Twilio CEO Steps Down Amid Investor Pressure

Founder Jeff Lawson replaced by current president

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Published: January 8, 2024

Tom Wright

Twilio CEO Jeff Lawson has resigned and been replaced by the firm’s president, Khozema Shipchandler.

Lawson’s departure comes as Twilio battles activist investors who demand a spin-off of certain assets or a complete sale of the business.

Lawson co-founded Twilio in 2008.

“Building Twilio over the past 15 years has been one of the most rewarding experiences of my life,” he said.

“I’m proud to have led the company from zero to over $4 billion in annualised revenue, and now generating a 19% free cash flow margin as of our last earnings.

“I leave Twilio in the hands of a capable and talented management team who have my full support and respect. Khozema is a great leader, and I am confident he will lead the company well. Thank you to every Twilio customer, employee and developer I’ve had the privilege of building with. I can’t wait to see what you build next.”

New CEO Shipchandler joined CEO as chief financial officer in 2018 before moving to COO in October 2021 and then president of communications at the start of last year. Before joining Twilio, he spent over 22 years in various senior roles at General Electric.

As part of the management change, Jeff Epstein – a current board member – takes on the role of chair.

Shipchandler said: “I am honoured to step into the CEO role and to partner with our talented team to lead Twilio in its next era.

“Over the last year and a half, we have implemented meaningful changes across the organization to position ourselves for renewed growth and to drive operational improvements, optimize our capital allocation strategy, and enhance focus and execution.

“We have a strong foundation, but we always have more work to do. As I step into the CEO role, I am focused on continuing to build on the considerable growth and operating improvements we’ve made across the board, plus taking a fresh look at the areas of the business that are underperforming to realize the full potential of our business.”

Twilio expects to exceed its original guidance ranges for Q4 2023 revenue, non-GAAP income from operations, and FY 2023 non-GAAP income from operations, which it originally provided on November 8, 2023.

Investor Pressure

Last year, Twilio reportedly sought advice from Qatalyst Partners to defend itself against activist investors, particularly Anson Funds, which has urged Twilio to sell or divest its data and applications business. Qatalyst, typically known for facilitating company sales, is exclusively providing activist defence advice to Twilio. Activist investors Anson Funds and Legion Partners have pressured Twilio to make strategic changes, including selling business units.

Despite a 45 percent stock gain in the current year, Twilio is still recovering from an 80 percent loss in 2022, and its annual revenue growth has dropped to 5 percent.

Some industry experts question the business understanding of activist investors, while others highlight Twilio’s robust underlying technology amid identity confusion as it transitions from an API to an application company.

The company’s engagement with Qatalyst suggests a focus on defending its current structure rather than exploring a sale.

Amid the ongoing investor pressure, Twilio announced its third round of layoffs in 15 months in December, affecting approximately 295 employees, primarily in the Flex and Segment go-to-market teams, along with supporting functions like marketing and finance.

The decision to streamline offerings follows earlier layoffs in February (17 percent of its workforce) and September 2022 (11 percent).

Lawson attributed the layoffs to an unsuccessful investment in Segment’s go-to-market strategy, leading to excessive spending.

The company reported a Q3 2023 GAAP loss of $108.9 million, prompting further cost-cutting measures.

Despite previous actions, such as divesting businesses, Twilio remains unprofitable.

The latest layoffs coincide with plans to integrate Flex, its CCaaS platform, into the more successful communications business, simplifying the sales experience.

Lawson said then that the strategy will balance profit and growth and capitalize on the CustomerAI opportunity. Some speculated it may also respond to activist investors’ calls to divest the data and applications portfolio.

 

 

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