Twilio Inc. (NYSE:TWLO) Q3 2020 Earnings Conference Call - Final Transcript

Oct 26, 2020 • 05:00 pm ET


Twilio Inc. (NYSE:TWLO) Q3 2020 Earnings Conference Call - Final Transcript


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Khozema Shipchandler

the short term as the growth of our messaging product has been re-accelerating, a trend that continued in Q3. To reiterate, this is a trade-off that we will gladly take as it adds gross profit dollars which we can continue to reinvest, delivering elevated levels of growth. Gross margin was also negatively impacted by about 100 basis points from foreign exchange, primarily from the euro appreciating relative to the US dollar.

Non-GAAP operating profit came in at approximately $7 million, stronger than originally forecasted, driven by higher-than-forecasted revenue and the timing of hiring within the quarter. While we were able to catch up on our hiring plans in the third quarter, the timing of some of the hires meant that we didn't fully recognize the expenses we had forecasted.

Moving to guidance. Please note that our guidance today does not include the impact of our announced acquisition of Segment. We expect the acquisition to close during the quarter and we do expect a modest top and bottom line impact in the fourth quarter. As such, on a standalone basis, we expect Q4 revenue of $450 million to $455 million, including A2P fees, for year-over-year growth of 36% to 37%, and we expect a fourth quarter operating loss in the range of $10 million to $15 million.

While on the topic of guidance, I'd like to update you want to guidance philosophy. Going forward, we plan on only providing quarterly guidance. At our recent Investor Day, we provided medium-term guidance that we expect 30% organic annual revenue growth for the next four years. Also, our medium-term guidance does not incorporate the pending acquisition of Segment. This guidance was provided based on our forecast for Twilio's existing business. We are managing the business for the long term, making decisions that benefit all stakeholders, and our medium-term revenue guidance reflects this.

As we discussed at our Analyst Day, some of the investments we plan on making this year did not materialize as we had originally forecast due to COVID. While still finalizing our 2021 plan, we intend to continue with our investment plans into 2021, which we anticipate will drive operating losses into next year. Also with our recent announcement to acquire Segment, there will be certain integration costs we will incur to further enhance Twilio's customer engagement platform. Once the deal closes, we expect to provide more information on our Q4 call.

Lastly, I encourage those of you that may have missed our Investor Day held on October 1 as well as our announcement acquiring Segment to visit Twilio's Investor Relations website at to view the presentations and webcasts. I wish everyone well, and hope you are healthy and safe. Thank you for joining.

Operator, please open the line for questions.