William Blair Reiterates Outperform Rating on Twilio (TWLO)
William Blair analyst Bhavan Suri reiterated an Outperform rating on Twilio (NYSE: TWLO).
The analyst comments "Twilio’s fourth-quarter results were solid and largely as expected given the company preannounced results at its analyst day in January (see our note here: Positive Investor Day; Lays Out Aspiration for Durable Double-Digit Growth With Material Margin Expansion Ahead). Revenue growth accelerated to 11% in the quarter and Twilio reiterated its 2025 guidance of 7%-8% growth. The company has accelerated organic revenue growth every quarter in 2024, indicating significantly improved execution and signs of better demand for its offerings. Operating margin was 16.5%, though included 140 basis points of headwind from a onetime bad-debt write-off. Free cash flow of $94 million (8% margin) was below consensus expectations of $106 million (9% margin) but included incremental vendor prepayments of about $130 million. The communications business (over 90% of revenue) continues to be the main driver for Twilio, growing 12% this quarter. Meanwhile, Segment remains a drag as it declined 1%. Communications benefited from an acceleration in messaging, strong growth in email, and solid traction from ISV partners and the self-serve business. Communications net revenue retention (NRR) ticked up 2 percentage points sequentially to 108%, the highest it has been over the last six quarters the company has disclosed it. Management reiterated its goal of hitting 21%-22% operating margin by 2027. We do not see much to pick at in the results, though some investors may have been expecting an increase to the 2025 revenue guide. Overall, we thought this was a solid quarter and we continue to like the setup here as revenue trends are accelerating, execution is improving, and we see lots of room to expand margins. We would take advantage of material pullbacks and are reiterating our Outperform rating."
For an analyst ratings summary and ratings history on Twilio click here. For more ratings news on Twilio click here.
Shares of Twilio closed at $147.28 yesterday.