Twilio (TWLO) 8 Nov 232023 Q3 Earnings call transcript

Good afternoon, and welcome to the Twilio Third Quarter 2023 Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Bryan Vaniman, SVP of Investor Relations. Please go ahead, sir.

Good afternoon, everyone, and thank you for joining us for Twilio's Third 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.

Jeff and and Officer. Aidan are President, Khozema today Communications; Twilio Viggiano, me Lawson, CEO; Co-Founder Shipchandler, Joining Chief Financial

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

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

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

flow. us Thank joining you, operations from delivered generating $XXX and cash All record profitability and from and and Twilio delivered quarter, billion thank our cash $X.XXX everyone, revenue, million told, non-GAAP targets for strong operations revenue of non-GAAP of income of non-GAAP and you, income quarter another exceeding of million a free Bryan, we third flow. today. free $XXX

strong year-to-date $XXX operations of we're million. our from to guidance year the On million income our $XXX back results, raising full to non-GAAP

revenue QX. our XX% reflecting gains quarterly Communications the of are strength As rapidly in you our showing results, efficiency represented can business, of which our see, fundamental the in

market leader first-ever and Communications the Gartner of attractive as our platform. Quadrant CPaaS, recognition, our strength our indicative in recognized by for fact, business recently terrific a In position the of Magic was a

a customer with improve drive base. We're our cross-sell opportunities go-to-market win self-service our our focus SoftBank We motion win across more our partnerships partnership. help further expansion meaningful opportunities Communications to to and share, of capabilities continue us to significant including also on forming new customers, market

With durable, grow Communications But efforts We to we how, can drive our we top continue is business of the expect believe structure streamlined line over to while are growth Communications moving flow controlling can we a these that the business time, in real more forward. efficient powerful continued every innovation, and story our for driver this profit cost costs. day of our be and proving Twilio. business cash

stabilizing, driving bookings continues Applications go-to-market As green been successfully initial execute are improvements an also focused in modest a our some third volumes our the uptick in in business on Data in where seen and have Communications quarter. rebuilding we're to including & function our usage environment shoots, We've business.

products, the continued strength was named was named and again market our also external of services. once the the share for the of CDP in to validation financial CDP XXXX MarketScape leader and also IDC for leader as We receive Segment June

While is to signals encouraging, these still work are more be early there done.

ahead. With but Board be the interim will as necessary details your at forward I an further business, respect critical share Twilio of leader seasoned recruit TD&A as part I Elena of partnered in & until Donio as have light reaccelerate period closely a as AI of this decide member, team for us our you to transition. to Elena a Data and adviser. into her I President of for we will the in into company Twilio joining like the and a I'd that an a out to advisory partnership transitioning business. lead Before the Thank to especially the I through the the quarter, Elena time best adviser, and Elena and our an run of path executive leading difficult on role. get role Applications to opportunity

quarter. mentioned, this As saw in improvement TD&A the modest bookings a business I

yet However, to where them those are we be. want not

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with empower allow armed race Twilio AI-ready data Communications. This competitors informed they rewire with customer We in their communications. using in and data platform to vision fundamentally of and get flywheel the workforce so, sets we more and AI will set the and their give by to change. set help that large them the their companies a Speaking AI for SIGNAL, AI insights data capabilities CustomerAI, opportunities we customer customers, of to is change and will enter will that pairs customer August, that enable importantly, ahead required this effective, data to personalized to activating more working deliver their knowledge of their power revealed will message, with improve glean steps all doing knows interaction. call, deliver that will Segment skills predictive will initial the core the with know that AI-ready interact then initiatives customers, language generative data data to are of of data, The the with each believe on This need need companies. customers and to brands them them and models Their to to will that communications customers. When talk email their I their our customer truly grow. from AI

levels XXXX. progress have of we cash course generate begun of free immense income have In the from over we've months, X and $XXX just flow. teams meaningful operations, delivered in non-GAAP million to Our made

team Khozema Data Twilio. And strong a to a our is foundation solidifying the over I'll more & well around strategy profitability CustomerAI with turn us Communications and growth, durable our to to business. talk closely proposition that, drive the our value excited Applications deliver with to about strong term. differentiated long benefits to deliver CustomerAI it are positions that work over of realize We truly to I'm that

of Jeff. and organic gross an X% delivered Communications in reported revenue basis Thanks, on basis in XX.X%. a million Twilio on a $XXX non-GAAP margin year-over-year up X% QX, with

on Guard, these team, by focus landing engagement highlighted brand new well continue recent logos, Fraud quality bounds meaningful engine, continuing we and prospects. product creating push calling, driving for the optimization are portfolio innovation, efficient of And all and to of new announcements generating new Communications focused profits. growth, our traffic across customers opportunities cross-selling against to objectives. We're our SendGrid executing a non-GAAP we're our As CustomerAI, already intelligence, on voice which including Communications and

messages can delivered the delivered For customers leveraging example, be via marketing route, high-priority can our a timely preferences cost-effective the to be as one-time passcodes route. most most such communication whereas assign for

traction efficient structure. with solid demonstrate a our cost drive in more to continue ability We to growth

has had streamlined, our and partnerships. model Our go-to-market technology we've expanding ISV success global in been and

Communications with focused logos across efforts. product seeing portfolio are we large result, a new and through cross-selling landing our momentum As

their deals our of replace services wins half adopted in include use to roughly to Communications who Verify long-standing fact, for and were America couple highlight financial customer cases. A QX In North in identity of industry legacy security. non-messaging expansion in from cross-sell a the solution

quarter. Voice while We added a Additionally, e-commerce the also results saw Response voice with leading overall Interactive voice business Latin American business in in their expanding Twilio platform our encouraging us.

allows workflows. of largest Programmable logos our European Messaging reliability app citing airlines brand serve We navigate again with chose Twilio's beginning AI drive with standards signed as SoftBank. leveraging to a upfront subscription to Similarly, Verify ISVs a hotel experience. account to finally, on In leaders. and capabilities customers global agreement to compliance global delivering QX, and position ability one and to streamline Verify also their superior leading landed based millions who consume Twilio the QX, customer market global regulatory security a several their while landmark compliance payments. We're a technology of with adopted users, footprint, a go-to-market our customer Pro, leadership we seamless to company broaden wins which our our new in And chose continuing feedback with

services its SoftBank domestic upon. sales will through a channels offer customer have Twilio to Japan, base strong which draw in

and support near Japanese to adopt share. We're additional the exciting XX/X our products easily to self-serve an efforts our build This console also partnership for into so customers. automation contract strategic can SoftBank billing the will also expecting continue and SoftBank, purchasing, term, are market bring is improving capabilities more capture new with expand motion efficiently In we partnerships more provide with to expansion on pursue focused purchase, will and customers where grow we and can seamlessly usage. management us. Twilio of and customers

phone to quickly. allow our new more requirements provisioning compliance and onboard addition, number will In to teams much continue that customers automate

commitment improvement carrier year. up very minimal to as against effective and XXXX. registered to is we MMS and the SMS that light referenced. Similar U.S.-bound we registration registering an August reminder, of a As from XXX traffic traffic numbers in MMS amount XXDLC, we customers XX, of also going executing to potential phone to previously our pleased made revenue headwind us to in XXDLC, requiring second will toll-free quarter. our register to initial from risk I'm in success basis of traffic We our today, with traffic, a in partners U.S.-bound of permit only our to had the revenue half previously register of be the expect exceeding of points and to the for November enabled all be our the the into traffic, been able has SMS now registered QX our Thus much virtually we've impact far, this U.S.-bound deadline X. This the efforts anticipated goals. we which mitigate of XXDLC

in beyond impact immaterial. revenue to and be QX the expect We

that our for to Churn seeing was compliance on last quarter, portion many excluding are and and opportunities. stable, of and no we and a our new Similar our was net social driving team year-over-year with greater the Leading headwinds demonstrated small the Our are mask customers rate cross-sell QX third proud dollar-based registration customers. seeing while continues expansion feat. the and execution crypto XXX%, Communications expansion growth overall of charge relatively XXX% XXDLC the to are volume in across enacting and the deadline growth, quarter. crypto industries. I'm we success remain messaging

to and opportunities including improving motion focus on continue We Communications. capitalizing our self-serve on across cross-sell our streamlining go-to-market,

I'll that, seeing be progress to confident with I'm make over encouraging so talk and business. turn to improve, the coming Jeff back will TD&A are opportunity still it sustained we about further to to results, quarters. We the there is able And

Thanks, Khozema.

Turning to results. TD&A's

efforts, to primary up Our QX, proof ongoing. old The in reacceleration. This to need faster XX.X%. signals focus In enough. seen business X% $XXX encouraging and And translate margin not all business gross with our to rebuild so. continues be deserves initial non-GAAP from this necessary believe we our year-over-year ingredients early revenue, unit was of reaccelerating is some grow we've do of further business to a to TD&A reconstituting our while bookings evolution go-to-market million the delivered playbook but growth. go-to-market points I that has

it as to a changing to rapidly given evolve market. have continue We well,

land leading We a consolidating still deal looking taking growth ultimately we're further our onto team stage, changes contact this quarter, on-premises deals we chat, insurance which businesses. not X-figure that to including and the and Flex in our and solution, continuing Flex exciting I'll continue with flows be of churn a see account the off to and Despite and with recent Twilio. current their into working across customers leadership issues was company, both learnings. At accelerate messaging of their saw in several IVR dynamic, this to to we dynamic place, are customer migrate competitive increased also contraction center environment new customers win go-to-market their in some reflecting market TD&A, Now have this playbooks, experiencing legacy to all Segment. agents only our with selling but

the across deliver Twilio because to Sweetwater long-time vendor. We of voice, also to great to a as of example is a a since their a all-in looking came company agents Sweetwater, deal our on-premises under messaging who customizability customer previous Twilio the signed their gone Flex from cross-sell deliver and has experience of the they're the retailer. to bespoke solutions. A communications platform experience and actively all a email, of their a of with now is Twilio on able musical bringing customers customer Sweetwater instruments platform

we last more market, profiles need our At and and XXX is a deal we of Segment. into in we trillion real-time. points announced all team their data long-standing real-time initiative. with for delivers. In that This in who use systems which those and market a fintech transactional events Segment all than cross-sell billion data signed And resolved process to order Their to all real-time leveraging to in CDP a underscores Segment the over across company brands. first the the SIGNAL XX leadership product-led behalf have Communications the recognition opportunities, is driving milliseconds. last of a data growth Segment months the leading can case identify in is share customer QX, do London XX data of that processed week, customer on of in basis Turning

with space. the We company a also new established construction relationship in software a

company from historically, acquisitive they of customer needed to data systems a inform multiple consolidate XXX-degree to the marketing has the journeys. view been disparate build to very As their

for hundreds won repeatable as a based customers traits exciting also toy most company ETL This to first Segment's or is CustomerAI. already allows popular a like of TD&A advanced customers such with partner offer Databricks a our to customer et as insights hyper-targeted on help apps of their will the We leading access invest real-time is GSI the to create will the models making an ecosystem Reverse with across to global give general a We've a of CustomerAI and are audiences in this action most our capabilities take exciting and that deal be Segment Segment. Segment's model forward experience look and customer was data personalization that around capabilities brand. games. What's think inked product, deal to partner continuing their improve recognized which great value, a to purchase, globally subscribing, with millions to using We Predictions, propensity lifetime foundational churn likelihood well. predictive to availability cetera. partner to employees announced

customer more seeing more already they're to cost predictions. XXX have and advertising Predictions using customers based of acquisition seen company on their with by than convert has results. One We propensity targeted fall quickly XX%

cetera, campaigns, a company across Xx opens, product click-throughs, saw based predictions. Another for on e-mail improvement including all recommendation metrics funnel et their

is that's rapidly several that and of just CustomerAI on Our multiplying the engagement early we're are capabilities customers working first to show and that costs declining, bringing market.

the is provide something use goal better data, short-term AI Our coming to help customers see Segment can today. how cases that customer require

automation, Our long-term relationships thanks AI. customer provide goal better is to to and unprecedented cost savings

are So TD&A AI are customer significant generating in interest. seeing significant our within and we wins products investments customer

to incredible our it through teams, in walk more to and teams, more the customers closer do, work Aidan detail. on our product this importantly, potential of most and financials to our I now have to field build intend our to on We turn get over I'll and to business. deliver foundation the

Jeff. you, Thank

We and from year $XXX came of foundation exceeded goal free revenue and year-to-date. into Twilio. delivering our exceeded million record quarter operations delivered flow. X $XXX income non-GAAP that have operations in We another build cash million continue non-GAAP guidance $XXX income from QX a and We for targeting financial to million strong quarters, the of to

our in business commitment Our of to levels over and meaningful results profitability ability demonstrate drive our time.

was a revenue $X.XXX reported respectively. X% X% and up on billion and quarter basis, Third organic year-over-year

IoT Applications and divested basis. year-over-year revenue billion the million, was $XXX was X% As a adjusting reported our quarter an million, on organic million ValueFirst of revenue up up $XX revenue to $XXX X% X% a for revenue Data on basis year-over-year. reminder, compares this second of $X.XXX & businesses. Communications and from after

quarter. across continue stabilization We our volumes usage-based products throughout see to in the

revenue We risk. also executed of registration well in Both revenue against these our factors our XXDLC mitigating goal, drive QX. helped beat

organic industry. crypto during rate year-over-year. referenced headwinds excluding was QX negatively XX% the QX growth customers we revenue growth our Total by As crypto call, our QX earnings was in impacted from customers revenue

crypto-related basis QX started in still points moderate, the has in impact QX. basis down XXX XXX about basis and XXX QX, we from While revenue points expect in to points headwinds of

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

expansion As data higher XXX% instances for customers. XXX% among churn by dollar-based net excluding and mentioned, driven of communications Dollar-based net and primarily for was expansion or applications was Khozema customers. segment contraction XX%, crypto

some The a XX.X% We brands, $XXX in timing operating margins slowdowns recent ] and and were This gross points million, sequential of their customers revenue compensation impairment QX was growth driving of loss from years. year-over-year of up basis million efficiencies in million, mix down & as basis in quarter-over-quarter our the gross see up primarily We of operations [ experiencing current representing Stock-based XXX employee than XXX QX That which messaging Communications. Gross increase and beat was GAAP but focus our a approximately later occurred of $X basis to of of XX.X%. XX.X% business. QX for also continue Applications quarter-over-quarter, was more real gross by XX.X%. growing our restructuring expenses QX, revenue to Communications $X.X $XXX costs, initiatives restructuring charges. due facing and excluding basis which meaningfully percentage and with representing refresh driven up was points respectively. year-over-year XX% continued macro in XXX and the associated year-over-year. prior margin product $XXX the a XX.X%, includes at came million, non-GAAP on margin estate businesses, driven from million across margins in given our environment. non-GAAP non-GAAP by benefited profit cost-cutting non-GAAP expectations own points operations XXX was Data mix of termination and Non-GAAP within ahead income from and divestitures. points segments delivered

revenue cash million, free to generated by in percentage modestly QX. In of collections. we heightened expect stock-based QX, flow part of compensation We driven in decline as a $XXX

While as profitability we drive focus to us do in greater free reoccur remains cash quarter, the each we not expect a level this for flow business.

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

Moving guidance. on to

to For our growth and QX, and we're year-over-year on reported divestitures. an IoT $X.XX billion organic account initiating X% a billion, target which a on $X.XX to for representing X% ValueFirst of basis X% revenue recent of basis, to X%

The income million. I'm our We expect we've of to $XXX QX $XXX setup we're date. our good momentum. progress executing non-GAAP to with the well, strong open the to targets pleased million provides raising and $XXX to it teams made non-GAAP deliver a income a to on to operations are and million from And operations let's with which we as enter $XXX year XXXX guidance finish questions. full million, look up for that, year from profitability with

Your Taylor comes Instructions] with first McGinnis [Operator UBS. question from

Hickey Taylor. on Jeff is Congrats on This for quarter. the

seems XX%, that the Data the that XX% the net could when retention continue to to And bottom? On terms Apps business, from things be What a gross gross could a soften like is impacting are segment margins seeing churn you hit of we & bit falling there. trends in something with maybe of currently?

This and of is I'll the gross Jeff. let take margin first then I'll this of question aspect take of Aidan it. the part the question, maybe

what implementations headwinds, we bookings some deliver we product to churn. Several initiatives drive order customers value have churn. the and is at to realizing contraction. particularly to and have professional sure deal As over of in renewal are the modest of teams churn to not road growth we've efforts, make contraction, I post their place results in we ensuring ultimately, which cases, well in the bookings bookings you'd as and given driving drive in important on anything customers most also certain a implement and working ago. this an it just relative TD&A. in see we in in focused concerted contraction about expect, as customers And mandating to driving map faster importantly, to some an gross think month around the sales We're of also in been margin? and well. And incentives reduced most as lot easier cost-cutting aligned just as a we successfully. improvements to improvements to as on contraction customers of we our churn we're in are QX TD&A And announced But seeing mitigate competitive outright our ambitious is to and They're lower CustomerAI increase and, in sizes are businesses. you try sales with to churn continue the products seeing services a we're and Aidan, noted, push own meetings, mitigating well, through part improve did And but our churn for the need making as QX. not in we that's I early there would think interest add those of instances

sure. Yes,

So Applications. is impacting I what's think -- the gross margins & in churn don't not Data

So and year-over-year are they're down they down quarter-over-quarter.

So a couple Jeff, there. to of understand dynamics,

across expenses, term. ensure costs So spend XXXX, back-end mentioned continue in software to products, the to through and over which in portfolio, in to tech invest and in around Applications. our an and we features. said. And to expect higher CustomerAI and flowing to next-gen new migrating that also the products & and vendors And last these first, We're our our will that's functionality as capabilities longer are hosting obviously, invest capitalized driven infrastructure, we're as infrastructure is in efficient continue this AI innovation innovations focused We're like to see and seeing things P&L. And of functionality we continuing business. these I increase Data optimize in certain scaling quarter,

where be you'll will of the have margin we double time So expenses, that a period overlapping or see in and rates. there

benefits the these reap to expect we'd of obviously, end, back the On investments.

with comes Marshall Stanley. question Meta from next Morgan Our

look business. to for looking this And outside & kind product of what it the to do for advancements? you this keys business? room just you of with or see just what macro? as sticking Data new are leadership you overall maybe for the business as reacceleration Jeff, still Maybe of on the go Applications Is go-to-market

make one things So year. what number really Number talked arresting bookings, that what Thanks, that's of in can the and are all are likely it new and it. really time renewal, on and Really to a most do that's just those growth [indiscernible] comes for that, sure in There's speak trajectory our not X churn customers TD&A. right? do things when renew, are stuff focused churn to that are our successful, terms been Yes. We make or a is not this customers, majority are about of the the is things you two, contraction; in bit business, we of lot can to Meta. like and but contraction, sure control. Customers we've a lot of control.

second is new bookings. course, The thing, of

but are the to year. the we are see grow continue seeing all on to very sales today. year team, training et And the hiring doing been more bookings aggressively we which so, expansions, about I of it we've grow last and on things is we part reconstitution has, the And know, the spent them, said, the as even love logos, those like meaningful the focused, cross-sells, sales up happen. the reps, We'd of something enabling seeing it so mean, I we've call them, than throughout greater you talked pipeline, growth growth building cetera. And bookings

ASPs we looking healthy remaining quarter. noting especially worth see go signals So that stable. those for, as into also And and win are and the it's fourth positive enterprise that rates the we're all we

focus? for, product somebody leadership, it or And sales you are is with more of kind the just what looking

technology, think, question. also for obviously, big business the especially as a looking background, contact for leader -- We're is the that go-to-market becoming of Segment great initiative. but a good as, a with given degree I CustomerAI obviously, important, business, some center our increasingly well to That's AI

looking as for bring good product the as in go-to-market, really we're CustomerAI. products we primarily, to someone have who form fit current new market I of we products understandings would the both has well say, So with market

with Next question Mark comes from Murphy JPMorgan.

idea to cost he spoke could intelligence million. this of Sam by thinking Jeff, a X the and brought of SIGNAL up conference, fall with the factor Altman, back that you

projects if And who wondering, in even to and I'm that understand if if being moves do to they're Twilio up the that all Twilio generative just where would who is, customers value so direction, on up the see typical really materially. as kind it pretty customer the you if amplify it can -- Twilio's mechanism customer of ratchet steam? the ends AI you wondering could think bots gather allows -- talking mean, how much to customer of these that I'm I spend cases

thanks, for customers. the in places able your different Obviously, will really for this a We game out. right? very to it's how to exactly across Mark. tell for we is aligned, solving it's use our vision put AI hard out going it's all set to what Well, are think data things the play CustomerAI a to early going to that possible, big you've I to got it's dirty, if the data only happen. not So all And having and kind is very actually of in sitting lot, really will become things to companies. solve on going all I not AI this inevitable. And really key it become about to systems of said if companies and all, things think handle I those different that is about the their I think talked not good be these hard of some spread so

and that of of every how order talking about understand information need getting to business, they office relationships, here overall, the first as so and have these customer to the they're optimizing interactions, like they company. the customer who the that in can raw to so business order is cases start AI going you maturity, use come customer And data these front

about thinking we're how that's so And today. it

that's disrupted I because license much Now generative have think that world interesting AI the need I businesses fewer of companies very super the this to that in world opportunity coming in be per seats. other thing in SaaS I will seat particular, think think the

model. I used be AI data that is going sitting and think that latch in to to that the data things to essentially really usage-type in is is systems, to a need going on

our They data, of the is, what for think triggered coming seats. set contract world seats. seats back-end in But that may grow generally need are business matters world. the systems, companies where They the they're of I using. so really AI, not the fewer this may number speaking, And same number up with well a by the that's workflows processes, the may

our the And is based in not so largely rather Communications monetizing a happy business to and a Twilio Data seat basis we usage-based have on even position I'm business a very our that but model on well. per be as service

with from Our Nick Altmann Scotiabank. next comes question

nature talk trends you can some seasonality the QX the And given then sort November? you versus of sort to can or stabilization? I think seen stabilization Communications speak are messaging, due underlying side, how for that there's guys sort but to factors the sort maybe you trends trying in just just the on blur in more much seeing to Communications just people extent QX what in just of understand of bit. seasonal one-time have in is guidance the about and seasonal First, and you're a usage October of

those So helpful. you any would be can kind way parse X out of

Yes.

comments. it the little So I'll start, guide this is bit hand Aidan, to I'll and talk to Khozema and add over any about then a

the of guiding we're revenue third billion quarter, $X.XX to So the is to to $X.XX compared roughly which flat in quarter. billion

by we're we revenue. given and customers with of volume environment costs, optimistic of Communications, And know XX% really in stabilization the the I'd is quarter nature the second that in encouraged but we're is, to which remain the their that and uncertain, stable, the say third prudently, cutting our in nearly both volumes lines some so and what plan variability many therefore, that really continuing we seeing and will saw with remains we're business, that and particularly usage-based revenue overall, quarter performance the

stable, wouldn't And to really I transpired XXXX. into Yes. additional Aidan I November, by what would we comment add think said. optimistic on cautiously mean, but volumes said QX in anything we I what I can't certainly into being that of heading echo QX. Aidan in-quarter we're October, just encouraged remain and and periods, those kind are what obviously

Goldman with next question Sachs. comes from Our Kash Rangan

I'm full-blown the of it and system system and about that you're Twilio's the interplay data looks value don't that, a AI AI get in you to perspective. get whereas closed of a data world data. the your AI within you that all CRM advantage take out. sans curious to which on curious add a record like where if to what It thoughts it can your system a system, curious just loop way closed some feedback you of whole to Jeff, have how different with of how a work be record, data, and you assets to of to loop the your able the on there's slightly have. planning application I'm ecosystem, are function has will a we logical thoughts then actionable record, assets the But campaigns how be you you create AI that seems there's and think bring to the loop. I'm conclusion laid

trying that to XX CRM a think will be system did, we also we're don't customers having Yes. has we view Thanks, oftentimes if "Oh, I that is to then would answer. think companies as companies said, warehouses be try single years. of be were how you've I record, our take, well. going will the single have view like or that turned for, their data Segment There's this of the problem which customer turning to working, of a why and solve this to to And been bought solve that problem Kash. customer." And This this a of reason the looking give thing been at when have

ample proof is customers the of record. systems all way, of So And none I clicks the companies. and you is of on actually event the that is solving CRM this a of talk to that problem. streaming data, of speaks and to stuff kind not of that mobile by when bunch scale data It it the and going opens, specialty consumer scrolls consumer data scale world is page and in views all that app think

story, the click of the systems And record. the data, so in that's so a is of data stream all is so is part CRM other

that's where it's data, system on that's really service is unsolved an We're so and -- least So of that to solve. still. And record. a is the years And Segment goes And not problem we're at a this is the problem the that's the into why CRM, solves hard cloud, so and that list create of such solution another to starting. world XX is the problem customer trying why on.

to We what sense solution to make to it coming are the problem to they the And market bring And all. for. are customers too of need many Twilio that's fact, trying systems of have already companies of in to record.

Turrin comes Fargo question next Securities. from Our with Wells Michael

and metrics significantly, also that up the target move fairly margin, income continues on we're some show Data particular, & segment, some seeing of rates growth core the in Aidan, in operating to Apps decay. but

into to wondering from how given just back think the some just margin dial expansion significant transition margin if happening and Appreciate you drive help improvements you're a need investment the we just reinforcing showing. there's where you're set foundation. the So there. level general some Maybe just trajectory point here, about should reaching

Yes.

in terms guided of profit. to year we So this

We what out than coming haven't with non-GAAP about When out obviously business pleased we XX% really year into gross to XX% so given the the profit a guide units, revenue, Communications and of performance for laid you the we're -- played our has date. profit This think XXXX. that year, the you of different X the profit. our generates about business think today relative better

really then side, is business that investing. So generator we're the profit for company. And the & Data Applications on

house the investment Data foreseeable efficiencies assume we're that the the would say that are Applications. I what's on So for the side in Communications really you enabling of could the generating future, & that

to of we functions to range leverage well lower-cost a pursuing. we not now. shift terms as automation in and the leverage see move and right business So regions I continue X Communications as that those leverage. I'd areas, we're should to think or come also both outlook expect that going as specific have we of from as going automation where largely G&A lower-cost to that to self-serve, shift we areas a the give -- forward to But opportunity we're are regions

question comes Our next from Alex Zukin with Wolfe Research.

growth just of get to think I Jeff, if have want the then sales billings improvement? And meaningful net better be Applications plus that kind maybe of ex guys about if the made And trough? applications to guess about of some range calculate growth the we the just such when reconstituting do but revenue, I maybe progress when investment Is rate you I business, on if the for we for I then put the on change me understand revenue reacceleration. XA, the we're about kind retention I motion do to is the side, greater the efficiency in about just great future number need or, sales the XB that kind some say, where the you guess operating I the the need kind seeing you of where marketing of versus activating the a side, the would business. think -- talking would of in side X% and maybe rate that expect think to app of actually you right on for -- now think I deferred way we've to savings? and been about

in I'll Why lot there. Jeff? to over I and then So hand there don't a was it start

DBNE a Applications the starting with where trough. there's and Data & kind of So

outlook to an guide & not that on give don't maybe growth thoughts Applications some we I'm Data the there, and metric but going to rate. just So

grew fourth the future. revenue quarter, we growth higher And muted contraction, though bookings growth would on a in slow really bit reducing in we said, sequential Jeff did down prior business where to we bookings more higher will QX. and bookings, the churn and & expect, continue expect a sequential we're focused, would the that's as Applications it improvement expect quarter, quarter. revenue into compared X% result that we was Data in in the That So so last to period XX% based just quarter-over-quarter. And in

the quarter, that's We and the solid wins number build in of a we're quarter. focus. bookings the third in uptick really working So saw on to the saw in we

The second revenue. question was with deferred regards to

take Applications Data and driven trends, There's that, in it, timing It over-index but deferred by always balance the as was I I So and lumpiness -- revenue things quarter. & it the in this I was by revenue wouldn't payments but guess. -- to the Applications, change Data the so to -- wouldn't driven I & deferred trend number. of that over-index like wouldn't

part So hand to let question. Jeff it the me the take of to over next

to essentially, the I TD&A. Alex. believe for you, question is in more The And we invest short the answer was, do. need Thank effort don't no, sales we

good reps. a number hired of We have

and see starting enabled have them are We productivity. we to that

money happening not thing in effort be on It's the whole us answer. of general, to underinvesting. a think we is that I more want matter don't spending faster, obviously, that Now but the

doing a productivity, there's we to growing to I order to in the it's think matter our that evolve of I the hit. in productivity and a think hit continuing it's make continually that number a matter presence of in market. And their to of things want that we're team numbers

to matter more. think us don't of it's I invest a having So

we've the to on syrup. waffles some think now got just we I plate, enough have add

Piper Sandler. James question next from with comes Fish Our

the off the through walk actually overall, side, saw actually ] this if actually collections. linearity Aidan, Can stronger on [ about actually you should cash us cash Building talked long-term you couple better happen expect Michael's more to there of here these the of prior in the years we it flow question drive is flow overall? around relative of just you stay margin, would Additionally, wanting collections coming quarter free conversion next what deals years? net way upfront these any to to over about help to so think of income

Yes, flow. let me cash free on just touch

cash of cash free quarter in quarter So a us, million flow solid this second the of free for flow third quarter, generation. is record $XXX

as and cash flow the cash cash margin more now we there. Obviously, profitability with not free non-GAAP of improves, So consider but a as what more become flow going correlate profitable, free couple to free on things will be, guide right generally flow metrics should give our to should a improve. profit. We're

with was improvement to that is higher free you'll happen expect what the unusual some there's tends about period. What just variability lumpiness, in or DSO. quarter on in that ended had our cash the some heightened there than But improvement to free going up quarter-to-quarter collections did excluding quarter don't so We in prepayment have the a way. with happen collections, And this always we flow prior to the even working cash we Now capital. quarter, of every periods. the relative collections is heightened say quarter, We collections whether a or is will see other I second better flow it's quarter-over-quarter. X-day

never improve. it's It's so improve flow perfect. And cash see free But never we see time, we like profitability over as should linear.

versus earlier talk linearity what on about you can of saw of kind quarter But you the Right. here? guys kind within any itself, exiting

not we're quarter. the going No, down within to it break

comes Derrick Wood TD Cowen. next Our question with from

think, new pressure cross-selling in customers at, And I you the are how guys the effectiveness in investments guess, comp about customers customers of the and base? quarter. continued new net new on motion driving the I And feeling side? you wanted I are the X,XXX about the balancing touch to on on versus PLG how

business. Let just and Khozema let on more me touch quickly, Jeff the then about the metric I'll and talk

up first didn't it count, of more we XX% business ValueFirst dispose note of slightly X% so you're in Communications quarter. if that by quarter-over-quarter. dispositions is in the up driven a that there would have right, the was to thing the one detractor So year-over-year, small up the was all, customer There been

in continues that business, importantly, think low. to be churn I

And business. so see we churn as within a don't concern the Communications

can he going let talk on. me about and Khozema So hand to over it more what's

quite to absolutely, that would Yes. on to really, answer I question result making as really color I been of and very streamlining do, stuff provide that. was went create obviously that We've a in to feel new customer mean, the we've outright, I there. ecosystem your of right additional of trust XXDLC of our and the it. I of it it, the to side we the I been some think just certainly a thing lot process good past, on But sign-ups little we the the a in good that. like able that mean terms drove registration efforts self-serve some feel say, progress the recent friction through we've focused about about

expense self-serve of think we do be there'll of into be growth. the going A, it's that, drive that that to the beyond ongoing efficiencies think able at things, don't up we'll like, side I end to feel I coming but

I also pricing, That any good. seeing think interesting for actually is highlighted feels it from came volatile bit messaging. that the macro. wins not a to Aidan on quarter a pretty that kind fact importantly, in the of example. We number beyond of really alluded that pressure of were we're products a

are about that, I XXXX. optimism an seeing the is, in business think while QX necessarily continues in look whole well. And a to of I see and spite is that we the inflection think quite we thing the of fair don't yet, perform volumes. I think dynamic important probably stabilization amount we And do things how most into a in heading have

next with comes Our question from Samad Samana Jefferies.

the little headwinds answered SMB the we've of diverging impacts build the already third of in Twilio This and sounds the bit verticals. third incrementally impacts called Others through the and that little drop weaker called quarter, course out some from couple slowdowns first some from over that second. the half the some when is And to deeper a Billy dig versus certain kind cost-cutting I'm you've enterprise that in was companies there It quarter. spending talked quarter. were pretty tracked could this want the incrementally out in macro the the to out and out get the of that of that impacts the about by companies of the third software incremental the to spending year, midway your customers, we're here metrics Fitzsimmons measures course a in over in customer of got on remarks you you're compared heard in season, got little questions. But SMB digging like remains quarter specifically into a worse material trends the is trends Samana. that business and a stable customers. But called some business about noting for software if other macro how at calling curious more what a earnings that trying of quarter answers the I of in and questions dig prepared the on in was growth upfront churn for macro into in to Samad on

So more some from curious that to commentary how business bit hear companies. compares to Twilio's a little other about

Sure.

then start Jeff well. and So jump why Khozema can in don't as or I

let's So That's business. about as Communications. the vast relates it the -- to talk majority of

volumes So the stable we quarter. continue to see remain in

So that's in been row. a quarters X

some we at third industry through look and volumes see quarter. we but quarter And at social when growth seeing verticals those. other that in crypto third you messaging, quarter, of an seen about presenting industry kind Second the stabilize, it you headwind. We and and level, a when the at do are and verticals, out talked look we've played larger

are seeing overall our and by so on media And social growth is masked crypto well. and in somewhat that the we as rate headwinds

coming we about right? feel It's also overall, good So So the where in has business, vast it's as the for do you rate it think about say I'd majority X% the XXX% expansion from new customer the And quarter. is. than of net the so rate base. business dollar-based growth an that been. historically is it's growth the lower

historical to is consider net It low. be the is and is comes The been where continues like play. what seeing and low. levels, into lower has this on something relative dollar-based higher expansion we're other to really to crypto historically seeing rate contraction expansion churn We're thing

of understanding we're terms example So in what it's good a seeing.

volumes So in messages platforms, there's on it our platform. obviously, our customers' crypto less verification on when results less

industry seeing from pretty stabilization overall, is of most perspective some the the industry. across but business specific and are So performing feel a how about headwinds, good we

Aidan and other seeing growth, we generally some industries of good with look several us which asked and that messaging that Yes. think if we've specifically question. pointed talked you think is I and We've now the number kind pretty the I I one said. those of would of social mean part basically you crypto. in participate, think your in headwinds pretty also of agree times with historically I associated the good. think about feel headwinds categories. But at are what I of a And we out about I makes

have is to, future, the stable. sized. alluded about we foreseeable pretty volumes feels kind and we've we've dialed the our business the us of I of feel spite is business comes pretty the way That structure, that it been addressed cost think encouraging. And that the way the whatever Aidan way that think certainly I good at As in for that

I so environment that whatever prepared And think kind of now to execute we're is. through

in point? Perfect. versus spending mean, at I difference enterprise this SMBs for any

for Nothing specific little that example, color gave the wouldn't friction enterprises. short-term a we We're I now that expect with you that on would mean dynamics time. there XXDLC, really I earlier. that persist. there. with specific I at point mean I past to I out wouldn't were to call some bit so really of I additional some self-serve created think anything

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

there is either what great lot in terms working go room the programs kind drill to down self-service Comms on of other in there where Obviously, the for I we to and journey wanted the profitability. cost-out of on much you're place are business. through a of efforts still How expanding that work are on? or

that obviously, come a driving there of efficiency. think way short period terms is opportunity some of additional Yes. in I long we've I time. mean, in do quite a

X, of results, right, result, of a a quite we've to been I as changes think out year the our of as we've some or over result kind take of has as cost. the made. We last that responded in well about that structural And a the you've published talked did that seen we've able so. business lot quite

all also created a greater of think has driven we've focus, simplicity I that and lot more disciplined efficiency.

of talked self-serve I areas, I bit. think little terms we mean, additional In about a

to will an us always drive that's that think I ongoing area allow efficiencies.

historically, after really happened will have simplifying sale. I those reduce cost category, material kind don't interactions any we've that really our the lot us particular, been in incremental product help user to get I to the think onboarding, focused to growth. of high-touch think the the Communications on have headcount add that business experience, human experience, that we the a what and would of of that the in of waned kind is have so journey that

in internal definitely which good that we of as we're feels area pretty externally point. But many at growth that two, there like in some that that CustomerAI, obviously shared can a drive and shared both you also can see like terms AI So the of and earlier is efficiencies I opportunities we Aidan looking an Jeff being some imagine, well. well. as accelerate think at remarks

that's to increase growth the on in running continue just like we we how can without a operating think the that profile, any I so of And the put wrapper meaningful sort incremental and business. thing, whole we're driving expense feel really

comes Walravens next Pat Securities. Our with question from JMP

of It's long-term really doesn't new My rate. could -- the success the billion great value Twilio I leadership, $X business? nearly to drive Communications TD&A you see quarterly shareholder even Communications run think mean, the at without Jeff, question, with the with and business performance business do if the business improve, TD&A sustained just is

the Pat, Yes. for Thank question. you,

the business what proud has as driven really I'm look, Communications So well.

I we've profit. scale at business drive can the think shown

drive the business we're with better think of the data going do And and strategy term not long better business pursuing. that communications. communications, just those we together. over that communications to, can communications more who is building fuses I even a are However, understanding Why? that that an we're Because an that's

more a what to this lot value we software is bring if a opportunity lot the Communications differentiate able more effective company our is assets, are customers, in the want. Segment with to to add and where take our so do what want the in Customers data and market have we value them together And to customers communication. a drive assets competitively really more

which prepared in Like able I those predictive talked down and using think companies we were which XX%, right? earlier these about vehicle I the data, how a customer. in a you cost customers how those traits I smarter of drive So using lot when love to allows a types acquisition of the lot actually outcomes Segment to stories of are example, is of by and bring to business results talk be together bring for we the the Communications, the drive terms can customer stories remarks about -- to

the things all vehicle honestly communications right? is sure what we can talking next and CustomerAI as stand-alone. in one to using extremely And unlock as -- growth and a looking has the the of truly us AI gift And far, differentiated, on much the talked more about to the But what forward step drive so is so emerging, and going been conversation together. start business. look, and is we've when data that's obviously, no of ahead, new that's opportunity that with we're really the Segment AI that about we that story. And market stand-alone focused very fuse the especially the been on making about And the the we and what together There's right the way nature to a in today, of can get differentiated proposition so that renaissance we've really think focused on you a idea I better, that's for value out pursuing. that's is I'm not with there now

with MacWilliams from question next Barclays. Our Ryan comes

early year in Any just season from last holiday customers a about M&A your recently software then insight thinking this into And pickup number companies. a year? are of to how similar we've traffic seen

been changes strategy on Just there's checking incremental any to there. see your if

I can talk about allocation, or about holiday maybe then and talk seasonality can Aidan capital Jeff.

Thanksgiving there terms especially period, call prior the that, obviously. In But traffic wouldn't relative in see season. some anything to uptick prior into I as with around seasonality, that mean, certain the kind certainly of of heading certainly I years. would unusual is holidays, an we'll any out the Christmas period, We anticipate

Aidan that with be think it of the up less the more normal the provided we what will line business, or and in guidance. see will I kind seasonality it in

Jeff. M&A. I'll This talk about is

game opportunities of we that good active are always matter I priority an of right there corporate top market. in said, As out now. and is are M&A business a hygiene, of digesting the a corner profit keeping of terms operating board lot don't we're an That our non-GAAP on in really the organic growing results way. proud we're Obviously, really we've that turning shown change, the in the of and think

the always now. where that said, and do right really that's board, team's we good management active But chest. got keep pretty focus obviously, so is a an And game we've war

question Macquarie Fred with final from Our Capital. comes Havemeyer

carry And the the think about differentiators just question agree guess as level the fundamentally key I OpenAI I that I more hinted data where big one we tasks space agents they at I of call, out think at application intervention. AI without picture, in the think, autonomous longer-term AI a with longer term, at race. the generative a might high start a of in closing the see trend I human week, here, out

without exactly, automatically how we can human Twilio communication, see just so is -- you might more when where the And done into next over but chain? the I would know AI estimate years, Twilio I perhaps coming fit about who via do mean, don't see that this where that value over thinking next

data in a clicks, Look, you, vision our AI customer predictive rapidly world which companies automate by and their use I Fred. their do a help an point profile, set points. really every the by Segment what improve is of up done, out sign they've what our for, for that's for, the customers, and has customer, good to that their inject take turn generative this understanding that evolving. told that story now it, all they that it into taking understanding is the Thank not AI customers AI And think improve do is really of up scrolls, that's give to touch to to what of the interactions role we've company those every everything sign they using and profile off, into those their touch one

terms this going I to be of you're we of presales, marketing. SIGNAL, I terms of there's see When service, tremendous in in which believe a in at look, vision customer automation. to showed tremendous amount basically of automation going think amount terms of says, a

think every going are X/XX have number going at of guardrails at are be four, a on is what And to to would on have Number we've result to they're that customers. change have they future of tremendous to of allowed do. that they companies. And the the how how access the to one, the how have going agents customers. to more for within amount They is framework ingredients of I that to probably think actions about have idea Now taking agents come for play. operate part companies. power can number those actions to going cost CustomerAI they're people. do of automation, to of thinking access serving happen, is is, the to absolutely as are we one go need about to And -- companies. there's spend that knowledge we've that And three, to raw to this behalf serving. And information that they those at true. that of about they're going access going the they going that's productive those I otherwise. operate taking And it companies get customer automation to companies we're their about thought to believe are customer-facing like kind function? right, gone Number what And to to two, the tools of XXx operate to We need our behalf that's access look that agents is about here else

Third This joining today. Earnings us will Conference Quarter Call. you Twilio's for XXXX Thank conclude

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