I'm somewhat on top of the stock, here's my not financial advice take:
1. Growth rate slowed such that valuations had to come down (went from inevitable overtaking of Salesforce in size, to decades of growth required)
2. Environment -- Cashflow negative meaning another raise was required without fiscal controls and in a high interest environment that's really tough. A return to office end of covid anxiety meant the Covid bubbled stocks are returning to mean. (eg compare zoom has done relatively similar over past 5 yrs)
3. IMO a few execs were absurdly over compensated whilst investor pressure against dillution was targeted to rank and file employees. eg: Eyal Manor earned a reported $42M in compensation (and a $2.5M retention bonus that reading between the lines sounds like hush money), meanwhile ICs were often given below cost of living raises and no refreshers.
1-2 means outside investors had to lower the valuation and 3 meant a combination of dilution and morale hits.
A few other things that could contribute to a slowing growth rate:
1. People build software differently now. There's not as much reliance on text messages (fewer phone apps build built, 2fa via phone is considered dangerous, etc)
2. Gig economy is stabilizing. There was a huge increase in new companies for years, but at this point it feels like we've stalled on new innovations in that space (while a lot of VC-subsidized ones have faded out)
3. There's way more regulations on spam (good for us, bad for Twilio). I think Twilio did as good a job of avoiding spam as anyone could reasonably expect, but the barrier to entry to using Twilio for even reasonable projects now involves the government. Plus with the crackdown on spam (good!), a portion of their business has likely been affected.
I have no idea the breakdown of their revenue, but my understanding is that now they do a lot more than just the SMS they were famous for. Especially with all the companies they bought.
Semi-related to your third point, I do not trust a text message from a company that does not use the shortened phone number system that was popularized by Twilio. It's the easiest way to detect phishing attempts because scammers don't use those.
Why wouldn't you? Anyone and their mother could get a long code number from Twilio for $1/mo, without any kind of verification or KYC process.
Meanwhile, a short code would run you $4500 for three months (IIRC, memory is fuzzy, and it's probably changed), and you had to go through an approval process with all the mobile carriers (that is, Verizon, T-Mobile, etc. had to individually approve the short code) where you explained your use case and promised not to spam.
(Obviously things are different now with the campaign registration and approvals requires even for long code numbers. But short codes are still harder to get, and the approvals more rigorous.)
You’re both pretty much right it looks like he vested all the RSUs in one year so he while he took it all home in 2021 it had probably vested over 4 years, the first 3 when it wasn’t reflected as comp.
I truly hope it's not the divide and sell that activists have been pushing for. The time to sell to CRM or ADBE was during pandemic highs, now both those are probably more interested in AI hype. I think AWS or another cloud provider would be an interesting pairing though, but with Jeff out so does the hopes of an Amazon relationship besides 2023's announcement
They spent a ton of money buying other companies. That’s always capital intense.
Software isn’t capital intensive the way a large industrial factory would be, but it still has unfavorable financial conditions that require raising. You can’t sell software until you’ve built it, so you have to incur a large employee/R&D expense for years until the product is ready. And of course none of that is IP that you can just get a loan against (unlike say, building a factory).
It’s funny to contrast that with the video game publishers. They’ll push to sell things that aren’t even close to finished, make bank, and do it again and again.
I think the common thread with Twilio the sms/sip product and Twilio the CDP / nee Segment is this: businesses outgrow them. Both of them work well for smb and lower midmarket, but as companies grow, become horrendously expensive and essentially strongly encourage migration off. A public company is not a failure, but when your product has a ceiling with your customers, that's painful.
I also had a really annoying experience with Sendgrid post acquisition. I'd used Sendgrid for my first company (as in I personally made the purchase, implemented the apis, and for a long time, was the sole and then admin account). I went to use it for my next company pre website launch and they froze my new account and their customer service was a pita. To be fair, the site wasn't up, but I needed the ability to send emails to publish the site (it's a crucial part of new account flow.) They wouldn't allow me to use sendgrid even though I was happy to share my linkedin, my previous history with their company, etc. We're happy sendinblue customers.
One can continuously grow a stock if they reduce the shares outstanding.
That being said iirc buy backs have notoriously all gone to executives. Essentially they buy back, and then award themselves options to re-dilute, but cannot readily find a source for that. So maybe incorrect.
When a business does a stock buyback, the business receives the stock, not any executive(s).
The business might pay the executive with stock per the board approved compensation package, but a CEO does not wake up and say “I want to give myself 5M shares so let’s do a 5M share buyback”.
A buyback benefits all shareholders equally by reducing supply of the stock and therefore increasing its price.
It's not that executives receive the bought back stock, but that their stock based compensation plans result in no net decrease in the amount of outstanding shares.
My take: ignore the pandemic. The stock price was around $90 before the pandemic hit, which isn't much higher than it is right now. Twilio was basically the perfect remote-work-enabling pandemic company. And the market piled on and thought Twilio was a great place to put money during a global pandemic, when so many other places seemed risky or disastrous.
After mid-2021, that $400+ stock price started looking a little silly. And the broader market downturn in 2022 hit Twilio even harder than it hit the broader market.
And, meanwhile, Twilio's growth numbers -- while still being an unprofitable company! -- look worse than they did at the beginning of 2020. $75 might be generous for how the company is actually doing.
(Full disclosure: former employee for ~10 years, and I still have a few shares left.)
My take: They're too expensive at volume (and they have competitors, just not famous ones) and not specialized enough / not best in class compared to tools like Klaviyo.
This. They're great for small/mid-sized developers, but they price themselves out once you're doing billions of messages a month. At that point companies start looking at aggregators one level down (i.e. closer to the carriers or raw SMTP).
> One issue might be that Microsoft (as ever) launched a milquetoast competitor that sounds the same to a purchasing department in 2020.
AWS (and presumably Google) also provides a suite of telephony services with Chime, SNS, Connect, etc. I assume the strategy now is to sell to/merge with a smaller CSP to provide a competitive portfolio of services.
