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Twilio (TWLO) Gains 4% on Break-Even Q1 Earnings & Strong Sales

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Twilio’s (TWLO - Free Report) shares soared 3.8% in Wednesday’s extended trading session after the company reported better-than-expected results in the first quarter of 2022. The company reported break-even earnings for the first quarter, while the Zacks Consensus Estimate was pegged at a loss of 23 cents per share.

However, the bottom line compared unfavorably with the year-ago quarter’s non-GAAP earnings of 5 cents per share. The dismal bottom line can be attributed to increased investments in research & development and sales & marketing initiatives to drive future growth, which more than offset the benefits of higher revenues.

Revenue Details

The cloud-based communications platform-as-a-service provider reported revenues of $875.4 million, which improved by 48% year over year and surpassed the consensus mark of $861.6 million. The company’s newly acquired Zipwhip business contributed $32.2 million to total revenues.

Twilio 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 and Flex, which are its fastest-growing software-as-a-service products at present.

Twilio’s dollar-based net expansion rate was 127% in the reported quarter, up from 126% in the previous quarter but down from 133% in the year-ago quarter.

The company’s active customer accounts increased to 268,000 as of Mar 31, 2022 from 256,000 at the end of the fourth quarter of 2020 and 235,000 as of Mar 31, 2021.

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

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

Operating Results

Non-GAAP gross profit climbed 40.6% year over year to $460 million. However, the non-GAAP gross margin contracted by 200 basis points (bps) to 53%.

Twilio reported first-quarter non-GAAP operating income of $5 million, lower than the year-ago quarter’s operating income of $17.3 million. The non-GAAP operating margin contracted by 200 bps to 1% from the year-earlier quarter’s 3%.

General & administrative expenses on a non-GAAP basis increased 40.7% to $84.5 million and accounted for 10% of the quarterly revenues.

Research & development expenses on a non-GAAP basis surged 44% year over year to $154.6 million and made up 18% of the quarterly revenues.

Non-GAAP sales & marketing expenses surged 51.2% to $216.1 million and represented 25% of the first-quarter revenues.

Balance Sheet

The company exited the January-March quarter with cash and cash equivalents and short-term marketable securities of $5.22 billion, down from $5.36 billion at the end of the fourth quarter of 2021. As of Mar 31, 2022, TWLO’s long-term debt was $986.2 million.

Guidance

Twilio forecast non-GAAP loss per share between 20 cents and 23 cents for the second quarter of 2022. The Zacks Consensus Estimate for the same is pegged at a loss of 16 cents per share.

For the current quarter ending Jun 30, 2022, the company anticipates revenues between $912 million and $922 million, suggesting year-over-year growth of 36% to 38%. The Zacks Consensus Estimate is pegged at $900.1 million. Management estimates the non-GAAP loss from operations in the range of $35 million- $40 million.

Zacks Rank & Stocks to Consider

Twilio currently carries a Zacks Rank #3 (Hold). Shares of TWLO have fallen 64.7% in the past year.

Some better-ranked stocks from the broader technology sector are Semtech (SMTC - Free Report) , Gogo (GOGO - Free Report) and Analog Devices (ADI - Free Report) . Semtech and Gogo each sport a Zacks Rank #1 (Strong Buy), while Analog Devices carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Semtech's first-quarter fiscal 2023 earnings has been revised to 76 cents per share from 70 cents over the past 60 days. For fiscal 2023, earnings estimates have moved north by 8% to $3.38 per share in the past 60 days.

Semtech's earnings beat the Zacks Consensus Estimate in the preceding four quarters, the average surprise being 2.8%. Shares of SMTC have rallied 2.5% in the past year.

The Zacks Consensus Estimate for Gogo's first-quarter 2022 earnings has been revised downward by a penny to 13 cents per share over the past 30 days. For 2022, Gogo's earnings estimates have moved north by 3 cents to 65 cents per share in the past 60 days.

Gogo's earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 65%. Shares of GOGO have soared 91.1% in the past year.

The Zacks Consensus Estimate for Analog Devices' second-quarter fiscal 2022 earnings has been revised upward by 4 cents to $2.12 per share over the past 30 days. For fiscal 2022, earnings estimates have moved north by 11 cents to $8.43 per share in the past 30 days.

Analog Devices' earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 6%. Shares of ADI have increased 7% in the past year.


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