Twilio Still Isn’t Profitable. Should Shareholders Be Worried?


Companies focused on growth are often unprofitable, which may give investors pause. Twilio (NYSE:TWLO) is one of those companies that hasn’t posted an annual profit, ever. On a Fool Live episode recorded on May 12, Fool contributors Brian Stoffel and Brian Withers discuss why investors shouldn’t be worried about this customer engagement platform’s negative bottom line.

Brian Stoffel: All right. Brian, former Twilio shareholder here, I’ll be honest.

Brian Withers: Oh, former.

Brian Stoffel: Don’t know them anymore. One of the things I remember about Twilio is that for a pretty big SaaS company, a software-as-a-service company, they don’t turn a profit. Is this still a problem? Is that a problem moving forward? Is it something that I should be worried about if I’m a shareholder?

Brian Withers: Yeah. There is a company that’s in e-commerce that didn’t turn a profit for a long time. [laughs] What’s that company? Amazon. Yes. Twilio is absolutely following the Amazon game plan. The CEO, Jeff Lawson actually worked at Amazon for a while in the AWS business and looks up to Bezos in the management principles there.

But anytime I’m looking at a company and it’s not making money, I look at what its runway it has, what is the timeframe it has. I compare all of its cash and investments, which Twilio has about $5.7 billion worth, and look at the loss that it had this quarter, 206 million. You know what? It had a positive cash flow from operations of four-and-a-half million. To me, on the low end, the company has at least seven years of cash and over the time period, I expect it to scale, grow more, and continue to edge its way to profitability over that long term. So I’m not worried at all.

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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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