Categories AlphaGraphs, Earnings, Technology

Twilio Q2 earnings met estimates, provides solid outlook

Twilio (NYSE: TWLO) saw its revenue for the second quarter coming ahead of estimates, while adjusted earnings came in line with the street consensus. The full-year earnings outlook also surpassed analyst estimates. However, the stock was down 2% in the after-market trading hours despite the Q2 earnings coming in line with estimates and solid earnings outlook. 

The company has been having a dream run in the bourses with the stock price surging 57% this year, touching a new 52-week high mark of $151 in June. The cloud platform’s stellar first quarter results and closing of the SendGrid deal acted as tailwinds in the rise of the share price.

Twilio Q2 2019 earnings infographic

Q2 Performance

Sales rose 86% to $275 million beating $264.1 million estimated by the street. Adjusted earnings came in at 3 cents per share, in line with the estimates. Last quarter, Twilio has guided Q2 sales to come in the range of $262-265 million and adjusted EPS of 2-3 cents.

Base revenues exclude revenues from its customers who don’t have a 12-month contract with the firm. This would give investors a hang on number of large accounts who enter into long-term contracts with the Twilio, which would bring in sustainable revenues reducing volatility.

Base revenue continued its growth trend increasing 90% over prior year and 16% sequentially. It’s worth noting that Q2 stats include the contribution from SendGrid, which was closed in the first quarter.

Key Metrics Update

Active customers stood at 161,869 compared to 57,350 customers in the prior year. The surge in the customer stats is primarily due to the addition of SendGrid customers to Twilio’s metrics.

At the end of Q2, dollar-based net expansion rate stood at 140% compared to 137% reported last year. However, sequentially it is down 6% which is a concern for investors. This metric would help analysts to gauge whether Twilio is able to upsell/cross-sell its products to its existing customer base, which has entered into long-term contracts.

OpEx Update

As expected, operating expenses doubled to $243.7 million compared to $101.7 in the prior year period. The rise in expenses is primarily due to the ongoing investments Twilio is making to ramp up its product offering by acquisitions, expanding the sales and marketing team and increase research and development spending.

Looking Ahead

For the third quarter, the could platform is expecting revenue of $286-289 million and adjusted EPS of 1 to 2 cents. On the flip side, the street is anticipating sales to come in at $285.6 million and non-GAAP earnings of 1 cent per share.

For the fiscal 2019 period, the company anticipates top line in the range of $1.113-1.119 billion compared to $1.11 billion estimated by the analysts. Twilio expects non-GAAP earnings to be between 17 to 18 cents per share, surpassing 12 cent street estimates.

Bottom Line

Twilio is yet to report profits on a GAAP basis, primarily due to increased spending which is expected to increase its moat amongst its peers. Looking at the growth trend, the basic tenets of the business remains intact with the company closing the SendGrid deal.

The company already has reputed clients like Uber, Twitter, Lyft, Nordstrom, Box, Hulu, Salesforce, Twitch, Yelp etc. and investors would be expecting strong performance in the latter half of the year to justify its valuations.

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