Twilio (NYSE:TWLO) Q2 Sales Beat Estimates But Quarterly Guidance Underwhelms

Adam Hejl /
2022/08/04 4:32 pm EDT

Cloud communications infrastructure company Twilio (NYSE:TWLO) announced better-than-expected results in the Q2 FY2022 quarter, with revenue up 41% year on year to $943.3 million. However, guidance for the next quarter was less impressive, coming in at $970 million at the midpoint, being 0.95% below analyst estimates. Twilio made a GAAP loss of $322.7 million, down on its loss of $227.8 million, in the same quarter last year.

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Twilio (TWLO) Q2 FY2022 Highlights:

  • Revenue: $943.3 million vs analyst estimates of $920.9 million (2.43% beat)
  • EPS (non-GAAP): -$0.11 vs analyst estimates of -$0.20 (44.7% beat)
  • Revenue guidance for Q3 2022 is $970 million at the midpoint, below analyst estimates of $979.3 million
  • Free cash flow was negative $78.4 million, compared to negative free cash flow of $34.8 million in previous quarter
  • Net Revenue Retention Rate: 123%, down from 127% previous quarter
  • Customers: 275,000, up from 268,000 in previous quarter
  • Gross Margin (GAAP): 47.2%, down from 49.5% same quarter last year

“We closed a strong second quarter, delivering $943 million in revenue and 41% year-over-year growth, while also signing our largest Flex deal ever,” 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 $668.9 million, to $943.3 million.

Twilio Total Revenue

And unsurprisingly, this was another great quarter for Twilio with revenue up 41% year on year. On top of that, revenue increased $67.9 million quarter on quarter, a very strong improvement on the $32.6 million increase in Q1 2022, and a sign of acceleration of growth.

Guidance for the next quarter indicates Twilio is expecting revenue to grow 31% year on year to $970 million, slowing down from the 65.2% 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 28.7% over the next twelve months.

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 275,000 customers at the end of the quarter, an increase of 7,000 on last quarter. That is a little slower customer growth than what we are used to seeing lately, suggesting that the customer acquisition momentum is slowing a little bit.

Twilio Customers

Key Takeaways from Twilio's Q2 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 $17.7 billion and more than $4.39 billion in cash, the company has the capacity to continue to prioritise growth over profitability.

We enjoyed seeing Twilio’s impressive revenue growth this quarter. On the other hand, it was unfortunate to see that the revenue guidance for the next quarter missed analysts' expectations and there was a slowdown in customer growth. Overall, this quarter's results were mixed. The company is down 3.7% on the results and currently trades at $94.59 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.

One way to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 70% year on year and best-in-class SaaS metrics it should definitely be on your radar.

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