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Twilio Projects Sales Falling Short of Estimates After CEO Change

In Business
February 15, 2024

(Bloomberg) — Twilio Inc. projected revenue in the current quarter that fell short of expectations, offering the first view of its future since the software company’s longtime chief executive officer stepped down last month amid pressure from activist investors. The shares declined about 10% in extended trading.

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Sales will be about $1.03 billion for the period ending in March, Twilio said Wednesday in a statement. Analysts, on average, estimated $1.05 billion. Adjusted operating income will be $120 million to $130 million, compared with the $126 million average projection.

Twilio failed to give a full-year outlook, saying it would provide the 2024 forecast next month after the company conducts an “operational review” of its Segment business unit, which includes its data and applications divisions. Activist investor Anson Funds has urged Twilio to divest those divisions or sell itself entirely.

The Segment business “is not performing at the level that it needs to,” said new Chief Executive Officer Khozema Shipchandler in a conference call after the results, noting that Twilio’s communications business made up 93% of revenue in 2023.

The company is focused on “doing fewer things better,” highlighting that Twilio is ending smaller businesses such as its video product, Chief Financial Officer Aidan Viggiano said.

The San Francisco-based company, known for its businesses-to-consumer communication services, has struggled to maintain its once-high revenue growth and investor excitement. It has announced three separate rounds of job cuts since late 2022. In the review of its Segment unit, “all options are on the table, ranging from reorganization to a spinout,” said John Butler, an analyst at Bloomberg Intelligence.

In January, Twilio announced that co-founder and CEO Jeff Lawson would be replaced by Shipchandler, a deputy who previously ran Twilio’s largest business unit. “We are on the watch for further structural changes under the new CEO,” Derrick Wood, an analyst at TD Cowen, wrote ahead of results.

The shares fell to a low of $63.19 in extended trading after closing at $72.27 in New York. The stock has dropped 4.7% this year and is well below its record high of $443.49 in February 2021.

Read More: Twilio’s Jeff Lawson Steps Down From CEO Role and Board

Fourth-quarter sales increased 5% to $1.08 billion. Adjusted operating income was $172.6 million. Both metrics topped analysts’ estimates. While announcing the leadership change in January, the company said results would be higher than its previous guidance.

(Updates with comments from executives beginning in the fourth paragraph.)

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