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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, 2021
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-20210930_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 shareTWLOThe New York Stock Exchange
As of October 22, 2021, 168,448,610 shares of the registrant’s Class A common stock and 9,880,181 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 




TWILIO INC.
Quarterly Report on Form 10-Q
For the Three Months Ended September 30, 2021
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:
the impact of the coronavirus disease of 2019 (“COVID-19”) pandemic on the global economy, our customers, 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;
anticipated technology trends, such as the use of and demand for cloud communications;
our ability to continue to build and maintain credibility with the global software developer community;
our ability to attract and retain customers to use our products;
the evolution of technology affecting our products and markets;
our ability to introduce new products and enhance existing products;
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 Schrems II decision invalidating the EU-US Privacy Shield, the California Consumer Privacy Act of 2018 (“CCPA”) 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 attract and retain enterprises and international organizations as customers for our products;
our ability to form and expand partnerships with technology partners and consulting partners;
our ability to successfully enter into new markets and manage our international expansion;
the attraction and retention of qualified employees and key personnel;
our ability to effectively manage our growth and future expenses and maintain our corporate culture;

2



our ability to compete effectively in an intensely competitive market;
the sufficiency of our cash and cash equivalents to meet our liquidity needs;
our anticipated investments in sales and marketing, research and development and additional systems and processes to support our growth;
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 natural disasters and public health epidemics, such as COVID-19 on our business, results of operations and financial condition and on our customers, employees, vendors and partners; 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 in “Summary of Risk Factors and Uncertainties Associated with Our Business” 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.

3



PART I - FINANCIAL INFORMATION

Item 1. Financial Statements
TWILIO INC.
Condensed Consolidated Balance Sheets
(Unaudited)
As ofAs of
September 30,December 31,
20212020
(In thousands)
ASSETS
Current assets:
Cash and cash equivalents$1,497,498 $933,885 
Short-term marketable securities3,896,754 2,105,906 
Accounts receivable, net345,793 251,167 
Prepaid expenses and other current assets165,760 81,377 
Total current assets5,905,805 3,372,335 
Property and equipment, net237,241 183,239 
Operating right-of-use asset248,582 258,610 
Intangible assets, net1,102,599 966,573 
Goodwill5,263,051 4,595,394 
Other long-term assets219,569 111,282 
Total assets$12,976,847 $9,487,433 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$76,293 $60,042 
Accrued expenses and other current liabilities368,683 252,895 
Deferred revenue and customer deposits121,337 87,031 
Operating lease liability, current50,760 48,338 
Total current liabilities617,073 448,306 
Operating lease liability, noncurrent223,033 229,905 
Finance lease liability, noncurrent20,254 17,856 
Long-term debt985,547 302,068 
Other long-term liabilities49,191 36,633 
Total liabilities1,895,098 1,034,768 
Commitments and contingencies (Note 13)
Stockholders’ equity:
Preferred stock  
Class A and Class B common stock178 164 
Additional paid-in capital12,910,271 9,613,246 
Accumulated other comprehensive income(405)9,046 
Accumulated deficit(1,828,295)(1,169,791)
Total stockholders’ equity11,081,749 8,452,665 
Total liabilities and stockholders’ equity$12,976,847 $9,487,433 
See accompanying notes to condensed consolidated financial statements.

4



TWILIO INC.
Condensed Consolidated Statements of Operations
(Unaudited)

Three Months Ended
September 30,
Nine Months Ended
September 30,
2021202020212020
(In thousands, except share and per share amounts)
Revenue$740,176 $447,969 $1,999,095 $1,213,686 
Cost of revenue375,561 217,095 1,004,929 580,146 
Gross profit364,615 230,874 994,166 633,540 
Operating expenses:
Research and development209,890 136,652 565,970 371,692 
Sales and marketing264,548 140,875 713,196 387,420 
General and administrative122,522 65,617 346,958 182,038 
Total operating expenses596,960 343,144 1,626,124 941,150 
Loss from operations(232,345)(112,270)(631,958)(307,610)
Other expenses, net(6,613)(3,996)(39,219)(2,099)
Loss before benefit (provision) for income taxes(238,958)(116,266)(671,177)(309,709)
Benefit (provision) for income taxes14,849 (648)12,673 (1,919)
Net loss attributable to common stockholders$(224,109)$(116,914)$(658,504)$(311,628)
Net loss per share attributable to common stockholders, basic and diluted$(1.26)$(0.79)$(3.82)$(2.18)
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted177,231,285 147,501,075 172,605,371 142,832,021 
See accompanying notes to condensed consolidated financial statements.


5



TWILIO INC.
Condensed Consolidated Statements of Comprehensive Loss
(Unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2021202020212020
(In thousands)
Net loss$(224,109)$(116,914)$(658,504)$(311,628)
Other comprehensive (loss) income:
Unrealized (loss) gain on marketable securities(982)(3,021)(6,137)5,499 
Foreign currency translation31  (245) 
Net change in market value of effective foreign currency forward exchange contracts (161) (3,069) 
Total other comprehensive (loss) income(1,112)(3,021)(9,451)5,499 
Comprehensive loss attributable to common stockholders$(225,221)$(119,935)$(667,955)$(306,129)
See accompanying notes to condensed consolidated financial statements.

6





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 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 notes
1,158,381 2 — — 80,047 — — 80,049 
Donated common stock22,102 — — — 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 

7





TWILIO INC.
Condensed Consolidated Statements of Stockholders Equity, continued
(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 9,913,181 $12 $12,910,271 $(405)$(1,828,295)$11,081,749 
See accompanying notes to condensed consolidated financial statements.

8





TWILIO INC.
Condensed Consolidated Statements of Stockholders Equity, continued
(Unaudited)
Common Stock
Class A
Common Stock
Class B
Additional Paid-In CapitalAccumulated Other Comprehensive Income (Loss)Accumulated Deficit
Total Stockholders Equity
SharesAmountSharesAmount
(In thousands, except share amounts)
Balance as of December 31, 2019126,882,172 $124 11,530,627 $14 $4,952,999 $5,086 $(678,812)$4,279,411 
Net loss— — — — — — (94,791)(94,791)
Exercises of stock options243,029 — 426,001 — 8,231 — — 8,231 
Vesting of restricted stock units849,763 1 23,107 — — — — 1 
Value of equity awards withheld for tax liability(8,726)— (4,692)— (1,674)— — (1,674)
Conversion of shares of Class B common stock into shares of Class A618,103 1 (618,103)(1)— — — — 
Donated common stock22,102 — — — 2,701 — — 2,701 
Unrealized loss on marketable securities— — — — — (9,375)— (9,375)
Stock-based compensation— — — — 72,021 — — 72,021 
Balance as of March 31, 2020128,606,443 $126 11,356,940 $13 $5,034,278 $(4,289)$(773,603)$4,256,525 
Net loss— — — — — — (99,923)(99,923)
Exercises of stock options1,590,891 2 459,010 — 45,230 — — 45,232 
Vesting of restricted stock units807,270 1 4,212 — — — — 1 
Value of equity awards withheld for tax liability(6,018)— — — (1,144)— — (1,144)
Conversion of shares of Class B common stock into shares of Class A983,005 1 (983,005)(1)— — — — 
Shares issued under ESPP190,642 — — — 16,473 — — 16,473 
Donated common stock22,102 — — — 3,972 — — 3,972 
Unrealized gain on marketable securities— — — — — 17,895 — 17,895 
Stock-based compensation— — — — 82,559 — — 82,559 
Balance as of June 30, 2020132,194,335 $130 10,837,157 $12 $5,181,368 $13,606 $(873,526)$4,321,590 
Net loss— — — — — — (116,914)(116,914)
Issuance of common stock in connection with a public offering, net of underwriting discounts5,819,838 6 — — 1,408,744 — — 1,408,750 
Costs related to the public offering— — — — (541)— — (541)
Exercises of stock options218,555 — 173,199 — 9,221 — — 9,221 
Vesting of restricted stock units926,032 1 1,688 —  — — 1 
Value of equity awards withheld for tax liability(5,870)— — — (1,409)— — (1,409)
Conversion of shares of Class B common stock into shares of Class A282,780 — (282,780)— — — — — 
Equity component from partial settlement of 2023 convertible senior notes715,819 1 — — 46,154 — — 46,155 
Donated common stock22,102 — — — 5,757 — — 5,757 
Unrealized loss on marketable securities— — — — — (3,021)— (3,021)
Stock-based compensation— — — — 92,679 — — 92,679 
Balance as of September 30, 2020140,173,591 $138 10,729,264 $12 $6,741,973 $10,585 $(990,440)$5,762,268 
See accompanying notes to condensed consolidated financial statements.

9





TWILIO INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)

Nine Months Ended
September 30,
20212020
CASH FLOWS FROM OPERATING ACTIVITIES:(In thousands)
Net loss$(658,504)$(311,628)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization189,669 98,070 
Non-cash reduction to the right-of-use asset36,249 27,240 
Net amortization of investment premium and discount24,880 2,909 
Amortization of debt discount and issuance costs5,457 18,432 
Stock-based compensation445,366 237,822 
Amortization of deferred commissions20,798 8,556 
Tax benefit related to release of valuation allowance(15,569)(716)
Allowance for credit losses11,371 8,417 
Value of donated common stock24,583 12,430 
Loss on extinguishment of debt28,965 3,155 
Other adjustments8,626 (142)
Changes in operating assets and liabilities:
Accounts receivable(81,186)(58,340)
Prepaid expenses and other current assets(59,929)(8,733)
Other long-term assets(66,501)(64,777)
Accounts payable(8,665)86 
Accrued expenses and other current liabilities84,730 59,594 
Deferred revenue and customer deposits27,004 7,799 
Operating lease liabilities(36,274)(25,161)
Other long-term liabilities(1,019)2,740 
Net cash (used in) provided by operating activities(19,949)17,753 
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions, net of cash acquired and other related payments(490,880)(2,786)
Purchases of marketable securities and other investments(3,225,799)(1,465,158)
Proceeds from sales and maturities of marketable securities1,334,444 892,365 
Capitalized software development costs(35,926)(26,114)
Purchases of long-lived and intangible assets(33,575)(19,252)
Net cash used in investing activities(2,451,736)(620,945)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from a public equity offering1,766,400 1,408,750 
Payments of costs related to public offerings(464)(433)
Proceeds from issuance of senior notes987,500  
Payments of debt issuance costs(2,751) 
Proceeds from settlement of capped call, net of settlement costs228,412  
Principal payments on debt and finance leases(4,852)(6,688)
Proceeds from exercises of stock options and shares issued in ESPP71,607 79,157 
Value of equity awards withheld for tax liabilities(