Twilio Q4 Earnings Preview: Buy Ahead Of A Substantial Rebound

Drew Angerer
It’s a big year for tech rebounds, but we have to be extra vigilant that the stocks we’re investing in also have fundamental firepower to justify these gains. So far earnings season is playing out well for most companies, but post-earnings reactions have generally been very volatile – with companies jumping double-digits (which has been more common), or sliding dramatically on weakened profitability or lowered expectations (like Lyft).
Twilio (NYSE:TWLO), in my view, is well-positioned for an earnings rally. Already up more than 20% so far, I think Twilio has a lot of lost ground to reclaim and good news in Q4 could be the catalyst to spark the fire:

I remain very bullish on Twilio and recommend adding the stock ahead of earnings. Twilio next reports on Wednesday, February 15 – and I think we could be in for substantial gains after the report.
Positive read-through from other internet companies
The first topic we should discuss: as a reminder for investors who are newer to Twilio, the company primarily drives growth via a “land and expand” business model. Twilio’s software is entirely usage-based: meaning every single time somebody uses the Twilio API to send an internet-powered text or voice call, Twilio gets paid.
Yes, like many other software companies, Twilio has seen the macroeconomy drag its sales cycles. New deals are taking longer to close. But customers who are already installed on the platform are presumably still using their applications in the same way and at the same pace, so Twilio’s “expansion” growth is not at risk.
The chart below shows Twilio’s most recent trend of dollar-based net retention rates; so far, Twilio customers have been trending toward a 20%+ net expansion:

Twilio dollar-based net retention (Twilio Q3 earnings deck )
Now let’s turn to reports from some of Twilio’s key customers. Now, Twilio has reached a far more diversified customer base than immediately after its IPO, when Uber (UBER) and Facebook (META) made up a huge chunk of revenue. Even though these companies are a smaller chunk of revenue today, they still provide directional color on how usage trends might play out.
Let’s start with Meta, which reported earnings earlier in February. DAUs rose 4% y/y to 2.00 billion, including a 2-million user sequential increase in users in the US and Canada, which are the highest revenue-generating region.

Facebook DAUs (Meta Q4 earnings deck)
Moreover, Facebook’s ratio of DAUs to MAUs reached a record 67.5%, up from 67.1% in Q3 and 66.2% in the year-ago Q4. On top of this, Meta reported that ad impressions served grew 23% y/y in the fourth quarter.

Facebook MAUs (Meta Q4 earnings deck)
All of this data suggests that activity/usage is up across the core Facebook family of apps, and Twilio – which powers the Messenger function – should benefit from this increase in usage.
Uber also has positive read-through. Gross bookings in the mobility/rideshare segment grew 37% y/y (lapping against a difficult post-COVID opening comp last year as well):

Uber mobility bookings (Uber Q4 earnings release)
Needless to say, the more people are hailing Uber rides, the more opportunities there are for them to contact their Uber drivers through voice or text – which use the Twilio API, and for which Twilio gets paid per instance.
Focus on cost-cutting
Note as well that just two days before its earnings print, Twilio announced that it would be laying off 1,500 workers, representing a huge 17% chunk of its overall workforce.
On top of this, the company is shrinking its real estate portfolio, which will further reduce its opex run rates.
Already as of Q3, Twilio was nearing a single-digit pro forma operating margin loss. Assuming consistent revenue performance (which will hopefully turn up better than expectations, due to the positive read-through from other internet ecosystem companies), these cost-cuts should help Twilio push above breakeven from a pro forma standpoint.
Twilio is, above all, a company that relies on economies of scale. In particular, it relies on its “land and expand” motion to drive increased usage from its existing install base. If the company can keep up its trend of 120%+ net expansion rates (which activity readings from other internet companies seem to be supporting), on top of a lower expense base, 2023 can really be the year where Twilio’s profitability shines.
Valuation and key takeaways
At current share prices near $62 (factoring in the lift in the stock after Twilio announced its new layoffs), Twilio trades at a market cap of $11.40 billion. After we net off the $4.21 billion of cash and $987 million of debt on the company’s most recent balance sheet, Twilio’s resulting enterprise value is $8.18 billion.
Meanwhile, for the upcoming fiscal year FY23, Wall Street analysts are expecting Twilio to generate $4.43 billion in revenue, up 17% y/y (data from Yahoo Finance). This puts Twilio’s valuation at just 1.8x EV/FY23 revenue.
To me, this valuation (especially when compared to double-digit multiples at Twilio’s peak during the pandemic) signifies plenty of upside opportunity, even after this year’s substantial gains to date. In my opinion, even a whiff of good news during the Q4 earnings release has the potential to send Twilio roaring higher.
Take advantage of current low prices to buy Twilio ahead of a more substantial rebound.
Former Myanmar colonel who once served as information minister gets 10-year prison term for sedition

BANGKOK (AP) — A former high-profile Myanmar army officer who had served as information minister and presidential spokesperson in a previous military-backed government has been convicted of sedition and incitement, a legal official said Thursday. He was sentenced to 10 years in prison.
Ye Htut, a 64-year old retired lieutenant colonel, is the latest in a series of people arrested and jailed for writing Facebook posts that allegedly spreading false or inflammatory news. Once infrequently prosecuted, there has been a deluge of such legal actions since the army seized power from the elected government of Aung San Suu Kyi in February 2021.
He was arrested in late October after a military officer from the Yangon Regional Military Command reportedly filed a change against him, around the time when some senior military officers were purged on other charges, including corruption. He was convicted on Wednesday, according to the official familiar with the legal proceedings who insisted on anonymity for fear of being punished by the authorities.
Ye Htut had been the spokesperson from 2013 to 2016 for President Thein Sein in a military-backed government and also information minister from 2014 to 2016.
After leaving the government in 2016, Ye Htut took on the role of a political commentator and wrote books and posted articles on Facebook. For a time, he was a visiting senior research fellow at the ISEAS-Yusof Ishak Institute, a center for Southeast Asia studies in Singapore.
After the army’s 2021 takeover, he often posted short personal vignettes and travel essays on Facebook in which he made allusions that were generally recognized to be critical of Myanmar’s current military rulers.
The army’s takeover triggered mass public protests that the military and police responded to with lethal force, triggering armed resistance and violence that has escalated into a civil war.
The official familiar with the court proceedings against Ye Htut told The Associated Press that he was sentenced by a court in Yangon’s Insein prison to seven years for sedition and three years for incitement. Ye Htut was accused on the basis of his posts on his Facebook account, and did not hire a lawyer to represent him at his trial, the official said.
The sedition charge makes disrupting or hindering the work of defense services personnel or government employees punishable by up to seven years in prison. The incitement charge makes it a crime to publish or circulate comments that cause fear, spread false news, agitate directly or indirectly for criminal offences against a government employee — an offense punishable by up to three years in prison.
However, a statement from the Ministry of Legal Affairs said he had been charged under a different sedition statute. There was no explanation for the discrepancy.
According to detailed lists compiled by the Assistance Association for Political Prisoners, a watchdog group based in Thailand, 4,204 civilians have died in Myanmar in the military government’s crackdown on opponents and at least 25,474 people have been arrested.
Top CIA agent shared pro-Palestinian to Facebook after Hamas attack: report

A high-ranking CIA official boldly shared multiple pro-Palestinian images on her Facebook page just two weeks after Hamas launched its bloody surprise attack on Israel — while President Biden was touring the Jewish state to pledge the US’s allegiance to the nation.
The CIA’s associate deputy director for analysis changed her cover photo on Oct. 21 to a shot of a man wearing a Palestinian flag around his neck and waving a larger flag, the Financial Times reported.
The image — taken in 2015 during a surge in the long-stemming conflict — has been used in various news stories and pieces criticizing Israel’s role in the violence.
The CIA agent also shared a selfie with a superimposed “Free Palestine” sticker, similar to those being plastered on businesses and public spaces across the nation by protesters calling for a cease-fire.
The Financial Times did not name the official after the intelligence agency expressed concern for her safety.
“The officer is a career analyst with extensive background in all aspects of the Middle East and this post [of the Palestinian flag] was not intended to express a position on the conflict,” a person familiar with the situation told the outlet.
The individual added that the sticker image was initially posted years before the most recent crisis between the two nations and emphasized that the CIA official’s Facebook account was also peppered with posts taking a stand against antisemitism.
The latest post of the man waving the flag, however, was shared as Biden shook hands with Israeli leaders on their own soil in a show of support for the Jewish state in its conflict with the terrorist group.
Biden has staunchly voiced support for the US ally since the Oct. 7 surprise attack that killed more than 1,300 people, making the CIA agent’s posts in dissent an unusual move.
In her role, the associate deputy director is one of three people, including the deputy CIA director, responsible for approving all analyses disseminated inside the agency.
She had also previously overseen the production of the President’s Daily Brief, the highly classified compilation of intelligence that is presented to the president most days, the Financial Times said.
“CIA officers are committed to analytic objectivity, which is at the core of what we do as an agency. CIA officers may have personal views, but this does not lessen their — or CIA’s — commitment to unbiased analysis,” the CIA said in a statement to the outlet.
Follow along with The Post’s live blog for the latest on Hamas’ attack on Israel
Neither the Office of the Director of National Intelligence nor the White House responded to The Post’s request for comment.
All of the official’s pro-Palestinian images and other, unrelated posts have since been deleted, the outlet reported.
The report comes as CIA Director William Burns arrived in Qatar, where he was due to meet with his Israeli and Egyptian counterparts and the Gulf state’s prime minister to discuss the possibility of extending the pause in fighting between Israeli forces and Hamas terrorists in the Gaza Strip for a second time.
Israel and Hamas agreed Monday to an additional two-day pause in fighting, meaning combat would likely resume Thursday morning Israel time if no additional halt is brokered.
Both sides agreed to release a portion of its hostages under the arrangement.
More than 14,000 Palestinians in Gaza, including many women and children, have been killed in the conflict, according to data from the Hamas-controlled Ministry of Health.
Lee Hsien Yang faces damages for defamation against two Singapore ministers over Ridout Road rentals

SINGAPORE — The High Court in Singapore has directed Lee Hsien Yang to pay damages to ministers K. Shanmugam and Vivian Balakrishnan for defamatory statements made in Facebook comments regarding their rental of black-and-white bungalows on Ridout Road.
The court issued a default judgment favouring the two ministers after Lee – the youngest son of Singapore’s founding prime minister Lee Kuan Yew and brother of current Prime Minister Lee Hsien Loong – failed to address the defamation lawsuits brought against him. Lee had, among other claims, insinuated that the ministers engaged in corrupt practices and received preferential treatment from the Singapore Land Authority for their bungalow rentals.
The exact amount of damages will be evaluated in a subsequent hearing.
Restricted from spreading defamatory claims against ministers
Not only did Justice Goh Yi Han grant the default judgment on 2 November, but he also imposed an injunction to prohibit Lee from further circulating false and defamatory allegations.
In a released written judgment on Monday (27 November), the judge highlighted “strong reasons” to believe that Lee might persist in making defamatory statements again, noting his refusal to remove the contentious Facebook post on 23 July, despite receiving a letter of demand from the ministers on 27 July.
Among other things, Lee stated in the post that “two ministers have leased state-owned mansions from the agency that one of them controls, felling trees and getting state-sponsored renovations.”
A report released by the Corrupt Practices Investigation Bureau in June concluded that no wrongdoing or preferential treatment had occurred concerning the two ministers. However, Lee continued referencing this post and the ongoing lawsuits, drawing attention to his remarks under legal scrutiny.
Justice Goh emphasised that the ministers met the prerequisites for a default judgment against Lee. The suits, separately filed by Shanmugam, the Law and Home Affairs Minister, and Dr Balakrishnan, the Foreign Affairs Minister, were initiated in early August.


He failed to respond within 21 days
Lee and his wife, Lee Suet Fern, had left Singapore in July 2022, after declining to attend a police interview for potentially giving false evidence in judicial proceedings over the late Lee Kuan Yew’s will.
His absence from Singapore prompted the court to permit Shanmugam and Dr Balakrishnan to serve him legal documents via Facebook Messenger in mid-September. Despite no requirement for proof that Lee saw these documents, his subsequent social media post on 16 September confirmed his awareness of the served legal papers.
Although Lee had the opportunity to respond within 21 days, he chose not to do so. Additionally, the judge noted the novelty of the ministers’ request for an injunction during this legal process, highlighting updated court rules allowing such measures since April 2022.
Justice Goh clarified that despite the claimants’ application for an injunction, the court needed independent validation for its appropriateness, considering its potentially severe impact on the defendant. He reiterated being satisfied with the circumstances and granted the injunction, given the continued accessibility of the contentious Facebook post.
Lee acknowledges court order and removes allegations from Facebook
Following the court’s decision, Lee acknowledged the court order on 10 November and removed the statements in question from his Facebook page.
In the judgment, Justice Goh noted that there were substantial grounds to anticipate Lee’s repetition of the “defamatory allegations by continuing to draw attention to them and/or publish further defamatory allegations against the claimants.”
The judge mentioned that if Lee had contested the ministers’ claims, there could have been grounds for a legally enforceable case under defamation law.
According to Justice Goh, a reasonable reader would interpret Lee’s Facebook post as insinuating that the People’s Action Party’s trust had been squandered due to the ministers’ alleged corrupt conduct, from which they gained personally.
While Shanmugam and Dr Balakrishnan were not explicitly named, the post made it evident that it referred to them, and these posts remained accessible to the public, as noted by the judge.
Justice Goh pointed out that by choosing not to respond to the lawsuits, Lee prevented the court from considering any opposing evidence related to the claims.
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