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Twilio (NYSE: $TWLO) Posts Earnings Beat, Stock Down 15% on Disappointing Q1 Guidance

Twilio Inc. (NYSE: $TWLO)

Twilio Inc. (NYSE: $TWLO) is a business communication platform that offers users access to programmable communication tools for text messaging, voice calls, and other communication solutions using APIs.

Founded in 2008, Twilio enables enterprises to benefit from in-depth analytics and security throughout the customer acquisition process for sales growth and improved engagement. Based in Rincon Center, San Francisco, Twilio’s services are available globally in 180 countries and territories.

On Wednesday, February 14, 2024, after markets closed, Twilio released its Q4 and full-year fiscal 2023 results to a negative market reception.  

Twilio’s Q4 Results

Twilio reported $1.08 billion in revenue for the fourth quarter, an increase of 5% year over year and above analysts’ estimate of $1.04 by 3.25%. Non-GAAP EPS in the quarter came in at $0.86, above analysts’ expectation of $0.58 by 49.5% and 290.90% higher than last year’s EPS of $0.22.

Broken down by source, Communications revenue came in at $1 billion in Q423, a 5% increase from last year, while Segment revenue was $75 million, a 4% increase from last year.

GAAP gross margin increased to 49% in the fourth quarter, from 47% a year ago on a GAAP gross profit of $531,166, compared to $481,142 last year. At the end of the fourth quarter, the company had $222.5 million in net cash from operations and a free cash flow of $210.9 million.

Full-year revenue increased by 9% to $4.15 billion, while fiscal 20203 non-GAAP EPS was $2.45, compared to $0.15 in fiscal 2022. Twilio ended fiscal 2023 with net cash from operations of $414.8 million and free cash flow of $363.5 million.

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Notable Highlights

As of December 31, 2023, Twilio had over 305 thousand active customer accounts, compared to 290 thousand at the end of fiscal 2022. However, it was a 1000 decline from the previous quarter, suggesting a slowdown in customer acquisition.

It experienced a net revenue retention rate of 102% in Q423, compared to a net revenue retention rate of 110% in Q422. The net revenue retention rate for the full year was 103% compared to 121% in fiscal 2022.

Share Buyback Program

Twilio announced that since February 2023, when its board authorized a share repurchase program of $1 billion, it had used over 73% of the repurchase program, or $730M. The company said the program would continue and is slated to end on December 31, 2024.

Twilio Fiscal Q1 2024 Outlook

Twilio said it would provide a full-year outlook in March. For the first quarter, the company expects revenue of $1.025 – $1.035 billion, a Y/Y increase of 2%-3%.

That forecast is below analysts’ expectations of $1.05 billion at the $1.03 midpoint and represents a massive slowdown from the 15% growth recorded last year. Twilio forecast a non-GAAP EPS of $0.56 – $0.60 for Q124, above the $0.47 non-GAAP EPS reported in Q122.

Stock performance

During pre-market trading, Twilio stock dipped by up to 12.11% to $63.52 per share on the disappointing outlook. The stock had dipped nearly 7% on slowing momentum by the start of February 2024.

However, it began to pick up pace on renewed hope of future sales growth. The recent disappointing outlook is likely to wipe away that optimism.  

The current pre-market price is below its 52-week high price of $79.70, below the 50-day moving average of $72.21, and just above the 200-day moving average price of $63.03.

Twilio Stock

Twilio Stock Outlook

Before the February 14, 2024, Q4 results, Wall Street was quite optimistic about TWLO stock, giving it a moderate buy rating. The bullish analysts expected the price to reach $110 in the next 12 months, while the bearish forecast was $50 per share.

TWLO stock’s average price forecast was $73.47, a 1.66% upside from its last closing price. However, based on the recent Q124 outlook, most analysts will likely downgrade their forecast.

Is TWLO Stock a Buy?

Twilio was a pandemic darling. Demand for its services skyrocketed during the pandemic as businesses turned to online communication tools to connect with customers. However, the stock has struggled since the end of the pandemic restrictions.

Many investors had hoped that the company’s sales growth deceleration had bottomed out in the fourth quarter and were looking forward to growth in Q1. The disappointing outlook signals that Twilio’s sales slowdown has yet to bottom out.

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