Twilio is a leading cloud company that enables developers to build communication into their apps.
TwilioJanuary 17, 2021
Thesis - Twilio makes it easy for tech companies and startups to build communication into their apps. They provide APIs that can automate text messaging, send transactional emails and make calls. It’s perhaps best understood with use-cases. For example, Airbnb use Twilio to improve communication between guests and hosts. When a guest messages a host and the host fails to respond, Airbnb uses Twilio to send an automatic SMS message to the host and nudge them for a response. This improves the experience for Airbnb and can be done without further human intervention. Another example, Deliveroo use Twilio to enable masked phone calls from the rider to customers. This means a rider and customer can call to discuss a food drop-off without either exchanging their mobile numbers, maintaining privacy. If these use-cases still don’t resonate, it’s useful to know that Stripe, Lyft, Salesforce, Yelp, Twitch, Zendesk, Coca-cola, M&S and many more are also customers. They have a usage-based business model, which means they make more revenue as the volume of communications increases. Twilio is in the sweet spot of offering a crucial service (communication) in a growing market (web applications), growing revenue over 50% YoY. They are known as being a technology-first company, with an easy-to-use product. Developers love Twilio because they make their job easier. Before Twilio’s APIs, adding communication to web and mobile apps was a difficult and expensive process. The stock has almost quadrupled since its March low.
Financials & Performance - Twilio has 208,000 active customers and last quarter announced $448m in revenue, up 52% year-over-year. Dollar-based net expansion was 137%, meaning from the same customers a year ago they earned 37% more money. This highlights their ability to grow both their breath of use-cases and volume of usage with a customer. The company is not yet profitable as it chooses to focus on growth. They have healthy gross margins of 53%. They have also shown an appetite to grow their business through bolt-on acquisitions. In 2019, they acquired SendGrid a provider of an email API and earlier this year they announced the acquisition of Segment, a customer data platform.
Leadership - Jeff Lawson is the CEO and founder of Twilio. He is a serial entrepreneur and was previously the founding CTO of StubHub. He was also a technical product manager at Amazon during the formation of AWS, giving him strong acumen as the leader of a cloud organisation. He has a 94% approval rating on Glassdoor.com.
Risks - As mentioned, the stock has quadrupled in value in a short space of time. The company is now valued at $62b, making is one of the larger players in the Saas space. However, this is a company that has sustained 50-80% revenue growth for 8 quarters and has bolstered its position during a period of technology acceleration globally.