Here are some further tidbits and thoughts from the conference call.
Base revenue continues to outpace overall growth meaning that variable revenue is becoming a smaller part of the pie. This is good news as Base revenue is customers that sign a 12 month agreement to minimum usage. The dollar based net expansion rate of 155% tells us that customers who signed up 12 months ago are using TWLO more today.
The company announced some key wins. One is a large airline, the other is All Web Leads (insurance industry) and the other is a large service provider to the US automobile market - servicing 10s of millions of auto clients. The latter two are utilizing TWLO for their call centers, apparently an incredibly important part of the businesses. The airline win was attributed to the company’s Enterprise Plan put in place recently whereby they are looking to penetrate larger organizations. A prior enterprise win was ING Bank.
TWLO rolled out new products in the quarter. If they meant anything to me, I’d list them.
The products they are focused on rolling out in 2017 are related to Programmable chat, voice and video though don’t let the fact that I listed those throw you off into thinking I know something about them.
Listening to the end of CEO Lawson’s prepared comments was interesting. When the conference call notes become available, I’ll post that section.
Top 10 Customers - 29%
Biggest Organization - 17% (don’t know what this means)
Whats App - 6%
Throughout the call management made it painfully clear they are looking to expand revenues and customers. They were almost apologetic for achieving 59% margins in the quarter stating not to expect that near term again. They even mentioned the elections causing seasonal traffic that increased revenue by a whopping $1M. They reiterated a goal to breakeven beginning in Q4 this year.
However, management does explain their path to profitability. It entails increasing the customer base for its low level building blocks for communications then creating more high level “use case” API. They are already doing this today with higher level API such as Notify. Higher level API allows developers to implement TWLO tech more quickly into an organization. This also allows TWLO to recognize revenue more quickly. These high level “use case” API carry higher margins.
The company sees this as the very early innings in the transition from hardware based legacy communication systems to software based solutions. TWLO clearly feels they are the industry leader currently.
One analyst asked why they aren’t pricing their products higher if competition isn’t a concern to which they replied that increasing customers and revenues is the number one goal. Profitability through higher margin products will come later. Long term GM are expected to be 60% to 65%.
Just thought I’d provide some thoughts fresh in my mind after listening to the call.
Take care,
A.J.