Twilio is another one reporting shortly so a bold buy ahead of earnings. If they do fall after earnings it is usually not a problem if the earnings are good. Short-term momentum investors always dive in and out of shares in exciting companies.
Twilio was one of the SaaS stalwarts of the last bull market. It looks to me like an exciting case of born again under a new CEO, Khozema Shipchandler and a new chairman, Jeff Epstein. Shipchandler has enjoyed a meteoric rise at Twilio.
Khozema Shipchandler most recently served as President of Twilio Communications, since his appointment in March 2023. Prior to that, he had served as Twilio’s Chief Operating Officer since October 2021 and as Chief Financial Officer from November 2018 to October 2021. Prior to Twilio, Shipchandler held a variety of financial and operating roles at GE across Industrial Internet, Aviation and Corporate Audit in the U.S., Middle East and Singapore.
Twilio, website, 8 January 2024
Twilio describes itself as a customer engagement platform.
Twilio enables companies to use communications and data to add intelligence and security to every step of the customer journey, from sales to marketing to growth, customer service and many more engagement use cases in a flexible, programmatic way. Across 180 countries and territories, millions of developers and hundreds of thousands of businesses use Twilio to create magical experiences for their customers.
Twilio website
This looks like a classic case of a brilliantly creative founder, Jeff Lawson, being unsuited to the nitty gritty business of running a fast-growing business. He has stepped down and Shiplander, a guy, I suspect, more in the mould of Apple’s operations genius, Tim Cook, has replaced him at the same time as another important individual, Jeff Epstein, has become chairman of the board. Epstein is quite a player.
Jeff Epstein is Chairman of the Board for Twilio. He is also an Operating Partner at Bessemer Venture Partners, where he specializes in marketplaces and enterprise software. In addition to Twilio, he serves on the Boards of Directors of Kaiser Permanente, Booking Holdings, Shutterstock and several private companies. He is also a lecturer at Stanford University.
He is the former Executive Vice President and Chief Financial Officer of Oracle, one of the world’s largest and most profitable technology companies, with a market value of over $150bn. Prior to joining Oracle, Jeff served as Chief Financial Officer of several public and private companies, including DoubleClick (sold to Google), King World Productions (sold to CBS) and Nielsen’s Media Measurement and Information Group. Earlier in his career, he was an investment banker at The First Boston Corporation.
He holds an MBA from the Stanford University Graduate School of Business, where he was an Arjay Miller Scholar, and a BA from Yale College, where he graduated summa cum laude, Phi Beta Kappa.
Twilio website
Twilio is picking up momentum.
Twilio delivered a strong third quarter. We exceeded our Q3 guidance delivering $1.134bn in revenue, up 10pc year over year, and generated $182m in non-GAAP income from operations.
We also delivered another strong quarter of cash generation with $189m of free cash flow. I’m encouraged to see the acceleration to double-digit revenue growth this quarter, alongside strong operating leverage and continued product innovation. Our commitment to financial discipline, operating rigor and innovation remain key guideposts for the team, and I’m proud of what we accomplished in Q3. Since becoming CEO at the start of the year, I’ve met with hundreds of customers in nearly every industry across the globe.
In my conversations with customers, many of the problems they’re encountering can be solved by greater personalization vis-a-vis communications plus contextual data plus AI. Our concerted focus on embedding AI and machine learning throughout the Twilio platform has resulted in a differentiated offering that strategically positions us to capture a massive opportunity as we leverage the strength of our platforms, the leading CPaaS [communications platform as a service] and supported by unmatched data tools, including segment to minimise complexity and create better customer outcomes. More customers are turning to Twilio because we deliver a stronger ROI, driving demonstrable results that help customers increase their revenue and reduce their costs. By integrating AI with our core product suite, we’re able to automate capabilities, boost productivity, and drive personalisation at scale.
Khozema Shipchandler, CEO, Twilio, Q3 2024, 31 October 2024
Technology is improving all the time.
Our new features and integrations for advertisers to create targeted campaigns began delivering promising results. First, our generative audiences feature that uses generative AI to create audiences with natural language prompts is significantly reducing the time and resources required to build targeted audiences for customer engagement campaigns. Over 25pc of our segment CDP* customers have already started taking advantage of this new capability in the few weeks it’s been made globally available. Second, we’ve expanded and created new integrations with Amazon, Google, LinkedIn and Meta, giving marketers the ability to activate their data in campaigns across these platforms and reduce their customer acquisition costs.
*A “CDP customer” refers to a customer whose data is managed and unified within a Customer Data Platform (CDP), meaning their information from various sources like website visits, email interactions, and purchases are collected and combined to create a single, comprehensive customer profile that can be used for personalised marketing and customer engagement strategies.
As an example, the Motley Fool needed an out-of-the-box integration to help build, manage and activate audiences. With Segment, the Motley Fool was able to increase its operational efficiencies by automating processes, accurately target paid ad campaigns to decrease its cost per acquisition, and make the experience more relevant for its premium members, helping with retention and lifetime value. I am incredibly energised about the opportunities ahead. The solid quarter that we delivered and significant progress we made against our financial goals is a testament to the hard work and focus of our team.
As we look to create a world in which every digital interaction between businesses and consumers is amazing. I firmly believe that Twilio has the right strategy, leaders and innovative platform to unleash the full potential of communications plus contextual data plus AI.
Khozema Shipchandler, CEO, Twilio, Q3 2024, 31 October 2024
I think what is happening at Twilio is still a relatively slow burn as the new CEO gets to grips with introducing efficiencies, improving the net retention rate of customers and incorporating AI into the business model.
The company is well-placed to do well with its technology sitting at the heart of the relationship between enterprises and their customers and revenue being usage-based. This gives the company strong operating leverage.
The chart looks strong with the shares exploding from an extended base pattern. The shares are overbought so there could be turbulence in the short term but the outlook based on technical and fundamental factors looks appealing.
Dow Jones Chart Looks Promising
This is an uber-long-term chart of the Dow Jones Industrials where each candlestick equals a year. Even on this chart, we can see that bunching of the moving averages leads to significant buy signals and massive moves.
What we have at present is an ongoing bull market in full flight. The constituents of the Dow Jones index are shown below.
Share Recommendations (31 January 2025)
Twilio. TWLO
