⌨️ Can Twilio Get Profits Going?

Walmart falls most since 1987.

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⌨️ Twilio: Turning A Corner?

Supplier of communication tools Twilio Inc. (TWLO) has seen its market cap drop by two-thirds over the last 15 months. But the company now has an optimistic growth projection. Can this lead to it commanding a similar “valuation premium” again?

Growth Through Acquisition

Growth stocks have been in the eye of the storm in the second half of 2021. What goes up must come down, and that’s what happened to scores of companies. Twilio is no exception.

Shares of the web service provider, which took off in March 2020 from sub-$100 levels, peaked in July last year at $412. Ten months hence, shares are back to where they were two years back.

Twilio is somewhat different from its brethren, who have borne the brunt of fundamentals catching up with them. Between Q1 2020 and Q4 2021, the company has more than doubled its revenue to $850M from $365M. The company has also increased its total number of active customers to 256K in Q4 2021 from 190K.

Last year, Twilio acquired Zipwhip, a company that works with wireless carriers to enable business landlines to send and receive text messages. The $850M deal made Zipwhip a part of Twilio’s Messaging Business Unit. Before Zipwhip, Twilio had made nine other acquisitions starting in 2015. Its acquisition of Segment in 2020 was its most expensive at $3.2B.

Twilio’s most recent acquisition was that of Boku Identity Inc. in March for $32.3M. Its parent Boku Inc. is in the mobile payment solutions space. The purchase was meant to provide Twilio with a platform within the mobile identity and authentication sector.

Profits On The Horizon?

For Q1 2022, Twilio did better than expected, both on the revenue front as well as EPS.

Key Highlights From Q1 2022:

  • Revenue: $875.3M Vs $863.8M expected
  • EPS: $0.00 Vs Loss of $0.21 expected

Revenue for Q1 grew 48% Y-o-Y. Though impressive, it was slower than the 54% growth in Q4 2021 and 62% during Q1 2021. Zipwhip contributed $32.2M in Q1 2022, compared to $31.8M in Q4 2021 and $23.6M in Q3 2021.

Twilio’s organic revenue, which excludes the contribution of all acquisitions closed after January 1, 2021, was up 35% Y-o-Y. Overall customer count at the end of Q1 stood at 268K, a growth of 12K from the previous quarter.

All said and done, Twilio is yet to report a profit. From a loss of $90M in Q1 2020, Twilio reported a net loss of $222M in Q1 2022 (compared to $197M Y-o-Y and narrower than the $283M loss of Q4 2021). The company spent ~$1B on sales and marketing to achieve its growth last year.

For the current quarter, Twilio expects revenue of $917M. Y-o-Y implies 37% growth, the slowest over the past many quarters. Organic growth is expected to grow 28% for the current quarter. Loss per share is expected between $0.23 to $0.20.

The company expects to turn operationally profitable during 2023. With the acquisitions and other investments paying off and costs coming down, the management believes profits are only a matter of time.

Be that as it may, shares are now back to where they were at the pandemic’s start. Market cap is down from the $70B peak to today’s $18B. If Twilio wishes to command the same valuation premium it once did, it has a simple task to deliver on its promises. Else, investors are an unforgiving bunch, as the past year has undoubtedly proven!

Market Reaction
TWLO ended at $101.71, up 2.04%.

Company Snapshot 📈

TWLO $101.71 +2.03 (2.04%)

Analyst Ratings (33 Analysts) BUY 94%  HOLD 06%  SELL 0%

Newsworthy 📰

Worries: Walmart shares fall as higher costs, supply chain problems and inventories eat into profits (WMT -11.38%)

Aftermath: Netflix lays off 150 employees as the streaming service contends with big subscriber losses (NFLX +2.17%)

What Bonus?: JPMorgan shareholders reject Jamie Dimon’s $50M bonus (JPM +3.31%)

Later Today 🕒

  • Lowe’s Cos. Inc. Earnings (LOW)
  • Target Corporation Earnings (TGT)
  • Cisco Systems Inc. Earnings (CSCO)
  • Analog Devices Inc. Earnings (ADI)
  • Bath & Body Works Inc. Earnings (BBWI)
  • Copart Inc. Earnings (CPRT)
  • Hawkins Inc. Earnings (HWKN)

Today’s Fun Fact

Apple Sold 849,450 iPhones per day in 2018

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