Elon Musk attributes Twitter cost cuts to negative $3 billion cash flow

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Elon Musk has defended his financial management of Twitter, saying the social media platform would have faced a negative cash position of $3 billion a year had it not been for his controversial cost-cutting efforts.

The billionaire entrepreneur, who bought the social media company for $44 billion in October after it tried to pull out of the deal, gave insight into his dire finances during an online Twitter Spaces forum on Wednesday.

We have a fire emergency drill… This company is like you in a plane going down to the ground and at high speed with the engines on fire and the controls not working, he said. he says. This is the reason for my actions which can sometimes seem fallacious.

He said the platform was on track to spend around $5 billion in 2023. Overall costs on Twitter in 2021, the last annual period the company reported before going private, were $5. $6 billion, during which time it made a pre-tax loss of $221,409.

Musk predicted that Twitter’s net cash outflow, if you made no changes, would be around $6 billion to $6.5 billion next year. That’s partly because the company was burdened with $12.5 billion in debt to help fund its acquisition, requiring around $1.5 billion a year in annual debt service payments amid rising interest rates, he said.

Not good since Twitter has $1 billion in cash, he said. That’s why I’ve spent the last five weeks cutting costs like crazy.

His remarks suggested the company was on track to achieve around $3 billion in annual revenue next year. That would suggest Twitter was on track for revenue up to $2 billion lower in 2023 than the $5 billion it made in 2021 — which came mostly from advertising. Many marketers have pulled out of the platform since Musks took control over moderation issues.

The picture of Twitter’s finances comes after Musk laid off around half of its 7,500 employees and cut benefits, raising concerns about whether the company has enough staff in areas such as content moderation and compliance.

On Sunday, Musk said in a tweet that Twitter had been on the fast track to bankruptcy since May.

However, Musk said on Wednesday that the changes he made would mean the company would roughly break even.

With the changes we’re making here to massively reduce the burn rate and increase subscriber revenue, I now think Twitter will actually be fine next year, Musk said, adding that he’s spoken to advertisers who urged him to show how Twitter could provide a return on their investment.

The Tesla and SpaceX chief executive has previously indicated that he plans to turn Twitter into a multi-purpose app, where users might be able to send funds or make purchases, for example, with the aim of generating news sources of revenue, including payments and subscriptions.

However, an attempt to launch a new premium subscription service, Twitter Blue, has been fraught with difficulty after some users used the blue tick’s paid verification offer to impersonate others. , forcing the company to stop and then restart the service.

Late Tuesday, Musk said he would step down as head of Twitter as soon as he found someone crazy enough to take the job, bowing to the result of a poll of platform users that he led this weekend.

Musk also indicated he would continue to lead the company’s software and server teams after his resignation, suggesting he would remain closely involved in day-to-day operations and product development at the social networking site.

Additional reporting by Richard Waters in San Francisco

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