PVTL Vs TWLO (6 months ago)

Investment Analysis Clubs Saul’s Investing Discussions
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I decided to compare PVTL to TWLO at the start of the year. I feel like PVTL is similar to TWLO in
April with its growth being hidden by a single customer. TWLO had Uber and PVTL had Ford. TWLO had
a growth rate of 41% with Uber included and a 62% with Uber data excluded. The data for
subscription revenue for PVTL is not as easy to find because the revenue of ford is subscription
and services rolled together. By watching the service revenue you notice it is mostly flat with the
biggest drop being in Q1-Q2 2018 where we see an increase in Ford’s expenditures in PVTL by 1.4
million.

Service Revenue (in millions of dollars)

        Apr           Jul          Oct            Jan            Total
2017:   59            70            72             65            266
2018:   68            61            63             58            250
2019:   66            67                                         262 guidance

Revenue from Ford  (in millions of dollars)
        Apr           Jul
2018:   10.8          12.2 
2019:   3.6            3.3

Which leads me to believe that majority of Ford’s spending in PVTL is in subscriptions. I ran
multiple numbers from 40% to 80% of Ford's spending as subscriptions.

Subscription Revenue minus Ford(40%) (in millions of dollars) 

        Apr           Jul          
2018:   48.7          60.1    
2019:   88.5          96.7
Growth  82%           60%

Subscription Revenue minus Ford(80%) (in millions of dollars) 

        Apr           Jul          
2018:   44.3          55.2    
2019:   87.1          95.4
Growth  96%           72%

The slow down from Q1 to Q2 in growth still exists and is exacerbated when you exclude Ford, but
that highlights how amazing Q1 was. Q2 was still a great quarter for subscription growth. Q2 also
had an increase in deferred revenue to 60 million from 20 million in Q1, which is an indicator of
future growth. PVTL also maintains a dollar-based net expansion rate of 156%, even with Ford
cutting.

My overall opinion was slightly more muted than when I started, but I still see PVTL as a company
with significant growth to go. Thanks for reading my first every write up of a companies’
financials.

Drew,
Long PVTL
48 Likes
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Good insight. But this drop off in Ford rev. brings up an interesting question. In TWLO’s case Uber decided to do communications inhouse instead of spending on TWLO. If Ford is not spending on PVTL then how are they getting the same service that PVTL is offering? Is PVTL’s service something that can be cancelled i.e. it is non-essential? Ford seems to have concluded so. If Ford did so could other PVTL customers do the same?

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In TWLO’s case Uber decided to do communications inhouse instead of spending on TWLO. If Ford is not spending on PVTL then how are they getting the same service that PVTL is offering? Is PVTL’s service something that can be cancelled i.e. it is non-essential? Ford seems to have concluded so. If Ford did so could other PVTL customers do the same?

Hi Drew and Karthiko,

I agree with Karth, but also I see other reasons to see a big difference between Twilio and Pivotal.

  1. Twilio explained clearly what was going on, and what the expected time-line was. Pivotal gave no explanation at all for what had happened with Ford.

  2. Twilio has a huge number of customers, which is growing rapidly. Pivotal has 300, which are growing slowly.

  3. Twilio has an impressive entrepreneurial CEO. Pivotal has a CEO who was running his business for many years as an internal division of Dell, until some months ago, and who hasn’t a clue how to run it as a free standing business.

  4. Is it a free standing business? It’s still 95% controlled by Dell?

  5. When Twilio had its Uber problem, it kept increasing the number of customers at a rapid rate. When Pivotal had its Ford problem it added 15 customers.

Pivotal still goes into my “Too tough to get a grasp on!” file. It may do well, but it will do it without me for the time being.

Saul

40 Likes
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Gosh Saul, replies like these show one of your true strengths: self-awareness.

How well you know yourself and your ability to align your portfolio with your personal style is probably almost as important as your ability to find great companies.

Something for us all to learn from.

15 Likes
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Also other IPO’s give their prior year results which are real. They are results when the company was a real company, just one which was not yet listed on an exchange.

On the other hand, all those gorgeous past results of Pivotal’s are from when it was just a division of Dell and we don’t have a clue what they meant. Like close to zero Sales and Marketing Expenses, and very low Operating Expenses in general. Was Dell just picking up those expenses in another division to make Pivotal look good for the IPO? Who knows?

Yep, too hard for me!

Saul

8 Likes