Twilio, a cloud communications platform, reported its Q4 2023 earnings, surpassing analysts' expectations. Shares fell 14% as the weaker outlook and slid in its Dollar-based Net Expansion Rate. TWLO dipped below key support at the $68 level and is testing its 200-sma ($63.18) in pre-market trade. OIt is finding support at that level. This is an area traders need to track.
The company posted earnings of $0.86 per share, beating the consensus of $0.57. Revenues for the quarter showed a 5.0% year-over-year increase, reaching $1.08 billion, slightly higher than expectations.
The number of active customer accounts rose to more than 305,000 as of December 31, 2023, compared to over 290,000 in the previous year. This growth indicates an expanding customer base.
However, Twilio's Dollar-Based Net Expansion Rate, which measures the revenue generated from existing customers, decreased to 102% for Q4 2023 from 110% in Q4 2022. Similarly, the full-year Dollar-Based Net Expansion Rate declined from 121% in 2022 to 103% in 2023. While still showing growth, these figures suggest a slight slowdown in the expansion of revenue from existing customers.
The company provided mixed guidance for Q1 2024, with an expected EPS of $0.56 to $0.60, compared to the consensus of $0.55. Revenue guidance for Q1 is in the range of $1.025 billion to $1.035 billion, slightly lower expectatons.
Twilio recently underwent restructuring, moving its Flex and Marketing Campaigns products from its Data & Applications business unit to its Communications business unit. The Data & Applications unit was also renamed Twilio Segment, incorporating its Segment and Engage products. As a result, all segment-level results and metrics have been recast accordingly. The Communications business, which accounted for 93% of revenue in 2023, demonstrated notable strength, and Twilio plans to capitalize on this momentum throughout 2024. On the other hand, the Twilio Segment business, although strategically important, continues to underperform.
To enhance its offerings, Twilio has been focusing on customer artificial intelligence (AI), which has shown promising early adoption. Since its launch in Q3 2023, over 150 customers have embraced customer AI predictions. The company remains optimistic about the potential of AI in its future growth.
Twilio made headlines by signing its largest messaging deal to date, securing a nine-figure commitment with a leading cloud communications software company. This deal further illustrates the company's ability to attract significant partnerships and contracts.
Market analysts have offered their insights on Twilio's performance and provided contrasting ratings. Northland downgraded Twilio from Outperform to Market Perform and set a price target of $66. This decision was based on a PEG ratio of 1.7x and a P/E multiple of 25. Northland believes that the ongoing operational review of the Segment business unit, which has underperformed, could have potential implications on Twilio's AI strategy.
In contrast, JMP maintained an Outperform" rating for Twilio and set a target price of $110. They commended the company for surpassing expectations in Q4 2023, reporting higher-than-expected earnings per share and revenue. JMP highlighted the improvement in the Dollar-Based Net Expansion Rate, which had been declining in previous quarters. However, they noted that Twilio's guidance for Q1 2024 was lower than anticipated, which could have contributed to the stock's lower outlook.
In conclusion, Twilio's Q4 2023 earnings report showed strong performance, beating analysts' expectations with higher earnings per share and revenue. The company experienced growth in its active customer accounts. However, the Dollar-Based Net Expansion Rate indicated a slight slowdown in revenue generated from existing customers. Twilio's strategic focus on the Communications business unit, along with the adoption of customer AI, remains promising. The ongoing operational review of the Segment business unit introduces some uncertainty regarding the company's AI strategy. With a significant messaging deal and potential implications from the operational review, Twilio's future performance will be closely monitored.