01—Abstract
Summary
Summary of the 10-K filed February 27, 2023. Cited figures are marked; the original filing is the authoritative source.
Twilio Inc. reported 2022 revenue of $3.83 billiona, up 35% from $2.84 billion in 2021, driven by a Dollar-Based Net Expansion Rate of 121% and growth in Active Customer Accounts to over 290,000.
However, the company posted a net loss of $1.26 billionb for 2022 (compared with $949.9 million in 2021), with a GAAP gross margin of 47% and a GAAP loss from operations of $1.21 billion. Non-GAAP income from operations was a loss of $4.5 million, roughly breakeven, as the company works toward sustained profitability. Cash flow from operations was negative $254.4 million, and the company ended 2022 with $651.8 million in cash and cash equivalents and $3.5 billion in short-term marketable securities.
Management announced a significant restructuring in February 2023. Twilio is reorganizing into two business units, Twilio Communications and Twilio Data & Applications (previously Software), and has committed to a workforce reduction of approximately 17% on top of the 11% reduction from September 2022. The February plan is estimated to cost $100.0 to $135.0 millionc, and the company is closing additional offices.
The company also authorized a $1.0 billiond share repurchase program expiring December 31, 2024. Management intends to prioritize efficiencies and profitability in the Communications business while accelerating growth in Data & Applications. Key risks highlighted in the filing include macroeconomic pressure on usage-based revenue, rising network service provider fees (such as A2P SMS fees), dependence on Amazon Web Services for platform operations, and a December 2022 security incident affecting approximately 209 customers.
The company also faces a San Francisco tax assessment lawsuit with a trial expected in summer 2023, and it has $1.0 billion of senior notes outstanding. The dual-class share structure is set to convert to a single class by the Final Conversion Date of June 28, 2023.
02—Key points
Key Highlights
- Revenue grew 35% to $3.83 billion in 2022 from $2.84 billion in 2021; Dollar-Based Net Expansion Rate was 121%, and Active Customer Accounts exceeded 290,000.
- GAAP net loss widened to $1.26 billion in 2022 from $949.9 million in 2021; GAAP gross margin declined to 47% from 49%.
- Non-GAAP loss from operations was $4.5 million in 2022, compared with non-GAAP income from operations of $2.5 million in 2021.
- Operating cash flow was negative $254.4 million in 2022; cash and cash equivalents totaled $651.8 million and short-term marketable securities $3.5 billion at year-end.
- Workforce reductions of approximately 11% in September 2022 and approximately 17% in February 2023, with the February plan estimated at $100.0 to $135.0 million in charges.
- Reorganization into two business units, Twilio Communications and Twilio Data & Applications, plus additional office closures in 2023.
- A $1.0 billion share repurchase program was authorized in February 2023 and runs through December 31, 2024.
03—One dollar
Follow one dollar
For each $1.00 of revenue in FY2022, Twilio lost $0.33.
- Revenue$3.83B100.0%
- Cost of revenue−$2.01B52.6%
- Gross profit$1.81B47.4%
- Operating costs−$3.02B78.9%
- Operating income−$1.21B31.5%
- Interest, other & tax−$50.7M1.3%
- Net income−$1.26B32.8%
04—Financials
Financial Highlights
Figures from 10-KFY2022filed February 27, 2023Financial Statements
FY2022 against FY2021
| Line item | FY2022FY2021 | Change |
|---|---|---|
| Revenue | $3.83B$2.84B | +34.6% |
| Cost of Revenue | $2.01B$1.45B | +38.7% |
| Gross Profit | $1.81B$1.39B | +30.4% |
| R&D Expenses | $1.08B$789.22M | +36.7% |
| Operating Expenses | $3.02B$2.31B | +30.9% |
| Operating Income | -$1.21B-$915.58M | −31.6% |
| Net Income | -$1.26B-$950.00M | −32.2% |
| EPS (Basic) | $-6.86$-5.45 | −25.9% |
| EPS (Diluted) | $-6.86$-5.45 | −25.9% |
| Shares Outstanding (Basic) | 182.99M174.18M | +5.1% |
| Shares Outstanding (Diluted) | 182.99M174.18M | +5.1% |
05—Questions
Frequently Asked Questions
Is Twilio profitable?
No. Twilio recorded a GAAP net loss of $1.26 billion in 2022 and a GAAP loss from operations of $1.21 billion. On a non-GAAP basis, the company reported a loss from operations of $4.5 million in 2022, compared with non-GAAP income from operations of $2.5 million in 2021. The filing states that the company must generate and sustain higher revenue to achieve profitability.
What drove revenue growth in 2022?
Revenue increased by $984.5 million, or 35%, to $3.83 billion. The filing attributes this mainly to existing customers increasing usage, reflected in a Dollar-Based Net Expansion Rate of 121%, along with a 13% increase in Active Customer Accounts. Programmable Messaging revenue rose $650.0 million.
What is the company doing to reduce costs?
Twilio cut its workforce by about 11% in September 2022 and by about 17% in February 2023, reduced its office footprint by becoming remote-first and closing offices, and reorganized into two business units. The February workforce reduction is estimated to cost $100.0 to $135.0 million.
What are the main risks flagged in the filing?
Key risks include macroeconomic pressure on customer usage, which is largely usage-based; rising network service provider fees; reliance on Amazon Web Services; cybersecurity incidents, including a 2022 social engineering attack affecting about 209 customers; regulatory and privacy compliance, including an FCC cease-and-desist letter received January 24, 2023; and a San Francisco tax assessment lawsuit with trial expected in summer 2023.
How is the company's capital position and shareholder return structured?
The company had $651.8 million in cash and cash equivalents and $3.5 billion in short-term marketable securities at December 31, 2022, against $1.0 billion of senior notes due 2029 and 2031. It authorized a $1.0 billion share repurchase program in February 2023. The company has never paid dividends and does not expect to do so in the foreseeable future.
06—Continue