Summary
Twilio reported third-quarter fiscal 2021 revenue of $740.2 million, up 65% from the prior-year quarter. Year-to-date revenue reached $2.00 billion, up 64.7%. Management tied the increase to higher usage of Programmable Messaging and Programmable Voice, adoption of additional products by existing customers, additional A2P fees imposed by certain carriers, and revenue contribution from acquisitions. Active Customer Accounts rose to more than 250,000 as of September 30, 2021, from 208,000 a year earlier. Dollar-Based Net Expansion Rate was 131%, compared with 137% in the prior-year quarter. The company noted that Twilio Segment and Zipwhip results do not impact that metric in either period. The 10 largest Active Customer Accounts generated 11% of total revenue, down from 14%, so customer concentration eased.
Profitability remained under pressure. GAAP gross profit was $364.6 million in the quarter, up 57.9%, while year-to-date gross profit was $994.2 million, up 56.9%. Gross margin was 49.3%, down 2.3 percentage points from the prior-year quarter, and year-to-date gross margin was 49.7%, down 2.5 percentage points. GAAP operating loss widened to $232.3 million in the quarter, and the year-to-date operating loss widened to $632.0 million. GAAP net loss was $224.1 million for the quarter, and the year-to-date net loss was $658.5 million. Diluted EPS was -$1.26 for the quarter and -$3.82 year to date. Operating margin was -31.4% for the quarter and -31.6% year to date. On a non-GAAP basis, income from operations was $8.2 million in the quarter, compared with $7.3 million in the prior-year quarter. Non-GAAP gross margin was 54%, down from 55%. Non-GAAP operating margin was 1%, down from 2%. Non-GAAP net income per share was $0.01, compared with $0.04.
Cash generation turned negative. Operating cash flow was -$46.2 million for the quarter, down $50.0 million from the prior-year quarter, and -$19.9 million year to date, down $37.7 million. Capital expenditures were $21.4 million in the quarter, up 232.1%, and $33.6 million year to date, up 74.4%. Deferred revenue was $121.3 million at September 30, 2021, up 257.8% from the prior-year quarter. The company ended the quarter with 7,381 employees. It also completed the Zipwhip acquisition on July 14, 2021, for a purchase price of $838.4 million, which is expected to support toll-free messaging in the United States.
For the fourth quarter ending December 31, 2021, Twilio initiated guidance for revenue growth of 39% to 40%, including contributions from Twilio Segment and Zipwhip. The company also guided to a non-GAAP operating loss and a non-GAAP loss per share, based on 178 million non-GAAP basic shares outstanding. Product announcements included Twilio Engage, Twilio Live, and Twilio Messaging X. Twilio also announced a dual listing on the Long-Term Stock Exchange, a U.S. national securities exchange. Leadership changes are notable: George Hu resigned as Chief Operating Officer effective October 27, 2021, and will serve as a strategic advisor until January 3, 2022; Khozema Shipchandler was appointed Chief Operating Officer while continuing as principal financial officer; Marc Boroditsky took over go-to-market responsibilities. Risks include gross margin pressure from additional A2P fees, a higher mix of international product usage, higher network service provider fees in certain geographies, amortization of acquired intangibles, and the re-acceleration of the messaging business. COVID-19 remains uncertain, with possible delayed sales cycles, reduced customer budgets, and changes in consumer behavior. Twilio also faces integration risk from acquisitions, rapid technological change, competitive pressure, and the impact of recent and future privacy changes on certain third party platforms.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2021 | Q2 FY2021 | QoQ | Q3 FY2020 | YoY |
|---|---|---|---|---|---|
| Revenue | $740.2M | $668.9M | +10.7% | $448.0M | +65.2% |
| Gross profit | $364.6M | $331.2M | +10.1% | $230.9M | +57.9% |
| Gross margin | 49.3% | 49.5% | -0.3 pp | 51.5% | -2.3 pp |
| Research & development | $209.9M | $181.3M | +15.8% | $136.7M | +53.6% |
| Sales & marketing | $264.5M | $238.1M | +11.1% | $140.9M | +87.8% |
| General & administrative | $122.5M | $114.2M | +7.3% | $65.6M | +86.7% |
| Total operating expenses | $597.0M | $533.5M | +11.9% | $343.1M | +74.0% |
| Operating income (loss) | -$232.3M | -$202.3M | -14.9% | -$112.3M | -107.0% |
| Operating margin | -31.4% | -30.2% | -1.2 pp | -25.1% | -6.3 pp |
| Net income (loss) | -$224.1M | -$227.9M | +1.6% | -$116.9M | -91.7% |
| Net margin | -30.3% | -34.1% | +3.8 pp | -26.1% | -4.2 pp |
| Diluted EPS | -$1.26 | -$1.31 | +$0.05 | — | — |
Risks
GAAP gross margin declined to 49.3% in FY2021 Q3 from 51.5% in FY2020 Q3, down 2.3 pp, and to 49.7% in FY2021 year to date from 52.2% in FY2020 year to date, down 2.5 pp. MD&A attributes pressure to additional A2P SMS fees imposed by carriers, higher acquired-intangible amortization, growing international mix, and higher network service provider fees; pass-through A2P fees may raise revenue and cost of revenue without increasing gross profit dollars and mathematically pressure gross margins.
GAAP operating loss widened to $232.3 million in FY2021 Q3 from $112.3 million in FY2020 Q3, and net loss widened to $224.1 million from $116.9 million. Diluted EPS loss widened to $1.26 from $0.79, and accumulated deficit was $1.8 billion as of September 30, 2021.
GDPR, the Schrems II invalidation of the EU-U.S. Privacy Shield, new Standard Contractual Clauses, and CCPA/CPRA increase compliance costs and enforcement risk. Twilio has faced European customer hesitancy or refusal to use services because primary data processing facilities are in the U.S.; GDPR fines can reach the greater of EUR 20 million or 4% of global annual revenue.
Twilio is subject to FCC and international telecommunications rules, including CPNI, SHAKEN/STIR, emergency services, licensing, and numbering resource requirements. The Australian Communications and Media Authority issued a formal finding against Twilio in 2019 for failure to upload data into a centralized emergency services database; noncompliance could lead to audits, fines, or prohibition from providing services in a jurisdiction.
Operating cash flow turned negative: FY2021 Q3 operating cash flow was -$46.17 million versus $3.84 million in FY2020 Q3, and FY2021 year-to-date operating cash flow was -$19.95 million versus $17.75 million in FY2020 year to date.
The pandemic may continue to disrupt demand and operations, with travel, hospitality, and ridesharing customers recovering at varying rates. MD&A says there may be volatility in customer demand and buying habits, delayed sales cycles, and contract delays or reduced minimum commitments.
Twilio completed several acquisitions including Zipwhip for $838.4 million in July 2021, Segment, and ValueFirst. Integration may be difficult, benefits may not be realized, key employees or customers may be lost, and preliminary purchase accounting estimates could change; goodwill and intangibles were $6.4 billion as of September 30, 2021.
Rapid headcount growth from 3,664 employees at September 30, 2020 to 7,381 at September 30, 2021, and international headcount from 1,108 to 2,701, strains culture and management. Twilio faces competition for experienced enterprise sales professionals and uncertainty around its Open Work hybrid model.
Enterprise and international sales involve longer, less predictable cycles, multiple decision makers, and higher customer support and pricing negotiation costs. MD&A says sales and marketing expenses rose 88% in FY2021 Q3, partly from a 114% average increase in sales and marketing headcount, as Twilio expands enterprise sales.
Twilio depends on network service providers and internet service providers for connectivity and phone numbers. Fees may change daily or weekly while customer pricing does not, and providers may interrupt services or terminate agreements without notice; carrier A2P SMS fees have already pressured gross margins.
International revenue was 31% of revenue in FY2021 year to date, compared with 27% in FY2020 year to date. International gross margin is typically lower than U.S. gross margin due to higher network service provider fees; expansion also brings regulatory, tax, Brexit, currency, and data localization risks.
Twilio had $1.0 billion of indebtedness outstanding as of September 30, 2021, including the 2029 Notes and 2031 Notes. Covenants limit activities, and failure to generate sufficient cash to service debt could lead to default, acceleration, or liquidity problems.
Dollar-Based Net Expansion Rate decreased to 131% in FY2021 Q3 from 137% in FY2020 Q3. If customers reduce usage or fail to expand, revenue growth could slow and Twilio may need to spend more on sales and marketing to maintain revenue.
Twilio must meet monthly uptime service level commitments of at least 99.95%. A February 26, 2021 critical feature enablement service overload caused connection issues across multiple products for a limited number of hours; Twilio incurred customer credits and may lose or see reduced customer usage from such outages.
SaaS KPIs
All quarters →Dollar-Based Net Expansion Rate
Non-GAAP Gross Margin
Non-GAAP Operating Margin
Active Customer Accounts
Summary, forecast, risks and KPIs are extracted from TWILIO INC's SEC filings for Q3 FY2021 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 6, 2026.