Twilio (TWLO) Q4 Earnings and Revenues Surpass Estimates

Twilio Inc. TWLO reported fourth-quarter 2019 non-GAAP earnings of 4 cents per share, which topped the Zacks Consensus Estimate of a penny and was in line with the year-ago figure.

Meanwhile, the company’s fourth-quarter revenues soared 62% year over year to $331.2 million and also surpassed the Zacks Consensus Estimate of $315 million, driven by increase in clientele and the Sendgrid buyout. Growing adoption of Twilio Flex is also a tailwind.

Quarterly Details

The company’s base revenues jumped 65% year over year to $306.6 million.

Organic base revenues of $253 million soared 36% year over year. SendGrid revenues of $54 million grew 30% year over year.

Twilio’s top 10 active customer accounts contributed to 14% of its total revenues, down from 20% in the year-ago period but up from 13% sequentially. WhatsApp represented approximately 6% of revenues in the quarter.

The company’s dollar-based net expansion rate was 124% in the reported quarter, down from 147% in the prior-year period.

The company’s active customer accounts increased to 179,000 as of Dec 31, 2019 from 64,286 on Dec 31, 2018. In the fourth quarter, Twilio added 6,908 active customer accounts.

During the quarter, PayPal, which has more than 300 million customers, selected Twilio as its SMS delivery platform. The company also entered into new deals as well as expanded relations with many other customers.

Operating Results

Non-GAAP gross profit skyrocketed approximately 71.5% year over year to $189.1 million. Further, gross margin expanded 300 basis points (bps) to 57%.  However, it was down sequentially due to some increased international usage, customer, product and country mix, carrier fees, FX and others.

Non-GAAP research and development as a percentage of revenues expanded 500 bps to 23%.

The company reported non-GAAP operating loss of $3.01 million against operating income of $2.37 million in the prior-year quarter.

Balance Sheet

The company exited the reported quarter with cash and cash equivalents plus short-term marketable securities of $1.85 billion, down from $1.88 billion sequentially.

As of Dec 31, 2019, the company generated $14.05 million of cash from operational activities.

Twilio Inc. Price, Consensus and EPS Surprise

Twilio Inc. Price, Consensus and EPS Surprise

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

2019 Highlights

Twilio delivered revenues of $1.13 billion, up 75% from 2018.

For the full year, dollar-based net expansion rate was 136%.

The company ended 2019 with more than 179,000 active customers.

Outlook

Twilio is looking forward to expand its enterprise and international reach and continue to build out partner ecosystem. As a result, the company is stepping up investments in its systems and infrastructure, go-to-market team and Flex, as well as in R&D, which is likely to remain an overhang on profitability in the near term.

Although the Verizon A2P program went live, the company’s guidance does not include any revenue benefit or margin impact from A2P fees.

For 2020, Twilio expects revenues in the range of $1.475-$1.479 billion, indicating growth of 30-31% driven by strength in core products and constant development of newer products like email and Flex. The Zacks Consensus Estimate is pegged at $1.45 billion.

The company projects non-GAAP loss per share in the band of 20-14 cents. The Zacks Consensus Estimate is pegged at earnings of 20 cents.

For 2020, the company expects gross margins to continue to be in the mid-to-high 50s.

For the first quarter of 2020, Twilio anticipates revenues between $335 million and $338 million. The Zacks Consensus Estimate is pegged at $327.47 million.

Moreover, the company forecasts non-GAAP loss per share to be 11-9 cents. The Zacks Consensus Estimate for earnings stands at a penny.

Zacks Rank and Stocks to Consider

Twilio currently carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the broader technology sector are Perficient PRFT, Applied Materials AMAT and ManTech International Corporation MANT, each flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Perficient, Applied Materials and ManTech is currently pegged at 11.75%, 8.2% and 8%, respectively.

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