Twilio’s IPO

I and a few of my friends have been scratching our heads about missing this IPO. I know the company very well, admire their business and management and had them as a definite buy if they ever IPO’d. And then I missed it and had to sit on the side lines while it soared over 100% since its debut. I’m not crying, sand entered my eye. 

However, since then I’ve dug in to do my research on them in order to see if the business is still worth buying. And my answer is yes. As long as your time horizon is long enough, Twilio is a buy. Why?

Twilio provides web based real time communication. Matter of fact, the company describes itself as a cloud communications platform. Their mission is to power the future of business commutations, and they already have a number of customers that they’re doing that for. So Uber generates a number you text and talk to your drivers through while shielding both your and their real numbers? Twilio powers that. You can run a call center that can be reached from many different countries? Twilio. You have a nifty app and you want to add voice, text and video chat capabilities to it? Twilio. You get the picture.

The industry is slated to grow around 30+% every year for the next four years at least and Twilio at a current market cap of $2.7 billion is well position to grab a lot of that growth. 

Twilio’s 2015 revenue was around $137m up from around $76m in 2014, a growth rate of over 80%. On a quarterly basis they had revenues of $49.8m first quarter this year, up from $25.9m last year and $15.3m the year before. So in terms of growth, they’re explosive. 

They also have a solid, apparently very satisfied customer base among the newer, high growth companies and start ups like Uber, Hubspot, Zendesk, Nordstrom etc. They also have 900,000 developer accounts on their platforms and growing, each of those developers using their API to power solutions for different companies, old and new. 

Twilio is still unprofitable but they’re early stage enough for it now to matter. The company estimates their addressible market at around $45 billion so they’re just scratching the surface. Also, as they scale up, the losses have been reducing which is a good trend. They went from losing 54 cents for every dollar of revenue to losing only 21 cents between 2013 and 2015. 

The investment risks are typical. The company is young, the industry unproven and the management isn’t the most experienced. The company is also employing a dual share class structure to retain control of the company so you as an investor might not have much say, but does that really matter? Other than that, they share the same risks with most young, fast growing start ups which is that things might not work out exactly how they planned it. 

Still. For all they’ve done so far and the opportunity they have ahead? They’re a solid buy. 

What do you think?

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