Update on TWLO

A stock thesis that I've continued to stay positive on, throughout the past couple of years. Stock performance hasn't been great but update on notes: 
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• CPAAS (communications platforms as a service, SaaS) → slowly into CRM
  • Industry 27.6% CAGR, with 38% of TAM; communications see meaningful growth
• Clients: Airbnb, Lyft, Uber, Instacart, Reddit, Accenture, etc.
• Competitors: Vonage, Sinch, RingCentral, etc.
• Offering: Twilio operates via a cloud-based delivery model that enables users to add video, messaging and voice features to business software. It recently launched Twilio Engage, which is the by-product of its channel APIs and Segment's customer data platform.
• Market: High switching costs, technology and network effect allows them to continue a foothold in the market.
• Company: Great leadership under Jeff Lawson, did a restructuring in 2023 with 26% workforce cut to form 2 business units: Communications & Data/Applications - respectively $3.5bn revenue and $400mn. Communications relatively mature but still expanding customer base (alongside AI offerings, expanded to 300,000 customers) into logistics, hospitality, etc. Data/Applications currently going through GTM phase and rapid expansion. Bundled offering allows for more personalized/tailored customer experience.
  • Direction: Bottom line GAAP profitability (currently reached non-GAAP)
• Issues: lengthening sales cycle (given consumer slowdown), NRR and dollar-based net expansion (revenue per customer) dropping but profitability increasing; long-term 30% organic growth target lowered to 15-25%
• Valuation: 2.4x EV-Revenue (relatively cheap, as peer group may trade around 5x)
• News: Despite EBITDA being negative, they have a huge 5.9 billion cash balance and 1 billion in debt (balance sheet strength).
  • $1bn stock buyback for FY23, CEO buys $10mn
  • Activist investor “Legion” urges for board changes, divestitures, etc.
  • Google Cloud generative AI partnership, Toyota Connected Destination Assist (faster customer support services)