When Saul’s enthusiasm for Twilio got me back in (Aug 2018), I saw the potential, but I admit I was tepid. Still raw from a tough 2017, I said, “Probably won’t go higher than 5% here. I believe in the growth, but I can’t ignore the margins.”
Then I doubled my position in September. I was convinced on Twilio once again, and said, “Twilio dominates their industry. Hard to see them not continuing to grow and do great. …but I probably won’t add shares.” I kept it as a top 5 position ever since, but didn’t let it get above 10 or 11%. This quarter, I’m changing my tune. I may not be as bold as Saul (20%+? You’re a wild man in the best way!), but I’ve added more than 30% to my Twilio position in the past week or so. Their growth is simply staggering, and I think it’s only going to get better.
In fact, in my just-for-fun poll on Friday, 85% of you voted that Twilio would report $248m or more in Q1 2019. That would be at least 92% more revenue than in Q1 of 2018. Sure, it’s not all organic, but does anyone care!?
Now I agree, they need to reign in the spending. But all things in time. When a company can grow like this, I want them investing every cent they can to do just that. Plus, as revenue explodes, perhaps many of the acquisition costs have already been absorbed. We’ll just have to see. But the bottom line is, it’s too early to worry about the bottom line. Not when you can grow at this pace.
Revenue: 204.3m (up 77%)
Gross Margin: 53%
OpEx: 152m (up 89% - yikes! Let’s look for this to level off.)
SBC: 32m (approx. 16% of revenue…a little high. Hope it comes down over the next few quarters.)
Net Expansion Rate: 147% (WOW.)
Guidance: 225m at high end (74% growth – though not all organic)
Guidance for share count: 130m (a substantial increase and important to note)
Current Share price: 106.85
Market Cap using 130m shares: $13.9 billion
P/S: 21.4 (but if they grow at a 90% to 100% pace, that will fall FAST, even though growth is not all organic)
One analyst on the call pointed out: If I even take out the seasonal election benefit of $10 million, it looks like the average revenue per customer continues to grow at this 25% to 30% rate. You can read the responses but this seems incredibly positive to me. I’ve been calculating it myself and here’s the last few quarters:
So I admit Twilio isn’t perfect, but I’ve seen enough that I’m all in. What does “all in” mean? Well in addition to adding 30%+ to my position, I am upping my conviction in Twilio. They don’t just offer useful software to customers. They don’t even just facilitate customers’ sales like SQ or SHOP. No: Twilio actually becomes an integral part of their customers’ offerings. Truly special.