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What The Hell Just Happened To Twilio And Etsy?

Update: Shares of Twilio are currently down 23 percent in midday trading. Shares of Etsy are down just over 9 percent in midday trading.

tl;dr: Earnings are hard.

That dull thud you heard around 1 pm PST today was the sound of Twilio and Etsy’s share prices falling by double-digit percentage points in near perfect harmony.

The two companies (IPO classes of 2016 and 2015, respectively) were winners in the unicorn category, proving that, for some, there is light at the end of the private-market tunnel.

However, after today, it’s fair to say that that light has dimmed for the two firms. Before we get into the why and how, here’s what the two companies looked like in the first hour after the markets closed and after-hours trading kicked into gear:



At the time of writing, now pushing 3 pm PST, shares of Etsy are down $1.90 per share, or 16.68 percent. Shares of Twilio are off a staggering 29.64 percent.

Why should you care? Because Etsy was once worth $30 per share, valuing the company at more than $3 billion. It’s worth less than $10 per share now. Twilio was once worth $68.79 per share last September, its highest closing price to-date. Today, after earnings, its shares trade under $24.

The tough patch the two unicorns hit in sync doesn’t reflect well on tech companies still looking to go public. So what happened? Let’s find out.

What Went Wrong: Twilio

We’ll start with Twilio. The company beat on both top and bottom lines, reporting $87.4 million in revenue, and a per-share loss $0.02 under expectations. What could drive its share price so far down? Uber, that’s what.

TechCrunch’s John Mannes has the proper riff:

On the earnings call, CEO Jeff Lawson addressed the unexpected guidance by explaining that Uber, one of Twilio’s largest customers, will be reducing its use of Twilio over the next year. This is a major hit for the company because Uber accounted for 12 percent of its revenue in this quarter. Twilio expects this number to fall off over the next year as Uber moves to handle more of its communication infrastructure in house.

This announcement means that Twilio has a huge sales hole to fill moving forward, as an eighth of its revenue is now at risk. And there is now precedent for one of its largest customers leaving its platform. The company argued that other customers likely won’t follow suit, but a key customer with one foot out the door isn’t encouraging.

How many small customers does Twilio have to bring on to replace one of Uber’s scale? Answer: lots.

Outside of that, Twilio ‘s guidance didn’t inspire. If this all still feels unfair, keep in mind that Twilio is valued on growth, not profits. Losing a key customer come makes the growth pitch far harder to make.

What Went Wrong: Etsy

Unlike Twilio, which is still up sharply from its IPO price after its earnings response this afternoon, Etsy is under its own debut value. The company, in fact, has traded under that mark since late August of 2015.

What happened this time? Etsy missed earnings expectations, reporting revenue that came in under guidance.

Its first quarter tally of $96.9 million was up 18.4 percent from the year prior, besting the growth pace set by the company’s GMV, which grew a slimmer 14.2 percent over the same period. Analysts had expected $98.35 million in top line. And the company had zero earnings per share, when a single cent of profit was expected.

But, worse, was what the company labeled a “Senior Leadership Transition.” In English, it means the company got a new CEO. And, as part of the same piece, promised layoffs. Here’s Business Insider with the quote:

“Early in the second quarter of 2017, we also looked for opportunities to increase efficiency and streamline our cost structure,” the company said. “As a result of this process, we have identified savings that will be realized through a combination of headcount reductions and a reduction in internal program expenses.”

All told, that’s a full flop: revenue miss, profit miss, CEO shakeup, and layoffs.

We do not often cover earnings at Crunchbase News because we don’t hate you or ourselves. At the same time, sometimes we have to. So here we are.

Do not take these two data points as indicative of a trend. Twilio and Etsy are unique firms. Today, however, wasn’t the best.

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