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Twilio (TWLO) Q1 Earnings Beat, Shares Fall on Dim Outlook
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Twilio Inc. (TWLO - Free Report) started 2024 on a strong note by reporting better-than-expected financial results for the first quarter. Despite the stronger-than-expected quarterly performance, the company’s shares tumbled 6.7% during Tuesday’s extended trading session as its revenue guidance for the second quarter fell short of the Zacks Consensus Estimate, indicating a slowdown in demand amid macroeconomic uncertainties.
Coming to the first-quarter performance, the programmable communication tool provider reported non-GAAP earnings of 80 cents per share, which surpassed the Zacks Consensus Estimate of 60 cents and came above management’s guidance range of 56-60 cents.
The bottom line also witnessed a robust improvement from the year-ago quarter’s earnings of 47 cents. The strong year-over-year growth in earnings was primarily driven by increased revenues, lower expenses and a reduction in the outstanding share count.
The cloud-based communications platform-as-a-service provider registered revenues of $1.05 billion, which surpassed the Zacks Consensus Estimate of $1.03 billion as well as came ahead of management’s guidance range of $1.025-$1.035 billion. Year over year, first-quarter revenues improved 4% on a reported basis and 7% organically.
On its earnings conference call, Twilio stated that the first-quarter top-line performance was negatively impacted by challenges from customers in the crypto industry and the unsetting of the software component of the Zipwhip business. These factors resulted in a 210 basis points (bps) headwind to the company’s first-quarter organic revenue growth. Excluding these factors, Twilio’s first-quarter organic revenue growth was 9%.
Segment-wise, revenues from the Communications division came in at $972 million, up 4% year over year on a reported basis and 7% organically. Segment division’s sales grew 2% year over year to $75 million.
Twilio’s dollar-based net expansion rate was 102% in the reported quarter, flat with the previous quarter but down from 106% in the year-ago quarter. The company’s first-quarter dollar-based net expansion rates for the Communications and Segment divisions were 103% and 92%, respectively.
Active customer accounts increased to more than 313,000 as of Mar 31, 2024 from 305,000 at the end of the fourth quarter of 2023. The figure was 300,000 as of Mar 31, 2023. As of Mar 31, 2024, Communications and Segment active customer accounts were more than 305,000 and 7,900, respectively.
Operating Results
The non-GAAP gross profit increased 8% year over year to $566 million. The non-GAAP gross margin expanded 180 bps year over year and 170 bps sequentially to 54.1%, primarily driven by a lower international messaging mix and lower hosting fees as a result of larger credits on the company’s cloud spend. The first-quarter non-GAAP gross margin for the Communications and Segment divisions came in at 52.2% and 77.6%, respectively.
The non-GAAP operating income jumped 54% year over year to $160 million. The non-GAAP operating margin of 15.2% for the first quarter expended 490 bps on a year-over-year basis but contracted 80 bps sequentially.
General & administrative (G&A) expenses on a non-GAAP basis decreased to $75.6 million from $76.8 million in the year-ago quarter. G&A expenses accounted for 7.2% of quarterly revenues, down from 7.6% in the year-ago quarter. Research & development (R&D) expenditures on a non-GAAP basis increased 5.4% year over year to $165.2 million. R&D expenses accounted for 15.8% of first-quarter revenues, up from 15.6% in the year-ago quarter.
Non-GAAP sales & marketing costs declined 12.3% to $165.6 million. The same represented 15.8% of first-quarter revenues, lower than 18.8% in the year-ago quarter.
Balance Sheet
The company exited the March quarter with cash and cash equivalents and short-term marketable securities of $3.83 billion, down from $4.01 billion at the fourth-quarter 2023 end. As of Mar 31, 2024, TWLO’s long-term debt was $989.4 million.
During the first quarter, Twilio generated operating cash flow of $190.1 million and free cash flow of $177.3 million. Twilio repurchased stocks worth $356.9 million during the first quarter. Moreover, the company revealed that it intends to complete the remaining $1.5 billion of authorized repurchases by December 2024.
Second-Quarter Guidance
For the current quarter ending Jun 30, 2024, TWLO anticipates revenues between $1.05 billion and $1.06 billion, which indicates a year-over-year increase of 1-2% on a reported basis and 4-5% on an organic basis. The Zacks Consensus Estimate for second-quarter revenues is pegged at $1.07 billion.
Twilio projects non-GAAP income from operations to be in the range of $135-$145 million. It forecasts non-GAAP earnings in the range of 64-68 cents per share. The consensus mark for second-quarter earnings currently stands at 65 cents per share.
Zacks Rank & Stocks to Consider
Currently, Twilio carries a Zacks Rank #3 (Hold). Shares of TWLO have plunged 16.5% year to date (YTD).
The Zacks Consensus Estimate for NVIDIA’s fiscal 2025 earnings has been revised 10 cents upward to $23.94 per share in the past 30 days, which suggests year-over-year growth of 84.7%. The long-term estimated earnings growth rate for the stock stands at 30.9%. The NVDA stock has soared 82.8% YTD.
The Zacks Consensus Estimate for Salesforce’s fiscal 2025 earnings has been revised upward by 3 cents to $9.71 per share in the past 60 days, which calls for an increase of 18.1% on a year-over-year basis. The long-term expected earnings growth rate for the stock is pegged at 17.4%. CRM shares have risen 5.3% YTD.
The consensus mark for Paycom’s 2024 earnings has been revised upward by 3 cents to $7.68 per share over the past seven days, which indicates a marginal 0.9% decrease from 2023. It has a long-term earnings growth expectation of 10.4%. The PAYC stock has declined 16.5% in the YTD period.
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Twilio (TWLO) Q1 Earnings Beat, Shares Fall on Dim Outlook
Twilio Inc. (TWLO - Free Report) started 2024 on a strong note by reporting better-than-expected financial results for the first quarter. Despite the stronger-than-expected quarterly performance, the company’s shares tumbled 6.7% during Tuesday’s extended trading session as its revenue guidance for the second quarter fell short of the Zacks Consensus Estimate, indicating a slowdown in demand amid macroeconomic uncertainties.
Coming to the first-quarter performance, the programmable communication tool provider reported non-GAAP earnings of 80 cents per share, which surpassed the Zacks Consensus Estimate of 60 cents and came above management’s guidance range of 56-60 cents.
The bottom line also witnessed a robust improvement from the year-ago quarter’s earnings of 47 cents. The strong year-over-year growth in earnings was primarily driven by increased revenues, lower expenses and a reduction in the outstanding share count.
Twilio Inc. Price, Consensus and EPS Surprise
Twilio Inc. price-consensus-eps-surprise-chart | Twilio Inc. Quote
Revenue Details
The cloud-based communications platform-as-a-service provider registered revenues of $1.05 billion, which surpassed the Zacks Consensus Estimate of $1.03 billion as well as came ahead of management’s guidance range of $1.025-$1.035 billion. Year over year, first-quarter revenues improved 4% on a reported basis and 7% organically.
On its earnings conference call, Twilio stated that the first-quarter top-line performance was negatively impacted by challenges from customers in the crypto industry and the unsetting of the software component of the Zipwhip business. These factors resulted in a 210 basis points (bps) headwind to the company’s first-quarter organic revenue growth. Excluding these factors, Twilio’s first-quarter organic revenue growth was 9%.
Segment-wise, revenues from the Communications division came in at $972 million, up 4% year over year on a reported basis and 7% organically. Segment division’s sales grew 2% year over year to $75 million.
Twilio’s dollar-based net expansion rate was 102% in the reported quarter, flat with the previous quarter but down from 106% in the year-ago quarter. The company’s first-quarter dollar-based net expansion rates for the Communications and Segment divisions were 103% and 92%, respectively.
Active customer accounts increased to more than 313,000 as of Mar 31, 2024 from 305,000 at the end of the fourth quarter of 2023. The figure was 300,000 as of Mar 31, 2023. As of Mar 31, 2024, Communications and Segment active customer accounts were more than 305,000 and 7,900, respectively.
Operating Results
The non-GAAP gross profit increased 8% year over year to $566 million. The non-GAAP gross margin expanded 180 bps year over year and 170 bps sequentially to 54.1%, primarily driven by a lower international messaging mix and lower hosting fees as a result of larger credits on the company’s cloud spend. The first-quarter non-GAAP gross margin for the Communications and Segment divisions came in at 52.2% and 77.6%, respectively.
The non-GAAP operating income jumped 54% year over year to $160 million. The non-GAAP operating margin of 15.2% for the first quarter expended 490 bps on a year-over-year basis but contracted 80 bps sequentially.
General & administrative (G&A) expenses on a non-GAAP basis decreased to $75.6 million from $76.8 million in the year-ago quarter. G&A expenses accounted for 7.2% of quarterly revenues, down from 7.6% in the year-ago quarter. Research & development (R&D) expenditures on a non-GAAP basis increased 5.4% year over year to $165.2 million. R&D expenses accounted for 15.8% of first-quarter revenues, up from 15.6% in the year-ago quarter.
Non-GAAP sales & marketing costs declined 12.3% to $165.6 million. The same represented 15.8% of first-quarter revenues, lower than 18.8% in the year-ago quarter.
Balance Sheet
The company exited the March quarter with cash and cash equivalents and short-term marketable securities of $3.83 billion, down from $4.01 billion at the fourth-quarter 2023 end. As of Mar 31, 2024, TWLO’s long-term debt was $989.4 million.
During the first quarter, Twilio generated operating cash flow of $190.1 million and free cash flow of $177.3 million. Twilio repurchased stocks worth $356.9 million during the first quarter. Moreover, the company revealed that it intends to complete the remaining $1.5 billion of authorized repurchases by December 2024.
Second-Quarter Guidance
For the current quarter ending Jun 30, 2024, TWLO anticipates revenues between $1.05 billion and $1.06 billion, which indicates a year-over-year increase of 1-2% on a reported basis and 4-5% on an organic basis. The Zacks Consensus Estimate for second-quarter revenues is pegged at $1.07 billion.
Twilio projects non-GAAP income from operations to be in the range of $135-$145 million. It forecasts non-GAAP earnings in the range of 64-68 cents per share. The consensus mark for second-quarter earnings currently stands at 65 cents per share.
Zacks Rank & Stocks to Consider
Currently, Twilio carries a Zacks Rank #3 (Hold). Shares of TWLO have plunged 16.5% year to date (YTD).
Some better-ranked stocks in the broader technology sector are NVIDIA (NVDA - Free Report) , Salesforce (CRM - Free Report) and Paycom Software (PAYC - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for NVIDIA’s fiscal 2025 earnings has been revised 10 cents upward to $23.94 per share in the past 30 days, which suggests year-over-year growth of 84.7%. The long-term estimated earnings growth rate for the stock stands at 30.9%. The NVDA stock has soared 82.8% YTD.
The Zacks Consensus Estimate for Salesforce’s fiscal 2025 earnings has been revised upward by 3 cents to $9.71 per share in the past 60 days, which calls for an increase of 18.1% on a year-over-year basis. The long-term expected earnings growth rate for the stock is pegged at 17.4%. CRM shares have risen 5.3% YTD.
The consensus mark for Paycom’s 2024 earnings has been revised upward by 3 cents to $7.68 per share over the past seven days, which indicates a marginal 0.9% decrease from 2023. It has a long-term earnings growth expectation of 10.4%. The PAYC stock has declined 16.5% in the YTD period.