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Twilio (TWLO - Free Report) reported better-than-expected results in the first quarter of 2023. The company reported non-GAAP earnings of 47 cents per share in the first quarter, registering a solid improvement from the year-ago quarter’s break-even earnings.

The year-over-year growth in non-GAAP earnings was primarily due to higher revenues and cost savings through headcount reductions. The bottom line also surpassed the Zacks Consensus Estimate of 20 cents per share.

Despite reporting strong first-quarter results, shares of Twilio fell 14.7% in Tuesday’s extended trading session as the company’s revenue guidance for the second quarter fell short of the consensus mark.

Twilio Inc. Price, Consensus and EPS Surprise

Twilio Inc. price-consensus-eps-surprise-chart | Twilio Inc. Quote

Revenue Details

The cloud-based communications platform-as-a-service provider reported revenues of $1.01 billion. The figure improved by 15% year over year and surpassed the consensus mark of $999.8 million.

TWLO has been benefiting from the constant expansion of its international business and the continuous acceleration of digital transformation projects across several industries. The top line was primarily driven by the enhancement of customer experiences across various product portfolios like Segment, Flex and Engage, which are its fastest-growing software-as-a-service products at present.

Twilio’s dollar-based net expansion rate was 106% in the reported quarter, down from 110% in the previous quarter and 127% in the year-ago quarter. The company’s active customer accounts increased to 300,000 as of Mar 31, 2023 from 290,000 at the end of the fourth quarter of 2022 and 268,000 as of Mar 31, 2022.

Operating Results

The non-GAAP gross profit climbed 14.3% year over year to $526.1 million. However, the non-GAAP gross margin contracted 100 basis points (bps) to 52%.

Twilio reported a first-quarter non-GAAP operating income of $103.8 million, up from the year-ago quarter’s non-GAAP operating profit of $5 million. The non-GAAP operating margin was 10% in the first quarter, up from 1% in the year-ago quarter.

General & administrative expenses on a non-GAAP basis decreased 9.1% to $76.8 million and accounted for 8% of the quarterly revenues. Research & development expenses on a non-GAAP basis increased 1.4% year over year to $156.8 million and made up 16% of the quarterly revenues.

Non-GAAP sales & marketing expenses declined 12.6% to $188.8 million. The same represented 19% of first-quarter revenues.

Balance Sheet

The company exited the January-March 2023 quarter with cash and cash equivalents and short-term marketable securities of $3.95 billion, down from $4.16 billion at the end of the fourth quarter of 2022. As of Mar 31, 2023, TWLO’s long-term debt was $987.8 million.

Second-Quarter 2023 Guidance

For the current quarter ending Jun 31, 2023, the company anticipates revenues between $980 million and $990 billion, suggesting year-over-year growth of 4% to 5%. The top-line guidance remains way lower than the Zacks Consensus Estimate of $1.04 billion.

Twilio forecast non-GAAP earnings between 27 cents and 31 cents per share for the second quarter of 2023. The Zacks Consensus Estimate for the same is pegged at earnings of 28 cents per share. Management estimates the non-GAAP income from operations in the range of $65-$75 million.

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