TWLO - Earnings call transcript Q1 2024

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Operator

Hello, and welcome to the Twilio Inc.

First Quarter 2024 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. It is now my pleasure to introduce Senior Vice President of Investor Relations and Corporate Development, Bryan Vaniman.

Bryan Vaniman

Good afternoon, everyone, and thank you for joining us for Twilio's First Quarter 2024 Earnings Conference Call.

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 at earnings between on our investors.twilio.com. our in and presentation results disclose non-GAAP earnings non-GAAP our financial

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

assumptions any will Aidan, forward-looking I'll except law. With then for we'll Forward-looking of made. hand to open beliefs Q&A. as the it are call statements by and QX represent the statements, update disclaim who such our any to over discuss and that, We our and only results, as required obligation date statements Khozema

Khozema Shipchandler

everyone, and thank non-GAAP from Thank QX Good afternoon, operations. delivering our year, start in today. to a in and you, the exceeding us you for billion guidance, $X.XXX $XXX Twilio Bryan. million had revenue joining solid income

operations, board a year-over-year strong XX% another Our $XXX a teams non-GAAP the increase gross of cash million, and $XXX executed free in well evidenced in from by as income non-GAAP QX million. of across quarter record quarter flow profit our of of

optimistic reinvigorating business are far. our early about progress of stages are thus the the in We and

we to quarters, profitability. the free new operating flow. In that's paired targeted leverage we before. accompanying than cash the focus and authorized significant the last X the to repurchases, total committed meantime, to billion. announced of rigor strategy and non-GAAP In In and expect also a billion additional significant and that GAAP share operating discipline, $X innovation In greater with growth R&D executing share an are accelerated delivering additional over XXXX, we're reaccelerate with for confidence March, authorization flow, Board the and operating profitability an are X making time. is reflection last begun the in our target This repurchase fact, announced we our board's to free ever $X quarters, QX that cash been opportunity investments bringing ahead. of we've In on we also we

and team we year. At billion of by As remaining of we've also we're is $X.X time, Segment's focused the today, operating repurchases billion getting shares, that Twilio into our to of innovation, QX income by more the embedding we Segment same product completed on capabilities plans operational on a the repurchased this and the of commitment end focused products, $X.X basis including approximately complete and review breakeven XXXX. of targeting the Segment, Communications non-GAAP to outlined, to executing

making layer. progress in and releasing board, new many we're are predictive which innovating We of underpinned generative our the are products, by CustomerAI, AI each area. Across and

operate role as innovation. And in let's financial a to the turn now chapter our welcomed rigor will company shaping leaders our we bench an important on to Finally, who focus with highlights. new operational next Twilio, and we of business of play discipline, greater

our basis first business of quarter up year-over-year overall Twilio organic on had X% million, Our an representing strong revenue. and Communications a with revenue of $XXX XX%

expanding agreement be our In believe that our wins, QX, with in growth global and Singapore short term. In partners China and our on the delivering of X-figure approach, the partner Hong extending momentum and disciplined value a Communications by carriers, fueled resell new of customers with to released signed the network and cross-sell both meaningful that its the majority products and will we're this for one and deepened partners, who resellers. our driving levers enterprise relationships and we products ISVs Unicom, across we're China's customers. wireless growth of a customer more short reacceleration drive will landed During long Communications quarter, focused self-service we ISVs, term, will With Kong.

signed also marketing a them be with will We co-sell working space automation Bloomreach, and in partnership with leader a products. to Twilio the

a better the are larger In value will products. With expand our we've products and launches Profiles assists markets AI innovation Unified number creating data their within on products. into and interaction, deal XXXX, customer insights QX, long while Twilio driving progress Copilot Segment X and our Flex, Uk Over more natively sizes. Communications by in preferences. giving automating to these new we with of into reducing Unified customers, Agent Universidad real-time where embed our Segment relationships intelligent centers. Copilot, Agent their Copilot within Segment in synergies ultimately term, deeper Profiles currently contact and behaviors and each the like We and Profiles, times. Agent unlock them and By into in our agents will Twilio's and resolution Unified customers are beta, focus already first leveraging and Twilio capabilities embedded Communications for announced customers' powered made with public Copilot, agent provides productivity stickier actionable for on enhancing agents from are accessing insights routing of Agent

by As And X of in just handle driven XX% support cases using deflect tools, able XX%. a been AI a to time months. result, reduction in our automation they've they've by embedded

our combining results scale it our are Segment While value it's customers how within these early, are illustrates realize quickly impressive able capabilities. to at still business Communications as when tremendous

operators, including an better realize PGA on personalized are public Intelligence, brands keyword, a response allows from Flex innovations, using their Our our great data hundreds AI when tangible based over to getting for language which beta allowing our leveraging also which have benefits transcriptions Voice within to their from Intelligence, Voice customer With insights recordings. Of are initial gotten of customer for using the trigger Intelligence, has that other communications. America continue of interactions valuable Voice any call support customers. instance, customers brands deployed half customers action like

to uses million introduced generative alone, recently to a place. And escalations AI customers embed capabilities we're best overall currently also Fraud verification sentiment churn of take XX,XXX than that Guard. the more may for language large XX Guard fraudulent language into our or better the Verify get continuing customer leveraging QX blocked can determine sense We brands models over where AI products. And conversation We so and in messages. have operators Fraud

customers also are We not saving our ensuring and have a seamless only money, but we're users customers our experience.

new which Bluesky, At the to media Twilio's sign-up a a its app, to competitive They app a users. ensure social seamless recently with launched During dollars, the hundreds the save users quarter, process saw signed we XXX,XXX of of public. chose secure of API amount gaining deal and thousands for only the impressive one received it authentication. day. launch, not ensured almost users new Verify company Guard new company sign-ups, secure And helped an but in Fraud

to business. our Segment Twilio Now turning

clarity QX, underperformance short that $XX in quarter, but million, greater X% year-over-year. was we review a of Segment of our revenue with March out address believe For up priorities we of It the was operational came will around segment list Segment. a challenging

onboarding to this cost performance. embed accelerating products to these of rationalizing in the its delivering turn review, rightsize We month and to meaningful and by momentum. In data investments that Segment's financial plans of natively right value already Communications Segment will time we we X place to capitalizing churn interoperability, continue our enhancing base, following the against XXXX focus progress business to contraction that customers we've believe using for into on in warehouse automate on made set improve CustomerAI and all the areas, address and around, have and AI

income by to a QX XXXX. non-GAAP getting breakeven operating also are basis to We committed on Segment

activate with to During bidirectional data. that Snowflake. With partnerships we Databricks, a we the Databricks ingest launched quarter, deepened seamlessly customers our integration allows and new and

GA by customers QX to We and into Copilot is interoperability positive to track are material in data warehouse further demonstrates embedded QX, and value natively businesses. we impact and the that Segment's are earlier, more to on adopted XXXX, like delivered enhancements innovation realizing Predictions product their partners in Agent it's get customers, since benefits Communications. CustomerAI deliver as across new to its focused continuing mentioned when offerings our

Inc., of data weeks Brazilian CustomerAI management they've Predictions investment by said and tools, company, team since work our their a implementing using that audience instance, X out-of-the-box rates. save science and engagement XP been conversion For improved able to and

we bring deliver can QX, Segment Looking beta, value our ahead we'll further our data embeds combining customers into products. natively with Communications which our Segment second by the demonstrates to Communications to product that into

that want new to over things moment joined the turning welcome Before Aidan, have to to take leaders my management team. a I

also of President to Product Chief Communications; as welcomed practices. Marketing Koehler as our Shani a Twilio governance we our Chris Segment. our Wyatt Inbal our quarter, and thoughtful the taken And approach During Chief Officer. We've Officer joined Thomas for yesterday, as evolving

and change. and recently voted be Stafman, drive Sachem we're as framework over next Andy Investor targets. team, of a proposal progress June. In attractive and a welcomed an XX as we updated decisions we share we're at very of a short the we're hold at submitted deliver Board our levels of within April deliberate profitability Management, in to And plan a a Meeting Annual at for an Directors. in the second, a maturing upon We're medium months, rigor to time our financial will Day that early of with announced we to company time, First, which of we in finally, And focus Board, which of Twilio's and term. making we'll significant medium-term lot the Head Shareholder summary, making and period growth discipline, continuing declassification partner to Capital set

turn over meaningful long financial our and that started create impacts us changes bear drive are will our opportunities with And I'll fruit, of others we've some profitable allow of Aidan. term. take to the in recent to but deliver to to for to durable, these we confident from longer stakeholders growth see will commitment our we it all over While that, positive the value pursue results, on

Aidan Viggiano

million, from and of and $XX $XXX delivered up on was QX and X% organically Communications was reported free solid Khozema. was up we billion, cash year-over-year; revenue consecutive Thank revenue you, non-GAAP QX, and million, In revenue flow $X.XXX and operations X% year-over-year; fourth our organically our quarter year-over-year. X% both X% exceeded Segment X% generation. reported guidance revenue up income

that was combined referenced to sunsetting QX. revenue as our Our impacted in our a growth of growth business component organic XXX we've call. quarters as represented QX Zipwhip headwind point These QX software in basis of the crypto during the headwinds earnings several by the past revenue our discussed well XXXX we the that

revenue XX% year-over-year. was QX growth organic these organic was Excluding consolidated growth revenue and Communications items, X%

customers moving lapped material headwinds negative We have to expect growth crypto these now forward. a the do not from impact revenue and

XXXX Zipwhip to throughout continue software year. business, component basis we estimate points points basis which QX XX expect the to We of full modest XXX headwinds our sunsetting from for and in roughly the be

our We announced product. also the of previously video sunsetting

However, extended time based on customer feedback, the line through support XXXX. we've transition

result, As we expect a from notable XXXX. no headwinds video longer in

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

a Communications quarter-over-quarter. rate expansion for net was dollar-based Our XXX%, modest improvement

Our dollar-based crypto Zipwhip customers. net XXX% software and excluding was Communications expansion for

Our dollar-based by and net elevated driven churn expansion rate contraction. Segment was XX%, primarily for

Segment on contraction which As focused points record customer basis year-over-year. up investing over we spend, basis points a up gross non-GAAP data which hosting improve are million, on by will discussed our was cloud interoperability, during both The XX.X%. lower and our credits we're operational in Segment's year-over-year larger represented margin quarter-over-quarter. of messaging also benefited and This and lower improvement mix gross gross a to non-GAAP review margin XXX both $XXX international trending result delivered profit XXX of of and X% as fees driven warehouse time of quarter-over-quarter margins. was in value, Communications primarily early we time. We March, This improving believe

growth. QX towards dollar As we Segment gross Communications for our non-GAAP and margins the to and respectively. business units a XX.X%, business continue reminder, manage XX.X% gross were profit

are As to greater migrating new recognize of Segment's this providers a reminder, part infrastructure year efficiencies. we architecture to

incur overlapping some expenses. we During this will vendor transition,

income the migration a decline we result, until year-over-year. completed. QX rate non-GAAP the gross from up Segment's million, is XX% expect operations throughout was $XXX to margin As year

initiated mentioned As time. we we this of which million reduce expenses included employee compensation expenses to bonus associated stock-based with our last over sequential quarter, $XX new incremental cash program,

bonus $XXX cash and our million million. It's costs, and key $XXX $X million continued expenses million $XX in points of million, $XXX restructuring a to by down of million, year-over-year several program. QX up was free basis Our down loss basis in points million. operating XX the operations approximately progress which $XX for I'm QX business. $XX was QX, XX over focus efficiency is work the Stock-based associated pleased last new over on was up team the XX.X% loss the almost restructuring unit from XXX of flow cash restructuring operations of and as free a cash basis was flow last from generated excluding XXX of XX payments. of business in of QX our QX, generated million with driven basis included points quarter, point prior the non-GAAP the and with and free Communications inclusive cash margin points basis was drive from non-GAAP QX year-over-year. We $XXX been operations Segment our XXX impact area quarter-over-quarter compensation income from versus business for a GAAP XX.X% non-GAAP we've year-over-year, percentage ongoing million revenue months, quarters really of charges. $XX employee for the reflects of our flow. This

As target employee year over incremental expenses to time. the compensation from we fiscal reduce a organic $XXX million our introduced inclusive of as growth $XXX provided And Khozema targets XXXX. was for non-GAAP from of profitability cash of to in operations, bonus XXXX XXXX March, year of an reminder, new we with that million to program million $XX fiscal estimated mentioned, operating expenses GAAP XX% revenue income and associated QX stock-based X% accelerated to

XXXX. basis also a Segment on to to by driving breakeven We QX income non-GAAP from committed operations

should having program, $XXX outstanding to share reduce since over authorized date next million We $X intend Finally, in billion. over which on to earnings repurchases we're February. meaningfully few billion total repurchases our approximately count buyback $X.X remaining $X.X complete the quarters. our good progress share year's brings our our the This last of by end, to repurchased continuing call billion to make

Moving to guidance.

X% a to basis. XX%. initiating revenue organic reiterating representing X% target of X% revenue our basis range billion, also We're organic we're to of growth $X.XX on billion reported X% and $X.XX X% QX, to a For to of year-over-year on year full an growth

Turning to our profit outlook.

from is effect sequentially, For merit $XXX associated million. This with standard with QX, QX, years, that primarily payroll as well of marketing consistent due to travel income million expenses as into non-GAAP $XXX prior down we incremental expect our in to operations expenditures. increased increases and go

year from to non-GAAP in to operations we're raising outperformance $XXX QX, million our our given However, full guidance income $XXX million.

we to improving continuing free operations. free full Additionally, from flow that cash we our in anticipate will are and full flow year year cash non-GAAP focus our profile, be on generation income line with

up with for to on customers to it the to build continue open improved ahead, look ] our At We're reaccelerate investing we our As profitability. in shareholders time, flow free to initiatives to buyback and generating reaffirming questions. significant our to and both the share cash path program. excited GAAP same we've outcomes growth. quarters. our [ progress the over we're coming And I'm accelerated made we'll deliver we've now that,

Operator

from [Operator Jim line with Fish the Instructions] Our of first PSC. question comes

Quinton Gabrielli

of versus enterprise Maybe across, or Jim your looking bifurcation call you This first, weaknesses to at significant one are spend similar customers point? it, demand you more strength willingness is kind other? Is or are how your the Or or budgets very the between strength the across verticals? Fish. across on X at and those mid-market Quinton seeing commercial this for

Khozema Shipchandler

in across volume of we're the general, that, demand say Yes. would of hanging kind there I seeing kind board.

to I of in comps some business the we're Aidan a look I we've there's especially like and calls oriented her traffic, the that price growth always maintain we to There's mentioned in like in industries growth. pretty think noise as seen bit dollars, more we're we've I got couple as that around you that think in we a profit are internationally general, to terms most seeing profile our discipline end team with good. these. with our the respect of terminating up remarks, what that that respect and think customers where little we've creates. And at gross trying Zipwhip of about weakness. But serving, most year-over-year say, we've prior pockets, seeing in to talked that, Obviously, the I'd with that continues be sales

on I volumes for some period whole stabilize of the we've is, time. wrapper is seen kind the thing think that of

I'd a seen inflect that's particular, them We haven't call quite upwards. for in say, international. And out

those we out. I think long-term flip things but the feel about both those, number working to are on side, to that of going kind growth of initiatives, there's good play a and through, take and we're some time of kind short-term pretty

well is that we're in as additional focused term, ISVs I meantime, with cash we're focused time, cross-sell really think growth on leverage. short in the should incremental an as and and operating area the particularly that drive over flow

Quinton Gabrielli

it. a product for of talk bright spot Aidan, rest kind this uplift? Got And about then, margins this why kind of we you. see but from continue Gross Understanding was sustainable the mix, the a sure. upside here Can for why through you benefit some couldn't maybe be year? wouldn't of

Aidan Viggiano

Yes, sure.

gross So both well. business we XXX units quarter-over-quarter, points as up up margins with saw basis

a couple dynamics. So of

Communications was U.S. the points Twilio up and which basis between Part the which you mix business was the They is international. were said, side, favorable this that XXX on First, carries point. it what of quarter-over-quarter. at

mentioned, did terminating lower just see international traffic. we Khozema As

gross So benefit to that has internationally as gross know we've because in margins, a margins than domestically. past, lower the communicated we are

basis expect credits this QX continue. hosting in said from by related We XX to remarks, also spend. in as had, That prepared the don't points. about it to benefited I quarter, some benefit We

how by controllable of say X the continuing that gross as And well of not credits mix I'd as forward, think about Quin. combination margins fact us the going is things, necessarily hosting I so those kind isn't the

Operator

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

Mark Murphy

sense with to -- the preserve thinking you and Segment that CustomerAI vision. prior combine was our was that as the some the AI then broader the review, Comms, Khozema, you optionality, because mentioned, business business of back could can I

recognizing the it's wondering Databricks if you're connectivity. that a then in overall some and Segment also are, very usage that for into And mention And what I sluggish did because more quick I seeing kind about projects trying the Just in seeing customer pipeline? pulling business, have those LLMs? was understand of that do I'm data is just follow-up. to you of

Khozema Shipchandler

Yes. Mark. Good question,

there. there's So dynamics X kind of

respect Segment of to is were to combine of committed of some as we Copilot So that to with was that data operating product. we review the It's Communications called I that that part make uses something one like That refer Copilot. of sure elements launched think the Segment specifically, the to Profiles. the we with first that able things have. We to as Unified the Agent capabilities the that Agent we

able you flywheel Unified continually are where creates that what that on kind a Segment get like so is one be to with just to better us to with is out and of for into context be they an consumer data a is used for value will, be through of broadly that the if allows customers, that of if our basically, that interaction back the during for keeps for And data a that the cost, consumers is, to for then absorb able subsequent flywheel and to every subsequently, fundamentally kind of then flywheel, that subsequently and then stored Copilot, so of turning. fed experience. And generative that, ability Profile, call, to the customer then a have information more agent able reduce create

too. And are more Communications within of nicely. well progress we things pretty so feel like to the of number committed year. the about of during as with think delivered the And so We a those of elements, how there's one our on second think quarters, course upcoming one. actually We to alluded being the track Segment, AI generative I products kind good for broadly, respect X about kind then I there, to the We've both as and that's Segment. optionality happening

Databricks. to as interoperability with well also The that operating establish folks players And other that the big you part of with and in the one that out part out the about warehouse we of of Snowflake, greater laid actually, are market. the was as as question other Databricks data was review priorities the asked data those warehouse

exact about the And as way so about that on that same the we months we the basically announcements release map made of players, part us that customers about Databricks see ago, of road is some should to that we're of intended in progress who allows users. our make. We're today articulated behalf that you may and forth be we already to seamlessly traction with think those starting X.X Databricks, data the making fulfilling that asked X back that you particular, offer on to

to And combined so enterprise Segment as capabilities additive, that's the Segment of leverage to just that, not we increasingly the think Communications. but we entire

Operator

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

Meta Marshall

Maybe maybe following kind we're about up of understanding product on Segment, that -- just to there. new but are the leadership rollouts Great. happening, in days XX

Just leadership in they've as how That any there? helpful. would and be thoughts the to gotten new of go-to-market improve

Khozema Shipchandler

question, Good Meta. Yes.

kind of more specifically then think just question think that and your and more I leadership Thomas he's the about brought. So I I'll generally, answer

progress feel So I target our for 'XX. of seeing take making QX in line. be we've while we going path profit terms steps revenue that. think to good some to in terms We're we in going like up track non-GAAP business, in linear. And and started necessarily operating to the we're the ultimately bookings, of of terms path for the kind established take that's on time progress. And show good That towards that to isn't we're up catch of

control meantime, there's some to there. of In prioritization. our going we're focused so about the R&D like be costs and And of sort areas very the dynamics

Thomas, starting talk our a referenced green track. we customers that see some shoots. get of I we to couple before There's to In terms of go-to-market, are in

the about they of with our them. what nature those to ability excited grow very we're do, customers, think I

historically. we've time I to particular, to what in value think I faster significantly where ability for been customers. very excited deliver think, we're than, our about those is

in in to able able up be I think several we've value cases, actually, where initially. taken as us instances, -- XX starting as that that And think months, to to to the achieve in get X see past, fast to we're to I some days. some has been

think leaders, has of to leadership our With very, I respect frankly. of to the feel leadership overall. But an bench specifically, awesome been very deep terms all given knowledge Thomas the his team, in useful the background about Thomas I addition quite our product some of both often given the of product, just focused in be of his well as marketing, sort is on tends where as which buyer to because he marketer these strong instances.

a with I it's accelerant also of we're think general, in that's the I And stability think geared to been in which and expect. something some that very terms progress real towards, just Segment. we that respect focus, provided is

Operator

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

Taylor McGinnis

little rev provide driving growth to on X% that guide bit could in the more hoping you color slower I'm of organic X% what's a XQ.

like So higher XQ. is revenue it looks than crypto actually in XQ

be might some headwinds that you would you lead other to growth. think that, that, of would with combined the accelerating lapping, So

why maybe environment the macro or just comment not in be XQ, any there start has some of demand the the that that? in So might be deterioration might you anything can been that driving at on of And materializing?

Aidan Viggiano

add, and Taylor, Khozema wants he start, can. if to I'll

a out. So of to things couple call

We So headwind don't out be called this at to lapped expect some point. QX. product-specific in we dynamics we crypto have that have a largely for. it do We

growth from a QX So Segment's as was so in perspective. we've X% said, first, revenue

for it muted be We the expect year. to

take on to a different results. kind they'll of As show but our financial we're time up number initiatives there, of said, Khozema in working

That points headwind then be We is yet QX, as of of roughly life we our continued year. And a some of not I'd stabilize, we've basis we also of say will business. from internationally growth broadly, just to Khozema end product. seeing trend or with in, points to noise a about year-over-year the And terminating mentioned, industries most have the are XXX the be software evident in traffic. It total say our headwind that basis will seeing more XX Zipwhip in operate for And of inflect kind in growth. but reaccelerate. I'd that volumes growth volumes Communications more our see we're

is terminating So reorienting talked volumes, pursue gross teams earlier. mentioned as what we've We're price reflected certain of about international gross markets. which seen around internationally little bit kind with really maintaining being discipline profit, I we traffic as a higher, and we're lower in the margins we

grow to lower so gross way we the XX%. seeing the business, run right by think traffic that's And we profits We are there. our but saw

that's having we're So still. bit of a not But an impact. standing

we're profits we As Khozema long-term thing we the number and range, of have to to the going short to the not reaccelerate that about. The today. be repurchase year there say say growth that on while he's talked in gave cash we we're underway. they're on guidance can and We've growth, to believe our opportunistic confident that undervalued. and the free of a profitability flow opportunities over I'm the by generation through And I'd I'll in willing total and mentioned, cash are profit as business, going when shares all is year reiterate continue actions regardless we're we last where cash both incremental this in initiatives working our and deliver also growth significant and ability to get that flow. of we're we drive proven the evidenced cash last

Operator

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

Aleksandr Zukin

then the And SMS a a kind brand volume. more of a like follow-up. changes And just shift quick towards again, any I Is in guess of sounds messaging NRR of a ] [ stabilization. messaging in personalized then Curious as internationally? that [ mix ] and what's environment stabilization helping calling? better competitive it that domestically, maybe drive

Khozema Shipchandler

a hearing little because Alex, had question back Yes, going just we you. I'm of to the repeat difficulty bit

like then volumes, there ask and right? the sounds were So of of SMS, more Did environment, NRR whether the seeing we you driving is was mix not you shift way it hear basically a towards it international messaging domestically, in or was then any messaging, question I there changes to stabilization precise stabilization? kind of that the competitive that or heard we what's

Aleksandr Zukin

did. you Yes,

Khozema Shipchandler

Okay.

the environment, one of take there. I any that maybe we've competitive say wouldn't real terms in seen changes I'll So that just first,

in Aidan as seen to have prior that think traffic. answer, bit in of her terminating I we of softness internationally terms little alluded a

from we think always think markets. our maintain those we about about want to like perspective, I the price way discipline that

little the kind or inflected. have for And we're they of impacting less time executing in look we bunch so as of a think been of some that more about numbers. against. growth to of that but and growth we've kind what in new of There's forward. I And seen. Otherwise, thinking across that's up stuff It the bit show of haven't take board some hopper the just volumes the a stable, the dynamics kind of will that's

personalized an In mix into on of mix, we strength of in you than of see margins, wouldn't obviously have that in to more weakens relates I time, terms Communications as over like impact a workloads. pull happening but and say anything what that's about bit in think as I gross especially Segment certainly more expectation, as our messaging going think to our little we've there's international it I is other already terms talked in significant that domestic,

using customers with already see personalized more we're starting data. think of I examples wanting communications that much to deliver to

through of the I that we think you'll some that of products see called kind off. more of

kind Profiles personalized communications. I lot increasingly, a Unified confines I but start Intelligence, is itself with within you'll Copilot think to been of we've the think voice is more Voice another. And using Agent see one, which of

I the see reduce going that business some is costs with think AI we customers that to our impacts and the of better fundamentally outcomes. way and generate that's accelerate to really generative

Aleksandr Zukin

about where guys out how of QX on moving -- of we year next getting as then the X hiring kind in investing both the And and think model about incremental But the quarters? the of think incremental OpEx targets leverage do QX. you and the of sense. you balance we side, are obviously, or actually hiring and kind where of kind dollars, most Makes should of kind for some here the pieces

Khozema Shipchandler

generally. I can of kind Yes. more question take the

been we're not I looking say our and don't the we needs think priorities the that, there. mean replenishing R&D. do like now through obviously, like right process just adds. I'd of of backfilling I feel headcount that have right to kind but material It's significant we pipeline any that stuff of around go have normal now. kind we

long a start have fruit think sort Communications of that Segment expect time, up medium we to bear really the in growth in of focused both the And number term. over projects numbers. of over some that this and show will I to We do to

offering the think automation, hiring. still near-term That's then other wouldn't we've And I roles about really that, already opportunity that which that, of one but got. And obviously add feel around on of pretty like the terms over impact just and what in good we I the we're think thing dynamics is basis called geo the last I one I that the think that of maybe in the otherwise, business. last obviously with I'll kind for see there OpEx, like this those is out diversification than you bonus out well. We're lot we've have as past, and way doing I time. we're cost of should rolled as the Twilio automation we've positive right? lot is than expect would externally that OpEx program I other we impacts customers, got think understand expect anything workloads a benefits that across same we compensation stock-based [indiscernible] But we've a to think that a

Operator

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

Ryan Koontz

explain are And with follow know I kind you the of competitive dynamic. last up, what's election registered I these on question about would toward what's to the certainly, And days? relates unregistered Alex's there the a could, around I as wanted opportunity to happening your also perspective, competitive you leader, messages And driving I if -- there any on and it the today? coming is political is how messaging impacting guess, landscape that in how that. up?

Khozema Shipchandler

of A Ryan. there, in Yes. couple questions

one first. So take let me the political

we So don't in revenue an anticipate of generate in expected an XXXX, some result obviously, really race. a we're season I generally, outsized election as customers, but middle of think from impact cycle, the political the we'll

requirements to traffic that customers of in expect as it network. use registration really relates our policy reminder, and It to the all as of quality sort we opt-ins. And just ensures consumers. of follow, protects place on a an that Just have we acceptable especially our

of in of best business the being implications through long-term think We that your first accept behind in where of that's stance as American not any entirely markets. That's well kind the process and actually question, because XXDLC the thing so interest during certainly cycle. a we're that going you good not whole upcoming that in last to is the us. And segue is of asked And that best this the we the we're dynamic year. part the taking the same interest policy has followed of business properly kind went long-term consumer, but global to most

very impact a a we think that. result I of felt as small

play we any that terms And really as as point the which like impact customers their nature trusted is as our well, of that from our or fraud clean. where point of traffic but a it a think toll-free competitive then to and receive business; so just doesn't of feedback ensures and no nonissue sort a work dynamics, a really in tools to be that that with that unique regulatory is provider, increasingly, a, of really the that and result, as think like I it's of anything a they that fashion, to is benefit with the b, at don't we as work role who using but our because that I posture that, not than kind don't alters got just that customers think I with think being that want well. And actually from helping can someone other so want and just committed well compliance, in prosecute finally, they also selling we there'll in and AI is done our traffic ensuring anything

Ryan Koontz

Khozema. follow-up. quick That's great, really a And just real

stable AXP those are up? the that inching is side, now? still Or relatively On

Khozema Shipchandler

of a since, years ago, stage. I say couple kind know, relatively There's this guess. stable talk I'd of it's about I at new to don't nothing

Operator

Our next question comes from the line of Samad Samana with Jefferies.

William Fitzsimmons

for you macro dynamics Awesome. the you of kind terms This pretty range ] I'll Intra-quarter, it Samad. that and ] growth in [ just assumes gave reaffirmed as year? what is growth actually range quick. of you an give you today. target us Billy progress remind [ organic through Fitzsimmons on Can

Aidan Viggiano

Yes.

as seen as on, talked zeroed free the the about on of where where the we've we've We So think we we're range. initiatives our say of range see And of with kind the working land before, higher ISVs I'd the I said the would on volumes on see I cross-sell would volumes, and you you very are in range, end the we initiatives kind volume of range going in What we regardless deliver that the that to expansion we're of cash outcomes at say that revenue regardless very and -- erosion did of continue of and range, kind end and say of that. -- relatively volume higher of execute is focused volumes, if the this would range. were about. in on different to between see We're -- in profit could of to Bill, revenue and we intent stable I the and the low flow. the of kind get would we I and if range. Conversely, end but lower Flex to any volumes we say overall started the up end

Operator

Wells line question Turrin Fargo. Michael the of next our with comes And from

Michael Turrin

QX that Just had QX back on and in up the to ticked picked metric, QX. Communications a customer down bit

just the any So or bounce if definitional, segment. customer that Communications of is of to segments, on the a I'm if return curious in back splitting activity to core that just is tied just a

Aidan Viggiano

I definitional. to me would options would gave -- overall just there. say not a minimum is is the spend. monthly the is, say, this $X it's that that represents It bounce you metric I anchored given revenue No, back, X But what

we do of have customer aggregate, portion in active a revenue. number so with relatively And accounts significant spend like low of a drive that, individual large not the

definitional. most the a talking relevant it just relative I and and has of guess, about of the we're importance to I nothing at customer do given bounce it's the I It's say the size the this threshold, terms metric with the $X a would point, back, business metric probably don't So think this of count, today. in but scale

kind much [ the ] grown. business of of and how we've Just the size

Michael Turrin

On there good to Segment, foundational to about how evaluation time that get we been of an the from? should business cost base had piece just Obviously, restart the line a think to period.

of time point, restarting you the good gotten foundational how you've a forward, of going at line to least now So where should think we about will. sort if

Aidan Viggiano

From a Michael? cost perspective,

Michael Turrin

business. are of you feel at I the when some of like but is I think mean, I so. place the in that efforts there, the there obviously, initial sort in foundation mean feel -- Yes, pieces just rebuilding you least moving the like when

Aidan Viggiano

around Why first the What don't cost I fourth lost versus and little side bit $XX a can is all the the the then That in we're actually the I quarter. was more start up taking? that with actions quarter. say million Khozema talk would business

by don't we we're is breakeven talked to time right? have things a regards we're a have to warehouse We of this linear, to business getting from to that quarter expect product get with interoperability. the a that completely a year. What path Khozema to We say second initiatives would of be I next on. data number working working about value. of on the product to perspective, There's number

incur deliver XXXX. So will It's objectives, that of by get some on necessarily decline QX but those we the costs we XXXX linear. breakeven for won't to to just be intend to QX

have there, that it. about know model how we place, but in just So that I wanted out so and plans to you to think put

Khozema Shipchandler

data we to good nature, a number in offering, of making we meeting a upcoming, on add map operational had are sure improving committed about road to both number that confidence some that to, is Segment, cost. ourselves, like only that that quite warehouse delivering and good are there, in targets those and changed nothing's non-GAAP by management breakeven Twilio there our this get ability that operational we're that for time combined of more year. In 'XX our again, other has to our were a the dynamics quite And of would of meantime, that against as additional things revenue next The I progress. And in team value. there also thing here set able about actually we out alluded Michael, terms being and to QX Yes. you interoperability, making areas, of each things been

take are And given bit seeing how green have to some to bookings are of nature shoots. the just revenue little going But a up. we the dynamics of of catch of time, kind

role the play future saw as think with are items that terms important a feel released the going critical and of outcomes. execute that you And Twilio, Segment continue the in interesting of really to those that we is first to in the I using important We customer we're we the to I that on I new data confident we are business, deliver a seeing customers. And to operational think asset think Agent of Comms really way to Segment going this Copilot that QX. is one increasingly

Operator

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

Pete Newton

for MacWilliams. Newton Ryan Pete This is

trended And just sales efficiency on efficiency execution question in a the recently? Maybe is has Just this rep sales side. how with internal... and line level

Aidan Viggiano

you We connection again? you. a to Could try have bad of bit a little

Pete Newton

better? this Is

Aidan Viggiano

Yes.

Pete Newton

Perfect.

get this has trended can the And Maybe expectations? efficiency is line between a if could Segment just delineate sales on you efficiency sales internal with recently? side Just in a the How side, we on question full the versus sales picture. side. so Communication

Aidan Viggiano

line on think There's it of with where I we the the team's be. Communications -- in executing. the house, to expected it's side Yes,

profit gross the XX% part. generation, have expectations. reoriented is to of in they're kind most team I'd that. with of probably on We that line dollar team for the measured performing say And

lighter in a and of are number to term But of QX. a came we bookings we say, see like of the longer the I'd say place, a would a On kind want side, in than team has the rebuild here. I kind in in Khozema of business has little Segment in, the Segment several actions the and be, want going it it's them. But for for metrics. time it couple and up some in reiterate of to won't them take business kind that so now, I about and where humming Thomas will take we to a times that of financial to back team show quarters to talked bit get

Khozema Shipchandler

to cost efficiency year. line generally last I actions pretty some has sales good. think mean obviously been we grow. very Revenue I significant continues took

we're that's metric, the As the to we Aidan against mentioned, gross important force. everybody sales able be and incentivize think dollar profit anchoring to

of that of combination translate lot quite And has year, that operating you've into feels flow, so leverage to yielded now the which cash a a over really that good. lot last QX. starting of things think is we which continued obviously, seen the I And to significant

Operator

line of Arjun And our Bhatia from next the William comes question with Blair.

Arjun Bhatia

Just laid on one thinking out with of and you you When we're little bit. touched had some a that quick the one plans for some the think Segment me. well, I of deeper of this integration as

some I So some there's still know curious through results flow start or to maybe the that Comms -- beyond? still long like quite something how the before business? products that to long should a see from that but 'XX bit with expect that how to outcome, and be we 'XX of in here, the left Is we do enhance to something done, of work

Khozema Shipchandler

Segment get when specific from bit a a fielded our example have versus cited our But Yes. to I capability delay mean I earlier an of shows value Communications, think remarks do when materially They really of financials for their how outcome of we how to starting at combined were overall. little a are customers a inside we were by them the in was point customer was in to up it. better customer between able cost how, for contact a it we that about this fundamentally, about XX%. And by powerful the cost They rate to deliver it XX%. a what's increase center lower is reduce at deflection a their environment, able right? outcome, core about

using Now kind AI, uplift. obviously to we're able value we'll us because trying accrues that some to of products different these upsell, that be of of some to

value and quarters, that turn then we examples. kind like again, prove this the We'll basis of general, the But good in customer next on really by so so take we'll very and pretty time that just to continue new I'm early to that, some think several about revenue. the I that logos adds signing over demonstrable good, encouraged into those to far, customers. examples use bookings will of certainly feel delivery. And So

Operator

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

Michael Funk

the to traffic due shift is example, curious that much I'm cited, a traffic, so for to on international versus in WhatsApp, softness and you So that RCS in of how volume. reduction

Khozema Shipchandler

say a wouldn't anything I shift it's Michael. due Yes. actually, to in

demand I kind of bit soft think environment a it's that in a little of perspective terms just termination. they're that -- international from

really RCS, more expect we line. the play down haven't in there activity think role like certainly significant terms I seen yet. a We to of RCS specifically,

will but probably think we to I it volumes. accretive international business, in if the be what that's saw anything, not

Michael Funk

embedding helpful. Segment could. Thank of more products. if very and I one one, color That's more the the for quick on And Comms Agent Copilot you

For and additional higher clarification separate or is charging Segment over for there, engagement it product familiar the churn Segment? time? more more Or a of and you embedding customers teaser are get and of to in that interest with hopefully drive lower, usage

Khozema Shipchandler

increased of of short, it But products Ultimately, upsell. details. in question result it take these There's lot like to short of considerations go how like number a price in There's in a some upsell. Yes. the pricing ultimately that in kind a a price ultimately just will it answer we'll will but your market, result of fundamentally result is to packaging kind answer and price. into of will

Michael Funk

be price as time, term, the simply increase. short embedded correct? the you SKUs initially But in or It's there But pricing. separate is no that over Okay. there launch, will Is in product.

Khozema Shipchandler

offer it's much the it typically it into of a as beta, not actually that the increase. customer price then GA-ed private is period, kind increase like in price there's there and But a goes once test and where of private fully period, of is of using When the it teaser for we kind a fundamentally out beyond effect. it's goes

So to price just meant and protective. uptick. with be meant value-enhancing the therefore, be It's it's to not

Operator

Bernstein. Weed line of next Our with Peter question comes from the

Peter Weed

benefiting wondering One on more or the the they isolated would may with what dragging and either business, in Communications just be be was Flex here been we some that grouping Communications we And if what might business Communications. at of have the things in I'm you historically. in looked marketing recently much Communications changed looking and how in the at of

Aidan Viggiano

a well, clear, think when like about marketing we I like to apples-to-apples is campaigns we to question it was talk talk about over there moved Flex just -- your be on an and basis. when we Communications, Communications,

kind history and moving So over. has campaigns of marketing recasted Flex of been all for

So artificial there's that like no reorganization. benefit from

Peter Weed

reason are about more I'm that would NRR, those Communications. NRR Sure. below over, how ticking or more actually -- I I'm if we aggressively, from that. the was just I just up Communications of and before be Segment and NRR -- got thinking like it where get more XXX% they've are was moved don't going, is know for breaking picking it up they knew like an and kind down

Aidan Viggiano

NRR. pulling of They're I up terms like necessarily roughly the the say No, benefiting -- same not not down. dragging we'd say They're business be wouldn't in I'd communications the in either position.

Operator

you. thank you conclude does Thank for may and disconnect. This in Ladies the gentlemen, participating now conference. you program, and today's

Twilio (TWLO) 7 May 242024 Q1 Earnings call transcript