Friday, November 04, 2022 5:08:41 PM
1:05 PM ET, 11/04/2022 - Briefing.com
Twilio (TWLO), a cloud communications platform provider, beat analysts' 3Q22 EPS and revenue estimates, continuing a winning streak that extends beyond five years. However, the stock is still getting crushed today because the company issued weak Q4 guidance, confirming fears that macroeconomic headwinds are causing its customers to pull back on spending. Specifically, its outlook for revenue of $995-$1.005 bln equates to yr/yr growth of just 18% at the midpoint, representing a steep deceleration from this quarter's growth of 33%. In fact, since 2Q21, TWLO's top-line growth rate has been trending lower, steadily dropping from the mid-60% level seen last year.
Until this quarter's earnings conference call, TWLO had maintained a relatively upbeat posture regarding its near-term prospects, while highlighting the resiliency of its business. For instance, during the Q2 earnings call, President Elena Donia commented that the company hadn't seen a significant deterioration in demand and that companies are prioritizing investments in solutions like TWLO's that drive revenue and efficiency. She did acknowledge, though, that a couple of isolated areas of softness were emerging, including crypto, social, and consumer on-demand. Not only did those verticals weaken further in Q3, but new cracks also formed in areas such as e-Commerce and retail.
Compounding the problem is that TWLO decided after the 2020 election cycle to off-board political traffic from its platform to avoid friction with some of its customers. Consequently, Q3 and Q4 will not experience the typical spike in political-based traffic that typically occurs during election cycles.
Unfortunately, the troubles aren't relagated to TWLO's Q4 revenue outlook.
Non-GAAP gross margin continues to contract, sinking to 25% in Q3 from 33% last quarter, and from 41% in 1Q22. The company is moving further and further away from its long-term gross margin target of 60% and investors are clearly losing confidence that it will reach that mark any time soon.TWLO attributes the erosion to a higher mix of lower margin international revenue. In Q3, international revenue accounted for 34% of total revenue, which was actually down from 35% in Q2 and Q1.When asked about this contradiction during the earnings call, COO Khozema Shipchandler explained that the 35% figure is based on where the customer's address is, not necessarily where the traffic ends up. Shipchandler added that TWLO has U.S. and international customers that reside internationally, and that send messages internationally, which have a slightly lower gross margin. As a result of the eroding gross margin and declining revenue growth, TWLO's profits are heading in the wrong direction. This quarter's ($0.27)/share loss was its worst showing in over five years and the company is forecasting another loss for Q4, guiding for EPS of ($0.11)-($0.06).Despite this backslide, TWLO maintained its expectation of achieving non-GAAP operating profitability in FY23. To help reach that goal, the company announced an 11% workforce reduction in September, but more changes to its cost structure may be needed.
TWLO is getting punished because the slowdown in growth is much more pronounced than investors were anticipating. Coming off of the Q2 earnings report, it seemed that demand was holding up relatively well, outside of a few weak spots. Conditions have soured significantly since then, though, and TWLO is now experiencing a broad-based downturn in customer spending levels. Making matters worse, TWLO's margins are on the downtrend, putting its profitability aspirations into question for next year.
"Then there was a woman, a lion of a woman."
Recent TWLO News
- Twilio to Announce First Quarter 2024 Results on May 7, 2024 • Business Wire • 04/09/2024 08:05:00 PM
- New Twilio Study Points to Lack of Customer Data as Major Obstacle to Reaping AI Rewards • Business Wire • 04/09/2024 01:00:00 PM
- Anson Funds Comments on Recent Events at Twilio • Business Wire • 04/04/2024 01:00:00 PM
- Exxon Mobil Forecasts Earnings Decline, Twilio Seeks Board Tenure Changes, and More News • IH Market News • 04/04/2024 11:30:20 AM
- Twilio Announces Retirement of Byron Deeter and Board Declassification • Business Wire • 04/03/2024 11:36:00 PM
- Twilio Appoints Andy Stafman to Board of Directors • Business Wire • 04/01/2024 12:00:00 PM
- Twilio Launches Unified Profiles and Agent Copilot, Combining Customer Data and AI to Boost Productivity and Engagement • Business Wire • 03/27/2024 01:00:00 PM
- Form 8-K - Current report • Edgar (US Regulatory) • 03/05/2024 02:03:59 PM
- Twilio Concludes Operational Review of Segment Business and Announces $2 Billion Expansion of Share Repurchase Authorization • Business Wire • 03/05/2024 02:00:00 PM
- Twilio to Participate in Morgan Stanley Technology, Media & Telecom Conference • Business Wire • 03/01/2024 09:05:00 PM
- Form S-8 - Securities to be offered to employees in employee benefit plans • Edgar (US Regulatory) • 02/27/2024 09:33:46 PM
- Form 10-K - Annual report [Section 13 and 15(d), not S-K Item 405] • Edgar (US Regulatory) • 02/27/2024 09:21:51 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 02/23/2024 11:55:17 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 02/23/2024 11:52:14 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 02/22/2024 11:53:32 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 02/22/2024 12:33:17 AM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 02/22/2024 12:29:44 AM
- Form 144 - Report of proposed sale of securities • Edgar (US Regulatory) • 02/21/2024 09:43:17 PM
- Form 144 - Report of proposed sale of securities • Edgar (US Regulatory) • 02/21/2024 09:41:35 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 02/20/2024 10:08:27 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 02/20/2024 10:03:46 PM
- Twilio Report Reveals Customer Data Platforms are a Critical Foundation for AI-Driven Customer Insights • Business Wire • 02/20/2024 02:00:00 PM
- Form 144 - Report of proposed sale of securities • Edgar (US Regulatory) • 02/15/2024 08:14:53 PM
- Form 144 - Report of proposed sale of securities • Edgar (US Regulatory) • 02/15/2024 08:14:15 PM
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