Twilio Inc. (TWLO)
Summary
Twilio is a tech company in the communications as a service industry
Their product is unique in an expanding industry
Twilio has been ranked as the top Customer Data Platform for the past 3 years
18 consecutive earnings beats
Concerns include the the company’s age
Communications As a Service
Before understanding Twilio’s business, its important to take a look at the industry they operate in. Communications as a service (CaaS) develop platforms for companies to, well, communicate on- providing voice, messaging, video calls and more over the internet.
Since COVID remote work is becoming more and more widespread, exploding the CaaS industry. Since then, it has grown to US$14.75B in 2023, and is projected to grow to over $70B over the next 10 years in the US alone.
For many CaaS providers, they develop a product for intra-company use, allowing employees to have all business communication in one place (think Zoom, Microsoft Teams, etc). Twilio takes a different approach, which makes them a unique player in the CaaS industry
Business Overview
Instead of building a platform for employees to contact each other, Twilio built a customer-facing platform. It allows its users to contact any and all of their customers from one place across different forms of communication, be it phone, text, Whatsapp, etc. This allowed them to carve out a niche in the CaaS industry, earning them 24% of worldwide market share.
Investment Thesis
Twilio’s position as a tech and communications company in a growing industry makes them great growth opportunity.
18 consecutive earnings beats
500% revenue increase since 2018
45% Forward EBITDA growth, compared to a sector median of 6%
On top of these fundamentals, International Data Corporation has ranked Twilio as the top Customer Data Platform for the past 3 years. Twilio also boasts great customer retention (see earnings call transcript linked in sources).
Concerns
The main concern with Twilio is their standing as a young company in the tech space. This makes them particularly susceptible to macroeconomic headwinds and associated market volatility.
Twilio also has a habit of tech acquisitions. While many of these acquisitions add new features that drive sales and contribute to their retention rate, it also poses financial risk as well as reliance on more acquisitions.
