Twilio Inc. Delivers Strong Q3 Earnings, Raises Full-Year Guidance
Exceeding Estimates and Boosting Investor Confidence
Twilio Inc. TWLO reported third-quarter 2024 non-GAAP earnings of $1.02 per share, outperforming the Zacks Consensus Estimate of 87 cents and exceeding management’s guidance of 81-86 cents.
This quarterly performance marks a significant increase from last year’s earnings of 58 cents per share. The year-over-year growth in earnings was largely fueled by rising revenues along with effective cost management.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
Twilio’s revenues reached $1.13 billion, exceeding the Zacks Consensus Estimate of $1.09 billion and surpassing management’s forecast of $1.085-$1.095 billion.
The company observed a 10% revenue increase compared to the same quarter last year. During the earnings call, Twilio attributed its revenue growth primarily to an increase in communications revenue, despite challenges related to the software aspect of its Zipwhip business, which created a 90-basis point headwind to organic revenue growth in the third quarter.
With robust results from both revenue and earnings, Twilio revised its earnings guidance for the year. This positive development, combined with optimistic outlooks, is expected to provide a lift to Twilio’s share price. Despite this, Twilio’s shares are down 7% year-to-date as the stock trails behind the Zacks Internet – Software industry, which has seen a growth of 25.7%.
Twilio Inc. Price, Consensus, and EPS Surprise
Twilio Inc. price-consensus-eps-surprise-chart | Twilio Inc. Quote
Revenue Breakdown by Segment
Within its segments, Twilio’s Communications division generated $1.06 billion, reflecting a 10% year-over-year increase, while the Segment division’s sales remained unchanged at $73.4 million.
The company reported a dollar-based net expansion rate of 105% in the quarter, a rise from 102% in the previous quarter and 101% a year ago. Specifically, the Communications and Segment divisions recorded net expansion rates of 106% and 91%, respectively.
Active customer accounts climbed to over 320,000 as of September 30, up from 316,000 at the end of the second quarter of 2024 and 306,000 at the same time last year. The counts for Communications and Segment were over 313,000 and 7,500, respectively.
Operating Performance Highlights
Non-GAAP gross profit grew by 8.6% year-over-year to $600 million, while the non-GAAP gross margin decreased 60 basis points to 52.9%. For the third quarter, the gross margins for the Communications and Segment divisions stood at 51.8% and 69.8%, respectively.
Non-GAAP operating income increased significantly by 33.7% to $182.4 million, expanding the non-GAAP operating margin to 16.1%, which improved by 290 basis points year-over-year.
General and administrative (G&A) expenses fell to $74.8 million from $79.6 million in the prior year, constituting 6.6% of revenues, down from 7.7%. Research and development (R&D) expenses rose 20.2% to $174.8 million, making up 15.4% of revenues, compared to 14.1% in the previous year. Non-GAAP sales and marketing expenses decreased by 12.1% to $168 million, representing 14.8% of revenues, a drop from 18.5% last year.
Financial Position
As the quarter ended, Twilio held cash, cash equivalents, and short-term marketable securities of $2.70 billion, down from $3.12 billion at the end of the prior quarter. Additionally, long-term debt was reported at $990.2 million as of September 30, 2024.
Twilio generated an operating cash flow of $204.3 million in the third quarter, bringing the total operating cash flow for the first three quarters of 2024 to $607.8 million. The company has also repurchased shares worth a total of $2.7 billion since initiating its $3 billion share repurchase program in February 2023.
Updated 2024 Guidance
Twilio has updated its full-year 2024 guidance, now expecting organic revenue growth of 7.5-8%, an increase from previous guidance of 6-7%. Non-GAAP income from operations is now forecasted to be between $700 million and $710 million, revising upward from $650 million to $675 million. The Zacks Consensus Estimate for 2024 revenues stands at $4.37 billion, reflecting a 5.2% year-over-year increase.
Additionally, Twilio has provided fourth-quarter guidance, estimating revenues of $1.15 billion to $1.16 billion, which suggests a year-over-year growth of 7-8%. The Zacks Consensus Estimate for fourth-quarter revenue is $1.15 billion.
For the fourth quarter, Twilio projects non-GAAP income from operations between $185 million and $195 million, alongside expected non-GAAP earnings of 95 cents to $1 per share, compared to a consensus mark of 86 cents per share.
Twilio’s Market Rank and Comparisons
Currently, Twilio holds a Zacks Rank #3 (Hold).
Among other notable stocks in the tech sector are Shopify SHOP, Fortinet FTNT, and F5 Inc FFIV. Shopify and Fortinet each sport a Zacks Rank #1 (Strong Buy), whereas F5 Inc has a Zacks Rank #2 (Buy) at this time. For a complete list of today’s Zacks #1 Rank stocks, visit the website.
In recent updates, the consensus for Shopify’s 2024 earnings has increased by 13 cents to $1.12 per share, representing a 51.31% year-over-year growth. The long-term expected earnings growth for Shopify is projected at 39.2%, with shares gaining 2.7% in 2024.
Fortinet’s 2024 earnings estimate has been revised up by 2 cents to $2.03 per share, showing a 24.5% increase year-over-year, with a long-term growth expectation of 16.3%. Shares of Fortinet have seen a rise of 34.5% year-to-date.
FFIV’s fiscal 2024 earnings estimate also increased by 3 cents to $14.03 per share, suggesting a 5% year-over-year growth, while it projects long-term growth of 7.8%. However, shares have declined by 33.5% this year.
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Twilio Inc. (TWLO): Free Stock Analysis Report
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