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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________________________
FORM 10-Q
_____________________________________________
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2024
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 001-37806
_____________________________________________
https://cdn.kscope.io/05859702df4c8dc72c28293532e2c9ee-twiliologored2a01.jpg
TWILIO INC.
(Exact name of registrant as specified in its charter)
_____________________________________________
Delaware26-2574840
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
101 Spear Street, Fifth Floor
San Francisco, California 94105
(Address of principal executive offices) (Zip Code)
(415) 390-2337
(Registrant’s telephone number, including area code)
____________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A Common Stock, par value $0.001 per shareTWLONew York Stock Exchange

As of May 1, 2024, 171,171,739 shares of the registrant’s Class A common stock were outstanding.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x  No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes x  No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting company
  Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes   No 
1


TWILIO INC.
Quarterly Report on Form 10-Q
For the Three Months Ended March 31, 2024
TABLE OF CONTENTS
Page


2


PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
TWILIO INC.
Condensed Consolidated Balance Sheets
(Unaudited)
As of March 31,As of December 31,
20242023
(In thousands)
ASSETS
Current assets:
Cash and cash equivalents$672,595 $655,931 
Short-term marketable securities3,154,005 3,356,064 
Accounts receivable, net540,932 562,773 
Prepaid expenses and other current assets310,063 329,204 
Total current assets4,677,595 4,903,972 
Property and equipment, net201,273 209,639 
Operating right-of-use assets68,887 73,959 
Equity method investment568,145 593,582 
Intangible assets, net321,501 350,490 
Goodwill5,243,266 5,243,266 
Other long-term assets208,622 234,799 
Total assets$11,289,289 $11,609,707 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable$82,194 $119,615 
Accrued expenses and other current liabilities442,133 424,311 
Deferred revenue and customer deposits142,372 144,499 
Operating lease liability, current47,904 49,872 
Total current liabilities714,603 738,297 
Operating lease liability, noncurrent110,267 120,770 
Finance lease liability, noncurrent6,960 9,191 
Long-term debt, net989,356 988,953 
Other long-term liabilities20,373 19,944 
Total liabilities1,841,559 1,877,155 
Commitments and contingencies (Note 11)
Stockholders' equity:
Preferred stock  
Class A common stock
177 182 
Additional paid-in capital14,960,837 14,797,723 
Accumulated other comprehensive (loss) income(4,941)619 
Accumulated deficit(5,508,343)(5,065,972)
Total stockholders’ equity9,447,730 9,732,552 
Total liabilities and stockholders’ equity$11,289,289 $11,609,707 
See accompanying notes to condensed consolidated financial statements.
3


TWILIO INC.
Condensed Consolidated Statements of Operations
(Unaudited)

Three Months Ended
March 31,
20242023
(In thousands, except share and per share amounts)
Revenue$1,047,050 $1,006,564 
Cost of revenue503,009 515,874 
Gross profit544,041 490,690 
Operating expenses:
Research and development251,615 238,595 
Sales and marketing214,018 259,885 
General and administrative111,966 112,568 
Restructuring costs9,946 121,942 
Impairment of long-lived assets 21,784 
Total operating expenses587,545 754,774 
Loss from operations(43,504)(264,084)
Other expenses, net:
Share of losses from equity method investment(29,575)(30,419)
Impairment of strategic investments (46,154)
Other income, net27,918 8,985 
Total other expenses, net(1,657)(67,588)
Loss before provision for income taxes(45,161)(331,672)
Provision for income taxes(10,188)(10,467)
Net loss attributable to common stockholders$(55,349)$(342,139)
Net loss per share attributable to common stockholders, basic and diluted$(0.31)$(1.84)
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted181,017,726 186,403,349 
See accompanying notes to condensed consolidated financial statements.
4


TWILIO INC.
Condensed Consolidated Statements of Comprehensive (Loss) Income
(Unaudited)
Three Months Ended
March 31,
20242023
(In thousands)
Net loss$(55,349)$(342,139)
Other comprehensive (loss) income:
Unrealized (loss) gain on marketable securities(5,193)30,750 
Foreign currency translation 483 
Net change in market value of effective foreign currency forward exchange contracts (4,505)3,335 
Share of other comprehensive income from equity method investment4,138 14,648 
Total other comprehensive (loss) income(5,560)49,216 
Comprehensive loss attributable to common stockholders$(60,909)$(292,923)
See accompanying notes to condensed consolidated financial statements.
5

TWILIO INC.
Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited)
Common Stock
Class A
Additional Paid-In Capital
Accumulated Other Comprehensive (Loss) Income
Accumulated DeficitTotal Stockholders' Equity
SharesAmount
(In thousands, except share amounts)
Balance as of December 31, 2023
181,945,771 $182 $14,797,723 $619 $(5,065,972)$9,732,552 
Net loss— — — — (55,349)(55,349)
Exercises of vested stock options43,835 — 421 — — 421 
Vesting of restricted stock units1,615,930 1 (1)— —  
Value of equity awards withheld for tax liability(26,757)— (1,918)— — (1,918)
Shares of Class A common stock issued and donated to charity22,102 — 1,295 — — 1,295 
Shares returned from escrow(696)— (192)— — (192)
Unrealized loss on marketable securities
— — — (5,193)— (5,193)
Repurchases of shares of Class A common stock including related costs(6,128,298)(6)— — (387,022)(387,028)
Net change in market value of effective foreign currency forward exchange contracts— — — (4,505)— (4,505)
Share of other comprehensive income from equity method investment— — — 4,138 — 4,138 
Stock-based compensation— — 161,061 — — 161,061 
Stock-based compensation - restructuring— — 2,448 — — 2,448 
Balance as of March 31, 2024
177,471,887 $177 $14,960,837 $(4,941)$(5,508,343)$9,447,730 
See accompanying notes to condensed consolidated financial statements.
6

TWILIO INC.
Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited)
Common Stock
Class A
Common Stock
Class B
Additional Paid-In Capital
Accumulated Other Comprehensive (Loss) Income
Accumulated DeficitTotal Stockholders' Equity
SharesAmountSharesAmount
(In thousands, except share amounts)
Balance as of December 31, 2022176,358,104 $174 9,617,605 $12 $14,055,853 $(121,161)$(3,375,836)$10,559,042 
Net loss— — — — — — (342,139)(342,139)
Exercises of vested stock options66,968 — 97,199 — 3,264 — — 3,264 
Vesting of restricted stock units1,516,634 2 — — (2)— —  
Value of equity awards withheld for tax liability(36,965)— — — (2,456)— — (2,456)
Conversion of shares of Class B common stock into shares of Class A common stock97,199 — (97,199)— — — — — 
Shares of Class A common stock issued and donated to charity22,102 — — — 1,599 — — 1,599 
Unrealized gain on marketable securities— — — — — 30,750 — 30,750 
Repurchases of shares of Class A common stock including related costs(1,902,124)(2)— — — — (124,990)(124,992)
Foreign currency translation— — — — — 483 — 483 
Net change in market value of effective foreign currency forward exchange contracts— — — — — 3,335 — 3,335 
Share of other comprehensive income from equity method investment— — — — — 14,648 — 14,648 
Stock-based compensation— — — — 164,999 — — 164,999 
Stock-based compensation - restructuring— — — — 10,333 — — 10,333 
Balance as of March 31, 2023176,121,918 $174 9,617,605 $12 $14,233,590 $(71,945)$(3,842,965)$10,318,866 
See accompanying notes to condensed consolidated financial statements.


7


TWILIO INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Three Months Ended
March 31,
20242023
CASH FLOWS FROM OPERATING ACTIVITIES:(In thousands)
Net loss$(55,349)$(342,139)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization53,318 71,393 
Non-cash reduction to the right-of-use asset5,076 8,574 
Net amortization of investment premium and discount(6,029)3,515 
Impairment of long-lived assets 21,784 
Stock-based compensation including restructuring158,606 170,799 
Amortization of deferred commissions18,829 17,865 
Provision for doubtful accounts6,204 7,220 
Share of losses from equity method investment29,575 30,419 
Impairment of strategic investments 46,154 
Other adjustments4,996 9,746 
Changes in operating assets and liabilities:
Accounts receivable15,637 (35,215)
Prepaid expenses and other current assets16,901 (51,438)
Other long-term assets6,859 (21,481)
Accounts payable(37,762)66 
Accrued expenses and other current liabilities(12,447)(19,130)
Deferred revenue and customer deposits(2,127)(2,611)
Operating lease liabilities(12,470)(13,651)
Other long-term liabilities306 264 
Net cash provided by (used in) operating activities190,123 (97,866)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of marketable securities and other investments(435,590)(136,119)
Proceeds from sales and maturities of marketable securities638,185 355,195 
Capitalized software development costs(11,154)(9,860)
Purchases of long-lived and intangible assets(1,671)(6,751)
Net cash provided by investing activities
189,770 202,465 
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on debt and finance leases(4,832)(7,353)
Value of equity awards withheld for tax liabilities(1,918)(2,456)
Repurchases of shares of Class A common stock and related costs(356,900)(114,993)
Proceeds from exercises of stock options421 3,264 
Net cash used in financing activities(363,229)(121,538)
Effect of exchange rate changes on cash, cash equivalents and restricted cash 39 
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH16,664 (16,900)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH—Beginning of period655,931 656,078 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH —End of period$672,595 $639,178 
Cash paid for income taxes, net$10,761 $3,479 
Cash paid for interest$18,893 $18,750 
RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH TO THE CONDENSED CONSOLIDATED BALANCE SHEETS
Cash and cash equivalents$672,595 $634,824 
Restricted cash in other current assets 3,916 
Restricted cash in other long-term assets 438 
Total cash, cash equivalents and restricted cash$672,595 $639,178 
See accompanying notes to condensed consolidated financial statements.
8

TWILIO INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Organization and Description of Business
Twilio Inc. (the “Company”) was incorporated in the state of Delaware on March 13, 2008. Today's leading companies trust Twilio's Customer Engagement Platform to build direct, personalized relationships with their customers everywhere in the world. Twilio enables companies to use communications and data to add intelligence and security to every step of their customers’ journey, from sales to marketing to growth, customer service and many more engagement use cases in a flexible, programmatic way.
The Company’s headquarters are located in San Francisco, California, and the Company has subsidiaries across North America, South America, Europe, Asia and Australia.
2. Summary of Significant Accounting Policies
(a)Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K filed with the SEC on February 27, 2024 (“Annual Report”).
The condensed consolidated balance sheet as of December 31, 2023, included herein, was derived from the audited financial statements as of that date, but may not include all disclosures including certain notes required by U.S. GAAP on an annual reporting basis.
In the opinion of management, the accompanying condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, comprehensive loss, stockholders’ equity and cash flows for the interim periods, but are not necessarily indicative of the results of operations to be anticipated for the full year 2024 or any future period.
(b)Principles of Consolidation
The condensed consolidated financial statements include the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated.
(c)Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates are used for, but not limited to, revenue allowances and sales credit reserves; recoverability of long-lived and intangible assets; allocation of goodwill to reporting units; impairment assessments of goodwill and indefinite-lived intangible assets; capitalization and useful life of the Company’s capitalized internal-use software development costs; fair value of acquired intangible assets and goodwill; accruals and contingencies. Estimates are based on historical experience and on various assumptions that the Company believes are reasonable under then current circumstances. However, future events are subject to change and best estimates and judgments may require further adjustments, therefore, actual results could differ materially from those estimates. Management periodically evaluates such estimates and they are adjusted prospectively based upon such periodic evaluation.
9

(d)Remaining Performance Obligations
Revenue allocated to remaining performance obligations for contracts with durations of more than one year was $150.6 million as of March 31, 2024, of which 63% is expected to be recognized over the next 12 months and 91% is expected to be recognized over the next 24 months.
(e)Deferred Revenue and Customer Deposits
As of March 31, 2024, and December 31, 2023, the Company recorded $142.4 million and $144.5 million as its deferred revenue and customer deposits, respectively. During the three months ended March 31, 2024 and 2023, the Company recognized $65.4 million and $71.3 million of revenue, respectively, that was included in the deferred revenue and customer deposits balances as of the end of the previous year.
(f)Concentration of Credit Risk
Financial instruments that potentially expose the Company to a concentration of credit risk consist primarily of cash, cash equivalents, marketable securities and accounts receivable. The Company maintains cash, cash equivalents and marketable securities with financial institutions. Certain balances held by such financial institutions exceed insured limits.
The Company sells its services to a wide variety of customers. If the financial condition or results of operations of any significant customer deteriorates substantially, operating results could be adversely affected. To reduce credit risk, management performs credit evaluations of the financial condition of significant customers and periodic re-evaluations, as needed, of existing customers. The Company does not require collateral from its credit customers and maintains reserves for estimated credit losses on customer accounts when considered necessary. Actual credit losses may differ from the Company’s estimates. As of March 31, 2024, and December 31, 2023, the allowance for doubtful accounts was $37.7 million and $42.0 million, respectively, and is recorded in accounts receivable, net, in the accompanying condensed consolidated balance sheets.
In the three months ended March 31, 2024 and 2023, no customer organization accounted for more than 10% of the Company’s total revenue.
As of March 31, 2024 and December 31, 2023, no customer organization represented more than 10% of the Company’s gross accounts receivable.
(g)Restructuring Costs
The Company records restructuring expenses when (i) management commits to a restructuring plan, (ii) the restructuring plan identifies all significant actions, (iii) the period of time to complete the restructuring plan indicates that significant changes to the plan are not likely, and (iv) employees who are impacted have been notified of the pending involuntary termination.
The Company enacted workforce reduction plans in February 2023, December 2023 and March 2024. In the three months ended March 31, 2024, restructuring charges incurred and cash paid related to these plans were not significant. The estimated remaining expenses related to these plans are not expected to be significant.
(h)Recently Adopted Accounting Guidance
In June 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. (“ASU”) 2022-03, "Fair Value Measurements (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions," which clarifies and amends the guidance of measuring the fair value of equity securities subject to contractual restrictions that prohibit the sale of the equity securities. The guidance will be effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. The Company adopted ASU 2022-03 in the first quarter of 2024 with no material impact to the Company’s condensed consolidated financial statements.
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(i)Recently Issued Accounting Guidance, Not yet Adopted
In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures,” which is intended to improve reportable segment disclosures. The ASU expands segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the CODM and included within each reported measure of segment profit or loss. It also requires disclosure of the amount and description of the composition of other segment items and interim disclosures of a reportable segment's profit or loss and assets. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with retrospective application required. Early adoption is permitted. The Company expects to adopt ASU 2023-07 upon its effective date. The adoption will require certain additional disclosure in the notes to the Company’s consolidated financial statements.
In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” which requires disclosure of disaggregated income taxes paid, prescribes standard categories for the components of the effective tax rate reconciliation and modifies other income tax related disclosures. ASU 2023-09 is effective for annual periods beginning after December 15, 2024 and may be applied on a prospective basis. Early adoption is permitted. The Company expects to adopt ASU 2023-09 upon its effective date. The adoption will require certain additional disclosure in the notes to the Company’s consolidated financial statements.
3. Fair Value Measurements
Financial Assets
The following tables provide the financial assets measured at fair value on a recurring basis:
Amortized
Cost or
Carrying
Value
Gross
Unrealized
Gains
Gross
Unrealized
Losses Less Than 12 Months
Gross
Unrealized
Losses More
Than
12 Months
Fair Value Hierarchy as of
March 31, 2024
Aggregate
Fair Value
Level 1Level 2Level 3
Financial Assets:(In thousands)
Cash and cash equivalents:
Money market funds$447,629 $— $— $— $447,629 $ $ $447,629 
Commercial paper13,036 — — —  13,036  13,036 
Total included in cash
    and cash equivalents
460,665 — — — 447,629 13,036  460,665 
Marketable securities:
Debt securities:
U.S. Treasury securities437,581 331 (665)(549)436,698   436,698 
Non-U.S. government
   securities
68,549 23 (20)(463)68,089   68,089 
Corporate debt securities and commercial paper2,651,283 6,442 (9,711)(2,731)14,690 2,630,593  2,645,283 
Total debt securities3,157,413 6,796 (10,396)(3,743)519,477 2,630,593  3,150,070 
Equity securities3,935 — — — 3,935   3,935 
Total marketable
   securities
3,161,348 6,796 (10,396)(3,743)523,412 2,630,593  3,154,005 
Total financial assets$3,622,013 $6,796 $(10,396)$(3,743)$971,041 $2,643,629 $ $3,614,670 
11

Amortized
Cost or
Carrying
Value
Gross
Unrealized
Gains
Gross
Unrealized
Losses Less Than 12 Months
Gross
Unrealized
Losses More
Than
12 Months
Fair Value Hierarchy as of
December 31, 2023
Aggregate
Fair Value
Level 1Level 2Level  3
Financial Assets:(In thousands)
Cash and cash equivalents:
Money market funds$408,696 $— $— $— $408,696 $ $ $408,696 
Total included in cash
    and cash equivalents
408,696 — — — 408,696   408,696 
Marketable securities:
Debt securities:
U.S. Treasury securities410,665 2,162 (7)(1,665)411,155   411,155 
Non-U.S. government
   securities
83,576 55 (111)(1,209)82,311   82,311 
Corporate debt securities and commercial paper2,859,071 15,366 (10,818)(5,922)16,690 2,841,007  2,857,697 
Total debt securities3,353,312 17,583 (10,936)(8,796)510,156 2,841,007  3,351,163 
Equity securities4,901 — — — 4,901   4,901 
Total marketable
   securities
3,358,213 17,583 (10,936)(8,796)515,057 2,841,007  3,356,064 
Total financial assets$3,766,909 $17,583 $(10,936)$(8,796)$923,753 $2,841,007 $ $3,764,760 
The Company’s primary objective when investing excess cash is preservation of capital, hence the Company’s debt securities primarily consist of U.S. Treasury Securities, non-U.S government securities, high credit quality corporate debt securities and commercial paper. Because the Company views its debt securities as available to support current operations, it has classified all available for sale securities as short-term.
Interest earned on debt securities was $27.2 million and $17.2 million in the three months ended March 31, 2024 and 2023, respectively. The interest is recorded as other income, net, in the accompanying condensed consolidated statements of operations.
The following table summarizes the contractual maturities of debt securities:
As of March 31,As of December 31,
20242023
Amortized
Cost
Aggregate
Fair Value
Amortized
Cost
Aggregate
Fair Value
Financial Assets:(In thousands)
Less than one year$1,092,477 $1,085,126 $1,448,256 $1,434,149 
One to three years2,064,936 2,064,944 1,905,056 1,917,014 
Total$3,157,413 $3,150,070 $3,353,312 $3,351,163 
Strategic Investments
As of March 31, 2024 and December 31, 2023, the Company held strategic investments with a carrying value of $31.1 million and $30.7 million, respectively, recorded as other long-term assets in the accompanying condensed consolidated balance sheets. The carrying value of these securities is determined under the measurement alternative on a non-recurring basis and adjusted for observable changes in fair value or impairment. There were no impairments or significant adjustments recorded in the three months ended March 31, 2024 related to these investments. During the three months ended March 31, 2023, the Company recorded an impairment loss of $46.2 million related to one of these investments in other expenses, net, in the accompanying condensed consolidated statement of operations.
Financial Liabilities
The Company’s financial liabilities that are measured at fair value on a recurring basis consist of foreign currency derivative liabilities and are classified as Level 2 financial instruments in the fair value hierarchy. As of March 31, 2024 and December 31, 2023, the aggregate fair value of these liabilities and the associated unrealized losses were not significant.
12

The Company’s financial liabilities that are not measured at fair value on a recurring basis are its Senior Notes due 2029 (“2029 Notes”) and its Senior Notes due 2031 (“2031 Notes”). As of March 31, 2024, the fair values of the 2029 Notes and 2031 Notes were $449.7 million and $437.1 million, respectively. As of December 31, 2023, the fair values of the 2029 Notes and 2031 Notes were $462.4 million and $452.3 million, respectively.
4. Property and Equipment
Property and equipment consisted of the following:
As of March 31,As of December 31,
20242023
(In thousands)
Capitalized internal-use software developments costs$310,947 $297,655 
Data center equipment (1)
104,803 104,543 
Leasehold improvements92,427 92,315 
Office equipment56,833 60,905 
Furniture and fixtures14,558 14,558 
Software14,639 14,639 
Total property and equipment594,207 584,615 
Less: accumulated depreciation and amortization (1)
(392,934)(374,976)
Total property and equipment, net$201,273 $209,639 
____________________________________
(1) Data center equipment contains $72.4 million in assets held under finance leases as of March 31, 2024 and December 31, 2023. Accumulated depreciation and amortization includes $59.3 million and $55.9 million of accumulated depreciation for assets held under finance leases as of March 31, 2024, and December 31, 2023, respectively.
Depreciation and amortization expense was $23.8 million and $20.1 million in the three months ended March 31, 2024 and 2023, respectively.
The Company capitalized $16.1 million and $14.2 million in internal‑use software development costs in the three months ended March 31, 2024 and 2023, respectively.
5. Segment Reporting
As of March 31, 2024, the Company had two operating and reportable segments: Twilio Communications (“Communications”) and Twilio Segment (“Segment”).
Twilio Communications: The Communications reportable segment consists of a variety of application programming interfaces (“APIs”) and software solutions to optimize communications between Twilio customers and their end users. The key products from which the segment derives its revenue are Messaging, Voice, and Email and Marketing Campaigns.
Twilio Segment: The Segment reportable segment consists of software products that enable businesses to achieve more effective customer engagement by providing the tools necessary for customers to build direct, personalized relationships with their end users. The key products from which the segment derives its revenue are Segment and Engage.
13

Presented below is the discrete financial information by reportable segment for the three months ended March 31, 2024 and 2023, that is regularly reviewed by the Chief Operating Decision Maker (“CODM”) for performance assessment and resource allocation decisions. Prior period amounts were reclassified to conform to the current period’s presentation. Asset information is not presented below since it is not reviewed by the CODM on a segment by segment basis. Revenue, costs of revenue and operating expenses are generally directly attributable to each segment. Certain costs of revenue and operating expenses are allocated based on methodologies that best reflect the patterns of consumption of these costs. Corporate costs consist of costs that support company-wide processes and are managed on the company-wide level, and include costs related to corporate governance and communication, global brand awareness, information security, and certain legal, human resources, finance and accounting expenses.
Three Months Ended
March 31,
20242023
(In thousands)
Revenue:
Communications$972,005 $932,948 
Segment75,045 73,616 
Total$1,047,050 $1,006,564 
Non-GAAP income (loss) from operations:
Communications$249,010 $180,464 
Segment(20,994)(17,217)
Corporate costs(68,406)(59,460)
Total$159,610 $103,787 
Reconciliation of non-GAAP income (loss) from operations to loss from operations:
Total non-GAAP income (loss) from operations$159,610 $103,787 
Stock-based compensation(156,158)(160,466)
Amortization of acquired intangibles(28,939)(50,774)
Acquisition and divestiture related expenses (2,235)
Loss on net assets held for sale (3,824)
Payroll taxes related to stock-based compensation(6,776)(5,247)
Charitable contributions(1,295)(1,599)
Restructuring costs (9,946)(121,942)
Impairment of long-lived assets (21,784)
Loss from operations(43,504)(264,084)
Other expenses, net(1,657)(67,588)
Loss before provision for income taxes$(45,161)$(331,672)

6. Derivatives and Hedging
As of March 31, 2024, the Company had outstanding foreign currency forward contracts designated as cash flow hedges with a total sell notional value of $206.8 million. The notional value represents the amount that will be sold upon maturity of the forward contract. As of March 31, 2024, these contracts had maturities of up to 17 months. Gains and losses associated with these foreign currency forward contracts were not significant.
The Company is subject to master netting agreements with certain counterparties of the foreign exchange contracts, under which it is permitted to net settle transactions of the same currency with a single net amount payable by one party to the other. It is the Company’s policy to present the derivatives at gross in its condensed consolidated balance sheets. The Company’s foreign currency forward contracts are not subject to any credit contingent features or collateral requirements. The Company manages its exposure to counterparty risk by entering into contracts with a diversified group of major financial institutions and by actively monitoring its outstanding positions. As of March 31, 2024, the Company did not have any offsetting arrangements.
14

7. Goodwill and Intangible Assets
Goodwill
As of March 31, 2024 and December 31, 2023, the balance of the Company’s goodwill was $5.2 billion, of which $4.9 billion relates to the Communications reportable segment and $306.1 million relates to the Segment reportable segment. There was no goodwill activity during the three months ended March 31, 2024.
Intangible assets
Intangible assets consisted of the following:
As of March 31, 2024
CostAccumulated AmortizationNet
Amortizable intangible assets:(In thousands)
Developed technology$397,473 $(274,167)$123,306 
Customer relationships349,074 (182,045)167,029 
Supplier relationships49,756 (28,586)21,170 
Trade names25,968 (24,204)1,764 
Order backlog10,000 (10,000) 
Patent3,968 (951)3,017 
Total amortizable intangible assets836,239 (519,953)316,286 
Non-amortizable intangible assets:
Telecommunication licenses4,920 — 4,920 
Trademarks and other295 — 295 
Total$841,454 $(519,953)$321,501 
As of December 31, 2023
CostAccumulated AmortizationNet
Amortizable intangible assets:(In thousands)
Developed technology$397,473 $(259,635)$137,838 
Customer relationships349,074 (170,511)178,563 
Supplier relationships49,756 (26,316)23,440 
Trade names25,968 (23,600)2,368 
Order backlog10,000 (10,000) 
Patent3,968 (902)3,066 
Total amortizable intangible assets836,239 (490,964)345,275 
Non-amortizable intangible assets:
Telecommunication licenses4,920 — 4,920 
Trademarks and other295 — 295 
Total$841,454 $(490,964)$350,490 
Amortization expense was $29.0 million and $50.8 million for the three months ended March 31, 2024 and 2023, respectively.
15

Total estimated future amortization expense is as follows:
As of March 31, 2024
Year Ended December 31,(In thousands)
2024 (remaining nine months)$83,053 
2025107,862 
202642,149 
202725,330 
202819,055 
Thereafter38,837 
Total$316,286 
8. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following:
As of March 31,As of December 31,
20242023
(In thousands)
Accrued payroll and related$51,671 $77,593 
Accrued bonus and commission37,587 17,345 
Accrued cost of revenue165,335 155,721 
Sales and other taxes payable66,295 70,913 
ESPP contributions16,880 6,130 
Finance lease liability6,169 8,489 
Restructuring liability12,841 29,086 
Share repurchase costs payable30,989 3,526 
Accrued other expense54,366 55,508 
Total accrued expenses and other current liabilities$442,133 $424,311 
9. Long-Term Debt
Long-term debt, net, consisted of the following:
As of March 31,As of December 31,
20242023
(In thousands)
2029 Senior Notes
Principal$500,000 $500,000 
Unamortized discount(4,088)(4,274)
Unamortized issuance costs(920)(962)
Net carrying amount494,992 494,764 
2031 Senior Notes
Principal500,000 500,000 
Unamortized discount(4,601)(4,744)
Unamortized issuance costs(1,035)(1,067)
Net carrying amount494,364 494,189 
Total long-term debt, net$989,356 $988,953 
As of March 31, 2024, the Company was in compliance with all of its covenants under the related indentures.
16

10. Revenue by Geographic Area
Revenue by geographic area is based on the IP address or the mailing address of the customer at the time of registration. The following table sets forth revenue by geographic area:
Three Months Ended
March 31,
20242023
Revenue by geographic area:(In thousands)
United States$686,527 $662,092 
International360,523 344,472 
Total$1,047,050 $1,006,564 
Percentage of revenue by geographic area:
United States66 %66 %
International34 %34 %
11. Commitments and Contingencies

(a)Lease and Other Commitments
The Company has entered into various non-cancelable operating lease agreements for its facilities. In the three months ended March 31, 2024, the Company did not enter into any significant new lease agreements.
The Company has non-cancelable contractual commitments with its cloud infrastructure provider, network service providers and other vendors. In the three months ended March 31, 2024, the Company did not enter into any significant non-cancelable contractual commitments.
(b)Legal Matters
From time to time, the Company may be subject to legal actions, claims, and government investigations or inquiries arising in the ordinary course of business. These matters may include, but are not limited to, matters involving privacy, data protection, data security, intellectual property, competition, telecommunications, consumer protection, taxation, securities, employment, and contractual rights. While the Company currently believes that the final outcomes of these matters will not have a material adverse effect on its business, the results of any current or future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources and other factors.
The Company accrues for contingencies when the Company believes that a loss is probable and that it can reasonably estimate the amount of any such loss. To the extent there is a reasonable possibility that a loss exceeding amounts already recognized may be incurred and the amount of such additional loss would be material, the Company will either disclose the estimated additional loss or state that such an estimate cannot be made. Significant judgment is required to determine the probability of a loss and to estimate the amount of any probable loss.
Legal fees and other costs related to litigation and other legal proceedings are expensed as incurred and are included in general and administrative expenses in the accompanying condensed consolidated statements of operations.
(c)Indemnification Agreements
In the ordinary course of business and in connection with its financing and business combination transactions, the Company enters into contractual arrangements under which it agrees to provide indemnification of varying scope and terms to business partners, customers and other parties with respect to certain matters, including, but not limited to, losses arising out of the breach of such agreements, intellectual property infringement claims made by third parties and other liabilities relating to or arising from the Company’s products or its acts or omissions.

The Company has also signed indemnification agreements with all of its board members and executive officers and certain employees that may require the Company to indemnify them for certain events in connection with their services to the Company or its direct or indirect subsidiaries.
17

As of March 31, 2024, and December 31, 2023, no amounts were accrued related to any outstanding indemnification agreements.
(d)Other Taxes
The Company conducts operations in multiple tax jurisdictions within and outside of the United States. In many of these jurisdictions, non-income-based taxes, such as sales, use, telecommunications and other local taxes are assessed on the Company’s operations. The Company carries reserves for certain of its non-income-based tax exposures in certain jurisdictions when it is both probable that a liability was incurred and the amount of the exposure could be reasonably estimated. These reserves are based on estimates which include several key assumptions including, but not limited to, the taxability of the Company’s services, the jurisdictions in which its management believes it had nexus and the sourcing of revenues to those jurisdictions.
The Company continues to remain in discussions with certain jurisdictions regarding its prior sales and other taxes that it may owe. In the event any of these jurisdictions disagree with management’s assumptions and analysis, the assessment of the Company’s tax exposure could differ materially from management’s current estimates.
As of March 31, 2024, the liabilities recorded for the non-income-based taxes were $18.2 million for domestic jurisdictions and $20.0 million for jurisdictions outside of the United States. As of December 31, 2023, these liabilities were $18.0 million and $22.2 million, respectively.
12. Stockholders' Equity
Preferred Stock
As of March 31, 2024, and December 31, 2023, the Company had authorized 100,000,000 shares of preferred stock, par value $0.001, of which no shares were issued and outstanding.
Common Stock
As of March 31, 2024, the Company had authorized 1,000,000,000 shares of Class A common stock and 3,170,181 shares of Class B common stock, each with a par value of $0.001 per share. As of March 31, 2024, 177,471,887 shares of Class A common stock and no shares of Class B common stock were issued and outstanding.
As of December 31, 2023, the Company had authorized 1,000,000,000 shares of Class A common stock and 3,170,181 shares of Class B common stock, each with a par value of $0.001 per share. As of December 31, 2023, 181,945,771 shares of Class A common stock and no shares of Class B common stock were issued and outstanding.
The Company had reserved shares of common stock for issuance as follows:
As of March 31,As of December 31,
20242023
Stock options issued and outstanding1,584,426 1,722,861 
Unvested restricted stock units issued and outstanding16,173,773 18,755,538 
Shares of Class A common stock reserved for Twilio.org419,939 442,041 
Stock-based awards available for grant under 2016 Plan30,471,471 19,869,260 
Shares of Class A common stock reserved for issuance pursuant to ESPP10,341,701 8,541,701 
Total58,991,310 49,331,401 
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Share Repurchase Programs

In February 2023, the board of directors of the Company authorized a repurchase of up to $1.0 billion in aggregate value of its outstanding Class A common stock through a share repurchase program. In March 2024, the board of directors of the Company authorized a second share repurchase program for an additional $2.0 billion in aggregate value of its outstanding Class A common stock. Repurchases under these programs can be made through open market, private transactions or other means, in compliance with applicable federal securities laws, and could include repurchases pursuant to Rule 10b5-1 trading plans. The Company has discretion in determining the conditions under which shares may be repurchased from time to time. The programs each expire on December 31, 2024.

In the three months ended March 31, 2024 and 2023, the Company repurchased 6.1 million and 1.9 million shares of its Class A common stock, respectively, for an aggregate purchase price of $384.3 million and $125.0 million, respectively. As of March 31, 2024, approximately $1.9 billion of the aggregate amount authorized under the stock repurchase programs remained available for future repurchases.
13. Stock-Based Compensation 
The Company’s 2016 Stock Option and Incentive Plan (the “2016 Plan”) provides for granting stock options, restricted stock units, restricted stock awards, stock appreciation rights, unrestricted stock awards, performance share awards, dividend equivalent rights and cash-based awards to its employees, directors and consultants. Certain of the Company’s outstanding equity awards were granted under equity incentive plans that are no longer active but continue to govern the outstanding equity awards granted thereunder.
In addition, pursuant to the Company’s 2016 Employee Stock Purchase Plan (“ESPP”), eligible employees may purchase shares of the Company’s Class A common stock at a discount of 15% through payroll deductions of their eligible compensation. The ESPP provides for separate six-month offering periods beginning in May and November of each year.
As of March 31, 2024, total unrecognized compensation cost related to unvested restricted stock units was $1.2 billion, which will be amortized over a weighted-average period of 2.6 years. As of March 31, 2024, total unrecognized compensation cost related to unvested stock options, the ESPP, and shares of Class A common stock in escrow subject to future vesting was not significant.
Stock-Based Compensation Expense
The Company recorded total stock-based compensation expense as follows:
Three Months Ended
March 31,
20242023
(In thousands)
Cost of revenue$5,891 $5,290 
Research and development81,349 78,093 
Sales and marketing34,655 48,129 
General and administrative34,263 28,954 
Restructuring costs2,448 10,333 
Total$158,606 $170,799 
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14. Net Loss Per Share Attributable to Common Stockholders
The following table sets forth the calculation of basic and diluted net loss per share attributable to common stockholders during the periods presented:
Three Months Ended
March 31,
20242023
Net loss attributable to common stockholders (in thousands)$(55,349)$(342,139)
Weighted-average shares used to compute net loss per share attributable to
     common stockholders, basic and diluted
181,017,726 186,403,349 
Net loss per share attributable to common stockholders, basic and diluted$(0.31)$(1.84)
The following outstanding shares of common stock equivalents were excluded from the calculation of the diluted net loss per share attributable to common stockholders because their effect would have been anti-dilutive:
As of March 31,
20242023
Stock options issued and outstanding1,584,426 2,007,636 
Unvested restricted stock units issued and outstanding16,173,773 13,487,645 
Shares of Class A common stock reserved for Twilio.org419,939 508,347 
Shares of Class A common stock committed under ESPP396,611 742,303 
Shares of Class A common stock in escrow 31,503 
Shares of Class A common stock in escrow and restricted stock awards subject to future vesting3,771 15,936 
Total18,578,520 16,793,370 
15. Income Taxes        
The Company computes its provision for income taxes for interim periods using an estimated annual effective tax rate based on anticipated annual pretax income or loss. The estimated annual effective tax rate is applied to the Company’s year-to- date income or loss, and is adjusted for discrete items recorded in the period. The primary difference between the Company’s effective tax rate and the federal statutory rate is the full valuation allowance the Company has established on its federal, state and certain foreign net operating losses and credits. The Company recorded an income tax provision of $10.2 million and $10.5 million for the three months ended March 31, 2024 and 2023, respectively.
The provision for income taxes recorded in the three months ended March 31, 2024 consists primarily of federal, state and foreign income taxes, withholding taxes in foreign jurisdictions in which the Company conducts business, and income tax expense from a foreign audit settlement. The provision for income taxes recorded in the three months ended March 31, 2023 consists primarily of federal, state and foreign income taxes and withholding taxes in foreign jurisdictions in which the Company conducts business, partially offset by an income tax benefit from the release of tax liabilities related to uncertain tax positions for which the statute of limitation had lapsed.
The Company is subject to taxation in the U.S. and various other state and foreign jurisdictions. Because the Company has net operating loss carryforwards for U.S. federal and state jurisdictions, the statute of limitations is open for all tax years.
16. Related Party Transactions
In May 2022, the Company and Syniverse Corporation (“Syniverse”), an equity method investee, entered into a wholesale agreement pursuant to which Syniverse would process, route and deliver application-to-person messages originating and/or terminating between the Company’s customers and mobile network operators. For the three months ended March 31, 2024 and 2023, the value of the transactions that occurred between the Company and Syniverse were $34.0 million and $33.5 million, respectively. These transactions were recorded as cost of revenue in the accompanying condensed consolidated statements of operations.
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Special Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which statements involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may,” “can,” “will,” “would,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “forecasts,” “potential,” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:
the impact of macroeconomic uncertainties and significant market volatility in the global economy on our customers, partners, employees and business;
our future financial performance, including expectations regarding our revenue, revenue growth, cost of revenue, gross profit, gross margin and operating expenses, our ability to generate positive cash flow and ability to achieve and sustain profitability on GAAP and non-GAAP bases, the factors affecting our results of operations, the timing of future expenses, the end dates for certain types of expenses, and the assumptions underlying such expectations;
the benefits and efficiencies we expect to derive from workforce reductions and other cost-saving initiatives, including reducing our global office footprint and stock-based compensation expense;
our business unit reorganization, including its expected costs and benefits, related accounting determinations and the shift in our segment reporting structure, and changes to our leadership structure;
the impact on our business, corporate culture, and employees as a result of our recent leadership transition;
our expectations regarding our Segment (formerly known as Data & Applications) business, including the targets set as a result of our recent operational review of Segment, new product releases, increased investment and go-to-market focus to capture market share, and increased revenue growth;
our expectations regarding our Communications business, including anticipated efficiencies and strategy for streamlining the customer experience, including increased focus on self-service capabilities;
our ability to retain and increase revenue from existing customers and attract new customers, including enterprises and international organizations;
our ability to maintain reliable service levels for our customers;
our anticipated investments in sales and marketing, research and development and additional systems and processes to support our growth;
the anticipated results of our foreign currency hedging activities;
our ability to compete effectively in an intensely competitive market, including our ability to set optimal prices for our products and adapt and respond effectively to rising costs, rapidly changing technology and evolving customer needs, requirements, and preferences;
potential harm caused by compromises in security, data and infrastructure, including cybersecurity protections;
our ability to comply with modified or new industry standards, laws and regulations applying to our business;
our ability to make progress on our environmental, social and governance (“ESG”) programs, goals and commitments;
our ability to manage changes in network service provider fees that we pay in connection with the delivery of communications on our platform;
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investments and costs required to prevent, detect and remediate potential cybersecurity threats, incidents and breaches of ours or our customers’ systems or information;
our ability to optimize our network service provider coverage and connectivity;
our ability to work closely with email inbox service providers to maintain deliverability rates;
the impact and expected results from changes in our relationships with our larger customers;
our ability to form and expand partnerships with technology partners and consulting partners;
anticipated technology trends, such as the use of and demand for cloud communications and customer engagement tools;
our ability to leverage artificial intelligence (“AI”) and machine learning (“ML”) and develop and deliver products that incorporate AI and ML and our expectations about CustomerAI and its potential;
our ability to successfully enter into new markets and manage our international expansion;
the sufficiency of our cash and cash equivalents to meet our liquidity needs;
our expectations regarding our share repurchase programs;
our ability to maintain, protect and enhance our intellectual property;
our ability to successfully defend litigation brought against us;
our ability to service the interest on our 3.625% senior notes due 2029 (“2029 Notes”) and on our 3.875% notes due 2031 (“2031 Notes,” and together with the 2029 Notes, the “Notes”), and repay such Notes;
our customers’ and other platform users’ violation of our policies or other misuse of our platform; and
our ability to successfully integrate acquired businesses and realize the benefits of our past or future strategic acquisitions, divestitures or investments.
We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q.
You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, results of operations and financial condition. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described below in Part II, Item 1A, “Risk Factors,” and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. We cannot assure you that the results, events and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.
The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 27, 2024. In addition to historical financial information, the following discussion contains forward-looking statements that are based upon current plans, expectations and beliefs that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under Part II, Item 1A, “Risk Factors” in this Quarterly Report on Form 10-Q.
Overview
We enable businesses of all sizes to revolutionize how they engage with their customers by delivering seamless, trusted and personalized customer experiences at scale. Our leading customer engagement platform comprises communications APIs that enable developers to embed numerous forms of messaging, voice, and email interactions into their customer-facing applications, as well as software products that target specific engagement needs, including our customer data platform, digital engagement centers, marketing campaigns and advanced account security solutions. This combination of flexible APIs and software solutions helps businesses of all sizes and across numerous industries to benefit from smarter and more streamlined engagement at every step of the customer journey, including reduced customer acquisition costs, lasting loyalty and increased customer value. Our platform, which combines our highly customizable communications APIs with customer data management capabilities, allows businesses to break down data silos and build a comprehensive single source for their customer data that is organized into unique profiles that are easily accessible by all their business teams. Empowered with this information and the insights it enables, businesses using our platform can provide robust, personalized and effective communications to their customers at every stage of their customer relationships. The value proposition of our offerings has become stronger and our products have become more strategic to our customers as more and more businesses have prioritized building more personalized and more differentiated customer engagement experiences through digital channels.
We operate our business in two business units: Communications and Segment. Our Communications business consists of a variety of APIs and software solutions to optimize communications between our customers and their end users. Our key Communications offerings include Messaging, Voice, Email, Flex, Marketing Campaigns, and User Identity and Authentication. Our Segment business consists of software products that enable businesses to leverage their first-party data to create unique customer profiles and achieve more effective customer engagement. Our key Segment offerings are Segment and Engage. Together, our Communications and Segment products power our customer engagement platform. We believe that our two business units are complementary and address adjacent needs and related problems for our customers. Our goal is to create a flywheel for effective customer engagement by combining Segment’s user profiles with our rich Communications data to drive more personalized and intelligent customer interactions. We believe that our business unit structure enables each business unit to execute toward its respective goals with appropriate focus and independence, best positioning us to achieve our long-term plan of creating the leading customer engagement platform.
In 2023, we revealed CustomerAI, our predictive and generative AI layer, which couples the power of large language models with the rich customer data that flows through our Customer Engagement Platform to help brands unlock enhanced consumer experiences. We believe that our CustomerAI capabilities and initiatives have the potential to increase the power and reach of our platform, make every interaction between our customers and their end users more personalized and intelligent, and accelerate our data and communications flywheel described above, benefiting both our Communications and Segment products.
In January 2024, our co-founder, Jeff Lawson, resigned as Chief Executive Officer and as a member of our board of directors, and Khozema Shipchandler, our former President, Twilio Communications, was appointed as Chief Executive Officer and as a member of our board of directors.

In the three months ended March 31, 2024 and 2023, our revenue was $1.05 billion and $1.01 billion, respectively, and our net loss was $55.3 million and $342.1 million, respectively. In each of the three months ended March 31, 2024 and 2023, our 10 largest Active Customer Accounts generated an aggregate of 10% of our total revenue.
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Factors Affecting Our Results of Operations
We are focused on profitable growth. To increase revenue and grow market share, we intend to drive product innovation, leverage predictive and generative AI, further enhance our ISV, reseller and other partner relationships, improve our self-service capabilities, cross-sell our products, expand internationally, and enhance Segment data warehouse interoperability. We also intend to optimize our business and take measures to reduce costs, including simplifying our business processes, modernizing our infrastructure, focusing on self-service, leveraging AI, and implementing other initiatives targeted at improving efficiencies in our business.
Our revenue is primarily derived from usage-based fees, which can lead to variability in our results of operations and at times create differences between our forecasts and actual results. Our usage-based revenue is also more immediately impacted by changes in consumer spending and macroeconomic conditions than our subscription-based revenue.
Our gross margin is impacted by a number of factors, including the timing and extent of our investments in our operations; our product mix; our ability to manage our cloud infrastructure‑related and network service provider fees, including A2P SMS fees; the mix of U.S. messaging termination compared to international messaging termination (which has lower gross margins); changes in foreign exchange rates; the timing of amortization of capitalized software development costs and acquired intangibles; and the extent to which we periodically choose to adjust prices of our products.
Our gross profit is impacted by our product mix. Our cost of revenue and gross profit are also impacted by changes in hosting fees and network service providers’ fees and our ability to pass these costs through to our customers. We also experience seasonal trends due to increased consumer activity in the fourth quarter, which may result in lower sequential revenue in the first quarter.
We are winding down the software component of our Zipwhip business in 2024, which we expect will negatively impact revenue growth rates in 2024. While we previously announced the end of life of our video product, we have extended this timeline to December 2026. As a result, we no longer expect a significant impact to our revenue growth rates in 2024 resulting from the end of life of our video product.
We are also migrating part of Segment’s architecture to a new infrastructure provider in 2024, which we expect to allow us to recognize greater operational efficiency and scale up new AI-driven products and features. We expect this migration will take several quarters and result in overlapping expenses with our original and new vendors for much of 2024, which we expect to negatively impact Segment gross margins until we complete the migration. We expect to complete the migration by the end of 2024.
We expect our prior workforce restructurings to reduce our operating expenses in future periods. We also expect that the new cash bonus program that we introduced in 2024 to reduce or eliminate our use of equity compensation for certain employees will impact our expenses commencing in the current period.
In February 2023, one of our customers, Oi SA, a Brazilian telecom company, initiated reorganization proceedings in a Brazilian bankruptcy court and exposed us to risks on collections of pre-petition receivables and ongoing revenue. In April 2024, the creditors of Oi SA approved a Judicial Reorganization Plan (the “Oi Reorganization Plan”) that aims to ensure Oi SA’s operational feasibility and continuity of activities and further provides extended and discounted payment terms for pre-petition receivables. The Oi Reorganization Plan is subject to ratification by the Brazilian bankruptcy court and contains contingencies including but not limited to Oi SA’s completion of financing by July 16, 2024. As of March 31, 2024, we have $10.8 million in pre-petition accounts receivable (net of $4.4 million in reserves) and $16.7 million in post-petition accounts receivable due from Oi SA. The customer has been making regular payments on post-petition receivables. If the Oi Reorganization Plan is not ratified, if Oi SA fails to comply with its obligations under the Oi Reorganization Plan, if the contingencies contained in the Oi Reorganization Plan are not timely resolved, or if the customer ceases to make payment on post-petition receivables, we may incur additional bad debt expense or reductions in revenue in future periods.
Key Business Metrics
We review a number of operational and financial metrics, including Active Customer Accounts and Dollar-Based Net Expansion Rate, to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans and make strategic decisions.
The following table summarizes our year-over-year revenue growth and Dollar-Based Net Expansion Rate for the three months ended March 31, 2024 and 2023, and the number of Active Customer Accounts as of March 31, 2024 and 2023.
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Three Months Ended
March 31,
20242023
Active Customer Accounts313,000 300,000 
Total Revenue (in thousands)
$1,047,050 $1,006,564 
Total Revenue Growth Rate
%15 %
Dollar-Based Net Expansion Rate
102 %106 %
Active Customer Accounts
We define an Active Customer Account at the end of any period as an individual account, as identified by a unique account identifier, for which we have recognized at least $5 of revenue in the last month of the period. A single organization may constitute multiple unique Active Customer Accounts if it has multiple account identifiers, each of which is treated as a separate Active Customer Account. Active Customer Accounts excludes customer accounts from Zipwhip, Inc. (“Zipwhip”). Communications Active Customer Accounts and Segment Active Customer Accounts are calculated using the same methodology, but using only revenue recognized from accounts in the respective segment. When presented in this Quarterly Report on Form 10-Q, (i) the number of Active Customer Accounts is rounded down to the nearest thousand, (ii) the number of Communications Active Customer Accounts is rounded down to the nearest thousand, and (iii) the number of Segment Active Customer Accounts is rounded down to the nearest hundred.
Our business and customer relationships have grown since we began reporting the number of Active Customer Accounts using the above definition, which is anchored to a minimum $5 monthly revenue figure. We have a large number of Active Customer Accounts with relatively low individual spend that in the aggregate do not drive a significant portion of our revenue. Due to this dynamic, we believe that the number of Active Customer Accounts, as currently defined, is less informative now as an indicator of the growth of our business and future revenue trends than it has been in prior periods. In the three months ended March 31, 2024 and 2023, revenue from Active Customer Accounts represented over 99% of total revenue in each period.
Dollar‑Based Net Expansion Rate
Our Dollar-Based Net Expansion Rate compares the total revenue from all Active Customer Accounts and customer accounts from Zipwhip in a quarter to the same quarter in the prior year. To calculate the Dollar-Based Net Expansion Rate, we first identify the cohort of Active Customer Accounts and customer accounts from Zipwhip that were Active Customer Accounts or customer accounts from Zipwhip in the same quarter of the prior year. The Dollar-Based Net Expansion Rate is the quotient obtained by dividing the revenue generated from that cohort in a quarter, by the revenue generated from that same cohort in the corresponding quarter in the prior year. When we calculate Dollar-Based Net Expansion Rate for periods longer than one quarter, we use the average of the applicable quarterly Dollar-Based Net Expansion Rates for each of the quarters in such period. Revenue from acquisitions does not impact the Dollar-Based Net Expansion Rate calculation until the quarter following the one-year anniversary of the applicable acquisition, unless the acquisition closing date is the first day of a quarter. As a result, for the quarter ended March 31, 2024, our Dollar-Based Net Expansion Rate excludes the contributions from any acquisitions made after January 1, 2023. Revenue from divestitures does not impact the Dollar-Based Net Expansion Rate calculation beginning in the quarter the divestiture closed, unless the divestiture closing date is the last day of a quarter. As a result, for the quarter ended March 31, 2024, our Dollar-Based Net Expansion Rate excludes the contributions from any divestitures made after March 31, 2023. Communications Dollar-Based Net Expansion Rate and Segment Dollar-Based Net Expansion Rate are calculated using the same methodology, but using only revenue attributable to the respective segment and Active Customer Accounts and customer accounts from Zipwhip for that respective segment.
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We believe that measuring Dollar-Based Net Expansion Rate, on an aggregate basis and at the segment level, provides an important indication of the performance of our efforts to increase revenue from existing customers. Our ability to drive growth and generate incremental revenue depends, in part, on our ability to maintain and grow our relationships with existing Active Customer Accounts and to increase their use of the platform. An important way in which we have historically tracked performance in this area is by measuring the Dollar-Based Net Expansion Rate for Active Customer Accounts. Our Dollar-Based Net Expansion Rate increases when such Active Customer Accounts increase their usage of a product, extend their usage of a product to new applications or adopt a new product. Our Dollar-Based Net Expansion Rate decreases when such Active Customer Accounts cease or reduce their usage of a product or when we lower usage prices on a product. As our customers grow their businesses and extend the use of our platform, they sometimes create multiple customer accounts with us for operational or other reasons. As such, when we identify a significant customer organization (defined as a single customer organization generating more than 1% of revenue in a quarterly reporting period) that has created a new Active Customer Account, this new Active Customer Account is tied to, and revenue from this new Active Customer Account is included with, the original Active Customer Account for the purposes of calculating this metric.
Key Components of Statements of Operations
Revenue
Revenue. We recognize revenue from our products on either a usage basis or a subscription basis, depending on the nature of the product and the type of customer contract. Our reportable segments contain products that may follow either revenue recognition model.
The majority of our Communications reportable segment revenue is derived from usage-based fees. The usage-based fees are earned when customers access our cloud-based platform and start using the products. Some examples of our usage-based products are Messaging and Voice. For Messaging products, we primarily charge fees related to the number of text messages sent or received. For Voice products, we primarily charge fees for minutes of call duration. Some examples of the subscription-based Communications products are Email, Marketing Campaigns and Flex. For these products we recognize revenue evenly over the contract term.
Our Segment reportable segment revenue is derived from Segment and Engage products that are subscription-based. For these products we recognize revenue evenly over the contract term. When our usage-based products are embedded into our subscription-based products, we charge for each product separately on a usage or subscription basis, respectively, and record the revenue in the reportable segment in which each product resides.
Most of our usage-based customers gain access to our products and solutions through our e-commerce self-service sign-up format, which requires an upfront prepayment via credit card that is drawn down as they use our products. Pricing is generally based on a publicly available, self-serve pricing matrix that generally allows customers to receive tiered discounts as their usage of our products increases. Many of our larger usage-based customers enter into contractual arrangements with us for a period of at least 12 months. These contracts may include negotiated terms and typically include minimum revenue commitments of varying durations. Usage-based customers subject to such contracts are typically invoiced monthly in arrears for products used. In each of the three months ended March 31, 2024 and 2023, we generated 71% of our revenue from usage-based fees.
Subscription-based fees are earned in accordance with subscription pricing terms. For our subscription-based products, customers generally enter into negotiated contracts, which are typically one to three years in duration. Subscription customers are generally invoiced in advance at the start of the contract term. In each of the three months ended March 31, 2024 and 2023, we generated 29% of our revenue from non-usage‑based fees.
Amounts that have been charged via credit card or invoiced are recorded in revenue, deferred revenue or customer deposits, depending on whether the revenue recognition criteria have been met. Our deferred revenue and customer deposits liability balance is not a meaningful indicator of our future revenue at any point in time because the number of contracts with our invoiced customers that contain terms requiring any form of prepayment is not significant.
We define U.S. revenue as revenue from customers with IP addresses or mailing addresses at the time of registration in the United States. We define international revenue as revenue from customers with IP addresses or mailing addresses at the time of registration outside of the United States.
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Cost of Revenue and Gross Profit
Cost of Revenue. Cost of revenue consists primarily of fees paid to network service providers. Cost of revenue also includes cloud infrastructure fees, direct costs of personnel, such as salaries and stock‑based compensation for our customer support employees, and other non‑personnel costs, such as depreciation and amortization expense related to data centers and hosting equipment, and amortization of capitalized internal-use software development costs and acquired intangible assets. Costs of revenue are generally directly attributable to each segment. Certain costs of revenue are allocated to segments based on methodologies that best reflect the patterns of consumptions of these costs.
Our arrangements with network service providers require us to pay fees based on the volume of phone calls initiated or text messages sent, as well as the number of telephone numbers acquired by us to service our customers. Our arrangements with our cloud infrastructure providers require us to pay fees based on our server capacity consumption.
Gross Profit. Gross profit represents revenue less cost of revenue.
Operating Expenses
The most significant components of operating expenses are personnel costs, which consist of salaries, benefits, sales commissions and bonuses and stock‑based compensation. We also incur other non‑personnel costs related to our general overhead expenses.
Research and Development. Research and development expenses consist primarily of personnel costs, outsourced engineering services, cloud infrastructure fees for staging and development of our products, depreciation, amortization of capitalized internal-use software development costs and an allocation of our general overhead expenses. We capitalize the portion of our software development costs that meets the criteria for capitalization. Research and development expenses are generally directly attributable to each segment. Certain research and development expenses are allocated to segments based on methodologies that best reflect the patterns of consumptions of these costs. A small percentage of research and development costs, such as costs related to digital architecture and information security, are not allocated to segments because they support company-wide processes and are managed on a company-wide level.
We are focusing our research and development investment in the highest impact product areas for our future. We are investing strategically in alignment with our focus on building a trusted, leading customer engagement platform.
Sales and Marketing. Sales and marketing expenses consist primarily of personnel costs, including commissions and bonuses to our sales employees. Sales and marketing expenses also include expenditures related to advertising, marketing, brand awareness activities, costs related to our SIGNAL customer and developer conferences, credit card processing fees, professional services fees, depreciation, amortization of acquired intangible assets and an allocation of our general overhead expenses. Sales and marketing expenses are generally directly attributable to each segment. Certain sales and marketing expenses are allocated to segments based on methodologies that best reflect the patterns of consumptions of these costs. A small percentage of sales and marketing costs, such as costs related to corporate communications and global brand awareness, are not allocated to segments because they support company-wide processes and are managed on a company-wide level.
We focus our sales and marketing efforts on generating awareness of our company, platform and products, creating sales leads, expanding relationships with existing customers and establishing and promoting our brand, both domestically and internationally.
General and Administrative. General and administrative expenses consist primarily of personnel costs for our accounting, finance, legal, human resources and administrative support personnel. General and administrative expenses also include costs related to business acquisitions and dispositions, legal and other professional services fees, certain taxes, depreciation and amortization, charitable contributions and an allocation of our general overhead expenses. General and administrative expenses are allocated to each segment when they are directly attributable to each segment or are allocated to segments based on methodologies that best reflect the patterns of consumptions of these costs. A significant portion of general and administrative costs, such as costs related to corporate governance, and certain legal, human resources, finance and accounting functions, support company-wide processes and are managed on a company-wide level and, therefore, are considered corporate costs and are not allocated to segments.
We expect that we will incur costs associated with supporting the growth of our business. We may also incur higher than usual losses related to deterioration of quality of certain financial assets caused by macroeconomic conditions.
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Restructuring Costs. Restructuring costs consist primarily of personnel costs, such as employee severance payments, benefits and certain facilitation costs, associated with our workforce reductions. Restructuring costs also include stock-based compensation expense related to vesting of stock-based awards of the impacted employees.
Impairment of Long-Lived Assets. Impairment of long-lived assets consists of impairment of intangible assets and certain operating right-of-use assets and the associated leasehold improvements and property and equipment when the carrying amounts exceed their respective fair values.
Other Expenses, Net
Our other expenses, net consist primarily of our share of losses from our equity method investment, impairment charges and gains and losses related to our strategic investments and marketable securities, including interest income; and debt-related costs, including interest expense.
Provision for Income Taxes
Our provision for income taxes consists primarily of federal, state and foreign income taxes and withholding taxes in foreign jurisdictions in which the Company conducts business.
The primary difference between our effective tax rate and the federal statutory rate relates to the valuation allowance the Company established on the federal, state and certain foreign net operating losses and credits.
Non-GAAP Financial Measures
We use the following non‑GAAP financial information to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that this non‑GAAP financial information may be helpful to investors because it provides consistency and comparability with past financial performance, facilitates period‑to‑period comparisons of results of operations and assists in comparisons with other companies, many of which use similar non‑GAAP financial information to supplement their results of operations reported in accordance with generally accepted accounting principles (“GAAP”). We believe free cash flow and free cash flow margin provide useful supplemental information to help investors understand underlying trends in our business and our liquidity. Non‑GAAP financial information is presented for supplemental informational purposes only, should not be considered a substitute for financial information presented in accordance with GAAP and may be different from similarly‑titled non‑GAAP measures used by other companies. Whenever we use a non‑GAAP financial measure, a reconciliation is provided to the most closely applicable financial measure stated in accordance with GAAP. The users of our consolidated financial statements are encouraged to review the related GAAP financial measures and the reconciliation of these non‑GAAP financial measures to their most directly comparable GAAP financial measures.
Non‑GAAP Gross Profit and Non‑GAAP Gross Margin
For the periods presented, we define non‑GAAP gross profit and non‑GAAP gross margin as GAAP gross profit and GAAP gross margin, respectively, adjusted to exclude, as applicable, certain expenses as presented in the table below:
Three Months Ended
March 31,
20242023
Reconciliation:(In thousands)
GAAP gross profit$544,041 $490,690 
GAAP gross margin52 %49 %
Non-GAAP adjustments:
Stock-based compensation5,891 5,290 
Amortization of acquired intangibles15,682 29,961 
Payroll taxes related to stock-based compensation345 195 
    Non-GAAP gross profit$565,959 $526,136 
    Non-GAAP gross margin54 %52 %