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In the Hunt for Sales Growth, Twilio Takes Another Bottom-Line Dive

Anders Bylund, The Motley Fool

Twilio (NYSE: TWLO) announced second-quarter financial results on July 31. Here's a closer look at the mobile communications technologist's Q2 report.

Twilio's second-quarter results: The raw numbers

Metric

Q2 2019

Q2 2018

Change

Total revenue

$275 million

$148 million

86%

Net income (loss)

($93 million)

($24 million)

(286%)

GAAP earnings (loss) per share (diluted)

($0.72)

($0.25)

(188%)

Data source: Twilio. GAAP = generally accepted accounting principles.

What happened with Twilio this quarter?

  • The company is focused on maximizing revenue and customer growth at this time, leaving bottom-line concerns for future reports. Adjusted earnings came in at $0.03 per diluted share, unchanged from the year-ago period and consistent with management's stated goal to run Twilio at "slightly above breakeven."
  • The dollar-based net expansion rate came in at 140%, down from 146% in the previous quarter but up from 137% in Q2 2018. This metric measures how much more Twilio's active customers spent to renew their contracts compared to their old agreements.
  • Twilio sported approximately 162,000 active customer accounts by the end of this quarter, nearly triple the 57,000 accounts seen a year earlier. Besides the normal efforts to reach new customers, Twilio also enjoyed a significant boost from the acquisition of cloud-based email specialist SendGrid.
  • Not counting SendGrid and a handful of smaller buyouts, Twilio's revenue showed 56% organic year-over-year growth in the second quarter. That's below the 60% organic growth Twilio experienced in Q1. The company didn't report this metric in the year-ago period.
  • A total of 129 million diluted shares helped Twilio reduce its net losses per share. This share count stands 34% above the year-ago level and increased by 11% in the second quarter alone.
Two jacket-clad hands holding a tablet above a table full of charts and calculators. The right hand points to a chart on the screen, showing growth.

Image source: Getty Images.

What management had to say

In the second-quarter earnings call, CFO Khozema Shipchandler noted that Twilio's fantastic net expansion rates are bound to decline at some point, but that investors shouldn't worry too much about that natural process.

"The one thing that we've always said and maintained over the last several calls is that expansion rate will fade over time," Shipchandler said. "It's not that it's going to be a precipitous drop. But it will fade over time and that's just the kind of the law of large numbers kicking into the way that the business is going to grow, but I wouldn't take that as anything other than the business is just becoming a lot larger."

Looking ahead

Twilio's management offered the following third-quarter and full-year guidance:

  • In the third quarter, total revenue should land near $288 million. Adjusted earnings per share should stay a penny or two above the breakeven point. The weighted share count will continue to grow, stopping in the neighborhood of 150 million stubs.
  • The full-year revenue target was raised by 0.9%, landing at approximately $1.12 billion. Operating income held steady at roughly $6.5 million, while adjusted earnings jumped from $0.12 to $0.17 per share. The weighted share count for 2019 as a whole is now seen at 143 million, up from 141 million three months ago.


Anders Bylund has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Twilio. The Motley Fool has a disclosure policy.

This article was originally published on Fool.com