TWLO - Earnings call transcript Q3 2019

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Operator

Good afternoon, and welcome to the Twilio’s Q3 2019 Earnings Conference Call. My name is Daphne, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session.

I will now turn the call over to Andrew Zilli, Vice President of Investor Relations. Mr. begin. may you Zilli,

Andrew Zilli

everyone, quarter you call. fiscal afternoon for joining our third XXXX and good for thank us Thanks, earnings conference

results on filings call SEC investors.twilio.com. press replay Our today's of and can IR our a found website at be release,

Jeff today and Co-Founder Khozema are COO; CEO; CFO. Joining Hu, and Lawson, me George Shipchandler,

Reconciliations can reminder, and non-GAAP GAAP some today be As press our in our a earnings will be and guidance between commentary of in found our non-GAAP terms. results release.

and discussion subject company our prove of may and contain Should these are some Additionally, incorrect, these results assumptions which statements, responses materially from should forward-looking to assumptions. actual forward-looking differ to be our uncertainties statements. risks, could materialize any of or

factors our affect included should incorporate Form today's A by results are be filings financial SEC XX-Q, that during to could recent description risks, and and of these report in our discussion considered our uncertainties reference. including most and remarks on information our other this assumptions

Forward-looking occurrence statements statements forward-looking such after to except no information any assumptions update or of represent reflect call obligation required to events events, the We reflect as and are law. to or made. statements or circumstances our during undertake of this beliefs made unanticipated today the date as new only by

that, hand you, With it Jeff. to over I'll

Jeff Lawson

Thanks, Zilli, and welcome everyone earnings call. to quarter’s this

you, to moment our in first Sonoma and thank of protecting horrifying recognize in call. neighbors the brave other Bay lives, take the to the and onto their Thank responders absolutely doing and Before the a I best to north livelihoods at conditions. I'd begin, X,XXX firefighters to our now County like homes, fires nearly keep

days scale view total results that of were this XX%, reinforces opportunity. early still strong that our Our that growing in growth revenue the are third market quarter with tremendous we this

we have bigger the in we the today, much while category And leader are aspirations.

our environment to to new long-term to and position inputs investing are engagement more slightly below confident Khozema fast we've guidance but growing our new much excited the ahead. more for and perspective surface business came demand into success across detail take us will this are base We products, doesn't revenue that and advantage market. about platform very regions, our that, for the and only of what the on I that customer that We're strong. in change recognize business our in scratched go are lies the that

We as for great continue on to companies needs building experiences every to customer engagement digital help customers. reimagine focus their company their

success our of driving Our the the all and breadth choice Twilio companies as relationships meaningful of first our with as customers. approach innovation is commitment relationships customer position with platform and building sizes of to product for offering developer

registered developer in of Twilio at million on north announced been today some will shortly about in Twilio has nowhere And products at a first and event new annual started now number at that and SIGNAL this accounts can features. and about leaders always is developers SIGNAL, customer Innovation core where being see million X of business developer more and new approach new working we we with the which the X had platform you talk SIGNAL, excited welcomed particularly and you number with companies X,XXX our told customers, climbing. introduced I'm George over features and conversations. more than that than of QX, prospects, we've evident products and the our we I at well of the biggest

the importance expect But who of launched At that with point this easier and a mentioned I experience out we customers Lyft, especially customers, conversations brands. engagement of with the from Nordstrom, transform and deliver conversations as kind this find from make Redfin, meaningful better we others. where companies their see we've a two message like easy, every message that with brands they built kind to heard to build a that's had as experience. they We've of engagement brand why for to the two customers out some company getting an across that only has channels work. it most their SIGNAL, way responding Everyone times doesn't reached way many to Flex, a engage of Macy's, way have figured opportunity customers, to this and customer frictionless

of Twilio major and We all SendGrid, within than product address also to ads ad to email synchronizes the market. managed informed smarter. a billion and the channel, SendGrid new Google are platforms: UI for Instagram, our from ads more your a of This you more by contacts allows three Facebook, marketing spending offering announced all $XXX ads your ads ads across campaigns digital target single of the email intelligence be importantly, the Ads. and so across can advertising is

email and inbox them, before rates send addresses bounce We to sender validation email validates which reputation improving also companies decreasing announced the and placement. API,

always named of yet. vision the everyone this engagement and CPaaS recognized our and the IDC and to who our of focused customers. best Twilio in is to a the digital customer SIGNAL success for tremendous great SIGNAL for innovation de energy to our deliver to There's transformation. our at CPaaS team icon year a recently I for no continues attended was a and want extensive worldwide thank that SIGNAL Twilio as leader strategy platform, because innovation of different. example amount this drive of segment the the being MarketScape facto And this was customer making on

has The fruit. a on and is our innovation solutions report communications and focus great validation that single of segment vision is of the recent constant our almost such powering as specifically bearing new communication mentioned how This Flex. our future handedly created Twilio highlighted

our high as are we're Flex, passed just to to features customers the product of for. see year We're the value traction and interest GA. with innovating Speaking of continuing continuously first asking great we add

companies we of media the voice to coming In the Streams announced to into more. access at conversation analytics calls transcription, allowing SIGNAL, real-time fact, the Flex, get API Media and

to brought within autopilot announced and also console. integrations We Flex and GA CTI native Zendesk the Flex between

While it's still some look to better continue and of seeing move to omnichannel efforts all engagement. as contact companies we the are to cloud transformation customer for early centers drive their great digital those sizes Flex, wins

are of yet combat One back made is the was feature verified by to other the step announcements we phone allows new trusted Twilio. voice that authenticated at a channel by that Twilio, unwanted take branded are SIGNAL This that robocalling. we and taking another calls

about get platform. have of actors. wanted be one, and had you proactively might many the I amount the about been calls, previous on do wanted on given of legislation and and Now, measures robocalls the of I but And calls our as or day our might unwanted school. but to might have get that our To noise, kicked who fraudster know potential impact concerns customers have We've such investors since talked business. from place. head it referring automated texts bad preventative When kinds to: and texts in texts, your there as unwanted calls calls it clear, you are we automated, texts people today. address calls off platform, a on beginning, two on those we behaviors Since from child's automated, those not support talk we they really of such about be or have automated

or designed and a actors industry use notifications. impact Carriers, emergency further We and are texts, cases. will we regulation valid wanted concern that welcome impinge appointment and said reminders, Congress, the There's calls to That customers to fraud flight support legislation bad about working these legislation do bad the with could making FCC, good groups support automated that changes, think doctor’s actors alerts or target these this.

me doing we're what So let address there.

support legislation we on passed expect signed and SHAKEN/STIR a bill weeks. Senate to in of we the As The and both that today, implementation House coming be have robocall focused

cryptography digital a common based of to the telephone SHAKEN/STIR As spoofed. number not calling key is uses a reminder, call ensure techniques on certificates public

We industry year to those goal by go SHAKEN/STIR expect platform our ensure in to the made live. and end initial in great pieces be of have in have under line strides for the help place with the signed will calls

just And have developed board that standards group joined ATIS, that we yesterday, the the announced we SHAKEN/STIR. of

partner ensure illegal is voice channels, primarily and furthering on advancing combat with board. And other at a our policies Karyn and and sits voice their have ATIS consumers benefit we illegal industry messaging and also providers counsel, Telecom, efforts. Smith, to We’re Carriers our federal and networks, for that to U.S. commitment involvement general our protect association, member the With of mitigation robocall U.S. protect businesses. responsible Twilio our strong Telecom, robocalls,

Carriers since customer's June, that pharmacists automatically our given doctors, and traffic. not anticipate cautiously to will they block and and we texts need Carriers as the have want an back their continue calls understanding in when teachers, blocking option the schools, on proceed impact And seen calls to others. receive importantly, calls consumers from to We were

However, looked revenue communications case even single be a of text the percentage the blocking including that currently wanted extreme allows you if data could estimate that carriers our we of on or messages, digit most at historical based of total legislation impacted.

are We the actual confident scenario, we worst importantly, obviously taking we is case the steps is ready be our these platform the de that for will necessary And approach regulation ensure This feel intends messages to impact minimis. which a the commission changes. FCC but that the classified Title channel support this I in this free. text carriers including ecosystem do as others the Twilio. largely service, as all The that has indicates keep to expect

is still this innings of the evidenced by scale George customers, market we about rate our opportunity about demand the the growth for close, at in are our great to talk to as early massive So platform. this and

long all era. to on to and every Twilions for yet how for customers our quarter want their the their of dedication their they in help another great reinvent focused thank the customers around the our this the all with for managing for trusting engage are as Twilio world digital customer to platform business and customers. We engagement thank endless company I run

And you to with that George. over

George Hu

Jeff. Thanks,

as the Our presence, investments performance our we a the initiatives, team quarter internationally are to paying to these and And strong partner out community. expanding market future building delivered in enterprise go continue foundation for the multiple build another strong expanding third off. for

the the than accounts. great A the sign expansion agreements XXXX in new XX are seeing more In with fact, of global we traction during we quarter, signed enterprise. or

executive, strong in region. an Yoshihiro a hiring Konno, we Internationally, office the opened lead to Japan

chose heard with Toronto, see Morgan bring on D.C., SIGNAL, of why power Stanley others the in great from like Washington and engagement. London, to continue to around Tel we the communications. world they At customers Paris Engage Engage Roadshows, and learn our the holding together coming their events Aviv success to weeks. Twilio We're Netflix, and Lyft, We customer to we a where community coming develop stops future with

programmable The stubs, quarter. for third and Department HR the let entered approximately new National XXX,XXX to Now their using when from financial SMS review XXXK with and more. via shared employees. We few a exciting USDA services authenticate employees me Finance the of the quarter to messaging of they U.S. this into service pay highlight are were logging provider Agriculture's in the a allocations deals relationship is WXs, Center,

to periodically onetime National send addition employees. exciting government. will and account notifications with Finance This relationship to the authentication, SMS federal password of In departments of new their use the Center largest the is to one an reminders

the They to are their build their them banking customers application challenger IVR serving We their Twilio also ground Chime builder accommodate excited Studio, To and completely industry to visual expanded any members from bank with U.S. our innovative health. for growing Chime, we're the on fastest journey. support up support growth, an disrupting helping account. on financial on chose of inbound platform level our incredible focused their to achieve relationship the banking

a complete most global chose with for across Last into second of year, Westpac Australia the Twilio customer. institution, the because we're We as digital to expansion as with platform of of we financial a offered scale. brand started is global XXX they demands efforts Australian its tens new company with millions our expanding new solution billion together market its there. customers. meet working account largest Westpac, value for a standard omnichannel we Notify a forward dollars. Westpac its We continue of the look and excited XXXX to entered Westpac with the rapidly notifications needed by relationship modern its and of progress Australia’s and

customers Flex great since GA October our for feedback we continues and of top in we've to XXXX. mind became heard of be

agent regions. SE, experience. a their Allianz several Allianz to the one with relationship new center chose power contact a world's of in signed we partner quarter financial Flex number This insurer out In Flex has one our customer and developer world's close groups and approach. largest Develop, services working the rolled combination business Direct Allianz Direct and with with

We also services, a provides Depot enable workplace. subsidiary the to CompuCom end end Systems, and into Office digital relationship with of a consulting entered managed that technology new to

reimagine are XXXX to and Allianz and great and had agents. win with like global As adapt to customer examples fully part the major platform. needs excited experience, a we Flex contact cross-sell The their interaction of in their massive progress of channel a their to efforts changing CompuCom regardless more help to Twilio SendGrid a cross-sell companies strategy with than CompuCom customers we to well provide continue programmable of more chose this These space quarter the Flex customer airline. of for center are shift both seamless the

use of Twilio and each flight changes, like and which and shows this team customer possible capable will we more. adding SendGrid for in was delays a make are This supporting checking They'd millions hard built effort customer these members, great reminders, of including our who customers. been messaging by and and who a all the deals Twilio amazing Email, years a to few working company relationship I of QX the personally value team product for the all a want engagement. SendGrid notifications of combining strong month expanded SMS thank email to for

expand we that and our market into like this all companies sizes. truly opportunity spans a of we're continually As encouraged shapes penetration travel,

used calls service for leading SIM front, Mason its built the smart tablets. customers in customers. the that a they for tablets computing kiosks, looking scale patient hospitals with their They help connect companies partner scale for their the a created a Super its to and was signed Twilio as ordering On services to Twilio hardware agreement engagement and infrastructure Forbes IoT build and provider edge we products more. turned to business were for an customized Mason, to and mobile have

into we're excited continued to going scale market on traction year expand continued our head IoT and of as partner the executing early, We're the positioned IoT making internationally. to XXXX. is we we're and our grow fuel presence, investments While next offering. our we'll Overall, into continue very ecosystem about our key and strategy QX the growth well into enterprise

With that, I'll to over Khozema. it pass

Khozema Shipchandler

platform growth how to power the strong of scale quarter George, for was choose Twilio business. Thanks, their testament and QX and is engagement showcases good our continue trusted the as afternoon a everyone. another this to High platform. customers of Twilio's customer

Organic to Now diving into the million third numbers, base revenue, which includes Twilio Twilio to Twilio SendGrid, growing in grew $XXX quarter. year-over-year XX% $XX XX% grew million was approximately revenue year-over-year. SendGrid for million. year-over-year base $XXX the XX%

pains. that while in systems we'd we mentioned, growing expected. fall to than where revenue few short very experienced was We've growth be. some come base Jeff of growth like came lower older As bit strong, our and with the rapid them Consequently, of a a sometimes

we discovered approximately issued third growing that in a faced customers quarter few run which being impact $X as resulted ongoing these also some onetime will the our to our billing pains processes have credits rate. totaling errors some in We million, of in

root errors Importantly, understand our to our billing we systems. improve related and these internal processes issues and are and controls other identified the working

will into invest the growth We systems future. continue trajectory support to our to in strong

revenue we moment change our Let are planning current to a me to take disclosures make. and the discuss

the through breakout we SendGrid will variable Accordingly, to percentage less quarter as continue evaluate public. business. scale variable to revenue believe less before revenue the in the WhatsApp prior and total, X% we variable, acquisition which overall but quarter XX% this has QX XXXX, Twilio declined closing has expect constitutes in contribution disclose versus of the and last of way the than total a the in longer the size a went Given revenue meaningful Variable X% has the base achieved, beginning designation better and XX% the in become revenue XXXX we majority the materially of we XXXX, to is from that quarter, category. to

data metric ongoing revenue we total is regarding now base to shifting important we basis base provide dollar third was off an quarter, especially your rate from compares scale Dollar-based change One revenue historical XXX% difficult models. on size coming very net our to normalize and the using a note will strong rate will of revenue, at total expansion this the and expansion that XXXX. basis of be this in so

I quarter. the credits by mentioned points Additionally, impacted few a DBNE the in

for provide bit what around over next As to rate a we the expect expansion of approached me let several the context the quarters. year, end of

XXXX. customer QX not to year First comp a occur traffic and for QX. do a this of anticipate we difficult growth in in the recall making XX% benefited that ramp again international And strong about by large those political

Second, a therefore lower quarter. SendGrid's the give XXX%, about historical few And expansion rate take points next dollar-based overall expansion once rate or given had combined any we’ll in been year.

recall, SendGrid was two our results. XXXX to and XXXX X, QX therefore As you may only acquired months February contributed on

QX rate of extra SendGrid, full we to month a of The the XXXX. of QX benefit will expansion will will As from an expect our be QX have in expansion also realized from impact increase revenue combined the XXXX benefit and QX. rate sequential

XXXX. the Top active and we accounts XXX,XXX down of in in range third total the communicating. Gross sequentially quarter Moving XX% revenue within quarter. XX the from been on, high to accounts active contributed QX had at flat at XX.X% approximately of XX% customer customer XXs margins the mid we've in end were QX

to any call will not provide impact be the yet as customer, mix, to timing, carrier the implemented. during P&L AXP continue have no the and mid FX impact the with regards to quarter we fees minor post-implementation. may still during Going cause high intakes, earnings country operate normal forward, updates others fluctuations. carrier fees, We have in XXs to we but the product, they while expect do to had puts

a our user anticipated, developer due which profit slightly in SIGNAL, in and of As million in operating was annual August. coming red conference, held the primarily loss at to $X.X was

we our to reduce feed estimates. us usage. more make for inputs potentially refined our allowing the capitalized Additionally, align process process, amount capitalize our better accumulating P&L This could cash software that with and closely we

tremendous get increase of year continue and As us share fiscal market the company. grow in opportunity a we XXXX, we to to see QX into ahead

our areas in in advantage about XXXX we talked guidance of opportunity. today this believe our is as years $X a has position expect for for market we believe of these us well take moment, profitability market will to the investments want efforts. $X reiterate profitability. focal loss earlier today, company. versus key elevated to some priorities million on that this long-term that these important an operating will we're finish multiple as slight million to of this massive go George In And to not Staying product growth. I drive innovation to optimizing of now investing We the for while with a point context,

of We sourcing, strategic few. over-time are and in efficiencies compensation changes to the internally drive changes early a working name including number a of to to stock-based capital stages

stock heard compensation and feedback over and time. ring on based down those your dilution We've both our numbers working of are actively to

full investments Twilio specific but levers enable with between also we more to extend provide these highlight today comes. today GAAP when Ultimately, results. information take items, don't our of advantage this have any being and will non-GAAP delta items opportunity. market and generational of Some leading We these position time the made the to regards will the to close

call With open that, everyone the Operator? questions. thank and joining I'll you for now for

Operator

from line comes Ittai [Operator first question from Instructions] Kidron the Your Oppenheimer. of

Ittai Kidron

Khozema I guys. on Khozema the systemic focus – million credit. issue the $X I this, to just of really wanted Thanks. Hey

a Or that my get in sure cumulative in hope this. to over around and clear get quarter make this effect be understand this I quarters had quarter? does itself multiple happen the this just this? me Just Is hands me

Khozema Shipchandler

for it's a Yes, little the so of bit thanks both, question.

we've on As as said I that just on the based experienced a think call, company. the we growth

sort to that some billing our through particular in are given for was some order of is experience things system going And specifically we manual one And fashion. that related looked paramount. that this obviously not pains really our that we've is the issue were of we forms a as at think I input where incorrectly explained. customers customer growing is systems this the our want trust

were a customers we once inputs, did we And couple issued were were analysis to a problem. And that back of manual of impacted. the of went And them were found thorough promptly we and in We credits preceded on going now and the that were there some these controls historically in a quarters. the place think a address errors handle got what we've we've quarter, to there got couple caused them that couple forward. the good a this of

Ittai Kidron

fully the this December, effect. now sure make as shift this results into guided to results actual think I to And from into about already with just mind. September September So take in the credit December is effect,

quite December. So midterms quarter-over-quarter understand your is onetime that substantially else in very that seems you it I still transaction last activity here And in anything large this? still little political, and decelerating business the requires But from that is core there volume or December. the Is onetime growth had to there highlighting to the you September September business the in from year understanding of think customer. like

Khozema Shipchandler

that I characterize it wouldn't Yes, way.

give perspective. more maybe the the and detail have from then and a Let bit little customer financials you Jeff you bit I'll a little me as a well give of George

quarter, of than take terms bit we did by think run I more our the guidance in the ongoing a down December rate.

issues we've felt it prudent we working are a with we we're think that and the them, quantifying think until good that. we're but through we as bit I extra but work certainly addressed. like it was issues certain the we're in warranted got do fixes buffer so necessarily of like absolutely put to all it that a the are that, And not entailed I felt an to think correct handle we little on I to was feel actively

growth got way any half like time, As long it mean it's as the at scale you impressive. for a it really to relates comps, signaled to look we're the I we've mentioned, kind feel terrific of that we've at year-over-year – difficult The that really, in be back going that you we of the year.

the to political traffic. pointed You

it again growth I we've slow example, rate I rate last pretty and our think that expansion been expectations half particularly down would a had the year. that that ticked customer of for of think a little really we around year. clear the we the And the onetime kind read in back bit that up

a Just maintaining a And rates more a DBNE referenced, that this an again, great little those the revenue Jeff add hard these And of obviously is size. business impact at our little where headed. on then turn base too. little we bit But the impact over moment still have let maybe explained feel a credits is ago. about growth bit we'll bit as I it And me color. to we to

Jeff Lawson

Ittai. Hey, Yes.

So, errors, I in year-over-year billion organic manual mean, quarter think dollar turned growing the despite at we XX% a I rate. run a nearly

I'm of we've so, proud accomplished. really what And

the these it. opportunity. this companies they using what hearing our need right all companies scale, one to very on this rate. that once is things we're of new our customers that. focused customers trend. long-term lifetime we're only we're And from and engage and to we're on here growing of all proud provide digital at a the changes in those at This And capitalize of happening that's mega their We're how the So channels of ability and about one

We've all we I team great as them business a a model. We've a market. getting better it's great see look and grow. I at got got So, great it,

So really what I'm ahead. about excited lies

Ittai Kidron

guys. luck Good good. Very

Jeff Lawson

Thank you, Ittai.

Operator

Your from Suri comes next the of from question line William Blair. Bhavan

Bhavan Suri

if I the question base I a expansion from dollar that rates points common could it metric. bps. touch you quickly. are basis trying understand Hey habits to the was I XXX guys, provide guess, reasonably issue. basis or dynamics within XXX changing for credits to that bps of billings it my speed if billing up points and to feels for thanks I was did sort of I’m you or be color target, want some this that? thanks that I And net would of how decelerated applications taking guess have had seeing but just scale of understand some drives it it effect XXX and volatility spending obviously I even just Or customers? on launched matters, like here, the just like have down hundred we few just the the guess Khozema. helpful. It to guess

Khozema Shipchandler

Yes. then I'll George little of seeing. the is what of just the perspective, But knew provide we a I Bhavan, reiterate, And that to just perspective the bit would me short I the again, the a mean think strong. comment in comps point, maybe difficult have think a Again, at our Again, answer pretty would is from always the really back I I reached math growth no. let scale we've have and we from that of guess half terms year. he's say starting I maybe customer in as

QX political And was QX, a out that of going the to into of XX%. in bit was that. well on approaching XX%. And results it that had normalize try And onetime traffic that then there recall we bit. back impact to you actually had little little XXXX, If had a that we this approaching we last to year then expansion That growth in elevating we period. was had we an tried growth the that as rates customer back had

I year, just associated part think DBNE part of would over in comps, that the larger been this elaborate expectations error time to lapped because in relates the we're And business issue pretty we we is it large as the running clear is numbers. in that credits. the we've becoming because a so, the into that manual billing on then our lot law And fact footfall you fade in will, and of as it in if this

can got saw all let you turn results you together color quarter. But over we that kind don't related so, what on the I he in But me in more. that's And to that of the that pointed put you a bit the it's think and George that on the to. it map issues that that some and of anything DBNE to

George Hu

of I mean, shift would customers demand fundamentally see don't some the our see our for seen Thanks, we the of to in in opportunity big except a we excited, we Sure. do front change us. plan haven't dynamics capture We that fundamental and customers. which of investing talked a say environment. that Khozema. interest We're really from Khozema to still are still about, any with and I we're lot nothing

Bhavan Suri

helpful. Okay,

sort you George adopters? demographics are ask me VAR there. Obviously, Let have maybe seeing early talked wins a the Flex in from the multiple I quickly what the is nice with initial going the up you conversations times And how This channel. for guess follow I of something just you here. with on past. and then were touch maybe about

Just those can color on you. get I two. Thank if

George Hu

question. great Yes,

So, terms consistent still It's said the in I a would I product. customers, was what say before. it the demographics newer generally speaking, of of mean, with we

So we're early still phase. mostly in the adopter

haven't the of product. we excited these to the crossed about from the and We’ve newer to expanding of with I proposition yet the the lot that excited still and that see it of a mainstream. yet It's have shoots. I beginnings start of We kind normal customers – the speaks a interest digital tech this But of But think And companies. not chasm. more is Allianz green caution pattern. economy product. we're to forward value towards now power CompuCom We're very the would not

we're there. about partners, the excited In terms we're facts the of seeing

right some past, that are infrastructure had mentioned, not testing really this in as the that strong that I a historically resellers bringing reseller for motion it we've And, We're investing some, frankly Twilio in or resellers. and initial now. onto year platform. been We've I've believe

be us, a will while something we don't in will able for that catalyst that it Flex think XXXX. we'll definitely for that think, it onboard be think more to interest I are it. investing be certainly, material us. in I growing is for I in but is the And

Bhavan Suri

guys. thank Great, you

Jeff Lawson

Thanks, Bhavan.

George Hu

Thanks, Bhavan.

Operator

question Morgan. next the J.P. Your Murphy from from Mark line of comes

Mark Murphy

continue for impact Khozema, wondering XXXX? is QX? to million many thank Yes, that think billing it you you. the $X I'm in And $X just would QX, how quarters into do million also

Khozema Shipchandler

I question think run pretty it the we our from that don't mean, good perspective. things about way impact But it look how we obviously, general, question. we I feel intimated. rate will of the kind for your necessarily after in way QX. FP&A thanks that into see Yes, Good continuing Mark. an the mean, XXXX I question, in evaluate

We’re not guiding for today. that obviously

So, I want the down rate. way one. I to it and definitely the moment that to on guide, as does as run itself it far an get ago, said on our a characterize have too impact that relates don't the we QX road ongoing But

It's full $X about million. a

probably onetime nature But play a want like you convey into would we comments guided – we communicated have issue, think just understood We have woods, fixes. handle ago, that bit it we a is the do as of if less bit moment on the be a that the of to things feel I that a have through way buffer, into kind a way the smart issue. just we're the for terms that we that out on get we that a in you like based in the we but out will, and it's we gave want we or until felt that do QX arms ourselves smart thing was investors. And we good to we the about We think it the all the way we've our the of it. of feel. around little fully while caught we little to way more put thing

Mark Murphy

Okay, great. credits? will receiving And the be then how many customers

Khozema Shipchandler

the have a mean off my the it we're head, top single head, realm. I know digit in don't I talking I that number it's It's my but so about number, pretty small. of of Mark. top that don't off

Mark Murphy

Okay.

XXs think I for you're If QX growth. that other look we're four at us you, guiding to out for The I I like low XXs. and would just looking question get if X% QX. in then across it And had at base would revenue and how we it that considered mid to sequentially, about quarters, trended X% around look it's something we think

for billing curious, the glide say would of and fair path what And to it constrained, Or into just cushion trend artificially you extra as would I due at sounds revenue a you next this QX? And base assessment maybe look again how guess, year? it's little errors that so, on I'm a view we'd currently? the like and the

Khozema Shipchandler

we've going the obviously not just customer of got do I had we've I signaled I'm we've it the political. this in that this call. anything Mark, would billings on and that We year, mean guide that QX thing. comment obviously the we to we XXXX. previously into Yes. comps have as we'll that We alluded when say to simply some tough onetime half back previously. had

feel have in say your XXXX. out to beyond inflicted were to put you're that feel to spite overall think And spite I quarter, about But not a the great just issues business. the current the in and what position kind the of of we to to model. will we is of the XX% be great I going guide so, able comp, in about self organic we in that the in inputs results to together whatever

Mark Murphy

Thank you.

Operator

Bracelin comes from of Brent the line Jaffray. question next from Your Piper

Brent Bracelin

Thank you Jeff, One XX XX% versus saw I slowdown take top look in Khozema, one at the of quarter. could. wanted growth the XX, at growth had and the that slowdown I at about the accelerated actually good top revenue the Khozema maybe the to little you outside top of the looked decline XX. different But you for to the like of – and million from fact the top XX the $XX an I sequential customer If bulk growth here. and the in it if revenue XX% contribution just afternoon. outside a for slice an

to or sequentially actually to a about where calculated customers the Is top this bigger having for that think quarter? safe then cohort applied? the net Or you it rates think decline cohort the quick that assume broad-based accelerated top these did as XX outside could the decline, maybe XX one you credits And that again, that some top rates? in of Jeff. rate? customer bulk And of some So talk expansion of there change expansion at looking expansion you that's were XX do of net the is follow-up about just net impact just on

Khozema Shipchandler

It’s good question. lot a in that. a Okay,

the start where and credit to just in was itself off terms credits. So the with or placed of that

to As of but maybe my different among customer base single off top digits. sure. handful a earlier, XX, in customers our the I were top of couple I our that them, think of larger head, there top would said don't they were XX, There a were have in be customers larger the been

In on or sequential up generated terms customers, dollar was the from here, overall top think of up of trying actually I that quarter-to-quarter a value cohort that in terms that of but pulling basis. overall

on. I you question incorrect. flat, or exact percentages callbacks, And so, top of goes feel obviously the offline speaks about the our declining overall total the of the But, premise to map with that I right. time that's the is good the XX the in of fact think, about follow we up don't concentration as We'll holding on kind or which of was but steady think

Brent Bracelin

It quarter, XX% was thought XX% I this quarter. it last it. this XX top next Got was quarter, XX XX last quarter.

Khozema Shipchandler

right. That's right, that's

Brent Bracelin

going in was about you the later, four RCS getting Obviously, we what new to what Sprint, ago, Jeff, you investors as about of RCS. Europe it SMS have months couple have of gen Thanks. AT&T next impact potential this overall I RCS impact kind later, question questions four Okay with Verizon, then direct we're has how consortium? on is pricing And the And think years? here to this do? could think that potential I next business kind you should relative the from we service, around of joining four saw T-Mobile months and the Google up. and now getting when of for months some guess

Jeff Lawson

Thanks Brent. RCS. about question the absolutely, for Yes,

and all, as upgrade supporter supported XXXX an think SMS, alluded RCS of So, a reminder, channel. of first right. this. strong And a early RCS to you has we're a Twilio since to as just RCS But as of

you So capabilities maps the it to and or message, are call the the adds things like can commerce more. economics is action within similar, buttons or new that but similar, do reach that's can messaging the core exciting because And all app the the building more this rich and we build is of Twilio on inside experiences developers Android already really phones. even on

opens new up that's opportunities. so really And exciting. It

we CCMI, and the building carrier four carriers rollout, that this carriers, those in United Now, inter-op messaging the initiative its view announced implementation four week by which is cross which the is will States hasten between was about good. the its

in with and of get on the top been all you out. on for effort. because that It's and when inter-operating good. probably can than carriers just been the It it time. and long do has to And four we it out really means promise can benefit carriers this weren't the out that that sooner going and if So RCS the the our customers leveraging That's agreeing each of our start rolling it inter-oping States get how on other. rolling United cooperating there carriers they’re RCS four customers a dependent

Operator

question next [Bank Nikolay Merrill line of of Your the America from Lynch]. comes Beliov

Nikolay Beliov

of question specifically the first rate my cohorts cohorts think – XX, Hi, with with expansion B taking the are happy both the look of thanks and part is, top cohorts? you is newer the the And outside the expansion at are My questions. line for rate for customer of Khozema. George and what trending my do you question in cohorts? you the older older When

George Hu

for newer quarter-over-quarter. I rate Hi. from that changed characteristics This the say wouldn't our them cohorts, have expansion is Yes, George. of materially

Nikolay Beliov

sales in both. of overlay question XX% I to XX% XX% versus for of And for of Okay. force? revenues. up a kind terms a as and like for picked spend as different about direct new while the a to a Is and revenue marketing XX% guys XX% guess like of sales you the you first Sales percentage marketing normal historically time

Khozema Shipchandler

are that mean that we've those said want Yes. This what so wouldn't the se like in think feel efficient. we making Khozema. is a normal. investments we sales I engine, I new as investments is believe marketing continue I say it's and the while per that we for long to

the quarter. also in I loss the particular the one think that took for up look is expense the a as QX onetime SIGNAL, shows numbers as at outlier and we which a is driver you large

you're and there I in an So of QX. comparing orange little of an a think apple QX bit to terms

Nikolay Beliov

it. Got you. Thank

Khozema Shipchandler

thanks. Yes,

Operator

RBC with Markets. comes Your next question from Zukin Capital Alex

Alex Zukin

guys. taking question. Hey Thanks the for

the just based on again. of net maybe topic favorite expansion, So dollar

– different if of the terms going this it I to we way. but know a been and add a asked try has In for guidance little bit, QX, I'm

it's back add you think, drop-off me wrong, which in the I still that XXXs I our looks by see you if the I'm If fairly QX. like correct math, very material low a it for do credits, mean,

bounce back QX You cushion and then the terms completing anniversarying mentioned and anniversarying. in in the the both the based extra – net dollar of expansion

zip appreciated help Is it kind of about So based than dollar sustainable net any that? we Is a have higher the and Just I would in thinking can understand just in us there be follow-up. it which the it quick Is you for teens? be should code any retention? is way there then XXXs? help one

Khozema Shipchandler

I'll on of Yes. but question. to help a math. DBNE don't for terms the I'll directional I'll a give you this – Khozema. updates is Thanks guide model. to bit you you little give of try specifically, your We in

significantly I that, extremely the mentioned QX earlier, in rates XXXX it approaching and XX% QX QX and called XX% and think about is elevated we out. in had growth And and had contributed we political XXXX QX had way both, a think QX to onetime this as as dynamic in I QX. you pretty customer then also and result, approaching in onetime which then that you obviously, this

stripped so, And that out this the absence impacts election in and customer obviously of normalized. are of having half with those the back behavior in an year

credit rate run issue, little is you do as The as you affects QX dynamic pointed this revenue a our bit well. also have that second which into out,

that to a in relative both DBNE. you and prior of fade QX of overall bit periods little so, QX do have a terms in And

number so we And that specifically. don't guide again, on

want a I specificity think way beyond little real I you're any provide marked that. you to on low the it, don't based that but

by I got calculating little a or say good around XXXX. as is feel into get down the obviously got guidance previously I'd fold come for anniversary it, definition is with that at we'll QX suggested. bit. it acquisition, start down it which we of But again, as As make little DBNE overall quite going becomes stub much don't because expansion based point you've in we're we that way QX, what rate the then combined out you've it come XXXX, just providing to January SendGrid more not our a complicated the on currently a and that we that continued into we're into expect which about will to but month, DBNE, bit And out to

Alex Zukin

Got it. or And follow-up then maybe George just adoption. Flex Jeff a for on

Allianz. You a costumer nice signed

about guys on revenue contribution decent about think this years. have should perspective how I overall potentially pretty revenue this a from being next years business curious talked to over to the previously business I'm few timeframe? you a meaningful And a just over next think we contributor the two

George Hu

George. is This

existing something yes, question in value And timeframes, a our for encouraged The the that definitely talking customers are early, we long-term people adoption, on. seeing specifically meaningful. a Khozema with potential opportunity, a certainly take with continue excited And proposition. of we're to have has that long revenue buying differentiated sign in customers. is our be that's I commenting on I about to we kind to said, obviously that us journey. think are of that Flex that but we are existing success obviously interested are these the So, without customers. let we're I'll field. think data And, yes, seeing by adoption huge on a the like a market think we that journey. it's our I We're think this points like very And And we

Khozema Shipchandler

revenue time revenues, it's our to today We continue In time. to revenue it material yet. to a will its today really It's goes obviously of is off grow that I and contribution We in terms expect be over this generate of obviously. the certainly think not contributor as product to Khozema, revenue on.

that contribution material really years. as back are time material that be that that its maybe to signaled wins. over our But revenue, wouldn't about anticipate XXXX. certainly end said, and as of past is next great we the that I to most would of we in expect things happen think number terms until feel XXXX, And I what headed that the really is goes. in But think where customer the I've several expectation George recent the some a of fairly I

Alex Zukin

Perfect, you guys. thank

Khozema Shipchandler

Thank you.

Operator

with next The question Bellini comes Goldman from Heather Sachs.

Dan Church

acquisition. in the us nine or Church quick Dan have is SendGrid for on you cross-selling expectations? about Any could color how Heather to commentary initiatives of this Bellini. a months tracked give question. on have just been Hi, It's terms relative I since

George Hu

Hey, that closed I heard think example in this Yes, I our of QX. airline George. you is we mean, the

track. say would speaking, I So generally we're on

products. going this to point existing I we forces think are customers to we've the fully integrated together new cross-sell sales the and customers and at

So, characterize think would yes, as I them track. on I

Dan Church

thanks. Helpful,

the rest think Thank mine you. have been asked. I of

Operator

next The of comes question Stanley. Meta with from Morgan Marshall line the

Meta Marshall

agreement you second away margins in be when sense should Thanks. dealing And the you quarter. like Great, any thanks. alluded of timeline as question, not term or you're more expansion applications, had thinking refer from? directly I healthy closed kind my pricing competition kind an And obviously you’ve around very wanted perhaps what get to cycles of sales the walked of to the to to deals kind we in of those contracts customer of you're Is the maybe that broadly prepared a script. just then seeing on account remain there from gross or of developer? with

George Hu

This is George.

cycles, I of asked do a sense types we that good So, see think, that the cycles. you I definitely of would two terms sales in say in the question sales

self-service the quarter be account, transactions can definitely at our can the we within ones start those start intra I commercial where in quarter. And cycles. the in have complete think be a segment, shorter and so developer times, relatively

think other describe, now these be we've And Flex, totally to is normalized expected think and and typically enterprise start, fine. be having, cycles we're cycles. have longer side for on true. self-service so not product saying I to that's sales of the what enterprises, for I a that's that example, developers I sold by which speak. to are said, spectrum, of been more be it's going They're for As the started would going think frankly that seeing more to even I to We've

In me again? half your second terms can of remind question the of you –

Khozema Shipchandler

Gross margins.

George Hu

churn margins, customers terms of like that in we haven't change leaving from logo like Gross seen perspective. in or customer, material churn, a

So that's I we're providing Khozema field. in gross color, more don't what is the but margin know if seeing

Khozema Shipchandler

to Yes, question. I George I relates churn, the mean, it as think answered

factors billing the XX talked you I about that the really in have think it be. it thing been would only other say within about that kind talked lot conversation. the margins of The this about that bps of zone due we is this thing zone the of I we we've only the variety is due was call issue it course past. a bit signaling expected it's long clipped a around otherwise a a gross It's to for in we've and by that out during where moves But to to little about time.

Meta Marshall

thanks. Great,

Operator

of line comes Partners. the Guggenheim Nandan question from with Amladi next Your

Nandan Amladi

Hi, taking thanks for my question.

So merge leading next basic as revenue what we to about into year? and the the maybe as way think you metrics variable streams, head

Khozema Shipchandler

way that mean, of think the Well, meaningful, to I a become manage that in internally, I that step a maybe lot we designation – the take the the has for doing I certainly and the mean, company we're a first I we that the think, reason company. just think I second. variable back way that place terms run in less revenue

joined pretty in we I've since way about substantially change I revenue it's see certainly kind was a we metric, was make. think, to the it that a play now. of And declined But X% this company. been like it that particular thinking so, felt wanted I that the year that It also should of something of terms would out long time

We see percentage obviously given you'll variable. simply that we total variable instead like us feel data suite revenue revenue been revenue what but around WhatsApp that would fact you I think, DBNE of of on metrics us. that's I some to breaking metric. otherwise the ARPU, going think So, pretty that et growth base what provide is as from comfortable significant the from a of But and talked necessarily things otherwise forward the total around should cetera, – we the about continue that out in around report We'll expect that's past.

Nandan Amladi

you. Thank

Operator

Power next The from Will comes Baird. question the with of line

Will Power

I just dollar-based couple a to I one just follow-up back the missed. expansion the piece just Yes, maybe questions. Thanks. rate. come guess other net Khozema Great. of quickly that

kind have the XXXX you revenue anticipated setting to you well. calculation going of that that just of being and variable in part of Is terms pulled do the think And I impact that said what's from again that? in that? of front that into level begin WhatsApp in as variable you revenue

Khozema Shipchandler

Hi, Will.

DBNE on folding of specifically? as impact and with the total mean You part calc? What's the associated variable

Will Power

Yes.

Khozema Shipchandler

Yes.

it's for been think to many de mean, of about reasons I this going I minimis thinking be time. the honestly. that's think, I that one we've some pretty doing

be see you think XXX for points, or really plus guys impact. will it there to something I mean an minus material immaterial think I about. could think I you basis impact but be won't don't and

Will Power

Okay.

Khozema Shipchandler

question the The part second of missed. I

Will Power

it. I that Yes, was know just that to… I wanted

Khozema Shipchandler

that And We'll through. the you bridge kind that for first – number The time. sure of just – the not the we'll you different that bringing QX. see timing pieces, you the timing a all change of sorry, of on it with provide guys change of we're the we'll make a moving in changes, timing the can walk so make to

Will Power

just thinking here. conversations like But you early Is Okay. further of lot And kind you're on how that question you're moves the Jeff cases, I just it excitement the in about seeing? at maybe seems XXXX? of can from for SIGNAL a color use George API, recognize feedback, provide excitement any then a into or that. customer beta

Jeff Lawson

Yes, Will. This absolutely, Jeff. is

connect launched a help better just So background, with to their we right. conversations to companies customers, quick

to of was delayed you – or text message, like like got and kind reply experience. you And got have delivered or your got boarding the would a when years was A exciting. happen. few was it your was flight saying We message novel then ago, that package was we've nothing flight your when all it

like you You great get it's automated if experience. not us, said a an back need thing. help, That call

you obviously we're can And do seeing able contact route like there you, say, alerts hey to center best the help companies companies so, a then an a and sometimes things should to leading lot and look, apply what the employee, in-store it's the employee, there's it is who and be employee. out that sometimes can of it's

of like people are is their ago of with and medium. a years all these have may about. sitting at and BYOD pocket the got been people messaging workers who in a variety preferred It's a instead out desk XX of device desks and phone now They've

with company. their I’ll that those way is to at that want company it's really to so, the And customers just announced be to company so customers consumers say we employees talk way of brand in enable really the product. new SIGNAL, the product. has the capture it to to Obviously, a it's designed beta able service the product changed and the that conversations connect change and every

trend stages in into we starts the It going other with early with think how to on. with we want there's very happens and the a here each of bridges macro companies. then engage world engage But how often I it’s that product. So as consumer

since I'll conversations, answer want dialogue. with of the most intended, that created for pun two conversations is the like a And it's with I And conversations a text lot past, to way that new, what say customers. not our just call trying companies. And been we no of a the that company notion is it's that necessarily the thing it’s in way to one with making announced we're

of from life there super started interest the early it's peak I it's that struck cycle in and think customers, product. nerve we've so, a but to And

Will Power

you. thank Yes,

Operator

line And your Rich & Needham last of with question Valera comes Company. from the

Rich Valera

on question sort above, the just like math, well grew been over which I follow-up XX% in SendGrid. better seems it think quarter, recently set. and growing a initially of XX% it's A you'd is it the Doing bar the I than little guess,

cross-sell and the process, growth next we rate that So kind I'm the see initiative? at the really year early flesh in XX% think, growth still, somewhat I where plus just a rate in that cross-selling you're could wondering, sustained for that as you of could think you go given out

Khozema Shipchandler

Yes, Rich. Hi, this is Khozema.

XX%. In the at rate growth the in came it terms for quarter, of

I in of we're to XX%. business. right, guide out I disappointed is going next as think a I math feel above I've about be XX%, being great your think that. would just it said We at So not growth we really pretty rate good previously, fell growth prospects I that. we but the the again, shot year, below have think if And about mean, the the

the the been in And zone don't range. number, I like consistently our guidance expectations that any have detailed but around so that's kind to expectations. of provide of our Again, in want somewhere

Rich Valera

them year? just as levels serve a That's into expense up, one of forward head going going of Is side. run next think good as could, to it exceptional I run expense back Should into sort rate next base XQ we out? on if the sort year? anything we a is the of the from great of we for and would Or rates there in scale that QX sort the as and upward follow

Khozema Shipchandler

going Yeah, to that's I mean, figuring XXXX think be, what we're I plan a right. the still is good question. out

it so opportunities other great elevated that way we the certainly scale, this growth – one as we put is I So necessarily. QX about say see multi-year anything into think long the dollars. at is think I way that read to we I is, is investable What will wouldn't or that see

returns so, per investment us opportunity there onetime an at our se. can organic And for saw And returns at deliver XXXX in as that for generating nothing is otherwise, scale. XX% those from is for and expecting you in investing great to looking we we're But investors. speak. future. the we're continue continue of are There's the we hopefully elevated something kinds what And kind the us QX growth of deck

Rich Valera

Okay, thank you.

Operator

Thank in There you are this participating further questions time. no for at today's conference.

bye. disconnect. Good may You now

Twilio (TWLO) 30 Oct 192019 Q3 Earnings call transcript