Solid earnings beat and share buyback plan sends Twilio's stock higher

CLOUD

Shares of Twilio Inc. leaped by more than 13% in extended trading today after the communication service provider reported fourth-quarter earnings and revenue that beat expectations and said it will buy back shares worth $1 billion.

The company reported a net loss of $229.4 million in the quarter, down from a $291.4 million loss a year earlier. Earnings before certain costs such as stock compensation came to 22 cents per share, while revenue for the period rose 22% from a year ago, to $1.02 billion.

The results were better than expected, with analysts targeting a loss of nine cents per share on revenue of $998.9 million.

Twilio is best known for selling developer tools that make it possible to embed capabilities such as voice, text messages and video into software applications. The company’s software also streamlines communications for cloud-based apps.

In recent years, the company has expanded into other markets too, with its biggest push coming in the customer engagement sector. In the wake of its $3.2 billion acquisition of Segment Inc. in 2020, it launched its Twilio Engage growth automation platform, which is used by marketers to improve their customer relationships by creating more personalized experiences.

Despite its attempts at expanding into new markets, Twilio has, like other internet-focused businesses, seen its revenue growth slow over the past year. Although it managed to beat Wall Street’s targets, its revenue grew at the slowest pace in more than two years.

Twilio said its active customer accounts increased by 13% in the quarter, to more than 290,000, but it warned that rising fears of a recession appear to be pressuring demand.

The company has taken steps to deal with its slowing pace of growth. Earlier this week, it announced a second round of job cuts, saying it will let go of 17% of its staff in order to reduce its costs. That came after a first round of cuts in November reduced its staff headcount by 11%. The company also said it will close some of its offices in an attempt to improve its profitability.

In addition to cutting its staff, Twilio said it will reorganize its products into two separate business units. Twilio Communications will focus on its communications services, while Twilio Data & Applications will manage its Segment, Flex and Engage applications.

“This week, we announced meaningful changes to Twilio’s leadership group, organizational structure, team size and capital allocation strategy that will both accelerate our path to profitability and most importantly, improve our execution in delivering our Engagement Platform strategy for our customers,” Twilio co-founder and Chief Executive Jeff Lawson (pictured) said in a statement. “While our vision remains, the way we operate and execute has changed — all in service of driving better focus for the business and ultimately enhancing value creation for our shareholders.”

Twilio’s restructuring, along with the earnings and revenue beat and announcement of the share buyback program, appeared to temper any disappointment investors may have had over its guidance for the coming quarter. For the first quarter of fiscal 2023, Twilio sees revenue of between $995 million and $1 billion, below Wall Street’s target of $1.02 billion.

Photo: Web Summit/Flickr