Twitter’s Revenue, Adjusted Earnings Fell About 40% in Month of December | Hacker News Reader

Twitter’s Revenue, Adjusted Earnings Fell About 40% in Month of December

wsj.com

81 pointsdonohoe114 comments

It's interesting to consider that the company was profitable in 2018 ($1.2B) & 2019 ($1.4B) [0].

It would have also been profitable in 2021 if not for a $900 million lawsuit settlement hitting the books.

It was by no means a sinking ship until the acquisition and subsequent "improvements".

Perhaps they'll turn it around but there was probably a more predictable path back to profitability than the one Musk chose.

[0] https://www.statista.com/statistics/274563/annual-net-income...

While Twitter itself is not a sinking ship, the current equity holders are. The debt cost will be ~1.5B this year. The current equity holders will be diluted thru a new funding or thru a bankruptcy liquidation, though I feel it's unlikely Elon let's it go that far.

Revenue down 40% in Decemeber. Extrapolate that to an entire quarter (last year Q4 was 1.57B) means 942M of quarterly revenue. Out of that, he needs to pay something like 1.25B/4=312.5M (maybe more? Seems like some of the debt is variable rate) in interest on the loans he used to acquire the company. That’s 30% of revenue just needed to service Elon’s debt.

That leaves $629M/quarter with which to operate the business which cost 1.38B to run in Q4 2021. Has he slashed operating costs by >55%? He fired 75% of employees but there are plenty of non-payroll costs as well that are harder to trim (real estate, storage and compute costs, etc). That’s what “trending toward break even” would look like.

It all sounds pretty insane to me. But just imagine what the TWTR stock would have done if the last CEO had cut costs even a little without Elon’s debt weighing the balance sheet down and Elon’s erratic behavior scaring advertisers away. I think it shows Twitter could have very easily turned a healthy profit if that had been their priority. It was not a company in financial crisis as Musk apologists sometimes like to suggest.

> real estate

Reports began surfacing as early as December that Musk is refusing to pay rent for Twitter's offices (https://www.cnbc.com/2022/12/13/twitter-reportedly-hasnt-pai...), so we already know what his tactic is there. One might even be sympathetic, were it not for the fact that he also nixed WFH and ordered everyone back into the offices that he now refuses to pay for.

They tried that with their Singapore office and the landlord just walked the staff out of the building. Apparently that caused them to pay up pretty quickly. https://news.yahoo.com/twitter-employees-escorted-singapore-...

I’m never sympathetic toward billionaires that don’t pay their bills.

> Reports began surfacing as early as December that Musk is refusing to pay rent for Twitter's offices...

And what's the strategy there? Isn't the best that can be expected is Musk kicks the can down the road, and in the end pays the rent plus $$$ in legal fees?

I'm sure someone will say Musk is a billionaire and they can weasel out of anything in the legal system, but he wasn't able to do that for the Twitter acquisition and wouldn't a lease be a pretty air-tight contract?

> And what's the strategy there? Isn't the best that can be expected is Musk kicks the can down the road, and in the end pays the rent plus $$$ in legal fees?

I mean if you don't have any money right now; paying $X+N later sounds better than paying $X now when you don't have X.

No, the best outcome is actually that Musk is in a negotiable position since due to office vacancies those properties would just sit vacant.

That means he likely can manage to settle for less than his current rent because the owners will be willing to negotiate -- because some money is still better than no money.

> I think it shows Twitter could have very easily turned a healthy profit if that had been their priority

Standard tech business model - reinvest all the profits into growth.

> He fired 75% of employees

Wouldn’t that allow them to massively downsize wrt real estate?

Eventually they can downsize, but corporate leases are usually signed for very long terms because of all the investment in “building out” the space to meet a company’s customized needs. You can’t just snap your fingers and walk away from these lease agreements.

Ah, yeah, I forgot about that. Still, that should allow for decent reductions in the future.

At the same time he also demanded that everyone return to the physical office, in a company that prior to acquisition had committed to permanent WFH for anyone who wanted.

Fun fact: to this day, the most-upvoted Twitter thread of all time on HN is "Twitter Will Allow Employees to Work at Home Forever": https://news.ycombinator.com/item?id=23155647

Does anyone know what the percentages were?

Twitter lost 500MM to 1000MM a year for the last 12 years.

Not a company in financial crisis?

In what universe?

> Twitter lost 500MM to 1000MM a year for the last 12 years.

That did not occur in this universe

Accumulated past losses are typical for growth companies. Uber has about $33 billion in accumulated losses on its balance sheet. It's not any kind of automatic death sentence, just a sign that investors really wanted to pour money into this company over a long period of time.

Can the drop in revenue be offset by the ~80% drop in payroll? None of the prognostications about Twitter’s total and utter technical collapse after such a dramatic headcount reduction came true [0]. It still may be a bit premature even after a few months to say that the company is perfectly fine with so few engineers (e.g. can it survive a disaster recovery situation [1]?), but the platform is definitely performing far better than almost anyone predicted.

[0] https://daringfireball.net/2022/12/twitter_still_up

[1] https://twitter.com/matthew_d_green/status/15919392829479526...

The site has been pretty unstable recently. The headcount cost reduction is worth much less than the additional cost of lost ad revenue + interest payments. Twitter was break even pre-Elon and is now down billions per year.

The collapse won't be technical, as I'm sure the engineers which remain can keep the systems running.

The collapse will happen due to the lack of remaining moderators. Twitter will become completely toxic to advertisers, politicians and influencers, who won't want to remain on the platform. Hate, antisemitism, and unmanaged CSE and SE material are growing.

There was an interesting BBC story about this today: https://www.bbc.co.uk/news/technology-64804007

>The collapse will happen due to the lack of remaining moderators.

Orwellian garbage. The internet was just fine and companies insanely profitable before the the censorship tyrants showed up and demanded everything be their way.

I swear sometimes it feels like the 90’s Christian fundamentalists won, they just rebranded.

This just isn't true. Popular sites have had censors from the very beginning. No one is using sites that are full of spam and child porn.

I use Twitter for multiple hours every day (I'm addicted) and have never seen child porn.

That is the effect of all those moderators working.

I thought they were all fired? Are you saying they are working for free (like reddit mods lol)?

> The internet was just fine and companies insanely profitable before the the censorship tyrants showed up and demanded everything be their way.

What strange way to conflate profits and censorship.

Also, you are forgetting just how different the internet was a couple of decades ago. Social media really did change the game in terms of idea (bad ideas too) dissemination. Good ideas, bad ideas, lies are shoved down everyone's throat constantly, and not everyone is rational and can tell the difference between those three things.

So no, this isn't fundamentalism winning. This is culture changing, and the rules and regulations changing slower.

> definitely performing far better than almost anyone predicted.

Everytime I log in to the twitter app, the notification icon lights up, then turns off, and sometimes it lights up again with some delay. Some other times it stays lit up and doesn't turn off, even though I have no new notifications. It's gotten to the point where I no longer check the notifications because the indicator is wrong almost all the time.

The timing on this post is pretty funny considering Twitter is experiencing a major outage right now: https://twitter.com/twittersupport/status/163279294226274713... (probably wont load because twitter is experiencing an outage, here's what it says:

"Some parts of Twitter may not be working as expected right now. We made an internal change that had some unintended consequences. We're working on this now and will share an update when it's fixed.")

Twitter's web app has been grotesquely slow for me the last two weeks or so. It takes literally five seconds from the moment of navigating to it to showing just the background color.

Decay is not a binary thing. It happens gradually. One data point: I saw reporting that the rate of significant outages through February of this year is almost 5x what it was last year.

> Can the drop in revenue be offset by the ~80% drop in payroll?

So, I suspect it does offset some of it but still remember that twitter is spending ~1.5 Quarters of payroll in order to get this offset.

For 2022Q2, twitter had a revenue of about 1.2B and stock based compensation of .28B [1]. So assuming, stock compensation is 2x cash compensation would imply that saving 80% in payroll saves < 0.7B per quarter which is 3/4 of their lost revenue [2]. I suspect it's really going to be like 3-5x though as employees with high compensation skew heavily towards stock.

Note: I did round numbers often.

[1]: https://s22.q4cdn.com/826641620/files/doc_financials/2022/q2... [2]: https://news.ycombinator.com/item?id=35041019

> Can the drop in revenue be offset by the ~80% drop in payroll? None of the prognostications about Twitter’s total and utter technical collapse after such a dramatic headcount reduction came true [0].

I think there's a famous Hemingway quote that goes something like "change happens slowly, then all at once." Twitter still may be able to coast for awhile, even if 100% of the technical staff were fired, but they've certainly lost a lot of knowledge and likely put those that remain in a situation where burnout is likely [1]. If there's going to be a technical collapse, I think it will be over a longer term.

[1] Especially since I see little in Twitter to keep an engineer passionate. There's no story here about saving humanity from climate change or colonizing Mars. It's just "keep the boss happy" and "keep prior achievements from being ruined," but those aren't very motivating and Musk seems to have a talent to undermine them.

Why can’t we get past this?

Some people, probably that didn’t know what they were talking about, expected that everything would fall over right away. I think most of us knew that this wouldn’t happen.

This doesn’t mean that there wasn’t merit in the view that reducing Twitter’s headcount so drastically and suddenly would result in platform instability.

My understanding is that Twitter has been unstable. I’m not using Twitter anymore, but I’ve heard it from a bunch of people, including people who aren’t politically motivated to make that claim.

> None of the prognostications about Twitter’s total and utter technical collapse after such a dramatic headcount reduction came true [0].

There are a lot of annoying bugs that cropped up over the last months, and most of these involve features rarely used.

My pet peeve is search: You have to do a search using the from-keyword like ten times or more until it actually shows results. When you scroll down for older results, you have to scroll to top and then to the bottom again because it doesn't have an "Older" button, just infinite scroll. There is no way to make the search remember you prefer recent results instead of "top" with a completely intransparent ranking.

On top of that comes general instability - the app and website keeps randomly forgetting you're in the "I follow" timeline, the "for me" algorithmic timeline has sometimes hours worth of lag and is filled with crap - no I don't want to see porn someone else liked, or endless pages of replies against some random Nazi or TERF. DM groups take ages to load or stay in a weird half rendered state in the app.

The seams are falling apart.

No, because Elon funded the acquisition with loan money and yearly debt payments alone jumped to 1.5B.

Interestingly, within a few hours of this post, they seem to have deployed or changed something that has broken most of the site for most users.

This used to happen a long time ago, once in a while with pre-musk twitter, but I don't recall it happening in the past few years.

I don't understand why Musk didn't wait a few months for things to settle down before raising hell at Twitter. Before he bought it people were saying "He's gonna destroy Twitter!" and then he buys it and behaves as if he intends to prove them right.

There's no understanding what he's done, really. He could've pursued a traditional m&a strategy with real diligence and been able to back out when the market made it clear he was overpaying. He could've bought 10 or 15% and gotten a board seat and then gotten any information he wanted. A fun thing to think about: how much of what he accomplished in reality could he have accomplished if he'd only bought enough to get a board seat?

But he had exactly that option. He quite deliberately chose not to join the board when he learned about the obligations of corporate board members to shareholders as a whole.

No doubt he would have been influential as a board member, but there’s no way he would have been able to change as much as he’s had (or get the rest of the board to accede to the massive vaporization of equity value).

Because to him this isn't "raising hell", this is "solving Twitter". But he's still not capable of understanding that social media is actually a far, far harder problem than cars or even rocket science.

Specifically, social media does not have an end goal, like a car on the road or getting people into and back home from space safely. Social media is infinitely messy because that's what we humans are, and you can't "fix" that.

Even if he was totally right he was aware that most people thought he was wrong. It's insane to make advertisers and investors think you're a lunatic whether or not you actually are when your income is dependent on those advertisers.

Because he bought a break-even business at an elevated price, on the precipice of an industry-wide decline, and saddled it with huge interest payments. He had no lever to pull to increase revenues that much, so he had to cut costs dramatically from day one and hope the business would stabilize at a smaller size. Remains to be seen if it will.

There’s a reason he tried to get out of the purchase…

My main takeaway from watching him fumble around haplessly at Twitter is that there's not a chance in hell that I'd ever get in a car built by a company that he runs like that, let alone a rocket.

Credit where credit is due - he’s very good at manufacturing. I don’t think the software has ever been the strong point for Musks businesses. Infamous self driving mode being the most obvious example.

Twitter is pretty much just software (and a few data centers?) so not playing to his strengths. Of course he got himself in this mess with his ego

> he’s very good at manufacturing

Tesla's quality control is infamously bad. Rather, Musk is very good at marketing, being able to project his reality distortion field far enough to sell shoddily-manufactured cars for luxury-car prices.

>> he’s very good at manufacturing

> Tesla's quality control is infamously bad.

Also I believe SpaceX is effectively run by other (competent) people, and Musk stays out of the rocketry part.

>Also I believe SpaceX is effectively run by other (competent) people, and Musk stays out of the rocketry part.

This is extremely hard to believe, given interviews with him, former employees and even astronauts that trained with SpaceX.

If you believe the articles, SpaceX is very good at actively managing Musk.

There's an awful lot of software involved in his cars and rockets too though, and what has been very obvious in his time at Twitter is that he's perfectly happy to demand a new feature be added in a stupidly short timeframe but apparently incapable of either thinking through the consequences of adding it, or listening to someone who can.

Would be interesting to know how such demands are handled at Tesla and SpaceX. Twitter, being a company he just bought, not was part of building up, may not have the same mechanism and culture to handle these things.

Well the proof is in the pudding. I’m willing to wait to Dec ‘23 and see where things are.

/I would ride in a falcon9 and NASA feels the same.

He made a mistake, and an expensive one.

If he bought Twitter now, he probably only need 1/2 or 1/3 what he paid.

Truth to be told, even the richest man in the world can’t predict the market

Waiting would probably meant bigger losses in time. If you want to refactor a business, better do it quick.

I think refactor might be the wrong term here - typically if you want to refactor something you have to know what it's doing and why it's broken. In my uninformed opinion it seems like the changes happened so fast there was no time for that initial evaluation.

It's fascinating to watch him learning in real time as he is experiments and bring his own experience to it. He has been a successful executive for a tech company before, Tesla is just a tech company that sells cars. Now social media

He came in shook it up and innovated. Facebook copied his subscription idea. Other social media companies are likely to follow. He has already changed the industry, and where it goes, he probably doesn't even know

Facebook copying his questionable subscription model is hardly evidence for "innovation". If anything it's the opposite -- it shows big corps just copy each other as a safety mechanism -- something we've already seen with the large rounds of lay-offs.

It’s an interesting turning point for social media. It’s not like Meta is doing any better and among smart people I know, no one is excited about social media and most have stopped using it in favor of smaller group communications

Meta seems to betting big on VR and failing. I'm not sure that its instrinsically about social media so much as a bad pivot.

> "his subscription idea"

https://blog.twitter.com/en_us/topics/company/2021/introduci...

Musk innovated at twitter years before he ever bid on twitter, amazing skills.

“Learning” is an interesting way of saying “running into the ground”

> In an update to investors, Twitter reported a decline of about 40% year-over-year in both revenue and adjusted earnings for the month, the people said.

Mathematically this is difficult to believe... Unless the interest payment == the cost reductions or the interest was adjusted out of the adjusted earnings and the cost reductions == 40% etc.

Someone somewhere in the long line of people from twitter to 'people familiar with the matter' are either making shit up or waving their hands in the air and grabbing the nearest number.

Googles ad revenue fell around 10% in the same period just based on secular trends.

Twitter fired their ad sales team and angered their ad partners. It seems perfectly feasible they added a 30% drop.

Also investor calls are extremely easy to source because there are so many people on the call and most of them have no vested interest in keeping the numbers secret.

> Twitter fired their ad sales team and angered their ad partners.

Which was just baffling move to me. We're not selling enough, so fire the sales team and let the product sell itself? How does that make any sense?

I suppose they could have been thinking Blue check-mark sales would magically plug the hole, but that was quickly proved to be a stupid, over-optimistic idea.

Yes adjusted earnings in this case is most likely something like "Adjusted EBITDA" so interest cost is adjusted out by definition, and they may also adjust out things like severance payments (if they are actually paying them).

"Adjusted EBITDA" is what I assumed as well - no interest, no restructuring costs etc.

Given revenue ~= costs at twitter the head count reduction (~80% and including all the really fat cats at the top) & reduction in expensive microservices, benefits, free meals etc has shaved only 40% off the costs.

Ad based businesses are getting hit hard, which explains the desire to switch to subscription based models.

It doesn’t help when someone like Elon is chasing away advertisers with so much success.

With the layoffs they’ve had I wonder how net profit etc are going to shape up.

Since Twitter is now private a lot of numbers and finance info is going to be just hearsay and rumors… but things almost certainly can’t be going well.

>but things almost certainly can’t be going well.

Is that obvious? Didn't they fire way more than 40% of the workforce? Presumably that was the biggest expense, so they should be much closer to profitable now than they were before.

They also have to pay a ton of additional interest and lost a lot of revenue

From the article:

> In an update to investors, Twitter reported a decline of about 40% year-over-year in both revenue and adjusted earnings for the month, the people said.

If adjusted earnings are down 40% - which is a non GAAP way of measuring profit and usually more aggressive - Twitter is much further away from being profitable than it was pre-Musk.

A lot of severance but I don’t know how/where that is accounted for in stuff like this.

I assume you are correct thought and they are on that path.

The fact that they're being sued by the landlord of their offices because they can't pay the rent seems like a good indicator.

Not just physical rents. The Information reports that Twitter is at least $70 million behind on their AWS bills:

https://www.theinformation.com/articles/musk-delayed-paying-...

Amazon is retaliating by not paying their Twitter ad bills, which seems like the kind of thing that can be effective against the Trump-Musk school of business operations.

That's insane. Why isn't amazon just pulling the plug? I imagine that with 40% staff, twitter now lacks the institutional knowledge to switch providers. Seems like amazon cutting them off would be a really effective way for amazon to make sure that they get paid first.

> Seems like amazon cutting them off would be a really effective way for amazon to make sure that they get paid first.

Or an effective way of killing Twitter, losing their money and a customer forever.

Amazon can afford to play a patient game of tit-for-tat.

I don't think so. An hour of downtime isn't going to kill twitter (One assumes that twitter has it together enough to pay ASAP once site goes down), and once you do it once to prove you're serious you probably never have to do it again and will get paid on time forever after.

I would imagine AWS desperately wants to avoid a reputation as someone who will shut down a x billion dollar business over an unpaid bill. They will try every reasonable remedy to recover the money before taking the nuclear option.

> One assumes that twitter has it together enough to pay ASAP once site goes down

I don't assume that. ;-)

Do you really believe this report?

"Twitter sales and marketing staff were told by their colleagues that Amazon had threatened to withhold payment for advertising it runs on Twitter". My experience with sales and marketing staff at virtually every company I've ever worked is that they are morons.

I simply don't believe that AWS would allow this to continue without shutting them down. There's no way a contract allows for them to rack up bills like this.

The comment you're replying to features the "Trump-Musk" line, which is strongly indicative of an incredibly biased person whose allowed politics to hijack their brain. Comparing Musk to Trump is just absurd.

Couldn't they just retaliate by stopping their AWS service? Isn't that what happens when you don't pay your bill?

That's kind of like the trope of a loan shark "busting people's legs". It doesn't do any good, because then they can't work to make the money they need to pay off the loan shark.

Threats only work if you carry them out when someone calls your bluff. The loan shark is interested in making sure everyone else pays.

There is a 5-year contract in place, so a little different than just a credit card on file that is failing to charge based on usage. Also, it was reported they aren’t using the compute power as expected in contract, so the bill may not fully relate to actual resources consumed.

just revoke their account and wipe their databases :-) like every other account that's behind on their bills

if they went from >7000 to <2000 he might be trying to hardball renegotiate or terminate overpriced contracts to house that no longer existent army of workers that were probably put in place even before covid. Who knows since they are private, but that's what we're currently facing in SF ourselves - an empty office with a multiyear lease that nobody knows what the f to do with.

Sure he's trying to hardball, but he's also doing that with his Amazon bills, which can hardly be seen as a good sign.

Ad based businesses are getting hit hard

What are you basing this on?

Google and Meta earnings saying that cost per click is down around 15%

How much was it him "chasing away advertisers" vs activists pushing boycotts?

Does not matter how much activist push to boycott, they aren't the ones paying the bills. There's been activist calls to boycott facebooks for so many years now and it has hardly made a dent into Facebook ads spending because companies know they make a good ROI from IG and FB ads.

It's a business decision if you want to keep spending your advertising dollars on Twitter, and if for whatever reason the ROI is not there anymore, then you drop your advertising budget. Why is the ROI not there anymore? You have to ask.

> There's been activist calls to boycott facebooks for so many years now and it has hardly made a dent into Facebook ads spending because companies know they make a good ROI from IG and FB ads.

Usually because Reddit and Facebook actually act on public outrage and close down hate groups.

Companies don’t care how “organic” a particular moment of public outage is. To make marketing decisions, they gauge the impact on their current and future business. If activists get public traction that will affect sales, the company will do something about it.

The advertisers care about "brand safety", which Musk completely undermined with his verification changes and the following wave of meme accounts impersonating companies.

The changes were quickly rolled back to put safeguards and new check marks in place, but by that point a lot of advertisers had already decided to freeze their spending or even stop their campaigns.

The wave of un-bans also didn't help. A screenshot was circulating of an Erasmus (student exchange program) ad appearing right under the tweet of a freshly un-banned Nazi, raving against some minority group.

I doubt the woke activism made a big difference.

The folks pulling advertising aren't responding to activist demands. They're the activists.

Isn't that kind of the same thing? If you're so controversial that people successfully call to boycott you personally, is that not chasing away paying customers?

Wow. Didn't realize asking a simple question based on hearing that a bunch of advertisers dropped within 48 hours of Musk purchasing the company warranted a bunch of downvotes.

I legitimately had no idea what the answer was, simply asked the question, but apparently forgot that anything Twitter related attracts the axe grinding crowd on here.

> Some of Twitter’s debt carries an annual interest rate of almost 15%.

!!!

Is there more information on this? How much is the principle, who are the lenders and what are the terms?

https://www.wsj.com/articles/elon-musk-explores-raising-up-t...

"Twitter’s unsecured bridge loans, which total $3 billion, are the most expensive portion of the $13 billion debt package Mr. Musk incurred as part of his $44 billion acquisition of the social-media company. They carry an interest rate of 10% plus the secured overnight financing rate, a benchmark interest rate that has shot up in recent months and currently sits at 4.3%."

"With every quarter that passes without Twitter refinancing the debt, the interest rate goes up by an additional 0.50 percentage point, according to regulatory filings. Twitter’s first quarterly interest payment is due at the end of the month, the filings show."

15% of 3B!

ouch

https://www.reuters.com/markets/us/how-will-elon-musk-pay-tw...

13B from a few big banks including Morgan Stanley. Rumor was that they were trying to sell the debt for 60c on the dollar but I don’t think that’s played out.

https://archive.is/J7l42

Well, what did you except?

Companies spend less money on ads in times like these. Musks childish behaviour plus instability and free speach issues made it really easy for companies to cut on their twitter ad spending first

He's Trump and a used car salesman rolled into one. I was a fan of his before I started following him in November 2022. A few weeks later I un-followed him and once again stopped using Twitter altogether.

December ‘22 was peak drama. What does Feb ‘23 look like? Many advertisers have returned and many costs have been reduced.

> Many advertisers have returned

Do you have a source for that?

I work at one of the biggest advertisers in my European country and we resumed spending just last month along with many other large brands plus at least one large agency. We had lengthy arguments with "activist" coworkers but ultimately persevered. So at least anecdotally, it's happening.

> we resumed spending just last month along with many other large brands

Resumed spending or resumed spending at Twitter?

> Resumed spending or resumed spending at Twitter?

Given the context, almost certainly "resumed spending at Twitter."

Previously (but only 10 pts): https://news.ycombinator.com/item?id=35025045

// What's the trick to resubmit identical links and not add vote to prior submission, to generate a new submission?

Elon Musk is "real life's Tony Stark".

... He keeps getting his mansion and armor destroyed.

Reply on news.ycombinator.com