A month has gone by since the last earnings report for Twilio Inc. (TWLO). Shares have added about 18.6% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Twilio Inc. due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Twillio Reports Q4 Results
Twilio reported fourth-quarter 2018 non-GAAP earnings of 4 cents per share, which matched the Zacks Consensus Estimate. Meanwhile, the company incurred a loss of 3 cents in the year-ago quarter.
The company’s fourth-quarter revenues soared 77% year over year to $204.3 million and also surpassed the Zacks Consensus Estimate of $182 million. Its core products, voice, messaging, e-mail and its engagement platform strategy were key growth drivers.
The company’s base revenues also jumped 77% year over year to $186.2 million. Significant increase in seasonal spending from a large international customer added earlier in 2018 and the impact of midterm elections in the United States drove base revenues. Excluding Uber, base revenues grew 79%.
Twilio’s top 10 active customer accounts contributed to 20% of total revenues, up from 17% in the year-earlier period and 18% in the earlier reported quarter.
The company benefited not only from a robust expansion of its existing customer base but also owing to first-time deals with the new ones, which resulted from the company’s firm focus on introducing products and its go-to-market sales strategy. Its go-to-market investments are helping it further penetrate the traditional enterprise.
Moreover, a few Twilio Flex deals signed in the fourth quarter are key catalysts. Gaining adoption of new products is driving the company’s dollar-based net expansion rate, which stood at 147% in the reported quarter.
The company registered a 31.3% surge in active customer accounts, thus bringing the total count to 64,286 as of Dec 31, 2018. Alone in the fourth quarter, Twilio added more than 3,133 active customer accounts.
Non-GAAP gross profit climbed approximately 79% year over year to $110.3 million. Gross margin expanded 100 basis points (bps) to 54%.
The company reported non-GAAP operating income of $2.4 million against non-GAAP operating loss of $3.9 million in the prior-year quarter.
The company exited the quarter under review with cash and cash equivalents plus short-term marketable securities of $748.3 million compared with $745.4 million sequentially.
Additionally, during the quarter under consideration, the company generated cash flow of $7.98 million from operational activities.
For the full year, Twilio expects revenues between $1.065 billion and $1.077 billion. Base revenues are estimated in the range of $1.028-$1.036 billion.
The company projects non-GAAP earnings per share in the band of 8-11 cents.
For the first quarter of 2019, Twilio envisions revenues between $222 million and $225 million. Base revenues are anticipated within $212-$214 million. The company forecasts non-GAAP earnings per share of breakeven to a penny.
SendGrid acquisition is expected to rake in roughly $27-$28 million as part of first-quarter revenues and contribute nearly $168-$170 million to full-year revenues.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -14.75% due to these changes.
Currently, Twilio Inc. has a poor Growth Score of F, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Twilio Inc. has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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