One of the books on many investors’ must-read list is William Thorndike’s The Outsiders: Eight Unconventional CEOs and Their Radically Rational Blueprint for Success. It tells the story of eight CEOs that were masters at capital allocation and powering outsize gains for shareholders. It seems Jeff Lawson, Twilio‘s (NYSE:TWLO) founder and CEO, is taking a page out of Thorndike’s book. On this Motley Fool Live episode, recorded on March 3, Fool contributor Brian Withers discusses how this platform-as-a-service company is building its cash hoard and using its stock to grow its addressable market.
Brian Withers: Twilio’s one of my favorites, I think it’s a five percenter in my portfolio. They also have done some capital raises, 1.5 [billion]. So they knocked it out of the park with their earnings and the stock went up overnight and the next day, and then I think the day after that, they announced this capital raise [laughter] and the stock went down again.
It’s one of my best cloud computing stock for 2021. I love Twilio. Not only did it raise a billion-and-a-half from stock, it got another billion from senior notes, which is essentially debt. That brings their cash and cash equivalents to 5 1/2 billion dollars. They’ve made a couple acquisitions along the way. They’ve been smart to use stock, so they haven’t impacted their cash position very much.
The last earnings was just fantastic for them. Sixty-five percent growth, not including the acquisitions, it was 52 percent; 139 percent [dollar-based] revenue retention. Like some of the other companies, they are only going to be providing quarterly guidance going out one quarter. They expect the revenue growth for the next quarter to be 44-47 percent.[The] stock’s a little bit off the high at 16 percent. But these guys got a long runway of growth. I love their capturing their customers. Their long-term growth drivers are the contact centers, this new Segment.io acquisition, international. They just continue to grow their addressable market and I really love the leadership there.
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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