Just a few random TWLO thoughts:
(1) We use TWLO on our Salesforce.com for texting w customers. To our employee base, since texting is embedded in our Salesforce.com, texting looks like a Salesforce.com function…yet it’s fully powered by Twilio. One of our developers built it out as a skunkworks project in a couple of weeks. We started it out in Jan 2018 w a handful of users and now have 70 people on it. Each month the usage has gone up. From 514 text messages in Jan 2018, to 4,434 messages in April, 5,709 in Jul, 6,809 in Oct, 12,029 in Jan 2019. The ongoing cost is dirt cheap. The interesting part is we did no internal marketing on it. It’s all grown by departments asking for it. And our employees that might use something like this could eventually be all 18,000 of our company, but more likely a couple thousand would use it… Fits well w TWLO’s 145% net expansion rate/story, doesn’t it?! Out company is living proof of that. Grows like a weed! Recently, our tech folks made some changes in our Salesforce.com and broke the Twilio integration. The small handful of current users were in uproar for the few hours it wasn’t around!
(2) I re-read the last earnings report today. What an awesome report that was. As you’ll recall, they spoke to Flex quite a bit in the report. I had this view that Flex was a non starter as larger competitors like SF.com’s Service Cloud or Five9 call center capability. And you know, those companies don’t typically sell their products direct to Developers (DEVs)…but more like sales to biz execs/IT leaders. So is marketing Flex to DEVs really the right thing? Marketing to DEVs or as Jeff Lawson says, “winning hearts and minds of DEVs” (one of their three core priorities) makes sense for their core Twilio products (i.e., my point #1 above). But can you really sell a large biz change like a call center product to a DEV? That’s usually a sell to a biz exec or IT leader. However, they got me thinking. Since Flex is totally customizable, maybe DEVs do it just like our company did w the use case on item #1 (above). Perhaps a DEV at a company builds out a skunkworks/free to try Call Center on Flex. Make it fully customizable for the specific business use case. Then the DEV shows it to some biz folks. Then it catches wildfire. Almost like the weed example from #1/net expansion rate strategy that they currently enjoy. So after thinking about it, I think that strategy can work. Note, TWLO is also working w the Partner channel on Flex…so they have that going for them as well. Will be interesting to see how Flex plays out in the earnings report.
(3) Also, sounds like a ~75% GM on Flex. Sendgrid is similar GM%. They’ll take a bit of a hit on GM% on the Verizon quarter of a penny fee starting in Feb, but new products will eventually also help the GM% story. They were clear in last earnings report, they are not a GM% growth story in the short term. Don’t think we’ll see a hit to GM%, either positive or negative in the coming earnings report.
(4) International. It’s 26% of their biz today and growing faster than the US. Good! So they had 1,274 employees at end of last quarter. I see 275 open reqs on their jobs page. Big expansion. Skimming the jobs…many of those 275 are international jobs. I feel that should bode well for seeing the international number grow significantly.
TWLO is becoming one of my largest. It’s ~7.1% of my portfolio today. I’m likely to sell other stocks and grow my position, even w the recent run-up.
Also, I want to say thank you again for this incredible board. Saul has totally changed the way I think. I used to have ~70 equities as close back to Q2 of last year. Am now down to 19. Don’t think I’ll ever quite get to ~10 as the $ concentration is more risk than I like, but I’m very happy w the somewhat/more concentrated view to my port.
I don’t know how many times I hit my “Saul board” bookmark each day!
Best wishes to all.