Twilio ‘Math Error’ Prompts Stock Decline
Last week, Twilio’s shares fell after they failed to meet shareholder expectations, offering up a weak quarterly earnings report. Following the call, the stock crashed by seven percent. Higher numbers have also been reported. So what was so underwhelming about what Twilio said on the call? According to a report by CNBC, ‘earnings, excluding certain items, were three cents per share and not one cent per share, which is what analysts forecasted. When it came to revenue, Twilio reported they earned $295.1 million, not the $287.8 million analysts anticipated.
Twilio reported revenue growth of 75 percent during the third quarter, according to a company press release. They even reported its net-dollar expansion rate was 132 percent, six percentage points under what analysts had predicted. As a result, the measurement of revenue growth fell short of expectations.
Twilio CEO, Jeff Lawson, appeared on Jim Cramer’s Mad Money last week to defend the company’s lower-than-expected numbers, telling Cramer Twilio’s seen a lot of success because of its focus on CX. Regarding the earnings report, Lawson told Cramer “we just focus on the long-term,” remaining optimistic throughout the interview.
‘Simple Math Error’ Will Never Happen Again
This week, CNBC reported, Twilio made a mistake on its earnings report, which led to the stock decline. Lawson again appeared on Mad Money where he shared:
“We’ve instituted extra processes so this does not happen again, adding “this is one of the growing pains we’ve experienced as we’ve grown so quickly”
Analysts predict the CPaaS leader will reach a milestone this year, $1.1 billion in revenue by the end of 2019. Lawson added, “No assumptions have changed. Nothing about our forecast has changed.”
Analyst Reacts to Twilio’s Blunder
This is not the first time Twilio’s made such a mistake, in the previous quarter the CPaaS giant had issues with its billing system, prompting them to credit roughly $5 million in one-time credits. Will Twilio reach a billion-dollar valuation by 2020? We only have two short months before that becomes a reality. Irwin Lazar is Vice President and Service Director at Nemertes. His research focuses on the digital workplace and unified communications. In a recent interview, he told me:
“While I’m not a financial analyst I’d assume this error is likely to lead to legal action and regulatory scrutiny”
“Twilio’s revised earnings are still strong and reflect continued growth in the intelligent customer engagement market where Twilio plays with its Flex offering.” He added, they see continued growth in the Communications-Platform-as-a-Service space – driven by digital transformation efforts that often use messaging to improve customer interaction.
Twilio does have some competition in the space, Lazar told me, adding ‘Twilio does face a competitive market as companies like Five9, TalkDesk, Seranova, RingCentral, inContact, 8×8, and Amazon grow their offerings.’
He also shared, while vendors like Avaya, Cisco, and Genesys still dominate in the large, complex contact center space, Twilio will need to show that it has taken concrete action to ensure that this type of mistake does not happen again.source uctoday