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What changed in TWILIO INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of TWILIO INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+573 added−530 removedSource: 10-K (2024-02-27) vs 10-K (2023-02-27)

Top changes in TWILIO INC's 2023 10-K

573 paragraphs added · 530 removed · 388 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

60 edited+28 added−39 removed10 unchanged
Biggest changeCommunications Our Communications solutions consist of highly customizable APIs and products that can be used individually or in combination to build rich contextual communications within applications. We offer easy-to-use flexible building blocks for developers to build omnichannel engagements with customers worldwide. We also provide advanced compliance management to support success within a changing ecosystem of regulations.
Biggest changeWe generate revenue from our platform through a combination of usage-based and subscription-based fees, which varies by product as indicated below and described in further detail in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Communications Our Communications solutions consist of highly customizable APIs and products that can be used individually or in combination to build rich contextual communications within applications, allowing developers to build omnichannel engagements with customers worldwide.
The value proposition of our offerings has become stronger and our products have become more strategic to our customers as more and more businesses have prioritized building stronger, more personalized and more differentiated customer engagement experiences through digital channels.
The value proposition of our offerings has become stronger and our products have become more strategic to our customers as more and more businesses have prioritized building more personalized and more differentiated customer engagement experiences through digital channels.
In our Communications business, our competitors are primarily (i) regional network service providers that offer limited developer functionality on top of their own physical infrastructure, (ii) communications platform-as-a-service (“CPaaS”) companies that offer communications products and applications, and (iii) other software companies that compete with portions of our communications product line.
In our Communications business, our competitors are primarily (i) communications platform-as-a-service (“CPaaS”) companies that offer communications products and applications, (ii) other software companies that compete with portions of our communications product line, and (iii) regional network service providers that offer limited developer functionality on top of their own physical infrastructure.
In structuring these benefit plans, we seek to provide an aggregate level of benefits that are comparable to those provided by similar companies. 10 Corporate Information Twilio Inc. was incorporated in Delaware in March 2008. Our principal executive offices are located at 101 Spear Street, Fifth Floor, San Francisco, California 94105, and our telephone number is (415) 390-2337.
In structuring these benefit plans, we seek to provide an aggregate level of benefits that are comparable to those provided by similar companies. Corporate Information Twilio Inc. was incorporated in Delaware in March 2008. Our principal executive offices are located at 101 Spear Street, Fifth Floor, San Francisco, California 94105, and our telephone number is (415) 390-2337.
The SEC also maintains an Internet website that contains periodic and current reports, proxy statements and other information about issuers, like us, that file electronically with the SEC. The address of that website is www.sec.gov. We webcast our earnings calls and certain events we participate in or host with members of the investment community on our investor relations website.
The SEC also maintains an Internet website that contains periodic and current reports, proxy statements and other information about issuers, like us, that file electronically with the SEC. The address of that website is www.sec.gov. 10 We webcast our earnings calls and certain events we participate in or host with members of the investment community on our investor relations website.
Information on our key ESG programs, goals and commitments, and certain metrics can be found in our annual Impact Report, available on our website at https://investors.twilio.com/governance. Website references throughout this document are provided for convenience only, and the content on the referenced websites is not incorporated by reference into this report.
Information on our key ESG programs, goals and commitments, and certain metrics can be found in our annual Impact and DEI Report, available on our website at https://investors.twilio.com/governance. Website references throughout this document are provided for convenience only, and the content on the referenced websites is not incorporated by reference into this report.
Our values, which we call the Twilio Magic, remind us every day who we are at our core and guide how we act and how we make decisions. We are Builders . We are Owners . We are Curious . We are Positrons . 9 Twilio.org Communications play a critical role in solving some of the world’s toughest social challenges.
Our values, which we call the Twilio Magic, remind us every day who we are at our core and guide how we act and how we make decisions. We are Builders . We are Owners . We are Curious . We are Positrons . Twilio.org Communications play a critical role in solving some of the world’s toughest social challenges.
In addition, we provide time off and we maintain a tax-qualified 401(k) retirement plan that provides eligible U.S. employees with an opportunity to save for retirement on a tax-advantaged basis. In 2022, we matched 50% of the first 6% of contributions by plan participants, subject to annual contribution limits set forth in the Internal Revenue Code of 1986, as amended.
In addition, we provide time off and we maintain a tax-qualified 401(k) retirement plan that provides eligible U.S. employees with an opportunity to save for retirement on a tax-advantaged basis. In 2023, we matched 50% of the first 6% of contributions by plan participants, subject to annual contribution limits set forth in the Internal Revenue Code of 1986, as amended.
Our small development teams foster greater agility, which enables us to develop new, innovative products and make rapid changes to our infrastructure that increase resiliency and operational efficiency. Our development teams designed and built our customer engagement platform, our core platforms stack, as well as our Super Network.
Our small development teams foster greater agility, which enables us to develop new, innovative products and make rapid changes to our infrastructure that increase resiliency and operational efficiency. Our development teams designed and built much of our customer engagement platform, our core platforms stack, as well as our Super Network.
Information about Geographic Revenue Information about geographic revenue is set forth in Note 15 of our Notes to Consolidated Financial Statements included in Part II, Item 8, “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K.
Information about Geographic Revenue Information about geographic revenue is set forth in Note 16 of our Notes to Consolidated Financial Statements included in Part II, Item 8, “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K.
Our platform provides developers tools to build, scale, and deploy real-time communications within software applications, while simultaneously offering technology that allows businesses to harness the power of first-party data to improve the experience of their customers. The data our platform collects can inform every interaction across the customer journey to achieve more personalized, timely and impactful engagement.
Our platform provides developers tools to build, scale, and deploy real-time communications within software applications, while simultaneously offering technology that allows businesses to harness the power of first-party data to improve the experience of their customers. The data that our platform collects can inform interactions across the customer journey to achieve more personalized, timely and impactful engagement.
When potential customers do not have the available developer resources to build their own applications, we refer them to either our technology partners who embed our products in the solutions that they sell to other businesses (such as contact centers and marketing automation), our professional services team or outside consulting partners who provide consulting and development services for organizations that have limited software development expertise to build their software applications on our platform.
Additionally, when potential customers do not have the available developer resources to build their own applications, we refer them to our technology partners who embed our products in the solutions that they sell to other businesses (such as contact centers and marketing automation), our professional services team or outside consulting partners who provide consulting and development services for organizations that have limited resources or expertise to build our platform into their software applications or technology stacks.
Twilio Segment is a leading customer data platform (“CDP”) that provides businesses with the tools to harness the power of first-party data by unifying information collected throughout each customer’s journey into a unique profile.
Twilio Segment is a leading customer data platform that provides businesses with the tools to harness the power of first-party data by unifying real-time information collected throughout each customer’s journey into a unique profile.
In addition, we provide support options to address the individualized needs of our customers. All of our customers get free support and system status notifications. Our customers can also engage with the broader Twilio community to resolve issues. We offer three paid tiers of support with increasing levels of availability and guaranteed response times.
In addition, we provide support options to address the individualized needs of our customers. All of our customers get free support and system status notifications. Our customers can also engage with the broader Twilio community to resolve issues. For our Communications products, we generally offer three paid tiers of support with increasing levels of availability and guaranteed response times.
Our voice software, which works over both the traditional public switched telephone network (“PSTN”) and over Internet Protocol (“VoIP”), allows developers to incorporate advanced voice functionality such as text-to-speech, global conferencing, emergency calling, call recording, media streams and others, as well as address use cases such as contact centers, call tracking, analytics solutions and anonymized communications. • Email.
Our voice software, which works over both the traditional public switched telephone network and over Internet Protocol (“VoIP”), allows developers to incorporate advanced voice functionality such as text-to-speech, global conferencing, emergency calling, call recording, media streams and others, as well as address use cases such as contact centers, interactive voice response systems, call tracking, analytics solutions and anonymized communications.
Twilio Segment collects, contextualizes and unlocks the potential of first-party data across the customer engagement stack by: • collecting user data from interactions with websites, mobile apps, digital ads, and more; • combining data from these different sources and systems to form a complete picture of each customer; • creating from this a customer profile that can be accessed by every business team within the organization; and, • integrating customer data into subsequent interactions to drive personalization across channels.
Segment collects, contextualizes and unlocks the potential of first-party, real-time data across the customer engagement stack by: • collecting data from customers’ interactions with websites, mobile apps, digital ads, and more; • combining data from these different sources and systems to form a complete picture of each customer; • creating a customer profile that can be accessed by every business team within the organization; and • integrating customer data into subsequent interactions to drive personalization across channels.
As of December 31, 2022, we had 3,605 employees in our sales and marketing organization. Customer Support To make it easy to learn how to use our products, we provide all of our users with comprehensive documentation, how-to guides and tutorials. We supplement and enhance these tools with the participation of our engaged developer community.
As of December 31, 2023, we had 2,631 employees in our sales and marketing organization. Customer Support To make it easy to learn how to use our products, we provide all of our users with comprehensive documentation, how-to guides and tutorials. We supplement and enhance these tools with the participation of our engaged customer community.
Compensation and Benefits We are committed to delivering a comprehensive compensation and benefits program that provides support for all of our employees’ well-being. We provide competitive compensation and benefits to attract and retain talented employees, including offering market-competitive salaries, equity, and in the case of our sales teams, commissions.
We are committed to delivering a comprehensive compensation and benefits program that provides support for all of our employees’ well-being. We provide competitive compensation and benefits to attract and retain talented employees, including offering market-competitive salaries, incentive compensation in the form of bonuses or sales commissions, and equity compensation for certain employees.
Regulatory We are subject to a number of U.S. federal, U.S. state and foreign laws and regulations that involve matters central to our business. These laws and regulations may involve privacy, data protection, intellectual property, competition, telecommunications, broadband, VoIP, consumer protection, export taxation and controls, or other subjects.
Regulatory We are subject to a number of U.S. federal, U.S. state and foreign laws and regulations that involve matters central to our business. These laws and regulations may involve privacy, data protection, data security, intellectual property, competition, telecommunications, broadband, VoIP, consumer protection, export controls, economic sanctions, anti-bribery, anti-corruption, anti-money laundering, taxation, or other subjects.
Our growth to this scale has predominantly been organic as a result of our customers increasing their usage of our products, extending their usage of our products to new applications, or adopting new products that we offer.
Our growth has predominantly been organic as a result of new customer acquisition, as well as customers increasing their usage of our products, extending their usage of our products to new applications, or adopting new products that we offer.
As of that date, we also had 36 issued patents in foreign jurisdictions, all of which are related to our U.S. patents and patent applications. We have also filed various applications in the United States and internationally to establish and protect our rights to certain aspects of our intellectual property portfolio.
As of such date, we also had 36 issued patents in foreign jurisdictions, all of which are related to our U.S. patents and patent applications. We have also filed various applications for protection of certain aspects of our intellectual property in the United States and internationally.
Twilio Engage builds upon the unified profiles of Twilio Segment to enable marketers to create personalized campaigns and to manage, measure and scale them through a single platform. Such campaigns can include personalized messages delivered via native SMS, email, and/or custom channels.
Twilio Engage (“Engage”) is an automation platform for the delivery of omnichannel campaigns, which builds upon the unified profiles of our Segment platform to enable marketers to create personalized campaigns and to manage, measure and scale them through a single platform. Such campaigns can include personalized messages delivered via native SMS, email, and/or custom channels.
The Super Network also contains a set of APIs that gives our customers access to additional foundational components offered through our platform, such as phone numbers and session initiation protocol (“SIP”) trunking. Core offerings of our Communications business include: • Programmable Messaging.
The Super Network also contains a set of APIs that gives our customers access to additional foundational components offered through our platform, such as phone numbers and session initiation protocol trunking.
We believe that the principal competitive factors in our market are completeness of offering, credibility with customers, global reach, ease of integration and programmability, product features, platform scalability, reliability, security and performance, brand awareness and reputation, the strength of sales and marketing efforts, customer support, and the cost of deploying and using our products.
The principal competitive factors in these markets include completeness of offering, credibility with customers, global reach, ease of integration and programmability, product features, platform scalability, reliability, deliverability, security and performance, brand awareness and reputation, the strength of sales and marketing efforts, customer support, and the cost of deploying and using products.
Our platform, which uniquely combines our highly customizable communications APIs with leading customer data management capabilities, allows businesses to do exactly that, breaking down data silos and building a comprehensive single source for their customer data organized into unique profiles and easily accessible by all their business teams.
Our platform, which combines our highly customizable communications APIs with customer data management capabilities, allows businesses to break down data silos and build a comprehensive single source for their customer data that is organized into unique profiles that are easily accessible by all their business teams.
We also rely on a number of registered trademarks, applications for trademarks and common law protections afforded to certain unregistered trademarks to protect our brand. 8 As of December 31, 2022, in the United States, we had 232 issued patents, which expire between 2029 and 2041.
We also rely on a number of registered trademarks, applications for trademarks and common law protections afforded to certain unregistered trademarks to protect our brand. As of December 31, 2023, in the United States, we have been issued 274 patents, which expire between 2029 and 2042.
Twilio Verify is a managed solution that effectively adds security at the point of new user activation and onwards, providing a seamless, consistent and secure login experience.
Twilio Verify (“Verify”) is a managed solution for multi-channel user verification, which effectively adds security at the point of new user activation and onwards, providing a seamless, consistent and secure login experience.
Intellectual Property We rely on a combination of patent, copyright, trademark, trade secret and other intellectual property laws in the United States and other jurisdictions, as well as license agreements, other contractual protections, and internal processes, procedures, and controls, to protect, establish, maintain, and enforce our intellectual property and other proprietary rights technology.
For our other Communications products, offerings include email implementation and deliverability, and configuration and integration of our communications channels. 8 Intellectual Property We rely on a combination of patent, copyright, trademark, trade secret and other intellectual property laws in the United States and other jurisdictions, as well as license agreements, other contractual protections, and internal processes, procedures, and controls, to protect, establish, maintain, and enforce our intellectual property and other proprietary rights technology.
In addition to creating unified profiles that drive personalized customer interactions, Twilio Segment includes privacy and security features that help businesses comply with privacy laws, including the General Data Protection Regulation (“GDPR”) and the California Consumer Privacy Act of 2018 (“CCPA”). • Twilio Engage.
In addition to creating unified profiles that drive personalized customer interactions, Segment includes privacy and security features that help businesses comply with privacy laws, including the General Data Protection Regulation (“GDPR”) and the California Consumer Privacy Act of 2018 (“CCPA”). Revenue generated from Segment is primarily recognized on a subscription basis. • Engage.
In addition, as of December 31, 2022, we had 58 registered trademarks in the United States and 512 registered trademarks in foreign jurisdictions.
In addition, as of December 31, 2023, we had 55 registered trademarks in the United States and 540 registered trademarks in foreign jurisdictions.
Moreover, as we expand the scope of our platform, we may face additional competition. Research and Development Our research and development efforts are focused on building a trusted, comprehensive customer engagement platform while enhancing our existing products and developing new products and features. Our research and development organization is predominantly built around small development teams.
Research and Development Our research and development efforts are focused on building a trusted, comprehensive customer engagement platform while enhancing our existing products and developing new products and features. 7 Our research and development organization is predominantly built around small development teams.
Twilio Programmable Messaging (MessagingX) is an API to send and receive SMS, MMS, Toll-Free SMS, High-Throughput Toll-Free SMS and over-the-top (“OTT”) (e.g., WhatsApp and Facebook Messenger) messages globally. It uses intelligent sending features to ensure messages reliably reach end users wherever they are.
The core offerings of our Communications business include: • Messaging. Twilio Programmable Messaging (“Messaging”) is an API to send and receive SMS, MMS, Toll-Free SMS, and over-the-top (e.g., WhatsApp and Facebook Messenger) messages globally over a variety of sender types. It uses intelligent sending features to ensure messages reliably reach end users wherever they are.
As of December 31, 2022, 530,449 shares of Twilio Class A common stock were set aside for Twilio.org operations. In 2022, over 15,000 active social impact accounts used Twilio products and funding to reach more than 559 million people worldwide.
As of December 31, 2023, 442,041 shares of Twilio Class A common stock were set aside for Twilio.org charitable activities. In 2023, over 20,000 active social impact customers used Twilio products and funding to reach more than 546 million people worldwide.
We believe that we compete favorably on the basis of the factors listed above and that none of our competitors currently compete directly with us across all of our product offerings.
We believe that we compete favorably on the basis of the factors listed above and that none of our competitors currently compete directly with us across all of our product offerings. With the introduction of new products and services and new market entrants, we expect competition to intensify in the future.
We are implementing several organizational initiatives targeted at improving efficiencies of our processes, enhancing our fiscal discipline on all levels, optimizing utilization of our distributed workforce, driving agile decision making frameworks and more.
We are implementing several organizational initiatives targeted at improving efficiencies of our processes, enhancing our fiscal discipline on all levels, optimizing utilization of our distributed workforce, driving agile decision-making frameworks and more. We expect that these initiatives will result in operating cost reductions and increase effectiveness and efficiency within our organization. • Leveraging AI .
We consider our relations with our employees to be good and have not experienced interruptions of operations or work stoppages due to labor disagreements. Diversity, Equity and Inclusion Following our organizational commitment to diversity, equity and inclusion (“DEI”) principles, we continue the work to embed and operationalize anti-racism and anti-oppression values across the business.
We consider our relations with our employees to be good and have not experienced interruptions of operations or work stoppages due to labor disagreements. We are committed to embedding and operationalizing diversity, equity, and inclusion (“DEI”) across our business.
We currently derive an insignificant amount of revenue from fees for customer support. We also offer professional services which provide in-depth, hands-on, fee-based packages of advisory, software architecture, integration and coding services to existing and prospective customers and partners to optimize their use of the Twilio platform.
We also offer professional services which provide in-depth, hands-on, fee-based packages of advisory, software architecture, integration and coding services to existing and prospective customers and partners to optimize their use of the Twilio platform. For Flex and Segment, offerings include services for implementing digital engagement center solutions and customer data platform design.
Our customized software products are designed to address specific use cases, including our customer data platform, virtual contact centers, personalized yet scalable marketing campaigns and advanced account security systems. Our leading communications solutions, including our Application Programming Interfaces (“APIs”), are highly customizable and enable developers to embed numerous forms of voice, messaging, and email interactions into their customer-facing applications.
Our leading customer engagement platform comprises communications application programming interfaces (“APIs”) that enable developers to embed numerous forms of messaging, voice, and email interactions into their customer-facing applications, as well as software products that target specific engagement needs, including our customer data platform, digital engagement centers, marketing campaigns and advanced account security solutions.
Our customers use this API to address numerous use cases, including account notifications, marketing, account security and order confirmations, as well as two-way and conversational use cases, such as conversational sales support and customer care. • Programmable Voice.
Our customers use this API to address numerous use cases, including account notifications, marketing, account security, mass alerts and order confirmations, as well as multi-party and conversational use cases, such as conversational marketing, sales support and customer care. Revenue generated from Messaging is primarily recognized on a usage basis. • Voice.
Twilio Programmable Voice allows developers to build solutions to make, manage and receive phone calls globally through a browser, an app, a phone or anywhere else one can take a call.
Twilio Programmable Voice (“Voice”) is an API that allows developers to build solutions to make, manage and receive phone calls globally through a browser, application, phone or other methods.
Many of the laws and regulations to which we are subject are still evolving and being tested in courts, and some could be interpreted in ways that could harm our business. In addition, the application and interpretation of these laws and regulations often are uncertain, particularly in the new and rapidly evolving industry in which we operate.
Many of the laws and regulations to which we are subject are still evolving and we expect to become subject to additional laws and regulations in the future. The application and interpretation of these laws and regulations often are uncertain, particularly in the new and rapidly evolving industry in which we operate.
Our Employees and Human Capital Resources As of December 31, 2022, we had a total of 8,156 employees, including 3,490 employees located outside of the U.S. None of our U.S. employees are represented by a labor union with respect to their employment. Employees in certain of our non-U.S. subsidiaries have the benefits of collective bargaining arrangements at the national level.
Although we have works council, statutory and/or collective bargaining employee representation obligations in certain countries outside of the U.S., none of our U.S. employees are represented by a labor union with respect to their employment. Employees in certain of our non-U.S. subsidiaries have the benefits of collective bargaining arrangements at the national level.
While we believe that our ESG goals align with our long-term growth strategy and financial and operational priorities, they are aspirational and may change, and there can be no assurance that they will be met.
While we believe that our ESG goals align with our long-term growth strategy and financial and operational priorities, they are aspirational and may change, and there can be no assurance that they will be met. 9 Our Employees and Human Capital Resources As of December 31, 2023, we had a total of 5,867 employees, including 2,337 employees located outside of the U.S.
We routinely run a rigorous statistical analysis to ensure compensation is fair, taking into account factors that should impact pay, like role, level, location, and performance. Our full-time employees are eligible to receive, subject to the satisfaction of certain eligibility requirements, our comprehensive benefits package that includes medical, dental and vision insurance and life and disability insurance plans.
Our full-time employees are eligible to receive, subject to the satisfaction of certain eligibility requirements, our comprehensive benefits package that includes medical, dental and vision insurance and life and disability insurance plans.
We have also fueled our growth through successful strategic acquisitions and integrations of businesses that complemented our pre-existing products and allowed us to expand our platform and to add new customer accounts. Acquisitions of note have included Segment, the leading customer data platform we acquired in 2020, and Zipwhip, the leading toll-free messaging provider we acquired in 2021.
We have also fueled our growth through strategic acquisitions and integrations of businesses that complemented our pre-existing products and allowed us to expand our platform and to add new customer accounts. 4 Our Platform We aim to deliver the leading customer engagement platform that intelligently orchestrates customer engagement across the entire customer life cycle.
For additional information about government regulation applicable to our business, see Part I, Item 1A, “Risk Factors” in this Annual Report on Form 10-K. The Twilio Magic We believe there is a unique spirit to Twilio, manifested in who we are and how we work together. We value and invest in a positive culture of optimism, innovation, and accountability.
The Twilio Magic We believe there is a unique spirit to Twilio, manifested in who we are and how we work together. We value and invest in a positive culture of optimism, innovation, and accountability.
In our Data & Applications business our competitors are primarily (i) legacy on-premises vendors, (ii) software-as-a-service (“SaaS”) companies and marketing cloud platform vendors that offer bundled applications and platforms, and (iii) CRM and customer experience vendors. With the introduction of new products and services and new market entrants, we expect competition to intensify in the future.
In our Segment business, our competitors are primarily (i) software-as-a-service (“SaaS”) companies and marketing cloud platform vendors that offer bundled applications and platforms, (ii) customer relationship management (“CRM”) and customer experience vendors and (iii) standalone customer data platform vendors.
Item 1. Business Overview We enable businesses of all sizes and across numerous industries to revolutionize how they engage with their customers. Our leading customer engagement platform (“CEP”) comprises a suite of flexible software and communications solutions that allow businesses to deliver seamless, trusted and engaging customer experiences at scale.
Item 1. Business Overview We enable businesses of all sizes to revolutionize how they engage with their customers by delivering seamless, trusted and personalized customer experiences at scale.
Using our two-factor authentication APIs, developers can add an extra layer of security to their applications with second-factor passwords sent to users via SMS, voice, email or push notifications. 5 Data & Applications We believe that a personalized, positive customer experience is the best path to long-term customer loyalty.
Using our two-factor authentication APIs, businesses can add an extra layer of security to their applications with second-factor passwords sent to users via SMS, voice, email or push notifications. Revenue generated from User Identity and Authentication is primarily recognized on a usage basis.
We have experienced substantial growth in our business since inception, and as of December 31, 2022, we had over 290,000 Active Customer Accounts that represent organizations big and small, old and young, across nearly every industry.
We have experienced substantial growth in our business since inception, and as of December 31, 2023, we had over 305,000 Active Customer Accounts representing organizations from small and medium-sized business to large enterprises across a broad range of industries.
Our Data & Applications solutions enable businesses to create highly personalized experiences and campaigns across multiple channels using real-time customer data. They also allow businesses to break down data silos across their organizations and to leverage a single unified source of customer data for their various business teams. Our Data & Applications products are primarily offered on a subscription basis.
They also allow businesses to break down data silos across their organizations and to leverage a single unified source of customer data for their various business teams. The core offerings of our Segment business include: • Segment.
Twilio Flex is a fully programmable contact center platform that allows companies to deploy a broad array of customer engagement channels while providing the tools to easily create, change or extend any part of their custom solutions.
Flex is built for the new world of tailored customer experiences and omnichannel communications, allowing companies to deploy a broad array of personalized, data-driven customer engagement channels while providing the tools to easily create, change or extend any part of their custom solutions. With Flex, businesses can rapidly deploy a tailored cloud-based engagement center that addresses their specific needs.
Our sales organization includes sales development, inside sales, field sales, specialty sales and sales engineering personnel. 7 Our Data & Applications products require a strategic solution-oriented sales model and deep customer relationship building. We are deliberate in developing these skills and customer relationships leveraging the trust and reputation we have built while solving new and broader problems for our customers.
Our go-to-market model for our Segment business requires a consultative solution-oriented sales model that emphasizes value-based discovery, technical proof of concept, and customer relationship building. We are deliberate in developing these skills and customer relationships leveraging the trust and reputation we have built while solving new and broader problems for our customers.
Through Twilio Engage, businesses can deepen their customer relationships and convert what might otherwise have been isolated interactions into continuous, long-term relationships. • Twilio Flex. Twilio Flex is a programmable virtual contact center built for the new world of tailored customer experiences and omnichannel communications.
Through Engage, businesses can deepen their customer relationships and convert what might otherwise have been isolated interactions into continuous, long-term relationships. Revenue generated from Engage is primarily recognized on a subscription basis.
It also provides sender authentication, security, mobile support and many other tools. Businesses use our email products for both marketing messages and transactional emails, including shipping notifications, friend requests, password resets and sign-up confirmations. • Account Security. Online fraud has evolved into a major concern that requires today’s businesses to have advanced solutions for registering, onboarding and recognizing customers.
Our Email API allows businesses to integrate with multiple leading development frameworks and client libraries in multiple languages as well as customize various links and domains. It also provides sender authentication, security, mobile support and many other tools. Businesses use our email products for both marketing messages and transactional emails, including shipping notifications, friend requests, password resets and sign-up confirmations.
This in turn empowers businesses to build productive one-to-one relationships, at scale, through both easy-to-use APIs and extensible software products like Twilio Flex and Twilio Engage. The central pillars of our customer engagement platform, consistent with the new business unit structure referenced above, are described below.
This in turn empowers businesses to build productive one-to-one relationships, at scale, through both easy-to-use APIs and extensible software products like Flex and Engage. Our platform is connected to our Super Network (“Super Network”), a software layer that enables our customers’ applications to communicate with devices globally.
These teams continue to focus on the highest impact product areas for our future. As of December 31, 2022, we had 3,590 employees in our research and development organization.
These teams continue to focus on the highest impact product areas for our future, which includes focusing on continued innovation in the face of rapid technological change and changing industry practices.
Twilio SendGrid Email API (“Email API”) solves email delivery challenges at scale, enabling customers to build customized solutions and helpful shortcuts to streamline integration and optimize for inbox placement. The Email API allows businesses to integrate with multiple leading development frameworks and client libraries in multiple languages as well as customize various links and domains.
Revenue generated from Voice is primarily recognized on a usage basis. • Email. Twilio SendGrid Email (“Email”) is an API that solves email delivery challenges at scale, enabling customers to build customized solutions and provides helpful shortcuts to streamline integration and optimize for inbox placement.
Our highest tier plan, intended for our largest customers, includes a dedicated support engineer, duty manager coverage and quarterly status reviews. Our support model is global, with 24x7 coverage and support offices located throughout the world, with our larger offices located in the United States, Ireland, Colombia, India, and Singapore.
Our highest tier plan, intended for our largest customers, includes a designated support engineer, duty manager coverage and quarterly status reviews. Similarly, our subscription products generally feature a base level of customer support plus premium, paid support options. Our support model is global, with coverage available 24x7. We currently derive an insignificant amount of revenue from fees for customer support.
With drag and drop editing, approachable automation and powerful contacts management, Marketing Campaigns help marketers attract and retain customers more efficiently. Marketing Campaigns include email design and templates, list management, dynamic content and email testing. Our Strategy We are a leader in the customer engagement platform category.
Revenue generated from Email is primarily recognized on a subscription basis. 5 • Marketing Campaigns. Marketing Campaigns is built on top of our Email infrastructure to help digital marketers build and send email campaigns at scale. With drag and drop editing, approachable automation and powerful contacts management, Marketing Campaigns helps marketers to attract and retain customers more efficiently.
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Our CEP empowers businesses to create the tailored solutions needed to engage their customers at every step of the customer journey through real-time, relevant, personalized communications over the customers’ preferred communication channels. With our platform, businesses can personalize every transaction with real-time data, build lasting loyalty, cut customer acquisition costs and increase customer lifetime value.
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This combination of flexible APIs and software solutions helps businesses of all sizes and across numerous industries to benefit from smarter and more streamlined engagement at every step of the customer journey, including reduced customer acquisition costs, lasting loyalty and increased customer value.
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Our platform is designed to support all of the most important ways people communicate through technology and our global infrastructure is capable of supporting virtually any business at scale. As indicated above, we have seen escalating enthusiasm for our offerings as businesses have increasingly prioritized delivering, and their customers have increasingly come to expect, personalized experiences through digital communication channels.
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In February 2023, we began operating our business in two business units: Twilio Communications (“Communications”) and Twilio Data & Applications (“Data & Applications”), which has since been renamed Twilio Segment. Our Communications business consists of a variety of APIs and software solutions to optimize communications between our customers and their end users.
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Such experiences require businesses to understand their customers on a deep level, with a comprehensive view of their customers across multiple digital touchpoints, that reveals what their needs are and which communications methods they prefer.
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Our key Communications offerings include Messaging, Voice, Email, Flex, Marketing Campaigns, and User Identity and Authentication. Our Segment business consists of software products that enable businesses to leverage their first-party data to create unique customer profiles and achieve more effective customer engagement. Our key Segment offerings are Segment and Engage.
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As we announced on February 13, 2023, moving forward we will operate as two separate business units: Twilio Communications and Twilio Data & Applications (previously referred to as Software).
Added
Together, our Communications and Segment products power our customer engagement platform. We believe that our two business units are complementary and address adjacent needs and related problems for our customers. Our goal is to create a flywheel for effective customer engagement by combining Segment’s user profiles with our rich Communications data to drive more personalized and intelligent customer interactions.
Removed
We believe that this strategic realignment will enable us to better execute on the key priorities for each side of our business—driving efficiencies for Twilio Communications and accelerating growth for Twilio Data & Applications—while accounting for each business unit’s unique economic, customer and product needs.
Added
We believe that our business unit structure enables each business unit to execute toward its respective goals with appropriate focus and independence, best positioning us to achieve our long-term plan of creating the leading customer engagement platform.
Removed
These two business units can execute toward their respective financial goals with more focus and independence—but they are also highly complementary. Our Data & Applications business benefits from our underlying communications platform and our substantial active customer base. Our success in Data & Applications also drives more intelligence for our Communications products.
Added
In 2023, we revealed CustomerAI, which refers to generative and predictive artificial intelligence (“AI”) and machine learning (“ML”) capabilities and initiatives that we believe have the potential to increase the power and reach of our platform, make every interaction more personalized and intelligent, and accelerate our data and communications flywheel described above, benefiting both our Communications and Segment products.
Removed
Together, they address adjacent buyers and related problems that our customers have. With this strategic realignment, we believe we are well-positioned to achieve our long-term plan of creating the market-leading customer engagement platform. 4 Our Platform We aim to deliver the leading platform that intelligently orchestrates customer engagement across the entire customer life cycle.
Added
Communications also includes our omnichannel digital engagement center, as well as solutions for user identity and authentication and advanced compliance management to support success within a changing ecosystem of regulations. In the fourth quarter of 2023, we moved Flex and Marketing Campaigns from our Data & Applications (since renamed Segment) business unit to our Communications business unit.
Removed
Our Communications solutions include Programmable Messaging, Programmable Voice, Email, Account Security and more. The majority of our communications products are offered on a usage basis. Email is offered on a subscription basis. Our platform is connected to our “ Super Network, ” a software layer that enables our customers’ applications to communicate with devices globally.
Added
Marketing Campaigns includes email design and templates, list management, dynamic content and email testing. Revenue generated from Marketing Campaigns is primarily recognized on a subscription basis. • Flex. Twilio Flex (“Flex”) is a digital engagement center for the entire customer journey—a sales tool for pre-purchase conversations, a cloud-based contact center, and an in-app digital concierge.
Removed
Our Communications products that are embedded into our Data & Applications products are charged separately on a usage basis. Core offerings of our Data & Applications business include: • Twilio Segment.
Added
Revenue generated from Flex is primarily recognized on a subscription basis. • User Identity and Authentication. Our User Identity and Authentication (formerly Account Security) solutions include advanced solutions for registering, onboarding and recognizing customers.
Removed
With Twilio Flex, businesses can rapidly deploy tailored cloud contact centers to create an exact omnichannel contact center experience that addresses their specific business needs. • Marketing Campaigns. Marketing Campaigns is built on top of our proven email infrastructure to help digital marketers build and send email campaigns at scale, faster than ever.
Added
Segment We believe that a personalized, positive customer experience is a key driver of effective customer engagement and long-term customer loyalty. Our Segment solutions enable businesses to create highly personalized experiences and campaigns across multiple channels using first-party, real-time customer data.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeRisk Factor Summary Our business operations are subject to numerous risks and uncertainties, including those outside of our control, that could cause our business, results of operations, and/or financial condition to be harmed, including risks regarding the following: Risks Related to Our Business and Industry • the impact of macroeconomic uncertainties; • fluctuations in our quarterly results and our ability to meet securities analysts’ and investors’ expectations; • the effectiveness of actions taken to restructure our business in alignment with our strategic priorities; • the potential disruption caused by the reorganization of our business into business units; • our ability to maintain and grow our relationships with existing customers such that they increase their usage of our platform; • our ability to attract new customers in a cost-effective manner and increase adoption of our products by enterprises; • the evolution of the market for our products and platform, including the continued adoption of such by developers; 11 • our ability to effectively manage our growth; • our ability to compete effectively in an intensely competitive market; • our history of losses and uncertainty about our future profitability; • our ability to hire, integrate and retain highly skilled personnel; • our ability to maintain and enhance our brand and increase market awareness of our company and products; • our ability to adapt and respond effectively to rapidly changing technology, evolving industry standards, changing regulations, and changing customer needs, requirements or preferences; • disruptions or deterioration in the quality of service and connectivity by third-party service providers; • a failure to set optimal prices for our products; • significant risks associated with expansion of our international operations; • our reliance on our largest customers to generate a significant amount of our revenue; • our ability to integrate and achieve the expected benefits of acquisitions, partnerships and investments; Risks Related to Cyber Security, Data Privacy and Intellectual Property • any breaches of our networks or systems, or those of AWS or our service providers; • our substantial reliance on AWS to operate our platform; • our actual or perceived failure to comply with increasingly stringent laws, regulations and obligations relating to privacy, data protection and data security; • our ability to protect our intellectual property rights; • our use of open source software; Risks Related to Legal and Regulatory Matters • our ability to comply with telecommunications-related regulations, and the impact of 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; • federal legislation and international laws imposing obligations on the senders of commercial emails; • fraudulent usage of or activity relating to our products; • changes in laws and regulations related to the Internet or its infrastructure; • compliance with applicable laws and regulations, including export control, economic trade sanctions, and anti-corruption regulations; • standards imposed by private entities and inbox service providers that interfere with the effectiveness of our platform; • any legal proceedings or claims against us; Risks Related to Financial and Accounting Matters • exposure to foreign currency exchange rate fluctuations; • our substantial indebtedness that may decrease our business flexibility; • our ability to obtain additional capital to support our business and its availability on acceptable terms; • the accuracy of our estimates and judgments related to our critical accounting policies; • changes in accounting standards that may cause adverse financial reporting fluctuations; • our failure to maintain an effective system of disclosure controls and internal control over financial reporting; Risks Related to Tax Matters • our ability to use our net operating losses and certain other tax attributes to offset future taxable income and taxes; • additional tax liabilities or potentially adverse tax consequences on our global operations and structure; • changes in tax rules and regulations; Risks Related to Ownership of Our Class A Common Stock • 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; • the dual class nature of our stock; • the possibility that we may not realize the anticipated long-term stockholder value of our share repurchase program; 12 • securities or industry analysts changing their recommendations regarding our Class A common stock; and • anti-takeover provisions contained in our governing documents and the exclusive forum provision in our bylaws.
Biggest changeRisk Factor Summary Our business operations are subject to numerous risks and uncertainties, including those outside of our control, that could cause our business, results of operations, and financial condition to be harmed, including risks regarding the following: Risks Related to Our Business and Industry • the impact of macroeconomic uncertainties; • fluctuations in our quarterly results and our ability to meet securities analysts’ and investors’ expectations; • the effectiveness of actions taken to restructure our business in alignment with our strategic priorities; • our business unit reorganization and further changes to our business organization and reporting segments; • our ability to maintain and grow our relationships with existing customers such that they increase their usage of our platform; • our ability to attract new customers in a cost-effective manner; • our ability to increase adoption of our products by enterprises; • our ability to develop new products and enhancements that achieve market acceptance and adapt to changing technology and regulations, industry standards and interoperability requirements; • the evolution of the markets for our products; • our ability to effectively manage our growth; • our ability to compete effectively in intensely competitive markets; • our history of losses and uncertainty about our future profitability; • our ability to hire, integrate and retain highly skilled personnel; • our ability to maintain and enhance our brand and increase market awareness of our company and products; • disruptions or deterioration in quality of service and connectivity by third-party service providers; • failure to set optimal prices for our products; • our international operations; • our reliance on our largest customers to generate a significant amount of our revenue; • our ability to integrate and achieve the expected benefits of acquisitions, partnerships and investments; Risks Related to Cybersecurity, Data Privacy and Intellectual Property • any breaches of our networks or systems, or those of Amazon Web Services (“AWS”) or our service providers; • our actual or perceived failure to comply with increasingly stringent laws, regulations and obligations relating to privacy, data protection and data security; • our ability to protect our intellectual property rights; • our use of open source software; • our reliance on third-party technology and intellectual property; 11 • our use of AI technologies in our platform and business; Risks Related to Legal and Regulatory Matters • our ability to comply with telecommunications-related regulations, and the impact of 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; • federal and state legislation and international laws imposing obligations on the senders of commercial emails; • fraudulent or illegal usage of or activity relating to our products; • changes in laws and regulations related to the Internet or its infrastructure; • compliance with applicable laws and regulations, including export control, economic trade sanctions, and anti-corruption regulations; • standards imposed by private entities and inbox service providers that interfere with the effectiveness of our platform; • any legal proceedings or claims against us; Risks Related to Financial and Accounting Matters • exposure to foreign currency exchange rate fluctuations; • our substantial indebtedness that may decrease our business flexibility; • our ability to obtain additional capital to support our business and its availability on acceptable terms; • the accuracy of our key metrics, and assumptions and estimates used to calculate them; • the accuracy of our estimates and judgments related to our critical accounting policies; • changes in accounting standards that may cause adverse financial reporting fluctuations; • the possibility that our goodwill or intangible assets could become impaired; • our failure to maintain an effective system of disclosure controls and internal control over financial reporting; Risks Related to Tax Matters • our ability to use our net operating losses and certain other tax attributes to offset future taxable income and taxes; • additional tax liabilities or potentially adverse tax consequences on our global operations and structure; • changes in tax rules and regulations; Risks Related to Ownership of Our Common Stock • volatility of the trading price of our common stock; • potential decline in the market price of our common stock due to substantial future sales of shares; • the possibility that we may not realize the anticipated long-term stockholder value of our share repurchase program; • securities or industry analysts changing their recommendations regarding our common stock; • anti-takeover provisions contained in our governing documents and the exclusive forum provision in our bylaws; General Risks • the occurrence of natural catastrophic events and other events beyond our control; and • our initiatives, goals, commitments, and disclosures related to ESG matters. 12 Risks Related to Our Business and Our Industry Global economic and political conditions, including macroeconomic uncertainties, may continue to adversely impact our business, results of operations and financial condition.
In our Communications business, our competitors are primarily (i) regional network service providers that offer limited developer functionality on top of their own physical infrastructure, (ii) CPaaS companies that offer communications products and applications, and (iii) other software companies that compete with portions of our communications product line.
In our Communications business, our competitors are primarily (i) CPaaS companies that offer communications products and applications, (ii) other software companies that compete with portions of our communications product line, and (iii) regional network service providers that offer limited developer functionality on top of their own physical infrastructure.
In addition, the following issues, among others, must be addressed in order to realize the anticipated benefits of our acquisitions, partnerships or investments: • combining the acquired businesses’ corporate functions with our corporate functions; • combining acquired businesses with our business in a manner that permits us to achieve the synergies anticipated to result from such acquisitions, the failure of which would result in the anticipated benefits of our acquisitions not being realized in the time frame currently anticipated or at all; • maintaining existing agreements with customers, distributors, providers, talent and vendors and avoiding delays in entering into new agreements with prospective customers, distributors, providers, talent and vendors; • determining whether and how to address possible differences in corporate cultures and management philosophies; • integrating the companies’ compliance, administrative and IT infrastructure; • developing products and technology that allow value to be unlocked in the future; • evaluating and forecasting the financial impact of such acquisitions, partnerships and investments, including accounting charges; and 24 • effecting potential actions that may be required in connection with obtaining regulatory approvals.
In addition, the following issues, among others, must be addressed in order to realize the anticipated benefits of our acquisitions, partnerships or investments: 24 • combining the acquired businesses’ corporate functions with our corporate functions; • combining acquired businesses with our existing business in a manner that permits us to achieve the synergies anticipated to result from such acquisitions, the failure of which would result in the anticipated benefits of our acquisitions not being realized in the time frame currently anticipated or at all; • maintaining existing agreements with customers, distributors, providers, talent and vendors and avoiding delays in entering into new agreements with prospective customers, distributors, providers, talent and vendors; • determining whether and how to address possible differences in corporate cultures and management philosophies; • integrating the companies’ compliance, administrative and IT infrastructure; • developing products and technology that allow value to be unlocked in the future; • evaluating and forecasting the financial impact of such acquisitions, partnerships and investments, including accounting charges; and • effecting potential actions that may be required in connection with obtaining regulatory approvals.
Foreign Corrupt Practices Act, as amended (“FCPA”) and United Kingdom Bribery Act of 2010; • changes in international trade policies, tariffs and other non-tariff barriers, such as quotas and local content rules; • more limited protection for intellectual property rights in some countries; • adverse tax consequences; • fluctuations in currency exchange rates, which could increase the price of our products outside of the United States, increase the expenses of our international operations and expose us to foreign currency exchange rate risk; • currency control regulations, which might restrict or prohibit our conversion of other currencies into U.S. dollars; • restrictions on the transfer of funds; • deterioration of political relations between the United States and other countries; 23 • the impact of natural disasters and public health epidemics or pandemics such as COVID-19 on employees, contingent workers, partners, travel and the global economy and the ability to operate freely and effectively in a region that may be fully or partially on lockdown; and • political or social unrest, economic instability, conflict or war in a specific country or region in which we, our customers, partners or service providers operate, which could have an adverse impact on our operations in the region or otherwise have a material impact on regional or global economies, any or all of which could adversely affect our business.
Foreign Corrupt Practices Act, as amended (“FCPA”) and United Kingdom Bribery Act of 2010; • changes in international trade policies, tariffs and other non-tariff barriers, such as quotas and local content rules; • more limited protection for intellectual property rights in some countries; • adverse tax consequences; • fluctuations in currency exchange rates, which could increase the price of our products outside of the United States, increase the expenses of our international operations and expose us to foreign currency exchange rate risk; • currency control regulations, which might restrict or prohibit our conversion of other currencies into U.S. dollars; • restrictions on the transfer of funds; • deterioration of political relations between the United States and other countries; • the impact of natural disasters and public health epidemics or pandemics such as COVID-19 on employees, contingent workers, partners, travel and the global economy and the ability to operate freely and effectively in a region that may be fully or partially on lockdown; and • political or social unrest, economic instability, conflict or war in a specific country or region in which we, our customers, partners or service providers operate, which could have an adverse impact on our operations in the region or otherwise have a material impact on regional or global economies, any or all of which could adversely affect our business.
Although we maintain incident management and disaster response plans, in the event of a major disruption caused by a natural disaster or man-made problem, we may be unable to continue our operations and may endure system interruptions, reputational harm, delays in our development activities, lengthy interruptions in service, breaches of data security and loss of critical data, any of which could adversely affect our business, results of operations and financial condition.
Although we maintain incident management and disaster 45 response plans, in the event of a major disruption caused by a natural disaster or man-made problem, we may be unable to continue our operations and may endure system interruptions, reputational harm, delays in our development activities, lengthy interruptions in service, breaches of data security and loss of critical data, any of which could adversely affect our business, results of operations and financial condition.
While we maintain errors, omissions and cyber liability insurance policies covering certain security and privacy damages, we cannot be certain that our existing insurance coverage will continue to be available on acceptable terms or will be available, and in sufficient amounts, to cover the potentially significant losses that may result from a security incident or breach or that the insurer will not deny coverage as to any future claim.
While we maintain errors, omissions and cyber liability insurance policies covering certain security and privacy damages, we cannot be certain that our existing insurance coverage will continue to be available on acceptable terms or will be 26 available, and in sufficient amounts, to cover the potentially significant losses that may result from a security incident or breach or that the insurer will not deny coverage as to any future claim.
You should carefully consider the risks and uncertainties described below, together with all of the other information in this Annual Report on Form 10-K, including the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes, before making a decision to invest in our Class A common stock.
You should carefully consider the risks and uncertainties described below, together with all of the other information in this Annual Report on Form 10-K, including the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes, before making a decision to invest in our common stock.
For example, the GDPR, the United Kingdom’s Data Protection Act 2018 (“UK GDPR”) and the Swiss Federal Act on Data Protection impose strict requirements for processing the personal information of individuals protected by the legislation, whether their data is processed within or outside the European Economic Area (“EEA”), the United Kingdom (“UK”) and Switzerland, respectively (such jurisdictions, collectively, “Europe”).
For example, the GDPR, the United Kingdom’s Data Protection Act 2018 (“UK GDPR”) and the new Swiss Federal Act on Data Protection, impose strict requirements for processing the personal information of individuals protected by the legislation, whether their data is processed within or outside the European Economic Area (“EEA”), the United Kingdom (“UK”) and Switzerland, respectively (such jurisdictions, collectively, “Europe”).
In addition, if our security, or that of AWS, is compromised, our products or platform are unavailable, or if our users are unable to use our products within a reasonable amount of time or at all, any one of which may be due to circumstances beyond our control, then our business, results of operations and financial condition could be adversely affected.
In addition, if our security, or that of AWS, is compromised, our products or platform become unavailable, or if our users are unable to use our products within a reasonable amount of time or at all, any one of which may be due to circumstances beyond our control, then our business, results of operations and financial condition could be adversely affected.
If we fail to comply with open source licenses, we may be subject to certain requirements, including requirements that we offer our products that incorporate the open source software for no cost, that we make available the source code for any modifications or derivative works we create based upon, incorporating or using the open source software and that we license such modifications or derivative works under the terms of applicable open source licenses.
If we fail to comply with open source licenses, we may be subject to certain requirements, including requirements that we offer our products that incorporate the open source software for no cost, that we make available the source code for any modifications or 29 derivative works we create based upon, incorporating or using the open source software and that we license such modifications or derivative works under the terms of applicable open source licenses.
As another example, beginning in 2022, the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) eliminates the option to deduct research and development expenditures currently and requires taxpayers to capitalize and amortize them over five or fifteen years pursuant to Section 174 of the Code, which impacts our effective tax rate and our cash tax liability in 2022.
As another example, beginning in 2022, the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) eliminates the option to deduct research and development expenditures currently and requires taxpayers to capitalize and amortize them over five or fifteen years pursuant to Section 174 of the Code, which impacts our effective tax rate and our cash tax liability in 2023.
If the actual payments we 39 make to any jurisdiction exceed the accrual in our balance sheet, our results of operations would be harmed. In addition, some customers may question the incremental tax charges and seek to negotiate lower pricing from us, which could adversely affect our business, results of operations and financial condition.
If the actual payments we make to any jurisdiction exceed the accrual in our balance sheet, our results of operations would be harmed. In addition, some customers may question the incremental tax charges and seek to negotiate lower pricing from us, which could adversely affect our business, results of operations and financial condition.
Compliance with applicable regulatory requirements regarding the export of our products and provision of our services, including with respect to new releases of our products and services, may create delays in the introduction of our products and services in international markets, prevent our customers with international 34 operations from deploying our products and using our services throughout their globally-distributed systems or, in some cases, prevent the export of our products or provision of our services to some countries altogether.
Compliance with applicable regulatory requirements regarding the export of our products and provision of our services, including with respect to new releases of our products and services, may create delays in the introduction of our products and services in international markets, prevent our customers with international operations from deploying our products and using our services throughout their globally-distributed systems or, in some cases, prevent the export of our products or provision of our services to some countries altogether.
Among other things, the CAN-SPAM Act, obligates the sender of commercial emails to provide recipients with the ability to “opt-out” of receiving future commercial emails from the sender. In addition, some states have passed laws regulating commercial email practices that are 32 significantly more restrictive and difficult to comply with than the CAN-SPAM Act.
Among other things, the CAN-SPAM Act, obligates the sender of commercial emails to provide recipients with the ability to “opt-out” of receiving future commercial emails from the sender. In addition, some states have passed laws regulating commercial email practices that are significantly more restrictive and difficult to comply with than the CAN-SPAM Act.
Our failure to comply with those covenants could result in an event of default which, if not cured or waived, could permit the trustee, or permit the holders of the Notes to cause the trustee, to declare 36 all or part of the Notes to be immediately due and payable or to exercise any remedies provided to the trustee and/or result in the acceleration of substantially all of our indebtedness.
Our failure to comply with those covenants could result in an event of default which, if not cured or waived, could permit the trustee, or permit the holders of the Notes to cause the trustee, to declare all or part of the Notes to be immediately due and payable or to exercise any remedies provided to the trustee and/or result in the acceleration of substantially all of our indebtedness.
If we fail or are perceived to have failed to maintain compliance with these requirements, we could be subject to regulatory audits, civil and criminal penalties, fines and breach of contract claims, as well as reputational damage, which could impact the willingness of customers to do business with us.
If we fail or are perceived to have failed to maintain compliance with these requirements, 27 we could be subject to regulatory audits, civil and criminal penalties, fines and breach of contract claims, as well as reputational damage, which could impact the willingness of customers to do business with us.
Among others, we must comply (in whole or in part) with: • the Communications Act of 1934, as amended, which regulates communications services and the provision of such services; • the Telephone Consumer Protection Act, which limits the use of automatic dialing systems for calls and texts, artificial or prerecorded voice messages and fax machines; • the Communications Assistance for Law Enforcement Act, which requires covered entities to assist law enforcement in undertaking electronic surveillance; 30 • requirements to safeguard the privacy of certain customer information; • payment of annual FCC regulatory fees and contributions to FCC-administered funds based on our interstate and international revenues; and • rules pertaining to access to our services by people with disabilities and contributions to the Telecommunications Relay Services fund.
Among others, we must comply (in whole or in part) with: • the Communications Act of 1934, as amended, which regulates communications services and the provision of such services; • the Telephone Consumer Protection Act, which limits the use of automatic dialing systems for calls and texts, artificial or prerecorded voice messages and fax machines; • the Communications Assistance for Law Enforcement Act, which requires covered entities to assist law enforcement in undertaking electronic surveillance; 31 • requirements to safeguard the privacy of certain customer information; • payment of annual FCC regulatory fees and contributions to FCC-administered funds based on our interstate and international revenues; and • rules pertaining to access to our services by people with disabilities and contributions to the Telecommunications Relay Services fund.
We may be required to incur additional expenses to meet applicable international regulatory requirements or be 31 required to raise the prices of services, or restructure or discontinue those services if required by law or if we cannot or will not meet those requirements. Any of the foregoing could adversely affect our business, results of operations and financial condition.
We may be required to incur additional expenses to meet applicable international regulatory requirements or be required to raise the prices of services, or restructure or discontinue those services if required by law or if we cannot or will not meet those requirements. Any of the foregoing could adversely affect our business, results of operations and financial condition.
Any debt financing that we may secure in the future could involve restrictive covenants relating to our capital raising activities, our ability to repurchase stock, and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities.
Any debt financing that we may 38 secure in the future could involve restrictive covenants relating to our capital raising activities, our ability to repurchase stock, and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities.
Ransomware and cyber extortion attacks, including those perpetrated by organized criminal threat actors, nation-states, and nation-state-supported actors, are becoming increasingly prevalent and severe and can lead to significant interruptions in our operations, loss of data and income, reputational harm, and diversion of 25 funds.
Ransomware and cyber extortion attacks, including those perpetrated by organized criminal threat actors, nation-states, and nation-state-supported actors, are becoming increasingly prevalent and severe and can lead to significant interruptions in our operations, loss of data and income, reputational harm, and diversion of funds.
On October 8, 2021, the Organization for Economic Co-operation and Development (the “OECD”) announced the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (the “Framework”) which agreed to a two-pillar solution 40 to address tax challenges arising from digitalization of the economy.
On October 8, 2021, the Organization for Economic Co-operation and Development (the “OECD”) announced the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (the “Framework”) which agreed to a two-pillar solution to address tax challenges arising from digitalization of the economy.
Volatility in, or the actual or perceived lack of performance of, our stock price may affect our ability to attract, motivate and retain key employees. In September 2022 and February 2023, we implemented reductions in force, which may have an impact on our ability to hire, retain and motivate employees.
Volatility in, or the actual or perceived lack of performance of, our stock price may affect our ability to attract, motivate and retain key employees. In September 2022, February 2023 and December 2023, we implemented reductions in force, which may have an impact on our ability to hire, retain and motivate employees.
These obligations may not effectively prevent unauthorized disclosure or use of our confidential information, and it may be possible for unauthorized parties to copy or access our software or other proprietary technology or information, or to develop similar products independently without our having an adequate remedy for unauthorized use or disclosure of our confidential information.
These obligations may not effectively prevent unauthorized disclosure or use of our confidential information, and it may be possible for unauthorized parties to copy or access our software or other proprietary technology or information, or to develop similar products independently without us having an adequate remedy for unauthorized use or disclosure of our confidential information.
We may be at an increased risk of having our IP addresses denylisted due to our scale and volume of email processed, compared to our smaller competitors. There can be no guarantee that we will be able to successfully remove ourselves from those lists.
We may be at an increased risk of having our IP addresses denylisted due to our scale and volume of email processed, compared to our smaller 36 competitors. There can be no guarantee that we will be able to successfully remove ourselves from those lists.
While we have primarily transacted with customers and business partners in U.S. dollars, we have also conducted business in currencies other than the U.S. dollar. We expect to significantly expand the number of transactions with customers that are denominated in foreign currencies in the future as we continue to expand our business internationally.
While we have primarily transacted with customers and business partners in U.S. dollars, we have also conducted business in currencies other than the U.S. dollar. We expect to expand the number of transactions with customers that are denominated in foreign currencies in the future as we continue to expand our business internationally.
The market price of our Class A common stock could decline as a result of substantial sales of our Class A common stock, particularly sales by our directors, executive officers and significant stockholders, or the perception in the market that holders of a large number of shares intend to sell their shares.
The market price of our common stock could decline as a result of substantial sales of our common stock, particularly sales by our directors, executive officers and significant stockholders, or the perception in the market that holders of a large number of shares intend to sell their shares.
We have in the past and may in the future be subject to a variety of evolving threats, including but not limited to social-engineering attacks (including through phishing attacks), malicious code (such as viruses and worms), malware (including as a result of advanced persistent threat intrusions), denial-of-service attacks (such as credential stuffing), personnel misconduct or error, ransomware attacks, supply-chain attacks, software bugs, server malfunctions, software or hardware failures, loss or unavailability of data or other information technology assets, adware, telecommunications failures, earthquakes, fires, floods and other similar threats.
We have in the past and may in the future be subject to a variety of evolving threats, including but not limited to social-engineering attacks (including through phishing attacks), malicious code (such as viruses and worms), malware (including as a result of advanced persistent threat intrusions), denial-of-service attacks (such as credential stuffing), personnel misconduct or error, ransomware attacks, supply-chain attacks, software bugs, server malfunctions, software or hardware failures, loss or unavailability of data or other information technology assets, adware, telecommunications failures, earthquakes, fires, floods, natural disasters, and other similar threats.
Passing these fees through to our customers typically has the effect of increasing our revenue and cost of revenue, but typically does not impact the gross profit dollars received for sending these messages and, as a result, has a negative impact on our gross margins.
Passing these fees through to our customers typically has the effect of increasing our Communications revenue and cost of revenue, but typically does not impact the gross profit dollars received for sending these messages and, as a result, has a negative impact on our gross margins.
These macroeconomic conditions have resulted in, and may continue to result in, decreased business spending by our customers and prospective customers and business partners, reduced demand for our products, lower renewal rates by our customers, longer or delayed sales cycles, including customers and prospective customers delaying contract signing or contract renewals, reduced budgets or minimum commitments related to the products that we offer, or delays in customer payments or our ability to collect accounts receivable, all of which could have an adverse impact on our business, results of operations and financial condition.
These macroeconomic conditions have resulted in, and may continue to result in, decreased business spending by our current and prospective customers and business partners, reduced demand for or usage of our products, lower renewal rates by our customers, longer or delayed sales cycles, including current and prospective customers delaying contract signing or contract renewals, reduced budgets or minimum commitments related to the products that we offer, or delays in customer payments or our ability to collect accounts receivable, all of which could have an adverse impact on our business, results of operations and financial condition.
In determining the adequacy of our provision for income taxes, we assess the likelihood of adverse outcomes that could result if our tax positions were challenged by the Internal Revenue Service (“IRS”), and other tax authorities.
In determining the adequacy of our provision for 40 income taxes, we assess the likelihood of adverse outcomes that could result if our tax positions were challenged by the Internal Revenue Service (“IRS”), and other tax authorities.
Although we believe our tax estimates are reasonable, the final determination of tax audits and any related litigation could be materially different than that which is reflected in historical income tax provisions and accruals.
Although we believe our tax estimates are reasonable, the final 41 determination of tax audits and any related litigation could be materially different than that which is reflected in historical income tax provisions and accruals.
If we are unable to maintain effective marketing programs, then our ability to efficiently attract new customers could be adversely affected and we may not be able to attract the number and types of new customers we are seeking.
If we are unable to maintain effective marketing programs, our ability to efficiently attract new customers could be adversely affected, and we may not be able to attract the number and types of new customers we are seeking.
We rely on contractual representations made to us by our customers that their use of our platform will comply with our policies and applicable law, including, without limitation, our email and messaging policies.
We rely on contractual representations made to us by our customers that their use 34 of our platform will comply with our policies and applicable law, including, without limitation, our email and messaging policies.
Anti-corruption laws are interpreted broadly and generally prohibit companies, their employees, agents, representatives, business partners, and third parties intermediaries from directly or indirectly authorizing, offering, or providing, improper payments or things of value to recipients in the public or private sector, and also require that we maintain accurate books and records and adequate internal controls and compliance procedures designed to prevent violations.
Anti-corruption laws are interpreted broadly and generally prohibit companies, their employees, agents, representatives, business partners, and third-party intermediaries from directly or indirectly authorizing, offering, or providing, improper payments or things of value to recipients in the public or private sector, and also require that we maintain accurate books and records and adequate internal controls and compliance procedures designed to prevent violations.
Further, enterprises, including some of our 17 customers, may choose to develop their own solutions that do not include our products. They may also demand reductions in pricing as their usage of our products increases, notwithstanding increased costs incurred by us to provide such products, which could have an adverse impact on our gross margin.
Further, enterprises, including some of our existing customers, may choose to develop their own solutions that do not include our products. They may also demand reductions in pricing as their usage of our products increases, notwithstanding increased costs incurred by us to provide such products, which could have an adverse impact on our gross margin.
Industry reports indicate that the threat actors also attacked other technology, telecommunication and cryptocurrency companies. Furthermore, we are required to comply with laws and regulations that require us to maintain the security of personal information and we may have contractual and other legal obligations to notify customers, regulators, impacted individuals or other relevant stakeholders of security breaches.
Industry reports indicate that the threat actors also attacked other technology, telecommunication and cryptocurrency companies. Furthermore, we are required to comply with laws and regulations that require us to maintain the security of personal information and we may have contractual and other legal obligations to notify customers, regulators, government agencies, impacted individuals or other relevant stakeholders of security breaches.
Enhancements and new products that we develop may not be introduced in a timely or cost-effective manner, may contain errors or defects, may require reworking features and capabilities, may have interoperability difficulties with our platform or other products or may not achieve the broad market acceptance necessary to generate significant revenue or increase our gross margins.
Enhancements and new products that we develop may not be introduced in a timely or cost-effective manner, may contain errors or defects, may require reworking features and capabilities, may have interoperability difficulties with our platform or other products or may not achieve the broad market acceptance necessary to generate significant revenue or increase our gross profits.
In particular, cyberattacks and other malicious internet-based activity continue to increase in frequency and in magnitude generally, and cloud-based companies have been targeted in the past.
In particular, cyberattacks and other malicious internet-based activity continue to increase in frequency and in magnitude generally, and cloud-based companies have been 25 targeted in the past.
There is an increasing focus from regulators, certain investors, and other stakeholders concerning ESG matters, both in the United States and internationally. We communicate certain ESG-related initiatives, goals, and/or commitments regarding environmental matters, diversity, responsible sourcing and social investments, and other matters in our annual ESG Report, on our website, in our filings with the SEC, and elsewhere.
There is an increasing focus from regulators, certain investors, and other stakeholders concerning ESG matters, both in the United States and internationally. We communicate certain ESG-related initiatives, goals, and/or commitments regarding environmental matters, diversity, responsible sourcing and social investments, and other matters in our annual Impact and DEI Report, on our website, in our filings with the SEC, and elsewhere.
Our efforts to grow our business may be more costly than we expect, and we may not be able to increase our revenue enough to offset our increased operating expenses. We may incur significant losses in the future for a number of reasons, including the other risks described herein, and unforeseen expenses, difficulties, complications and delays and other unknown events.
Our efforts to grow our business may be more costly than we expect, and we may not be able to increase our revenue enough to offset our associated operating expenses. We may incur significant losses in the future for a number of reasons, including the other risks described herein, and unforeseen expenses, difficulties, complications and delays and other unknown events.
The risks and uncertainties described below may not be the only ones we face. If any of the risks actually occur, our business, results of operations and financial condition could be adversely affected. In that event, the market price of our Class A common stock could decline, and you could lose part or all of your investment.
The risks and uncertainties described below may not be the only ones we face. If any of the risks actually occur, our business, results of operations and financial condition could be adversely affected. In that event, the market price of our common stock could decline, and you could lose part or all of your investment.
The substantial majority of the services we use from AWS are for cloud-based server capacity and, to a lesser extent, storage and other optimization offerings. AWS enables us to order and reserve server capacity in varying amounts and sizes distributed across multiple regions. We access AWS infrastructure through standard IP connectivity protocols.
The substantial majority of the services we use from AWS are for cloud-based reserve service capacity and, to a lesser extent, storage and other optimization offerings. AWS enables us to order and reserve service capacity in varying amounts and sizes distributed across multiple regions. We access AWS infrastructure through standard IP connectivity protocols.
Although our share repurchase program is intended to enhance long-term stockholder value, there is no assurance that it will do so because the market price of our Class A common stock may decline below the levels at which we repurchase shares, and short-term stock price fluctuations could reduce the effectiveness of the program.
Although our share repurchase program is intended to enhance long-term stockholder value, there is no assurance that it will do so because the market price of our common stock may decline below the levels at which we repurchase shares, and short-term stock price fluctuations could reduce the effectiveness of the program.
The principal competitive factors in our market include completeness of offering, credibility with customers, global reach, ease of integration and programmability, product features, platform scalability, reliability, deliverability, security and performance, brand awareness and reputation, the strength of sales and marketing efforts, customer support, as well as the cost of deploying and using our products.
The principal competitive factors in our market include completeness of offering, credibility with customers, global reach, ease of integration and programmability, product features, platform scalability, reliability, deliverability, security and performance, brand awareness and reputation, the strength of sales and marketing efforts, customer support, and the cost of deploying and using products.
Any enforcement action by the FCC, which may be a public process, would hurt our reputation in the industry, could erode customer trust, possibly impair our ability to sell our VoIP and other telecommunications products to customers and could adversely affect our business, results of operations and financial condition.
Any enforcement action by the FCC, which may be a public process, would hurt our reputation in the industry, could erode customer trust, possibly impair our ability to sell our VoIP, other telecommunications products and/or other services to customers and could adversely affect our business, results of operations and financial condition.
We have incurred substantial indebtedness that may decrease our business flexibility, access to capital, and/or increase our borrowing costs, and we may still incur substantially more debt, which may adversely affect our operations and financial results. As of December 31, 2022, we had $1.0 billion of indebtedness outstanding (excluding intercompany indebtedness).
We have incurred substantial indebtedness that may decrease our business flexibility, access to capital, and/or increase our borrowing costs, and we may still incur substantially more debt, which may adversely affect our operations and financial results. As of December 31, 2023, we had $1.0 billion of indebtedness outstanding (excluding intercompany indebtedness).
Any failure to repurchase stock after we have announced our intention to do so may negatively impact our reputation and investor confidence in us and may negatively impact our stock price. 42 The existence of our share repurchase program could cause our stock price to be higher than it otherwise would be and could potentially reduce the market liquidity for our stock.
Any failure to repurchase stock after we have announced our intention to do so may negatively impact our reputation and investor confidence in us and may negatively impact our stock price. 43 The existence of our share repurchase program could cause our stock price to be higher than it otherwise would be and could potentially reduce the market liquidity for our stock.
The inability to import personal information to the United States could significantly and negatively impact our business operations; limit our ability to collaborate with parties that are subject to data privacy and security laws; or require us to increase our personal information processing capabilities in Europe and/or elsewhere at significant expense.
The inability to transfer personal information to the United States could significantly and negatively impact our business operations; limit our ability to collaborate with parties that are subject to data privacy and security laws; or require us to increase our personal information processing capabilities in Europe and/or elsewhere at significant expense.
Ineffective disclosure controls and procedures and internal control over financial reporting could also cause investors to lose confidence in our reported financial and other information, and could have a material and adverse effect on our business, results of operations and 38 financial condition and could cause a decline in the trading price of our Class A common stock.
Ineffective disclosure controls and procedures and internal control over financial reporting could also cause investors to lose confidence in our reported financial and other information, and could have a material and adverse effect on our business, results of operations and financial condition and could cause a decline in the trading price of our common stock.
Repurchasing our Class A common stock reduces the amount of cash we have available to fund working capital, capital expenditures, strategic acquisitions or business opportunities, and other general corporate purposes, and we may fail to realize the anticipated long-term stockholder value of any share repurchase program.
Repurchasing our common stock reduces the amount of cash we have available to fund working capital, capital expenditures, strategic acquisitions or business opportunities, and other general corporate purposes, and we may fail to realize the anticipated long-term stockholder value of any share repurchase program.
As a result of the reductions in force, we have incurred and may continue to incur additional costs in the short-term, including cash expenditures for employee transition, notice period and severance payments, employee benefits and related facilitation costs, as well as non-cash expenditures related to vesting of share-based awards.
As a result of the reductions in force, we have incurred, and may continue to incur, additional costs in the short term, including cash expenditures for employee transitions, notice period and severance payments, employee benefits and related facilitation costs, as well as non-cash expenditures related to vesting of share-based awards.
If we are unable to increase adoption of our products by enterprises, our business, results of operations and financial condition may be adversely affected. Historically, a majority of our revenue has been generated as a result of software developers adopting our products through our self-service model.
If we are unable to increase adoption of our products by enterprises, our business, results of operations and financial condition may be adversely affected. Historically, a majority of our revenue has been generated as a result of software developers adopting our Communications API products through our self-service model.
Our results of 37 operations may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our results of operations to fall below the expectations of securities analysts and investors, resulting in a decline in the trading price of our Class A common stock.
Our results of operations may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our results of operations to fall below the expectations of securities analysts and investors, resulting in a decline in the trading price of our common stock.
If any analyst who covers us were to cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause the trading price of our Class A common stock or trading volume to decline.
If any analyst who covers us were to cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause the trading price of our common stock or trading volume to decline.
We believe that maintaining and enhancing the “Twilio” brand identity and increasing market awareness of our company and products, particularly among developers and enterprises, is critical to achieving widespread acceptance of our platform, to strengthen our relationships with our existing customers and to our ability to attract new customers.
We believe that maintaining and enhancing the “Twilio” brand identity and increasing market awareness of our company and products, particularly among developers and enterprises, is critical to achieving widespread acceptance of our platform, to strengthening our relationships with our existing customers and to our ability to attract new customers.
Additionally, the shares of Class A common stock subject to outstanding options and restricted stock unit awards under our equity incentive plans and the shares reserved for future issuance under our equity incentive plans will become eligible for sale in the public market upon issuance, subject to applicable insider trading policies.
Additionally, the shares of common stock subject to outstanding options and restricted stock unit awards under our equity incentive plans and the shares reserved for future issuance under our equity incentive plans will become eligible for sale in the public market upon issuance, subject to applicable insider trading policies.
Our tax expense may be impacted, for example, if tax laws change or are clarified to our detriment or if tax authorities successfully challenge the tax positions that we take, such as, for example, positions relating to the arms-length pricing standards for our intercompany transactions and our indirect tax positions.
Our tax expense may be impacted, for example, if tax laws change or are clarified to our detriment or if tax authorities successfully challenge the tax positions that we take, such as, for example, positions relating to the arm’s-length pricing standards for our intercompany transactions and our indirect tax positions.
In addition, to the extent that fluctuations in currency exchange rates cause our results of operations to differ from our expectations or the expectations of our investors and securities analysts who follow our stock, the trading price of our Class A common stock could be adversely affected.
In addition, to the extent that fluctuations in currency exchange rates cause our results of operations to differ from our expectations or the expectations of our investors and securities analysts who follow our stock, the trading price of our common stock could be adversely affected.
This could lead to a number of risks, including: actual or perceived disruption of service or reduction in service standards to our customers; the failure to preserve adequate internal controls as we reorganize our general and administrative functions, including our information technology and financial reporting infrastructure; the failure to preserve partnership, sales and other important relationships and to resolve conflicts that may arise; loss of sales as we eliminate certain sales positions, reorganize our sales teams into business units, and focus on leveraging our self-service capabilities; failure to develop effective cross-selling motions between the businesses; failure of the business units to drive efficiencies and leverage; diversion of management attention from ongoing business activities and core business objectives in order to manage operational changes; and the failure to maintain our corporate culture, employee morale and productivity, and to retain highly skilled employees due to reductions in our workforce and changes in leadership structure.
This could lead to a number of risks, including: actual or perceived disruption of service or reduction in service standards to our customers; the failure to preserve adequate internal controls as we reorganize our general and administrative functions, including our information technology and financial reporting infrastructure; the failure to preserve partnership, sales and other important relationships and to resolve conflicts that may arise; loss of sales as we eliminate certain sales positions, reorganize our sales teams into business units, and improve and expand our use of self-service capabilities; failure to develop effective cross-selling motions between the businesses; failure of the business units to drive efficiencies and leverage; diversion of management attention from ongoing business activities and core business objectives in order to manage operational changes; and the failure to maintain our corporate culture, employee morale and productivity, and to retain highly skilled employees due to reductions in our workforce and changes in leadership structure.
For example, Apple, Google and other cell-phone operating system providers or inbox service providers have developed and, may in the future develop, new applications or functions intended to filter spam and unwanted phone calls, messages or emails. Third party platforms may also implement changes to their privacy policies or practices that may impact us or our customers.
For 18 example, Apple, Google, Yahoo and other cell-phone operating system providers or inbox service providers have developed, and may in the future develop, new applications or functions intended to filter spam and unwanted phone calls, messages or emails. Third party platforms may also implement changes to their privacy policies or practices that may adversely impact us or our customers.
In addition, our second amended and restated bylaws provide that any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock is deemed to have notice of and consented to the Delaware Forum Provision and the Federal Forum Provision; provided, however, that stockholders cannot and will not be deemed to have waived our compliance with the U.S. federal securities laws and the rules and regulations thereunder.
In addition, our bylaws provide that any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock is deemed to have notice of and consented to the Delaware Forum Provision and the Federal Forum Provision; provided, however, that stockholders cannot and will not be deemed to have waived our compliance with the U.S. federal securities laws and the rules and regulations thereunder.
For example, on January 24, 2023, we received a cease-and-desist letter from the FCC alleging that we were transmitting illegal robocall traffic that originated from an independent software vendor customer and their end user customer.
For example, on January 25, 2023, we received a cease-and-desist letter from the FCC alleging that we were transmitting illegal robocall traffic that originated from an independent software vendor customer and their end user customer.
If we are unable to adequately manage our growth and other business changes in a manner that preserves the key aspects of our corporate culture, including as a result of our recent reductions in force and business unit reorganization, the quality and performance of our products may suffer, which could negatively affect our brand, reputation and ability to retain and attract customers and employees.
If we are unable to adequately manage our growth and other business changes in a manner that preserves the key aspects of our corporate culture, including as a result of our past reductions in force and the reorganization of our business, the quality and performance of our products may suffer, which could negatively affect our brand, reputation and ability to retain and attract customers and employees.
We may not realize the anticipated long-term stockholder value of our share repurchase program, and any failure to repurchase our Class A common stock after we have announced our intention to do so may negatively impact our stock price.
We may not realize the anticipated long-term stockholder value of our share repurchase program, and any failure to repurchase our common stock after we have announced our intention to do so may negatively impact our stock price.
Investors seeking cash dividends should not purchase our Class A common stock. 44 General Risks Our business is subject to the risks of pandemics, earthquakes, fire, floods and other natural catastrophic events, and to interruption by man-made problems such as power disruptions, computer viruses, data security breaches, terrorism or war.
Investors seeking cash dividends should not purchase our common stock. General Risks Our business is subject to the risks of pandemics, earthquakes, fire, floods and other natural catastrophic events, and to interruption by man-made problems such as power disruptions, computer viruses, data security breaches, terrorism or war.
If we are unable to maintain the integrations between our products with such third-party products, our ability to meet the needs and expectations of our current and prospective customers could be adversely affected and adversely affect our business.
If we are unable to maintain the integrations between our products and such third-party products, our ability to meet the needs and expectations of our current and prospective customers could be adversely affected, which could adversely affect our business.
If any of the analysts who cover us change their recommendation regarding our Class A common stock adversely, or provide more favorable relative recommendations about our competitors, the trading price of our Class A common stock would likely decline.
If any of the analysts who cover us change their recommendation regarding our common stock adversely, or provide more favorable relative recommendations about our competitors, the trading price of our common stock would likely decline.
In addition, if Amazon requires that we comply with unfavorable terms in order to continue our use of AWS of if Amazon implements any changes in its service levels for AWS, the changes may adversely affect our ability to meet our customers’ requirements, result in negative publicity which could harm our reputation and brand and may adversely affect the usage of our platform.
(“Amazon”) requires that we comply with unfavorable terms in order to continue our use of AWS or if Amazon implements any changes in its service levels for AWS, the changes may adversely affect our ability to meet our customers’ requirements, result in negative publicity which could harm our reputation and brand and may adversely affect the usage of our platform.
We currently generate significant revenue from our largest customers, and the loss or decline in revenue from any of these customers could harm our business, results of operations and financial condition. In the years ended December 31, 2022, 2021 and 2020, our 10 largest Active Customer Accounts generated an aggregate of 12%, 11% and 14% of our revenue, respectively.
We currently generate significant revenue from our largest customers, and the loss or decline in revenue from any of these customers could harm our business, results of operations and financial condition. In the years ended December 31, 2023, 2022 and 2021, our 10 largest Active Customer Accounts generated an aggregate of 10%, 12% and 11% of our revenue, respectively.
In addition, certain non-U.S. jurisdictions in which we operate have enacted laws regulating the sending of email that are more restrictive than U.S. laws. For example, some foreign laws prohibit sending broad categories of email unless the recipient has provided the sender advance consent (or "opted-in") to receipt of such email.
In addition, certain non-U.S. jurisdictions in which we operate have enacted laws regulating the sending of email that are more restrictive than U.S. laws. For example, some foreign laws prohibit sending broad categories of email unless the recipient has provided the sender advance consent (or “opted-in”) to receipt of such email.
Item 1A. Risk Factors Investing in our Class A common stock involves a high degree of risk. A description of the risks and uncertainties associated with our business is set forth below.
Item 1A. Risk Factors Investing in our Class A common stock (“common stock”) involves a high degree of risk. A description of the risks and uncertainties associated with our business is set forth below.
These fluctuations and the related impacts to any earnings guidance we may issue from time to time could cause the price of our Class A common stock to change significantly or experience declines.
These fluctuations and the related impacts to any earnings guidance we may issue from time to time could cause the price of our common stock to change significantly or experience declines.
The success of any enhancements or new products depends on several factors, including timely completion, adequate quality testing, actual performance quality, market-accepted pricing levels and overall market acceptance.
The success of any enhancements or new products we introduce depends on several factors, including timely completion, adequate quality testing, actual performance quality, market-accepted pricing levels and overall market acceptance.
Our platform must integrate with a variety of network, hardware, mobile and software platforms and technologies, and we need to continuously modify and enhance our products and platform to adapt to changes and innovation in these technologies.
Our platform must integrate with and leverage a variety of infrastructure, network, hardware, mobile and software platforms and technologies, and we need to continuously modify and enhance our products and platform to adapt to changes and innovation in these technologies.
We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, as provided in Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The results of these estimates form the basis for making judgments about the carrying values of assets, liabilities and equity, and the amount of revenue and expenses that are not readily apparent from other sources.
We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, as provided in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The results of these estimates form the basis for making judgments about the carrying values of assets, liabilities and equity, and the amount of revenue and expenses that are not readily apparent from other sources.
Risks Related to Ownership of Our Class A Common Stock The trading price of our Class A common stock has been volatile and may continue to be volatile, and you could lose all or part of your investment.
Risks Related to Ownership of Our Common Stock The trading price of our common stock has been volatile and may continue to be volatile, and you could lose all or part of your investment.
Our business operations are subject to interruption by natural disasters, flooding, fire, power shortages, public health epidemics or pandemics such as COVID-19, terrorism, political unrest, cyber-attacks, geopolitical instability, war, the effects of climate change and other events beyond our control. For example, our corporate headquarters are located in the San Francisco Bay Area, a region known for seismic activity.
Our business operations are subject to interruption by natural disasters, flooding, fire, power shortages, public health epidemics or pandemics, terrorism, political unrest, cyber-attacks, geopolitical instability, war, the effects of climate change and other events beyond our control. For example, our corporate headquarters are located in the San Francisco Bay Area, a region known for seismic activity.
We recently implemented a program to hedge transactional exposure against the Euro, and may do so in the future with respect to other foreign currencies. We also use derivative instruments, such as foreign currency forward and option contracts, to hedge certain exposures to fluctuations in foreign currency exchange rates.
We have implemented a program to hedge transactional exposure against the Euro, and may do so in the future with respect to other foreign currencies. We also use derivative instruments, such as foreign currency forward and option contracts, 37 to hedge certain exposures to fluctuations in foreign currency exchange rates.
Additionally, if customers fail to pay us or reduce their spending with us, we may be adversely affected by an inability to collect amounts due, the costs of enforcing the terms of our contracts, including through litigation, or a reduction in revenue.
Additionally, when customers fail to pay us or reduce their spending with us, we may be adversely affected by an inability to collect amounts due, the costs of enforcing the terms of our contracts, including through litigation, and/or a reduction in revenue.
For example, prior instances of disruptions in our cloud communications platform impacted our customers’ ability to use products on our platform for up to several hours at a time.
Additionally, prior instances of disruptions in our cloud communications platform impacted our customers’ ability to use products on our platform for up to several hours at a time.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeIn May 2022, we announced our decision to become a remote-first company whereby employees would have flexibility to work remotely on a permanent basis. As a result of this decision, in the third quarter of 2022, we permanently closed several of our office locations in the United States, including a portion of our original headquarters space.
Biggest changeIn 2022, we announced our decision to become a remote-first company allowing our employees the flexibility to work remotely on a permanent basis. As a result of this decision, we permanently closed several of our offices, including a portion of our headquarters space.
This includes our international headquarters in Dublin, Ireland, and regional offices used for business operations, sales, support, and product development. Additional information regarding our lease commitments is available in Note 8 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
This includes our international headquarters in Dublin, Ireland, and regional offices used for business operations, sales, support, and product development for our business segments. Additional information regarding our lease commitments is available in Note 10 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
We believe that our remaining facilities are adequate and suitable for our current needs and that, should it be needed, suitable additional or alternative space will be available to accommodate our operations. Item 3.
We believe that our remaining facilities are adequate and suitable for our current needs and that, should it be needed, suitable additional or alternative space will be available to accommodate our operations.
The financial impact on our results of operations from closing several of our offices in 2022 is described in Note 5 and Note 8 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. 45 We lease additional office space in various other locations in North America, South America, Europe and Asia.
The financial impact on our results of operations from closing these offices is described in Note 6 and Note 10 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. We lease additional office space in various other locations in South America, Europe and Asia.
Item 2. Properties We lease all of our facilities and do not own any real property. Our headquarters is located in San Francisco, California, where we actively occupy 101,434 square feet of office space at 101 Spear Street.
Item 2. Properties We lease all of our facilities and do not own any real property. Our headquarters, which serves as our principal offices for our business segments, is located in San Francisco, California, where we actively occupy 83,372 square feet of office space at 101 Spear Street.
Removed
On February 13, 2023, we announced that we will be permanently closing additional office locations during 2023.
Removed
Legal Proceedings Refer to Note 16(b) to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for a description of our current material legal proceedings. Item 4. Mine Safety Disclosures Not applicable. PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeHolders of Record As of January 31, 2023, we had 279 holders of record of our Class A common stock and Class B common stock. The actual number of stockholders is greater than this number of record holders and includes stockholders who are beneficial owners but whose shares are held in street name by brokers and other nominees.
Biggest changeThe actual number of stockholders is greater than this number of holders of record and includes stockholders who are beneficial owners but whose shares are held in street name by brokers and other nominees. Dividend Policy We have never declared or paid any cash dividends on our capital stock.
The shares were “restricted securities” for purposes of Rule 144 under the Securities Act, and had an aggregate fair market value on the date of donation of $9.5 million. The foregoing transaction did not involve any underwriters, any underwriting discounts or commissions, or any public offering.
The shares were “restricted securities” for purposes of Rule 144 under the Securities Act, and had an aggregate fair market value on the date of donation of $5.3 million. The foregoing transaction did not involve any underwriters, any underwriting discounts or commissions, or any public offering.
We believe the offer, sale and issuance of the above shares were exempt from registration under the Securities Act by virtue of Section 4(a)(2) of the Securities Act because the issuance of the shares did not involve a public offering. Item 6. [Reserved]
We believe the offer, sale and issuance of the above shares were exempt from registration under the Securities Act by virtue of Section 4(a)(2) of the Securities Act because the issuance of the shares did not involve a public offering.
The comparisons are based on historical data and are not indicative of, nor intended to forecast, the future performance of our Class A common stock. 46 Table of Contents Sales of Unregistered Securities During the year ended December 31, 2022, we issued 88,408 shares of our unregistered Class A common stock to an independent donor advised fund to further our Twilio.org philanthropic goals.
The comparisons are based on historical data and are not indicative of, nor intended to forecast, the future performance of our common stock. 49 Table of Contents Sales of Unregistered Securities During the year ended December 31, 2023, we issued 88,408 shares of our unregistered common stock to an independent donor advised fund to further our Twilio.org philanthropic goals.
An investment of $100 (with reinvestment of all dividends) is assumed to have been made in our Class A common stock and in each respective index at the market closing price on the last trading day for the fiscal year ended December 31, 2017, and its relative performance is tracked through December 31, 2022.
An investment of $100 (with reinvestment of all dividends) is assumed to have been made in our common stock and in each respective index at the market closing price on the last trading day for the fiscal year ended December 31, 2018, and its relative performance is tracked through the last trading day for the fiscal year ended December 31, 2023.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information for Common Stock Our Class A common stock is traded on the New York Stock Exchange under the symbol “TWLO.” Our Class B common stock is neither listed nor traded.
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information for Common Stock Our Class A common stock (“common stock”) is traded on the New York Stock Exchange under the symbol “TWLO.” Our Class B common stock is neither listed nor traded, and no Class B common stock is currently issued or outstanding.
Dividend Policy We have never declared or paid any cash dividends on our capital stock. We intend to retain any future earnings and do not expect to pay any dividends in the foreseeable future.
We intend to retain any future earnings and do not expect to pay any dividends in the foreseeable future.
Added
Holders of Record As of January 31, 2024, we had 251 holders of record of our Class A common stock. There are no holders of record of our Class B common stock.
Added
Issuer Purchases of Equity Securities The following table summarizes the share repurchase activity for the three months ended December 31, 2023: Total Number of Shares Purchased (1) Average Price Paid Per Share (2) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1) (In thousands) (In thousands) (In millions) October 1 - 31, 2023 943 $ 53.42 943 $ 399 November 1 - 30, 2023 758 $ 54.16 758 $ 358 December 1 - 31, 2023 415 $ 72.75 415 $ 328 2,116 2,116 _____________________________ (1) In February 2023, our board of directors authorized a share repurchase program to repurchase up to $1.0 billion in aggregate value of our Class A common stock.
Added
Repurchases under the program can be made through open market transactions, privately negotiated transactions and other means in compliance with applicable federal securities laws, including through Rule 10b5-1 plans. We have discretion in determining the conditions under which shares may be repurchased from time to time. The program expires on December 31, 2024.
Added
Refer to Note 18 — Stockholders' Equity in Part II, Item 8, of this Annual Report on Form 10-K for additional information related to share repurchases. (2) Average price paid per share includes costs associated with the repurchases. Item 6. [Reserved]

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeYear Ended December 31, 2022 2021 2020 Consolidated Statements of Operations Data: (In thousands, except share and per share amounts) Revenue $ 3,826,321 $ 2,841,839 $ 1,761,776 Cost of revenue (1) (2) 2,012,744 1,451,126 846,115 Gross profit 1,813,577 1,390,713 915,661 Operating expenses: Research and development (1) (2) 1,079,081 789,219 530,548 Sales and marketing (1) (2) 1,248,032 1,044,618 567,407 General and administrative (1) (2) 517,414 472,460 310,607 Restructuring costs (1) 76,636 — — Impairment of long-lived assets 97,722 — — Total operating expenses 3,018,885 2,306,297 1,408,562 Loss from operations (1,205,308) (915,584) (492,901) Other expenses, net: Share of losses from equity method investment (35,315) — — Other expenses, net (3,009) (45,345) (11,525) Total other expenses, net (38,324) (45,345) (11,525) Loss before (provision for) benefit from income taxes (1,243,632) (960,929) (504,426) (Provision for) benefit from income taxes (12,513) 11,029 13,447 Net loss attributable to common stockholders $ (1,256,145) $ (949,900) $ (490,979) Net loss per share attributable to common stockholders, basic and diluted $ (6.86) $ (5.45) $ (3.35) Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted 182,994,038 174,180,465 146,708,663 __________________________________ (1) Includes stock-based compensation expense as follows: Year Ended December 31, 2022 2021 2020 (In thousands) Cost of revenue $ 21,136 $ 14,074 $ 8,857 Research and development 374,846 258,672 173,303 Sales and marketing 240,109 213,351 103,450 General and administrative 148,194 146,188 76,301 Restructuring costs 14,275 — — Total $ 798,560 $ 632,285 $ 361,911 ____________________________________ (2) Includes amortization of acquired intangibles as follows: Year Ended December 31, 2022 2021 2020 (In thousands) Cost of revenue $ 122,653 $ 114,896 $ 59,501 Research and development 1,680 1,260 — Sales and marketing 81,841 82,493 38,915 General and administrative 7 135 78 Total $ 206,181 $ 198,784 $ 98,494 55 Table of Contents The following table sets forth our results of operations for each of the periods presented as a percentage of our total revenue: Year Ended December 31, 2022 2021 2020 Consolidated Statements of Operations, as a percentage of revenue: ** Revenue 100 % 100 % 100 % Cost of revenue 53 51 48 Gross profit 47 49 52 Operating expenses: Research and development 28 28 30 Sales and marketing 33 37 32 General and administrative 14 17 18 Restructuring costs 2 — — Impairment of long-lived assets 3 — — Total operating expenses 79 81 80 Loss from operations (32) (32) (28) Other expenses, net Share of losses from equity method investment (1) — — Other expenses, net * (2) (1) Total other expenses, net (1) (2) (1) Loss before (provision for) benefit from income taxes (33) (34) (29) (Provision for) benefit from income taxes * * 1 Net loss attributable to common stockholders (33 %) (33 %) (28 %) ____________________________________ * Less than 0.5% of revenue. ** Columns may not add up to 100% due to rounding. 56 Table of Contents Comparison of Fiscal Years Ended December 31, 2022, 2021 and 2020 Revenue Year Ended December 31, 2022 2021 2020 2021 to 2022 Change 2020 to 2021 Change (Dollars in thousands) Total Revenue $ 3,826,321 $ 2,841,839 $ 1,761,776 $ 984,482 35 % $ 1,080,063 61 % 2022 compared to 2021 In 2022, total revenue increased by $984.5 million, or 35%, compared to the same period last year.
Biggest changeYear Ended December 31, 2023 2022 2021 Consolidated Statements of Operations Data: (In thousands, except share and per share amounts) Revenue $ 4,153,945 $ 3,826,321 $ 2,841,839 Cost of revenue (1) (2) 2,110,015 2,012,744 1,451,126 Gross profit 2,043,930 1,813,577 1,390,713 Operating expenses: Research and development (1) (2) 942,790 1,079,081 789,219 Sales and marketing (1) (2) 1,022,985 1,248,032 1,044,618 General and administrative (1) (2) 468,459 517,414 472,460 Restructuring costs (1) 165,733 76,636 — Impairment of long-lived assets 320,504 97,722 — Total operating expenses 2,920,471 3,018,885 2,306,297 Loss from operations (876,541) (1,205,308) (915,584) Other expenses, net: Share of losses from equity method investment (121,897) (35,315) — Impairment of strategic investments (46,154) — — Other income (expenses), net 47,863 (3,009) (45,345) Total other expenses, net (120,188) (38,324) (45,345) Loss before (provision for) benefit from income taxes (996,729) (1,243,632) (960,929) (Provision for) benefit from income taxes (18,712) (12,513) 11,029 Net loss attributable to common stockholders $ (1,015,441) $ (1,256,145) $ (949,900) Net loss per share attributable to common stockholders, basic and diluted $ (5.54) $ (6.86) $ (5.45) Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted 183,327,844 182,994,038 174,180,465 __________________________________ (1) Includes stock-based compensation expense as follows: Year Ended December 31, 2023 2022 2021 (In thousands) Cost of revenue $ 26,343 $ 21,136 $ 14,074 Research and development 331,526 374,846 258,672 Sales and marketing 183,389 240,109 213,351 General and administrative 121,584 148,194 146,188 Restructuring costs 13,015 14,275 — Total $ 675,857 $ 798,560 $ 632,285 ____________________________________ (2) Includes amortization of acquired intangibles as follows: Year Ended December 31, 2023 2022 2021 (In thousands) Cost of revenue $ 113,266 $ 122,653 $ 114,896 Research and development 1,913 1,680 1,260 Sales and marketing 77,128 81,841 82,493 General and administrative — 7 135 Total $ 192,307 $ 206,181 $ 198,784 59 Table of Contents The following table sets forth our results of operations for each of the periods presented as a percentage of our total revenue: Year Ended December 31, 2023 2022 2021 Consolidated Statements of Operations, as a percentage of revenue: ** Revenue 100 % 100 % 100 % Cost of revenue 51 53 51 Gross profit 49 47 49 Operating expenses: Research and development 23 28 28 Sales and marketing 25 33 37 General and administrative 11 14 17 Restructuring costs 4 2 — Impairment of long-lived assets 8 3 — Total operating expenses 70 79 81 Loss from operations (21) (32) (32) Other expenses, net Share of losses from equity method investment (3) (1) — Impairment of strategic investments (1) — — Other income (expenses), net 1 * (2) Total other expenses, net (3) (1) (2) Loss before (provision for) benefit from income taxes (24) (33) (34) (Provision for) benefit from income taxes * * * Net loss attributable to common stockholders (24 %) (33 %) (33 %) ____________________________________ * Less than 0.5% of revenue. ** Columns may not add up to 100% due to rounding. 60 Table of Contents Comparison of Fiscal Years Ended December 31, 2023, 2022 and 2021 Revenue Year Ended December 31, 2023 2022 2021 2022 to 2023 Change 2021 to 2022 Change (Dollars in thousands) Twilio Communications $ 3,858,693 $ 3,550,087 $ 2,640,874 $ 308,606 9 % $ 909,213 34 % Twilio Segment 295,252 276,234 200,965 19,018 7 % 75,269 37 % Consolidated total revenue $ 4,153,945 $ 3,826,321 $ 2,841,839 $ 327,624 9 % $ 984,482 35 % 2023 compared to 2022 In 2023, Communications revenue increased by $308.6 million, or 9%, compared to the same period last year.
Our ability to drive growth and generate incremental revenue depends, in part, on our ability to maintain and grow our relationships with existing Active Customer Accounts and to increase their use of our platform. An important way in which we have historically tracked performance in this area is by measuring the Dollar-Based Net Expansion Rate for Active Customer Accounts.
Our ability to drive growth and generate incremental revenue depends, in part, on our ability to maintain and grow our relationships with existing Active Customer Accounts and to increase their use of the platform. An important way in which we have historically tracked performance in this area is by measuring the Dollar-Based Net Expansion Rate for Active Customer Accounts.
Cost of revenue also includes cloud infrastructure fees, direct costs of personnel, such as salaries and stock‑based compensation for our customer support employees, and other non‑personnel costs, such as depreciation and amortization expense related to data centers and hosting equipment, amortization of capitalized internal-use software development costs and acquired intangible assets.
Cost of revenue also includes cloud infrastructure fees, direct costs of personnel, such as salaries and stock‑based compensation for our customer support employees, and other non‑personnel costs, such as depreciation and amortization expense related to data centers and hosting equipment, and amortization of capitalized internal-use software development costs and acquired intangible assets.
(Provision for) Benefits From Income Taxes Our (provision for) benefit from income taxes consists primarily of income taxes, withholding taxes in foreign jurisdictions in which the Company conducts business and tax benefits related to the release of valuation allowance from historically completed acquisitions.
(Provision for) Benefit From Income Taxes Our (provision for) benefit from income taxes consists primarily of income taxes, withholding taxes in foreign jurisdictions in which the Company conducts business and tax benefits related to the release of valuation allowance from historically completed acquisitions.
This increase was primarily attributable to an increase in the usage of our products by our existing customers as reflected in our Dollar-Based Net Expansion Rate of 121%, as well as a 13% increase in the number of Active Customer Accounts, from over 256,000 as of December 31, 2021, to over 290,000 as of December 31, 2022.
This increase was primarily attributable to a 13% increase in the number of Active Customer Accounts, from over 256,000 as of December 31, 2021, to over 290,000 as of December 31, 2022, as well as an increase in the usage of our products by our existing customers, as reflected in our Dollar-Based Net Expansion Rate of 121%.
The increase in personnel costs were largely a result of a 21% average increase in general and administrative headcount to support the growth of our business globally. The increase was also attributable to a $28.3 million increase in our bad debt expense.
The increase in personnel costs were largely a result of a 21% increase in average general and administrative headcount to support the growth of our business globally. The increase was also attributable to a $28.3 million increase in our bad debt expense.
Other long-term assets increased $146.5 million primarily due to an increase in the sales commissions balances related to the growth of our business. The impairment of operating lease assets and other long lived assets is described further in Note 5 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
Other long-term assets increased $146.5 million primarily due to an increase in the sales commissions balances related to the growth of our business. The impairment of operating lease and other long lived assets is described further in Note 6 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
Accounts payable and other current liabilities increased $105.8 million primarily due to increases in transaction volumes, the impact from the new sabbatical employee benefit that we introduced effective July 1, 2022. Operating lease liabilities decreased $54.5 million due to payments made against our operating lease obligations.
Accounts payable and other current liabilities increased $105.8 million primarily due to increases in transaction volumes, and the impact from the then new sabbatical employee benefit that we introduced effective July 1, 2022. Operating lease liabilities decreased $54.5 million due to payments made against our operating lease obligations.
The increase was primarily attributable to a $264.4 million increase in personnel costs, net of capitalized costs, largely as a result of a 33% average increase in our research and development headcount as we continued to focus on enhancing our Twilio Segment and Flex products and strengthening our platform infrastructure.
The increase was primarily attributable to a $264.4 million increase in personnel costs, net of capitalized costs, largely as a result of a 33% increase in average research and development headcount as we continued to focus on enhancing our Segment and Flex products and strengthening our platform infrastructure.
We may also incur higher than usual losses related to deterioration of quality of certain financial assets caused by the macroeconomic conditions. Restructuring Costs.
We may also incur higher than usual losses related to deterioration of quality of certain financial assets caused by macroeconomic conditions. Restructuring Costs.
In 2022, sales and marketing expenses increased by $203.4 million, or 19%, compared to the same period last year. The increase was primarily attributable to a $175.5 million increase in personnel costs, largely as a result of a 26% average increase in sales and marketing headcount as we continued to expand our sales efforts globally.
In 2022, sales and marketing expenses increased by $203.4 million, or 19%, compared to the same period in the prior year. The increase was primarily attributable to a $175.5 million increase in personnel costs, largely as a result of a 26% increase in average sales and marketing headcount as we continued to expand our sales efforts globally.
Cash Flows from Investing Activities In 2022, cash used in investing activities was $616.5 million primarily consisting of $498.9 million of purchases of marketable securities and other investments, net of maturities and sales, $45.8 million related to capitalized software development costs, $37.4 million of net cash paid to acquire other businesses and $34.4 million related to purchases of long-lived assets.
In 2022, cash used in investing activities was $616.5 million primarily consisting of $498.9 million of purchases of marketable securities and other investments, net of maturities and sales, $45.8 million related to capitalized software development costs, $37.4 million of net cash paid to acquire other businesses and $34.4 million related to purchases of long-lived assets.
The primary difference between our effective tax rate and the federal statutory rate relates to the full valuation allowance the Company established on the federal, state and certain foreign net operating losses and credits. 50 Table of Contents Non-GAAP Financial Measures We use the following non‑GAAP financial information, collectively, to evaluate our ongoing operations and for internal planning and forecasting purposes.
The primary difference between our effective tax rate and the federal statutory rate relates to the valuation allowance the Company established on the federal, state and certain foreign net operating losses and credits. 56 Table of Contents Non-GAAP Financial Measures We use the following non‑GAAP financial information, collectively, to evaluate our ongoing operations and for internal planning and forecasting purposes.
We define U.S. revenue as revenue from customers with IP addresses or mailing addresses at the time of registration in the United States. We define international revenue as revenue from customers with IP addresses or mailing addresses at the time of registration outside of the United States. Cost of Revenue and Gross Margin Cost of Revenue .
We define U.S. revenue as revenue from customers with IP addresses or mailing addresses at the time of registration in the United States. We define international revenue as revenue from customers with IP addresses or mailing addresses at the time of registration outside of the United States. Cost of Revenue and Gross Profit Cost of Revenue .
Our primary uses of cash include operating costs, such as personnel-related costs, network service provider costs, cloud infrastructure costs, facility-related spending, as well as, from time to time, acquisitions and investments.
Our primary uses of cash include operating costs, such as personnel-related costs, network service provider costs, cloud infrastructure costs, facility-related spending, as well as, from time to time, acquisitions, investments and share repurchases.
These Notes are described in detail in Note 13 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
These Notes are described in detail in Note 14 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
In the years ended December 31, 2022, 2021, and 2020, our revenue was $3.8 billion, $2.8 billion and $1.8 billion, respectively, and our net loss was $1.3 billion, $949.9 million and $491.0 million, respectively.
In the years ended December 31, 2023, 2022, and 2021, our revenue was $4.2 billion, $3.8 billion and $2.8 billion, respectively, and our net loss was $1.0 billion, $1.3 billion and $949.9 million, respectively.
In the three years ended December 31, 2022, 2021 and 2020, revenue from Active Customer Accounts represented over 99% of total revenue in each period. Dollar‑Based Net Expansion Rate Our Dollar-Based Net Expansion Rate compares the total revenue from all Active Customer Accounts in a quarter to the same quarter in the prior year.
In the three years ended December 31, 2023, 2022 and 2021, revenue from Active Customer Accounts represented over 99% of total revenue in each period. 53 Table of Contents Dollar‑Based Net Expansion Rate Our Dollar-Based Net Expansion Rate compares the total revenue from all Active Customer Accounts and customer accounts from Zipwhip in a quarter to the same quarter in the prior year.
Sales and marketing expenses also include expenditures related to advertising, marketing, our brand awareness activities, costs related to our SIGNAL customer and developer conferences, credit card processing fees, professional services fees, depreciation, amortization of acquired intangible assets and an allocation of our general overhead expenses.
Sales and marketing expenses also include expenditures related to advertising, marketing, brand awareness activities, costs related to our SIGNAL customer and developer conferences, credit card processing fees, professional services fees, depreciation, amortization of acquired intangible assets and an allocation of our general overhead expenses. Sales and marketing expenses are generally directly attributable to each segment.
To calculate the Dollar-Based Net Expansion Rate, we first identify the cohort of Active Customer Accounts that were Active Customer Accounts in the same quarter of the prior year.
To calculate the Dollar-Based Net Expansion Rate, we first identify the cohort of Active Customer Accounts and customer accounts from Zipwhip that were Active Customer Accounts or customer accounts from Zipwhip in the same quarter of the prior year.
Operating Expenses The most significant components of operating expenses are personnel costs, which consist of salaries, benefits, sales commissions and bonuses and stock‑based compensation. We also incur other non‑personnel costs related to our general overhead expenses. Research and Development.
Gross profit represents revenue less cost of revenue. Operating Expenses The most significant components of operating expenses are personnel costs, which consist of salaries, benefits, sales commissions and bonuses and stock‑based compensation. We also incur other non‑personnel costs related to our general overhead expenses. Research and Development.
Our gross margin has been and will continue to be affected by a number of factors, including the timing and extent of our investments in our operations; our product mix; our ability to manage our network service provider and cloud infrastructure‑related fees, including A2P SMS fees; the mix of U.S. revenue compared to international revenue; changes in foreign exchange rates; the timing of amortization of capitalized software development costs and acquired intangibles; and the extent to which we periodically choose to adjust prices of our products.
Our gross margin is impacted by a number of factors, including the timing and extent of our investments in our operations; our product mix; our ability to manage our cloud infrastructure‑related and network service provider fees, including 52 Table of Contents A2P SMS fees; the mix of U.S. revenue compared to international revenue; changes in foreign exchange rates; the timing of amortization of capitalized software development costs and acquired intangibles; and the extent to which we periodically choose to adjust prices of our products.
The increase was also due to a $13.4 million increase in advertising expenses. 58 Table of Contents In 2022, general and administrative expenses increased by $45.0 million, or 10%, compared to the same period last year.
The increase was also due to a $13.4 million increase in advertising expenses. In 2022, general and administrative expenses increased by $45.0 million, or 10%, compared to the same period in the prior year.
Our arrangements with network service providers require us to pay fees based on the volume of phone calls initiated or text messages sent, as well as the number of telephone numbers acquired by us to service our customers.
Our arrangements with network service providers require us to pay fees based on the volume of phone calls initiated or text messages sent, as well as the number of telephone numbers acquired by us to service our customers. Our arrangements with our cloud infrastructure providers require us to pay fees based on our server capacity consumption. Gross Profit .
Impairment of Long-Lived Assets. Impairment of long-lived assets consists primarily of impairment charges allocated to the carrying amount of certain operating right-of-use assets and the associated leasehold improvements and property and equipment when the carrying amounts exceed their respective fair values.
Impairment of Long-Lived Assets. Impairment of long-lived assets consists of impairment of intangible assets and certain operating right-of-use assets and the associated leasehold improvements and property and equipment when the carrying amounts exceed their respective fair values.
We believe that the accounting policies, assumptions and estimates associated with revenue recognition and business combinations have the greatest potential impact on our consolidated financial statements. Therefore, we consider these to be our critical accounting policies and estimates.
Our actual results could differ from these estimates. We believe that the accounting policies, assumptions and estimates associated with revenue recognition have the greatest potential impact on our consolidated financial statements. Therefore, we consider these to be our critical accounting policies and estimates.
We believe that use of our platform by customers at or above the $5 per month threshold is a stronger indicator of potential future engagement than trial usage of our platform or usage at levels below $5 per month. The number of Active Customer Accounts is rounded down to the nearest thousand .
We believe that use of our platform by customers at or above the $5 per month threshold is a stronger indicator of potential future engagement than trial usage of our platform or usage at levels below $5 per month.
In 2022, U.S. revenue and international revenue represented $2.5 billion, or 66%, and $1.3 billion, or 34%, respectively, of total revenue. In 2021, U.S. revenue and international revenue represented $1.9 billion, or 68%, and $914.5 million, or 32%, respectively, of total revenue.
In 2022, U.S. revenue and international revenue represented $2.5 billion, or 66%, and $1.3 billion, or 34%, of total revenue, respectively.
This increase was primarily attributable to increases in the usage of our products by our existing customers, as reflected in our Dollar‑Based Net Expansion Rate of 131%, as well as a 16% increase in the number of Active Customer Accounts, from 221,000 as of December 31, 2020, to over 256,000 as of December 31, 2021.
This increase was primarily attributable to a 13% increase in the number of Communications Active Customer Accounts from over 249,000 as of December 31, 2021, to over 282,000 as of December 31, 2022, as well as the increased usage of our products by our existing customers, as reflected in our Communications Dollar‑Based Net Expansion Rate of 121%.
Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under Part II, Item 1A, “Risk Factors” in this Annual Report on Form 10-K. Overview We enable businesses to reinvent how they engage with their customers.
Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under Part I, Item 1A, “Risk Factors” in this Annual Report on Form 10-K.
The following table summarizes our revenue growth, our number of Active Customer Accounts and Dollar-Based Net Expansion Rate for 2022, 2021 and 2020.
The following table summarizes our year-over-year revenue growth and Dollar-Based Net Expansion Rate for the years ended December 31, 2023, 2022 and 2021, and the number of Active Customer Accounts as of December 31, 2023, 2022 and 2021.
Cash Flows from Financing Activities In 2022, cash provided by financing activities was $45.0 million primarily consisting of $59.6 million in proceeds from stock options exercised by our employees and shares issued under our 2016 Employee Stock Purchase Plan (the “ESPP”), offset by $13.4 million in principal payments on debt and finance leases.
In 2022, cash provided by financing activities was $45.0 million primarily consisting of $59.6 million in proceeds from stock options exercised by our employees and shares issued under our employee stock purchase plan, offset by $13.4 million in principal payments on debt and finance leases. Critical Accounting Policies and Estimates Our consolidated financial statements are prepared in accordance with U.S.
We are focusing our research and development investment in the highest impact product areas for our future. We are investing strategically in alignment with our focus on building a trusted leading customer engagement platform. Sales and Marketing. Sales and marketing expenses consist primarily of personnel costs, including commissions and bonuses to our sales employees.
We are investing strategically in alignment with our focus on building a trusted, leading customer engagement platform. 55 Table of Contents Sales and Marketing. Sales and marketing expenses consist primarily of personnel costs, including commissions and bonuses to our sales employees.
With respect to changes in operating assets and liabilities, accounts receivable and prepaid expenses increased $196.0 million primarily due to revenue growth, the timing of cash receipts and pre-payments for cloud infrastructure fees and certain operating expenses. Accounts payable and other current liabilities increased $137.7 million primarily due to increases in transaction volumes.
With respect to changes in operating assets and liabilities, accounts receivable and prepaid expenses increased $141.4 million primarily due to revenue growth, timing of cash receipts and pre-payments of our cloud infrastructure fees and certain operating expenses.
For further detail refer to Note 5 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. 2021 compared to 2020 In 2021, research and development expenses increased by $258.7 million, or 49%, compared to the same period in the prior year.
For further detail refer to Notes 3 and 11 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. 2022 compared to 2021 In 2022, other expenses, net, decreased by $7.0 million, or 15%, compared to the same period in the prior year.
Cash Flows The following table summarizes our cash flows: Year Ended December 31, 2022 2021 2020 (In thousands) Cash (used in) provided by operating activities $ (254,368) $ (58,192) $ 32,654 Cash used in investing activities (616,452) (2,489,996) (845,855) Cash provided by financing activities 45,007 3,096,325 1,493,311 Effect of exchange rate changes on cash, cash equivalents and restricted cash 60 (191) 40 Net (decrease) increase in cash, cash equivalents and restricted cash $ (825,753) $ 547,946 $ 680,150 60 Table of Contents Cash Flows from Operating Activities In 2022, cash used in operating activities consisted primarily of our net loss of $1.3 billion adjusted for non-cash items, including $798.6 million of stock-based compensation expense reflecting the impact of the September Plan, $279.1 million of depreciation and amortization expense, $97.7 million of impairment of operating lease assets and other long-lived assets, $57.9 million amortization of deferred commissions, $47.2 million of non-cash reduction in our operating right-of-use asset, $35.3 million of share of losses from equity method investments, $35.0 million of allowance for credit losses, $33.2 million of net amortization of investment premium and discount and $396.6 million of cumulative changes in operating assets and liabilities.
Cash Flows The following table summarizes our cash flows: Year Ended December 31, 2023 2022 2021 (In thousands) Cash provided by (used in) operating activities $ 414,752 $ (254,368) $ (58,192) Cash provided by (used in) investing activities 228,603 (616,452) (2,489,996) Cash (used in) provided by financing activities (643,610) 45,007 3,096,325 Effect of exchange rate changes on cash, cash equivalents and restricted cash 108 60 (191) Net (decrease) increase in cash, cash equivalents and restricted cash $ (147) $ (825,753) $ 547,946 Cash Flows from Operating Activities In 2023, cash provided by operating activities consisted primarily of our net loss of $1.0 billion adjusted for non-cash items, including $675.9 million of stock-based compensation expense, $284.4 million of depreciation and amortization expense, $320.5 million of impairment of intangible assets and other long-lived assets, $72.9 million amortization of deferred commissions, $27.0 million of non-cash reduction in our operating right-of-use asset, $121.9 million of share of losses from equity method investments, $51.9 million of provision for bad debt and $230.6 million of cumulative changes in operating assets and liabilities.
General and administrative expenses also include costs related to business acquisitions, legal and other professional services fees, certain taxes, depreciation and amortization, charitable contributions and an allocation of our general overhead expenses. We expect that we will incur costs associated with supporting the growth of our business and to meet the increased compliance requirements associated with our international expansion.
General and administrative expenses also include costs related to business acquisitions and dispositions, legal and other professional services fees, certain taxes, depreciation and amortization, charitable contributions and an allocation of our general overhead expenses.
Our arrangements do not contain general rights of return. However, credits may be issued on a case-by-case basis. Credits are accounted for as variable consideration, are estimated based on historical trends and are recorded against revenue. The contracts do not provide customers with the right to take possession of the software supporting the applications.
Non-usage-based contracts revenue is recognized on a ratable basis over the contractual term which is generally from one to three years. Our arrangements do not contain general rights of return. However, credits may be issued on a case-by-case basis. Credits are accounted for as variable consideration, are estimated based on historical trends and are recorded against revenue.
We enter into contracts that can include various combinations of products and services, which are generally capable of being distinct and accounted for as separate performance obligations. Revenue is recognized net of allowances for credits and any taxes collected from customers, which are subsequently remitted to governmental authorities.
We enter into contracts that can include various combinations of products and services, which are generally capable of being distinct and accounted for as separate performance obligations.
Some examples of the usage‑based fees that we charge include fees related to the number of text messages sent or received using our Programmable Messaging, minutes of call duration activity for our Programmable Voice and the number of authentications for Twilio Verify.
The usage-based fees are earned when customers access our cloud-based platform and start using the products. Some examples of our usage-based products are Messaging and Voice. For Messaging products, we primarily charge fees related to the number of text messages sent or received. For Voice products, we primarily charge fees for minutes of call duration.
Unanticipated events and circumstances may occur that may affect the accuracy or validity of such assumptions, estimates or actual results. Recent Accounting Pronouncements Not Yet Adopted See Note 2(af) to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for a discussion of recent accounting pronouncements not yet adopted. 62 Table of Contents
Recent Accounting Pronouncements Not Yet Adopted See Note 2(af) to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for a discussion of recent accounting pronouncements not yet adopted.
We believe that our cash, cash equivalents and marketable securities balances, as well as the cash flows generated by our operations, will be sufficient to satisfy our anticipated cash needs for working capital and capital expenditure needs, including authorized share repurchases, for the next 12 months and beyond.
There can be no assurance that additional credit lines or financing instruments will be available in amounts or on terms acceptable to us, if at all. 65 Table of Contents We believe that our cash, cash equivalents and marketable securities balances, as well as the cash flows generated by our operations, will be sufficient to satisfy our anticipated cash needs for working capital and capital expenditure needs, including authorized share repurchases, for the next 12 months and beyond.
Amounts that have been invoiced are recorded in accounts receivable and in revenue or deferred revenue depending on whether the revenue recognition criteria have been met.
The contracts do not provide customers with the right to take possession of the software supporting the applications. Amounts that have been invoiced are recorded in accounts receivable and in revenue or deferred revenue depending on whether the revenue recognition criteria have been met.
However, our belief may prove to be incorrect, and we could utilize our available financial resources sooner than we currently expect.
However, our belief may prove to be incorrect, and we could utilize our available financial resources sooner than we currently expect. We may be required to seek additional equity or debt financing in order to meet our future capital requirements.
Operating Expenses Year Ended December 31, 2022 2021 2020 2021 to 2022 Change 2020 to 2021 Change (Dollars in thousands) Research and development $ 1,079,081 $ 789,219 $ 530,548 $ 289,862 37 % $ 258,671 49 % Sales and marketing 1,248,032 1,044,618 567,407 203,414 19 % 477,211 84 % General and administrative 517,414 472,460 310,607 44,954 10 % 161,853 52 % Restructuring costs 76,636 — — 76,636 100 % — — % Impairment of long-lived assets 97,722 — — 97,722 100 % — — % Total operating expenses $ 3,018,885 $ 2,306,297 $ 1,408,562 $ 712,588 31 % $ 897,735 64 % 2022 compared to 2021 In 2022, research and development expenses increased by $289.9 million, or 37%, compared to the same period last year.
Operating Expenses Year Ended December 31, 2023 2022 2021 2022 to 2023 Change 2021 to 2022 Change (Dollars in thousands) Research and development $ 942,790 $ 1,079,081 $ 789,219 $ (136,291) (13) % $ 289,862 37 % Sales and marketing 1,022,985 1,248,032 1,044,618 (225,047) (18) % 203,414 19 % General and administrative 468,459 517,414 472,460 (48,955) (9) % 44,954 10 % Restructuring costs 165,733 76,636 — 89,097 116 % 76,636 100 % Impairment of long-lived assets 320,504 97,722 — 222,782 228 % 97,722 100 % Total operating expenses $ 2,920,471 $ 3,018,885 $ 2,306,297 $ (98,414) (3) % $ 712,588 31 % 2023 compared to 2022 In 2023, research and development expenses decreased by $136.3 million, or 13%, compared to the same period last year.
In May 2022, we announced our decision to become a remote-first company, giving employees the flexibility to work remotely on a permanent basis.
In 2022, we announced our decision to become a remote-first company, allowing our employees the flexibility to work remotely on a permanent basis. As part of our new operating strategy, we permanently closed several of our offices in 2022 and 2023.
Subscription-based fees are derived from our complex software products, such as Twilio Segment, Twilio Engage, Twilio Flex and certain non-usage-based contracts, such as with the sales of short codes and customer support. Non-usage-based contracts revenue is recognized on a ratable basis over the contractual term which is generally from one to three years.
Platform usage is considered a monthly series comprising one performance obligation and usage-based fees are recognized as revenue in the period in which the usage occurs. Our subscription-based fees are derived from our software products, such as Segment, Engage, Flex, Email and Marketing Campaigns, and certain other non-usage-based contracts, such as with the sales of short codes and customer support.
With our platform, businesses can personalize every transaction with their customers, build lasting loyalty, cut customer acquisition costs and increase customer lifetime value. 47 Table of Contents For a comprehensive overview of our business, our platform and our products refer to Part I, Item 1, “Business,” included elsewhere on this Annual Report on Form 10-K.
For a comprehensive overview of our business, our platform and our products refer to Part I, Item 1, “Business,” included elsewhere in this Annual Report on Form 10-K.
The increase was primarily attributable to a $331.5 million increase in personnel costs, largely as a result of a 74% average increase in sales and marketing headcount, including as a result of acquisitions, as we continued to expand our sales efforts globally.
The increase in operating expenses was primarily attributable to a $67.9 million increase in Segment personnel costs, largely as a result of a 50% increase in average Segment headcount as we continued to focus on enhancing our products and expanding our sales efforts globally, and a $9.1 million increase in advertising costs.
Under the program, we may purchase shares from time to time through open market transactions, privately negotiated transactions, and other means in compliance with applicable securities laws, including through Rule 10b5-1 plans. The program is set to expire on December 31, 2024.
Repurchases under the program will be made through open market, private transactions or other means in compliance with applicable federal securities laws, and could include repurchases pursuant to Rule 10b5-1 trading plans. We have discretion in determining the conditions under which shares may be repurchased from time to time. The program expires on December 31, 2024.
Non‑GAAP Gross Profit and Non‑GAAP Gross Margin For the periods presented, we define non‑GAAP gross profit and non‑GAAP gross margin as GAAP gross profit and GAAP gross margin, respectively, adjusted to exclude, as applicable, certain expenses as presented in the table below: Year Ended December 31, 2022 2021 2020 Reconciliation: (In thousands) GAAP gross profit $ 1,813,577 $ 1,390,713 $ 915,661 GAAP gross margin 47 % 49 % 52 % Non-GAAP adjustments: Share-based compensation 21,136 14,074 8,857 Amortization of acquired intangibles 122,653 114,896 59,501 Payroll taxes related to stock-based compensation 539 — — Non-GAAP gross profit $ 1,957,905 $ 1,519,683 $ 984,019 Non-GAAP gross margin 51 % 53 % 56 % Non‑GAAP Operating Expenses For the periods presented, we define non‑GAAP operating expenses (including categories of operating expenses) as GAAP operating expenses (and categories of operating expenses) adjusted to exclude, as applicable, certain expenses as presented in the table below: Year Ended December 31, 2022 2021 2020 Reconciliation: (In thousands) GAAP operating expenses $ 3,018,885 $ 2,306,297 $ 1,408,562 Non-GAAP adjustments: Share-based compensation (763,149) (618,211) (353,054) Amortization of acquired intangibles (83,528) (83,888) (38,993) Acquisition related expenses (2,621) (7,449) (21,765) Payroll taxes related to stock-based compensation (23,293) (48,417) (27,389) Charitable contribution (9,541) (31,169) (18,993) Restructuring costs (76,636) — — Impairment of long-lived assets (97,722) — — Non-GAAP operating expenses $ 1,962,395 $ 1,517,163 $ 948,368 51 Table of Contents Non‑GAAP (Loss) Income from Operations and Non‑GAAP Operating Margin For the periods presented, we define non‑GAAP (loss) income from operations (which we may refer to as “non-GAAP operating profit” or “non-GAAP profit from operations”) and non‑GAAP operating margin as GAAP loss from operations and GAAP operating margin, respectively, adjusted to exclude, as applicable, certain expenses as presented in the table below: Year Ended December 31, 2022 2021 2020 Reconciliation: (In thousands) GAAP loss from operations $ (1,205,308) $ (915,584) $ (492,901) GAAP operating margin (32) % (32) % (28) % Non-GAAP adjustments: Share-based compensation 784,285 632,285 361,911 Amortization of acquired intangibles 206,181 198,784 98,494 Acquisition related expenses 2,621 7,449 21,765 Payroll taxes related to stock-based compensation 23,832 48,417 27,389 Charitable contribution 9,541 31,169 18,993 Restructuring costs 76,636 — — Impairment of long-lived assets 97,722 — — Non-GAAP (loss) income from operations $ (4,490) $ 2,520 $ 35,651 Non-GAAP operating margin — % — % 2 % 52 Table of Contents Factors Affecting Our Performance We believe that the future success of our business and our results of operations may be significantly affected by many factors, including the factors described below and those outlined in Part II, Item 1A, “Risk Factors.” Usage-Based Fees.
Non‑GAAP Gross Profit and Non‑GAAP Gross Margin For the periods presented, we define non‑GAAP gross profit and non‑GAAP gross margin as GAAP gross profit and GAAP gross margin, respectively, adjusted to exclude, as applicable, certain expenses as presented in the table below: Year Ended December 31, 2023 2022 2021 Reconciliation: (In thousands) GAAP gross profit $ 2,043,930 $ 1,813,577 $ 1,390,713 GAAP gross margin 49 % 47 % 49 % Non-GAAP adjustments: Stock-based compensation 26,343 21,136 14,074 Amortization of acquired intangibles 113,266 122,653 114,896 Payroll taxes related to stock-based compensation 699 539 — Non-GAAP gross profit $ 2,184,238 $ 1,957,905 $ 1,519,683 Non-GAAP gross margin 53 % 51 % 53 % Non‑GAAP Operating Expenses For the periods presented, we define non‑GAAP operating expenses (including categories of operating expenses) as GAAP operating expenses (and categories of operating expenses) adjusted to exclude, as applicable, certain expenses as presented in the table below: Year Ended December 31, 2023 2022 2021 Reconciliation: (In thousands) GAAP operating expenses $ 2,920,471 $ 3,018,885 $ 2,306,297 Non-GAAP adjustments: Stock-based compensation (636,499) (763,149) (618,211) Amortization of acquired intangibles (79,041) (83,528) (83,888) Acquisition and divestiture related expenses (5,555) (2,621) (7,449) Loss on net assets divested (32,277) — — Payroll taxes related to stock-based compensation (12,286) (23,293) (48,417) Charitable contributions (17,346) (9,541) (31,169) Restructuring costs (165,733) (76,636) — Impairment of long-lived assets (320,504) (97,722) — Non-GAAP operating expenses $ 1,651,230 $ 1,962,395 $ 1,517,163 57 Table of Contents Non‑GAAP Income (Loss) from Operations and Non‑GAAP Operating Margin For the periods presented, we define non‑GAAP income (loss) from operations and non‑GAAP operating margin as GAAP income (loss) from operations and GAAP operating margin, respectively, adjusted to exclude, as applicable, certain expenses as presented in the table below: Year Ended December 31, 2023 2022 2021 Reconciliation: (In thousands) GAAP loss from operations $ (876,541) $ (1,205,308) $ (915,584) GAAP operating margin (21) % (32) % (32) % Non-GAAP adjustments: Stock-based compensation 662,842 784,285 632,285 Amortization of acquired intangibles 192,307 206,181 198,784 Acquisition and divestiture related expenses 5,555 2,621 7,449 Loss on net assets divested 32,277 — — Payroll taxes related to stock-based compensation 12,985 23,832 48,417 Charitable contributions 17,346 9,541 31,169 Restructuring costs 165,733 76,636 — Impairment of long-lived assets 320,504 97,722 — Non-GAAP income (loss) from operations $ 533,008 $ (4,490) $ 2,520 Non-GAAP operating margin 13 % — % — % 58 Table of Contents Results of Operations The following table sets forth our results of operations for the periods presented.
In the years ended December 31, 2022, 2021, and 2020, our 10 largest Active Customer Accounts generated an aggregate of 12%, 11% and 14% of our total revenue, respectively.
In the years ended December 31, 2023, 2022, and 2021, our 10 largest Active Customer Accounts generated an aggregate of 10%, 12% and 11% of our total revenue, respectively. Recent Developments Business Unit Reorganization. In February 2023, we began operating our business in two business units: Twilio Communications (“Communications”) and Twilio Data & Applications (“Data & Applications”).
Refer to Note 8, Note 13 and Note 16(a) to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for discussions of our obligations and commitments related to leases, debt and other purchase obligations. 59 Table of Contents We may, from time to time, consider acquisitions of, or investments in, complementary businesses, products, services, capital infrastructure or technologies which might affect our liquidity requirements, cause us to secure additional financing or issue additional equity or debt securities.
We may, from time to time, consider acquisitions of, or investments in, complementary businesses, products, services, capital infrastructure or technologies which might affect our liquidity requirements or cause us to secure additional financing or issue additional equity or debt securities.
We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates.
GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances.
For further detail refer to Note 6 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. In 2022, we incurred $97.7 million in impairment charges related to our operating lease assets and other long-lived assets. The impairment charges were triggered by the office closures in 2022.
For further detail refer to Note 7 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. In 2023, impairment of long-lived assets increased by $222.8 million, or 228%, compared to the same period last year.
A single organization may constitute multiple unique Active Customer Accounts if it has multiple account identifiers, each of which is treated as a separate Active Customer Account. We believe that the number of Active Customer Accounts is an important indicator of the growth of our business, the market acceptance of our platform and future revenue trends.
We believe that the number of Active Customer Accounts, on an aggregate basis and at the segment level, is an important indicator of the growth of our business, the market acceptance of our platform and future revenue trends.
In 2020, U.S. revenue and international revenue represented $1.3 billion, or 73%, and $479.6 million, or 27%, respectively, of total revenue.
In 2023, U.S. revenue and international revenue represented $2.8 billion, or 66%, and $1.4 billion, or 34%, of total revenue, respectively.
These increases were partially offset by a $21.6 million decrease in charitable contribution expense that we made through Twilio.org. In 2022, we incurred $76.6 million in restructuring costs as a result of the September Plan approved by the compensation and talent management committee of our board of directors during the third quarter of 2022.
These increases were partially offset by a $21.6 million decrease in charitable contribution expense that we made through Twilio.org. In 2022, we incurred $76.6 million in restructuring costs as a result of restructuring activities undertaken in September 2022, as described in Note 7 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
The timing, manner, price and amount of any repurchases are determined by us at our discretion and depend on a variety of factors, including legal requirements, price and economic market conditions. 2029 Notes and 2031 Notes In March 2021, we issued and sold $1.0 billion aggregate principal amount of senior notes, consisting of $500.0 million principal amount of 3.625% notes due 2029 (the “2029 Notes”) and $500.0 million principal amount of 3.875% notes due 2031 (the “2031 Notes,” and together with the 2029 Notes, the “Notes”).
As of December 31, 2023, approximately $327.9 million of the originally authorized amount remains available for future repurchases. 2029 Notes and 2031 Notes In March 2021, we issued and sold $1.0 billion aggregate principal amount of senior notes, consisting of $500.0 million principal amount of 3.625% notes due 2029 (the “2029 Notes”) and $500.0 million principal amount of 3.875% notes due 2031 (the “2031 Notes,” and together with the 2029 Notes, the “Notes”).
Revenue from acquisitions does not impact the Dollar-Based Net Expansion Rate calculation until the quarter following the one-year anniversary of the applicable acquisition, unless the acquisition closing date is the first day of a quarter. 48 Table of Contents We believe that measuring Dollar-Based Net Expansion Rate provides a more meaningful indication of the performance of our efforts to increase revenue from existing customers.
Revenue from acquisitions does not impact the Dollar-Based Net Expansion Rate calculation until the quarter following the one-year anniversary of the applicable acquisition, unless the acquisition closing date is the first day of a quarter. As a result, for the year ended December 31, 2023, our Dollar-Based Net Expansion Rate excludes the contributions from acquisitions made after October 1, 2022.
The increase in cost of revenue was primarily attributable to a $465.5 million increase in network service providers’ costs, which included the additional A2P fees imposed by certain carriers, and a $44.2 million increase in cloud infrastructure fees, all to support the growth in usage of our products.
The increase in Communications cost of revenue was primarily attributable to a $477.0 million increase in network service providers’ costs, including the impact of hedging instruments, a $30.7 million increase in hosting fees, and a $14.7 million increase in support costs, all of which supported the growth in usage of our products by new and existing customers.
For more details on the nature of this transaction, accounting treatment and the impact to our financial statements refer to Note 2(w) and Note 10 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. Sabbatical Program.
Refer to Note 6, Note 8 and Note 12 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information on the restructuring, impairment and segment reporting. 51 Table of Contents Share Repurchase Program.
Year Ended December 31, 2022 2021 2020 Active Customer Accounts (as of end date of period) (1) 290,000 256,000 221,000 Total Revenue (in thousands) (2) $ 3,826,321 $ 2,841,839 $ 1,761,776 Total Revenue Growth Rate (2) 35 % 61 % 55 % Dollar-Based Net Expansion Rate (3) 121 % 131 % 137 % ____________________ (1) Excludes Active Customer Accounts from Zipwhip in 2021 and 2022.
Year Ended December 31, 2023 2022 2021 Active Customer Accounts 305,000 290,000 256,000 Total Revenue (in thousands) $ 4,153,945 $ 3,826,321 $ 2,841,839 Total Revenue Growth Rate 9 % 35 % 61 % Dollar-Based Net Expansion Rate 103 % 121 % 131 % Active Customer Accounts We define an Active Customer Account at the end of any period as an individual account, as identified by a unique account identifier, for which we have recognized at least $5 of revenue in the last month of the period.
Liquidity and Capital Resources As of December 31, 2022, we had cash and cash equivalents of $651.8 million and short-term marketable securities of $3.5 billion. Cash and cash equivalents consist of money market funds, reverse repurchase agreements and commercial paper.
The increase in Segment cost of revenue was primarily attributable to a $10.2 million increase in hosting fees and a $5.8 million increase in support costs. Liquidity and Capital Resources As of December 31, 2023, we had cash and cash equivalents of $655.9 million and short-term marketable securities of $3.4 billion. Cash equivalents consist of money market funds.
The increase in international revenue was attributable to the growth in usage of our products by our existing customers as reflected in our overall Dollar-Based Net Expansion Rate of 121%, as well as a 13% increase in the number of international Active Customer Accounts. 2021 compared to 2020 In 2021, total revenue increased by $1.1 billion, or 61%, compared to the same period in the prior year.
This increase was primarily attributable to a 5% increase in the number of Active Customer Accounts, from over 290,000 as of December 31, 2022 to over 305,000 as of December 31, 2023, as well as the increased usage of our products by our existing customers, as reflected in our Dollar-Based Net Expansion Rate of 103%.
Employees who had already accumulated more than three years of tenure with us as of the program’s effective date became immediately eligible for their sabbatical leaves. As of December 31, 2022, we carried a $30.7 million liability related to this program.
The sabbatical program was intended to provide our tenured employees with a paid leave of four consecutive weeks after every three years of service. Employees who had accumulated more than three years of service as of the program’s effective date became eligible for their benefit immediately.
Cost of Revenue and Gross Margin Year Ended December 31, 2022 2021 2020 2021 to 2022 Change 2020 to 2021 Change (Dollars in thousands) Cost of revenue $ 2,012,744 $ 1,451,126 $ 846,115 $ 561,618 39 % $ 605,011 72 % Gross margin 47 % 49 % 52 % 57 Table of Contents 2022 compared to 2021 In 2022, cost of revenue increased by $561.6 million, or 39%, compared to the same period last year.
In 2021, U.S. revenue and international revenue represented $1.9 billion, or 68%, and $914.5 million, or 32%, of total revenue, respectively. 61 Table of Contents Cost of Revenue and Gross Profit Year Ended December 31, 2023 2022 2021 2022 to 2023 Change 2021 to 2022 Change (Dollars in thousands) Cost of revenue $ 2,110,015 $ 2,012,744 $ 1,451,126 $ 97,271 5 % $ 561,618 39 % Gross profit $ 2,043,930 $ 1,813,577 $ 1,390,713 $ 230,353 13 % $ 422,864 30 % 2023 compared to 2022 In 2023, cost of revenue increased by $97.3 million, or 5%, compared to the same period last year.
The increase in cost of revenue was primarily attributable to a $449.7 million increase in network service providers’ costs and a $36.5 million increase in cloud infrastructure fees, all to support the growth in usage of our products. In 2022, gross margin declined compared to the same period last year.
The increase in Communications cost of revenue was primarily attributable to a $19.5 million increase in hosting fees and a $51.3 million increase in network service providers’ costs, net of the impact of hedging instruments, to support the increase in revenue due to the growth in usage of our products by our new and existing customers. 64 Table of Contents In 2023, Segment non-GAAP loss from operations increased by $42.7 million, or 144%, compared to the same period last year.
In the years ended December 31, 2022, 2021 and 2020, we generated 73%, 72% and 76% of our revenue, respectively, from usage‑based fees.
These contracts may include negotiated terms and typically include minimum revenue commitments of varying durations. Usage-based customers subject to such contracts are typically invoiced monthly in arrears for products used. In the years ended December 31, 2023, 2022 and 2021, we generated 71%, 73% and 72% of our revenue, respectively, from usage-based fees.
Customers gain access to our products and solutions either through an e-commerce self service sign-up format which requires an upfront prepayment via credit card that is drawn down as they use our products; or for our larger customers, including enterprise customers, a negotiated contract is established for at least 12 months that contain minimum revenue commitments and which may contain more favorable pricing.
When our usage-based products are embedded into our subscription-based products, we charge for each product separately on a usage or subscription basis, respectively, and record the revenue in the reportable segment in which each product resides. 54 Table of Contents Most of our usage-based customers gain access to our products and solutions through our e-commerce self-service sign-up format, which requires an upfront prepayment via credit card that is drawn down as they use our products.
The majority of our revenue is derived from usage-based fees that we charge primarily for our communications products, which can lead to variability and at times create significant differences between forecasts and actual results. In addition, our product mix and mix of international and domestic customers may significantly impact our gross margin.
Our revenue is primarily derived from usage-based fees, which can lead to variability in our results of operations and at times create differences between our forecasts and actual results. Our usage-based revenue is also more immediately impacted by changes in consumer spending and macroeconomic conditions than our subscription-based revenue.
Customers on such contracts are typically either invoiced monthly in arrears for products used or invoiced in advance at the start of the term. Amounts that have been charged via credit card or invoiced are recorded in revenue, deferred revenue or customer deposits, depending on whether the revenue recognition criteria have been met.
In the years ended December 31, 2023, 2022 and 2021, we generated 29%, 27% and 28% of our revenue, respectively, from non-usage‑based fees. Amounts that have been charged via credit card or invoiced are recorded in revenue, deferred revenue or customer deposits, depending on whether the revenue recognition criteria have been met.
Additionally, cash from operations could also be affected by various risks and uncertainties in connection with the impact of an economic downturn or recession, significant market volatility in the global economy, timing and ability to collect payments from our customers and other risks detailed in Part I, Item 1A, “Risk Factors.” Share Repurchase Program In February 2023, our board of directors authorized a share repurchase program to repurchase $1.0 billion of our Class A common stock over time.
Our future capital requirements, the adequacy of our available funds and our cash from operations depend on many factors and are affected by various risks and uncertainties, including those set forth in Part I, Item 1A, “Risk Factors.” Share Repurchase Program In February 2023, our board of directors authorized a share repurchase program pursuant to which we may repurchase up to $1.0 billion in aggregate value of our common stock.
In February 2023, our board of directors authorized a share repurchase program to repurchase $1.0 billion of our Class A common stock over time. Under the program, we may purchase shares from time to time through open market transactions, privately negotiated transactions and other means in compliance with applicable securities laws, including through Rule 10b5-1 plans.
Repurchases under this program can be made through open market, private transactions or other means in compliance with applicable federal securities laws and could include repurchases pursuant to Rule 10b5-1 trading plans. We have discretion in determining the conditions under which shares may be repurchased from time to time.
In 2021, sales and marketing expenses increased by $477.2 million, or 84%, compared to the same period in the prior year.
In 2022, U.S. revenue and international revenue represented $2.5 billion, or 66%, and $1.3 billion, or 34%, of total revenue, respectively. 2022 compared to 2021 In 2022, Communications revenue increased by $909.2 million, or 34%, compared to the same period in the prior year.
The increase was also due to a $43.6 million increase related to the amortization of acquired intangible assets and a $31.6 million increase in advertising expenses. In 2021, general and administrative expenses increased by $161.9 million, or 52%, compared to the same period in the prior year.
This increase was partially offset by a $62.9 million decrease in impairments of operating right-of-use assets and property and equipment due to fewer office closures in 2023 compared to 2022. 2022 compared to 2021 In 2022, research and development expenses increased by $289.9 million, or 37%, compared to the same period in the prior year.
In 2021, cash used in investing activities was $2.5 billion primarily consisting of $1.9 billion of purchases of marketable securities and other investments, net of maturities and sales, $491.5 million of net cash paid to acquire other businesses as described in Note 9 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K, $44.0 million related to capitalized software development costs and $46.0 million related to purchases of long-lived assets.
Cash Flows from Investing Activities In 2023, cash provided by investing activities was $228.6 million primarily consisting of $247.4 million of maturities and sales of marketable securities and other investments, net of purchases, and $38.2 million of proceeds from divestitures, net of cash divested, partially offset by $39.9 million related to capitalized software development costs and $11.3 million related to purchases of long-lived assets.
We have included Zipwhip in our results of operations prospectively after its closing date of July 14, 2021; Twilio Segment after its closing date of November 2, 2020; and all other acquisitions from the respective closing dates of each acquisition. The period-to-period comparison of our historical results are not indicative of the results that may be expected in the future.
The period-to-period comparison of our historical results are not indicative of the results that may be expected in the future.
For further details on this event refer to Note 6 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. In February 2023, we committed to a workforce reduction plan (the “February Plan”), that in addition to the September Plan, is intended to reduce operating costs, improve operating margins, and accelerate profitability.
For additional details refer to Note 7 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. Sabbatical Program. In February 2023, we announced that we will be sunsetting our employee sabbatical program that we introduced effective July 1, 2022.
The increase was primarily attributable to a $142.1 million increase in personnel costs, largely as a result of a 75% average increase in general and administrative headcount, including as a result of acquisitions, to support the growth of our business globally.
The decrease was primarily attributable to a $78.1 million decrease in total personnel costs, which was mostly driven by the restructuring of our workforce in September 2022, February 2023 and December 2023, that contributed to a 21% decrease in average general and administrative headcount in 2023.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

4 edited+0 added−0 removed7 unchanged
Biggest changeCash, cash equivalents and restricted cash consist of money market funds, reverse repurchase agreements and commercial paper. Short-term marketable securities consist primarily of U.S. treasury securities, non-U.S. government securities, high credit quality corporate debt securities and commercial paper. The cash and cash equivalents and short-term marketable securities are held for working capital purposes.
Biggest changeIn any given period, cash and cash equivalents may consist of bank deposits, money market funds, reverse repurchase agreements and commercial paper. Marketable securities consist primarily of U.S. treasury securities, non-U.S. government securities and high credit quality corporate debt securities. The cash and cash equivalents and marketable securities are held for working capital purposes.
We enter into foreign currency derivative hedging transactions to mitigate our exposure to market risks that may result from changes in foreign currency exchange rates. For further information, refer to Note 7 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
We enter into foreign currency derivative hedging transactions to mitigate our exposure to market risks that may result from changes in foreign currency exchange rates. For further information, refer to Note 9 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
A hypothetical 10% change in foreign exchange rates during any of the periods presented would not have had a material impact on our consolidated financial statements. 63 Table of Contents
A hypothetical 10% change in foreign exchange rates during any of the periods presented would not have had a material impact on our consolidated financial statements. 68 Table of Contents
Item 7A. Quantitative and Qualitative Disclosures about Market Risk We are exposed to certain market risks in the ordinary course of our business, including sensitivities as follows: Interest Rate Risk We had cash and cash equivalents of $651.8 million and short-term marketable securities of $3.5 billion as of December 31, 2022.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk We are exposed to certain market risks in the ordinary course of our business, including sensitivities as follows: Interest Rate Risk We had cash and cash equivalents of $655.9 million and marketable securities of $3.4 billion as of December 31, 2023.

Other TWLO 10-K year-over-year comparisons