Twitter survives Trump account ban with an increase in users following January move

After kicking former President Donald Trump off its platform a month ago,  Twitter announced Tuesday it gained more daily users in January than the average number it has added in that month over the past four years.

While some critics were expecting a drop in users following the Trump ban, Twitter CEO Jack Dorsey told analysts Tuesday, “We’re a platform that is obviously much larger than anyone topic or anyone account.”

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While most of Twitter's earnings release was devoted to the final quarter of the year where the company raked in more than $1 billion in revenue, Twitter did take the unusual step of offering user growth guidance for the current quarter. The company did so because of the circumstances involving the former president's suspension from the platform following the January 6th attack on the U.S. Capitol by groups of his supporters and following two tweets he made which the company said were in violation of its glorification of violence policy.

Although not offering a figure for the new users added in January, the company did note daily users climbed to 192 million from 187 million in the third quarter, helped by one million new users in the U.S. The domestic market also accounted for the bulk of the fourth-quarter revenue of $1.29 billion. The U.S. was responsible for $733 million good for a year-over-year increase of 24%.

International revenue increased by 34% to $556 million, with revenue from Japan, the social media giant's second-largest market, increasing 26% to $176 million, or 14% of total revenue.

As for advertising revenue, the company reported a 31% increase to $1.15 billion for the quarter, with total ad engagement growing 35% over the same period. Data licensing and other revenue increased 9% to a total of $134 million. Mobile application promotion (MAP) ads totaled more than $300 million in fiscal year 2020, roughly flat year-over-year. However, MAP revenue for the quarter increased 50% year-over-year. The company also announced the launch of its rebuilt MAP offering and website clicks objective, which the company says will "increase our addressable market and diversify our customer base."

After-hours trading saw the stock up more than 2%.

Operating income totaled $252 million, or 20% of total revenue, compared to $153 million, or 15% for the same period in 2019.

Total costs and expenses for the quarter grew to $1.04 billion in the fourth quarter, with the cost of revenue, driven by traffic acquisition costs, revenue share from partnerships, and public cloud-related expenses, growing 38% to $433 million, research and development expenses growing 25% to $248 million due to higher personnel-related costs, sales and marketing expenses growing 1% to $244 million due to increased outside services and higher sales-related expenses, and general administration expenses growing 12% to $112 million, primarily due to higher personnel-related costs.

In addition, stock-based compensation expenses grew 27% to $128 million, accounting for approximately 10% of total revenue.

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Twitter ended the fourth quarter with more than 5,500 employees worldwide and approximately $7.47 billion in cash, cash equivalents, and marketable securities.

Net cash for the quarter was $330 million, an increase from $277 million in the same period last year, while capital expenditures for the quarter totaled $292 million, compared to $150 million in the same period last year, driven by "infrastructure investments in data center buildouts to support audience growth and product innovation." Adjusted free cash flow for the quarter was $38 million, compared to adjusted free cash flow of $127 million in the same period last year.

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In addition, the company initiated a stock buyback program in the fourth quarter, bringing in a total of $251 million of its stock during the quarter. The company intends to repurchase a total of $2 billion of Twitter stock over time to "maintain an appropriate capital structure, offset stock dilution, and return capital to shareholders."

"Our pace in future quarters is likely to be lower and may vary based on the operating environment, our capital needs, and market conditions," Twitter said in its shareholder letter.

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Looking ahead, the company expects to grow its headcount by more than 20% in 2021, especially in engineering, product, design, and research areas. However, the company expects total costs and expenses to grow 25% or more in 2021.

Twitter expects total revenue for 2021 to grow faster than expenses, assuming the pandemic continues to improve and taking into account an expected “modest impact” from Apple’s upcoming privacy changes to iOS 14. In the first quarter of 2021, the company estimates revenue to grow between $940 million and $1.04 billion and operating income to be between a loss of  $50 million and break even. For fiscal year 2021, Twitter expects stock-based compensation expenses to be between $525 million and $575 million and capital expenditures to be between $900 million and $950 million.