SendGrid (SEND) to be acquired by Twilio (TWLO) for $2 billion

Twilio (TWLO) said it has agreed to buy the Denver-based email platform company for $2 billion in an all-stock deal. Under the terms of their agreement, a Twilio subsidiary will be merged with and into SendGrid, with SendGrid surviving as a wholly owned subsidiary of San Francisco-based Twilio, the companies said.

  

At the closing, expected for the first half of 2019, each share of SendGrid stock will be converted into the right to receive 0.485 shares of Twilio stock, representing a per-share price for SendGrid stock of $36.92 based on Twilio's closing price on Monday. Both boards will have to approve the deal. The companies will report third-quarter results on Nov. 6, but they said Monday they both have exceeded their guidances provided earlier in the year. Guidance for a combined company will be provided after the deal is closed, the companies said.

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SendGrid Moves From 'Pipe To Application'

"Growth drivers for SendGrid are fairly straight forward — it's adding customers and getting those customers to send more emails through SendGrid pipes," Piper Jaffray analyst Alex Zukin said in a note to clients.

Zukin added that Sendgrid is moving from "pipe to application." That means adding more value-add marketing services to a business that sends over a billion emails a day. Customers include Uber, Yelp, eBay, Spotify, Airbnb and Glassdoor.

"Future products, much like Marketing today, should come with higher prices and margin profiles," Zukin said. "Cost per email for the company's marketing application are 3 times to 4 times that of core Email API. The company believes that at scale marketing has the potential to be more profitable than Email API."

Other companies that use cloud-based APIs include digital payments startup Stripe and Twilio, the latter of which sells communications messaging software.

Following its IPO, SendGrid stock moved up steadily, closing around 31 on March 9. SendGrid stock fell 10% on May 2, the day after it reported first-quarter results as investors were disappointed.

But SendGrid's second-quarter results, which came on July 31, sparked a rally. Profit climbed to 5 cents per share from 2 cents a year earlier. Revenue jumped 32% to $35.7 million.

SendGrid (SEND) reported earnings on Tue 31 July 2018 (a/h)

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SendGrid beats by $0.04, beats on revs; guides Q3 and FY18 revs above consensus 

• Reports Q2 (Jun) earnings of $0.05 per share, $0.04 better than the Capital IQ Consensus of $0.01; revenues rose 32.1% year/year to $35.67 mln vs the $34.35 mln Capital IQ Consensus. Ended the quarter with more than 74,000 customers, up 35% compared with the second quarter of 2017. Delivered email volume of 140.2 billion for the second quarter, up 29% compared with the second quarter 2017.
• Co sees Q3 revs of $35.9 -36.1 mln vs. $35.28 mln Capital IQ Consensus Estimate; non-GAAP adjusted net income of ~$1.25-1.75 million, which does not include ~$3.0 million of stock compensation expense, and less than $500,000 of restructuring and M&A-related expense. 
• Co sees FY18 revs of $142.5 -144.0 mln vs. $141.66 mln Capital IQ Consensus Estimate; adjusted net income of $7.0 million to $9.0 million.

SendGrid (SEND) began trading on the NYSE on Wed 15 Nov 2017

• Update Oct 15, 18: SendGrid (SEND) to be acquired by Twilio (TWLO) for $2 billion
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• The company had priced its stock at $16 a share on the day before its IPO, which would bring in about $131 million. 
• It opened at $18.55, or 16 percent higher, and hit a high of $19.21. The price hovered around $18 for most of the morning, closing at $18.00, up 12.5 percent on its first day.

SendGrid, which got an early start at the Techstars accelerator in Boulder, built its business on transactional emails and making sure its clients got their messages to their customers’ inboxes — from Uber ride receipts and Spotify password resets to  salary updates on Glassdoor.

In the Denver tech community, SendGrid is known for its work culture and promoting its four H’s: honest, hungry, humble and happy. Many in the community expressed their excitement on Twitter, such as Erik Mitisek, the state’s chief innovation officer.

Executives and guests of SendGrid, Inc. visit the New York Stock Exchange to celebrate their IPO. To mark the occasion Chief Executive Officer, Sameer Dholakia, alongside Tom Farley, President, NYSE, ring The Opening Bell.

CEO Sameer Dholakia and SendGrid’s three founders — Isaac Saldana, Tim Jenkins and Jose Lopez — rang the morning bell to open the NYSE.

SendGrid isn’t yet profitable, but it has seen revenues rise since it was founded in 2009. In its first nine months this year, sales hit $80.2 million, which is higher than all of 2016. Net losses grew 36 percent to $4.7 million in the first nine months of this year, from the same period last year. It has also grown from three founders to 408 employees in its eight years.

Heimes said the company is going after an $11 billion email market, of which SendGrid has less than 3 percent. The company has expanded into marketing messages and is targeting international customers — growth areas that may explain why the company’s stock price went beyond last week’s proposed targeted price range of $13.50 to $15.50.