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Twilio (NYSE:TWLO) Exceeds Q1 Expectations, Customer Growth Accelerates


Jabin Bastian /
2022/05/04 4:35 pm EDT
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Cloud communications infrastructure company Twilio (NYSE:TWLO) reported Q1 FY2022 results that beat analyst expectations, with revenue up 48.3% year on year to $875.3 million. The company expects that next quarter's revenue would be around $917 million, which is the midpoint of the guidance range. That was in roughly line with analyst expectations. Twilio made a GAAP loss of $221.6 million, down on its loss of $206.5 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) Q1 FY2022 Highlights:

  • Revenue: $875.3 million vs analyst estimates of $863.8 million (1.33% beat)
  • EPS (non-GAAP): $0 vs analyst estimates of -$0.21 ($0.21 beat)
  • Revenue guidance for Q2 2022 is $917 million at the midpoint, roughly in line with what analysts were expecting
  • Free cash flow was negative $34.8 million, compared to negative free cash flow of $58.7 million in previous quarter
  • Net Revenue Retention Rate: 127%, in line with previous quarter
  • Customers: 268,000, up from 256,000 in previous quarter
  • Gross Margin (GAAP): 48.5%, down from 50.5% same quarter last year

“We carried our momentum into 2022 and delivered another strong quarter to start the year, with first quarter revenue coming in at $875 million, representing 48% year-over-year growth," said Jeff Lawson, Twilio’s co-founder and CEO.

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 exceptional over the last year, growing from quarterly revenue of $589.9 million, to $875.3 million.

Twilio Total Revenue

And unsurprisingly, this was another great quarter for Twilio with revenue up 48.3% year on year. But the growth did slow down compared to last quarter, as the revenue increased by just $32.6 million in Q1, compared to $102.5 million in Q4 2021. We'd like to see revenue increase by a greater amount each quarter, but a one-off fluctuation is usually not concerning.

Guidance for the next quarter indicates Twilio is expecting revenue to grow 37% year on year to $917 million, slowing down from the 66.8% year-over-year increase in revenue the company had recorded in the same quarter last year. Ahead of the earnings results the analysts covering the company were estimating sales to grow 31.3% over the next twelve months.

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Customer Growth

You can see below that Twilio reported 268,000 customers at the end of the quarter, an increase of 12,000 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 Q1 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 $20.3 billion and more than $5.22 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 the really strong revenue growth. Overall, we think this was a strong quarter, that should leave shareholders feeling very positive. The company is up 1.63% on the results and currently trades at $120.48 per share.

Twilio may have had a good quarter, so should you 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.