According to Elon Musk, Twitter could be cash flow positive by Q2

Elon Musk said Twitter’s finances are improving enough for the social media company to return to positive cash flow next quarter as the chief executive seeks to cut costs, lure advertisers back and deal with the platform’s technical woes .

Speaking at a Morgan Stanley investor conference on Tuesday, Musk said the company’s cash flow, which he bought for $44 billion last year, will break even in the second quarter, adding that it could even turn positive during that period.

He said Twitter’s costs are expected to be about $3 billion a year — including $1.5 billion in interest payments on the $13 billion in debt he used to purchase — less than the $4.5 billion the company would otherwise have made in 2023.

However, Musk acknowledged a “massive drop in advertising” as marketers left the site over his plans to relax content moderation. In 2021, the last full year that Twitter reported its earnings, it made $5.1 billion.

Twitter generated net cash of $126 million in the first quarter of 2022, which declined to $30 million in the second quarter, its last financial results filing as a public company.

Musk has conducted dramatic cost-cutting efforts to get Twitter’s finances under control, including several waves of job cuts. Still, the move to leaner operations has created internal chaos and repeated technical issues for users.

The company has also come under increasing scrutiny from regulators for its ability to comply with social media rules. On Tuesday, a report by the Republican-led House Judiciary Committee said regulators at the Federal Trade Commission have previously asked Twitter to issue internal communications related to Musk since the acquisition, as well as details about his new premium subscription service, Twitter Blue.

In an extensive interview with Morgan Stanley banker Michael Grimes, Musk said he reduced cloud spending by 40 percent and stopped Twitter from using three or two data centers to improve its finances. Meanwhile, a company presentation showed that Twitter’s daily monetizable active user count has risen to 253 million, its highest level ever.

Musk added that some brands were returning to the platform, and he now plans to improve ad relevance by allowing marketers to target users by keyword and interest. Twitter is “poorly monetized” as it makes 5 to 6 cents per hour per user, he said, adding that he hopes to increase that to at least 15 cents per hour.

“The natural potential here for Twitter revenue is staggering,” Musk said.

In the future, he still plans to roll out payments on the platform, adding that he believes it’s “possible to become the largest financial institution in the world just by giving people convenient payment options.”

Grimes, head of technology investment banking at Morgan Stanley, who led the Uber and Facebook IPOs, told Musk during the interview that the media had painted an “inaccurate account” of his ownership of the platform and that the “value is clear.” . ‘ about the changes he made.

Morgan Stanley led the banking syndicate that loaned Twitter $13 billion in November, which partially funded the Musk acquisition. Morgan Stanley supplied the bulk, about $3.5 billion. The banks, which include Barclays and Bank of America, are facing potentially large losses on the loans as uncertainty over Musk’s strategy to make Twitter profitable and pressure from rising interest rates have left them unable to sell the debt to investors.