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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 March 31, 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-20220331_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, First 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 April 30, 2022, 171,861,852 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 March 31, 2022
TABLE OF CONTENTS
Page

1

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:
•our ability to effectively manage our growth, including maintaining our corporate culture;
•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;
•the impact of the coronavirus disease of 2019 (“COVID-19”) pandemic on the global economy, our customers, partners, employees and business;
•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;
•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;
•potential harm caused by compromises in security, data and infrastructure, including cybersecurity protections, 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 manage changes in network service provider fees that we pay in connection with the delivery of communications on our platform;
•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;
2

•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 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:
•our ability to effectively manage our rapid growth;
•fluctuations in our quarterly results and our ability to meet securities analysts’ and investors’ expectations;
•the impact of the global COVID-19 pandemic;
•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;
•new and unproven markets for our products and platform;
3

•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 attract new customers in a cost-effective manner;
•our ability to develop enhancements to our products 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;
•any breaches of our networks or systems, or those of AWS or our service providers;
•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, 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.
4

PART I - FINANCIAL INFORMATION
Item 1. Financial Statements

TWILIO INC.
Condensed Consolidated Balance Sheets
(Unaudited)
As of March 31,As of December 31,
20222021
(In thousands)
ASSETS
Current assets:
Cash and cash equivalents$1,617,022 $1,479,452 
Short-term marketable securities3,606,290 3,878,430 
Accounts receivable, net406,736 388,215 
Prepaid expenses and other current assets201,142 186,131 
Total current assets5,831,190 5,932,228 
Property and equipment, net259,003 255,316 
Operating right-of-use assets225,951 234,584 
Intangible assets, net1,006,692 1,050,012 
Goodwill5,286,683 5,263,166 
Other long-term assets281,283 263,292 
Total assets$12,890,802 $12,998,598 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$93,389 $93,333 
Accrued expenses and other current liabilities433,668 417,503 
Deferred revenue and customer deposits139,671 140,389 
Operating lease liability, current53,094 52,325 
Total current liabilities719,822 703,550 
Operating lease liability, noncurrent201,354 211,253 
Finance lease liability, noncurrent22,053 25,132 
Long-term debt, net986,243 985,907 
Other long-term liabilities43,897 41,290 
Total liabilities1,973,369 1,967,132 
Commitments and contingencies (Note 10)
Stockholders’ equity:
Preferred stock— — 
Class A and Class B common stock181 180 
Additional paid-in capital13,343,554 13,169,118 
Accumulated other comprehensive loss(84,984)(18,141)
Accumulated deficit(2,341,318)(2,119,691)
Total stockholders’ equity10,917,433 11,031,466 
Total liabilities and stockholders’ equity$12,890,802 $12,998,598 
See accompanying notes to condensed consolidated financial statements.
5

TWILIO INC.
Condensed Consolidated Statements of Operations
(Unaudited)

Three Months Ended
 March 31,
20222021
(In thousands, except share and per share amounts)
Revenue$875,363 $589,988 
Cost of revenue450,292 291,684 
Gross profit425,071 298,304 
Operating expenses:
Research and development240,611 174,800 
Sales and marketing287,906 210,590 
General and administrative114,362 110,253 
Total operating expenses642,879 495,643 
Loss from operations(217,808)(197,339)
Other expenses, net(6,677)(8,313)
Loss before benefit from (provision for) income taxes(224,485)(205,652)
Benefit from (provision for) income taxes2,858 (890)
Net loss attributable to common stockholders$(221,627)$(206,542)
Net loss per share attributable to common stockholders, basic and diluted$(1.23)$(1.24)
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted180,898,713 167,160,458 
See accompanying notes to condensed consolidated financial statements.

6

TWILIO INC.
Condensed Consolidated Statements of Comprehensive Loss
(Unaudited)
Three Months Ended
 March 31,
20222021
(In thousands)
Net loss$(221,627)$(206,542)
Other comprehensive loss:
Unrealized loss on marketable securities(62,826)(4,176)
Foreign currency translation(165)(210)
Net change in market value of effective foreign currency forward exchange contracts(3,852)— 
Total other comprehensive loss(66,843)(4,386)
Comprehensive loss attributable to common stockholders$(288,470)$(210,928)
See accompanying notes to condensed consolidated financial statements.
7
TWILIO, INC.
Condensed Consolidated Statements of Stockholder's Equity
(Unaudited)
Common Stock
Class A		Common Stock
Class B		Additional Paid-In CapitalAccumulated Other Comprehensive 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 

Common Stock
Class A		Common Stock
Class B		Additional Paid-In CapitalAccumulated Other Comprehensive 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 
See accompanying notes to condensed consolidated financial statements.
8

TWILIO INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Three Months Ended
 March 31,
20222021
CASH FLOWS FROM OPERATING ACTIVITIES:(In thousands)
Net loss$(221,627)$(206,542)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization68,103 59,592 
Non-cash reduction to the right-of-use asset12,415 11,711 
Net amortization of investment premium and discount10,712 4,240 
Amortization of debt discount and issuance costs338 3,373 
Stock-based compensation155,275 137,155 
Amortization of deferred commissions12,626 5,630 
Allowance for credit losses2,558 1,985 
Value of shares of Class A common stock donated to charity4,232 9,405 
Loss on extinguishment of debt— 7,602 
Other adjustments(1,478)3,089 
Changes in operating assets and liabilities:
Accounts receivable(19,623)5,565 
Prepaid expenses and other current assets(14,176)(29,912)
Other long-term assets(27,399)(15,232)
Accounts payable1,247 (10,275)
Accrued expenses and other current liabilities18,148 28,307 
Deferred revenue and customer deposits(1,453)3,435 
Operating lease liabilities(13,058)(12,053)
Other long-term liabilities(4,415)(2,570)
Net cash (used in) provided by operating activities(17,575)4,505 
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions, net of cash acquired and other related payments(27,682)(66,926)
Purchases of marketable securities and other investments(246,874)(1,640,499)
Proceeds from sales and maturities of marketable securities442,753 356,824 
Capitalized software development costs(10,250)(10,434)
Purchases of long-lived and intangible assets(6,980)(4,986)
Net cash provided by (used in) investing activities150,967 (1,366,021)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from public offerings, net of underwriters' discount and issuance costs— 1,766,400 
Payments of costs related to public offerings(35)(360)
Proceeds from issuance of senior notes due 2029 and 2031— 987,500 
Payment of debt issuance costs— (130)
Principal payments on debt and finance leases(6,520)(2,751)
Value of equity awards withheld for tax liabilities(1,065)(2,774)
Proceeds from exercises of stock options11,727 11,564 
Net cash provided by financing activities4,107 2,759,449 
Effect of exchange rate changes on cash, cash equivalents and restricted cash27 (44)
NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH137,526 1,397,889 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH—Beginning of period1,481,831 933,885 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH —End of period$1,619,357 $2,331,774 
Cash paid for income taxes, net$1,443 $1,252 
Cash paid for interest$19,011 $263 
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Purchases of property and equipment through finance leases$— $5,266 
Value of common stock issued to settle convertible senior notes due 2023$— $422,716 
RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH TO THE CONSOLIDATED BALANCE SHEETS
Cash and cash equivalents$1,617,022 $2,331,774 
Restricted cash in other current assets1,970 — 
Restricted cash in other long-term assets365 — 
Total cash, cash equivalents and restricted cash$1,619,357 $2,331,774 
See accompanying notes to condensed consolidated financial statements.
9
TWILIO INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Organization and Description of Business
Twilio Inc. (the “Company”) was incorporated in the state of Delaware on March 13, 2008. The Company is the leading cloud communications platform and enables developers to build, scale and operate real-time customer engagement within their software applications via simple-to-use Application Programming Interfaces (“API”). The power, flexibility, and reliability offered by the Company’s software building blocks empower entities of virtually every shape and size to build world-class engagement into their customer experience.
The Company’s headquarters are located in San Francisco, California, and the Company has subsidiaries across North America, South America, Europe, Asia and Australia.
2. Summary of Significant Accounting Policies
(a)Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K filed with the SEC on February 22, 2022 (“Annual Report”).
The condensed consolidated balance sheet as of December 31, 2021, included herein, was derived from the audited financial statements as of that date, but may not include all disclosures including certain notes required by U.S. GAAP on an annual reporting basis.
In the opinion of management, the accompanying condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, comprehensive loss, stockholders’ equity and cash flows for the interim periods, but are not necessarily indicative of the results of operations to be anticipated for the full year 2022 or any future period.
(b)Principles of Consolidation
The condensed consolidated financial statements include the Company and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated.
(c)Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates are used for, but not limited to, revenue allowances and sales credit reserves; recoverability of long-lived and intangible assets; capitalization and useful life of the Company’s capitalized internal-use software development costs; fair value of acquired intangible assets and goodwill; accruals and contingencies. Estimates are based on historical experience and on various assumptions that the Company believes are reasonable under current circumstances. However, future events are subject to change and best estimates and judgments may require further adjustments, therefore, actual results could differ materially from those estimates. Management periodically evaluates such estimates and they are adjusted prospectively based upon such periodic evaluation.
(d)Remaining Performance Obligations
Revenue allocated to remaining performance obligations for contracts with durations of more than one year was $152.7 million as of March 31, 2022, of which 67% is expected to be recognized over the next 12 months and 94% is expected to be recognized over the next 24 months.
10
(e)Deferred Revenue and Customer Deposits
As of March 31, 2022 and December 31, 2021, the Company recorded $140.4 million and $141.5 million as its deferred revenue and customer deposits, respectively, that are included in deferred revenue and customer deposits and other long-term liabilities in the accompanying condensed consolidated balance sheets. During the three months ended March 31, 2022 and 2021, the Company recognized $64.9 million and $27.8 million of revenue, respectively, that was included in the deferred revenue and customer deposits balance as of the end of the previous year.
(f)Deferred Sales Commissions
Total net capitalized commission costs as of March 31, 2022 and December 31, 2021, were $196.4 million and $193.4 million, respectively, and are included in prepaid expenses and other current assets and other long‑term assets in the accompanying condensed consolidated balance sheets.
(g)Concentration of Credit Risk
Financial instruments that potentially expose the Company to a concentration of credit risk consist primarily of cash, cash equivalents, restricted cash, marketable securities and accounts receivable. The Company maintains cash, restricted cash, cash equivalents and marketable securities with financial institutions that management believes are financially sound and have minimal credit risk exposure although the balances will exceed insured limits.
The Company sells its services to a wide variety of customers. If the financial condition or results of operations of any significant customer deteriorates substantially, operating results could be adversely affected. To reduce credit risk, management performs credit evaluations of the financial condition of significant customers. The Company does not require collateral from its credit customers and maintains reserves for estimated credit losses on customer accounts when considered necessary. Actual credit losses may differ from the Company’s estimates. During the three months ended March 31, 2022 and 2021, no customer organization accounted for more than 10% of the Company’s total revenue.
As of March 31, 2022 and December 31, 2021, no customer organization represented more than 10% of the Company’s gross accounts receivable.
(e)Changes to Significant Accounting Policies
There have been no changes to the Company’s significant accounting policies as described in its Annual Report.
(f)Recently Adopted Accounting Guidance
In October 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2021-08, “Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers,” which requires that an entity recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC 606, "Revenue from Contracts with Customers." At the acquisition date, an acquirer should account for the related revenue contracts as if it had originated the contracts. Generally, this should result in an acquirer recognizing and measuring the acquired contact assets and contract liabilities consistent with how they were recognized and measured in the acquiree's financial statements, assuming the acquirer is able to assess and rely on how the acquiree applied ASC 606. The Company adopted ASU 2021-08 in the first quarter of 2022 with no material impact to the Company's condensed consolidated financial statements.

11
3. Fair Value Measurements
Financial Assets
The following tables provide the financial assets measured at fair value on a recurring basis:
Amortized
Cost or
Carrying
Value		Gross
Unrealized
Gains		Gross
Unrealized
Losses		Fair Value Hierarchy as of
March 31, 2022		Aggregate
Fair Value
Level 1Level 2Level 3
Financial Assets:(In thousands)
Cash and cash equivalents:
Money market funds$272,248 $— $— $272,248 $— $— $272,248 
Reverse repurchase agreements200,000 — — — 200,000 — 200,000 
Commercial paper24,900 — — — 24,900 — 24,900 
Total included in cash and cash equivalents497,148 — — 272,248 224,900 — 497,148 
Marketable securities:
U.S. Treasury securities410,933 2 (9,694)401,241 — — 401,241 
Non-U.S. government securities181,628 — (4,983)176,645 — — 176,645 
Corporate debt securities and commercial paper3,095,397 180 (67,173)11,000 3,017,404 — 3,028,404 
Total marketable securities3,687,958 182 (81,850)588,886 3,017,404 — 3,606,290 
Total financial assets$4,185,106 $182 $(81,850)$861,134 $3,242,304 $— $4,103,438 
Amortized
Cost or
Carrying
Value		Gross
Unrealized
Gains		Gross
Unrealized
Losses		Fair Value Hierarchy as of
December 31, 2021		Aggregate
Fair Value
Level 1Level 2Level  3
Financial Assets:(In thousands)
Cash and cash equivalents:
Money market funds $786,548 $— $— $786,548 $— $— $786,548 
Commercial paper46,076 — — — 46,076 — 46,076 
Total included in cash and cash equivalents832,624 — — 786,548 46,076 — 832,624 
Marketable securities:
U.S. Treasury securities375,305 6 (2,561)372,750 — — 372,750 
Non-U.S. government securities221,641 — (1,355)220,286 — — 220,286 
Corporate debt securities and commercial paper3,300,326 960 (15,892)31,000 3,254,394 — 3,285,394 
Total marketable securities3,897,272 966 (19,808)624,036 3,254,394 — 3,878,430 
Total financial assets$4,729,896 $966 $(19,808)$1,410,584 $3,300,470 $— $4,711,054 
The Company's primary objective when investing excess cash is preservation of capital, hence the Company's marketable securities primarily consist of U.S. Treasury Securities, non-U.S government securities, high credit quality corporate debt securities and commercial paper. As the Company views its marketable securities as available to support current operations, it has classified all available for sale securities as short-term. As of March 31, 2022 and 2021, for fixed income securities that were in unrealized loss positions, the Company has determined that (i) it does not have the intent to sell any of these investments, and (ii) it is not more likely than not that it will be required to sell any of these investments before recovery of the entire amortized cost basis. In addition, as of March 31, 2022 and 2021, the Company anticipates that it will recover the entire amortized cost basis of such fixed income securities before maturity.
Interest earned on marketable securities was $15.6 million and $3.9 million in the three months ended March 31, 2022 and 2021, respectively. The interest is recorded as other expenses, net, in the accompanying condensed consolidated statements of operations.
12
The following table summarizes the contractual maturities of marketable securities:
As of March 31, 2022As of December 31, 2021
Amortized
Cost		Aggregate
Fair Value		Amortized
Cost		Aggregate
Fair Value
Financial Assets:(In thousands)
Less than one year$1,066,875 $1,061,276 $1,084,751 $1,085,006 
One to three years2,621,083 2,545,014 2,812,521 2,793,424 
Total$3,687,958 $3,606,290 $3,897,272 $3,878,430 
Strategic Investments
As of March 31, 2022 and December 31, 2021, the Company held strategic investments with a carrying value of $69.3 million and $68.3 million, respectively, recorded as other long-term assets in the accompanying condensed consolidated balance sheets. The carrying value of these securities is determined under the measurement alternative on a non-recurring basis and adjusted for observable changes in fair value. There were no impairments or other adjustments recorded in the three months ended March 31, 2022 and 2021 related to these securities.
Financial Liabilities
The Company’s financial liabilities that are measured at fair value on a recurring basis consist of foreign currency derivative liabilities and are classified as Level 2 financial instruments in the fair value hierarchy. As of March 31, 2022 and December 31, 2021, the aggregate fair value of these instruments and the associated gross unrealized losses were not significant.
The Company’s financial liabilities that are not measured at fair value on a recurring basis consist of its 2029 Notes and 2031 Notes, respectively. As of March 31, 2022 the fair values of the 2029 Notes and 2031 Notes were $474.4 million and $466.5 million, respectively. As of December 31, 2021, the fair value of the 2029 Notes and 2031 Notes were $510.2 million and $512.8 million, respectively.

4. Property and Equipment
Property and equipment consisted of the following:
As of March 31, 2022As of December 31, 2021
(In thousands)
Capitalized internal-use software development costs$213,309 $198,589 
Data center equipment (1)
78,210 77,946 
Leasehold improvements87,600 85,297 
Office equipment61,063 58,636 
Furniture and fixtures15,591 15,360 
Software10,731 10,506 
Total property and equipment466,504 446,334 
Less: accumulated depreciation and amortization (1)
(207,501)(191,018)
Total property and equipment, net$259,003 $255,316 
____________________________________
(1) Data center equipment contains $63.0 million in assets held under finance leases as of each March 31, 2022, and December 31, 2021. Accumulated depreciation and amortization contains $30.1 million and $26.8 million in accumulated amortization for assets held under finance leases as of March 31, 2022, and December 31, 2021, respectively.
Depreciation and amortization expense was $16.6 million and $14.4 million in the three months ended March 31, 2022 and 2021, respectively.
13
The Company capitalized $14.7 million and $15.1 million in internal‑use software development costs in the three months ended March 31, 2022 and 2021, respectively.
5. Derivatives and Hedging
As of March 31, 2022, the Company had outstanding foreign currency forward contracts designated as cash flow hedges with a total sell notional value of $324.9 million. The notional value represents the amount that will be sold upon maturity of the forward contract. As of March 31, 2022, these contracts had maturities of less than 9 months.
Gains and losses associated with these foreign currency forward contracts were as follows:
Consolidated Statement of Operations and Statement of Comprehensive LossThree Months Ended March 31,
20222021
(In thousands)
Losses recognized in OCINet change in market value of effective foreign currency forward exchange contracts$3,852 $— 
Losses recognized in income due to instruments maturingCost of revenue$1,597 $— 
The Company is subject to master netting agreements with certain counterparties of the foreign exchange contracts, under which it is permitted to net settle transactions of the same currency with a single net amount payable by one party to the other. It is the Company’s policy to present the derivatives at gross in its condensed consolidated balance sheet. The Company’s foreign currency forward contracts are not subject to any credit contingent features or collateral requirements. The Company manages its exposure to counterparty risk by entering into contracts with a diversified group of major financial institutions and by actively monitoring its outstanding positions. As of March 31, 2022, the Company did not have any offsetting arrangements.
6. Goodwill and Intangible Assets
During 2022, the Company completed a business combination for an aggregate accounting purchase price of $32.7 million, of which $25.7 million was allocated to goodwill and $8.2 million was allocated to intangible assets.
Goodwill
The goodwill balance as of March 31, 2022 and December 31, 2021 was as follows:
Total
(In thousands)
Balance as of December 31, 2021$5,263,166 
Goodwill additions and adjustments23,517 
Balance as of March 31, 2022$5,286,683 
14
Intangible assets
Intangible assets consisted of the following:
As of March 31, 2022
GrossAccumulated
Amortization		Net
Amortizable intangible assets:(In thousands)
Developed technology$796,231 $(251,248)$544,983 
Customer relationships539,264 (147,028)392,236 
Supplier relationships57,471 (11,915)45,556 
Trade names30,669 (15,442)15,227 
Order backlog10,000 (10,000)— 
Patent4,028 (553)3,475 
Total amortizable intangible assets1,437,663 (436,186)1,001,477 
Non-amortizable intangible assets:
Telecommunication licenses4,920 — 4,920 
Trademarks and other295 — 295 
Total$1,442,878 $(436,186)$1,006,692 

As of December 31, 2021
GrossAccumulated
Amortization		Net
Amortizable intangible assets:(In thousands)
Developed technology$794,831 $(222,765)$572,066 
Customer relationships538,264 (128,035)410,229 
Supplier relationships51,671 (9,491)42,180 
Trade names30,669 (13,874)16,795 
Order backlog10,000 (10,000)— 
Patent4,035 (508)3,527 
Total amortizable intangible assets1,429,470 (384,673)1,044,797 
Non-amortizable intangible assets:
Telecommunication licenses4,920 — 4,920 
Trademarks and other295 — 295 
Total$1,434,685 $(384,673)$1,050,012 
Amortization expense was $51.5 million and $45.2 million for the three months ended March 31, 2022 and 2021, respectively.
15
Total estimated future amortization expense is as follows:
As of March 31, 2022
Year Ended December 31,(In thousands)
2022 (remaining nine months)$154,826 
2023203,128 
2024197,693 
2025194,119 
2026120,493 
Thereafter131,218 
Total$1,001,477 

7. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following:
As of March 31, 2022As of December 31, 2021
(In thousands)
Accrued payroll and related$84,255 $78,780 
Accrued bonus and commission30,533 64,665 
Accrued cost of revenue153,571 118,004 
Sales and other taxes payable67,123 61,975 
ESPP contributions26,181 10,284 
Finance lease liability, current12,254 12,370 
Accrued other expense59,751 71,425 
Total accrued expenses and other current liabilities$433,668 $417,503 

8. Notes Payable
Long-term debt, net, consisted of the following:
As of March 31, 2022As of December 31, 2021
(In thousands)
2029 Senior Notes
Principal$500,000 $500,000 
Unamortized discount(5,529)(5,701)
Unamortized issuance costs(1,244)(