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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________________________________
FORM 10-Q
____________________________________________________
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM                  TO
Commission File Number 001-36164
____________________________________________________
Twitter, Inc.
(Exact name of registrant as specified in its charter)
____________________________________________________
Delaware
20-8913779
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
1355 Market Street, Suite 900
San Francisco, California 94103
(Address of principal executive offices and Zip Code)
(415) 222-9670
(Registrant’s telephone number, including area code)
____________________________________________________

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.000005 per shareTWTRNew York Stock Exchange
Preferred Stock Purchase Rights
N/ANew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES NO ☒
The number of shares of the registrant’s common stock outstanding as of July 22, 2022 was 765,246,152.




TABLE OF CONTENTS
Page







2


SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which statements involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:
our proposed acquisition by entities affiliated with Elon Musk, including our expectations regarding the timing and completion thereof, the purported termination of the merger agreement and litigation between Twitter and Mr. Musk and his affiliates, including our litigation commenced against Mr. Musk and certain of his affiliates to cause them to specifically perform their obligations under the merger agreement and consummate the closing in accordance with the terms of the merger agreement, as well as general business uncertainty relating to the pending transaction;
our ability to attract and retain people on Twitter and increase their level of engagement, including ad engagement, and its impact on revenue;
our expectations regarding our revenue growth, including the impact of COVID-19, the macroeconomic environment, including rising inflation and interest rates, Apple’s App Tracking Transparency policy, the war in Ukraine, and our cost and expenses;
our expectations regarding our monetizable daily active usage or users (mDAU), mDAU growth and growth rates and related opportunities, as well as the continued usage of our website and mobile applications, including the impact of seasonality;
our plans regarding top priorities, including health and safety and our expectations regarding the impact of health and safety measures on our reported metrics, policies, enforcement and preventing manipulation of our platform;
the impact of the COVID-19 pandemic and related responses of businesses and governments to the pandemic on our operations and personnel, and on commercial activity and advertiser demand across our platform and on our operating results;
our ability to develop or acquire new products, product features and services, improve our existing products and services, including with respect to Promoted Products, video and performance advertising, and increase the value of our products and services;
our business strategies, plans and priorities, our plans for headcount growth, investment in our research and development efforts, investment in capital expenditures, and our plans to scale capacity and enhance capability and reliability of our infrastructure and new data center;
our ability to provide new content from third parties, including our ability to secure video content on terms that are acceptable to us;
our ability to attract advertisers to our platforms, products and services and increase the amount that advertisers spend with us;
our ability to improve monetization of our products and services;
our future financial performance, including trends in ad engagements and cost per ad engagement, revenue, costs and expenses (including stock-based compensation) and income taxes;
our expectations regarding certain deferred tax assets and fluctuations in our tax expense and cash taxes;
the impact of laws and regulations relating to privacy, data protection, cybersecurity, content or copyright;
our expectations regarding outstanding litigation or the decisions of the courts;
3



the effects of seasonal trends on our results of operations;
the impact of our future transactions and corporate structuring on our income and other taxes;
our expectations regarding our future share repurchases;
the sufficiency of our cash and cash equivalents, short-term investment balance and credit facility together with cash generated from operations and continued access to capital markets to meet our working capital, capital expenditure, and other cash requirements including authorized share repurchases;
our ability to timely and effectively develop, invest in, scale and adapt our existing technology and network infrastructure;
our ability to successfully acquire and integrate companies and assets;
the impact of geopolitical events, including the war in Ukraine; and
our expectations regarding international operations and foreign exchange gains and losses.
We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q.
You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, operating results, cash flows or prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. We cannot assure you that the results, events and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.
The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.
4


NOTE REGARDING KEY METRICS
We review a number of metrics, including monetizable daily active usage or users (mDAU), changes in ad engagements and changes in cost per ad engagement, to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans and make strategic decisions. See the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations— Key Metrics” for a discussion of how we calculate mDAU, changes in ad engagements and changes in cost per ad engagement.
We define mDAU as people, organizations, or other accounts who logged in or were otherwise authenticated and accessed Twitter on any given day through twitter.com, Twitter applications that are able to show ads, or paid Twitter products, including subscriptions. Average mDAU for a period represents the number of mDAU on each day of such period divided by the number of days for such period. Changes in mDAU are a measure of changes in the size of our daily logged in or otherwise authenticated active total accounts. To calculate the year-over-year change in mDAU, we subtract the average mDAU for the three months ended in the previous year from the average mDAU for the same three months ended in the current year and divide the result by the average mDAU for the three months ended in the previous year. Additionally, our calculation of mDAU is not based on any standardized industry methodology and is not necessarily calculated in the same manner or comparable to similarly titled measures presented by other companies. Similarly, our measures of mDAU growth and engagement may differ from estimates published by third parties or from similarly-titled metrics of our competitors due to differences in methodology.
The numbers of mDAU presented in this Quarterly Report on Form 10-Q are based on internal company data. While these numbers are based on what we believe to be reasonable estimates for the applicable period of measurement, there are inherent challenges in measuring usage and engagement across our large number of total accounts around the world. Furthermore, our metrics may be impacted by our information quality efforts, which are our overall efforts to reduce malicious activity on the service, inclusive of spam, malicious automation, and fake accounts. For example, there are a number of false or spam accounts in existence on our platform. We have performed an internal review of a sample of accounts and estimate that the average of false or spam accounts during the second quarter of 2022 represented fewer than 5% of our mDAU during the quarter. The false or spam accounts for a period represents the average of false or spam accounts in the samples during each monthly analysis period during the quarter. In making this determination, we applied significant judgment, so our estimation of false or spam accounts may not accurately represent the actual number of such accounts, and the actual number of false or spam accounts could be higher than we have estimated. We are continually seeking to improve our ability to estimate the total number of spam accounts and eliminate them from the calculation of our mDAU and have made improvements in our spam detection capabilities that have resulted in the suspension of a large number of spam, malicious automation, and fake accounts. We intend to continue to make such improvements. After we determine an account is spam, malicious automation, or fake, we stop counting it in our mDAU, or other related metrics. We also treat multiple accounts held by a single person or organization as multiple mDAU because we permit people and organizations to have more than one account. Additionally, some accounts used by organizations are used by many people within the organization. As such, the calculations of our mDAU may not accurately reflect the actual number of people or organizations using our platform.
In addition, geographic location data collected for purposes of reporting the geographic location of our mDAU is based on the IP address or phone number associated with the account when an account is initially registered on Twitter. The IP address or phone number may not always accurately reflect a person’s actual location at the time they engaged with our platform. For example, someone accessing Twitter from the location of the proxy server that the person connects to rather than from the person’s actual location.
We regularly review and may adjust our processes for calculating our internal metrics to improve their accuracy.



5


PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
TWITTER, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except par value)
(Unaudited)
June 30,
2022
December 31,
2021
Assets
Current assets:
Cash and cash equivalents$2,680,596 $2,186,549 
Short-term investments3,440,147 4,207,133 
Accounts receivable, net of allowance for doubtful accounts of $13,459 and $15,278
972,591 1,217,404 
Prepaid expenses and other current assets180,247 266,484 
Assets held for sale 40,800 
Total current assets7,273,581 7,918,370 
Property and equipment, net2,175,290 2,082,160 
Operating lease right-of-use assets1,372,465 1,195,124 
Intangible assets, net52,643 69,324 
Goodwill1,303,438 1,301,520 
Deferred tax assets, net997,900 1,148,573 
Other assets403,970 344,445 
Total assets$13,579,287 $14,059,516 
Liabilities and stockholders' equity
Current liabilities:
Accounts payable$153,092 $203,171 
Accrued and other current liabilities676,189 918,350 
Operating lease liabilities, short-term187,982 222,346 
Total current liabilities1,017,263 1,343,867 
Convertible notes, long-term3,563,136 3,559,023 
Senior notes, long-term1,683,713 693,996 
Operating lease liabilities, long-term1,282,393 1,071,209 
Deferred and other long-term tax liabilities, net41,190 40,691 
Other long-term liabilities59,111 43,531 
Total liabilities7,646,806 6,752,317 
Commitments and contingencies (Note 15)
Stockholders' equity:
Preferred stock, $0.000005 par value-- 200,000 shares authorized; none issued and outstanding
  
Common stock, $0.000005 par value-- 5,000,000 shares authorized; 770,978 and 799,384 shares issued and outstanding
4 4 
Additional paid-in capital7,096,599 8,432,112 
Treasury stock, at cost-- 0 and 120 shares
 (5,295)
Accumulated other comprehensive loss(200,456)(117,320)
Accumulated deficit(963,666)(1,002,302)
Total stockholders' equity5,932,481 7,307,199 
Total liabilities and stockholders' equity$13,579,287 $14,059,516 

The accompanying notes are an integral part of these consolidated financial statements.

6


TWITTER, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended
June 30,
Six Months Ended
June 30,
2022202120222021
Revenue
$1,176,660 $1,190,427 $2,377,644 $2,226,445 
Costs and expenses
Cost of revenue
540,676 416,932 1,048,126 797,940 
Research and development
454,859 299,859 826,554 550,568 
Sales and marketing
308,301 301,902 608,110 536,494 
General and administrative
216,586 141,482 366,449 259,009 
Total costs and expenses
1,520,422 1,160,175 2,849,239 2,144,011 
Income (loss) from operations
(343,762)30,252 (471,595)82,434 
Interest expense
(23,342)(13,893)(38,786)(27,078)
Interest income
13,595 9,202 21,557 20,203 
Other income, net17,616 55,739 11,110 55,745 
Gain (loss) on sale of asset group(11) 970,463  
Income (loss) before income taxes
(335,904)81,300 492,749 131,304 
Provision (benefit) for income taxes
(65,897)15,651 249,470 (2,350)
Net income (loss)
$(270,007)$65,649 $243,279 $133,654 
Net income (loss) per share:
Basic
$(0.35)$0.08 $0.31 $0.17 
Diluted
$(0.35)$0.08 $0.30 $0.16 
Numerator used to compute net income (loss) per share:
Basic
$(270,007)$65,649 $243,279 $133,654 
Diluted
$(270,007)$68,501 $246,934 $138,896 
Weighted-average shares used to compute net income (loss) per share:
Basic
766,837 796,472 772,911 795,992 
Diluted
766,837 869,180 835,661 870,622 


The accompanying notes are an integral part of these consolidated financial statements.
7


TWITTER, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
(Unaudited)
Three Months Ended
June 30,
Six Months Ended
June 30,
2022202120222021
Net income (loss)
$(270,007)$65,649 $243,279 $133,654 
Other comprehensive income (loss), net of tax:
Change in unrealized loss on investments in available-for-sale securities(9,885)(3,791)(42,062)(14,809)
Change in foreign currency translation adjustment(35,049)11,667 (41,074)(8,153)
Net change in accumulated other comprehensive loss(44,934)7,876 (83,136)(22,962)
Comprehensive income (loss)$(314,941)$73,525 $160,143 $110,692 

The accompanying notes are an integral part of these consolidated financial statements.
8


TWITTER, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands)
(Unaudited)
Three Months Ended
June 30,
Six Months Ended
June 30,
2022202120222021
SharesAmountSharesAmountSharesAmountSharesAmount
Common stock
Balance, beginning of period763,578 $4 798,083 $4 799,384 $4 796,000 $4 
Issuance of common stock in connection with RSU vesting6,016 — 4,247 — 10,137 — 8,647 — 
Issuance of common stock in connection with acquisitions27 — — — 27 — — — 
Issuance of restricted stock in connection with acquisitions accounted for as stock-based compensation74 — 31 — 74 — 69 — 
Exercise of stock options20 — 1 — 25 — 524 — 
Issuance of common stock upon purchases under employee stock purchase plan1,555 — 1,539 — 1,555 — 1,539 — 
Shares withheld related to net share settlement of equity awards(197)— (88)— (311)— (243)— 
Repurchases of common stock— — (5,872)— (39,788)— (8,595)— 
Other activities(95)— — — (125)— — — 
Balance, end of period770,978 $4 797,941 $4 770,978 $4 797,941 $4 
Additional paid-in capital
Balance, beginning of period— $6,754,093 — $8,551,763 — $8,432,112 — $9,167,138 
Issuance of common stock in connection with acquisitions— 1,191 — — — 1,191 — — 
Exercise of stock options— 243 — 29 — 320 — 1,986 
Issuance of common stock upon purchases under employee stock purchase plan— 49,404 — 39,531 — 49,404 — 39,531 
Shares withheld related to net share settlement of equity awards— (8,951)— (4,928)— (13,141)— (15,497)
Stock-based compensation— 300,619 — 205,134 — 499,829 — 330,533 
Purchase of convertible note hedge— — — — — — — (213,469)
Tax related to purchase of convertible note hedge— — — — — — — 49,262 
Issuance of warrants— — — — — — — 161,144 
Repurchases of common stock— — — (333,812)— (1,273,116)— (495,364)
Purchase of forward contract under accelerated share repurchase agreements— — — — — (600,000)— — 
Cumulative-effect adjustment from adoption of new accounting standard— — — — — — — (567,547)
Balance, end of period— $7,096,599 — $8,457,717 — $7,096,599 — $8,457,717 
Treasury stock
Balance, beginning of period $ 83 $(5,297)120 $(5,295)98 $(5,297)
Retirement of treasury stock— — (83)5,297 (120)5,295 (181)10,594 
Repurchases of common stock— — 77 (5,298)— — 160 (10,595)
Balance, end of period $ 77 $(5,298) $ 77 $(5,298)
Accumulated other comprehensive loss
Balance, beginning of period— $(155,522)— $(96,932)— $(117,320)— $(66,094)
Other comprehensive income (loss)— (44,934)— 7,876 — (83,136)— (22,962)
Balance, end of period— $(200,456)— $(89,056)— $(200,456)— $(89,056)
Accumulated deficit
Balance, beginning of period— $(693,659)— $(712,888)— $(1,002,302)— $(1,125,669)
Repurchases of common stock— — — — — (204,643)— — 
Cumulative-effect adjustment from adoption of new accounting standard— — — — — — — 344,776 
Net income (loss)
— (270,007)— 65,649 — 243,279 — 133,654 
Balance, end of period— $(963,666)— $(647,239)— $(963,666)— $(647,239)
Total stockholders' equity770,978$5,932,481 798,018$7,716,128 770,978 $5,932,481 798,018 $7,716,128 
The accompanying notes are an integral part of these consolidated financial statements.
9


TWITTER, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended June 30,
20222021
Cash flows from operating activities
Net income
$243,279 $133,654 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense333,571 265,864 
Stock-based compensation expense459,453 289,075 
Bad debt expense(312)391 
Deferred income taxes131,148 (23,017)
Gain on investments in privately-held companies(22,600)(51,894)
Gain on sale of asset group(970,463) 
Other adjustments945 1,467 
Changes in assets and liabilities, net of assets acquired and liabilities assumed from acquisitions:
Accounts receivable228,579 88,969 
Prepaid expenses and other assets19,028 (44,520)
Operating lease right-of-use assets132,721 104,049 
Accounts payable(88,205)2,818 
Accrued and other liabilities(178,045)99,243 
Operating lease liabilities(133,312)(93,948)
Net cash provided by operating activities155,787 772,151 
Cash flows from investing activities
Purchases of property and equipment(317,670)(460,376)
Proceeds from sales of property and equipment3,332 4,837 
Purchases of marketable securities(1,643,930)(2,165,696)
Proceeds from maturities of marketable securities1,766,296 2,084,537 
Proceeds from sales of marketable securities590,592 1,092,794 
Purchases of investments in privately-held companies(6,536)(31,497)
Proceeds from sale of asset group1,050,000  
Investments in Finance Justice Fund(30,500)(22,700)
Business combinations, net of cash acquired(9,379)(22,937)
Other investing activities (8,385)
Net cash provided by investing activities1,402,205 470,577 
Cash flows from financing activities
Proceeds from issuance of convertible notes 1,437,500 
Proceeds from issuance of senior notes1,000,000  
Purchases of convertible note hedges (213,469)
Proceeds from issuance of warrants concurrent with note hedges 161,144 
Debt issuance costs(11,270)(16,769)
Repurchases of common stock(2,077,759)(495,364)
Taxes paid related to net share settlement of equity awards(13,141)(15,497)
Payments of finance lease obligations (565)
Proceeds from exercise of stock options320 1,986 
Proceeds from issuances of common stock under employee stock purchase plan49,404 39,531 
Net cash provided by (used in) financing activities(1,052,446)898,497 
Net increase in cash, cash equivalents and restricted cash505,546 2,141,225 
Foreign exchange effect on cash, cash equivalents and restricted cash(11,652)(3,999)
Cash, cash equivalents and restricted cash at beginning of period2,210,685 2,011,276 
Cash, cash equivalents and restricted cash at end of period$2,704,579 $4,148,502 
Supplemental disclosures of non-cash investing and financing activities
Changes in accrued property and equipment purchases$49,632 $138,257 
Reconciliation of cash, cash equivalents and restricted cash as shown in the consolidated statements of cash flows
Cash and cash equivalents$2,680,596 $4,125,595 
Restricted cash included in prepaid expenses and other current assets7,943 3,286 
Restricted cash included in other assets16,040 19,621 
Total cash, cash equivalents and restricted cash$2,704,579 $4,148,502 
The accompanying notes are an integral part of these consolidated financial statements.

10


TWITTER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Summary of Significant Accounting Policies
Basis of Presentation
The consolidated financial statements include the accounts of Twitter, Inc. and its wholly-owned subsidiaries (collectively, “Twitter” or the “Company”). All intercompany accounts and transactions have been eliminated in consolidation.
The unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (GAAP). The unaudited interim consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and reflect, in management’s opinion, all adjustments of a normal, recurring nature that are necessary for the fair statement of the Company’s financial position, results of operations and cash flows for the interim periods, but are not necessarily indicative of the results expected for the full fiscal year or any other period.
The interim consolidated financial statements and these related notes should be read in conjunction with the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.
Proposed Transaction with Elon Musk
On April 25, 2022, the Company entered into an Agreement and Plan of Merger (the Merger Agreement) with X Holdings I, Inc. (Parent), X Holdings II, Inc., a wholly owned subsidiary of Parent (Acquisition Sub), and, solely for the purpose of certain provisions of the Merger Agreement, Elon Musk. Parent and Acquisition Sub are affiliates of Elon Musk. The Merger Agreement provides that, subject to the terms and conditions set forth in the Merger Agreement, Acquisition Sub will merge with and into the Company (the Merger), with the Company surviving the Merger and becoming a wholly owned subsidiary of Parent (the Surviving Corporation). Under the Merger Agreement, at the effective time of the Merger, each issued and outstanding share of the Company’s common stock (subject to certain exceptions set forth in the Merger Agreement) will be canceled and converted into the right to receive $54.20 in cash, without interest (the Merger Consideration).
Consummation of the Merger is subject to the satisfaction or waiver of customary closing conditions, including: (1) approval of the Merger Agreement by the Company’s stockholders; (2) the expiration or termination of the waiting period under the United States Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, which occurred on June 2, 2022, and clearance under the antitrust and foreign investment laws of the United States and certain non-United States jurisdictions; and (3) the absence of any law or order by a governmental authority of the United States or certain non-United States jurisdictions that has the effect of rendering illegal or prohibiting the consummation of the Merger, or causing the Merger to be rescinded following the completion thereof. As of July 13, 2022, all required regulatory clearances and approvals have been obtained, and stockholder approval of the Merger Agreement is the only remaining approval or regulatory condition to consummating the closing of the Merger under the Merger Agreement. The exact timing of completion of the Merger, if at all, cannot be predicted because the Merger is subject to ongoing litigation, adoption of the Merger Agreement by our stockholders and the satisfaction of the other remaining closing conditions.

11


The Merger Agreement contains certain termination rights for the Company and Parent. Upon termination of the Merger Agreement under specified limited circumstances, the Company will be required to pay Parent a termination fee of $1.0 billion. Specifically, this termination fee is payable by the Company to Parent because (1) the Company terminates the Merger Agreement to allow the Company to enter into a definitive agreement for a competing acquisition proposal that constitutes a Superior Proposal (as defined in the Merger Agreement); or (2) Parent terminates the Merger Agreement because the Company’s Board of Directors recommends that the Company’s stockholders vote against the adoption of the Merger Agreement or in favor of any competing acquisition proposal. This termination fee will also be payable by the Company to Parent in the event that, generally, (1) a competing acquisition proposal for 50% or more of the stock or consolidated assets of the Company has been publicly announced and not withdrawn, (2) the Merger Agreement is terminated because the Company’s stockholders fail to adopt the Merger Agreement or because the Company materially breaches the Merger Agreement, and (3) within twelve months of such termination of the Merger Agreement, the Company enters into a definitive agreement providing for a competing acquisition proposal for 50% or more of the stock or consolidated assets of the Company and such acquisition is subsequently consummated. Upon termination of the Merger Agreement under other specified limited circumstances, Parent will be required to pay the Company a termination fee of $1.0 billion. Specifically, this termination fee is payable by Parent to the Company if the Merger Agreement is terminated by the Company because (1) the conditions to Parent’s obligations to consummate the Merger are satisfied and the Parent fails to consummate the Merger as required pursuant to, and in the circumstances specified in, the Merger Agreement; or (2) Parent breaches of its representations, warranties or covenants in a manner that would cause the related closing conditions to not be satisfied. Mr. Musk has provided the Company with a limited guarantee in favor of the Company, which guarantees, among other things, the payment of the termination fee payable by Parent to the Company, subject to the conditions set forth therein.
In addition to the foregoing termination rights, and subject to certain limitations, either party may terminate the Merger Agreement if the Merger is not consummated by October 24, 2022 (the Termination Date). The Termination Date will be extended for six months if the closing conditions related to applicable antitrust and foreign investment clearances and the absence of any applicable law or order making illegal or prohibiting the Merger have not been satisfied as of such date. In addition, if a party to the Merger Agreement brings litigation to enforce the performance of the Merger Agreement, the Termination Date will be extended to (i) the 20th business day following the resolution of such litigation or (ii) such other time period established by the court in such litigation.

On July 8, 2022, representatives of Mr. Musk delivered a notice purporting to terminate the Merger Agreement. Twitter believes that Mr. Musk’s purported termination is invalid and wrongful, and the Merger Agreement remains in effect. On July 12, 2022, Twitter commenced litigation against Mr. Musk, Parent and Acquisition Sub to cause them to perform their obligations under the Merger Agreement and consummate the closing in accordance with the terms of the Merger Agreement. On July 19, 2022, the Delaware Court of Chancery granted Twitter’s motion to expedite proceedings and scheduled a five day trial to begin in October 2022.

Other than transaction expenses associated with the proposed Merger of $33.1 million for the three and six months ended June 30, 2022, the terms of the Merger Agreement did not impact the Company's consolidated financial statements.
Prior Period Reclassifications
Certain prior period amounts have been reclassified to conform to the current period presentation.
Use of Estimates
The preparation of the Company’s consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, as well as related disclosure of contingent assets and liabilities. Actual results could differ materially from the Company’s estimates due to risks and uncertainties, including uncertainty in the current economic environment. To the extent that there are material differences between these estimates and actual results, the Company’s financial condition or operating results will be affected. The Company bases its estimates on past experience and other assumptions that the Company believes are reasonable under the circumstances, and the Company evaluates these estimates on an ongoing basis.
Recent Accounting Pronouncements
There have been no recent accounting pronouncements or changes in accounting pronouncements during the six months ended June 30, 2022, as compared to the recent accounting pronouncements described in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, that are of significance or potential significance to the Company.
Significant Accounting Policies
There have been no material changes to the Company's significant accounting policies from its Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
12


Note 2. Revenue
Revenue Recognition
Revenue is recognized when the control of promised goods or services is transferred to customers at an amount that reflects the consideration to which the Company expects to be entitled to in exchange for those goods or services. The Company identifies its contracts with customers and all performance obligations within those contracts. The Company then determines the transaction price and allocates the transaction price to the performance obligations within the Company's contracts with customers, recognizing revenue when, or as the Company satisfies its performance obligations. While the majority of the Company's revenue transactions are based on standard business terms and conditions, the Company also enters into sales agreements with advertisers and data partners that sometimes involve multiple performance obligations and occasionally include non-standard terms or conditions.
Revenue by geography is based on the billing address of the customers. The following tables set forth revenue by services and revenue by geographic area (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Revenue by services:
Advertising services$1,076,003 $1,053,411 $2,182,581 $1,952,251 
Subscription and other (1)
100,657 137,016 195,063 274,194 
Total revenue$1,176,660 $1,190,427 $2,377,644 $2,226,445 
(1) To better reflect the Company's business opportunities, including the sale of MoPub and the launch of Twitter Blue, the Company updated the name of the revenue line captioned “Data Licensing and Other Revenue” to “Subscription and Other Revenue” in the first quarter of 2022. This revenue line includes subscription revenue from the Twitter Developer Platform, Twitter Blue, and other subscription-related offerings.
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Revenue by geographic area:
United States$661,278 $653,075 $1,332,778 $1,209,295 
Japan153,277 151,443 332,870 321,407 
Rest of World362,105 385,909 711,996 695,743 
Total revenue$1,176,660 $1,190,427 $2,377,644 $2,226,445 
Contract Balances
The Company enters into contracts with its customers, which may give rise to contract liabilities (deferred revenue) and contract assets (unbilled revenue). The payment terms and conditions within the Company’s contracts vary by the type and location of its customer and products or services purchased, the substantial majority of which are due in less than one year. When the timing of revenue recognition differs from the timing of payments made by customers, the Company recognizes either unbilled revenue (its performance precedes the billing date) or deferred revenue (customer payment is received in advance of performance).
Unbilled Revenue (Contract Assets)
The Company presents unbilled revenue on the consolidated balance sheets within prepaid expenses and other current assets and within other assets. The Company’s contracts do not contain material financing components. The Company's unbilled revenue primarily consists of amounts that have yet to be billed under contracts with escalating fee structures. Specifically, because the Company generally recognizes revenue on a straight-line basis for data licensing arrangements with escalating fee structures, revenue recognized represents amounts to which the Company is contractually entitled; however, the revenue recognized exceeds the amounts the Company has a right to bill as of the period end, thus resulting in unbilled revenue.
Deferred Revenue (Contract Liabilities)
The Company presents deferred revenue primarily within accrued and other current liabilities on the consolidated balance sheets, and there is not expected to be any material non-current contract liabilities given the Company's contracting provisions. The Company's deferred revenue balance primarily consists of cash payments due in advance of satisfying its performance obligations relating to data licensing contracts and performance obligations given to customers based on their spend relating to advertising contracts, for which the Company defers, as they represent material rights. The Company recognizes deferred revenue relating to its data licensing contracts on a straight-line basis over the period in which the Company provides data. The Company recognizes deferred revenue relating to its advertising contracts based on the amount of customer spend and the relative standalone selling price of the material rights.
13


The following table presents contract balances (in thousands):
June 30,
2022
December 31,
2021
Unbilled revenue$37,104 $44,880 
Deferred revenue$135,232 $79,414 
The amount of revenue recognized in the three months ended June 30, 2022 that was included in the deferred revenue balance as of March 31, 2022 was $45.8 million. The amount of revenue recognized in the six months ended June 30, 2022 that was included in the deferred revenue balance as of December 31, 2021 was $79.2 million. This revenue consists primarily of revenue recognized as a result of the utilization of bonus ads inventory earned by and material rights provided to customers in prior periods and the satisfaction of the Company’s performance obligations relating to data licensing contracts with advance cash payments.
The amount of revenue recognized from obligations satisfied (or partially satisfied) in prior periods was not material.
The decrease in the unbilled revenue balance from December 31, 2021 to June 30, 2022 was primarily attributable to differences between revenue recognized and amounts billed in the Company's data licensing arrangements with escalating fee structures due to recognizing such fees as revenue on a straight-line basis.
The increase in the deferred revenue balance from December 31, 2021 to June 30, 2022 was primarily due to payments received or due in advance of satisfying the Company's performance obligations relating to data licensing contracts and bonus ads inventory offered to customers during the period for meeting certain spend targets, offset by the delivery of bonus ads inventory.
Remaining Performance Obligations
As of June 30, 2022, the aggregate amount of the transaction price allocated to remaining performance obligations in contracts with an original expected duration exceeding one year is $925.5 million. This total amount primarily consists of long-term data licensing contracts and excludes deferred revenue related to the Company’s short-term advertising service arrangements. The Company expects to recognize this amount as revenue over the following time periods (in thousands):

Remaining Performance Obligations

Total
Remainder of 202220232024 and Thereafter
Revenue expected to be recognized on remaining performance obligations$925,470 $175,653 $319,369 $430,448 
14


Note 3. Cash, Cash Equivalents and Short-term Investments
Cash, cash equivalents and short-term investments consist of the following (in thousands):
June 30,
2022
December 31,
2021
Cash and cash equivalents:
Cash$250,642 $336,958 
Money market funds923,728 1,000,671 
Corporate notes, commercial paper and certificates of deposit1,506,226 848,920 
Total cash and cash equivalents$2,680,596 $2,186,549 
Short-term investments:
U.S. government and agency securities$206,090 $374,868 
Corporate notes, commercial paper and certificates of deposit3,232,497 3,829,123 
Marketable equity securities1,560 3,142 
Total short-term investments$3,440,147 $4,207,133 
The contractual maturities of debt securities classified as available-for-sale as of June 30, 2022 were as follows (in thousands):
June 30,
2022
Due within one year$2,469,054 
Due after one year through five years969,533 
Total
$3,438,587 

The following tables summarize unrealized gains and losses related to available-for-sale debt securities classified as short-term investments on the Company’s consolidated balance sheets (in thousands):

June 30, 2022
Gross
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Aggregated
Estimated
Fair Value
U.S. government and agency securities$211,197 $ $(5,107)$206,090 
Corporate notes, commercial paper and certificates of deposit3,275,401 25 (42,929)3,232,497 
Total available-for-sale debt securities classified as short-term investments
$3,486,598 $25 $(48,036)$3,438,587 
December 31, 2021
Gross
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Aggregated
Estimated
Fair Value
U.S. government and agency securities$376,966 $12 $(2,110)$374,868 
Corporate notes, commercial paper and certificates of deposit3,832,983 4,873 (8,733)3,829,123 
Total available-for-sale debt securities classified as short-term investments
$4,209,949 $4,885 $(10,843)$4,203,991 
The gross unrealized loss on available-for-sale debt securities in a continuous loss position for 12 months or longer was not material as of June 30, 2022 and December 31, 2021.
The Company evaluates whether the unrealized loss on available-for-sale debt securities is the result of the credit worthiness of the corporate notes it held, or other non-credit-related factors such as liquidity, by reviewing a number of factors such as the implied yield of the corporate note based on the market price, the nature of the invested entity's business or industry, market capitalization relative to debt, changes in credit ratings, and the market prices of the corporate notes subsequent to period end. As of June 30, 2022, the gross unrealized loss on available-for-sale debt securities was $48.0 million. The unrealized losses were not determined to be credit-related, and there were no expected credit losses related to the Company's available-for-sale debt securities. As of June 30, 2022, no allowance for credit losses in short-term investments was recorded.
15


Note 4. Fair Value Measurements
The Company measures its cash equivalents, short-term investments and derivative financial instruments at fair value. The Company classifies its cash equivalents, short-term investments and derivative financial instruments within Level 1 or Level 2 because the Company values these investments using quoted market prices or alternative pricing sources and models utilizing market observable inputs. The fair value of the Company’s Level 1 financial assets is based on quoted market prices of the identical underlying security. The fair value of the Company’s Level 2 financial assets is based on inputs that are directly or indirectly observable in the market, including the readily-available pricing sources for the identical underlying security that may not be actively traded.
The following tables set forth the fair value of the Company’s financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2022 and December 31, 2021 based on the three-tier fair value hierarchy (in thousands):
June 30, 2022
Level 1Level 2Total
Assets
Cash equivalents:
Money market funds$923,728 $ $923,728 
Corporate notes 3,520 3,520 
Commercial paper 1,502,706 1,502,706 
Short-term investments:
U.S. government and agency securities 206,090 206,090 
Corporate notes 1,958,090 1,958,090 
Commercial paper 1,003,247 1,003,247 
Certificates of deposit 271,160 271,160 
Marketable equity securities1,560  1,560 
Other current assets:
Foreign currency contracts 8,966 8,966 
Total$925,288 $4,953,779 $5,879,067 
Liabilities
Other current liabilities:
Foreign currency contracts$ $5,382 $5,382 
Total$ $5,382 $5,382 
December 31, 2021
Level 1Level 2Total
Assets
Cash equivalents:
Money market funds$1,000,671 $ $1,000,671 
Commercial paper 843,919 843,919 
Certificates of deposit 5,001 5,001 
Short-term investments:
U.S. government and agency securities 374,868 374,868 
Corporate notes 2,633,777 2,633,777 
Commercial paper