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Why Is Twilio (TWLO) Up 16% Since Last Earnings Report?

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It has been about a month since the last earnings report for Twilio Inc. (TWLO - Free Report) . Shares have added about 16% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Twilio due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Twilio reported second-quarter non-GAAP earnings of 3 cents per share against the Zacks Consensus Estimate of a loss of 6 cents per share. The company had reported loss of 5 cents in the year-ago quarter.

The company’s second-quarter revenues surged 54% year over year to $147.8 million and surpassed the Zacks Consensus Estimate of $130 million.

Quarter Details

The company’s base revenues also increased 54% year over year to $135 million. Excluding Uber, base revenues showed consistent growth of 61%.

The company benefited not only from robust expansion within existing customers but also first- time deals with new ones, which resulted from the company’s continued focus on introducing products as well as its go-to-market sales strategy.

Management pointed out solid growth in the company’s core voice and messaging products to be a key driver. Moreover, positive response to Twilio Flex has given further impetus to the company’s Engagement Cloud strategy.

The company registered a 32% surge in active customer accounts, bringing the total count to 57,350 as of Jun 30, 2018. During the second quarter alone, Twilio added more than 3,365 active customer accounts.

Operating Results

Non-GAAP gross profit climbed approximately 48% year over year to $81 million. However, gross margin contracted 200 basis points (bps) to 55% as elevated cost of goods sold more than offset the benefit of higher revenues.

The company reported non-GAAP operating income of $2.2 million, compared with non-GAAP operating loss of $4.7 million in the year-ago quarter.

The company reported non-GAAP operating margin of 1% compared with year-ago quarter’s figure of a negative 5%.

Balance Sheet

The company exited the reported quarter with cash and cash equivalents, and short-term marketable securities of $795 million, up from $308 million reported at the end of the previous quarter.

In addition to this, during the quarter, the company generated cash flow of $19.2 million from operational activities.

Outlook

Buoyed by a stellar quarterly performance, Twilio provided encouraging outlook for the third quarter and raised its full-year revenue guidance.

For the full year, Twilio now expects revenues between $585.5 million and $589.5 million, up from the previous range of $538 million and $544 million.

Similarly, base revenues are now estimated in the range of $546.5–$548.5 million, higher than the previous forecast of $507–$510 million.

The company now projects non-GAAP earnings per share in the range of 2-4 cents against the earlier projection of a loss of 7-10 cents per share.

For the third quarter, Twilio estimates revenues to be between $150 million and $152 million. Base revenues are anticipated in the range of $142-$143 million. Non-GAAP earnings are projected in the range of 2-3 cents per share.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted -7.05% due to these changes.

VGM Scores

At this time, Twilio has a subpar Growth Score of D, 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

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Twilio has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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