Twilio Earnings review Q1 2020

Hi all,

Since Saul and most contributors on this board exited Twilio, it doesn’t get the same coverage as before, unfortunately. With the shares exploding after earnings I felt it would be interesting to look at the quarterly results of Q1 2020 and trying to understand why the shares went up so much.

I think the main reason for the stock pop was that many market participants thought Twilio with its usage based model would suffer in this environment. There have been some downgrades before the ER, basically arguing that Twilio would see less usage in certain areas; especially their affiliation with Uber – which certainly saw a big decline in business – put a question mark on Twilio. I was also concerned but ultimately unsure how Twilio would actually perform. Fortunately, I decided to wait for the ER and keep all my shares (I even bought a very small amount on March 12 when it dropped below $80).

As we have seen Twilio put these concerns to rest with a great earnings report that send shares higher by more than 40%! How great? Let’s see:

Revenue growth came in at 56.6% which was more than 11% higher than their guidance of 45%. It has to be noted, however, that Twilio counted SendGrid revenue to their numbers only from February 2019 onwards. Accordingly, they compare Q1 2020 numbers with SendGrid’s January to Q1 2019 without January – their actual apples to apples growth rate is therefore be a bit lower at 48% organic growth.

Dollar-based Net Expansion Rate came in at 143%, up from 125% in the last quarter. Although, after adjusting for the extra month of revenue from Twilio SendGrid in January 2020, Dollar-Based Net Expansion Rate was 135% – still a big improvement from the last quarter where we all became a bit worried.

They added 11,000 customers in the quarter and now stand at 190,000 customers in total. The top 10 customers make up 15% of Twilios revenue.

In Q4 2019 they guided for a NON-GAAP operating loss of $22 million in Q1 2020. They actually made a profit of $6 million.

Operating cash flow was $15,5 million, up from a negative $9 mil the year before.

Also the company followed up on their promise to reduce SBC: Non-GAAP weighted-average share count was up only 0.75% sequentially. Remember that Twilio increased their share count massively when they acquired SendGrid (not only in the quarter where they acquired but also the two quarters following the acquisition). Since Q3 2019 when they acknowledged that SBC was too high, they reduced the share count sequentially by 1.78% in Q4 2019, and now, as already stated, slightly increased it by 0.75%.

Twilio withdrew guidance for the full year because of COVID-19. However, they guided for 34.5% revenue growth in Q2 2020, which seemed like conservative guidance to me.

Here is what CEO Jeff Lawson had to say about guidance: „…I think it’s a mix of both honestly. We’re certainly seeing additional tailwind from education, from healthcare, from retail and some of the others that that we talked about. I think at some point, those are going to moderate a little bit. But at the same time, I think what is also going to happen is, is that we’re going to have some of the other use cases come back that have been down a little bit. And so I think, there are some puts and takes in the mix. But, as we said in our earlier remarks, like, what we’ve overall seen is that there’s sort of been a tailwind here. I think in terms of the back half of the year, we’re still cautiously optimistic about the way that things are going to play out there. We felt it was prudent to withdraw our guidance for that period, just given how dynamic things are, but we do remain cautiously optimistic. And I would say, certainly for the long-term. We’re as excited as we’ve ever been, if not more excited.“

Flex (their cloud call center solution) also seems to be getting some tailwinds: „Prior to this outbreak, it was estimated that of the roughly 15 million contact center seats in the market about 17% were in the cloud. Now it is expected to be 50% by 2025. And Flex provides us a great opportunity to help companies with this transition with a fully programmable contact center platform.“

Also, the SendGrid acquisition seems to be a success: „Adding emails to the platform has been very successful, as it allows us to offer customers a single platform for their digital customer engagement. And we continue to see email drive great new deals for us.“

Currently, Twilio is approximately a 10% position for me and I’m very comfortable with that. There have been some wobbles and tough comparisons bc of the SendGrid acquisition but they finally put these behind them. They don’t break out SendGrid numbers anymore which I think is fine (although more information is always better, and they do have a tendency to report or highlight numbers in the best possible way, which sometimes is not really apples to apples). I’m looking forward to the next quarter when we finally have the first apples to apples comparison since the SendGrid acquisition.

I’m sure Twilio will do well. “Our platform provides three things the world needs right now: digital engagement, software agility and cloud scale.”



Flex (their cloud call center solution) also seems to be getting some tailwinds: „Prior to this outbreak, it was estimated that of the roughly 15 million contact center seats in the market about 17% were in the cloud. Now it is expected to be 50% by 2025. And Flex provides us a great opportunity to help companies with this transition with a fully programmable contact center platform.“

If I recall correctly Flex was designed so that call center employees could work from home in a distributed fashion. In this time of social distancing and the normal of having at least some employess working from home; I feel this is the right product at the right time. If my belief that companies will increasingly let their workers work from home come true; this should be a fairly large tailwind. Prescient of them.

Still holding TWLO shares and glad of it.


I don’t like the headline, TWLO apples to oranges comparison of 57% growth without SendGrid’s January 2019, but putting that aside, there are lots to like in TWLO report this quarter, and the market is reacting accordingly. The way I look at this company is that it’s another one helping with the RAPID digital transformation that taking place. More so, in this COVID19 environment, TWLO provides 4 technologies that matters, messaging, email, voice and video, and with its diverse customer base, currently 190,000, I think is will handle weakness of some areas just fine.

Two big surprises for me were being HIPPA eligible and their video offering, both resulted in new wins for TWLO. From the conference call:

We announced that several of our products are now HIPAA eligible, meaning customers can more easily utilize our voice, video, SMS and fit products to develop communication workflows containing protected health information in a compliant way. HIPAA is another milestone for Twilio in elevating our data privacy and security to meet the needs of our HIPAA compliant customers. And we are committed to providing a platform trusted by customers and patients.

With shelter in place and social distancing going into effect, demand for telehealth solutions has soared. Virtual care became a new reality for doctors, nurses, clinicians and millions of patients around the world and Epic, the company that supports the comprehensive health records of 250 million people mobilized to build its own telehealth platform, powered by Twilio’s programmable video. The solution allows providers to launch a video visit with a patient, review relevant patient history and update clinical documentation directly within Epic.

This is a use case I thought Zoom (ZM) could have dominated, but it looks like TWLO is there too. Another positive from COVID is TWLO moving call centers to the cloud, and the speed at which it’s happening.

Digital transformation projects that could have taken years such as transitioning from an on-prem contact centre to the cloud instead took a weekend. Developers and companies big and small got to work, reconfiguring the world for a work from home and nearly 100% ecommerce reality.

I have a tiny 1% position in TWLO, but would look for opportunity to add. Keep an eye on the previous Saul’s winner.…



One interesting part of the call was the question about competition with Sinch, who was awarded a deal with SAP over Twilio. Jeff Lawson didn’t really answer the question, choosing to focus on Twilio’s strengths and value proposition. I took a glance at Sinch’s annual report and looks like they are claiming a US presence as well. Look forward to reading about another CPaaS competitor…

AC Doyle
(long TWLO)


I’m sure you know, Epic is huge in electronic medical records.

Hi Niki

I took another look at Twilio having not that long ago sold out at 110 thinking I had done well to dodge a bullet. Clearly in terms of share price action I got that wrong.

Clearly this was a beat and possessed several positives such as the DBNER up tick and bottom line leverage, however…

Apart from the ongoing disguise of the actual growth rate - 48% as opposed to 57% which you point out and which is referenced in the slides, one hidden point that this doesn’t account for was the easy compare this number was making.

Q1 2019 was one of the weakest quarters on record. The sequential ORGANIC growth rate from Q4 2018 to Q1 2019 was only $1m (from $204m to $205m).…

In previous years there was a substantial sequential growth of 6-12% going from Q4 to Q1.

I would be reluctant to draw too positive conclusion from this quarter’s release. I also see that Twilio has continued to low ball guidance numbers by a beyond reasonable amount for Q2 as it did for Q1 and previously.

Good luck to all holders. I don’t think at this level and with this quarter’s results I will be buying back in.