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Twilio Inc. (TWLO) Down 5% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Twilio Inc. (TWLO - Free Report) . Shares have lost about 5% 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 Inc. due for a breakout? 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.

Twilio Q2 Earnings and Revenues Top Estimates, Up Y/Y

Twilio reported better-than-expected second-quarter 2020 results and issued an upbeat guidance for the third quarter.

The company posted non-GAAP earnings of 9 cents per share for the June-end quarter, while the Zacks Consensus Estimate was pegged at a loss of 9 cents.

The non-GAAP bottom-line figure also soared 200% from the year-ago quarter’s 3 cents. This year-over-year upsurge was mainly driven by stellar revenue growth and efficient cost management.

Twilio’s quarterly revenues surged 46% year over year to $400.8 million and also surpassed the Zacks Consensus Estimate of $367.6 million on increase in clientele and the Sendgrid buyout. The growing adoption of Twilio Flex is also a tailwind.

During the reported quarter, the company witnessed waning demand from ride-sharing, hospitality and travel industries, which have been hit hard by the pandemic-led global lockdown. However, increased demand from health care, education, retail and crisis management organizations offset the negative impact of the aforementioned factors to a large extent.

Additionally, Twilio is benefiting from the accelerated digital-transformation projects across many industries in the wake of the global lockdown. Organizations are reconfiguring their set-up for a work-from-home operational environment and making nearly 100% e-commerce a reality.

Quarterly Details

Twilio’s top 10 active customer accounts contributed to 15% of its total revenues, flat sequentially, and up from the prior-year quarter’s 13%. WhatsApp represented approximately 7% of revenues during the second quarter.

The company’s dollar-based net expansion rate was 132% in the reported quarter, down from the prior-year period’s 141%.

The company’s active customer accounts increased to more than 200,000 as of Mar 31, 2020 from 190,000 as of Jun 30, 2019. In the second quarter, Twilio added more than 10,000 active customer.

Operating Results

Non-GAAP gross profit climbed 36.9% year over year to $224 million. However, gross margin contracted 300 basis points (bps) to 56% mainly due to a 100-basis point negative impact from Application to Person or A2P fees.

Twilio’s second-quarter non-GAAP operating income witnessed a five-fold jump to $9.5 million from the year-ago quarter’s $1.5 million. Non-GAAP operating margin expanded 100 bps to 2%.

Balance Sheet

The company exited the reported quarter with cash and cash equivalents plus short-term marketable securities of $1.9 billion, up sequentially from $1.84 billion.

During the first half of 2020, the company generated $13.9 million of cash from operational activities.

Outlook

Twilio issued an encouraging guidance for the September-end quarter.

For the quarter, the company anticipates revenues between $401 million and $406 million. It estimates non-GAAP operation loss in the range of $10 million to $15 million. The company also forecasts non-GAAP loss per share between 5 cents and 9 cents.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision flatlined during the past month. The consensus estimate has shifted -5.34% due to these changes.

VGM Scores

Currently, Twilio Inc. has a poor Growth Score of F, however its Momentum Score is doing a lot better with a B. However, 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.

Outlook

Twilio Inc. has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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