Twilio (TWLO) Down 0.4% Since Last Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for Twilio (TWLO). Shares have lost about 0.4% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Twilio due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Twilio Q4 Earnings and Revenues Surpass Estimates
Twilio reported better-than-expected fourth-quarter 2023 results. The programmable communication tool provider reported non-GAAP earnings of 86 cents per share, which surpassed the Zacks Consensus Estimate of 57 cents and came above management’s guidance range of 53-57 cents. The bottom line also witnessed robust improvement from the year-ago quarter’s earnings of 22 cents.
Revenue Details
The cloud-based communications platform-as-a-service provider registered revenues of $1.08 billion. The figure improved 5% year over year and beat the consensus mark of $1.04 billion.
The company benefited from the steady growth in the usage of its products and experienced seasonal sales boost during the holiday season. However, the top line was affected by the challenges from customers in the crypto industry.
In the fourth quarter, TWLO also restructured its business segments by shifting Flex and Marketing Campaigns to the Communications segment, which was earlier reported in the Data and Applications segment, thereby shifting $54 million of revenues to Communications. The company has renamed its Data and Applications business unit to the Twilio Segment, which includes both the Segment and Engage products.
The company’s dollar-based net expansion rate was 102% in the reported quarter, up from 101% in the previous quarter and down from 110% in the year-ago quarter.
Active customer accounts decreased to 305,000 as of Dec 31, 2023, from 306,000 at the end of the third quarter of 2023. The figure was 290,000 as of Dec 31, 2022.
Operating Results
Non-GAAP gross profit climbed 9% year over year to $564 million. The non-GAAP gross margin expanded 180 basis points to 52.4% year over year and declined 110 basis points sequentially.
Non-GAAP operating income was $172.6 million against the year-ago quarter’s non-GAAP operating loss of $32.9 million. The non-GAAP operating margin was 16% for the reported quarter.
General & administrative (G&A) expenses on a non-GAAP basis decreased 29.1% to $62.1 million. G&A expenses accounted for 6% of quarterly revenues, down from 9% in the year-ago quarter. Research & development (R&D) expenditures on a non-GAAP basis declined 15.9% year over year to $149.2 million. R&D expenses contributed 14% of fourth-quarter revenues, down from 17% in the year-ago quarter.
Non-GAAP sales & marketing costs declined 18.3% to $179.7 million. The same represented 17% of fourth-quarter revenues, lower than 21% in the year-ago quarter.
Balance Sheet
The company exited the December quarter with cash and cash equivalents and short-term marketable securities of $4.01 billion, up from $3.86 billion at the third-quarter 2023 end. As of Dec 31, 2023, TWLO’s long-term debt was $988.6 million.
During fiscal 2023, Twilio generated an operating cash flow of $414.8 million and repurchased stocks worth $656 million. Moreover, the company revealed that it had bought back $730 million worth of its common stock till Feb 14 under the ongoing $1 billion share repurchase program authorized in February 2023. The program will expire in December 2024.
Q1 Guidance
For the current quarter ending Mar 31, 2024, TWLO anticipates revenues between $1.025 billion and $1.035 billion, indicating a year-over-year increase of 2-3% on a reported basis and 5-6% on an organic basis. Twilio forecasts non-GAAP earnings in the range of 56-60 cents per share.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
The consensus estimate has shifted 28.06% due to these changes.
VGM Scores
Currently, Twilio has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Twilio has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
Performance of an Industry Player
Twilio is part of the Zacks Internet - Software industry. Over the past month, Paypal (PYPL), a stock from the same industry, has gained 5.5%. The company reported its results for the quarter ended December 2023 more than a month ago.
Paypal reported revenues of $8.03 billion in the last reported quarter, representing a year-over-year change of +8.7%. EPS of $1.48 for the same period compares with $1.24 a year ago.
Paypal is expected to post earnings of $1.17 per share for the current quarter, representing no change from the year-ago quarter. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.
Paypal has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of D.
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