Company Overview: Twilio (TWLO)

Twilio is currently 16% of our portfolio so this earnings announcement could have a significant impact on our portfolio.

At a high level, I feel comfortable with the size of the position. I feel like Twilio has been building an extremely strong foundation with an exceptional balance sheet and a strong suite of products that will drive growth into the foreseeable future.

I’ll be paying close attention to:

• Twilio Flex results - I think Flex has had better adoption than Wall Street has realized and it will begin to show over the next few quarters. This is expected to be a $500 million + sized product in the coming years

• Momentum with cross-selling of Twilio - SendGrid. Management expects 30%+ growth from Sendgrid over the next year

• IoT Developments.

• Any insight into Twilio Campaigns and Twilio for marketing as a growing verticle.

What I’d like to see in the results:

• Total Revenue: $302.25 million, beat by $14.75 million

• 169,000 Active Customer Accounts

• DBNER 137% - 140%.

Second Quarter 2019 Results Review:

• Total Revenue: $275 million, up 86% year-over-year (YoY).

• Dollar-Based Net Expansion Rate of 140%, up from 137% in Q2, 2018 (not impacted by SendGrid acquisition this quarter.

• 161,869 Active Customer Accounts (includes SendGrid).

• Q3, 2019 Total Revenue Guidance: $286 million to $289 million

• Full-Year 2019 Total Revenue Guidance: $1.113 billion to $1.119 billion1. Why we own the shares in 2 minutes or less

Third Quarter 2019 Guidance:

• Total Revenue: $287.5 million (midpoint)

• Full-year 2019 Total Revenue (millions): $1,116.5 (midpoint). Raised by $10 million from Q1 guidance.

1. Our Position and Why We Own Shares

As of October 22, 2019 we own 576 shares of Twilio with an average purchase price of $65.41 per share. Twilio is one of our largest positions at roughly 16% of our portfolio.

Twilio has been one of our top 4 holdings for over a year because I believe the company is transforming the way companies communicate. Most of what Twilio does is focused on customer service oriented communications, but the company’s products also enable app to app and machine to machine communications. Communications will always be critical for companies and Twilio is leading us into the future of communications.

2. Company Overview

What the Company Does

Check out these two videos to get a high-level understanding of what Twilio does. The first is from November 2018 and the second is from October 2015. It’s clear Twilio has continued to innovate, but they have remained focused on the same overarching mission which is to let developers use software to innovate and improve the way communications happen.

November 2018

October 2015

Management

Here is a link to the company’s executive management page which includes thorough bios on the entire management team.

Founder & CEO Jeff Lawson: Jeff has over 15 years of entrepreneurial and product experience. Check out his LinkedIn for a detailed timeline, but here’s what stood out to me. He was one of the first Technical Product Managers for AWS and only stayed in that position for a year and three months. This either means he hated his job or he had such an entrepreneurial itch that he left what was sure to be a very lucrative job building something very exciting (AWS) to focus on his entrepreneurial endeavors. I think it was the latter and I like that about him. He was also the Founding CTO of Stubhub for….8 months. Finally, Jeff was a student at the University of Michigan from 1995 - 2003 and received a BS in Computer Science & Film/Video. His summary on LinkedIn made me chuckle “I wasn’t actually a senior for 5 years…but took off four years in the middle to pursue my entrepreneurial habit

Jeff sounds like a really unreliable employee, a bad student, and has been involved with several startups. If Jeff or anyone who knows him reads this, that was a joke I promise! But seriously, it’s clear he had such a strong passion for solving a big, challenging problem and kept searching until he found the right idea: Twilio. 

Chief Operating Officer (COO) George Hu: Hu joined Twilio from Twitter in March of 2017. Prior to joining Twilio, Hu was at Twitter by way of acquisition. Peer, a workplace feedback company he founded was acquired by Twitter in 2016. However, the bulk of Hu’s experience comes from his 13 years at Salesforce where he served his final 3 years as Chief Operating Officer and helped bring the company to more than $5 billion in revenue. Hu’s focus has been helping Twilio expand into larger enterprise deals.

Chief Financial Officer (CFO) Khozema Shipchandler: Khozema joined Twilio in November of 2018 with over 20 years of experience in finance. Prior to joining Twilio, he was GE Digital’s Chief Commercial Officer. Here is a presentation from Khozema about some of the exciting things he was working on at GE Digital. I think Khozema was a great addition to the team.

Founding Story

Last 4 Quarters’ Results

October 30, 2019: Third Quarter 2019 Results

• Total Revenue: $295.1 million, up 75% YoY. Beat midpoint guidance by $7.6 mil (2.6%)

• Dollar-Based Net Expansion Rate of 132% compared to 145% year prior.

• 172,092 Active Customer Accounts. Up 10,223 (6.3%) QoQ

Guidance:

• Q4, 2019 Total Revenue: $313 million (midpoint), up 53% YoY

• Full Year, 2019 total revenue (millions): $1,115.5 (midpoint). Down by $1million from Q2 Guidance

July 31, 2019: Second Quarter 2019 Results

• Total Revenue: $275 million, up 86% year-over-year (YoY). Beat guidance by $11.5 million

• Dollar-Based Net Expansion Rate (DBNER) of 140%, up from 137% in Q2, 2018 (not impacted by SendGrid acquisition this quarter.

• 161,869 Active Customer Accounts (includes SendGrid). Up 7,162 (4.6%) QoQ

 Guidance:

• Q3, 2019 Total Revenue: $287.5 million (midpoint)

• Full-year 2019 Total Revenue (millions): $1,116.5 (midpoint). Raised by $10 million from Q1 guidance.

April 30, 2019: First Quarter 2019 Results

• Total Revenue: $233.1 million, up 81% YoY, beat by $9.6 million

• DBNER of 146% up from 132% in Q1, 2018

• 154,707 Active Customer Accounts (includes SendGrid).

Guidance:

• Q2, 2019 Total Revenue: $263.5 million (midpoint)

• Full-year 2019 Total Revenue (millions): $1,106.5 (midpoint)

February 12, 2019: Fourth Quarter 2018 Results

• Q4 Total Revenue: $204.3 million, up 77% YoY, beat by $20 million

• Full-year 2018 Total Revenue: $650.1 million, up 63% from full-year 2017, beat by $20 million

• DBNER of 147%, up from 118% in Q4, 2017

• 64,286 Active Customer Accounts compared to 48,979 the year prior.

Guidance:

• Q1, 2019 Total Revenue: $223.5 million (midpoint)

• Full-year 2019 Total Revenue (millions) $1,071 (midpoint)

November 06, 2018: Third Quarter 2018 Results

• Total Revenue: $168.9 million, up 68% YoY, beat by $17.9 million

• DBNER of 145%, up from 122% year prior

• 61,153 Active Customer Accounts, up from 46,489 year prior.

Guidance:

• Q4, 2019 Total Revenue: $184 million (midpoint)

• Full-year 2018 Total Revenue (millions): $630 (midpoint)

Best Case Scenario

What would have to happen for this company to grow 10x or 20x in size from here?- Coming soon

Worst Case Scenario

What would have to happen for this company to permanently lose 50% of its market cap or more?- Coming soon

3. Twilio Updates

- Will update after earnings or meaningful events

4. Twilio External Links

Nov 20, 2008: Twilio Techcrunch Launch Article

Oct 25, 2018: Article on Shopify adopting Twilio Flex

Nov 2, 2018: How Shopify Transforms Customer Experience with Twilio Flex (2 min video)

Thank You

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