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Twilio (TWLO) Q4 Loss Narrower than Expected; Guides Well
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Twilio Inc. (TWLO - Free Report) ended 2016 on a strong note as evident from the better-than-expected results for the fourth quarter. The company’s top and bottom line not only fared better than the Zacks Consensus Estimate but also recorded a solid year-over-year improvement.
Although the company reported adjusted loss (including one-time expenses and income but excluding stock based compensation) of 10 cents per share, it was narrower than the Zacks Consensus Estimate of a loss of 12 cents. Furthermore, on a non-GAAP basis, the company achieved breakeven, which not only compared favorably with the year-ago quarter’s loss of 7 cents but also its own guided range of a loss of 5 cents to 6 cents.
The year-over-year improvement in the bottom line was mainly driven by strong top-line growth, which was partially offset by increased operating expenses as well as higher share count.
The company’s fourth quarter revenues surged 59.6% year over year to $82 million and surpassed the Zacks Consensus Estimate of $73.9 million. Also, it came ahead of the previously guided range of $72.5 million to $74.5 million.
The robust top-line performance was mainly driven by seasonal contribution from elections in the United States and Brazil as well as strong year-over-year growth in active customer account. During the quarter, the company registered a 44% rise in active customer account, adding over 2,000 new active customer accounts, bringing the total count to 36,606 as of Dec 31, 2016.
Adjusted gross profit increased 66.2% year over year to $48.2 million while margin improved 240 basis points (bps) to 58.8%. Per Twilio “a favorable mix of usage in higher-margin geographies internationally, ongoing efficiency gains, and some end-of-year refunds and accrual reversals” positively impacted gross margin.
Adjusted operating expenses were up 53% year over year to $56.7 million. However, as a percentage of revenues, it declined 300 bps to 69.1%.
Further, the company’s operating loss increased 5.4% year over year to $8.5 million. However, as a percentage of revenues it declined to -10.4% from -15.7% reported in the year-ago quarter. Improved margin was the result of increased gross margin and lower operating expenses as a percentage of revenues.
The company exited 2016 with cash and cash equivalents of $305.7 million, up from $252.2 million in the previous quarter end. Moreover, during the year, the company generating operating cash flow of $10.1 million.
Guidance
The company provided outlook for the first quarter and full year 2017. For the first quarter, Twilio expects revenues to come between $82 million and $84 million (mid-point $83 million). This is significantly higher than the Zacks Consensus Estimate of $79.23 million. Base revenue is anticipated to be in a range of $78 million to $79 million. Non-GAAP operating loss is projected to come in a range of 6 cents to 7 cents per share.
For 2017, Twilio expects revenues to come between $364 million and $372 million (mid-point $368 million). This is significantly higher than the Zacks Consensus Estimate of $350.28 million. Base revenue is anticipated to be in a range of $351 million to $355 million. Non-GAAP operating loss is projected to come in a range of 15 cents to 19 cents per share.
Our Take
San Francisco, CA-based Twilio offers cloud-based software that helps developers make and receive phone calls, text messages and video chats. The company’s fourth quarter results were better than expected. The company also registered year-over-year improvement on both counts. Furthermore, it provided an optimistic guidance for the first quarter and full year 2017.
The company boasts a strong clientele that includes the likes of Netflix (NFLX - Free Report) , salesforce.com (CRM - Free Report) and Twitter among others. Furthermore, the long-standing relationship with Amazon (AMZN - Free Report) is particularly noticeable. Twilio uses Amazon Web Service (AWS) to host its platform. Moreover, Amazon had invested during Twilio’s Series E round funding in 2015.
The partnership with Amazon will provide the company exposure to the e-commerce giant’s massive customer base. Per the recently extended partnership, Twilio will now provide voice notifications in addition to SMS messages through the Amazon Simple Notification Service (SNS).
Despite a healthy customer base and strong relationship with Amazon, we believe registering growth in 2017 will be hard. Intensifying competition in the communications market and growing prevalence of in-app push notifications are major concerns. Moreover, customer concentration (more than 10% revenues come from WhatsApp) is a headwind.
Notably, the stock has outperformed the Zacks categorized Internet Software industry in the YTD period. Twilio has gained 9.2% in the said period compared with the industry’s return of just 3.5%.
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Twilio (TWLO) Q4 Loss Narrower than Expected; Guides Well
Twilio Inc. (TWLO - Free Report) ended 2016 on a strong note as evident from the better-than-expected results for the fourth quarter. The company’s top and bottom line not only fared better than the Zacks Consensus Estimate but also recorded a solid year-over-year improvement.
Although the company reported adjusted loss (including one-time expenses and income but excluding stock based compensation) of 10 cents per share, it was narrower than the Zacks Consensus Estimate of a loss of 12 cents. Furthermore, on a non-GAAP basis, the company achieved breakeven, which not only compared favorably with the year-ago quarter’s loss of 7 cents but also its own guided range of a loss of 5 cents to 6 cents.
The year-over-year improvement in the bottom line was mainly driven by strong top-line growth, which was partially offset by increased operating expenses as well as higher share count.
Twilio Inc. Price, Consensus and EPS Surprise
Twilio Inc. Price, Consensus and EPS Surprise | Twilio Inc. Quote
Quarter in Detail
The company’s fourth quarter revenues surged 59.6% year over year to $82 million and surpassed the Zacks Consensus Estimate of $73.9 million. Also, it came ahead of the previously guided range of $72.5 million to $74.5 million.
The robust top-line performance was mainly driven by seasonal contribution from elections in the United States and Brazil as well as strong year-over-year growth in active customer account. During the quarter, the company registered a 44% rise in active customer account, adding over 2,000 new active customer accounts, bringing the total count to 36,606 as of Dec 31, 2016.
Adjusted gross profit increased 66.2% year over year to $48.2 million while margin improved 240 basis points (bps) to 58.8%. Per Twilio “a favorable mix of usage in higher-margin geographies internationally, ongoing efficiency gains, and some end-of-year refunds and accrual reversals” positively impacted gross margin.
Adjusted operating expenses were up 53% year over year to $56.7 million. However, as a percentage of revenues, it declined 300 bps to 69.1%.
Further, the company’s operating loss increased 5.4% year over year to $8.5 million. However, as a percentage of revenues it declined to -10.4% from -15.7% reported in the year-ago quarter. Improved margin was the result of increased gross margin and lower operating expenses as a percentage of revenues.
The company exited 2016 with cash and cash equivalents of $305.7 million, up from $252.2 million in the previous quarter end. Moreover, during the year, the company generating operating cash flow of $10.1 million.
Guidance
The company provided outlook for the first quarter and full year 2017. For the first quarter, Twilio expects revenues to come between $82 million and $84 million (mid-point $83 million). This is significantly higher than the Zacks Consensus Estimate of $79.23 million. Base revenue is anticipated to be in a range of $78 million to $79 million. Non-GAAP operating loss is projected to come in a range of 6 cents to 7 cents per share.
For 2017, Twilio expects revenues to come between $364 million and $372 million (mid-point $368 million). This is significantly higher than the Zacks Consensus Estimate of $350.28 million. Base revenue is anticipated to be in a range of $351 million to $355 million. Non-GAAP operating loss is projected to come in a range of 15 cents to 19 cents per share.
Our Take
San Francisco, CA-based Twilio offers cloud-based software that helps developers make and receive phone calls, text messages and video chats. The company’s fourth quarter results were better than expected. The company also registered year-over-year improvement on both counts. Furthermore, it provided an optimistic guidance for the first quarter and full year 2017.
The company boasts a strong clientele that includes the likes of Netflix (NFLX - Free Report) , salesforce.com (CRM - Free Report) and Twitter among others. Furthermore, the long-standing relationship with Amazon (AMZN - Free Report) is particularly noticeable. Twilio uses Amazon Web Service (AWS) to host its platform. Moreover, Amazon had invested during Twilio’s Series E round funding in 2015.
The partnership with Amazon will provide the company exposure to the e-commerce giant’s massive customer base. Per the recently extended partnership, Twilio will now provide voice notifications in addition to SMS messages through the Amazon Simple Notification Service (SNS).
Despite a healthy customer base and strong relationship with Amazon, we believe registering growth in 2017 will be hard. Intensifying competition in the communications market and growing prevalence of in-app push notifications are major concerns. Moreover, customer concentration (more than 10% revenues come from WhatsApp) is a headwind.
Currently, Twilio carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Notably, the stock has outperformed the Zacks categorized Internet Software industry in the YTD period. Twilio has gained 9.2% in the said period compared with the industry’s return of just 3.5%.
Just Released – Driverless Cars: Your Roadmap to Mega-Profits Today
In this latest Special Report, Zacks’ Aggressive Growth Strategist Brian Bolan explores a full-blown technological breakthrough in the making – autonomous cars. He also spotlights 8 stocks with tremendous gain potential to feed off this phenomenon. Click to see the stocks right now >>