Twilio (TWLO -25%) is trading at levels not seen since its IPO in June of last year after a disappointing report.
Twilio is the leading communications platform as a service (CPaaS) company that enables developers to build, scale and operate real-time communications within software applications, allowing developers to embed voice, messaging, video and authentication capabilities into their applications via its Application Programming Interfaces, or APIs.
The CPaaS provider beat first quarter estimates but its second quarter forecast fell short and the company lowered its outlook for the full year due to reduced business with its largest company, Uber Technologies.
Twilio reported strong first quarter results. Revenue rose 47% to $87.4 million and the company reported a smaller than expected adjusted net loss. Active customer accounts were up 42% to 40,696.
However, softness with its largest customer, the massive ride-sharing unicorn Uber has spooked investors. Uber accounted for 12% of sales in Q1 but Twilio said that mix would decline this year.
Twilio said Uber is taking some of its communications in-house while also shopping around more for the service.
Vonage (VG) acquired the #2 CPaaS company called Nexmo last year. Vonage has improved its CPaaS offerings and said its (lower) CPaaS gross margins would converge with Twilio's over time. It is common for both CPaaS companies to share large accounts. It is unclear how much of the Uber issue is a result of them going in-house versus how much is a competitive threat from Vonage.
In any case, Uber is unlikely to encounter this problem from its other customers. The only other customer that accounts for a significant portion of revenue is Facebook's WhatsApp.
Twilio cut fiscal 2017 sales forecast by 2.4% at the midpoint but the stock has taken it on the chin today. High-multiple growth stocks like Twilio have a very thin margin of error. The $2.3 billion valuation has suddenly become a more reasonable at ~6.4x sales, which is closer to in-line with most growing cloud companies.