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Twilio (TWLO) Soars on Strong Q1 Results and Optimistic View
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Shares of Twilio Inc. (TWLO - Free Report) jumped more than 4% during yesterday’s after-hours trade after the company reported splendid first-quarter 2018 results, wherein its revenues topped the Zacks Consensus Estimate as well as management’s guided range. Also, the top line marked solid year-over-year growth.
Talking about the company’s bottom-line results, though it posted a loss per share on non-GAAP basis, the figure came in much lower than the Consensus mark and management’s guided range as well. Moreover, quarterly loss was in line with the year-ago quarter’s loss.
Let’s discuss the first-quarter results in detail.
Revenues
The company’s first-quarter revenues surged 47.8% year over year to $129.1 million and surpassed the Zacks Consensus Estimate of $116 million. Also, it came ahead of management’s previously-guided range of $115-$117 million. Furthermore, the company’s base revenues jumped 46% year over year to $117.5 million, also higher than management’s earlier guided range of $108–$109 million.
The robust top-line performance was mainly driven by remarkable year-over-year growth in active customer account which resulted from the company’s continued focus on introducing products as well as its go-to-market sales strategy.
The company registered a 32.7% surge in active customer accounts, adding more than 13,289 accounts over the last 12 months, bringing the total count to 53,985 as of Mar 31, 2018. During the first quarter alone, Twilio added more than 5,006 active customer accounts.
Operating Results
Non-GAAP gross profit climbed approximately 38.5% year over year to $71 million. However, gross margin contracted 360 basis points (bps) to 55%, as elevated cost of goods sold more than offset the benefit of higher revenues.
Non-GAAP operating expenses flared up 37.6% year over year to $75.6 million. The year-over-year surge was mainly due to increased investment in research and development, and sales to capitalize on the market opportunity. However, as a percentage of revenues, the figure decreased to 58.6% from 62.9% in the year-ago quarter.
Furthermore, the company reported non-GAAP operating loss of $4.7 million, wider than the year-ago figure of $3.7 million. Non-GAAP net loss came in at $4.2 million or 4 cents per share. In the year-earlier quarter, the company had reported net loss of $3.2 million or 4 cents per share. Benefits from higher revenues and efficient cost management were offset by elevated cost of goods sold.
Nevertheless, the non-GAAP loss per share came way below management’s guided range of a loss of 6-7 cents. Also, the quarterly loss came in narrower than the Zacks Consensus Estimate of a loss of 7.
The company exited the reported quarter with cash and cash equivalents, and short-term marketable securities of $308 million, up from $290.9 million reported at the end of the previous quarter. In addition to this, during the quarter, the company generated cash flow of $16.9 million from operational activities.
Outlook
Buoyed by a stellar quarterly performance, Twilio provided encouraging outlook for the second quarter and raised its full-year revenue guidance.
For the full year, Twilio now expects revenues between $538 million and $544 million (mid-point $541 million), up from the previous range of $506-$514 million (mid-point $510 million). This is significantly higher than the Zacks Consensus Estimate of $509.8 million.
Similarly, base revenues are now estimated in the range of $507–$510 million, higher than the previous forecast of $483-$487 million. Projection for the non-GAAP net loss per share range has been lowered to 7-10 cents from the previous forecast of 10-14 cents. The Zacks Consensus Estimate is pegged at a loss of 12 cents.
For the second quarter, Twilio estimates revenues to be between $129 million and $131 million (mid-point $130 million). This is higher than the Zacks Consensus Estimate of $122.6 million. Base revenues are anticipated in the range of $122-$123 million. Non-GAAP net loss is projected at 5-6 cents per share. The consensus estimate is currently pegged at a loss of 6 cents.
Recovers From Uber Hangover
The recently-reported strong quarterly results indicate that the company has been able to mitigate the loss of revenues from Uber.
It should be noted that Uber uses Twilio services for a variety of used cases such as driver and rider communication, driver marketing and several others. Till 2016, Uber used Twilio’s platforms in most of its geographical operations. However, since first-quarter 2017, Uber is “optimizing by used case and by geography” and is planning to "move communications for some use cases in-app." This means that Uber is now trying to operate its messaging services internally.
Uber’s contribution to Twilio’s revenues declined to approximately 4% in the first quarter from roughly 12% in the year-ago quarter.
Despite this, the company managed to report robust revenue growth in four back-to-back quarters, returning on growth trajectory, mainly due to its continued focus on rolling out products, global expansion, go-to-market sales and acquisition strategies.
Our Take
We believe the back-to-back impressive quarterly results and optimistic guidance will give a fresh boost to the company’s share price.
Notably, Twilio’s shares have outperformed the industry to which it belongs to, in the year-to-date period. The stock has appreciated 88% during the said period, while the industry recorded growth of 6.4%.
The company’s key initiatives, including product innovation, global expansion and acquisitions, are helping it gain customers, which bode well for long-term growth. We believe proliferation in cloud and mobile penetration across the globe will continue to fuel Twilio’s customer growth over the long run.
Twilio 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.
Nevertheless, intensifying competition in the communications market and growing prevalence of in-app push notifications are major concerns. Moreover, customer concentration is a headwind.
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early. See Zacks' 3 Best Stocks to Play This Trend >>
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Twilio (TWLO) Soars on Strong Q1 Results and Optimistic View
Shares of Twilio Inc. (TWLO - Free Report) jumped more than 4% during yesterday’s after-hours trade after the company reported splendid first-quarter 2018 results, wherein its revenues topped the Zacks Consensus Estimate as well as management’s guided range. Also, the top line marked solid year-over-year growth.
Talking about the company’s bottom-line results, though it posted a loss per share on non-GAAP basis, the figure came in much lower than the Consensus mark and management’s guided range as well. Moreover, quarterly loss was in line with the year-ago quarter’s loss.
Let’s discuss the first-quarter results in detail.
Revenues
The company’s first-quarter revenues surged 47.8% year over year to $129.1 million and surpassed the Zacks Consensus Estimate of $116 million. Also, it came ahead of management’s previously-guided range of $115-$117 million. Furthermore, the company’s base revenues jumped 46% year over year to $117.5 million, also higher than management’s earlier guided range of $108–$109 million.
The robust top-line performance was mainly driven by remarkable year-over-year growth in active customer account which resulted from the company’s continued focus on introducing products as well as its go-to-market sales strategy.
The company registered a 32.7% surge in active customer accounts, adding more than 13,289 accounts over the last 12 months, bringing the total count to 53,985 as of Mar 31, 2018. During the first quarter alone, Twilio added more than 5,006 active customer accounts.
Operating Results
Non-GAAP gross profit climbed approximately 38.5% year over year to $71 million. However, gross margin contracted 360 basis points (bps) to 55%, as elevated cost of goods sold more than offset the benefit of higher revenues.
Non-GAAP operating expenses flared up 37.6% year over year to $75.6 million. The year-over-year surge was mainly due to increased investment in research and development, and sales to capitalize on the market opportunity. However, as a percentage of revenues, the figure decreased to 58.6% from 62.9% in the year-ago quarter.
Furthermore, the company reported non-GAAP operating loss of $4.7 million, wider than the year-ago figure of $3.7 million. Non-GAAP net loss came in at $4.2 million or 4 cents per share. In the year-earlier quarter, the company had reported net loss of $3.2 million or 4 cents per share. Benefits from higher revenues and efficient cost management were offset by elevated cost of goods sold.
Nevertheless, the non-GAAP loss per share came way below management’s guided range of a loss of 6-7 cents. Also, the quarterly loss came in narrower than the Zacks Consensus Estimate of a loss of 7.
Twilio Inc. Price, Consensus and EPS Surprise
Twilio Inc. Price, Consensus and EPS Surprise | Twilio Inc. Quote
Balance Sheet
The company exited the reported quarter with cash and cash equivalents, and short-term marketable securities of $308 million, up from $290.9 million reported at the end of the previous quarter. In addition to this, during the quarter, the company generated cash flow of $16.9 million from operational activities.
Outlook
Buoyed by a stellar quarterly performance, Twilio provided encouraging outlook for the second quarter and raised its full-year revenue guidance.
For the full year, Twilio now expects revenues between $538 million and $544 million (mid-point $541 million), up from the previous range of $506-$514 million (mid-point $510 million). This is significantly higher than the Zacks Consensus Estimate of $509.8 million.
Similarly, base revenues are now estimated in the range of $507–$510 million, higher than the previous forecast of $483-$487 million. Projection for the non-GAAP net loss per share range has been lowered to 7-10 cents from the previous forecast of 10-14 cents. The Zacks Consensus Estimate is pegged at a loss of 12 cents.
For the second quarter, Twilio estimates revenues to be between $129 million and $131 million (mid-point $130 million). This is higher than the Zacks Consensus Estimate of $122.6 million. Base revenues are anticipated in the range of $122-$123 million. Non-GAAP net loss is projected at 5-6 cents per share. The consensus estimate is currently pegged at a loss of 6 cents.
Recovers From Uber Hangover
The recently-reported strong quarterly results indicate that the company has been able to mitigate the loss of revenues from Uber.
It should be noted that Uber uses Twilio services for a variety of used cases such as driver and rider communication, driver marketing and several others. Till 2016, Uber used Twilio’s platforms in most of its geographical operations. However, since first-quarter 2017, Uber is “optimizing by used case and by geography” and is planning to "move communications for some use cases in-app." This means that Uber is now trying to operate its messaging services internally.
Uber’s contribution to Twilio’s revenues declined to approximately 4% in the first quarter from roughly 12% in the year-ago quarter.
Despite this, the company managed to report robust revenue growth in four back-to-back quarters, returning on growth trajectory, mainly due to its continued focus on rolling out products, global expansion, go-to-market sales and acquisition strategies.
Our Take
We believe the back-to-back impressive quarterly results and optimistic guidance will give a fresh boost to the company’s share price.
Notably, Twilio’s shares have outperformed the industry to which it belongs to, in the year-to-date period. The stock has appreciated 88% during the said period, while the industry recorded growth of 6.4%.
The company’s key initiatives, including product innovation, global expansion and acquisitions, are helping it gain customers, which bode well for long-term growth. We believe proliferation in cloud and mobile penetration across the globe will continue to fuel Twilio’s customer growth over the long run.
Twilio 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.
Nevertheless, intensifying competition in the communications market and growing prevalence of in-app push notifications are major concerns. Moreover, customer concentration 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.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>