TWLO Stock Overview
Twilio Inc., together with its subsidiaries, provides a cloud communications platform that enables developers to build, scale, and operate customer engagement within software applications in the United States and internationally.
Twilio Inc. Competitors
Price History & Performance
|Historical stock prices|
|Current Share Price||US$68.13|
|52 Week High||US$373.00|
|52 Week Low||US$64.29|
|1 Month Change||-10.04%|
|3 Month Change||-31.26%|
|1 Year Change||-80.15%|
|3 Year Change||-36.06%|
|5 Year Change||128.24%|
|Change since IPO||136.64%|
Recent News & Updates
Twilio turns higher as it looks to cut 11% of workforce, reaffirms guidance
Twilio stock (NYSE:TWLO) had initially fallen premarket but turned 0.7% higher as it launches layoffs that will trim its workforce by about 11%. In an SEC filing, the company says its board committee approved a restructuring plan Monday to cut costs, improve operating margins, and shift selling capacity to accelerate software sales. It expects to incur $70M-$90M in charges in connection with the job cuts, about $55M-$70M of which is expected to result in future cash outlays. Most of those charges are expected to land in the third quarter, with it substantially complete (including cash payments) by the end of the fourth quarter. The company will exclude the restructuring costs from its non-GAAP results. It's reaffirming guidance it issued in an SEC filing Aug. 4 for the third quarter: revenue of $965M-$975M (growth of about 30-32 year-over-year, and vs. consensus for $973.6M), and a non-GAAP loss per share between 43 cents and 37 cents (below expectations for a loss of 34 cents per share).
What To Expect From Twilio After The Crash
Summary Twilio, like many other growth stocks, has crashed. I've covered Twilio in the past, so I think it's time to update my thoughts on it after this crash. The main attempt is to see whether any fundamental changes took place. It has long been my thesis that Twilio (TWLO) was a bubble stock. My thesis, more than being based on Twilio’s outrageous valuation, was based on two other realities: First, that Twilio is acting on a sector which runs a very severe risk of being obsoleted. Second, that even before being obsoleted, this sector is already prone to have very low margins. Now that Twilio has crashed - Twilio is down by more than 82% since its 52wk high, and even down nearly 50% from my first article on it, written as far back as 2019 - I think it’s time to revisit Twilio and see if anything changed. It’s time to try to establish whether Twilio might now be cheap or whether prospects might have improved. So, let’s do this. The Obsolescence Thesis Not much has changed. Particularly on the authentication area, it’s even better known that using SMS for 2FA (2-factor authentication) is undesirable from a security standpoint. Hence, more and more apps, use cases and companies are trying to move away from SMS use for that purpose. At the same time app-based messaging is faster, more reliable and cheaper than using SMS. Not all use cases are possible (for instance, in the absence of an installed app or browser session), but the realization that otherwise SMSs are an incredibly inferior alternative can’t but take hold. There’s little to drive away this thesis. SMSs aren’t going to improve – they’re static. It’s just a matter of time until they’re driven out by other forms of in-app messaging. The Competitive Sector Thesis When I first started writing about Twilio, around 3.5 years ago (early 2019), Twilio had around $650 million in revenues (2018), and not much to show in terms of profits ($115 million GAAP loss from operations). Fast forward 3.5 years, several acquisitions as well as strong revenue growth, and Twilio is now has $2.84 billion in revenues (2021) -- so more than 4.4x larger than in 2018. And yet, it all remains the same, not much in the way of profits ($916 million GAAP loss from operations), or, for those enamored with subscription-based businesses, no cash flow either (negative -$58.2 million cash from operations, even before capex). This is structural, this has to do with the nature of what Twilio sells. It basically resells telecom service through a programmatic API. This has two consequences: First, Twilio is selling a commodity (telecom services accessible through an API). This immediately puts it into contention with many other players selling the same – including the original VoIP players which, to build their own different businesses, had to build a very similar backend infrastructure (connection to many different physical telecoms). Since all players will have very similar costs (set by the telecom companies they connect to), this creates a very competitive field. For the customers, the service is also very similar, so pricing is the primary concern. The combination inevitably leads to low margins. Second, Twilio is unlike subscription businesses being paid for subscriptions before services are rendered (and costs incurred). Typically, subscription businesses can at least generate apparent cash flow as long as there’s growth, due to timing mismatches between receiving revenues and paying costs even if margins are low. Twilio is unlike those because it bills on usage (since it’s basically reselling telecom services). Since it bills on usage, it bills after usage takes place and it also has to pay for the usage itself. Although there can be timing mismatches between billing and receiving, they’ll be small (due to the billion occurring after the service is rendered) and thus Twilio can’t generate even apparent cash flow just because it’s growing fast. Hence, the negative operating cash flow for the entire year. The result is low margins, due to the first reason. Thus, Twilio posts loss after loss, especially on GAAP terms (where it can’t ignore the non-cash massive share printing). The result is also low cash flow, as we saw from the negative operating cash flow in 2021, or very low positive operating cash flows in 2020, 2019 and 2018. Hence, this is – and remains - structurally a lousy business to invest in, in my opinion. Any Hope? Well, most of Twilio’s business is based on APIs which basically resell telecom services (accessed programmatically). However, Twilio has been trying to add more value-added services on top – which aren’t as easily commoditized. Like adding functions enabling the creation of call service centers programmatically as well.
Why Okta, (NASDAQ:OKTA) Twilio (NYSE:TWLO) and Akamai (NASDAQ:AKAM) May Fit Together in the Authentication Segment
Security and authentication companies are a part of an emerging industry, which brings additional risks as investors stress test their business models. Instead of picking a single winner, investors may choose a bundle of companies that are targeting the same industry, as a way to spread their risk.
Twilio Is Racing Forward With Frantic Land Grab Strategies
Summary Twilio's aggressive expansion efforts have obviously paid off, with a 38% share in the CPaaS market by 2021. Despite the appearance of cash burn thus far, the TWLO management has guided profitability from FY023 onwards. Combined with the easing of macroeconomics then, we expect to see a meaningful recovery and long-term stock rally moving forward. Therefore, pointing to TWLO's massively attractive risk/reward ratio given the time of maximum pain now. Investment Thesis Twilio Inc (TWLO) has obviously embarked on an aggressive expansion plan, given the flurry of M&A activities in the past few years. This has naturally led the company to command the lion's share of 38% in the CPaaS market by 2021, based on Synergy Research Group. However, the management has also proved rather prudent, with reduced reliance on debt and reasonable share dilution thus far. We are already witnessing excellent results, with TWLO delivering impressive growth in active customer accounts by 14.5% YoY, from 240K in FQ2'21 to 275K in FQ2'22. Furthermore, the company still reported exemplary revenue net dollar-based expansion of 123% in FQ2'22, pointing to robust market demand. Naturally, these metrics indicate a notable slowdown from FQ1'22 YoY growth of 41% in accounts and 127% in dollar-based expansion, due to the worsening macroeconomics over the past few months and the hypergrowth during the pandemic. However, we must remind investors that these temporary headwinds will naturally be resolved by mid-2023, once the economy recovers. Therefore, not an accurate reflection of TWLO's fundamental performance. Despite the appearance of maximum pain, we remain bullish about TWLO's prospects, since adoption still stands to grow at a satisfactory rate post-reopening cadence, given the projected global growth of the Communications Platform as a Service (CPaaS) market from $6.3B in 2022 to $59.36B in 2032 at a CAGR of 25%. Analyst Matt VanVliet of BTIG said: Twilio is the clear market leader in the nearly $80bn CPaaS [communications platform as a service] market that is growing in excess of 20% annually. We expect Twilio to continue to gain market share with the broadest and best product offering, elevated investment in R&D and M&A to maintain that competitive positioning, and accelerating end-market demand for omnichannel communications capabilities that can be embedded in every step of the customer journey. (Nasdaq) TWLO Continues To Perform With A Growth At All Cost Strategy S&P Capital IQ In FQ2'22, TWLO reported revenues of $943.4M and gross profits of 47.2%, representing an increase of 41% though a notable decrease of 2.3 percentage points YoY, respectively. Given the impact of inflation and partly, the growth in its international segment, the company reported net incomes of -$322.8M and net income margins of -34.2% in FQ2'22, representing a decline of 41.6% and in line YoY, respectively. S&P Capital IQ Part of its lack of profitability is also attributed to its elevated operating expenses. By FQ2'22, TWLO reported operating expenses of $755.4M, representing a massive increase of 42.3% YoY. Since the pace of growth accelerated faster than its sales, it is natural that the company continues to struggle with unprofitability thus far. The ratio of the operating expenses to its growing revenues remains elevated at 80.1% and to gross profits at 169.5% in FQ2'22. Nonetheless, we expect to see a meaningful moderation ahead, as TWLO cuts costs by slowing down new hires and office closures moving forward. These efforts would likely pay off from FQ3'22 onwards, with improved operating metrics and non-GAAP profitability ahead, despite the one-time write-offs. S&P Capital IQ Notably, TWLO's Stock-Based Compensation ((SBC)) has also increased exponentially in the past two years, at an alarming CAGR of 74.62%. By FQ2'22, the company reported SBC expenses of $242.1M, representing a massive increase of 67.8% YoY and 342.4% from FQ2'19 levels. Thereby, contributing to its deepening GAAP net losses thus far. In addition, TWLO continues to moderately dilute its long-term shareholders to 182.4M by FQ2'22, through a mix of capital raises and aggressive M&A activities, on top of the above-mentioned SBC. These represent a notable share dilution of 217.4% since its IPO in 2016, with a total share count of 83.89M then. Not too bad, in our opinion, since these strategies have also been top-line accretive and notably reduced the impact on the company's debt obligation from $1.21B in FQ1'21, to $985.2M in FQ2'21, and finally to $986.62M in FQ2'22. S&P Capital IQ TWLO Debt Maturity Seeking Alpha In addition, TWLO remains well positioned for long-term growth with sustainable capital management in place, since these debts would only mature by 2029 and 2031. In the meantime, the company continues to invest in its long-term capabilities with a capital expenditure of $5.2M to its net PPE assets of $478.2 in FQ2'22. S&P Capital IQ Despite its negative Free Cash Flow ((FCF)) of -$66.4M and an FCF margin of -7% in FQ2'22, TWLO still reports sufficient cash and equivalents of $800.8M on its balance simultaneously. Thereby, reducing the need for another capital raise in the short term, since the management also guided breakeven by FY2023. However, we may potentially see another share dilutive effect or debt leveraging over the next two years, given the company's minimal profitability through FY2024.
|TWLO||US IT||US Market|
Return vs Industry: TWLO underperformed the US IT industry which returned -39.2% over the past year.
Return vs Market: TWLO underperformed the US Market which returned -23.1% over the past year.
|TWLO Average Weekly Movement||9.9%|
|IT Industry Average Movement||8.0%|
|Market Average Movement||6.9%|
|10% most volatile stocks in US Market||15.8%|
|10% least volatile stocks in US Market||2.8%|
Stable Share Price: TWLO is not significantly more volatile than the rest of US stocks over the past 3 months, typically moving +/- 10% a week.
Volatility Over Time: TWLO's weekly volatility (10%) has been stable over the past year.
About the Company
Twilio Inc., together with its subsidiaries, provides a cloud communications platform that enables developers to build, scale, and operate customer engagement within software applications in the United States and internationally. Its customer engagement platform provides a set of application programming interfaces that handle the higher-level communication logic needed for nearly every type of customer engagement, as well as enable developers to embed voice, messaging, video, and email capabilities into their applications. The company was incorporated in 2008 and is headquartered in San Francisco, California.
Twilio Inc. Fundamentals Summary
|TWLO fundamental statistics|
Is TWLO overvalued?See Fair Value and valuation analysis
Earnings & Revenue
|TWLO income statement (TTM)|
|Cost of Revenue||US$1.77b|
Last Reported Earnings
Jun 30, 2022
Next Earnings Date
|Earnings per share (EPS)||-5.79|
|Net Profit Margin||-31.16%|
How did TWLO perform over the long term?See historical performance and comparison