Twitter has announced financial results for its third quarter of 2021.
“I am proud of our third-quarter results. We’re improving personalization, facilitating conversation, delivering relevant news, and finding new ways to help people get paid on Twitter,” said Jack Dorsey, Twitter’s CEO.
“Average monetizable DAU (mDAU) reached 211 million, up 13% year over year in Q3, accelerating from 11% year over year growth in Q2, driven by ongoing product improvements and global conversation around current events.”
“Our focus is paying off, and we are pleased with our performance in the third quarter, with revenue up 37% year-over-year, reflecting strength across all major products and geographies,” said Ned Segal, Twitter’s CFO.
“We continued to drive increased value for our advertisers thanks to revenue product innovation, including progress on our brand and direct response offerings, strong sales execution, and a broad increase in advertiser demand. These factors contributed to 41% year-over-year growth in ad revenue in Q3.”
Third Quarter 2021 Operational and Financial Highlights
Except as otherwise stated, all financial results discussed below are presented in accordance with generally accepted accounting principles in the United States of America, or GAAP.
As supplemental information, we have provided certain non-GAAP financial measures in this press release’s supplemental tables, and such supplemental tables include a reconciliation of these non-GAAP measures to our GAAP results. The sum of individual metrics may not always equal the total amounts indicated due to rounding.
Q3 revenue totaled $1.28 billion, an increase of 37% year over year.
○ Advertising revenue totaled $1.14 billion, an increase of 41% year over year.
i. Total ad engagements increased 6% year over year.
ii. Cost per engagement (CPE) increased 33% year over year.
Data licensing and other revenue totaled $143 million, an increase of 12% year over year.
US revenue totaled $742 million, an increase of 45% year over year.
International revenue totaled $542 million, an increase of 28% year over year, or 27% on a constant currency basis.
iii. Operating loss of $743 million, or an operating margin of -58%, includes a one-time litigation-related net charge of $766 million1, as well as ongoing investments.
Adjusted operating income, which excludes the one-time litigation-related net charge, was $23 million reflecting an adjusted operating margin of 2%. This compares to an operating income of $56 million, representing an operating margin of 6% in the same period of the previous year.
iv. Stock-based compensation (SBC) expense grew 42% year over year to $164 million and was approximately 13% of total revenue.
v. Q3 net loss was $537 million, representing a net margin of -42% and diluted EPS of ($0.67). This compares to a net income of $29 million, a net margin of 3%, and diluted EPS of $0.04 in the same period of the previous year.
vi. Net cash provided by operating activities in the quarter was $389 million, compared to $215 million in the same period last year. Capital expenditures totaled $409 million, compared to $289 million in the same period last year, driven by infrastructure investments in data center build-outs to support audience growth and product innovation.
vii. The average monetizable daily active usage (mDAU) was 211 million for Q3, compared to 187 million in the same period of the previous year and 206 million in the previous quarter.
The average US mDAU was 37 million for Q3, compared to 36 million in the same period of the previous year and 37 million in the previous quarter.
We continue to expect total revenue to grow faster than expenses in 2021 (excluding the litigation settlement announced in Q3), and we expect to continue our investment posture as we enter next year.
Our 30%+ headcount growth in 2021, with annual merit increases, and other investments we made in 2021, including our new data center, will flow into annual expenses for 2022, likely resulting in a mid-20% increase in total expenses next year prior to hiring any more people or making additional investments during 2022.
Before providing 2022 guidance in February, we wanted to share some additional information regarding the sale of MoPub. The sale is expected to close in Q1, and while the associated product, engineering, and go-to-market teams are largely expected to shift to direct response, SMB, and commerce upon closing, it will take time for their work to deliver results.
As a result, we do not expect to recoup the total revenue loss associated with the sale of MoPub in 2022, which is estimated to be between $200 and $250 million.
Despite some expected 2022 revenue loss, there are no changes to our goal of generating $7.5 billion or more of annual revenue in 2023 with an increased focus and additional resources working on increasing our market share within the ~$150 billion and growing addressable market for ads on our website and apps.
Our outlook for Q4’21, which includes MoPub, is as follows:
i. Total revenue is expected to be between $1.5 billion and $1.6 billion.
ii. GAAP operating income is expected to be between $130 million and $180 million.
iii. Capital expenditures are expected to be between $85 million and $135 million.
iv. Stock-based compensation expense is expected to be approximately $175 million.
Note that Twitter’s outlook for Q4 reflects foreign exchange rates as of October 2021.