UPDATED 19:59 EDT / MAY 05 2021

CLOUD

Twilio beats earnings target and announces plans for R&D reshuffle

Cloud communications platform provider Twilio Inc. posted a strong earnings beat and solid guidance today as it announced a reorganization of its product and research and development efforts.

The company reported a first-quarter profit before certain costs such as stock compensation of 5 cents per share on revenue of $590 million, up 62% from the same period a year ago. That was a solid performance, with Wall Street looking for a loss of 9 cents per share on revenue of just $532.9 million.

Twilio Chief Executive Jeff Lawson (pictured) said the company delivered yet another quarter of “outstanding growth” as companies and industries use its platform to drive their digital transformation efforts. “Over the last year, one thing has become extremely clear: We are in the midst of a massive shift in the way companies engage with their customers that is driving a generational opportunity for Twilio,” he added.

Twilio sells software that mobile application developers can use to create chat and video functionality in order to connect with users. Its platform has seen massive growth over the last year as the COVID-19 pandemic forced more people to work, shop and socialize online.

One big indicator of Twilio’s growth is that it now has 235,000 active customer accounts, up from 190,000 a year earlier.

Such has been Twilio’s growth that the company has seemingly struggled to forecast its own strong performance. In the previous four quarters it beat the top end of its sales guidance every single time, posting an adjusted profit instead of a loss. That has helped Twilio’s stock achieve some impressive gains along the way.

But this time saw investors react differently, and Twilio’s stock fell more than 5% after the earnings release. That happened as the company actually offered more bullish guidance for once, saying it expects second-quarter revenue of between $591 million and $601 million, well ahead of Wall Street’s $579 million forecast.

Holger Mueller, an analyst with Constellation Research Inc., said Twilio is growing at a phenomenal rate and its first-quarter revenue puts it on track for well over $2 billion in sales this year. Still, he voiced concerns over its continued inability to drive a net profit.

“Twilio is getting even more in the red,” Mueller said. “A year ago it lost a dollar for every four it made, but this quarter it lost more than a dollar for every three that it makes. It may be an investment for the future, but with sales and marketing costs up and general and administrative costs doubling, investors may be thinking that the vendor needs to find a more conservatively managed operating platform soon.”

Investors may also have concerns over Twilio’s plans regarding its R&D unit. The company said it will split it into three smaller segments, the Twilio Communications Platform, Twilio Data Platform and Twilio Core Platform.

The first of those R&D segments will be led by Simon Khalaf, who has been promoted and now holds the title of senior vice president and general manager of Twilio’s Communications Platform. Peter Reinhardt, CEO of Twilio Segment, will be responsible for Twilio’s Data Platform, which also includes the SendGrid Email and SendGrid Marketing Campaigns products.

As for Twilio Core Platform, the company said it will search for a new leader following the departure of its current Chief Product Officer Chee Chew, who is stepping down later this month.

“Apparently the board was not happy with the R&D’s effectiveness, so it has split the R&D team into three areas and let the head of product go,” Mueller said. “But it’s also a sign that Twilio’s business is maturing. Its product areas need to grow and innovate faster, and that is easier when it’s done in smaller units. The long-term question is whether or not customers stumble over inconsistencies.”

Photo: Web Summit/Flickr

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