Twilio Eyeing Enterprise

| About: Twilio (TWLO)

Summary

Twilio is working on Enterprise Plan, a product that provides security, access management and granular administration aimed at meeting the needs of large, complex organizations.

It also launched an analytics product called Voice Insights, an analytics product that delivers API accessible network and device metrics.

To accelerate the Twilio Programmable Video service, it recently acquired the WebRTC media processing technologies built by the team behind the Kurento Open Source Project.

Twilio (NYSE:TWLO) was one of the first successful tech IPOs this year. But its stock has been on a roller coaster ride. Its share price shot up from $15 to $71 within a very short time frame. However, over the past few months, it has seen a downward trend.

Twilio's Financials

Third quarter revenue was up 62% to $71.5 million driven by growth across its new product lines, including the Sync application programming interface. GAAP loss was $11.3 million compared to a loss of $8.9 million a year ago. Non-GAAP loss was $3.4 million or $0.04 versus $4.6 million or $0.07 per share a year ago. Analysts had expected a loss of $0.08 per share on revenue of $67.2 million.

About 31% of its revenues come from 10 large customers. Two of these are variable customer accounts that account for 23% revenues and do not have long-term contracts.

What's worrying investors is that it doesn't have a long-term contract with Facebook's (NASDAQ:FB) WhatsApp. In 2013, 2014, 2015 and the nine months ended September 30, 2016, WhatsApp accounted for 11%, 13%, 17%, and 10% of its revenue. WhatsApp uses its Programmable Voice products and Programmable Messaging products in its applications to verify new and existing users on its service.

While sales and marketing expenses increased by 25% to $15.8 million, research and development expenses doubled over the year to $21.1 million. It ended the quarter with 34,457 active customer accounts that had at least $5 revenue compared to 23,822 active customer accounts last year. Dollar-based net expansion rate increased slightly over the year to 155%.

For the fourth quarter, it expects revenue of $72.5 million to $74.5 million and non GAAP net loss per share of $0.06 to $0.05. Analysts expect a loss of $0.06 per share on revenue of $70.5 million. For the full year 2016, it expects revenue of $268 million to $270 million and non GAAP net loss per share of $0.23 to $0.21.

During the quarter, Twilio announced the Twilio Enterprise Plan, a new subscription product that provides advanced security, access management, and granular administration aimed at meeting the needs of large, complex organizations.

It also has launched an analytics product called Voice Insights, an analytics product that delivers API accessible network and device metrics that provide the operational visibility needed to manage voice applications globally. It has also expanded its SIGNAL conference to London to further engage developers across Europe.

Twilio's Acquisitions

To accelerate the roadmap for Twilio Programmable Video service, it has recently acquired the proprietary WebRTC media processing technologies built by the team behind Kurento Open Source Project. Terms of the deal were not disclosed. Kurento is a project that provides developers with a toolkit for group communication. This deal is expected bring transcoding, recording and advanced media processing into the fold so that developers can build more robust video applications for consumers and the enterprise. It also will support new mediums like augmented reality, computer vision, robotics and the Internet of Things. The acquisition is expected to close in the fourth quarter of fiscal 2016.

This is its second acquisition after its purchase of secure authentication startup Authy in 2015 simplifying the authentication and verification experience for its customers. Authy provided two-factor authentication services to end users, developers and enterprises. At the time of the acquisition, Authy had a listing of over 6,000 sites that used its services to protect their users.

The market for cloud communications is rapidly evolving and is quite fragmented and competitive as barriers to entry in some segments is relatively low. It faces competition from legacy on-premise vendors, such as Avaya and Cisco and smaller vendors like Sinch, Nexmo and Plivo.

Its stock is now trading around $30.6 with market cap of about $2.67 billion. Its 52-week range is $23.66 to $70.96.

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