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Twilio Still Isn't Profitable. Should Shareholders Be Worried?

By Brian Withers and Brian Stoffel - Updated Jun 22, 2021 at 4:32PM

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Here's a way to look at unprofitable growth businesses.

Companies focused on growth are often unprofitable, which may give investors pause. Twilio (TWLO 0.64%) is one of those companies that hasn't posted an annual profit, ever. On a Fool Live episode recorded on May 12, Fool contributors Brian Stoffel and Brian Withers discuss why investors shouldn't be worried about this customer engagement platform's negative bottom line.

Brian Stoffel: All right. Brian, former Twilio shareholder here, I'll be honest.

Brian Withers: Oh, former.

Brian Stoffel: Don't know them anymore. One of the things I remember about Twilio is that for a pretty big SaaS company, a software-as-a-service company, they don't turn a profit. Is this still a problem? Is that a problem moving forward? Is it something that I should be worried about if I'm a shareholder?

Brian Withers: Yeah. There is a company that's in e-commerce that didn't turn a profit for a long time. [laughs] What's that company? Amazon. Yes. Twilio is absolutely following the Amazon game plan. The CEO, Jeff Lawson actually worked at Amazon for a while in the AWS business and looks up to Bezos in the management principles there.

But anytime I'm looking at a company and it's not making money, I look at what its runway it has, what is the timeframe it has. I compare all of its cash and investments, which Twilio has about $5.7 billion worth, and look at the loss that it had this quarter, 206 million. You know what? It had a positive cash flow from operations of four-and-a-half million. To me, on the low end, the company has at least seven years of cash and over the time period, I expect it to scale, grow more, and continue to edge its way to profitability over that long term. So I'm not worried at all.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Brian Stoffel owns shares of Amazon. Brian Withers owns shares of Twilio. The Motley Fool owns shares of and recommends Amazon and Twilio. The Motley Fool recommends the following options: long January 2022 $1,920 calls on Amazon and short January 2022 $1,940 calls on Amazon. The Motley Fool has a disclosure policy.

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