SAN FRANCISCO — Days earlier than Elon Musk struck a deal to purchase Twitter for $44 billion, he mentioned he didn’t “care concerning the economics” of the corporate. Because the world’s richest man, with a internet price of greater than $250 billion, he indicated that creating wealth from the social media service was removed from his prime goal.
However on Thursday, Mr. Musk was in a position to get an up-close have a look at the power of the enterprise he was shopping for.
Twitter reported income was $1.2 billion for the primary three months of the 12 months, up 16 % from a 12 months earlier however decrease than a 20 % development price the corporate had predicted for the 12 months. Revenue was $513 million, or about 61 cents per share. Wall Road analysts had been anticipating about $1.2 billion in income.
The social media firm mentioned it had 229 million every day lively customers, up practically 16 % from a 12 months in the past.
The outcomes come as Mr. Musk strikes to complete closing his deal for Twitter, which is anticipated to take the following three to 6 months. Mr. Musk, 50, who additionally leads the electrical carmaker Tesla and the rocket firm SpaceX, has vowed to take Twitter non-public and make it a haven for “free speech.” In latest days, he has criticized a few of Twitter’s prime executives who helped construct up the corporate’s insurance policies on what speech ought to be allowed on the platform and what shouldn’t, inflicting an uproar.
However even when Mr. Musk says he doesn’t care about Twitter’s enterprise, traders can be scrutinizing the corporate’s financials to see the way it could have an effect on the deal. Traders can be a specific earnings metric of Twitter’s — its earnings earlier than curiosity, taxes, depreciation and amortization, or EBITDA, used broadly as a proxy for money circulate — to gauge whether or not the corporate can repay the debt and curiosity that Mr. Musk’s deal will add to its stability sheet.
Mr. Musk is funding his acquisition of Twitter with $13 billion in debt financing and one other $12.5 billion in loans towards his inventory in Tesla. He’s anticipated so as to add about $21 billion in fairness financing.
Twitter executives have confronted questions over time concerning the prospects for the corporate’s enterprise, which depends totally on digital promoting. That enterprise has been inconsistent. Twitter has not turned a revenue for eight of the final 10 years. In 2020, the activist funding agency Elliott Administration took a stake in Twitter and known as for Jack Dorsey, certainly one of its founders, to resign as chief govt. Mr. Dorsey stepped down final 12 months.
“Whereas Twitter has had a rebound in advert development, its advert enterprise is considerably smaller than that of different main digital gamers,” mentioned Jasmine Engberg, an analyst at Insider Intelligence. “It additionally continues to have bother bringing in new customers, which is integral to rising advert income.”
Earlier than Mr. Musk grew to become concerned, Twitter’s executives set an aggressive trajectory for the corporate. The plan is for it to develop quickly over the following two years, reaching 315 million every day lively customers and $7.5 billion in annual income by the top of 2023.
How Elon Musk Purchased Twitter
A blockbuster deal. Elon Musk, the world’s wealthiest man, capped what appeared an inconceivable try by the famously mercurial billionaire to purchase Twitter for roughly $44 billion. Right here’s how the deal unfolded:
Mr. Musk’s acquisition might give Twitter the power to make modifications to its product as a personal firm, avoiding the scrutiny of Wall Road. Shut watchers of the corporate have lengthy famous Twitter’s hesitance to overtake its service due to protests from customers and advertiser sensitivity to drastic modifications.
However Mr. Musk can also throw the corporate into extra turmoil. Aside from Mr. Musk focusing on Twitter’s govt by the service, some customers have left the platform over the prospect of a Musk-led Twitter. Inside the corporate, some staff have additionally expressed issues as to what modifications Mr. Musk has in retailer for the service.
In an organization assembly on Monday, Mr. Agrawal acknowledged the uncertainty forward. “As soon as the deal closes, we don’t know what course this firm will go in,” he informed Twitter’s staff.
Anupreeta Das contributed reporting.