Twilio (NYSE:TWLO) Beats Q4 Sales Targets, Stock Soars

Petr Huřťák /
2023/02/15 4:16 pm EST

Cloud communications infrastructure company Twilio (NYSE:TWLO) beat analyst expectations in Q4 FY2022 quarter, with revenue up 21.6% year on year to $1.02 billion. However, guidance for the next quarter was less impressive, coming in at $1 billion at the midpoint, being 2.25% below analyst estimates. Twilio made a GAAP loss of $229.4 million, improving on its loss of $291.4 million, in the same quarter last year.

Is now the time to buy Twilio? Access our full analysis of the earnings results here, it's free.

Twilio (TWLO) Q4 FY2022 Highlights:

  • Revenue: $1.02 billion vs analyst estimates of $1 billion (2.43% beat)
  • EPS (non-GAAP): $0.22 vs analyst estimates of -$0.08 ($0.30 beat)
  • Revenue guidance for Q1 2023 is $1 billion at the midpoint, below analyst estimates of $1.02 billion
  • Free cash flow was negative $74.1 million, compared to negative free cash flow of $133.6 million in previous quarter
  • Net Revenue Retention Rate: 110%, down from 122% previous quarter
  • Customers: 290,000, up from 280,000 in previous quarter
  • Gross Margin (GAAP): 47%, in line with same quarter last year

“This week, we announced meaningful changes to Twilio’s leadership group, organizational structure, team size and capital allocation strategy that will both accelerate our path to profitability and most importantly, improve our execution in delivering our Engagement Platform strategy for our customers,” said Jeff Lawson.

Founded in 2008 by Jeff Lawson, a former engineer at Amazon, Twilio (NYSE:TWLO) is a software as a service platform that makes it really easy for software developers to use text messaging, voice calls and other forms of communication in their apps.

The first shift towards voice communication over the internet (VOIP), rather than traditional phone networks, happened when the enterprises started replacing business phones with the cheaper VOIP technology. Today, the rise of the consumer internet has increased the need for two way audio and video functionality in applications, driving demand for software tools and platforms that enable this utility.

Sales Growth

As you can see below, Twilio's revenue growth has been impressive over the last two years, growing from quarterly revenue of $548.1 million in Q4 FY2020, to $1.02 billion.

Twilio Total Revenue

This quarter, Twilio's quarterly revenue was once again up a very solid 21.6% year on year. Quarter on quarter the revenue increased by $41.5 million in Q4, which was in line with Q3 2022. This steady quarter-on-quarter growth shows the company is able to maintain its steady growth trajectory.

Guidance for the next quarter indicates Twilio is expecting revenue to grow 14.2% year on year to $1 billion, slowing down from the 48.4% year-over-year increase in revenue the company had recorded in the same quarter last year.

In volatile times like these we look for robust businesses with strong pricing power. Unknown to most investors, this company is one of the highest-quality software companies in the world, and their software products have been the default standard in critical industries for decades. The result is an impressive business that is up an incredible 18,152% since the IPO. You can find it on our platform for free.

Customer Growth

You can see below that Twilio reported 290,000 customers at the end of the quarter, an increase of 10,000 on last quarter. That is a little better customer growth than last quarter and quite a bit above the typical customer growth we have seen lately, demonstrating that the business itself has good sales momentum. We've no doubt shareholders will take this as an indication that the company's go-to-market strategy is working very well.

Twilio Customers

Key Takeaways from Twilio's Q4 Results

Since it has still been burning cash over the last twelve months it is worth keeping an eye on Twilio’s balance sheet, but we note that with a market capitalization of $11.4 billion and more than $4.16 billion in cash, the company has the capacity to continue to prioritise growth over profitability.

We were very impressed by Twilio’s very strong acceleration in customer growth this quarter. And we were also excited to see that it outperformed analysts' revenue expectations. On the other hand, it was unfortunate to see that the revenue guidance missed analysts' expectations and the revenue retention rate deteriorated. Overall, it seems to us that this was a decent, albeit mixed, quarter for Twilio. The company is up 7.48% on the results and currently trades at $71.01 per share.

Twilio may have had a tough quarter, but does that actually create an opportunity to invest right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

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The author has no position in any of the stocks mentioned.