01—Abstract
Summary
Summary of the 10-K filed March 2, 2020. Cited figures are marked; the original filing is the authoritative source.
Twilio Inc. reported total revenue of $1,134.5 milliona for 2019, up from $650.1 million in 2018, with a net loss of $307.1 million compared with $121.9 million in 2018.
Gross profit was $608.9 million, and loss from operations widened to $369.8 millionb from $115.2 million, driven by research and development expense of $391.4 million, sales and marketing expense of $369.1 million, and general and administrative expense of $218.3 million. Stock-based compensation rose to $264.3 million from $93.3 million. The increase in revenue includes the contribution of Twilio SendGrid, acquired February 1, 2019 in a share transaction valued at $2,658.9 million (total adjusted purchase price $2,841.5 million).
The company reports 179,000 Active Customer Accounts at December 31, 2019, up from 64,286 a year earlier, and a Dollar-Based Net Expansion Rate of 136% for 2019 compared with 140% for 2018. International revenue was $325.6 millionc, or 29% of total revenue. Management states it intends to operate to expand the reach and scale of its platform and grow revenue rather than maximize gross margins.
Cash and cash equivalents were $253.7 milliond and marketable securities were $1,599.0 million at year-end, following a June 2019 public offering that raised $979.0 million in net proceeds. The company also has $550.0 million of 0.25% convertible senior notes due 2023, and the conversion feature was triggered during the fourth quarter of 2019, making the notes convertible from January 1 through March 31, 2020.
The filing also discloses material legal matters, including the Telesign patent litigation, which the Federal Circuit affirmed in Twilio's favor on January 9, 2020, and a $10.0 million class action settlement related to the California Invasion of Privacy Act. Risk factors highlight dependence on Amazon Web Services for cloud infrastructure, reliance on network service providers, GDPR and other privacy regulation, and concentration of voting power in Class B shares, which held 28.6% of voting power for directors and executive officers as a group.
02—Key points
Key Highlights
- Revenue rose to $1,134.5 million in 2019 from $650.1 million in 2018, including $177.1 million contributed by SendGrid.
- Net loss widened to $307.1 million (EPS of $(2.36)) from $121.9 million in 2018; loss from operations was $369.8 million.
- Operating expenses reached $978.7 million, with research and development at $391.4 million and sales and marketing at $369.1 million.
- Active Customer Accounts grew to 179,000 from 64,286, while Dollar-Based Net Expansion Rate declined to 136% from 140%.
- Cash, cash equivalents and marketable securities totaled $1,852.7 million at year-end 2019, after the $979.0 million net-proceeds June 2019 offering.
- The $550.0 million 0.25% convertible senior notes due 2023 became convertible from January 1 to March 31, 2020 after the conversion trigger was met.
- Telesign patent litigation was resolved in Twilio's favor when the Federal Circuit affirmed the district court judgment on January 9, 2020.
03—One dollar
Follow one dollar
For each $1.00 of revenue in FY2019, Twilio lost $0.27.
- Revenue$1.13B100.0%
- Cost of revenue−$525.6M46.3%
- Gross profit$608.9M53.7%
- Operating costs−$978.7M86.3%
- Operating income−$369.8M32.6%
- Interest, other & tax$62.7M5.5%
- Net income−$307.1M27.1%
04—Financials
Financial Highlights
Figures from 10-KFY2019filed March 2, 2020Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $1.13B$650.07M | +74.5% |
| Cost of Revenue | $525.55M$300.84M | +74.7% |
| Gross Profit | $608.92M$349.23M | +74.4% |
| R&D Expenses | $391.36M$171.36M | +128.4% |
| Operating Expenses | $978.70M$464.46M | +110.7% |
| Operating Income | -$369.79M-$115.23M | −220.9% |
| Net Income | -$307.06M-$121.95M | −151.8% |
| EPS (Basic) | $-2.36$-1.26 | −87.3% |
| EPS (Diluted) | $-2.36— | — |
| Shares Outstanding (Basic) | 130.08M97.13M | +33.9% |
| Shares Outstanding (Diluted) | 130.08M— | — |
05—Questions
Frequently Asked Questions
What drove the increase in Twilio's revenue in 2019?
The filing attributes the growth in Base Revenue, which rose $466.8 million or 79%, mainly to higher usage of Programmable Messaging and Programmable Voice, adoption of additional products by existing customers, and revenue from the SendGrid acquisition for February 1 through December 31, 2019. Variable Revenue rose $17.6 million, or 31%.
Why did operating losses increase so significantly?
Operating expenses rose $514.2 million, or 111%, to $978.7 million. The filing cites personnel cost increases tied to headcount growth, with research and development headcount up 71% on average and sales and marketing headcount up 93% on average, along with SendGrid-related expenses, $264.3 million of stock-based compensation, and $72.8 million of amortization of acquired intangibles.
How much cash does Twilio have, and what are its debt obligations?
At December 31, 2019, Twilio had cash and cash equivalents of $253.7 million and marketable securities of $1,599.0 million. It had $550.0 million principal of 0.25% convertible senior notes due June 1, 2023. The company states it intends to settle the principal amount of the notes in cash. Management believes existing balances and operating cash flows will be sufficient for at least the next 12 months.
What are the main risks to Twilio's business highlighted in the filing?
Key risks include reliance on Amazon Web Services for hosting, dependence on network service providers whose fees can change frequently, exposure to evolving privacy laws such as GDPR and the California Consumer Privacy Act, telecommunications regulation by the FCC, intense competition, and a dual-class structure in which Class B shares carry 10 votes each. The filing also notes that a single Variable Customer, WhatsApp, accounted for 5% of 2019 revenue.
06—Continue