Twilio (TWLO) Gains 7% on Q3 Earnings Beat, Strong Guidance
Twilio Inc. TWLO shares gained 7.2% during Wednesday’s extended trading session after the company reported better-than-expected third-quarter 2023 results and provided strong guidance for the current quarter.
The programmable communication tool provider reported non-GAAP earnings of 58 cents per share, which surpassed the Zacks Consensus Estimate of 35 cents and came way above management’s guidance range of 33-37 cents. The bottom line also witnessed robust improvement from the year-ago quarter’s loss of 27 cents. The year-over-year rise in non-GAAP earnings was primarily due to higher revenues and cost savings through headcount reductions.
Revenue Details
The cloud-based communications platform-as-a-service provider registered revenues of $1.03 billion. The figure improved by 5% year over year and outshined the consensus mark of $985 million.
Twilio Inc. Price, Consensus and EPS Surprise
Twilio Inc. price-consensus-eps-surprise-chart | Twilio Inc. Quote
TWLO has been benefiting from the constant expansion of its international business and the continuous acceleration of digital transformation projects across several industries. The top line was primarily driven by the enhancement of customer experiences across various product portfolios like Segment, Flex and Engage. These are its fastest-growing software-as-a-service products at present.
Twilio’s dollar-based net expansion rate was 101% in the reported quarter, down from 103% in the previous quarter and 122% in the year-ago quarter. The Zacks Consensus Estimate was pegged at 95%.
Active customer accounts increased to 306,000 as of Sep 30, 2023, from 304,000 at the end of the second quarter of 2023. The figure was 280,000 as of Sep 30, 2022. The consensus mark stood at 308,107 for the reported quarter.
Operating Results
Non-GAAP gross profit climbed 11% year over year to $553 million. The non-GAAP gross margin expanded 200 basis points to 53%.
Non-GAAP operating income was $136.4 million against the year-ago quarter’s non-GAAP operating loss of $35.1 million. The non-GAAP operating margin was 13% for the reported quarter.
General & administrative (G&A) expenses on a non-GAAP basis decreased 16.1% to $79.6 million. G&A expenses accounted for 8% of quarterly revenues, down from 10% in the year-ago quarter. Research & development (R&D) expenditures on a non-GAAP basis declined 24.2% year over year to $145.5 million. R&D expenses made up 14% of third-quarter revenues, down from 20% in the year-ago quarter.
Non-GAAP sales & marketing costs declined 22.8% to $191 million. The same represented 18% of third-quarter revenues, way lower than 25% in the year-ago quarter.
Balance Sheet
The company exited the September quarter with cash and cash equivalents and short-term marketable securities of $3.86 billion, up from $3.68 billion at the second-quarter 2023 end. As of Sep 30, 2023, TWLO’s long-term debt was $988.6 million.
During the first nine months of 2023, Twilio generated operating cash flow of $192.2 million and repurchased stocks worth $548.9 million. Moreover, the company revealed that it had bought back $620 million worth of its common stock till Nov 7 under the ongoing $1 billion share repurchase program authorized in February 2023. The program will expire in December 2024.
Q4 Guidance
For the current quarter ending Dec 31, 2023, TWLO anticipates revenues between $1.03 billion and $1.04 billion, indicating a year-over-year increase of 1-2% on a reported basis and 4-5% organic growth. Twilio forecast non-GAAP earnings in the range of 53-57 cents per share. Management estimates non-GAAP income from operations in the $115-$125 million band.
Zacks Rank & Stocks to Consider
Currently, Twilio carries a Zacks Rank #3 (Hold). Shares of TWLO have increased 56.5% year to date (YTD).
Some better-ranked stocks from the broader technology sector are NVIDIA Corporation NVDA, Palo Alto Networks PANW and Splunk SPLK. NVIDIA sports a Zacks Rank #1 (Strong Buy), while Palo Alto and Splunk each carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today's Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for NVIDIA’s third-quarter fiscal 2024 earnings has been revised 2 cents northward to $3.34 per share in the past 60 days. For fiscal 2024, earnings estimates have moved 7 cents upward to $10.74 per share in the past 60 days.
NVIDIA’s earnings beat the Zacks Consensus Estimate thrice in the preceding four quarters while missing on one occasion, the average surprise being 9.8%. Shares of NVDA have surged 197.5% YTD.
The Zacks Consensus Estimate for Palo Alto Networks' first-quarter fiscal 2024 earnings has remained unchanged at $1.16 per share in the past 60 days. For fiscal 2024, earnings estimates have remained unchanged at $5.34 per share in the past 60 days.
Palo Alto Networks’ earnings beat the Zacks Consensus Estimate in the preceding four quarters, the average surprise being 22.2%. Shares of PANW have surged 72.2% YTD.
The Zacks Consensus Estimate for Splunk's third-quarter fiscal 2024 earnings has been revised upward by a penny to $1.12 per share in the past 60 days. For fiscal 2024, earnings estimates have moved upward by 2 cents to $3.78 per share in the past 60 days.
Splunk’s earnings beat the Zacks Consensus Estimate in the preceding four quarters, the average surprise being 154.9%. Shares of SPLK have risen 70.65 YTD.
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