Twilio Gives Disappointing Earnings Forecast on Rising Costs

(Bloomberg) -- Twilio Inc. gave a forecast for full-year results that fell far short of analysts’ estimates, reflecting the software maker’s rising costs in its efforts to expand.

The company expects to report a loss, excluding some costs, of 20 cents to 14 cents a share in 2020. Analysts, on average, projected profit of 24 cents, according to data compiled by Bloomberg. Annual sales will be as much as $1.49 billion, San Francisco-based Twilio said Wednesday in a statement, representing a significant decline in the company’s revenue growth rate.

Twilio Chief Executive Officer Jeff Lawson has assembled a broad set of cloud-based capabilities that help companies embed communications systems in their apps and on their web pages. He has sought to hire more sales people and expand internationally, increasing the company’s operating expenses.

“We’re investing for growth, for capturing a really large market opportunity that’s ahead of us,” Lawson said in an interview. “I believe growing profits at this stage would really be a mistake.”

A year ago, the company completed the largest acquisition in its history, buying SendGrid, which competes with Salesforce.com Inc. and others in helping clients send marketing emails. Twilio has traditionally focused on displacing legacy communications systems and selling directly to software developers. Wall Street has been closely watching progress in the company’s product Flex, which helps businesses set up contact centers to provide customer service.

Twilio’s shares fell more than 4% in extended trading after closing at $127.15. The stock climbed 10% in 2019.

The software maker also forecast an adjusted loss of 9 cents to 11 cents a share for the current quarter, which ends in March. Fourth-quarter revenue was $331.2 million, up 62% from the same period in 2018, and higher than analysts’ projections of $312.7 million.

Twilio’s revenue grew 75% in 2019, but that will slow to as much as 31% in the current year. Lawson said it has gotten harder to maintain the company’s earlier torrid pace of sales growth as it gets larger.

“We’re incredibly proud of the growth rate that we’re at now,” Lawson said. “if you look at all the software companies who have hit the $1 billion revenue mark, Twilio is the fastest growing company at this scale.”

(Updates with additional results starting in sixth paragraph.)

To contact the reporters on this story: Nico Grant in San Francisco at ngrant20@bloomberg.net;Nikitha Sattiraju in New York at nsattiraju@bloomberg.net

To contact the editors responsible for this story: Jillian Ward at jward56@bloomberg.net, Andrew Pollack

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