By Jahnavi Nidumolu and Krystal Hu
(Reuters) – Twitter’s cash flow remains negative because of a nearly 50% drop in advertising revenue and a heavy debt load, Elon Musk said on Saturday, falling short of his expectation in March that Twitter could be cashflow positive by June.
“Need to reach positive cashflow before we have the luxury of anything else,” Musk said in a tweet replying to suggestions on recapitalization.
Musk said on Sunday in another tweet that Twitter did not see the increase in advertising revenue that had been expected in June, adding: “July is a bit more promising.” Twitter Spaces also hasn’t generated revenue yet and is “all-cost”, Musk said.
This is the latest sign that the aggressive cost-cutting measures since Musk acquired Twitter in October are not enough to get Twitter cashflow positive, and suggests Twitter’s ad revenue may not have recovered as quickly as Musk suggested in an interview with the BBC in April that most advertisers had returned to the site.
After firing thousands of employees and cutting cloud service bills, Musk said the company had reduced its non-debt expenditures to $1.5bn from a projected $4.5bn in 2023. Twitter also faces annual interest payments of about $1.5bn as a result of the debt it took on in the $44bn deal that turned the company private.
It is unclear what timeframe Musk was referring to by the 50% drop in ad revenue. He has said Twitter was on track to post $3bn in revenue in 2023, down from $5.1bn in 2021.
Twitter has been criticized over lax content moderation, followed by an exodus of many advertisers that did not want their ads appearing next to inappropriate content.
Musk’s hiring of Linda Yaccarino, the former ad chief at Comcast’s NBCUniversal, as CEO signalled that ad sales were a priority for Twitter even as it worked to increase subscription revenue.
Yaccarino joined Twitter in early June and told investors that the social media company plans to focus on video, creator and commerce partnerships and is in early talks with political and entertainment figures, payments services, and news and media publishers.
On Thursday, Twitter said that select content creators will be eligible to get a part of the ad revenue the company receives in an attempt to draw more content creators to the site.