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Twilio (TWLO) Reports Narrower-Than-Expected Loss in Q2

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Twilio TWLO delivered better-than-anticipated second-quarter 2021 results. The company reported non-GAAP loss of 11 cents per share for the quarter, narrower than the Zacks Consensus Estimate of a loss of 14 cents. However, the non-GAAP bottom-line figure compared unfavorably with earnings of 9 cents in the year-ago quarter.

Total revenues increased 67% year over year to $668.9 million and surpassed the consensus mark of $597.7 million. Twilio’s newly acquired Segment business contributed $46.6 million to the company’s total revenues. The acquisition of ValueFirst acted as a tailwind.

Twilio is benefiting from the constant expansion of its international business as well as the continuous acceleration of digital transformation projects across many industries. In the quarter under review, the company experienced new customer growth with a strong net expansion rate.

The top-line growth was primarily driven by enhancement of customer experiences across various product portfolios like SendGrid, Segment and Flex which are its fastest-growing SaaS products at present.

Twilio Inc. Price, Consensus and EPS Surprise

Twilio Inc. Price, Consensus and EPS Surprise
Twilio Inc. Price, Consensus and EPS Surprise

Twilio Inc. price-consensus-eps-surprise-chart | Twilio Inc. Quote

Quarterly Details

Twilio’s dollar-based net expansion rate was 135% in the reported quarter, up from the 133% recorded in the previous quarter and 132% in the year-ago quarter.

Twilio’s active customer accounts increased to more than 240,000 as of Jun 30, 2021, from 235,000 at the end of first-quarter 2021 and 200,000 at the end of second-quarter 2020. In the second quarter, Twilio Segment customer accounts were also included in the active customer accounts.

Operating Results

Non-GAAP gross profit climbed 60.9% year over year to $360.5 million. However, gross margin contracted 200 basis points (bps) to 54%.

Twilio reported second-quarter non-GAAP operating income of $4.2 million, lower than the year-ago quarter’s operating income of $9.5 million. Non-GAAP operating margin contracted 100 bps to 1% from the year-earlier quarter’s 2%.

General & administrative revenues on a non-GAAP basis increased 70.3% to $69.3 million and accounted for 10% of the quarterly revenues.

Research & development revenues on a non-GAAP basis surged 51.9% year over year to $118.3 million and represented 18% of the quarterly revenues.

Non-GAAP sales & marketing revenues jumped 76% to $168.7 million and made up 25% of second-quarter revenues.

Balance Sheet

The company exited the April-June quarter with cash and cash equivalents plus short-term marketable securities of $5.93 billion, up from $5.71 billion at the end of the first quarter.

In the first half of 2021, the company generated $26.2 million of cash from operational activities.

Guidance

Twilio issued a bleak bottom-line outlook for third-quarter 2021. The company forecast non-GAAP loss per share between 14 cents and 17 cents. The Zacks Consensus Estimate for the same is pegged at a loss per share of 9 cents.

We believe the company’s drab bottom-line outlook reflects elevated spending on its expansion plans. Twilio has entered into new product and geography markets to sustain its high growth momentum.

For the current quarter ending Sep 30, 2021, the company anticipates revenues between $670 million and $680 million. The Zacks Consensus Estimate is pegged at $631.3 million. It estimates non-GAAP loss from operations in the range of $30 million to $25 million.

The company noted that its third-quarter outlook includes revenue contribution from Segment business but excludes the newly acquired ZipWhip asset.

Zacks Rank and Key Picks

Twilio currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the broader technology sector include Digital Turbine APPS, Salesforce CRM, and Zoom Video Communications ZM. While Digital Turbine and Zoom sport a Zacks Rank #1 (Strong Buy), Salesforce carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The long-term earnings growth rate for Digital Turbine, Salesforce, and Zoom is currently pegged at 50%, 18.4%, and 16.6%, respectively.


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