TWLO Q2 Earnings

Filing here:…

$265m was High Estimate from Q1 Earnings Report (~79% growth yoy)

Actuals: $275m Revenue
DBNRR: 140%
yoy rev Growth 86%
yoy rev Growth (base) 90%

Nice beat


Don’t think the robotraders liked the GAAP EPS. Revenue still great, think tomorrow it will rise.

I thought for sure TWLO stock would jump on a huge beat like this, revenue is INCREASING!
BUT LOSS is increasing also. I think investors, or at least algos are starting to be less patient in our cloud stocks operating with GAAP losses, especially when they’re increasing like this…
PS also had a huge dive after earnings, they had increased revenue but losses guided forward.
I am wondering what will happen when MDB reports in a couple months with a loss as well.
Hoping the hedge funds and smart money will still be willing to let companies have losses when their revenue growth is so huge and increasing at that

Revenue number includes SendGrid. Would be interesting to learn what the SendGrid-adjusted YoY% is.

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Here is the issue on TWLO for me.
The 90% growth number is nonsense.

They acquired a company.
They are using legacy TWLO rev and new SEND revenue and adding them together, but comparing them to ONLY TWLO revenue from previous year.

That makes little sense to gauge true growth.

If I remember correctly, for full 2018, TWLO and SEND did something like $798m…let’s call it 800m for napkin math.

To grow 50% y/y, their total 2019 revenue needs to be about $1.2b rev.

They raised their full year guidance very little, and it is at $1.119b.
Yes, I know it is “just guidance” but we are already 2 Q’s into the year now, and they have good visibility on current Q3.

There is a good chance this is no longer a 50% grower…but at their size, maybe that is not really that big an issue.
Also at this size, the market seems to want to see them show an ability to make a profit, and they didn’t do good on EPS, so stock is down.

I believe stock will recover, and probably quickly, as the TWLO story isn’t about EPS right now.
Once it recovers though, I am likely tapping out.
I just think there are smaller companies more likely to be able to accelerate or maintain 50%+ growth to invest in, that offer more stock appreciation upside.

Another issue may be perception of competition. BAND had a nice post-ER pop of 14%. I don’t think BAND is much of a threat, but perception can become reality.…

Key Metrics and Recent Business Highlights

161,869 Active Customer Accounts as of June 30, 2019, compared to 57,350 Active Customer Accounts as of June 30, 2018. Active Customer Accounts in the current period include the contribution from Twilio SendGrid customer accounts.
Dollar-Based Net Expansion Rate was 140% for the second quarter of 2019, compared to 137% for the second quarter of 2018. Twilio SendGrid results do not impact the calculation of this metric in the current period.
2,369 employees as of June 30, 2019.
Introduced Automation and Email Testing within Twilio SendGrid Marketing Campaigns, with workflows and integrated tools to build effective emails across one-time campaigns and automated series, all on a single platform for marketing and transactional email, with industry-leading deliverability.
Completed a follow-on offering of Class A Common Stock at a price of $124.00 per share, which resulted in aggregate proceeds of $979.0 million after deducting underwriting discounts and offering expenses. We intend to use the net proceeds for general corporate purposes, which may include acquisitions, refinancing or repayment of debt, capital expenditures, working capital and share repurchases.
Announced Trust Onboard, a feature for the Company’s Internet of Things (IoT) SIMs that enables developers to identify and authenticate cellular connected devices against cloud services, accelerating IoT time to market. Trust Onboard also integrates with Microsoft Azure IoT, allowing developers to sync devices to their Azure cloud from the Twilio Console.
Welcomed Jeff Immelt, former chairman and CEO of General Electric and current venture partner at New Enterprise Associates, to the Company’s Board of Directors.



275MM 86% revenue growth for combined company

This means that last TWLO was 275/1.86 = 147.85

SEND Q2 2018 = 35.67

Therefore Combined TWLO/SEND Q2 2018 183.5MM

275/183.5 = 50% YOY growth


when MDB reports in a couple months with a loss as well. I think Mongo is going to need to cut its losses on a percentage basis for the price to jump.
I am not sure why MDB price is lagging recently since the news seems very good. Maybe Mr Market thinks they will never make money…

They just said in the earnings call that TWLIO grew 56% without SendGrid


This means that SEND growth was 24%

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Aren’t sales or earning acquired by buying another company still real?
My main objection to purchases is that the seller knows more about the warts than the buyer. Buyer beware. We can see that in spades with the purchase of Viking by Middleby. I also assume the buyer has usually paid too much, particularly if the sale is in a bull market.
56% is still great but a decline from earlier quarters. Is Twillio reaching saturation of its market?
Looks like the after hours pop in AYX is balanced off by the loss in TWLO.


Hi Dreamer -

They just stated on the call that $9mil was removed from full year guidance that was a Verizon pass-through fee that has been delayed. If that had remained, FY guide would have been $1.128 bil. Not awe inspiring, but a bit better than the initial number.
The fee has nothing to do with their business…just a fee Verizon is adding that Twilio is passing through to their customers.

Aren’t sales or earning acquired by buying another company still real?

I would rather see organic growth rather than purchased growth simply because it means there is organic demand for the product, which, in all reality, will be cheaper to make in-house than to purchase. It’s higher quality growth and I’ve always felt that way. You couldn’t possibly tell me TWLO would have ever spent $2 billion to duplicate what send grid has done. As of now Twilio has an accumulated deficit of $500 million. Meaning they could have created 4 Twilios for the price of what they paid for SendGrid. Of course, acquisition is faster growth, just not as high quality.


Building in-house can be a reasonable alternative, but not always. There may be IP which the other company has that would be difficult to engineer around. And, one could be losing significant time in the market. Plus, with acquisition, a lot of what one is often acquiring is the existing customer base of the other company.


Yes, they acquired 75,000 customers that spend roughly $2000 a year at a cost of $40k per customer. And that’s not including overlap.

Obviously there are benefits such as synergies, I’m not saying there is no benefit. I’m saying organic growth is not the same as acquired growth. However insofar I have not seen any synergies show up in the financial results.

Sendgrid acquisition may be worth it by avoiding opportunity cost of developer resources.

The future of the company, ROI, and the large r and d expenses have to fuel future growth and returns. If they are focusing on a higher ROI opportunity internally, (which I think is IOT and the potentially enormous number of connections and endpoints), then spending $2B now and sacrificing zero time for beginning returns could be the right move.


So you don’t make any distinction between organic and acquired growth when considering growth rate metrics? That is the question. Not whether a company should or should not acquire another. If there is no distinction between organic and acquired growth, one may as well buy Upland Software. And Twilio grew 80% YOY period. The more companies they acquire the better their growth metrics are. I don’t see it that way but apparently others do.

I think the question is whether they made the right decision to acquire.

If you are basing the entire thesis and analysis on revenue growth, then the distinction is very important.

Knowing the organic and acquired growth is important information in the assessment, but with a company that is still small, filling out product portfolio and innovating fast for emerging technology the ROI hurdle is very different than a dividend paying large cap company. Overpaying may make a lot of sense, and why not when issuing stock at 20x sales that is just as or more overvalued?


Does anyone happen to know TWLO organic growth rate from last quarter? Wondering if they are accelerating growth organically or slowing down and if so by how much. Full revenue rates including send grid was an acceleration this quarter, which I expected the market to react positively too. The stock price did recover most of what it lost in after hours, we’ll see what happens tomorrow but I anticipate a big move in either direction.

Does anyone happen to know TWLO organic growth rate from last quarter?

It was given as “over 60%” last quarter. This quarter was 56%, which is still certainly not shabby, but is down sequentially. I see two problems causing the sell off after the release yesterday. I think they raised expectations too high for both Flex and for the Sendgrid acquisition, that they would both cause very rapid revenue increase, while in reality, each of them will take a while in explaining and selling to customers. Just they way I see it, not as any danger to the company, but as over-expectations getting pulled back.


Organic or purchased growth? I would prefer the former, but sometimes the latter is a good deal, it all depends on the circumstances. As outsiders we really don’t know how well the companies mesh, and whether the acquirer paid too much . Would it have been better for Twillio to develop the same capabilities internally? TBD.
There are lots of arguments against buying your way to growth, in general it does not work well long term. But each deal has it’s own specific pros and cons.
Is this particular deal enough for me to sell my TWLO stock? Not as long as management does not make a habit of it, but Twillio could be approaching some degree of market saturation as it gets ever larger.