Activist investor Legion Partners has implored Twilio to make boardroom changes, sell more assets, and improve its cost structure.
Indeed, it has reportedly met with Twilio officials six times in recent months, advocating for changes throughout the business.
These reports come after Twilio announced $1.38BN in trailing-12-month losses last month.
Its revenue growth also slowed to 15 percent YoY. This time last year, that figure stood at 48 percent.
As such, it is perhaps not surprising that Legion Partners, which owns a stake of approximately $40MN in Twilio, is trying to force change.
Moreover, its voice is likely to only grow louder, thanks to Twilio’s use of supervoting shares.
That system gives CEO Jeff Lawson a 22 percent voting stake. Yet, that will expire before the end of the month.
At that point, the stake seems set to drop to 3.6 percent, which reflects the percentage of Twilio’s stock that Lawson owns.
As such, the CEO and his board will likely come under increasing stockholder pressure in the upcoming months.
The markets have reacted well to this prospect, with Twilio’s stock jumping 11 percent on the news.
Such a jump goes against the grain, with Twilio – like most other CX vendors – enduring a stock price slump over the past year.
In this time, the business also cut 17 percent of its staff, closed some of its offices, and sold its IoT business unit to Kore.
Alongside that sale, Twilio let Zipwhip go, a business it bought for $850MN a little over a year prior.
Yet, to make the likes of Legion Partners happy, it seems that the CX vendor must go a lot further in the name of driving profitability.
What do the Analysts Think?
Analysts shared their thoughts on Twilio’s “staggering” net losses during an upcoming episode of CX Today’s BIG News show.
In doing so, Dave Michaels, Lead Analyst at TalkingPointz.com, reflected on how the vendor reached this point.
“Jeff Lawson figured out pretty early that CPaaS – a category he defined and created – was becoming commoditized,” he said. “So, he attempted to do a pivot with Segment, which seemed – at the time – to be a good logical purchase.
But, unfortunately, the economic rules changed, and now is not the time to be non-profitable, now is not the time to be doing a pivot, and he has been pummelled.
“The stock has fallen consistently now, for a while. But, they made a pivot, and it’s the wrong time to be doing a pivot. That’s the story.”
Liz Miller, VP & Principal Analyst at Constellation Research, agreed with Michels on this point. But, she also suggested that Twilio has lost touch with its vision.
“Normally, pivot means that you’re moving towards a direction,” said Miller.
“Now, some of the moves that Lawson has made seemed really smart. If we could go back in a time machine three or four years, that vision he had was pretty amazing.
But, there was a clear direction then, with the acquisition of Segment. Yet, they couldn’t stay on track. The moment they bought it, Twilio just started to meander.
Indeed, it seems that Twilio seems to have stepped too far away from its communications heritage.
After the acquisition, it launched marketing tools, sales solutions, and more. The ideas were bold. Yet, everything then slowly stalled.
Miller continued: “There was almost a realization of: “Oh wait, this stuff is really hard.”
There is a reason why there aren’t many players out there that are the Swiss army knife across the totality of customer experience. It’s because it’s really hard to understand and do all of those functions well.
Now, these losses and new stakeholder pressure may serve as a wake-up call for Twilio to focus in, rethink its vision, and have Lawson lead in a more directed way.
As the BIG Show will reveal, some analysts have suggested that this may include selling Segment.
Yet, whatever the case, Lawson & Co. will likely have some tough decisions to make in the near future, with revenue growth expected to slow down further in the next quarter.
