversations with advertisers. We now have a different conversation with them, and these conversations are different, either in their pre-communication or in comparison with the past. Given that the ad model has improved, audiences and engagement have increased, the ROI has increased, and our salespeople have been able to communicate with advertisers more effectively. These things prompted us to continue to invest more in sales. The turnover rate of our sales team has recently dropped, and we will recruit more sales staff this year.
RBC Capital Markets Analyst Mark Mahaney: I ask two questions. First, Noto is gone. Do you need to add fresh blood to the executive team? Second, I think you said that you think you have made very good progress in Japan. Can you talk about those factors that promote the monthly growth of active users in the international market? What are the factors that promote the growth of active users in the international market? Is this driven by the growth of a particular international market?
Dorsey: we do not intend to after Anthony left on the executive team of. This can prove Anthony's contribution to the company and the power of the management. So, the executives in our team will share the responsibilities of the former Anthony. We are happy to see the organization in a new way, but our management has a strong strength and we are confident of this strategy.
Seagal: I can talk about two points about the international market. In terms of revenue, we see that all international markets are strong in the past quarter, so our US business is basically flat, and all other markets are growing. We find that the performance of Japan and the Asia Pacific region is particularly strong. The Asia Pacific region, especially from China's export market, is very strong. We will continue to help Chinese brands transmit their information to outside China. The development of the European market is also good. When we are back on the track of income growth, we see a wide range of improvements, and we are proud of it.
Let's take a look at the growth of our audience and participation. 5 of the 10 largest markets have achieved two digit growth, which indicates that the audience and participation are improving. Things like Twitter Lite are still in the early stages, and the base is small, but it helps us open up some emerging markets. And the improvement in product Jack talked about is helping us all over the world.
Brian Nowakaki, Morgan Stanley analyst: O.
And then the investment in 2018, Jack, you have just talked about some of the friction points, which led to the 2 million - day visitors not leaving. Can you talk more about it?
Seagal: on the advertising model, we have found that all of our major advertising models have maintained strong growth. Brand advertising is a big driving factor. Jack said that direct reaction to advertising is also good. We are very satisfied with the implementation of these operations and the extensive achievements they have achieved.
We saw strong growth momentum from advertisers is extensive, but you can imagine, if you launch a product, if there is someone on your network products, if you are in the holiday season advertising to consumers, Twitter is a very good platform. The success we see is extensive.
As we mentioned before, we have got more customers in the United States and on the international market. The same is true in the fourth quarter. A lot of work is now delivering information and execution, which resonates with the hundreds of advertisers and will extend to a wider group of advertisers. So, some of this information is just to let more people in the industry know this information, not to consider other vertical areas.
Dorsey: in terms of friction, it's becoming increasingly clear that people visit Twitter with a very clear purpose. This is not the same purpose they have when they visit other social networks. People visit Twitter because they are interested in something. They are interested in the follow-up of specific interests or topics. We cannot match them quickly with what they are interested in.
So we put the landing especially as registration is an important transaction, to ensure that we consider their environment including where they are, when to visit Twitter, what you are interested in, and then as soon as possible will interest them and what they are matched together. In the process of matching, we will reduce the correlation coefficient of the accounts they concern, and increasingly connect them with the interests and topics they are interested in.
Jefferies analyst Brent - Hill (Brent Thill): how are they going to the Twitter platform for advertisers outside the top 100 advertisers? What did you find out from the relevant indicators? Do you see any trend?
Seagal: the success of our cooperation with the top 100 advertisers is driven by some factors. We believe that what really resonates with them is improved audience and participation, better advertising mode and higher relevance, which brings better return on investment.
The implementation of sales is to ensure that we tell our story, the success of detection and our influence on advertisers, which is very different, which makes us confident of the growth of investment in 2018.