Twilio Inc (NYSE:TWLO) was maybe the biggest growth story stock in the tech sector on Wednesday. This is a platform-as-a-service cloud play that has manifested increasing traction over the course of 2018, rising nearly fourfold since February after today’s breakout action.
The spark for the massive rip was a good ol’ fashioned big beat and raise. In fact, it may have been the company’s best quarter as a publicly traded entity, as revenue growth also accelerated to its highest levels since its June 2016 IPO. As a result, the stock is soaring higher today, up more than 30% to new all-time highs. Before we get deep into the data, here is a 30k ft view on the company.
Twilio Inc (NYSE:TWLO) owns and operates a platform that develops APIs (Application Programming Interfaces) that enable customers’ software developers to add voice communications, text messaging, video, and now email (thanks to its October 15 acquisition of SendGrid) into their software applications. Its two largest customers are Uber and Whatsapp, accounting for 6% and 4% of total revenue, respectively.
When using Uber, for example, TWLO provides the technology within that app that allows you to communicate with the driver. As another example, when you make a dinner reservation using OpenTable, and you receive a text confirmation saying that your table is ready, that’s powered by Twilio. So, you use it all the time, but you may not have realized it.
Getting to the Data
TWLO posted EPS of $0.07, beating analysts’ expectations by $0.05, with revenue surging by 68% to $168.9 million, easily topping the $151.6 million consensus. But, what’s perhaps the most impressive is that revenue growth actually improved from last quarter’s 54% mark.
In fact, revenue growth has been trending higher over the past few quarters, going from 40.5% in 4Q17, to 47.8% in 1Q18, then 54.1% last quarter, and finally 68.0% this quarter. This is extremely rare for a high-growth tech IPO.
When a company goes public, it has already peaked in terms of rate of growth on the top-line. We cannot emphasize this enough. You want to know why the stock broke out like it did today? It’s because Wall Street woke up and thought, “what if these guys are still heading into uncharted territory for the niche?”
So, what drove that burst? A 32% jump in Total Active Customers to 61,153.
During the quarter, TWLO announced the general availability of its new “Flex” product, which is a contact center application platform.
The company frames it like this: “Flex combines the scalability and reliability of our cloud platform with the ability to programmatically customize every element of the contact center experience.”
A lot of the growth was about signing up new Flex customers, including Uber competitor Lyft – which is already a TWLO customer. Lyft added Flex to bolster its customer support capabilities. TWLO also added high-growth cloud software Medallia to their customer base. The addition of these two new deals, along with other significant wins in the financial services sector, pushed its dollar-base net expansion rate to a robust 145%, up sharply from 122% in the year ago quarter.
Guidance was also a big positive contributor to the party: TWLO is forecasting Q4 EPS of $0.03-$0.04 vs. the $0.02 consensus, on revenue of $183-$185 million versus the $160.6 million consensus. At the mid-point, this would represent year/year growth of 60%, fairly consistent with its Q3 performance. In addition to the aforementioned SendGrid acquisition, and the successful launch of its Flex product, the company is also expecting artificial intelligence to provide another growth catalyst for the company.
Twilio Inc (NYSE:TWLO) recently announced its first machine learning product, “Understand”, and at this year’s SIGNAL conference, it also launched “AutoPilot”, the next evolution of Understand, with a natural language understanding engine, a conversational application platform and an omni-channel hub.