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Twitter Punches Up Q1 Revenue 21% on Strong International Sales, Posts Second Profitable Quarter

Twitter beat forecasts on the top and bottom line in the first quarter of 2018, lifted by a 53% jump in international revenue and a net gain of 6 million monthly users.

The company reported Q1 revenue of $665 million, up 21% year-over-year, and net income of $61 million (versus a net loss of $62 million in the year-ago quarter). It was only Twitter’s second quarter of posting a profit, after delivering its first net income in Q4 of 2017.

Adjusted earnings per share of 16 cents exceeded Wall Street’s expectations EPS of 12 cents, while Twitter beat analyst expectations of $605 million in revenue.

Twitter shares were up more than 2% in premarket trading Wednesday on the results. However, the stock dropped into negative territory after the market opened, falling more than 3% in morning trading after Twitter warned that will “face increasingly difficult comparables in the second half of 2018” given the turnaround in the business that began in the second half of 2017. “As a result, we continue to believe that our sequential growth rates for total revenue for the remainder of 2018 will resemble the sequential growth rates for total revenue in 2016,” the company said in a letter to shareholders.

According to Twitter, video now accounts for more than half of its ad revenue — which totaled $575 million in the quarter — and was again the fastest-growing ad format in Q1.

International revenue totaled $318 million, an increase of 53% year-over-year. Twitter called out particular strength in the Asia-Pacific region: Japan continued to be its second-largest market in terms of revenue after the U.S., with sales rising 61% year-over-year and contributing $117 million (or 18% of total revenue) in Q1.

Twitter’s average monthly active users grew 3% in the period, to 336 million for Q1, representing a net increase of 6 million sequentially. Most of that was overseas: In U.S., Twitter had 69 million MAUs (up about 1 million from the prior quarter). Analysts had expected Twitter to add a net 5 million monthly active users in Q1.

Once again, Twitter touted growth in its average daily active user base — saying it was up 10% year-over-year — but as usual it did not provide actual figures on the DAU metric.

“The first quarter was a strong start to the year,” Twitter CEO Jack Dorsey said in announcing the results. “We grew our audience and engagement, marking another quarter of double digit year-over-year DAU growth, and continued our work to make it easier to follow topics, interests, and events on Twitter.”

Twitter’s Q1 adjusted earnings before interest, tax, depreciation and amortization (EBITDA) was $244 million, compared with $170 million for the same period last year.

Stock-based compensation in Q1 declined 37% year-over-year, to $73.3 million. For Q2, Twitter expects adjusted EBITDA to be between $245 million and $265 million, and stock-based compensation expense to be $85 million to $95 million.

Twitter’s ad revenue on owned-and-operated platforms was $533 million, up 28%. Non-O&O advertising revenue fell 28%, to $42 million, driven by a $23 million year-over-year decline from the deprecated TellApart product (which did not generate any revenue in Q1). Excluding TellApart, non-O&O advertising revenue would have increased 18%.

Twitter ended Q1 2018 with $4.5 billion in cash and equivalents, and $1.6 billion in long-term debt.

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