TechFeb 22, 2021
Twilio benefits from the digitization of everything and releases earnings that surpasses expectations
Corporate Strategy
Victor Lei
Discover
Peloton classes, Etsy purchases and Netflix binges may be temporary during COVID, but one thing might not be — the digitization of everything.
On Feb. 17, one of the companies fueling this digitization, Twilio released its fourth-quarter earnings report that surpassed expectations:
Twilio was founded in 2009 to help companies add voice/text services into apps. i.e. Airlines use Twilio to send notifications about flight info/delays.
Over time, Twilio added additional communication tools like video, chatbots and email. Since its IPO in 2016, Twilio’s stock is up over 14x.
In 2019, Twilio’s growth had significantly slowed but COVID reaccelerated the demand for digital communication tools — giving Twilio a spike in sales growth and a nearly 4x increase in its stock price.
Like any opportunist, Twilio’s CEO, Jeff Lawson, took advantage of its elevated stock price by:
Twilio has aggressively expanded its products by launching new applications (i.e. video, chat) and acquiring businesses (i.e. Segment, SendGrid).
By growing a suite of complementary products, Twilio is…
And the strategy is working… In 2020, Twilio saw a dollar-based net expansion rate of 139%. Meaning — Twilio’s existing customers are spending 39% more than the previous year.
Twilio strategically chose acquisition targets that would complement the rest of its products. According to TechCrunch, its recent acquisition of Segment, could bring more customers to Twilio’s platform and strengthen its current existing products.
Twilio forecasted a sales growth of 44-47% in the next quarter — higher than what analysts expected. Unlike other COVID beneficiaries, which may have seen a temporary sales increase, COVID may have triggered a more-permanent surge in demand for Twilio’s products.
