TWLO - Earnings call 4 2023

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Operator

Hello, and welcome to the Twilio Fourth Quarter 2023 Earnings Conference Call. [Operator Instructions] I will now turn the conference over to Bryan Vaniman, Senior Vice President of Investor Relations. Please go ahead.

Bryan Vaniman

Good afternoon, everyone, and thank you for joining us for Twilio's Fourth Quarter 2023 Earnings Conference Call.

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

Khozema Officer. Executive are Viggiano, and today Financial Chief me Shipchandler, Officer; Chief Aidan Joining

reminder, will GAAP a release IR Definitions can As website. we found and and this measures be posted reconciliations call. our on prepared between on our our in and remarks results disclose non-GAAP earnings non-GAAP our financial

could We about subject and that outlook statements in are actual our to our and Form including make and cause goals. Many statements risks most risks filings, and this on differ XX-Q. those forward-looking also uncertainties to future will call, are statements unknown known materially described including results described. SEC recent those Such our uncertainties from of

statements forward-looking are update We obligation represent to except any statements, made. beliefs Forward-looking only statements as such our disclaim any required assumptions and by as law. of date the

over Aidan, and year I'll Khozema Q&A. open that, will With we'll full then to it and our results, discuss hand for QX call and who the

Khozema Shipchandler

afternoon, million you We exceeded cash Bryan. fourth income out from flow. in delivering XXXX. strong you, nearly had the for a free for and quarter revenue in income $XXX to $X.X and and terrific million targets Twilio today. Good revenue, from our non-GAAP a Thank in quarter, us non-GAAP close joining everyone, operations operations billion thank $XXX

to increased as shareholders. Before believe opportunity to this jumping leading I first sharing customers an start value CEO, incredible Twilio's into next a be for and my the its results call, by privilege of it the is to quarter, I unlock company this wanted there chapter. that into is

make interaction data combining on and more we're personalized As AI we to innovate, intelligent. the power continue of and communications, every to focused

a the platform on strong and leading fundamentally become are and competitive solid a is to executing unchanged, operational financial and engagement foundation vision position. Our this from we customer

businesses. tremendous products of their of We set are are because we bringing great customers have to value Twilio, thousands who hundreds a and to of committed

we took optimizing year, our last and the execution to capital enhance focus significant Over steps our strategy. while allocation

structure, profitability growth. streamline to We also to cost meaningful deliver actions durable our our accelerate path took and

XXXX Our teams delivered this. on numbers underscore objectives these and the in

During revenue, to $XXX non-GAAP operating improved restructuring a results $X in in loss a million operating stock-based non-GAAP $XXX from operating our revenue XXX $X.X by points XXXX, and million excluding million, flow of as income compensation, XXXX, we our year-over-year. in free delivered generated billion non-GAAP percent of expense reduced basis of cash

strides to enabled our All of significant path take hard this work on us GAAP profitability. to

to promise solutions, infuse into continue enabling intelligent on CustomerAI our communications to customers. Our product capabilities AI have our worked us our teams of more for

helped Our to demonstrate drive business XXXX. which leverage, upon Twilio financial continues the this for build momentum Twilio performance to in year, and impressive meaningful that will we communications the delivered

it is Segment touch to. at business already Twilio time, how I at I'll the same this to performance. the level closer look to bit have begun At needs we this performing later. deliver a not improved can take on see a

and am of increasing basis. year-over-year and it terms leading of operational in of product revenue a of Twilio Twilio year Our for grew Communications organic strong and over accomplished of extremely have team the the Twilio's just which in XX% quarter, full revenue XXXX privilege the billion. innovation. with of business, the last fourth I generated $X.XXX an had Communications XX% $X drove revenue on very what billion year, I And both over efficiency proud

streamline leverage year, and to drive the activity. further increased a of operating undertook we number go-to-market our actions Throughout

are efforts this We the QX moving shift. Flex and both by into we reflect reporting continued and these in campaigns Communications marketing today results

want aligning are natural also and and taking advantage cross-sell better With how opportunities. changes, our upsell buy of products we're to customers these our

success with of product aggressive an delivered also We CustomerAI. maps, early signs road saw and

used In Intelligence, reportings, call and analyze enables was have AI-powered an in call released that already XX minutes. QX, customers beta to Voice extract customers insights to Twilio their from it our capability over data million

optimization of we in greater increased drive our to and examples algorithm products. messaging innovations traffic traffic and flexibility are shaping introduced engine Our performance the

new Our XXX% XX products across our by testament sending to also and the over messages scale reliability messaging and core platform. set records Cyber during billion Week, e-mails X a billion with of and uptime e-mail,

that in XXXX. also are leader the named a our as Platforms, the Engagement CPaaS position Omdia Magic by recognized Universe: the leader innovations and Our as for Quadrant the maintained Gartner in to XXXX externally in XXXX Customer fact we evidenced Twilio industry, CPaaS a getting is

In We're software continuing a communications geographic of company. network customer a largest partners, our our to leveraging We're accelerate to reach our X-figure expand and footprint. date, deal deliver messaging ISVs impressive with to new our cloud ability also leading wins. to customers QX, signed we and commitment

interactions will orchestration signed they and where For fully of we powers important able for both for example, a of with Airship's brands, solution a mobile deal become will platform and global X-year, trillions Airship. app cross-channel our integrated channels. partner customers messaging thousands experience leverage be X-figure to an e-mail

be Our focus of us continue opportunity to will certainly one and is an this partner to year. for area on we channel proving

Applications, & Our underperform. formerly Segment continues Twilio still business, Twilio Twilio strategically while to to Data important

believe bookings not need sequential execute to our expectations. yet drove to can. QX, we We improvement I and better is we accelerating that growth in Although up

to framework as Over any be to to been is review an Twilio's and these findings operational the with forward work time results Segment. team in share past this conduct a and readout plan at result. extensive our changes financial working We of I've a X of March, ongoing. do weeks, path I'll to ready the which

unique our and CustomerAI are customer are beta each customers. for went publicly we're product determine CustomerAI helps most which on private by likely shipping QX. products and in updates tool, CustomerAI over XXXX, purchases great to drive teams a seeing live XXX becoming recommendations engagement customers, QX the to And been That to in the laser-focused that in said, available Predictions Since Segment adopted our has a response innovations.

to Staples Canada, CustomerAI excess and customers Platforms leverage the driving efforts. for other cross-selling leading their and product of merchandise effort and tech clear market in provide as was inventory leadership, sell in value #X meaningful that improve a the its XXXX It's Financial Customer on IDC's a Data IDC for work is where personalized powerful market is Services life is for share. recommendations that demonstrating Twilio in and to provider for more abundantly MarketScape able and solutions recommendation CDP reports evidenced recent Leaders by services, Segment to category the Industry the most XXXX school

unique leading meet our communications strong see They needs, chose of of with In both usage we combining financial data Twilio company whose the X-figure their capabilities. their with internally and spans competitive Segment. Communications recognizing quarter, externally the value We a proposition customers. deal customers our traction platform services a U.S. signed to with to and multiyear and continue fourth both

when efficiently rely Internally, of a their that securely and directly, multiple they're units. Verify authentication personalized get zero-copy logging users view so they're leverage business They get across process in. and of their Segment's them who deploying on Segment so a they architecture will deploying end can to warehouse profiles. data query real-time Externally, seamless enrich to to customers the secure millions and segment

from solely Messaging the software a With all company. We Twilio incumbent moved away also now from of relies and signed salon Twilio, deal this international on its providers X-figure management with company for an one-to-one directly messaging view for that them. purchasing BXB so products are customers. those beauty have the a its already customer And Segment able with company of business deployed to they better

to help These customers are lasting their Twilio leveraging data loyalty personalize together, them and build not with customers. just their bring to communications but and

Our deliver profitable team that will decisions on focused intentional enters and making XXXX us growth. help to durable, balanced

for clear. priorities the are year Our

to business will running we look growth. execution, and with accelerate need for continue areas we our First, sales can continue to where better we

review business we that path wrap while need the for advancing position of and growth. objective determine best to optimizing will forward Second, profitable success of Segment up long-term Twilio our our

remain both in portfolio several innovate extremely maps private AI and across product examples bullish road and to third, ability on we in beta. our our our with incredible And

years, it our Jeff up today. truly a the Jeff's for next this build believe and past job leading success a for set follow to we're grateful I'm disruptive footsteps. that the remarkable start-up journey, Lawson, co-founder, is phase of For company, from to I the that company in our XX did of admired to

my express to want of Twilions this company for also the make who special a gratitude I thousands place. such

undergone company that's a lot building all, delivering change have for on employees through our focused Our they've great Yet customers. past committed year. remained it a of to this

work to next growth innovative to That will how financially progress we've and to made to leading look a optimize said, I sound profitable business. team in positioned for business the this I'm impressed We run phase. forward. and more and has Twilio the have continue we moving with the extremely forward do, continually

And with it Aidan. over to that, turn I'll

Aidan Viggiano

strong guidance free flow. We quarter. Thank you, operations Khozema. exceeded non-GAAP record another Twilio and finished the with a fourth and from our of cash income quarter revenue, delivered year

million the year, from organic operations flow. billion non-GAAP cash For $XXX free in we in in full growth, $XXX revenue, generated revenue income XX% and $X.XXX million

exceeded These we've negative a and roughly a breakeven is to committed to one of business basis was over and what while non-GAAP progress into organic and results on said that do. from last outcome, growth. flow were levels made We going demonstrate to operations free that flow meaningful generated delivering the cash double-digit XXXX significant generating now free cash non-GAAP we we the came XXXX, we in income from year, this

X% billion, X% and X% $X billion, year-over-year. and reported Communications was revenue million, revenue organic X% up $XX revenue up up $X.XXX was X% year-over-year. Segment quarter was reported year-over-year. Fourth organic

As part Communications campaigns, Khozema a changes are these as of result regarding now of and products business. the our Flex operational marketing highlighted reported

been revenue & For Data have that million allocated would $XX this represented previously QX, to Applications. of

Segment We & includes products. Applications Twilio which our both Segment, have Engage and to Data also renamed

metrics As changes, accordingly. and recast result have level results a been all these of segment

holidays, quarter We across seasonal stabilization revenue usage-based products strong which as in throughout well the activity our continue the as to to beat QX. in our around drive see helped volumes

our crypto the customers growth, excluding customers was XX% year negatively excluding customers by year-over-year. organic headwinds to for XXXX, revenue X impacted revenue industry. crypto QX was the Total the year-over-year. And from total quarters, growth crypto QX XX% revenue organic rate growth full was Similar last in

to crypto with line QX after in roughly the of headwinds have majority lapped vast the we impact. from expect crypto will be QX, We which

XXX%. expansion rate net was dollar-based QX Our

XXX% a net churn primarily Our was elevated in did dollar-based churn for see Dollar-based and Communications XX%, QX. was net expansion rate or contraction crypto we contraction, Segment versus XXX% improvement rate that excluding for modest expansion by driven customers. and

international We million, points lower messaging. The quarter-over-quarter. year-over-year of decline points growing and and of non-GAAP a non-GAAP year-over-year by driven XXX profit XX.X%. XXX was up gross quarter-over-quarter This $XXX X% basis campaign margin basis delivered was gross down QX representing registration and XXDLC fees primarily

and margins gross non-GAAP our of non-GAAP business primarily in a XX%. driven our savings and non-GAAP San cost income of respectively. our This with margin at expectations settlement by XX.X%, though were operating million related and benefited revenue was Segment ongoing operations city we December better-than-expected discipline, QX XX.X% onetime representing gain the QX ahead for for from from $X $XXX restructuring Communications came and recognized units to Francisco. a also of meaningfully million,

commitment unit. As our provide in to of business we we intend feedback, going continue operations to performance response and business and transparency quarterly loss by evolve report investor our to non-GAAP greater on income disclosures forward, support in from to

million. our QX for million. $XXX non-GAAP non-GAAP for operations income loss business our $XX from from And was QX business Segment Communications was operations

of we growth. completion its the execution order for mentioned, review details business are improved We'll this operational on review profitable identify Khozema upon more to and path the provide March. of undergoing in outcome As forward Segment appropriate an the in

completed resulted our impairment relationship As approximately Segment assets. a Segment No our developed result of intangible part impairment our The year-end. carried assets million as in of and we a million the of acquisition. impairment customer we goodwill on at technology performance, test an $XXX reporting unit $XXX test acquired in identified. Segment's business was of intangible Segment goodwill

charge impairment Stock-based of XX.X% million, quarter-over-quarter with XXX expenses operations million basis of QX, of $XXX was restructuring to intangible compensation excluding charges restructuring aforementioned was $XXX points associated and QX year-over-year. non-GAAP includes million revenue which basis $XX points and related loss million percentage the as approximately costs, down a $X.X in Segment. asset from XXX

of million profitability strong San In benefit as generated settlement as with $XXX million, cash city primarily of our driven QX, $XX well by an related and collections non-GAAP free we cash to tightened onetime flow Francisco. the

While free we focus in flow flow cash to cash we drive free us remains for a expect vary greater as the quarter-to-quarter, profitability business.

completed announced we program to have continue billion against over to XXXX we $X date. now Lastly, and that $XXX million execute in share repurchases the February repurchase of

guidance. to Moving

due $X.XXX X% of we're The to and representing initiating X% what basis, QX, target growth we seasonal elevated to which not to an is revenue QX, X% a For platform a recur part is a our on expect year-over-year in reported This decline do dynamic to expected organic QX. we billion in X% basis. in to saw activity on on last year. to similar of billion, sequential in revenue $X.XXX

see the our prudently we're business. given the to stabilization products the nature growth through that planning continue volume of We expect of our across We year. usage-based do year-over-year balance communications

profitability our to QX. Turning outlook for

and associated from guide $XXX primarily down and new estimated an million, reduce efforts compensation $XXX a as of due employee from order program. incremental compensation operations to million grants a to We lower to expenses. us equity expect with revenue go-forward towards total sequentially transition million bonus of to non-GAAP our quarter-over-quarter, reduce compensation of proportion new cash equity of $XX expenses program income cash This continued in to stock-based part will our as allow

focus to and driving continuing committed reducing to GAAP We're on on our to stock-based path operating we profitability. compensation remain leverage,

Given provide operational year $XX taking an our framework to from March. full from of of operations expect XXXX premature provide review review cash at expenses a currently minimum, account new this program. operations stage. million estimated non-GAAP a underway, completion full the annual updates But after our we for even to income at it's non-GAAP in outlook exceed income guidance the income operations financial Segment any Segment to the non-GAAP the We from bonus XXXX into operational to and following intend incremental XXXX year

We've generation made non-GAAP the significant flow last driving year in business. strides over cash meaningful in and profitability our free

everything strengthened and for ahead. XXXX We in set excited in foundation of and well accomplished have XXXX, have I'm our I'm financial proud the beyond. to teams efficient ourselves up growth durable and our opportunities deliver

With that, up open we'll for it questions.

Operator

from Morgan [Operator Instructions] of Meta line Your with the Marshall comes first question Stanley.

Meta Marshall

in are Great. see in Maybe there growing. efficiency what know business. just Segment past, had to you of the pipelines first sales Was traction looking at you question, kind improving I the said or --

same of of You didn't give kind some statistics. those

performance just of improving there? to can use what kind we benchmark So

generally, that noticed America-focused, And of little being side we then pickup the just maybe second sequentially. ends a on the given up gross a -- down bit a question more Communications just see QX in of on step of traffic margins kind in North business, the

margins would be So helpful. just gross any commentary on

Khozema Shipchandler

Sure. Meta, part start part Segment with and can Yes. I'll the of it. of it Aidan margin answer the gross

just expect that think that sequential on of see So exactly not improvements indicators looking we overall QX. they're at just to, to that it and I some our be. of ourselves, we the of Segment, in I anticipating were alluded as we is like it's bookings And the where the But we not mean, did would we'd pace we're kind and expectations. of meeting improvement

year. And of notably, course win improvement the win we've was of rate actually new And performance our the in well, also bookings again, in logo the as QX see a rates modest XXXX. consistent QX. since sort we think over seen best I did

least pretty that, And about so trajectory, to feel we have terms in good but again, work of do. at

we the there. of portfolio do a expand better business. said, that able part can we we've to more we it can job in And finally, as definitely market just #X And across that share it's in our most but can at based it as just terms CustomerAI what Segment do IDC. CDP, based by been on then we strategically running and of we just it's determined on important, recent that by do report think that product how there's But with we least the the do think

Aidan Viggiano

margin take the I'll Meta, comp. on gross question

was bump quarter-over-quarter. it see We So down QX quite did up a bit.

the So we quarter-over-quarter higher saw of XXDLC freeze The by was than the is still what lower in QX half drop U.S. first year. driven registration quarter-over-quarter.

U.S. a of to using in XXDLC different in pressure last remember bucket. pressure in going primarily of some you messaging, we bit by to seeing registered, a a push international international in driven that are get quarter-over-quarter just are resulted And as of where quarter, countries saw within margin customers additional that. of within kind that function we messages fees the little that, margin If we and addition made well, the

at those XXX So basis for up when X look overall business, points performance the up But QX, are you good pretty is year, in Communications for margins big the drivers. the XXX basis points. year-over-year. quarter-over-quarter

although margin bit the positive in versus QX. down trend year, a a generally, So

Operator

question next from with Your comes of Murphy line the Mark JPMorgan.

Mark Murphy

and it? how you date. Anything win mentioned shed messaging to contract on can any I we Can that X-figure just came think might click on follow-up. won whether sometime believe Not the you Then you Khozema, you've quick when annualize largest I in And together? me or so deal start later duration messaging a that in then a contributing light just could to that perhaps that clear perhaps immediately revenue? year? have

Khozema Shipchandler

the mean far I because of of -- deals. too we it customer into both They're just we're that's score can't in the little unique customer to involved disclose on based but of the get able each we're I bit that proud those is certainly one. each fact names, kind type can't a Yes.

of I both arrangements. multiyear think those that are kind

X. see of see. And over an the for revenue that And so like of opportunity continue contract a time, we length typical we that or next to the that's revenue over there's period duration that kind should typically quarter

Mark Murphy

step QX guided in the consistently it to little drives how or -- you're -- relating the Okay. fairly spread a something on growth organic to Aidan Is and little that believe revenue actually then model. to growth to a it different kind quick it. guiding a compared that what you impact better where rate through we that? something as follow-up, I is else? crypto slightly even Got have of but it or QX to Is possible it's us it less the translates for

Aidan Viggiano

it, here. take me Mark, Let

a couple things of that there's So are happening.

organic So to we're We X% guiding growth. QX. were X% X% to in

And to couple so a consider. of things there's

basis a growth did about on we right? was QX. talk XXX point side, That So the in crypto, headwind

to in to other mention remarks, rest here. you in so the of remember prepared We I'll our the expect we is, QX. When the look thing headwind this it be it didn't a similar mention business, at

our to product streamline fewer things continue on really We focus to doing portfolio, better.

of well they component result but products, as to in deprecating our a our point planned impact roughly business are say, roughly headwind year total our software will growth of We growth. this both product those XXX wind-downs video are as would similar year, in QX. And Zipwhip I XXXX basis on

the you the you crypto, about within of plan software say than XXX more just And and about of we'll last So Zipwhip. a nature thing the have predictable. from I'll another from the just points of points then which XXX given video the business, different much basis subscription end usage-based continue is, business, have basis our life prudently to is again, business

So revenue we'll growth of balance the the year-over-year do expect year. throughout plan prudently. We

Operator

from Sandler. Your of with comes Fish next Piper line question the Jim

Unknown Analyst

on [indiscernible] in anything competitive can in something pricing point seeing a potentially Quinton messaging QX saw market changes Jim segment. been to you Is then in that's landscape been you of already that you're the positioning? anything for Fish. Maybe terms standpoint, here QX? And or for aggressive in is a from This competitors out specifically has in more core getting the from

Khozema Shipchandler

that would is is the is it I the built of and success short, Khozema. the the on our no, characterize company innovation quality question. Yes. that of I'll This way really offering. take the In

of on really kind specific to. of comment And so you're aware And competitor. I'm never any we referring what

innovative fair is and the customers really we a for do of our for think broad we that we and I solutions a set price deliver charge of it. communications reality what

of scale, serve our it's a customers the And channels, terms serve them made so we very, that users to well. We've as ensure are those our all the of of in global way of the fraudulent setup network or for and want for factors our think the lot better super experiences. very that whether stuck investments great we deliver fundamentally, mix reliability And breadth ensure we And compliance and in of the that that's well and either. to fraud Twilio we messages mitigation customers. a aren't just paying in

a history maintaining we've really And long had price of discipline.

if able folks been end of market and time. we've not so very over to our lower with grow that the very, share successfully the are compete And on market maintain,

Unknown Analyst

kind the a point maybe of headwinds sense. the Makes in understand rebound of crypto just pricing. And then is interesting follow-up. here. I crypto one seen quick as think But I kind a you've

improvement so Do a increase potential that to And increases, how you maybe, pricing of relationship a pricing crypto basis trend activity? XXXX activity we are of -- crypto-specific as on as still seeing do of quarter-over-quarter the see landscape? sort And from the you kind in see we Twilio? any see expect increase in that of we

Aidan Viggiano

Yes.

from quarter, crypto crypto of about those a things. couple year, perspective, So the talked platform. we being of volume the on third second Last peak our in a and of kind our periods

QX So expect that headwind saw to with kind line in headwind the expect we that bit. kind in of growth played on roughly headwind, which crypto a to QX, the in after little or of several we with headwinds we through pressures abate be the quarters last we

specific starting periods of to industry. But in of kind of terms of we any volume. that, going provide to Beyond the crypto I'm kind those are higher outlook not lap

Operator

of from comes with the question Turrin line next Wells Securities. Your Fargo Michael

Michael Turrin

Great. you question. I taking appreciate the

underlying understand metric segment But profile. the on not one that the we've a of customer down. I and looking is we're Just you're the -- the at seen organization number think metrics, the fine-tuning I just Communications as there's when customer where moving pieces

data-driven wondering independently is evaluation, just Communications add to well. if that add viewed Communications you its I add more the across of in detail in the built strategic of often maybe segment enablement that can portfolio, can then address at think can as I'm of it's the on what currently? And just if metrics more were we've the as intelligence maybe some terms to Twilio the as you driving part, just currently piece a second Is the has what's So kind route? go you portfolio Segment possible. customer all Segment data something to on just different a opportunity

Aidan Viggiano

Why start, I to start don't it hand I'll and on Khozema. customer then the question, I'll over

just start So the numbers. to with

customers. count company side, the we're seeing level, saw on what basis reduction Communications And at dollar maybe if of a X% they customer a was back of reminder just our the smaller customer XX in only XXX,XXX count quarter. the is step self-serve count the customers take really by So the metric to are we quarter-over-quarter, Really, points customer in a down revenue month and included itself, up on generated in at least $X year-over-year. driven final

and And that's customers $X slightly so have drove been that kind the what slip we $X, saw above change what might below of like really was so quarter-over-quarter.

cohorts. which revenue look count count customer increased as spending And quarter-over-quarter, metric, our with seeing how can that would up. we some is at remains go at naturally but down, kind when look of that largest revenue ARPUs customer that in actually that, Importantly, more low. you metric, relevant growth metric And we churn, up very we're see

but driven really self-serve in the on low dollar been overall, historically it customers remains small So just as churn this business. has it's Communications by revenue side,

Khozema Shipchandler

Yes.

Communications. to connection I and really broadly, your relates its with CDP more think kind Segment question of it As was and towards

all we've to kind started Twilio of lot a that together see a opportunity we handful our to launch exactly our offering. I And of that, think bring terms of with that the do single there combine data do of ability within offerings. in Communications our of best capabilities products offering of

open-minded which that we CDP, it company. way that the for announced need You in for to want today, recently, our Flex certainly Unify of relates has like to the and been see think value relatively offering, the as the value example, we're about create I

eye I We an demonstrated an think we review first undergoing are on durable and Segment to the focused that foremost, profitable alluded towards value fact we're of through again, durable and growth. operational growth. profitable creation, very, very and with

We strategically just we a combined be has segment CDP. All a unique value to that us important. are have data doing asset remains I more think having lot to be others we to there of things for I said, that then do opportunities and pretty opportunities improve stand-alone we a in happens better to which inherent a that Segment ISVs. think other than to the lot of think that with able the think first-party pursuing do some But get And way things. talked also data with think want that having about executional partnerships I we the we're in deeply with that on. ecosystem, embedded Communications,

there's too. think an there I opportunity

And the table a have asset. lot but per we think complete so have our when taking we're that anything to operational not do interesting March We'll we off we in se, a really more share review.

Operator

from Your Ryan Koontz Company. the next question with & comes of Needham line

Ryan Koontz

guide, which even kind the the unpack the you income how Appreciate seems do sequentially could you same thing like guide on compares. revenue of down operating here with some I wonder if plan? down percentage-wise. follow-up. Is income on I impacts any line one And a that operating of new have we other Are the move should think bigger kind about? mainly comp there the

Aidan Viggiano

start. Yes, Sure. I'll

down stepping to QX, we're on million. right, million million $XXX you're of guide $XXX QX profit, in So $XXX

into play, Ryan. come that things X really there's So

So a revenue is had to We talked down primarily first, driven very revenue. holiday about in in our a Week. seasonality really record strong The remarks, We prepared -- by Cyber season. step right? level volumes we QX, during had

result that. revenue quarter-over-quarter to of as expect down kind step We a of

So driver. that's a

are other the on The drivers OpEx line.

it's $XX the new year in hit expenses as will program, that $XX in with prepared that is, and the program. million associated bonus are of We you incremental for remarks the in non-GAAP new the roughly full first begin we'll that net million QX QX mentioned, noted expenses line. accruing Those The 'XX.

to reduce program over time. cash allow us will Importantly, expenses bonus this new stock-based our compensation

really OpEx QX, to that's in side. And That's to the payroll then actually to $XX second So in about QX they tax are contribution. than million on are taxes is million that due one of just higher QX. a resetting the item related in $XX headwind

to that work. taxes how based just payroll year move you starts So throughout as the abate on

Ryan Koontz

of kind clear. you And if I we it's kind XXDLC, of of sure complex I'm just That's a also issue, in the it's version that a are it's cycle? of the where been but great. know I could like, where registration Perfectly onboarding wonder fees of kind are in -- saw maybe we churn and you and XXDLC bit XX-second this journey. unpack a

Khozema Shipchandler

able we're is being The and QX, accelerated mean for QX alluded past, that fees acceleration one to abating think process. over of through to we in fees get I step customers Aidan an reasons remarks to are in a as Yes. our to be down of I of the answer. kind to margin the deadline registrations alluded short able the were of XX%-plus that in there since the that the That to were result QX prior meet effectively deadline.

And anymore balance those, And reasons. a ending there is -- actually up for wouldn't there's to so nothing there talk anticipate about variety about no we of the that.

So behind it's and are, that's us. kind of where we

Ryan Koontz

And those were like you're expedite-type fees fees seeing?

Khozema Shipchandler

process. They No. fees with that registration were onetime associated

were so that in ephemeral And they regard.

Operator

Your line Walravens next the question comes from of Citizens with Pat JMP.

Patrick Walravens

say, so far. on a And you. done I'll Thank lot just Khozema, congrats Great. getting

than over in still do. cash there's I $X in billion So look, has $X a billion But to so lot know Twilio debt. and less

possibilities what cash? increase the not you of So that the are with I there. could are purchase? what stock guess, in of Why -- terms And questions what do the X some

Aidan Viggiano

flow was operational cash. us of Yes. profile in strategy million against focused Thanks, We're question, framework updates of March. the our in our Pat. of we're flexibility. kind recognize And I'll of the cash free which financial will Yes, on affords right to he if Khozema emerging upon sitting or on a about $XXX the existing of That combination Segment I'd completion now a we that chime lot authorization, take we just lot capital remaining. the can say our of review likes. allocation come executing any our have

Operator

Your of McGinnis the question comes with next from line Taylor UBS.

Taylor McGinnis

Maybe just softer sequential what to the And was a bit the compared in in growth to so touch total was XQ, saw it looks revenue as well. business upside to on it softer like than growth you year. the last Communications guide slightly the

disaggregate to tough, quarter? seeing what it's became that? there any change. core can businesses you're about SMS guess, challenged others, the So just and what drove and maybe API you given versus areas in the Were of more Flex talk some the with And that I

maybe can the talk So between difference just those. about between you performance

Aidan Viggiano

just of think was I don't saw throughout that and X% I'd ahead is out make traffic in the for driven we I the midpoint holiday they're one the that during Cyber I kind by volumes think a understanding don't sure to you're thing lift question? guidance of I I want the of provided relative Taylor. the largely what of to Is Week. of -- kind seasonal asking, know, record we fee elevated that. would drove We say what QX. just I'm kind call quarter. Again, so It your range about, Yes. came really really

Taylor McGinnis

Communications like -- that same sequential at and Yes, just look the the growth last quarter-over-quarter Yes. when you might in time. a business, I guess, bit it have been at, looks year stronger little

little that bit So came I'm maybe wondering there of? deteriorated in may macro to a mindful in be the if or softer just was that just anything anything be

Aidan Viggiano

year, Well, largely year, it line. were -- I relative this in up little X%. we we're think was to X.X% we're mean, up QX. a And QX bit in over I Last

what roughly to it's last So year. similar we saw

Operator

question line comes Power next of Baird. William from Your with the

William Power

margins, business there? pull for now obviously cetera? to first can Any still is you the 'XX just that, the et to approaching about levers how a speak, of I as so how key margin you operating you're hat, maybe kind question business. revenue Communications running guess on Maybe can just think a maybe thinking Great. XX%. maybe about And strategic you're part now I Okay. across primary Khozema. priorities wearing color us already CEO kind in you're know for of But the of update question of the on that Communications kind or Communications

Khozema Shipchandler

Both Yes. good questions.

So the I just vision of a see with material level, like and really start sort just I of wouldn't kind anticipate like diversion to -- there. strategy maybe

think that day, really of world's at on And we like really, to leading few opportunities which think a made we of quite we side, I improve I we lot. mean, lot strides platform. Communications I pointed have think you secondly, customer the rates strong a The as have out uplifted progress want very a intend said, say, on to seen But profitable you've can we're in And focused that. I'd I end the out we continue our already there. the and margin execution. build engagement growth. certainly the

and that to do position, across profitable grow the think and with off an improve a faster growth. I from have we cross-sell in some think portfolio business execution opportunities of to have product And we faster. opportunity structurally deliver in I have we continue think as I sales example, ISV we to self-serve, our do well definitely our an improve an the company relationships, we more can build it to can opportunity, of our opportunity for

back us customers resiliency like. of efficient, close to kind the our always products well, and could being into the allow Fraud could innovation been I other a us And at got better. I the there's Voice example, a As features office of put road that we've do able are increasing think heart platforms, lot of we we've inside Examples of Twilio. to what the I and that become come. We've automation at which has That the Communications, to opportunity our copilots with Intelligence, be a company, more will cousin that, think be of Flex. of could that help is I think been number I processes to also our internal that for a products I just tried Guard, of say sticking AI-related think a productivity, there's big that kind serve map. to mean be developer to of in lot still have

really do both volume think it's growth. also And And there's increased combination a for in so that that additional delivering leverage on profits opportunity focusing I of increased while business.

Operator

of Your comes Ryan MacWilliams line the next from question with Barclays.

Ryan MacWilliams

like First the macro from a Do on from the Communication and me. like retention of one retention both a rate pieces. tough for stabilization of dollar-based visibility net have stable standpoint, those assuming divisions? the you to here you floor Pleased net and feel both Segment see the more you have

Aidan Viggiano

Yes.

beyond of revenue that's another think our way next asking quarter. I guide the for

So What X% guided to an to we QX were say to I is on we to outlook going would X% not DBNE. revenue. provide

working as leveled quarter, Communications that mentioned, just Khozema faster. The a about initiatives, as on we those regards are number We talk the to dynamics mentioned. of obviously on the kind to in release has off, are side. With of we it happy really you businesses saw to DBNE,

Segment contraction has We but And then again, higher was periods. really XXX contraction churn Still by off, seeing higher on previous talked pre-XXXX, we points muted up and and about last that leveled versus expansion. in the XXX%, kind side, quarter. low in are that relative just and churn levels historical of to that's driven more the basis below business, just

Ryan MacWilliams

messaging up. has Do XXXX. messaging for all in have going think customers And thing, are for still could and forward long asking that is you Or change wait a the RCS then could kind at it But or this about business of Communications things for been through see? Khozema, I but RCS something the be really has coming time a with know iPhone been never showed it?

Khozema Shipchandler

Yes. Good question.

I think it's opportunity. an

term, we the of don't RCS I really significant think from in short impact see on a the adoption business. the

the improving as having the peer-to-peer less in greatest between in and probably messaging near impact on of terms see think term messaging so Android, iOS experience the I we AXP.

I we the can but medium we a and messages. it's dynamic, an long help to necessarily it messaging, AXP deliver I the support richer, don't business think term, I think RCS business. and opportunity think it over for ultimately engaging is do think customers do more near-term

Operator

next Zukin Wolfe the Alex Research. line question from Your with of comes

Ethan Bruck

This Ethan Bruck on Alex is for Zukin.

then need decompose through of just -- what should 'XX, back growth the thing XQ. And apply also think main strategy should income back I than as to kind your margin, should of that how of the you forward? drivers after allocation going Just 'XX, we about this growth for to to be the year-over-year think we of half [indiscernible] and to year if the to 'XX operating well? the FY just the -- that flow or the it touching year down better remainder around similar comment get the of made also kind operating wondered is the as think about cash just capital And you on the just would free could how we are or kind you'll or just

Aidan Viggiano

start I the can some last of don't on about Why question the talk businesses. Khozema of growth drivers and the

would that there going We're it. generally performance variability in guide be general, free free quarter-to-quarter. on as would better, to not flow, that provide like will pleased delivered expect we're would we've cash say I So the with a And cash we just income -- flow XXXX. I say specific would will really expect on in becomes I follow.

Khozema Shipchandler

of And just terms it split growth kind drivers, Segment. me let the between Yes. and Communications in of

a on have XXXX, moment what and is use Communications, partnering not we're to just where areas in number is obviously those a the And streamlining in self-serve So process really case-based been we've for customer that across really we're focused think focused do I providing selling, alluded CustomerAI. in business. I initiatives And but our we guidance ago. of

We're customer help very leaning there. finally, I actionable for in the And then for front partnerships well, opportunity authentication. continuing think think partner we then conversations. lines self-serve also example, then streamlining, to where personalized there's strong into AI, We stuff And that in businesses. we're scale for in our them like starting better seeing we that. to see their Intelligence particular, we improve growth as Unify our to onboarding, richer, And deliver solutions. on on already allows billing, a customer omni-channel ISV we're are us more for Voice capacity, from compliance, as an innovative an opportunity it see really Verify, insights to and engagement

In in cases core enable kind we do help leading and our with driving mitigating time think we our is around value. cross-sell implementations just Segment, customer contraction. and ad to optimization we're what of really faster customers first priority opportunity conversations, streamline churn and terms to of is personalization, an In use spend have their and

Ethan Bruck

maybe just [ in broadly just should we allocation then capital think about like broadly touching how on going And forward? ]

Khozema Shipchandler

Yes, I follow can just again. up maybe

And providing not to company. think allocation. We're the I of framework. financial relates sheet March, the given guidance other that certainly balance allocation we updates some well alluded our as in around flow capital do to kind We're we'll cash operational to characteristics as provide of any the a part any capital well optionality Aidan ongoing earlier as as it have our going of as elements review. it as do our some work of

Operator

from comes next Funk of with line Your Bank America. of question Michael the

Michael Funk

Yes.

comms the business. one the for So first

it growth? drivers? from Aside do creating election? What the year, later what Is it are there, Is for we what the revenue you expect possible or expect better best expectations the macro? should Olympics growth drive the to product in revenue your

Khozema Shipchandler

wouldn't say of looking provide a point wouldn't point growth. of to as events we're kind we're be macro to I able to also which of any want items a I those growth. produce position to I own that really driver one dynamics. at would of our to durable Yes. being in in kind we

like earlier, some is mentioned really we're that selling, of on I use CustomerAI. focused areas and As self-serve the case-based

the solve approach they're our customers of necessarily is ways one the think our bag. problems to have that products lens versus we trying of I we've really just through which to tried in that the the in

it relates ago omnichannel, customer to of customer Unify then Voice for personalized terms few of moment a in examples authentication, a Verify conversations. richer Intelligence for mentioned and that I engagement as

And those areas to we anticipate we'll that do growth. are be where so all able lift

which in capabilities I data with in we to an Communications, data, opportunity Communications. think exciting AI, enrich also combined really our particular, a is opportunity have

more or it's contraction. as have And all for much I those things, churn really election is relates and do actually with we our do to -- again, I and ago, to think Olympics. around moment really mentioned I if as a is doesn't to priority Segment, And it's think much it the then the can then finally, the control mitigate

Michael Funk

exactly demand mothballing mean potentially the to would that CDP? the Does said one what that for more then more, helpful. that not apologize, means. you change table be that strategic the in with you off I then financial business I you until some framework, nothing of include market Khozema, if a could, clarity Does for And comes review that And Segment. sure sale? is mentioned Maybe

Khozema Shipchandler

necessarily into of Yes, any wouldn't things those it. I read

that we mind. about is hand, hand, an But on one However, what on other company. that approaching is can know the just do is best we're We I the the operational will we mind with Segment definitely and the the we business are the that so strategically believe can with forward. approaching talked say review better, the execute open path we important open determine We that to an underperforming. review

that or Our Segment it's that it of we of cetera, financials, what would Segment. to company, said we And is as durable profitable overall comms would that as is we we a to whether kind growth. priority provided guidance framework, March relates to the beyond be today, operational the make obviously elements targets, other or provide capital our whether changes et medium-term respect allocation addition in any it any March with in

Michael Funk

to earnings? come out would Great. that means And prior at March Or earnings?

Khozema Shipchandler

later targeting of March. much be early kind April. would Earnings We're in

Operator

Cowen. comes question TD with from the line Derrick of next Wood Your

James Wood

wanted the of on to just business. Khozema, Flex I touch side the

guys shifted side. made that some in you the You QX, to go-to-market Communications cuts

to of into curious and you're drive lean feeling cross-selling if of the changes? the because growth half Flex Just the of to first you're how go-to-market potentially new And looking kind some there's what then of levers capacity more just kind level disruption about the in structure? with in

Khozema Shipchandler

Yes. I mean, I speaking, the I'll first. question think second broadly more take perhaps

way the do engagement more about best to opportunity, Unify, there best with that is an And combines that, customers. Voice that Verify personalized then where area opportunity can Communications example, deal authentication. We the Segment. allows lines, we've example, for the customer of got of the of another Flex the front of on Intelligence a of voice for sort bit existing little is lot sort company. which a do omni-channel for where can for I do the across cross-selling into in deal talked about a think we that We've talked transform and a example, we

more We to insights. have an to much opportunity means actionable to use add a capabilities, their AI existing richer, as

terms we think lot the way of so we of which in interesting a all really in into ways like are add And cross-sell sort value we existing can business. our writ of large, those that

balance don't would honestly, of much changes, think first I a of Flex, we've half to change. seen the really even it I As relates say, the lot year. in I or not mean, the

we us when were was efficiencies in pretty simplifying what that was to that also clear actions and buying wanted able Voice, were the business. to make think experience for made We I personas the to some similar. while our the December, being the of we some sure in for customers IVR Flex extract

of our aligned and/or can So capabilities. we those way want of kind account the customers, a our And in customers offerings to to sell now every in Communications contact buy. composable our which center of one actually consolidated some in capabilities executives of Flex

And negative impact as real result. no a so

and future we realignment. the that possibilities in think opportunities I based that see upon

Operator

come from of Matt line Your final question of BTIG. VanVliet will the

Matthew VanVliet

are following sort out up leverage about you only point across engagement an the team the back with opportunity, channel, I and a larger of partner on reengaging not Maybe and but and additional just thinking enterprises? how building using that Flex into mean, that Communications, as distribution

Khozema Shipchandler

Yes.

there, So to I and think just there's I Flex wouldn't limit a few opportunities it necessarily. actually

the the of kind about and overall of a of augment inside we building innovative us. I broadly maybe more continuing -- provide to alongside Flex in number there. do Flex we that excited is Flex we think ecosystem, we're of of is, that experience enhanced And capabilities they've do developed itself, They've customer. that what a I'll progress been what see sort there. have partner With very a sort start

way customer well, solution. and aspects changes just think the the or of some is, of business on I to suit the selling both that echo decompose a do answer the be prior have need contact we've in the question is make kind little a to an buying than we fully-instantiated whatever based center inside able to that think of composable to the I to different Flex a bit as of opportunity sort made

I the a of them grow solutions bring example, a be see We to market, as with with an large with well important do customers, as partners our is, business more business, certainly we be of for the I the our opportunity area opportunity with ability becoming to ISVs. to to a do alluded a really for will we that own overall for interesting deal, partner us. of and think both able think do presents partner, for them to business signed the it their and an help other focus part significant really increasingly see we part

Operator

today's call. Thank conference We you. That joining. will for thank conclude you

You now disconnect may lines. your

Twilio (TWLO) 14 Feb 242023 Q4 Earnings call transcript