Twilio Announces Fourth Quarter and Full Year 2017 Results

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Q4 Total Revenue of $115.2 million, up 41% year-over-year

Q4 Base Revenue of $105.3 million, up 40% year-over-year

Q4 Dollar-Based Net Expansion Rate of 118%

SAN FRANCISCO–(BUSINESS WIRE)–Twilio Inc. (NYSE: TWLO), the leading Cloud Communications Platform
company, today reported financial results for its fourth quarter and
full year ended December 31, 2017.

We are kicking off our tenth year as a company with fabulous momentum.
I’m very proud of the team for our fourth quarter performance, but my
excitement lies in the foundations we’ve laid for the next ten years of
Twilio,” said Jeff Lawson, Twilio’s Co-Founder and Chief Executive
Officer. “We are poised for a stellar year ahead, built on our
relentless focus on customer success, quality, and software-fueled
innovation.”

Fourth Quarter 2017 Financial Highlights

  • Total revenue of $115.2 million for the fourth quarter of 2017, up 41%
    from the fourth quarter of 2016 and 15% sequentially from the third
    quarter of 2017.
  • Base revenue of $105.3 million for the fourth quarter of 2017, up 40%
    from the fourth quarter of 2016 and 14% sequentially from the third
    quarter of 2017.
  • GAAP loss from operations of $20.2 million for the fourth quarter of
    2017, compared with GAAP loss from operations of $12.8 million for the
    fourth quarter of 2016. Non-GAAP loss from operations of $3.9 million
    for the fourth quarter of 2017, compared with non-GAAP profit from
    operations of $0.1 million for the fourth quarter of 2016.
  • GAAP net loss per share attributable to common stockholders of $0.20
    based on 93.2 million weighted average shares outstanding in the
    fourth quarter of 2017, compared with GAAP net loss per share
    attributable to common stockholders of $0.15 based on 86.1 million
    weighted average shares outstanding in the fourth quarter of 2016.
  • Non-GAAP net loss per share attributable to common stockholders of
    $0.03 based on 93.2 million weighted average shares outstanding in the
    fourth quarter of 2017, compared with non-GAAP net profit per share
    attributable to common stockholders of $0.00 based on 100.2 million
    Non-GAAP weighted average shares outstanding in the fourth quarter of
    2016.

Full Year 2017 Financial Highlights

  • Total revenue of $399.0 million for the full year 2017, up 44% from
    the full year 2016.
  • Base revenue of $365.5 million for the full year 2017, up 49% from the
    full year 2016.
  • GAAP loss from operations of $66.1 million for the full year 2017,
    compared with GAAP loss from operations of $41.3 million for the full
    year 2016. Non-GAAP loss from operations of $20.1 million for the full
    year 2017, compared with non-GAAP loss from operations of $12.2
    million for the full year 2016.
  • GAAP net loss per share attributable to common stockholders of $0.70
    based on 91.2 million weighted average shares outstanding for the full
    year 2017, compared with GAAP net loss per share attributable to
    common stockholders of $0.78 based on 53.1 million weighted average
    shares outstanding for the full year 2016.
  • Non-GAAP net loss per share attributable to common stockholders of
    $0.19 based on 91.2 million non-GAAP weighted average diluted shares
    outstanding for the full year 2017, compared with non-GAAP net loss
    per share attributable to common stockholders of $0.16 based on 78.6
    million non-GAAP weighted average diluted shares outstanding for the
    full year 2016.

Key Metrics and Recent Business Highlights

  • 48,979 Active Customer Accounts as of December 31, 2017, compared to
    36,606 Active Customer Accounts as of December 31, 2016.
  • Dollar-Based Net Expansion Rate was 118% for the fourth quarter of
    2017, compared to 155% for the fourth quarter of 2016.
  • Launched our Engage Roadshow program in New York City and Melbourne,
    bringing together developers and technical decision makers to share
    their experiences.
  • Welcomed Sara Varni, formerly the SVP of Marketing for Salesforce’s
    Sales Cloud business, as our Chief Marketing Officer. Sara will be
    focused on scaling our marketing efforts around the world, supporting
    our commitment to our developer-first strategy while simultaneously
    taking on the enterprise market.
  • Added Ron Huddleston, formerly the Corporate Vice President of the One
    Commercial Partner Organization for Microsoft, as our Chief Partner
    Officer. Ron will be responsible for unifying the partner experiences
    for Twilio across Solution Partners, SIs, VARs, and Resellers.
  • Announced that Twilio Studio, our new drag and drop editor, has moved
    into Beta. Twilio Studio is designed to both expand the universe of
    people that can engage with our platform and accelerate their
    development time.

Chief Financial Officer Transition

The Company also announced plans for a transition in finance leadership.
Lee Kirkpatrick, who has served as Twilio’s Chief Financial Officer
since May 2012, has informed the Company and its Board of Directors of
his decision to leave the company. To ensure an orderly transition and
continuity of operations, Kirkpatrick will continue to serve as CFO
until his successor is found and has moved into the role. The search
process will begin shortly and is expected to be completed before the
end of the year.

Outlook

Twilio is providing guidance for the first quarter ending March 31, 2018
and full year ending December 31, 2018 as follows:

Quarter ending March 31, 2018:                  
Total Revenue (millions)     $ 115.0     to     $ 117.0
Base Revenue (millions) $ 108.0 to $ 109.0
Non-GAAP loss from operations (millions) $ 7.0 to $ 6.0
Non-GAAP net loss per share $ 0.07 to $ 0.06
Weighted average shares outstanding (millions) 94.5
 
 
Full year ending December 31, 2018:                  
Total Revenue (millions) $ 506.0 to $ 514.0
Base Revenue (millions) $ 483.0 to $ 487.0
Non-GAAP loss from operations (millions) $ 15.5 to $ 11.5
Non-GAAP net loss per share $ 0.14 to $ 0.10
Weighted average shares outstanding (millions) 96.0

 

Conference Call Information

Twilio will host a conference call today, February 13, 2018, to discuss
fourth quarter and full year 2017 financial results, as well as the
first quarter and full year 2018 outlook, at 2 p.m. Pacific Time, 5 p.m.
Eastern Time. A live webcast of the conference call, as well as a replay
of the call, will be available at https://investors.twilio.com.
The conference call can also be accessed by dialing (844) 453-4207, or
+1 (647) 253-8638 (outside the U.S. and Canada). The conference ID is
6928729. Following the completion of the call through 11:59 PM Eastern
Time on February 20, 2018, a replay will be available by dialing (800)
585-8367 or +1 (416) 621-4642 (outside the U.S. and Canada) and entering
passcode 6928729. Twilio has used, and intends to continue to use, its
investor relations website as a means of disclosing material non-public
information and for complying with its disclosure obligations under
Regulation FD.

About Twilio Inc.

Twilio’s mission is to fuel the future of communications. Developers and
businesses use Twilio to make communications relevant and contextual by
embedding messaging, voice, and video capabilities directly into their
software applications. Founded in 2008,Twilio has over 900 employees,
with headquarters in San Francisco and other offices in
Bogotá, Dublin, Hong Kong, London, Madrid, Malmö, Mountain
View, Munich, New York City, Singapore and Tallinn.

Forward-Looking Statements

This press release and the accompanying conference call contains
forward-looking statements within the meaning of the federal securities
laws, which statements involve substantial risks and uncertainties.
Forward-looking statements generally relate to future events or our
future financial or operating performance. In some cases, you can
identify forward-looking statements because they contain words such as
“may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,”
“intends,” “target,” “projects,” “contemplates,” “believes,”
“estimates,” “predicts,” “potential” or “continue” or the negative of
these words or other similar terms or expressions that concern our
expectations, strategy, plans or intentions. Forward-looking statements
contained in this press release include, but are not limited to,
statements about: Twilio’s outlook for the quarter ending March 31, 2018
and full year ending December 31, 2018 and Twilio’s expectations
regarding its products and solutions. You should not rely upon
forward-looking statements as predictions of future events.

The outcome of the events described in these forward-looking statements
is subject to known and unknown risks, uncertainties, and other factors
that may cause Twilio’s actual results, performance, or achievements to
differ materially from those described in the forward-looking
statements, including, among other things: adverse changes in general
economic or market conditions; changes in the market for communications;
Twilio’s ability to adapt its products to meet evolving market and
customer demands and rapid technological change; Twilio’s ability to
generate sufficient revenues to achieve or sustain profitability;
Twilio’s ability to retain customers and attract new customers; Twilio’s
limited operating history, which makes it difficult to evaluate its
prospects and future operating results; Twilio’s ability to effectively
manage its growth; and Twilio’s ability to compete effectively in an
intensely competitive market.

The forward-looking statements contained in this press release are also
subject to additional risks, uncertainties, and factors, including those
more fully described in Twilio’s most recent filings with the Securities
and Exchange Commission, including its Form 10-Q for the quarter ended
September 30, 2017 filed on November 14, 2017. Further information on
potential risks that could affect actual results will be included in the
subsequent periodic and current reports and other filings that Twilio
makes with the Securities and Exchange Commission from time to time.
Moreover, Twilio operates in a very competitive and rapidly changing
environment, and new risks and uncertainties may emerge that could have
an impact on the forward-looking statements contained in this press
release.

Forward-looking statements represent Twilio’s management’s beliefs and
assumptions only as of the date such statements are made. Twilio
undertakes no obligation to update any forward-looking statements made
in this press release to reflect events or circumstances after the date
of this press release or to reflect new information or the occurrence of
unanticipated events, except as required by law.

Use of Non-GAAP Financial Measures

To provide investors and others with additional information regarding
Twilio’s results, the following non-GAAP financial measures are
disclosed: non-GAAP gross profit and gross margin, non-GAAP operating
expenses, non-GAAP loss from operations and operating margin, non-GAAP
net loss attributable to common stockholders, and non-GAAP net loss per
share attributable to common stockholders, basic and diluted.

Non-GAAP Gross Profit and Non-GAAP Gross Margin. For the
periods presented, Twilio defines non-GAAP gross profit and
non-GAAP gross margin as GAAP gross profit and GAAP gross margin,
respectively, adjusted to exclude stock-based compensation and
amortization of acquired intangibles.

Non-GAAP Operating Expenses. For the periods presented, Twilio
defines non-GAAP operating expenses (including categories of operating
expenses) as GAAP operating expenses (and categories of operating
expenses) adjusted to exclude, as applicable, stock-based compensation,
amortization of acquired intangibles, acquisition-related expenses, and
payroll taxes related to stock-based compensation.

Non-GAAP Loss from Operations and Non-GAAP Operating Margin.
For the periods presented, Twilio defines non-GAAP loss from
operations and non-GAAP operating margin as GAAP loss from operations
and GAAP operating margin, respectively, adjusted to exclude stock-based
compensation, amortization of acquired intangibles, acquisition-related
expenses, and payroll taxes related to stock-based compensation.

Non-GAAP Net Loss Attributable to Common Stockholders and Non-GAAP
Net Loss Per Share Attributable to Common Stockholders, Basic and
Diluted.
For the periods presented, Twilio defines
non-GAAP net loss attributable to common stockholders and non-GAAP net
loss per share attributable to common stockholders, basic and diluted,
as GAAP net loss attributable to common stockholders and GAAP net loss
per share attributable to common stockholders, basic and diluted,
respectively, adjusted to exclude stock-based compensation, amortization
of acquired intangibles, acquisition-related expenses, and payroll taxes
related to stock-based compensation.

Twilio’s management uses the foregoing non-GAAP financial information,
collectively, to evaluate its ongoing operations and for internal
planning and forecasting purposes. Twilio’s management believes that
non-GAAP financial information, when taken collectively, may be helpful
to investors because it provides consistency and comparability with past
financial performance, facilitates period-to-period comparisons of
results of operations, and assists in comparisons with other companies,
many of which use similar non-GAAP financial information to supplement
their GAAP results. Non-GAAP financial information is presented for
supplemental informational purposes only, and should not be considered a
substitute for financial information presented in accordance with GAAP,
and may be different from similarly-titled non-GAAP measures used by
other companies. Whenever Twilio uses a non-GAAP financial measure, a
reconciliation is provided to the most directly comparable financial
measure stated in accordance with GAAP. Investors are encouraged to
review the related GAAP financial measures and the reconciliation of
these non-GAAP financial measures to their most directly comparable GAAP
financial measures.

With respect to Twilio’s guidance as provided under “Outlook” above,
Twilio has not reconciled its expectations as to non-GAAP loss from
operations to GAAP loss from operations or non-GAAP net loss per share
to GAAP net loss per share because stock-based compensation expense
cannot be reasonably calculated or predicted at this time. Accordingly,
a reconciliation is not available without unreasonable effort.

Operating Metrics

Twilio reviews a number of operating metrics to evaluate its business,
measure performance, identify trends, formulate business plans, and make
strategic decisions. These include the number of Active Customer
Accounts, Base Revenue, and Dollar-Based Net Expansion Rate.

Number of Active Customer Accounts. Twilio believes that
the number of Active Customer Accounts is an important indicator of the
growth of its business, the market acceptance of its platform and future
revenue trends. Twilio defines an Active Customer Account at the end of
any period as an individual account, as identified by a unique account
identifier, for which Twilio has recognized at least $5 of revenue in
the last month of the period. Twilio believes that use of its platform
by customers at or above the $5 per month threshold is a stronger
indicator of potential future engagement than trial usage of its
platform or usage at levels below $5 per month. A single organization
may constitute multiple unique Active Customer Accounts if it has
multiple account identifiers, each of which is treated as a separate
Active Customer Account.

Base Revenue. Twilio monitors Base Revenue as one of the
more reliable indicators of future revenue trends. Base Revenue consists
of all revenue other than revenue from large Active Customer Accounts
that have never entered into 12-month minimum revenue commitment
contracts with Twilio, which the Company refers to as Variable Customer
Accounts. While almost all of Twilio’s customers exhibit some level of
variability in the usage of its products, based on the experience of
Twilio’s management, Twilio believes that Variable Customer Accounts are
more likely to have significant fluctuations in usage of its products
from period to period, and therefore that revenue from Variable Customer
Accounts may also fluctuate significantly from period to period. This
behavior is best evidenced by the decision of such customers not to
enter into contracts with Twilio that contain minimum revenue
commitments, even though they may spend significant amounts on the use
of the Company’s products and they may be foregoing more favorable terms
often available to customers that enter into committed contracts with
Twilio. This variability adversely affects Twilio’s ability to rely upon
revenue from Variable Customer Accounts when analyzing expected trends
in future revenue.

For historical periods through March 31, 2016, Twilio defined a Variable
Customer Account as an Active Customer Account that (i) had never signed
a minimum revenue commitment contract with the Company for a term of at
least 12 months and (ii) has met or exceeded 1% of the Company’s revenue
in any quarter in the periods presented through March 31, 2016. To allow
for consistent period-to-period comparisons, in the event a customer
qualified as a Variable Customer Account as of March 31, 2016, or a
previously Variable Customer Account ceased to be an Active Customer
Account as of such date, Twilio included such customer as a Variable
Customer Account in all periods presented. For reporting periods
starting with the three months ended June 30, 2016, Twilio defines a
Variable Customer Account as a customer account that (a) has been
categorized as a Variable Customer Account in any prior quarter, as well
as (b) any new customer account that (i) has never signed a minimum
revenue commitment contract with Twilio for a term of at least 12 months
and (ii) meets or exceeds 1% of the Company’s revenue in a quarter. Once
a customer account is deemed to be a Variable Customer Account in any
period, they remain a Variable Customer Account in subsequent periods
unless they enter into a minimum revenue commitment contract with Twilio
for a term of at least 12 months.

Dollar-Based Net Expansion Rate. Twilio’s ability to drive
growth and generate incremental revenue depends, in part, on the
Company’s ability to maintain and grow its relationships with existing
Active Customer Accounts and to increase their use of the platform. An
important way in which Twilio tracks its performance in this area is by
measuring the Dollar-Based Net Expansion Rate for Active Customer
Accounts, other than Variable Customer Accounts. Twilio’s Dollar-Based
Net Expansion Rate increases when such Active Customer Accounts increase
their usage of a product, extend their usage of a product to new
applications or adopt a new product. Twilio’s Dollar-Based Net Expansion
Rate decreases when such Active Customer Accounts cease or reduce their
usage of a product or when the Company lowers usage prices on a product.
As our customers grow their businesses and extend the use of our
platform, they sometimes create multiple customer accounts with us for
operational or other reasons. As such, for reporting periods starting
with the three months ended December 31, 2016, when we identify a
significant customer organization (defined as a single customer
organization generating more than 1% of revenue in a quarterly reporting
period) that has created a new Active Customer Account, this new Active
Customer Account is tied to, and revenue from this new Active Customer
Account is included with, the original Active Customer Account for the
purposes of calculating this metric. Twilio believes that measuring
Dollar-Based Net Expansion Rate on revenue generated from Active
Customer Accounts, other than Variable Customer Accounts, provides a
more meaningful indication of the performance of the Company’s efforts
to increase revenue from existing customer accounts.

Twilio’s Dollar-Based Net Expansion Rate compares the revenue from
Active Customer Accounts, other than Variable Customer Accounts, in a
quarter to the same quarter in the prior year. To calculate the
Dollar-Based Net Expansion Rate, the Company first identifies the cohort
of Active Customer Accounts, other than Variable Customer Accounts, that
were Active Customer Accounts in the same quarter of the prior year. The
Dollar-Based Net Expansion Rate is the quotient obtained by dividing the
revenue generated from that cohort in a quarter, by the revenue
generated from that same cohort in the corresponding quarter in the
prior year. When Twilio calculates Dollar-Based Net Expansion Rate for
periods longer than one quarter, it uses the average of the applicable
quarterly Dollar-Based Net Expansion Rates for each of the quarters in
such period.

Source: Twilio Inc.

  TWILIO INC.      

Consolidated Statements of Operations

(In thousands, except share and per share amounts)
     
Three Months Ended
December 31,
2017 2016
(Unaudited)
Revenue $ 115,236 $ 81,952
Cost of revenue 55,022   34,205  
Gross profit 60,214   47,747  
Operating expenses:
Research and development 32,829 24,587
Sales and marketing 27,622 17,816
General and administrative 18,809 14,304
Charitable contribution 1,172   3,860  
Total operating expenses 80,432   60,567  
Loss from operations (20,218 ) (12,820 )
Other income (expenses), net 1,102   225  
Loss before (provision) benefit for income taxes (19,116 ) (12,595 )

(Provision) benefit for income taxes

197   (13 )
Net loss attributable to common stockholders $ (18,919 ) $ (12,608 )
 
Net loss per share attributable to common stockholders, basic and
diluted
$ (0.20 ) $ (0.15 )

Weighted-average shares used in computing net loss per share
attributable to common stockholders, basic and diluted

93,246,941   86,132,737  
 
  TWILIO INC.    

Consolidated Statements of Operations

(In thousands, except share and per share amounts)
     
Year Ended
December 31,
2017 2016
 
Revenue $ 399,020 $ 277,335
Cost of revenue 182,895   120,520  
Gross profit 216,125   156,815  
Operating expenses:
Research and development 120,739 77,926
Sales and marketing 100,669 65,267
General and administrative 59,619 51,077
Charitable contribution 1,172   3,860  
Total operating expenses 282,199   198,130  
Loss from operations (66,074 ) (41,315 )
Other income (expenses), net 3,071   317  
Loss before provision for income taxes (63,003 ) (40,998 )
Provision for income taxes (705 ) (326 )
Net loss attributable to common stockholders $ (63,708 ) $ (41,324 )
 
Net loss per share attributable to common stockholders, basic and
diluted
$ (0.70 ) $ (0.78 )

Weighted-average shares used in computing net loss per share
attributable to common stockholders, basic and diluted

91,224,607   53,116,675  
 
TWILIO INC.      
Consolidated Balance Sheets
(In thousands)
 
As of December 31,
Assets 2017 2016
Current assets:
Cash and cash equivalents $ 115,286 $ 305,665
Short-term marketable securities 175,587
Accounts receivable, net 43,113 26,203
Prepaid expenses and other current assets 19,279   21,512  
Total current assets 353,265 353,380
Restricted cash 5,502 7,445
Property and equipment, net 50,541 37,552
Intangible assets, net 20,064 10,268
Goodwill 17,851 3,565
Other long-term assets 2,559   484  
Total assets $ 449,782   $ 412,694  
 
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 11,116 $ 4,174
Accrued expenses and other current liabilities 53,614 59,308
Deferred revenue 13,797   10,222  
Total current liabilities 78,527 73,704
Long-term liabilities 11,409   9,543  
Total liabilities 89,936   83,247  
Commitments and contingencies
Stockholders’ equity:
Preferred stock
Common stock 94 87
Additional paid-in capital 608,165 516,090
Accumulated other comprehensive income 2,025
Accumulated deficit (250,438 ) (186,730 )
Total stockholders’ equity 359,846   329,447  
Total liabilities and stockholders’ equity $ 449,782   $ 412,694  
 

Contacts

Twilio Inc.
Investor Contact:
Greg Kleiner
ir@Twilio.com
or
Media
Contact:
Caitlin Epstein
press@Twilio.com

Read full story here

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