YORK UNIVERSITY STUDENT INVESTMENT FUND Twilio (NYSE:TWLO) By: Abiram Kanagasabai, Alex Stojic, Emily Watson, Eric Mogilner, and Ritesh Mehta YORK UNIVERSITY STUDENT Company Overview INVESTMENT FUND Investment & Company Overview Business Model Twilio (NYSE: TWLO) provides a Twilio is a develoPer Platform for communications and a SaaS tool which allows software teams cloud communications platform § to add caPabilities like voice, video, and messaging to their aPPlications. This enables businesses to Provide the right communications experience for their customers. Behind Twilio is that enables developers to a SuPer Network, which is a software layer that connects and oPtimizes communications operate communications within networks around the world, this allows comPanies and users to reliably call and message software applications anyone anywhere. § Key Parts of their Product offering includes: q Video Communications: Real-time video infrastructure and SDKs to embed video Company Management collaboration and context-sharing q Voice Communications: API and SDKs to build calling caPabilities within web and mobile Jeff Lawson apps Founder, CEO & Chairman q Messaging: API and SDKs to send and receive SMS, MMS, and IP messages globally Mr. Lawson has served as CEO of Twilio since 2008 and from your aPP previously served as CTO of q Authentication: Two-factor authentication service to strengthen and rePlace traditional NineStar and Stubhub.com username and Password login for websites George Hu COO Companies Using Twilio’s Services Financial Information Mr. Hu has served as COO of Twilio since 2017 and also served as the COO of salesforce.com for 5-Year Revenue CAGR 66.4% three years Top Line Performance EBITDA Margin (23.0%) 57% $1,135M Gross Margin 53.7% 55% EV / LTM Revenue 13.92x 54% $650M 54% EV / CY2020 Revenue 8.72x $399M $277M 54% $167M Debt / Equity 15.0% Share Price $93.05 2015 2016 2017 2018 2019 Revenue Gross Margin Source: Company Filings, Capital IQ 2 YORK UNIVERSITY STUDENT Product Offerings INVESTMENT FUND An Overview of What Twilio Offers Solutions Flex (2018) Account Security A fully Programable cloud contact centre Platform designed to allow This allows develoPers to add two-factor authentication APIs to add § businesses to build and imProve customer and agent experiences § an extra layer of security to their aPPlication, Products include: § Customers can dePloy an omnichannel contact centre Platform and 1. Authy (2012) – Provides user authentication codes Programmatically customize every aspect of the experience 2. Lookup (2014) – Allows develoPers to validate number format, device including the interface, communication channels, agent routing and type, and Provider Prior to sending messages rePorting, all dePending on the business’s needs 3. Verify (2019) – Enables develoPers to deliver a one-time verification Passcode All Solution APIs are charged based on a per-seat or per-use basis. Channel APIs Voice (2012) Messaging (2012) Video (2015) Twilio Voice – Initiate, receive and Twilio SMS & MMS – Send, receive and Twilio Video – Rich, multi-Party video § manage calls § track messages § experiences in web and mobile aPPs Call Recording – Securely record, Copilot – Send messages from local Phone such as recording and screen sharing § store, transcribe and retrieve calls in § numbers Network Traversal – Allows the cloud § develoPers to initiate low latency, Chat – In-app messaging Global Conference – Integrated audio reliable and cost-effective video § Channels – Send, receive, and track § conferencing with reduced latency sessions § messages to messaging aPPs Programmable Video products are Programmable Voice products are Programmable Messaging products are charged on a per-connected- charged on a per-minute basis. charged on a per-message basis. endpoint, per-active-endpoint and per-gigabit basis. Source: [] 3 YORK UNIVERSITY STUDENT Product Offerings INVESTMENT FUND An Overview of What Twilio Offers Services: Intelligence Autopilot Conversations Allows for develoPers to build conversational bots for IVR, mobile Allows for businesses to manage customer conversations across § chat, WhatsAPP, SMS, and the comPany’s contact center § many channels such as WhatsAPP, chat, SMS, and MMS AutoPilot has it’s own speech recognition and NLU software to Can communicate with customers on the channel they want to use, § determine the intent of the user § all through one platform This eliminates much of the grunt work for the develoPer so they can Has seen a 10x increase in response rate on the key conversational § focus on customizing specific tasks based on the users’ needs § platforms § Stores message history for future reference Autopilot is charged on a per minute, message Conversations is charged on a per active user and utterance basis. per month and storage (GB) per month basis Orchestration and Tools Studio TaskRouter Runtime Build malleable communication Route interactions from any channel to Gives the ability for develoPers to build § aPPlications § certain workers efficiently § APIs, serverless functions, and drag § Orchestrate conversation workflows Eliminates the comPlexity of allocating tasks and drop tools across channels § among a large amount of agents Provides error notifications so software § engineers can quickly fix bugs § Build dynamic IVRs that respond to Specify the skills of the workers and the skills customer inPuts § required for each queue Additionally, it can trigger custom § notifications based on specific error KeePs track of Performance from agents and codes § the queue Assists with scaling aPPs, event § auditing, and role-based access control TaskRouter is charged on a per-task basis. Source: Twilio Website 4 YORK UNIVERSITY STUDENT Product Offerings INVESTMENT FUND An Overview of What Twilio Offers Channel APIs Email (2018) Super Network (2014) § A $2bn acquisition of SendGrid, leading email API Platform § Phone Number Provisioning – Acquire local, national, mobile and § Integrations – Integrate email API with leading develoPment toll-free Phone numbers on-demand and connect to customer aPPs frameworks § Short Codes – Five to seven digit Phone number used to send or § Internet Protocol – Domains and links can be customized receive a high-volume of messages Per second Deliverability – Eliminate domain spoofing and Phishing Elastic SIP Trunking – Connect legacy voice aPPlications to the § § SuPer Network over IP infrastructure with globally available numbers Mobile Support – Email engagement for mobile aPPs § Interconnect – Enable enterPrise grade security and quality service Security – Two-factor authentication enables secure management § § of email by customers SendGrid’s Email products are charged on a per-email basis. Super Network products are charged on a per-minute or a per- phone-number basis. Upcoming Products Twilio Super SIM Twilio Narrowband SIM SuPer SIM enables IoT Products with no Wi-Fi § Extends the useful life of IoT devices and § access to connect to multiPle Tier-1 oPerators Provides a “long-term road maP” for develoPers located in over 180 countries using a single SIM § For devices sending infrequent or smaller Eliminates the need for managing contracts, Packets of data, Narrowband imProves Power § billing, SIM inventory and device configuration consumPtion for these Products Automatically connects to the right network for § It reduces the connectivity and hardware costs § the device and gives the user granular control over Price, Performance and coverage Makes the dePloyment to billions of IoT devices § much more doable and Practical Review usage rePorts from the country and § oPerator all under one interface Source: Annual Report 5 YORK UNIVERSITY STUDENT Share Performance INVESTMENT FUND Annotated Stock Price Graph 2-Year Price Performance $160.00 30 Strong growth in FY2019 and increased guidance propelled $140.00 3 stock throughout 2019 2 25 Millions $120.00 1 4 6 20 $100.00 5 Commentary $80.00 15 Had its IPO in June, 2016 § $60.00 § Beat EPS for most quarters in FY2019 10 Strong revenue growth fueled by § increased Product offerings $40.00 5 TWLO’s is Poised to continue to be a $20.00 § leader in the SaaS industry § ImProving margins, increasing Product $0.00 0 offerings and increasing customer 03/2018 06/2018 09/2018 12/2018 03/2019 06/2019 09/2019 12/2019 base are key variables moving forward Volume Close Trading Statistics March 31, 2019: § Q1 Earnings Beat – EPS $0.01 vs. $0.05 1 Trading Summary § Q1 total revenue oF $233.1 million December 30, 2019: Time Period § Revenue up 81% YoY § Q4 Earnings Beat – EPS $0.01 vs. $0.04 Low High Q4 Total Revenue oF $331.2 million May 29, 2019: § Q4 revenue up 62% YoY Announced launch oF oFFering oF $750 Million § 2 § 5 FY19 total revenue oF $1.13 billion Last 30 Days $104.88 $131.90 oF Class A Common Shares § § FY19 revenue up 75% YoY June 29, 2019: § Raised guidance For FY2020 § Over 179,000 active customer accounts Last 60 Days $104.88 $131.90 § Q2 Earnings Matched – EPS $0.03 vs. $0.03 3 § Q2 total revenue oF $275.0 million § Revenue up 86% YoY LTM $91.33 $151.00 September 30, 2019: March 4, 2020 § Q3 Earnings Beat – EPS $0.01 vs. $0.03 6 § Twilio brings on Steve Pugh as CSO and Glenn 4 § Q3 total revenue oF $295.1 million Weinstein as CCO § Revenue up 75% YoY Source: Company Filings, Bloomberg 6 YORK UNIVERSITY STUDENT INVESTMENT FUND Industry Overview Industry Dynamics & Major Players 7 YORK UNIVERSITY STUDENT Industry Overview INVESTMENT FUND Drivers and Trends Industry Drivers and Trends CPaaS Industry Growth § Shifts from