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Twilio Annual Report, Year Ended Dec 31, 2018

Filing Date
Filed March 1, 2019
Period End
December 31, 2018
Security
TWLO
In the record · 2016–202610-K1110-Q328-K108

TWLO filed 11 annual reports (10-K), 32 quarterly reports (10-Q) and 108 current reports (8-K) between 2016 and 2026.

  1. Material agreement8-K · May ’18May ’18
  2. Material agreement8-K · Aug ’20Aug ’20
  3. Restructuring8-K · Sep ’22Sep ’22
  4. Leadership change8-K · Jun ’26Jun ’26

01—Abstract

Summary

Summary of the 10-K filed March 1, 2019. Cited figures are marked; the original filing is the authoritative source.

Twilio Inc. reported its 10-K for fiscal 2018, showing revenue of $650.1 milliona, up from $399.0 million in 2017, and a net loss of $121.9 million, compared with $63.7 million in 2017.

Growth was driven by Base Revenue of $593.0 millionb, which rose 62% year over year, and by 64,286 Active Customer Accounts as of December 31, 2018, up from 48,979. The Dollar-Based Net Expansion Rate was 140%, versus 128% in 2017. Non-GAAP operating margin improved to 1%, from (5)% in 2017, and the company had $487.2 million in cash and cash equivalents plus $261.1 million in marketable securities at year end.

The balance sheet changed significantly during 2018. Twilio issued $550 millionc of 0.25% convertible senior notes due 2023, with net proceeds of approximately $537.0 million, and bought capped calls for $58.5 million. The company acquired SendGrid in February 2019 by issuing 23.4 million Class A shares valued at $2.6 billion.

The filing also notes that the Chief Financial Officer resigned in November 2018, and that the company has a material exposure from the Telesign patent litigation and a $10 milliond Flowers class action settlement, of which it reserved $1.7 million given insurance coverage. The risk profile is concentrated in a few areas. WhatsApp accounted for 7% of 2018 revenue, and the 10 largest Active Customer Accounts generated 18%.

Most customers have no long-term contracts. The company also faces a new A2P SMS carrier fee expected in 2019 that management says will weigh on gross margins.

The dual-class structure gives directors, executive officers and their affiliates 48.8% of voting power. The company has reported losses in each year since inception and an accumulated deficit of $371.7 million.

02—Key points

Key Highlights

  1. Revenue rose to $650.1 million in 2018 from $399.0 million in 2017, and the net loss widened to $121.9 million from $63.7 million.
  2. Base Revenue grew 62% to $593.0 million, and the Dollar-Based Net Expansion Rate was 140%, up from 128%.
  3. Active Customer Accounts reached 64,286 at December 31, 2018, up from 48,979 a year earlier.
  4. Non-GAAP operating margin was 1% in 2018, compared with (5)% in 2017.
  5. The company issued $550 million of 0.25% convertible senior notes due 2023 and acquired SendGrid in February 2019 for stock valued at $2.6 billion.
  6. Concentration risk: WhatsApp was 7% of 2018 revenue, and the 10 largest Active Customer Accounts generated 18%.
  7. Dual-class structure gives directors, executive officers and affiliates 48.8% of voting power, and the company has an accumulated deficit of $371.7 million.

03—One dollar

Follow one dollar

For each $1.00 of revenue in FY2018, Twilio lost $0.19.

  1. Revenue$650.1M100.0%
  2. Cost of revenue−$300.8M46.3%
  3. Gross profit$349.2M53.7%
  4. Operating costs−$464.5M71.4%
  5. Operating income−$115.2M17.7%
  6. Interest, other & tax−$6.7M1.0%
  7. Net income−$121.9M18.8%
Computed from 10-KFY2018filed March 1, 2019Computed from this filing’s revenue, gross profit, operating income and net income · right columngrey figure: share of revenue

04—Financials

Financial Highlights

Figures from 10-KFY2018filed March 1, 2019
Revenue$650.07M53.7% Gross MarginNet Income-$121.95M-18.8% Net MarginEPS (Diluted)$-1.26Total Assets$1.03BCash & Equivalents$487.21MFree Cash Flow$2.87M

Financial Statements

FY2018 against FY2017

Line itemFY2018FY2017Change
Revenue$650.07M$399.02M+62.9%
Cost of Revenue$300.84M$182.90M+64.5%
Gross Profit$349.23M$216.13M+61.6%
R&D Expenses$171.36M$120.74M+41.9%
Operating Expenses$464.46M$282.20M+64.6%
Operating Income-$115.23M-$66.07M−74.4%
Net Income-$121.95M-$63.71M−91.4%
EPS (Basic)$-1.26$-0.70−80.0%
Shares Outstanding (Basic)97.13M91.22M+6.5%

05—Questions

Frequently Asked Questions

  1. How did Twilio's revenue and losses trend in 2018?

    Revenue increased to $650.1 million from $399.0 million, a 63% increase as stated in the filing. The net loss widened to $121.9 million from $63.7 million, and operating expenses rose to $464.5 million from $282.2 million.

  2. What drove the growth in Base Revenue?

    The filing attributes the 62% increase in Base Revenue to higher usage of Programmable Messaging and Programmable Voice products and to existing customers adopting additional products. The increase was partly offset by lower usage prices implemented over time.

  3. How was the SendGrid acquisition financed and what is its status?

    Twilio acquired SendGrid on February 1, 2019 by issuing 23.4 million shares of Class A common stock valued at $2.6 billion, with each SendGrid share converting into 0.485 of a Twilio share. The purchase price allocation was preliminary at the time of filing.

  4. What are the main customer and litigation risks disclosed?

    WhatsApp accounted for 7% of 2018 revenue, and most customers have no long-term contracts. Telesign has appealed a judgment in Twilio's favor to the Federal Circuit, and the Flowers class action settlement provides for a $10 million common fund, with a $1.7 million reserve recorded.

06—Continue

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