Twitter Conference Call Highlights

Twitter Inc TWTR reported its third quarter earnings on Tuesday. Shares of the company plummeted 9 percent.

Below are some key highlights from its conference call.

• We had another very strong quarter financially, revenue growth of 114% year over year, totaling $361 million.
• Adjusted EBITDA rose to $68 million, up from $9 million just a year ago.
• We continued to make progress in user growth, adding 13 million net new users in the quarter, including another 3 million net new users in the U.S.
• That brings us to 43 million new monthly active users for the year and 284 million monthly active users in total.
• Twitter an increasingly daily use case for them.
• Three of the priorities to strengthen the core include: Improving the new user experience and getting new users a high-quality timeline the moment they sign up for the service; Providing much better rich media creation and consumption tools and experiences to drive more breadth and depth of content; Adding functionality to our direct messaging service to enable users to move fluidly between the public conversation and private conversation on Twitter.

New Launches:

• As one example, we rolled out a brand-new web onboarding flow that dramatically simplifies the sign-up process and that automatically creates a timeline based on what topics users choose as well as their browsing history.
• We get them into a fully populated timeline that does not require them to immediately know the language of Twitter or who is on Twitter, et cetera.
• Expect to see this on mobile in short order. Not only is the breadth and depth of content expanding, but that content is some of the best across the digital landscape.
• Just looking at television and music, we hosted the season premiere teaser of Showtime's hit show Homeland and one of ABC's new shows, Selfie, and exclusive videos and music from such diverse musicians as U2, One Direction, and even a Michael Jackson video, all exclusive to Twitter.
• Our second objective is to reduce barriers to consumption to help build the largest total audience in the world.
• We will continue to innovate on ways to better organize our content to deliver the right experiences at the right time for all types of users, logged-in, logged-out, and on syndicated partner properties.
• And the third objective is building new applications and services.
• Our announcement of Fabric a week ago at our developer conference is the most recent initiative in this area.
• And components of Fabric are already in use by tens of thousands of developers around the world, collectively reaching well over 1 billion iOS and Android users.
• We believe Fabric can be the one SDK that any global app developer needs to embed in their application.
• We provide crash reporting, beta testing, and analytics from the moment a developer is getting started.
• When developers are ready to launch their production apps, we provide identity services in the form of Twitter login and Digits, our next-generation native mobile sign-up service.
• Digits provides developers with multiple competitive advantages over other sorts of identity services, including building their own native mobile sign-up.
• And finally, developers can easily turn on the MoPub kit, our mobile ad exchange, when they're ready to monetize their apps at scale, harnessing our best-in-class ad mediation and exchange technologies.
• In closing, I'm happy with the strategy and the quality of the work we're doing.
• But given our significant aspirations and the breadth of the opportunity in front of us, it's more critical than ever that we increase our overall pace of execution.

Financials:

• Q3 was another strong quarter for Twitter.
• Total revenue reached $361 million, up 114% from the year-ago period and $21 million above the high end of our guidance range.
• Ad revenue reached $320 million, up 109% year over year.
• Growth was strong across all channels, with the DSO channel being the largest contributor, while the MMS and small-medium business channel growth rates outperformed.
• Looking by product, the vast majority of our year-over-year.
• In Q3, U.S. ad revenue grew 88%, while international ad revenue grew 164% year over year and accounted for 35% of total ad revenue.
• International growth outperformed the U.S., driven by strong growth in both APAC and EMEA countries.
• In Q3, we expanded our sales efforts to 12 new markets in Europe.
• We also expanded the reach of Twitter self-serve ad platform to 12 new countries.
• We now cover over 45% of our consumer footprint with the ability for advertisers to use our self-serve platform.
• We now have a sales presence in 60 countries around the world and see significant room for continued international revenue growth as we further expand and grow each channel.
• Looking by platform, our mix of revenue from mobile also continues to grow with 85% of total ad revenue now generated from mobile devices, up from approximately 70% from the prior year period.
• Data licensing and other revenue contributed $41 million in the quarter, an increase of 171% year over year.
• This growth was driven by both mobile ad exchange business in a full quarter of the Gnip data licensing business.
• Moving on to costs and EBITDA, in Q3, total expenses were $341 million, up 85% year over year.
• The increase was primarily driven by head count and related overhead costs as well as infrastructure investment.
• We ended the quarter with approximately 3,600 employees.
• Adjusted EBITDA margin for Q3 was 19%, more than three times that of Q3 2013 and up 200 basis points sequentially.
• Adjusted EBITDA totaled $68 million compared to just $9 million in the prior year period and above the high-end of our expectations.
• Adjusted EBITDA significantly outperformed our expectations due to the outperformance in revenue and lower than expected hiring in the period.
• For modeling purposes, we expect that quarterly interest expense to be roughly $20 million to $25 million on a GAAP basis and $4 million on a non-GAAP basis.
• We ended Q3 with roughly $3.6 billion of cash and marketable securities. Cash used in operations was $88 million.