EDITORIAL

Twilio’s Slide From Market Highs Crests 30% After It Announces Follow-On Offering, Preliminary Earnings

Editor’s Morning Note: Twilio shares are off again today, continuing the company’s recent declines. Let’s explore what’s up with what was tech’s hottest 2016 IPO1.

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The Internet is a series of tubes.

Twilio is off 5.79 percent this morning, another in a series of declines that have tempered the value of the recently-public unicorn.

Shares of Twilio initially rocketed higher following the company’s public offering. However, now that its IPO party has worn off, Twilio is taking stripes from investors. That’s nothing surprising in the pantheon of public firms, but for Twilio it is a change of pace.

Let’s examine the last few days to understand what is going on.

Seconds

Following similar, recent actions by Acacia Communications, Twilio recently signaled plans to sell more of its own equity to public investors, along with a boatload of shares from other parties. Only a fraction of the $400 million proposed sale will impact Twilio itself:

We currently intend to offer approximately $50 million of shares of Class A common stock and the remainder will be offered by the selling stockholders. We will not receive any proceeds from the sale of shares to be offered by the selling stockholders.

The offering will effectively reprice Twilio by providing a new price level for the transaction that will realign market opinion.

Twilio’s follow-on offering came to light on October 7, around a week ago today. Shares in the company closed at $60.58 that day. When the market next opened on the 10th, Twilio shares closed the session at just $52.02—a 14.13 percent decline from the previous session.

The decline isn’t without precedent. As Mattermark wrote earlier this week, another 2016 tech IPO, Acacia Communications, saw its share price decline when it sold more equity.

To see Twilio receive a haircut, therefore, isn’t surprising. However, as the company is trading today for just $48.50, we have more work to do.

Earnings

This week Twilio announced preliminary results for the quarter ending September 30. The early announcement makes sense, as investors are certainly going to be interested in what the company has recently put on the board if they are being offered the chance of owning more.

So, Twilio announced the results, which came in as follows:

  • Revenue between $70.25 million and $71.25 million.
  • Non-GAAP Gross profit between  $39.75 million to $40.25 million.
  • Implied non-GAAP gross margin: 55.78 percent to 57.29 percent.
  • GAAP net loss: $11.75 million to $12.25 million.
  • GAAP loss per share: $0.14 to $0.15.

Or, in simpler terms, Twilio’s revenue grew quickly from $44.3 million in the year-ago quarter, while its losses expanded from $8.9 million.

Speaking to VentureBeat’s Ken Yeung, Twilio said that its early earnings report “is intended to provide updated projections so that shareholders can make informed decisions in light of our follow-on offering.” Given that that is what we expected, fair play.

Today, Twilio is off 31.51 percent from its 52 week high. The company remains worth a multiple of its IPO valuation, but it’s always easier to measure down, rather than up.

Regardless the above lesson matters for companies looking to go public: If you go back to the well quickly, this is what you can expect.

Disclosure: Mattermark’s CEO Danielle Morrill is a former Twilio employee. While she sits about a dozen feet from editorial at the office, she has no sway over what this little team writes. Also, I presume that Mattermark and Twilio share at least one investor. That investor also gets no say.

  1. Shoutout to Nutanix fans. Twilio partisans, take your beef up with them.

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© Mattermark 2017. Sources: Mattermark Research, Crunchbase, AngelList.
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