Twilio Spooks Investors with Lightest Quarter of Growth in Over Five Years

Communications software company Twilio Inc. reported fiscal second-quarter revenue and net income that topped EPS and revenue estimates in Q2, however its soft Q3 guidance sent the stock sharply lower, down 11 percent after the release. The tone of the went from a confident in achieving its 30+% revenue growth target last quarter to management feeling just “really good” about the second half of the year. Its Q3 revenue guidance calls for just 30-32% growth yr/yr, its lightest quarter of growth in over five years.

Twlilio Network

Twlio became a powerhouse of the gig, cloud and the stay-at-home economy with many of its customers leaders in these fields like uber, lyft and Grubhub. 

Twilio Inc NYSE: TWLO

Earnings

Twilio Inc. reported fiscal second-quarter revenue and net income that topped EPS and revenue estimates in Q2, however its soft Q3 guidance sent the stock sharply lower, down 11 percent after the release.

Highlights

  • On an unadjusted basis TWLO had a net loss of $322.8 million or $1.77 per share for the latest quarter, compared to a loss of $227.9 million or $1.31 per share in the second quarter of 2021.
  • Adjusted EPS remained flat yr/yr at $(0.11).
  • Revenue continued to cool off, growing just 41.0% yr/yr to $943.35 mln, a deceleration from growth of +48.4%, +53.8%, and +65.2% in the previous three quarters.
  • Gross margins fell 300 bps yr/yr to 51%, widening the gap from TWLO’s long-term target of 60+%.
  • A higher allocation of international revenue was the driver behind contracting margins, as costs associated with international messaging are higher.
  • Veering from its path toward returning to profitability in FY23, TWLO guided adjusted EPS well below consensus, expecting $(0.43)-$(0.37). Nevertheless, the company reaffirmed its commitment to profitability next year, despite potential adverse impacts on its growth in the coming quarters.
  • It is also worth pointing out that TWLO tends to issue conservative guidance, so we would not be surprised to see the company post earnings well above its gloomy forecast in Q3.

Outlook

TWLO Q3 revenue guidance calls for just 30-32% growth yr/yr, its lightest quarter of growth in over five years. The path toward returning to profitability in FY23 has hit some headwinds. TWLO guided adjusted EPS well below consensus, expecting $(0.43)-$(0.37).

The company reaffirmed its commitment to profitability next year, despite potential adverse impacts on its growth in the coming quarters. TWLO is known to issue conservative guidance.

TWLO’s valuation of ~4x FY23 sales lends itself to being priced closer to perfection in a risk on and off stock market. TWLO did say during the call that it is seeing no material impacts from the current macroeconomic picture on its financials.

The company has begun noticing pockets of softness, particularly in crypto, consumer on-demand, and social media. Nother new there, TWLO commented that the impact is nonmaterial.

The company’s consumer data platform also has headwinds on the horizon due to Google’s (GOOG) plan to phase out third-party cookies, making it more challenging to build personalized experiences for consumers.

About Twilio

TWLO offers APIs for developers to integrate voice and messaging features into their applications, amongst other software-based offerings. The company says millions of developers around the world have used Twilio to unlock the magic of communications to improve any human experience.

Twilio has democratized communications channels like voice, text, chat, video and email by virtualizing the world’s communications infrastructure through APIs that are simple enough for any developer to use, yet robust enough to power the world’s most demanding applications. By making communications a part of every software developer’s toolkit, Twilio is enabling innovators across every industry — from emerging leaders to the world’s largest organizations — to reinvent how companies engage with their customers. via Website

Source: Twlio, Alphastreet

From The TradersCommunity Research Desk