Twilio Inc (TWLO)

The liquidity ratios of Twilio Inc. over the period from December 31, 2020, to December 31, 2024, indicate a general decline in short-term financial health, although the company maintains relatively strong liquidity metrics throughout this period.

The current ratio, which measures the company’s ability to meet its short-term obligations with its current assets, was highest at 8.43 on December 31, 2021. Subsequently, it experienced a decline to 6.17 by December 31, 2022. Although there was a slight recovery to 6.64 in 2023, the ratio continued to decrease to 4.20 in 2024. Despite this downward trend, the current ratio remains well above the critical threshold of 1, suggesting that Twilio generally possesses sufficient current assets to cover its short-term liabilities.

The quick ratio, which provides a more conservative assessment by excluding inventory from current assets, followed a similar trajectory. It peaked at 8.17 on December 31, 2021, then decreased to 5.82 on December 31, 2022. In 2023, the quick ratio increased slightly to 6.20 before declining again to 3.62 at the end of 2024. This pattern indicates that while the company's ability to quickly liquidate assets to cover short-term obligations has lessened, it continues to hold liquid assets comfortably exceeding short-term liabilities.

The cash ratio, the most conservative liquidity indicator measuring only cash and cash equivalents against current liabilities, was at its highest at 7.62 on December 31, 2021. It declined to 5.14 on December 31, 2022, then increased slightly to 5.43 in 2023 before dropping to 2.91 in 2024. Despite the decrease, the cash ratio remains above the critical minimum of 1, demonstrating that Twilio maintains a sufficient cash cushion relative to its short-term liabilities.

Overall, the liquidity profile of Twilio Inc. shows a trend of decreasing ratios over the analyzed period, reflecting a reduction in the company’s short-term liquidity buffers. However, the ratios consistently remain comfortably above critical thresholds, indicating that the company has historically maintained adequate liquidity levels to meet its immediate financial obligations.

---

Additional liquidity measure

The cash conversion cycle (CCC) of Twilio Inc. has demonstrated a relatively stable yet gradually increasing trend over the observation period from December 31, 2020, to December 31, 2024. At the end of 2020, the CCC was approximately 27.28 days, reflecting the time it takes for the company to convert its investments in inventory and other resources into cash flows from sales. By the end of 2021, the cycle slightly extended to approximately 27.56 days, indicating minimal change in operational efficiency.

Throughout 2022, the CCC increased further to around 30.16 days, suggesting a modest lengthening in the period required to convert receivables and manage inventory relative to payables. This upward trend continued into 2023, with the CCC reaching approximately 29.52 days, a slight reduction from 2022, indicating some stabilization or minor improvements in working capital management.

By the end of 2024, the CCC had increased again to approximately 31.78 days, marking an overall increase of about 4.5 days relative to the initial observation in 2020. This indicates that Twilio’s cash conversion cycle lengthened over the four-year span, reflecting either longer receivables collection periods, extended inventory holding times, or delays in accounts payable settlements, or a combination thereof.

Overall, the trend suggests that Twilio has experienced a gradual elongation of its cash conversion cycle over this period. The increase signifies that the company is taking relatively more time to convert its investments into cash, which could impact its liquidity position and working capital management efficiency unless offset by other operational strategies.