Twilio (TWLO) Posts Narrower-Than-Expected Q2 Loss, Solid Sales

Twilio TWLO reported better-than-expected results in the second quarter of 2022. The company reported a non-GAAP loss of 11 cents per share for the second quarter, while the Zacks Consensus Estimate was pegged at a loss of 20 cents per share.

The bottom line was flat with the year-ago quarter. Increased investments in research & development and sales & marketing initiatives to drive future growth continued to weigh on the bottom line, which more than offset the benefits of higher revenues.

Revenue Details

The cloud-based communications platform-as-a-service provider reported revenues of $943.4 million, which improved by 41% year over year and surpassed the consensus mark of $917.7 million. The company’s newly acquired Zipwhip business contributed $34 million to total revenues.

Twilio Inc. Price, Consensus and EPS Surprise

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

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 123% in the reported quarter, down from 127% in the previous quarter and 135% in the year-ago quarter.

The company’s active customer accounts increased to 275,000 as of Jun 30, 2022 from 240,000 at the end of the first quarter of 2022 and 268,000 as of Mar 31, 2021.

Operating Results

The non-GAAP gross profit climbed 33.4% year over year to $480 million. However, the non-GAAP gross margin contracted by 300 basis points to 51%.

Twilio reported a second-quarter non-GAAP operating loss of $7 million, while it reported an operating income of $4 million in the year-ago quarter.

General & administrative expenses on a non-GAAP basis increased 27% to $87.7 million and accounted for 9% of the quarterly revenues.

Research & development expenses on a non-GAAP basis surged 41% year over year to $167.1 million and made up 18% of the quarterly revenues.

Non-GAAP sales & marketing expenses surged 38% to $23.3 million and represented 25% of second-quarter revenues.

Balance Sheet

The company exited the January-March quarter with cash and cash equivalents and short-term marketable securities of $4.39 billion, down from $5.22 billion at the end of the first quarter of 2022. As of Jun 30, 2022, TWLO’s long-term debt was $986.6 million.

Guidance

Twilio forecast a non-GAAP loss per share between 37 cents and 43 cents for the third 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 Sep 30, 2022, the company anticipates revenues between $965 million and $975 million, suggesting year-over-year growth of 30% to 32%. Management estimates the non-GAAP loss from operations in the range of $60 million-$70 million.

Zacks Rank & Stocks to Consider

Twilio currently carries a Zacks Rank #3 (Hold). Shares of TWLO have fallen 62.7% year to date (“YTD”).

Some better-ranked stocks worth considering are from the broader technology sector Cadence Design Systems CDNS, Manhattan Associates MANH and 8×8, Inc. EGHT. Cadence Design Systems and Manhattan Associates each sport a Zacks Rank #1 (Strong Buy), while 8×8 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 Cadence Design Systems’ third-quarter 2022 earnings has been revised upward by nine cents to 97 cents per share over the past 30 days. For 2022, earnings estimates have moved north by 5.7% to $4.11 per share in the past 30 days.

Cadence Design Systems’ earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 9.8%. Shares of CDNS have decreased 2.3% YTD.

The Zacks Consensus Estimate for Manhattan Associates’ third-quarter 2022 earnings has been revised upward by a penny to 57 cents per share in the past 30 days. For 2022, earnings estimates have moved south by 18 cents to $2.38 per share in the past 30 days.

Manhattan Associates’ earnings beat the Zacks Consensus Estimate in the preceding four quarters, the average surprise being 30.3%. Shares of MANH have plunged 6.7% YTD.

The Zacks Consensus Estimate for 8×8’s second-quarter fiscal 2023 earnings has been revised upward by a penny to four cents per share over the past seven days. For fiscal 2023, the Zacks Consensus Estimate for 8×8’s earnings has moved north by 13 cents to 26 cents per share in the past seven days.

8×8’s earnings beat the Zacks Consensus Estimate thrice in the preceding four quarters while matching the same in one, the average surprise being 175%. Shares of EGHT have plunged 66.5% YTD.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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