3. Twilio Inc. (NYSE:TWLO)
Number of Hedge Fund Holders In Q2 2024: 54
Twilio Inc. (NYSE:TWLO) is a software company that provides developers with the capability to develop automated calling, messaging, and SaaS platforms. Its business model, which allows businesses to develop communications systems such as chat bots, is particularly well suited to meet business needs in the AI era. However, Twilio Inc. (NYSE:TWLO)’s shares are down 5% year to date, after a massive 22% drop in February which the stock is yet to recover from. The drop was due to the firm’s fourth quarter results which saw its Q1 revenue guidance of $1.03 billion to $1.04 billion miss analyst estimates of $1.05 billion. SaaS and software hypothesis is built on growth, and Twilio Inc. (NYSE:TWLO)’s shares weren’t helped by the fact that management failed to provide full year guidance. Piper Sandler boosted the share price target to $83 from $77 in August and kept an Overweight rating on the shares. and the optimism followed Twilio Inc. (NYSE:TWLO)’s second quarter earnings that saw the firm share 5.5% and 6.6% annual revenue growth for its third and fourth quarters, respectively.
Twilio Inc. (NYSE:TWLO)’s management shared key details for cost savings, another key factor for software firm hypothesis, during the Q2 2024 earnings call:
“Listen, I think we’ve done a lot on margins. If you just take a step back and think about the expansion that we got last year, and then coming into this year, our initial guide assumes very little operating margin leverage. If you look at our current guide for the year at the midpoint, it’s about — I’d say 250-ish basis points of margin expansion. So we continue to find opportunities to get expansion on both the OpEx line as well as the stock-based compensation line. And we don’t think we’re done. So we’ve talked about fact that we’re going to get the Segment business to break even by the second quarter of next year. That business lost $16 million in the second quarter, $21 million in the first quarter.
So you can see that there’s an opportunity to get leverage there. And then in addition, in the broader business, I’d say in communications and the G&A functions, there’s a lot of work that we’re doing around, you mentioned automation. We are a remote-first company, so we do have the opportunity to leverage lower-cost geographies as a way to continue to get efficiencies. And so we’re doing all of these things and continue to do them. I would say, I’m not going to give you an exact inning, but I would say we have a lot of opportunity to continue to expand margins both on the non-GAAP side as well as the GAAP side, including stock-based compensation. In terms of the profit, in terms of what’s coming from improvements in process versus cost discipline, I think it’s a little bit of both.
It’s largely cost discipline though. We continue to believe that we can run this company without having to add a lot of incremental costs. You’ve seen us do that now for 6 quarters in a row. And so we’re really just much more disciplined in terms of how we’re running the company, and that’s something Khozema drives pretty regularly with the team.”
