Twilio Rises 7% as Q2 Earnings & Revenues Beat Estimates

Twilio Inc. TWLO shares gained 6.7% during Thursday's extended trading session after the cloud communication company reported better-than-expected second-quarter 2024 results.

The programmable communication tool provider reported non-GAAP earnings of 87 cents per share, which surpassed the Zacks Consensus Estimate of 71 cents and came above management's guidance range of 64-68 cents.

The bottom line also witnessed a robust improvement from the year-ago quarter's earnings of 54 cents. The strong year-over-year growth in earnings was primarily driven by increased revenues, lower expenses and a reduction in the outstanding share count.

Revenue Details

The cloud-based communications platform-as-a-service provider registered revenues of $1.08 billion, which surpassed the Zacks Consensus Estimate of $1.06 billion and came ahead of management's guidance range of $1.05-$1.06 billion. Year over year, second-quarter revenues improved 4% on a reported basis and 7% organically.

On its earnings conference call, Twilio stated that the second-quarter top-line performance was negatively impacted by the unsetting of the software component of the Zipwhip business. This resulted in a 100-basis point (bps) headwind to the company's second-quarter organic revenue growth.

Segment-wise, revenues from the Communications division came in at $1.01 billion, up 4% year over year on a reported basis and 7% organically. The Segment division's sales grew 3% year over year to $75.2 million.

Twilio's dollar-based net expansion rate was 102% in the reported quarter, flat with the previous quarter but down from 103% in the year-ago quarter. The company's second-quarter dollar-based net expansion rates for the Communications and Segment divisions were 102% and 93%, respectively.

Active customer accounts increased to more than 316,000 as of Jun 30 from 313,000 at the end of the first quarter of 2024. The figure was 304,000 as of Jun 30, 2023. As of Jun 30, 2024, Communications and Segment active customer accounts were more than 309,000 and 7,700, respectively.

Operating Results

The non-GAAP gross profit increased 6.5% year over year to $555.8 million. The non-GAAP gross margin expanded 110 bps year over year to 53.3%. The second-quarter non-GAAP gross margin for the Communications and Segment divisions came in at 51.8% and 73.4%, respectively.

The non-GAAP operating income jumped 45.9% year over year to $175.3 million. The non-GAAP operating margin of 16.2% for the second quarter expended 460 bps on a year-over-year basis.

General & administrative (G&A) expenses on a non-GAAP basis decreased to $70.3 million from $73 million in the year-ago quarter. G&A expenses accounted for 6.5% of quarterly revenues, down from 7% in the year-ago quarter. Research & development (R&D) expenditures on a non-GAAP basis increased 6.2% year over year to $160 million. R&D expenses accounted for 14.8% of second-quarter revenues, up from 14.5% in the year-ago quarter.

Non-GAAP sales & marketing costs declined 13.3% to $171.7 million. The same represented 15.9% of second-quarter revenues, lower than 19.1% in the year-ago quarter.

Balance Sheet

The company exited the June quarter with cash and cash equivalents and short-term marketable securities of $3.12 billion, down from $3.83 billion at the end of the first quarter. As of Jun 30, 2024, TWLO's long-term debt was $989.8 million.

During the second quarter, Twilio generated operating cash flow of $213.3 million and free cash flow of $197.6 million. In the first half of 2024, it generated operating cash flow of $403.5 million.

Twilio repurchased stocks worth $1.27 billion during the first half of 2024. Moreover, the company revealed that it intends to complete the remaining $800 million of authorized repurchases by December 2024.

Guidance Update

Twilio updated its guidance for full-year 2024. The company now anticipates organic revenue growth of 6-7% in 2024, instead of 5-10% expected earlier. Non-GAAP income from operations is now projected to be in the range of $650-$675 million, up from the previous range of $585-$635 million. The Zacks Consensus Estimate for 2024 revenues is pegged at $4.35 billion, which indicates a year-over-year increase of 4.6%.

Twilio also initiated guidance for the third quarter. For the current quarter ending Sep 30, 2024, TWLO anticipates revenues between $1.085 billion and $1.095 billion, which indicates a year-over-year increase of 5-6% on a reported as well as an organic basis. The Zacks Consensus Estimate for third-quarter revenues is pegged at $1.09 billion.

Twilio projects non-GAAP income from operations in the range of $160-$170 million. It forecasts non-GAAP earnings in the range of 81-86 cents per share. The consensus mark for third-quarter earnings currently stands at 73 cents per share.

Zacks Rank & Other Stocks to Consider

Twilio currently sports a Zacks Rank #1 (Strong Buy). Shares of TWLO have declined 25.8% year to date (YTD).

Some other top-ranked stocks worth considering in the broader technology sector are AudioEye AEYE, PayPal and AppFolio. Currently, Twilio and PayPal each sport a Zacks Rank #1, while AppFolio carries a Zacks Rank #2 (Buy).

The consensus mark for AudioEye's 2024 earnings has been revised upward by 10 cents to 47 cents per share over the past seven days, which indicates a 327.3% increase from 2023. The stock has skyrocketed 337.1% YTD.

The Zacks Consensus Estimate for PayPal's 2024 earnings has been revised upward by 12 cents to $4.28 per share in the past seven days, which suggests a year-over-year decline of 16.1%. The stock has risen 6.4% YTD.

The Zacks Consensus Estimate for AppFolio's 2024 earnings has been revised upward by 16 cents to $4.14 per share in the past seven days, which implies an increase of 142.1% on a year-over-year basis. Shares of APPF have jumped 24.5% YTD.

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