10-Q 1 twlo-20220930.htm 10-Q twlo-20220930
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________________________
FORM 10-Q
_____________________________________________
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT 1934
For the quarterly period ended September 30, 2022
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 001-37806
_____________________________________________
twlo-20220930_g1.jpg
TWILIO INC.
(Exact name of registrant as specified in its charter)
_____________________________________________
Delaware26-2574840
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification Number)
101 Spear Street, Fifth Floor
San Francisco, California 94105
(Address of principal executive offices) (Zip Code)
(415) 390-2337
(Registrant’s telephone number, including area code)
____________________________________________
Securities registered pursuant to Section 12(b) of the act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A Common Stock, par value $0.001 per shareTWLONew York Stock Exchange
Long-Term Stock Exchange
As of October 27, 2022, 174,522,799 shares of the registrant’s Class A common stock and 9,817,605 shares of registrant’s Class B common stock were outstanding.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x  No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes x  No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting company
  Emerging growth company

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


TWILIO INC.
Quarterly Report on Form 10-Q
For the Three Months Ended September 30, 2022
TABLE OF CONTENTS
Page
Item 1.
Legal Proceedings

2


Special Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which statements involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may,” “can,” “will,” “would,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “forecasts,” “potential,” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:
the impact of macroeconomic uncertainties and the coronavirus disease of 2019 (“COVID-19”) pandemic, or significant market volatility in the global economy on our customers, partners, employees and business;
our future financial performance, including our revenue, cost of revenue, gross margin and operating expenses, ability to generate positive cash flow and ability to achieve and sustain profitability;
our ability to effectively manage our growth, including maintaining our corporate culture;
our ability to attract and retain qualified employees and key personnel;
our ability to retain and increase revenue from existing customers and attract new customers, including our ability to attract and retain enterprises and international organizations as customers for our products and our ability to maintain reliable service levels for our customers;
our anticipated investments in sales and marketing, research and development and additional systems and processes to support our growth;
our ability to compete effectively in an intensely competitive market, including our ability to adapt and respond effectively to rising costs, rapidly changing technology and evolving customer needs, requirements, and preferences;
potential harm caused by compromises in security, data and infrastructure, including cybersecurity protections;
our ability to comply with modified or new industry standards, laws and regulations applying to our business, including the General Data Protection Regulation (“GDPR”), the California Consumer Privacy Act of 2018 (“CCPA”), Brazil's General Data Protection Law (Lei Geral de Proteção de Dados Pessoais) (Law No. 13,709/2018), and other privacy or cybersecurity regulations that may be implemented in the future, and Signature-based Handling of Asserted Information Using toKENs (“SHAKEN”) and Secure Telephone Identity Revisited (“STIR”) standards (together, “SHAKEN/STIR”) and other robocalling prevention and anti-spam standards and increased costs associated with such compliance;
our ability to manage changes in network service provider fees that we pay in connection with the delivery of communications on our platform;
investments and resources and costs required to prevent, detect and remediate potential cybersecurity threats, incidents and breaches of ours or our customers’ systems or information;
our ability to optimize our network service provider coverage and connectivity;
our ability to work closely with email inbox service providers to maintain deliverability rates;
our ability to pass on our savings associated with our platform optimization efforts to our customers;
the impact and expected results from changes in our relationships with our larger customers;
our ability to form and expand partnerships with technology partners and consulting partners;
anticipated technology trends, such as the use of and demand for cloud communications;
3


our ability to successfully enter into new markets and manage our international expansion;
the sufficiency of our cash and cash equivalents to meet our liquidity needs;
our ability to maintain, protect and enhance our intellectual property;
our ability to successfully defend litigation brought against us;
our ability to service the interest on our 3.625% senior notes due 2029 (“2029 Notes”), our 3.875% notes due 2031 (“2031 Notes,” and together with the 2029 Notes, the “Notes”), and repay such Notes;
our customers and other platform users violation of our policies or other misuse of our platform;
our expectations about the impact of climate change, natural disasters, public health pandemics and epidemics and other natural catastrophic events and man-made problems such as data security breaches, war or terrorism; and
our ability to successfully integrate and realize the benefits of our past or future strategic acquisitions or investments.
We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q.
You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described below in Part II, Item 1A, “Risk Factors,” and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. We cannot assure you that the results, events and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.
The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.
Summary of Risk Factors and Uncertainties Associated with Our Business
Our business is subject to numerous risks and uncertainties outside of our control. One, or a combination, of these risks and uncertainties could materially affect any of those matters as to which we have made forward-looking statements and cause our actual results or an actual event or occurrence to differ materially from those results or an event or occurrence described in a forward-looking statement. Some of the principal risks associated with our business include the following:
the impact of macroeconomic uncertainties and the global COVID-19 pandemic;
fluctuations in our quarterly results and our ability to meet securities analysts’ and investors’ expectations;
the impact of actions that we are taking to restructure our business in alignment with our strategic priorities;
our ability to effectively manage our rapid growth;
the loss of our senior management and other key employees;
our ability to hire, retain and motivate qualified employees;
our ability to maintain and grow our relationships with existing customers and have them increase their usage of our platform;
our ability to maintain and enhance our brand and increase market awareness of our company and products;
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new and unproven markets for our products and platform;
any breaches of our networks or systems, or those of AWS or our service providers;
limitations on the use and adoption of our solutions due to privacy laws, data collection and transfer restrictions and related domestic or foreign regulations;
our ability to manage changes in network service provider fees that we pay in connection with the delivery of communications on our platform;
our ability to attract new customers in a cost-effective manner;
our ability to develop enhancements to our products, increase gross margins and introduce new products that achieve market acceptance;
our ability to compete effectively in the markets in which we participate;
our history of losses and uncertainty about our future profitability;
our ability to increase adoption of our products by enterprises;
our ability to expand our relationships with existing technology partner customers and add new technology partner customers;
significant risks associated with expansion of our international operations;
compliance with applicable laws and regulations;
telecommunications-related regulations and future legislative or regulatory actions;
our ability to obtain or retain geographical, mobile, regional, local or toll-free numbers and to effectively process requests to port such numbers in a timely manner due to industry regulations;
our ability to adapt and respond effectively to rapidly changing technology, evolving industry standards, changing regulations, and changing customer needs, requirements or preferences;
our ability to provide monthly uptime service level commitments of a minimum of 99.95% under our agreements with customers;
defects or errors in our products;
any loss or decline in revenue from our largest customers;
litigation by third parties for alleged infringement of their proprietary rights;
exposure to substantial liability for intellectual property infringement and other losses from indemnity provisions in various agreements;
our ability to successfully utilize or to integrate acquired businesses and technologies successfully or to achieve the expected benefits of such acquisitions, partnerships and investments;
our use of open source software;
our reliance on SaaS technologies from third parties;
potentially adverse tax consequences on our global operations and structure;
fraudulent usage of or activity relating to our products;
unfavorable conditions in our industry or the global economy;
requirement of additional capital to support our business and its availability on acceptable terms, if at all;
exposure to foreign currency exchange rate fluctuations;
our ability to use our net operating losses and certain other tax attributes to offset future taxable income and taxes;
our failure to maintain an effective system of disclosure controls and internal control over financial reporting;
the risks of pandemics, epidemics, earthquakes, fire, floods and other natural catastrophic events and of interruption by man-made problems such as power disruptions, computer viruses, data security breaches, war or terrorism;
volatility of the trading price of our Class A common stock;
potential decline in the market price of our Class A common stock due to substantial future sales of shares;
requirement of a significant amount of cash to service our future debt; and
our ability to raise the funds necessary for the repayment of the 2029 Notes and 2031 Notes for cash.
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
TWILIO INC.
Condensed Consolidated Balance Sheets
(Unaudited)
As of September 30,As of December 31,
20222021
(In thousands)
ASSETS
Current assets:
Cash and cash equivalents$632,794 $1,479,452 
Short-term marketable securities3,575,751 3,878,430 
Accounts receivable, net487,750 388,215 
Prepaid expenses and other current assets265,977 186,131 
Total current assets4,962,272 5,932,228 
Property and equipment, net263,862 255,316 
Operating right-of-use assets127,567 234,584 
Equity method investment732,490  
Intangible assets, net901,155 1,050,012 
Goodwill5,284,616 5,263,166 
Other long-term assets340,694 263,292 
Total assets$12,612,656 $12,998,598 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable$103,234 $93,333 
Accrued expenses and other current liabilities572,876 417,503 
Deferred revenue and customer deposits135,610 140,389 
Operating lease liability, current52,453 52,325 
Total current liabilities864,173 703,550 
Operating lease liability, noncurrent176,336 211,253 
Finance lease liability, noncurrent24,842 25,132 
Long-term debt, net986,985 985,907 
Other long-term liabilities29,432 41,290 
Total liabilities2,081,768 1,967,132 
Commitments and contingencies (Note 13)
Stockholders' equity:
Preferred stock  
Class A and Class B common stock184 180 
Additional paid-in capital13,842,301 13,169,118 
Accumulated other comprehensive loss(165,183)(18,141)
Accumulated deficit(3,146,414)(2,119,691)
Total stockholders’ equity10,530,888 11,031,466 
Total liabilities and stockholders’ equity$12,612,656 $12,998,598 
See accompanying notes to condensed consolidated financial statements.
6


TWILIO INC.
Condensed Consolidated Statements of Operations
(Unaudited)

Three Months EndedNine Months Ended
September 30,September 30,
2022202120222021
(In thousands, except share and per share amounts)
Revenue$983,030 $740,176 $2,801,747 $1,999,095 
Cost of revenue520,955 375,561 1,469,312 1,004,929 
Gross profit462,075 364,615 1,332,435 994,166 
Operating expenses:
Research and development284,735 209,890 804,987 565,970 
Sales and marketing328,833 264,548 951,697 713,196 
General and administrative135,331 122,522 392,319 346,958 
Restructuring costs72,451  72,451  
Impairment of long-lived assets97,722  97,722  
Total operating expenses919,072 596,960 2,319,176 1,626,124 
Loss from operations(456,997)(232,345)(986,741)(631,958)
Other expenses, net:
Share of losses from equity method investment(13,376) (13,376) 
Other, net(8,374)(6,613)(23,290)(39,219)
Total other expenses, net(21,750)(6,613)(36,666)(39,219)
Loss before (provision for) benefit from income taxes(478,747)(238,958)(1,023,407)(671,177)
(Provision for) benefit from income taxes(3,580)14,849 (3,316)12,673 
Net loss attributable to common stockholders$(482,327)$(224,109)$(1,026,723)$(658,504)
Net loss per share attributable to common stockholders, basic and diluted$(2.63)$(1.26)$(5.63)$(3.82)
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted183,692,564 177,231,285 182,319,735 172,605,371 
See accompanying notes to condensed consolidated financial statements.
7


TWILIO INC.
Condensed Consolidated Statements of Comprehensive Loss
(Unaudited)
Three Months EndedNine Months Ended
September 30,September 30,
2022202120222021
(In thousands)
Net loss$(482,327)$(224,109)$(1,026,723)$(658,504)
Other comprehensive loss:
Unrealized loss on marketable securities(22,151)(982)(103,999)(6,137)
Foreign currency translation(2,192)31 (4,646)(245)
Net change in market value of effective foreign currency forward exchange contracts (19,196)(161)(34,154)(3,069)
Share of other comprehensive loss from equity method investment(4,243) (4,243) 
Total other comprehensive loss(47,782)(1,112)(147,042)(9,451)
Comprehensive loss attributable to common stockholders$(530,109)$(225,221)$(1,173,765)$(667,955)
See accompanying notes to condensed consolidated financial statements.
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TWILIO, INC.
Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited)
Common Stock
Class A
Common Stock
Class B
Additional Paid-In CapitalAccumulated Other Comprehensive (Loss) IncomeAccumulated DeficitTotal Stockholders' Equity
SharesAmountSharesAmount
(In thousands, except share amounts)
Balance as of December 31, 2021170,625,994 $168 9,842,105 $12 $13,169,118 $(18,141)$(2,119,691)$11,031,466 
Net loss— — — — — — (221,627)(221,627)
Exercises of vested stock options180,643 — 193,889 — 11,727 — — 11,727 
Vesting of restricted stock units877,089 1 — — (1)— —  
Value of equity awards withheld for tax liability(5,804)— — — (1,065)— — (1,065)
Conversion of shares of Class B common stock into shares of Class A common stock215,389 — (215,389)— — — — — 
Shares of Class A common stock donated to charity22,102 — — — 4,232 — — 4,232 
Shares returned from escrow(152,239)— — — (387)— — (387)
Unrealized loss on marketable securities— — — — — (62,826)— (62,826)
Foreign currency translation— — — — — (165)— (165)
Net change in market value of effective foreign currency forward exchange contracts— — — — — (3,852)— (3,852)
Stock-based compensation— — — — 159,930 — — 159,930 
Balance as of March 31, 2022171,763,174 $169 9,820,605 $12 $13,343,554 $(84,984)$(2,341,318)$10,917,433 
Net loss— — — — — — (322,769)(322,769)
Exercises of vested stock options98,111 — 77,732 — 5,649 — — 5,649 
Vesting of restricted stock units1,049,640 1 — — (1)— —  
Value of equity awards withheld for tax liability(38)— — — (4)— — (4)
Conversion of shares of Class B common stock into shares of Class A common stock80,732 — (80,732)— — — — — 
Shares issued under ESPP258,221 1 — — 24,317 — — 24,318 
Shares of Class A common stock donated to charity22,102 — — — 2,373 — — 2,373 
Unrealized loss on marketable securities— — — — — (19,022)— (19,022)
Foreign currency translation— — — — — (2,289)— (2,289)
Net change in market value of effective foreign currency forward exchange contracts— — — — — (11,106)— (11,106)
Stock-based compensation— — — — 247,412 — — 247,412 
Balance as of June 30, 2022173,271,942 $171 9,817,605 $12 $13,623,300 $(117,401)$(2,664,087)$10,841,995 
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TWILIO, INC.
Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited)
Common Stock
Class A
Common Stock
Class B
Additional Paid-In CapitalAccumulated Other Comprehensive (Loss) IncomeAccumulated DeficitTotal Stockholders' Equity
SharesAmountSharesAmount
(In thousands, except share amounts)
Balance as of June 30, 2022173,271,942 $171 9,817,605 $12 $13,623,300 $(117,401)$(2,664,087)$10,841,995 
Net loss— — — — — — (482,327)(482,327)
Exercises of vested stock options38,368 — 35,187 — 2,056 — — 2,056 
Vesting of restricted stock units1,115,248 1  — (1)— —  
Value of equity awards withheld for tax liability(125)— — — (11)— — (11)
Conversion of shares of Class B common stock into shares of Class A common stock35,187 — (35,187)— — — —  
Shares of Class A common stock donated to charity22,102 — — — 1,911 — — 1,911 
Unrealized loss on marketable securities— — — — — (22,151)— (22,151)
Foreign currency translation— — — — — (2,192)— (2,192)
Net change in market value of effective foreign currency forward exchange contracts— — — — — (19,196)— (19,196)
Share of other comprehensive loss from equity method investment— — — — — (4,243)— (4,243)
Stock-based compensation— — — — 199,772 — — 199,772 
Stock-based compensation - restructuring— — — — 15,274 — — 15,274 
Balance as of September 30, 2022174,482,722 $172 9,817,605 $12 $13,842,301 $(165,183)$(3,146,414)$10,530,888 
See accompanying notes to condensed consolidated financial statements.



10

TWILIO, INC.
Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited)
Common Stock
Class A
Common Stock
Class B
Additional Paid-In CapitalAccumulated Other Comprehensive (Loss) IncomeAccumulated DeficitTotal Stockholders' Equity
SharesAmountSharesAmount
(In thousands, except share amounts)
Balance as of December 31, 2020153,496,222 $151 10,551,302 $13 $9,613,246 $9,046 $(1,169,791)$8,452,665 
Net loss— — — — — — (206,542)(206,542)
Exercises of vested stock options248,008 — 211,371 — 11,564 — — 11,564 
Vesting of restricted stock units913,966 1 — — (1)— —  
Value of equity awards withheld for tax liability(6,989)— — — (2,774)— — (2,774)
Conversion of shares of Class B common stock into shares of Class A common stock419,371 — (419,371)— — — — — 
Equity component from partial settlement of 2023 convertible senior notes1,158,381 2 — — 80,047 — — 80,049 
Shares of Class A common stock donated to charity22,102 — — — 9,405 — — 9,405 
Issuance of common stock in connection with a follow-on public offering, net of underwriter discounts4,312,500 4 — — 1,766,396 — — 1,766,400 
Costs related to the follow-on public offering— — — — (727)— — (727)
Issuance of restricted stock awards24,697 — — — — — — — 
Unrealized loss on marketable securities— — — — — (4,176)— (4,176)
Foreign currency translation— — — — — (210)— (210)
Stock-based compensation— — — — 141,542 — — 141,542 
Balance as of March 31, 2021160,588,258 $158 10,343,302 $13 $11,618,698 $4,660 $(1,376,333)$10,247,196 
Net loss— — — — — — (227,853)(227,853)
Exercises of vested stock options294,430 — 63,164 — 20,351 — — 20,351 
Vesting of restricted stock units839,472 1 — — (1)— —  
Value of equity awards withheld for tax liability(5,498)— — — (1,882)— — (1,882)
Conversion of shares of Class B common stock into shares of Class A common stock188,044 1 (188,044)(1)— — —  
Equity component from partial settlement of 2023 convertible
senior notes
3,688,584 4 — — 255,590 — — 255,594 
Settlement of capped call, net of related costs— — — — 225,233 — — 225,233 
Shares issued under ESPP100,107 — — — 23,699 — — 23,699 
Donated common stock22,102 — — — 6,789 — — 6,789 
Costs related to the follow-on public offering— — — — (50)— — (50)
Unrealized loss on marketable securities— — — — — (979)— (979)
Foreign currency translation— — — — — (66)— (66)
Net change in market value of effective foreign currency forward exchange contracts— — — — — (2,908)— (2,908)
Stock-based compensation— — — — 148,988 — — 148,988 
Balance as of June 30, 2021165,715,499 $164 10,218,422 $12 $12,297,415 $707 $(1,604,186)$10,694,112 



11

TWILIO, INC.
Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited)

Common Stock
Class A
Common Stock
Class B
Additional Paid-In CapitalAccumulated Other Comprehensive Income (Loss)Accumulated DeficitTotal Stockholders’ Equity
SharesAmountSharesAmount
(In thousands, except share amounts)
Balance as of June 30, 2021165,715,499 $164 10,218,422 $12 $12,297,415 $707 $(1,604,186)$10,694,112 
Net loss— — — — — — (224,109)(224,109)
Exercises of vested stock options222,066 — 83,484 — 15,993 — — 15,993 
Vesting of restricted stock units834,148 1 — — (1)— —  
Value of equity awards withheld for tax liability(5,530)— — — (1,896)— — (1,896)
Conversion of shares of Class B common stock into shares of Class A common stock388,725 — (388,725)— — — — — 
Donated common stock22,102 — — — 8,389 — — 8,389 
Cost adjustments related to the follow-on public offering— — — — 90 — — 90 
Shares issued in acquisition1,116,390 1 — — 419,036 — — 419,037 
Value of equity awards assumed in acquisition— — — — 1,511 — — 1,511 
Shares issued in acquisition subject to future vesting59,533 — — — — — — — 
Unrealized loss on marketable securities— — — — — (982)— (982)
Foreign currency translation— — — — — 31 — 31 
Net change in market value of effective foreign currency forward exchange contracts— — — — — (161)— (161)
Stock-based compensation— — — — 169,734 — — 169,734 
Balance as of September 30, 2021168,352,933 $166