TWILIO INC. Investor Update
March 5, 2024
©2024 TWILIO INC. ALL RIGHTS RESERVED
Legal Disclaimer
This presentation contains forward-looking statements within the meaning of the federal securities laws, including statements about our future performance and goals. These statements involve substantial risks and uncertainties, as further described in "Forward-Looking Statements" on slide 18, as well as in our most recent periodic reports filed with the SEC, including our Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q, which are available on our website and at sec.gov.
This presentation also contains non-GAAP financial measures. The non-GAAP financial measures, including non-GAAP income (loss) from operations, non-GAAP operating margin, non-GAAP operating expenses as a percentage of revenue, free cash flow, organic revenue and organic revenue growth, are presented for supplemental informational purposes only and should not be considered a substitute for financial information presented in accordance with GAAP. More information about and definitions of our non-GAAP financial measures used in this presentation can be found in "Non-GAAP Financial Measures" on slide 19, and reconciliations of our non-GAAP financial measures to the most directly comparable GAAP measures are included in the appendix.
©2024 TWILIO INC. ALL RIGHTS RESERVED
Topics to cover
- Overview of recent actions
- Segment operational review
- Capital allocation & financial targets
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Overview of Recent Actions
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Over the past 18 months, we have taken significant actions to advance priorities
- Established new operating model: Created two distinct business units to provide better focus, accountability, and transparency
- Streamlined go-to-market: Repositioned sales organization to better address unique buyer needs
Operational • Rationalized OpEx: Reduced headcount by ~35% since September 2022; implemented other cost reductions across the business
- Accelerated path to GAAP profitability: Delivered significant improvements in non-GAAP income and substantially reduced SBC
- Increased free cash flow: Generated meaningful free cash flow through improved operating leverage and working capital efficiency
Capital
Structure /
Efficiency
Leadership / Governance
- Returned capital: Launched $1B share repurchase program in February 2023; completed almost $800M to date
- Reduced stock-basedcompensation: Reduced SBC expense as a percent of revenue by 5 percentage points in 2023
- Transitioned leadership: Appointed Khozema Shipchandler, who led the transformation of our Communications business, to succeed our founder, Jeff Lawson, as CEO
- Evolved governance: Separated the roles of CEO and Board Chair, appointed three new independent directors in the past three years, and sunset our dual-class share structure
We will continue to focus on driving improved execution, accelerating growth, and realizing the full potential of the business
©2024 TWILIO INC. ALL RIGHTS RESERVED
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Our actions have materially improved key financial metrics
2021 | 2023 | |
Growth Strategy | Primary Focus | Durable |
on Rapid Growth | Profitable Growth | |
Non-GAAP OpEx / Revenue | 53% | 40% |
Non-GAAP Operating Profit | $3M | $533M |
Non-GAAP Operating Margin | 0% | 13% |
Free Cash Flow | ($148M) | $364M |
Headcount(1) | 7.9K | 5.9K |
Stock-Based Compensation / Revenue | 22% | 16% |
Capital Return | $0 | $1B |
Prior to 2023 | Authorized for 2023-2024 | |
(1) Headcount figures as of December 31 of each year. | |
Note: Non-GAAP operating expenses as a percentage of revenue, non-GAAP operating profit (also referred to as non-GAAP income from operations), non-GAAP operating margin, and free cash flow are non-GAAP financial measures. Refer to | |
"Non-GAAP Financial Measures" in the appendix for their definitions and a reconciliation of each non-GAAP measure to its most directly comparable GAAP measure. | ©2024 TWILIO INC. ALL RIGHTS RESERVED |
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Communications is by far the core driver of Twilio's performance; Segment remains a market leading, complementary technology, but has underperformed recently
2023 Financials:
Communications
2023 Revenue / % of Total Revenue
11% | 7% |
Organic Y/Y | Y/Y |
Revenue Growth | Revenue Growth |
$842M | ($72M) |
Non-GAAP Op Profit | Non-GAAP Op Loss |
22% | (25%) |
Non-GAAP Op Margin | Non-GAAP Op Margin |
A Leader in Omdia | A Leader in 2023 | A Leader in 2023 | A Leader in 2023 CDP for | #1 CDP by WW |
Universe: CPaaS | CPaaS Magic | CPaaS | Fin. Services MarketScape(4) | Market Share 2022(5) |
Platforms 2023-2024(1) | Quadrant 2023(2) | MarketScape(3) |
Note: Figures shown based on fiscal 2023.
Note: Communications organic revenue growth is a non-GAAP financial measure. Refer to "Non-GAAP Financial Measures" in the appendix for its definition and a reconciliation to its most directly comparable GAAP measure.
- Omdia CPaaS Platform Providers, 2023-2024
- Gartner® Magic Quadrant™ for Communications Platform as a Service, Lisa Unden-Farboud, Ajit Patankar, Brian Doherty, Daniel O'Connell, September 18, 2023. GARTNER is a registered trademark and service mark of Gartner, Inc. and/or its affiliates in the U.S. and internationally, and MAGIC QUADRANT is a registered trademark of Gartner, Inc. and/or its affiliates and are used herein with permission. All rights reserved.This graphic was published by Gartner, Inc. as part of a larger research document and should be evaluated in the context of the entire document. The Gartner document is available upon request from Twilio. Gartner does not endorse any vendor, product or service depicted in its research publications and does not advise technology users to select only those vendors with the highest ratings or other
designation. Gartner research publications consist of the opinions of Gartner's Research & Advisory organization and should not be construed as statements of fact. Gartner disclaims all warranties, expressed or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose. | ©2024 TWILIO INC. ALL RIGHTS RESERVED |
3. IDC MarketScape: Worldwide Communications Platform as a Service 2023 Vendor Assessment, By: Courtney Munroe, Melissa Fremeijer-Holtz, May 2023, IDC #US50607923 | |
4. IDC MarketScape: Worldwide Customer Data Platforms Focused on the Financial Services Industry 2023 Vendor Assessment, By: David Wallace, September 2023, IDC #US51211923 | 7 |
5. IDC Market Share: Worldwide Customer Data Platform Applications Software Market Shares, 2022: Continued CDP Growth to $2.7 Billion Proves Value of Unified Data for CX and Digital Business (Doc # US50861023). |
Segment Operational Review
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We have identified four specific drivers of Segment's underperformance
1
Level of | We invested ahead of growth; we are prioritizing and balancing future |
Investment | investments with our commitment to delivering durable, profitable growth |
2
Time to | Time for customers to get up-and-running on Segment was too long; we are |
Value | simplifying and automating implementation cycles by using AI as an accelerant |
3
Churn and Churn and contraction are elevated; we are improving time to value and
Contraction investing in platform interoperability with our data warehouse partners
4
Team Focus | Segment team was spread thin across too many priorities; we are recalibrating |
to focus on the highest impact areas | |
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Overview of Segment operational review
Review Process
- Upon his appointment as CEO in January 2024, Khozema Shipchandler initiated a review of Segment to identify the best path forward for the business in an effort to drive future shareholder value
- Our management team and Board evaluated a number of options for improved execution and profitable growth
- This 8-week evaluation included deep interactions with customers and Twilio leadership spanning sales, marketing, product, and engineering, as well as key leadership from our Communications business unit
- We assessed the root causes of our key operational challenges, our ability to address these issues, as well as the potential value that we believe we can create across our entire business with a tangible set of actions and improved execution
- With input from independent strategic and financial advisors, we also considered various hypothetical non-operational alternatives for Segment, including a sale, to understand the potential value unlock from strategic actions
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Twilio Inc. published this content on 05 March 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 05 March 2024 14:18:08 UTC.
