Yahoo Finance Twilio's (NYSE:TWLO) Q1: Beats On Revenue But Stock Drops
Cloud communications infrastructure company Twilio (NYSE:TWLO) reported Q1 CY2024 results beating Wall Street analysts' expectations , with revenue up 4% year on year to $1.05 billion. On the other hand, next quarter's revenue guidance of $1.06 billion was less impressive, coming in 2% below analysts' estimates. It made a non-GAAP profit of $0.80 per share, improving from its profit of $0.47 per share in the same quarter last year.
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Twilio (TWLO) Q1 CY2024 Highlights:
Revenue: $1.05 billion vs analyst estimates of $1.03 billion (1.4% beat)
EPS (non-GAAP): $0.80 vs analyst estimates of $0.59 (34.6% beat)
Revenue Guidance for Q2 CY2024 is $1.06 billion at the midpoint, below analyst estimates of $1.08 billion
Gross Margin (GAAP): 52%, up from 48.8% in the same quarter last year
Free Cash Flow of $177.3 million, down 15.9% from the previous quarter
Net Revenue Retention Rate: 102%, in line with the previous quarter
Customers: 313,000, up from 305,000 in the previous quarter
Market Capitalization: $11.06 billion
“We are operating with greater financial discipline, operational rigor, and focus on innovation than ever before,” said Khozema Shipchandler, CEO of Twilio.
Founded in 2008 by Jeff Lawson, a former engineer at Amazon, Twilio (NYSE:TWLO) is a software as a service platform that makes it really easy for software developers to use text messaging, voice calls and other forms of communication in their apps.
Communications Platform
The first shift towards voice communication over the internet (VOIP), rather than traditional phone networks, happened when the enterprises started replacing business phones with the cheaper VOIP technology. Today, the rise of the consumer internet has increased the need for two way audio and video functionality in applications, driving demand for software tools and platforms that enable this utility.
Sales Growth
As you can see below, Twilio's revenue growth has been strong over the last three years, growing from $590 million in Q1 2021 to $1.05 billion this quarter.
Twilio's quarterly revenue was only up 4% year on year, which might disappoint some shareholders. On top of that, the company's revenue actually decreased by $28.9 million in Q1 compared to the $42.28 million increase in Q4 CY2023. Sales also dropped by a similar amount a year ago and management is guiding for revenue to rebound in the coming quarter, which might hint at an emerging seasonal pattern.
Next quarter's guidance suggests that Twilio is expecting revenue to grow 1.7% year on year to $1.06 billion, slowing down from the 10% year-on-year increase it recorded in the same quarter last year. Looking ahead, analysts covering the company were expecting sales to grow 6.5% over the next 12 months before the earnings results announcement.
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Customer Growth
Twilio reported 313,000 customers at the end of the quarter, an increase of 8,000 from the previous quarter. That's a little better customer growth than last quarter and quite a bit above the typical growth we've seen in past quarters, demonstrating that the business has strong sales momentum. We've no doubt shareholders will take this as an indication that Twilio's go-to-market strategy is working very well.
Key Takeaways from Twilio's Q1 Results
We were impressed by Twilio's strong growth in customers this quarter. We were also glad its gross margin improved and free cash flow turned positive year on year (fourth quarter in a row). On the other hand, its revenue guidance for next quarter missed analysts' expectations. Zooming out, we think this was still a decent, albeit mixed, quarter, showing that the company is staying on track. The market was likely expecting more, and the stock is down 6.1% after reporting, trading at $59.5 per share.
So should you invest in Twilio right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.
