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Twilio Rockets Into 2021 With Record Revenue

By Brian Withers - Mar 5, 2021 at 7:02AM

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It's not too late to get on board to enjoy the ride.

The communications and customer-engagement platform Twilio (TWLO 7.49%) has been on a tear. Its tremendous growth in 2020 has shareholders cheering as its stock more than tripled last year. As Twilio soared into 2021, it's clear that this rocket ship hasn't lost any speed. On a Fool Live episode recorded on Feb. 18, Fool contributor Brian Withers dives into its recent fourth-quarter and year-end earnings report to see what has investors excited.

Brian Withers: Yeah. Twilio is up today. The earnings were liked by all. I can totally see why, revenue growth 65 percent year-over-year. There's a little asterisk to that which we'll get to. Fourth-quarter total net dollar expansion, 139 percent, which is up over the last few quarters, and their full-year revenue is at 55 percent. Some of that, there's some acquisition bump in there, which we'll see, but just a great report all around.

Two hundred and twenty-one thousand active customer account[s], up about 23 percent year-over-year. They're projecting Q1 to be up 44 to 47 [percent]. When management projects that they are going to be up 47 percent year-over-year, they have to be sandbagging. There's no way that you can project that high a revenue growth and not know that it's in the bag.

Now the other thing that you'll notice is that revenue is 526-536 [million dollars projected for 2021]. It's a little lower than their fourth-quarter revenue, and I'll talk a little bit about why that is.

In the fourth quarter, they had a couple of different things that they normalized out. Political revenue, about 23 million, which could be seen as a one-time thing, and then Segment revenue, this is the first time their customer data platform has been included in the results, which is about 23. This is not a one-time thing, so I appreciate them breaking it out for transparency reasons, but I wouldn't subtract this. I guess, what they're trying to do is compare organic growth and pull that one-time thing. So even with those two things pulled out at 52 percent, which is super awesome, and then if you pull out just the political revenue, you get down to about what Q1 would be, what they're projecting Q1 would be.

Now, remember, most of this revenue is transaction-based and variable-based, and usage-based. So in last quarter in Q3, they had 77 percent of their revenue that was usage-based and then the rest being subscriptions. This isn't a company that can count on subscriptions. They count on people, on their customers using their products. [The] fourth quarter tends to be a really high retail engagement quarter with the holidays and whatnot. So to see it actually flat quarter-over-quarter with the political revenue pulled out is, I think, a positive thing.

Annual revenue, this chart is just jaw-dropping. Go back five years, 167 million [in] revenue. Forward five years, 10x the revenue in five years. Wow.

Dollar-based net expansion, cool, you've seen over the last three quarters it's growing, which is awesome. The Segment [acquisition] revenue had nothing to do with this. You have to be in the customer cohort for two years to get counted in, so the Segment revenue is not included in their top 10. Customer accounts continues to decline as the overall percentage, which is good, to spread out the risks.

They have tons of international opportunity. Look at this, 27 percent of their business in FY20 was in non-U.S. Canada is included [in the international number] and still only 27 percent, so that says that there's a long runway of growth there.

Let me also show the earnings release here. Here it is. So still not making profit, net loss to shareholders, that's the year and three months ending 180 million [loss]. That seems like a big number, I would agree, but go down here to cash. Cash equivalents and short-term marketable securities, right around three billion [dollars]. Doing the quick math, that's four years' worth of cash if the margins don't improve. I imagine with scale, the margins are absolutely going to improve.

A tiny little bit of convertible debt, 300 million, this company is just rocking and rolling in, and this quarter shows its expanded ecosystem and how it's bringing value to customers. Shareholders congrats on the eight percent bump today.

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