Elon Musk expects Twitter to be ‘cash flow break-even’ next year

ELON Musk said Twitter is now on track to be “roughly cash flow break-even” next year, as the billionaire owner defended his deep cost-cutting measures at the social media platform.

Twitter was previously tracking towards a “negative cash flow situation of US$3 billion per year” before the cost cuts, Musk said on Wednesday (Dec 21) in a Twitter Spaces audio chat.

Since taking over Twitter on Oct 27, Musk has laid off 50 per cent of the company’s employees and demanded remaining staff commit to long hours and a “hardcore” culture, prompting more employee departures. The controversial moves have rattled advertisers, who contribute 90 per cent of Twitter’s revenue.

“We have an emergency fire drill on our hands,” Musk said. “That’s the reason for my actions.”

Twitter currently has a little over 2,000 employees, Musk said on Wednesday.

Musk said Twitter was previously on track to spend US$5 billion next year. With US$12.5 billion in debt due to the acquisition, Twitter was facing a net cash outflow of US$6.5 billion with revenue of about US$3 billion next year. That amounted to negative cash flow of US$3 billion, Musk said, adding that Twitter has US$1 billion in cash.

Twitter’s annual revenue in 2021 was US$5 billion and in February, the company forecast that 2022 revenue would grow in the low-to-mid 20 per cent range.

During the Spaces session, Musk said his “number one priority” was to grow subscriber revenue so it becomes a meaningful part of Twitter’s business. Currently, companies are cutting advertising budgets in a weak economy.

Musk, who also runs Tesla, said major advertisers have told him Twitter ads have the lowest return on investment out of all social media platforms.

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He said one advertiser suggested to him that Twitter should display an ad if a user mentions a product in tweet replies.

“I said, yeah, we should do that,” Musk said. REUTERS