Twilio (TWLO 1.08%) reported strong fiscal third-quarter 2020 results after the closing bell on Monday, Oct. 26.
Shares of the cloud-based communications platform provider fell 1.5% in after-hours trading on Monday. We can attribute the market's slight negative reaction to the company's earnings guidance for the fiscal fourth quarter coming in lighter than Wall Street was expecting.
There was plenty of great news, however. The company's third-quarter results for both the top and bottom lines breezed by the analyst consensus estimates. Moreover, fourth-quarter revenue guidance also easily topped expectations.
In 2020, Twilio stock has gained 206% through Oct. 26, compared with the S&P 500's 6.9% return. Shares have been getting a brisk tailwind from the COVID-19 pandemic, which has caused a surge in the number of people working, shopping, and performing many other activities from home and has accelerated many companies' digital transformations.
Image source: Twilio.
Key numbers
|
Metric |
Fiscal Q3 2020 |
Fiscal Q3 2019 |
Change |
|---|---|---|---|
|
Revenue |
$448.0 million |
$295.1 million |
52% |
|
GAAP operating income |
($112.3 million) |
($94.7 million) | N/A. Loss expanded 19%. |
|
GAAP net income |
($116.9 million) |
($87.7 million) |
N/A. Loss expanded 33%. |
|
Adjusted net income |
$7.0 million | $5.1 million | 37% |
|
GAAP earnings per share (EPS) |
($0.79) |
($0.64) | N/A. Loss expanded 23%. |
|
Adjusted EPS |
$0.04 | $0.03 | 33% |
Data source: Twilio. GAAP = generally accepted accounting principles.
Wall Street was looking for an adjusted loss per share of $0.03 on revenue of $409.8 million. So Twilio not only sailed by both expectations, it also posted a surprise adjusted profit.
For context, in the fiscal second quarter, Twilio's revenue surged 46% year over year to $400.8 million. GAAP loss per share landed at $0.71, about flat with the loss per share of $0.72 in the year-ago period. On an adjusted basis, earnings per shared tripled to $0.09. That result crushed the Wall Street estimate of a loss per share of $0.09.
Key operating metrics
|
Metric |
Fiscal Q3 2020 |
Change (YOY) |
|---|---|---|
| Active customer accounts | 208,000 | 21% |
| Dollar-based revenue net expansion rate | 137% | Up from 132% in the year-ago period. |
Data source: Twilio. YOY = year over year.
Dollar-based net expansion rate is a customer satisfaction measure provided by many cloud platform operators. The 137% result means that, on average, existing customers increased their spending on Twilio's platform by 37% year over year.
What management had to say
Here's part of what CEO Jeff Lawson had to say on the earnings call:
We delivered another quarter of outstanding results. I could not be prouder of what we've accomplished during these trying times. Our success is a testament to the value proposition that Twilio's platform offers businesses: digital engagement, software agility and cloud scale. Our goal is to build the world's leading customer engagement platform.
Fiscal Q4 2020 guidance
Management provided the following guidance for the fiscal fourth quarter. (It doesn't include the impact from the pending $3.2 billion acquisition of customer-data platform Segment, which is expected to close in the quarter.)
- Revenue of $450 million to $455 million, representing growth of 36% to 37% year over year.
- Adjusted loss per share of $0.11 to $0.08, compared to adjusted earnings per share of $0.04 in the year-ago period.
Going into the report, Wall Street had been modeling for fourth-quarter adjusted EPS of $0.01 on revenue of $436.9 million. Twilio's revenue outlook easily surpassed the consensus estimate, but the bottom-line guidance fell considerably short.
Investors should not be concerned with the lower-than-expected Q4 earnings guidance. Twilio is investing to fuel long-term growth. Moreover, its outlook is probably quite conservative due to the continued uncertainty surrounding the pandemic.
