Posted on Tuesday, Aug 28th 2018
Cloud computing software vendor Twilio (NYSE:TWLO) has been on a roll. It continues to deliver financial results that outpace all market expectations, driving its stock higher. The stock has witnessed a 220% growth rally during the year.
For the second quarter of the year, Twilio’s revenues grew 54% to $147.8 million, significantly ahead of the market’s forecast of $131 million. Twilio reported a net loss of $22 million in the quarter, compared with a loss of $7.1 million recorded a year ago. Non GAAP EPS came in at $0.03, compared with a non GAAP net loss of $0.05 per share a year ago. The Street was looking for a non GAAP loss of $0.05 per share for the quarter.
Among key metrics, Twilio ended the quarter with more than 57,350 active customer accounts, compared with 43,430 customers a year ago. The metric is important given the low customer base the company had till a few years ago. In 2015, Twilio earned 32% of its revenue from 10 accounts, and 26% of its revenues from WhatsApp and Uber alone. During the quarter, Twilio’s base revenues grew 54% to $135 million; and excluding Uber, base revenues grew at 61% over the year. Today, the top 10 accounts account for a more modest 18% of total revenues with no single customer contributing for more than 10% of company revenue.
Twilio’s net expansion rate, which measures how much more Twilio’s active customers spent on its services in comparison to the same clients’ year-ago orders, came in at 137%, compared with 132% a year ago. Excluding Uber, that number grew to 145% from 137%.
For the current quarter, Twilio forecast revenues of $150-$152 million, and an adjusted EPS pf $0.02-$0.03. The market was forecasting revenues of $135.9 million with a break-even third quarter. Twilio expects to end the year with revenues of $585.5-$589.5 million, with an adjusted EPS of $0.02-$0.04. The outlook is significantly higher than the previous guidance of $538-$544 million. The market was looking for revenues of $543 million for the year.
Twilio derives most of its revenues from core voice and messaging product lines, but it is looking to diversify with its Engagement Cloud offering. As part of this effort, earlier this year, it had launched Twilio Flex, its cloud contact center application platform. Flex is designed to provide customers a combination of cloud scale along with complete customization. It is also investing in building machine learning into Flex. It plans to integrate Flex with the leading AI platforms and products.
During the quarter, it also expanded its relationship with Google as a launch partner for two of their new efforts, Dialogflow and their Contact Center AI. These features have integrated Google services into Twilio deployments to create better, more automated customer experiences.
Besides expanding its product offering, Twilio has also been improving its developer platform. Recently, it tied up with WhatsApp to launch Twilio API for WhatsApp. As part of the agreement, the two will work together to enable WhatsApp to allow enterprises to integrate WhatsApp messaging into their notifications and customer support work logs.
Twilio’s revenue guidance has blown past its previous guidance and market expectations. But Twilio is yet to turn in a net profit. Its rivals include names like Bandwidth and Vonage’s Nexmo, both of which are profitable on a GAAP basis as they are able to leverage their existing infrastructure to deliver services that Twilio offers. Vonage leverages its core telephony business to support Nexmo’s growth, and Bandwidth uses its own nationwide IP voice network to generate higher operating margins than Twilio.
Besides competition, Twilio continues to be evaluated as an acquisition target. Earlier this year, Salesforce.com’s acquisition of 1% stake in Twilio ignited the speculation. Some even believe that Twilio may be a good acquisition target for the likes of Amazon which would be interested in adding Twilio’s expertise to its portfolio.
All doubts aside, for now the market is very pleased with Twilio’s performance. Its stock is trading at 52-week high levels of $81.16 with a market capitalization of $7.9 billion. It had fallen to a 52-week low of $23.25 in December last year. Twilio had listed in 2016 by pricing its stock at $15 apiece.
Photo Credit: Web Summit/Flickr.com
More investigation and analysis of Unicorn companies can be found in my latest Entrepreneur Journeys book, Billion Dollar Unicorns.
This segment is a part in the series : Billion Dollar Unicorns
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