of the hottest cloud software stocks in the market will report fourth results
this afternoon. Twilio (TWLO 115.74, -0.01, -0.01%)
is the leading cloud communications platform as a service (CPaaS). Its APIs
allow developers to easily build communications within apps, like texting an
Uber driver or AirbnB host, for example.
This is a very large market with a long runway for growth. The stock hit a new all-time high yesterday. It is up ~340% since the company reported fourth quarter results one year ago.
Twilio surprised investors last October when it announced the strategic acquisition of SendGrid, the leading email API. Twilio acquired SendGrid for $3 bln of its own stock. The company wisely used its own richly valued currency to "provide a complete platform for every form of customer engagement."
The resulting company will offer developers a single, best-in-class platform to manage all of their important communication channels: voice, messaging, video, and now email as well. The company closed the deal two weeks ago but SendGrid does not appear to be included in analyst's estimates.
Twilio has beaten on the top-line all ten quarters since its IPO. The company has blown away revenue estimates eight consecutive quarters and guided the following quarter revenue above consensus six quarters in a row.
Revenue growth has accelerated three quarters in a row, coming in at 68% in the third quarter. Active customer accounts grew 32% to over 61K while the dollar-based net expansion rate was 145%, up from 122% in the prior year.
Twilio guided for Q4 non-GAAP EPS of $0.03-0.04 with revenue up 60% to $183-185 mln.
The company is expected to guide for Q1 and FY19 including SendGrid. Analysts expect marginal profitability in the first quarter and fiscal 2019 with revenue up 55% and 56%, respectively. Importantly, those estimates do not appear to have incorporated SendGrid yet, so the guidance will likely not be comparable.
Twilio trades at over 20x FY18 sales or ~15x FY19 sales estimates which again, do not include SendGrid. Increased revenue from SendGrid will be offset by dilution from the increase in shares used in the deal. That type of multiple makes Twlio one of the most expensive enterprise software stocks in the market. As a result, expectations are very high. Twilio will have to once again report generous upside in order to not disappoint investors this afternoon.
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