Twilio (NYSE:TWLO) shareholders have had a rough year. The stock has underperformed the broader S&P 500 by a wide margin, and unfortunately, things got worse when the company delivered its third-quarter earnings report. In fact, Twilio's share price now sits 30% below its all-time high.

In this Backstage Pass video, which was recorded Oct. 29, 2021, Motley Fool contributor Trevor Jennewine shares his thoughts on the company's latest financial results and its prospects for future growth. Fool contributor Brian Withers is also in this clip.

Trevor Jennewine: Let's take a look. Twilio is a cloud communications company. Its platform really helps developers embed features like text messaging, voice, and video into their own applications. It's the technology behind communications of companies like Instacart, DoorDash, and Airbnb.

They reported third-quarter earnings yesterday and Wall Street's reaction has been quite negative. The stock was down about 18% today, closing in on a 52-week low. Let's take a look at what happened.

Revenue came in at $740 million. That was a beat, up 65%, that was a solid beat on the top line. And the company posted a net loss of a $1.26 per diluted share. A bigger loss than last year, but still a beat on the bottom line. Also, on an adjusted basis that the company actually was profitable at $0.01 per diluted share, down from $0.04 per diluted share last year. But still a beat.

Twilio also has 250,000 customers now and that's up 20%. The company's dollar-based net expansion rate was 131%. So it's adding new customers fairly quickly, and those customers are spending more over time. One of the problems here is that that expansion rate is actually lower than it was last year. It was 137% last year, so moving in the wrong direction. The company has also free cash flow negative through the first nine months of the year, a loss of $89 million. That is also moving the wrong direction compared to last year.

Let's see here. We'll get to guidance. Guidance is really what sunk the ship here for Twilio, but a few notes on management's commentary. Twilio, the core of its platform are developer tools to help embed those communications into applications. But it also offers a range of pre-built solutions. Twilio Flex helps businesses build contact centers, and Twilio Frontline allows sales teams to engage with customers. It recently announced Twilio Engage, which is an automated marketing platform. It's really got some of the big pillars of customer relationship management now. It's got a customer service solution, it's got a sales solution, and now an automated marketing solution that you can use to launch these omnichannel campaigns. I think that's a positive thing there. I think Twilio is going in a good direction.

The company acquired Segment relatively recently, and Segment is a customer data platform that allows companies to personalize communications. It's really headed toward that CRM space.

They also launched Twilio Live, which is a platform for audio and video streaming they can scale out to millions of people. Continuing to innovate.

Let's take a look at the fourth quarter. The outlook is $760 million to $770 million, which would be 40% growth. But the non-GAAP loss, they are looking for $0.26 to $0.23 cents. Wall Street was expecting a much smaller figure: $0.08. This was probably the worst part of the earnings. This is what really, really tanked the stock today. Like I said, it's about down 18%.

We've gotten a lot of questions about Twilio in the Slido over the last day or so in response to that big decline. I've done some thinking. I don't think this is a terrible quarter. Revenue growth is strong. Solid customer growth, that expansion rate is still solid. But it also wasn't a great quarter. The company's net loss is widening, and I think that has some investors spooked. Brian, hopefully that clears things up for you a little bit.

Brian Withers: Yeah, it does. Some of that I'm wondering some of that is purposeful investing versus just taking time to work through the Segment cost and integration process. I hope that management continues to keep us updated on how they're doing there.

Trevor Jennewine: Yeah, I think they will, for what it's worth, I'm a shareholder too, so I feel that pain today, but I don't have any plans to sell the stock.

Brian Withers: Yeah, I love the company, love the technology, the CEO. There's a ton of things going for it. It's just a report card.

Trevor Jennewine: That's right.

Brian Withers: We'll check in next time around.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.