Twilio Inc. TWLO reported third-quarter 2024 non-GAAP earnings of $1.02 per share, which surpassed the Zacks Consensus Estimate of 87 cents and came above management’s guidance of 81-86 cents.
The bottom line also witnessed a robust improvement from the year-ago quarter’s earnings of 58 cents. The strong year-over-year growth in earnings was primarily driven by increased revenues and cost discipline.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
The cloud-based communications platform-as-a-service provider registered revenues of $1.13 billion, which surpassed the Zacks Consensus Estimate of $1.09 billion and came ahead of management’s guidance of $1.085-$1.095 billion.
The company’s third-quarter revenues improved 10% year over year.
On itsearnings conference call Twilio stated that the third-quarter top-line performance was mainly driven by growth in communications revenues, offset by the unsetting of the software component of the Zipwhip business. This resulted in a 90-basis point (bps) headwind to the company’s third-quarter organic revenue growth.
Buoyed by strong top-line and bottom-line performances, Twilio raised its earnings guidance for the full year. The better-than-expected third-quarter results, along with upbeat guidance, can give a fresh boost to Twilio’s share price. Shares of Twilio have lost 7% year to date, underperforming the Zacks Internet – Software industry’s growth of 25.7%.
Twilio Inc. Price, Consensus and EPS Surprise
Twilio Inc. price-consensus-eps-surprise-chart | Twilio Inc. Quote
Twilio’s Revenues in Details
Segment-wise, revenues from the Communications division came in at $1.06 billion, up 10% year over year. The Segment division’s sales remained flat year over year at $73.4 million.
Twilio’s dollar-based net expansion rate was 105% in the reported quarter, up from the previous quarter’s 102% and the year-ago quarter’s 101%. The company’s third-quarter dollar-based net expansion rates for the Communications and Segment divisions were 106% and 91%, respectively.
Active customer accounts increased to more than 320,000 as of Sept. 30 from 316,000 at the end of the second quarter of 2024. The figure was 306,000 as of Sept. 30, 2023. As of Sept. 30, 2024, Communications and Segment active customer accounts were more than 313,000 and 7,500, respectively.
Operating Results
The non-GAAP gross profit increased 8.6% year over year to $600 million. The non-GAAP gross margin contracted 60 bps year over year to 52.9%. The third-quarter non-GAAP gross margin for the Communications and Segment divisions came in at 51.8% and 69.8%, respectively.
The non-GAAP operating income jumped 33.7% year over year to $182.4 million. The non-GAAP operating margin of 16.1% for the third quarter expended 290 bps on a year-over-year basis.
General & administrative (G&A) expenses on a non-GAAP basis decreased to $74.8 million from $79.6 million in the year-ago quarter. G&A expenses accounted for 6.6% of quarterly revenues, down from 7.7% in the year-ago quarter. Research & development (R&D) expenditures on a non-GAAP basis increased 20.2% year over year to $174.8 million. R&D expenses accounted for 15.4% of third-quarter revenues, up from 14.1% in the year-ago quarter.
Non-GAAP sales & marketing costs declined 12.1% to $168 million. The same represented 14.8% of third-quarter revenues, lower than 18.5% in the year-ago quarter.
Balance Sheet
The company exited the September quarter with cash and cash equivalents and short-term marketable securities of $2.70 billion, down from $3.12 billion at the end of the second quarter. As of Sept. 30, 2024, TWLO’s long-term debt was $990.2 million.
During the third quarter, Twilio generated an operating cash flow of $204.3 million and a free cash flow of $189.1 million. In the first three quarters of 2024, it generated an operating cash flow of $607.8 million.
Twilio repurchased stocks worth $2.7 billion in total since the beginning of its $3 billion share repurchase program initiated in February 2023.
Guidance Update
Twilio updated its guidance for full-year 2024. The company now anticipates organic revenue growth in the range of 7.5-8% in 2024 compared with the previous guidance of 6-7%. Non-GAAP income from operations is now projected in the range of $700-$710 million, up from the previous guidance of $650-$675 million. The Zacks Consensus Estimate for 2024 revenues is pegged at $4.37 billion, indicating a year-over-year increase of 5.2%.
Twilio also initiated guidance for the fourth quarter. For the quarter ending Dec. 31, 2024, TWLO anticipates revenues between $1.15 billion and $1.16 billion, which indicates a year-over-year increase of 7-8% on a reported as well as an organic basis. The Zacks Consensus Estimate for fourth-quarter revenues is pegged at $1.15 billion.
Twilio projects non-GAAP income from operations in the range of $185-$195 million. It forecasts non-GAAP earnings in the range of 95 cents to $1 per share. The consensus mark for fourth-quarter earnings is pegged at 86 cents per share.
Twilio’s Zacks Rank & Stocks to Consider
Twilio currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader technology sector are Shopify SHOP, Fortinet FTNT and F5 Inc FFIV. While Shopify and Fortinet sport Zacks Rank #1 (Strong Buy) each, F5 carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today's Zacks #1 Rank stocks here.
The consensus mark for Shopify’s 2024 earnings has been revised upward by 13 cents to $1.12 per share over the past 90 days, indicating a 51.31% year-over-year increase. The long-term expected earnings growth rate for the stock stands at 39.2%. Shares of SHOP have gained 2.7% in the year-to-date period.
The Zacks Consensus Estimate for Fortinet’s 2024 earnings has been revised upward by 2 cents to $2.03 per share in the past 30 days, indicating an increase of 24.5% on a year-over-year basis. It has a long-term earnings growth expectation of 16.3%. Shares of FTNT have jumped 34.5% in the year-to-date period.
The Zacks Consensus Estimate for FFIV’s fiscal 2024 earnings has been revised upward by 3 cents to $14.03 per share in the past 30 days, suggesting a year-over-year increase of 5%. It has a long-term earnings growth expectation of 7.8%. Shares of FFIV have plunged 33.5% in the year-to-date period.
5 Stocks Set to Double
Each was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
F5, Inc. (FFIV) : Free Stock Analysis Report
Fortinet, Inc. (FTNT) : Free Stock Analysis Report
Shopify Inc. (SHOP) : Free Stock Analysis Report
Twilio Inc. (TWLO) : Free Stock Analysis Report
To read this article on Zacks.com click here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
