Q4 2019 Earnings Call
<unk> earnings Conference call. My name is Sheryl and I will be your operator for today's call.
At this time participants are in listen only mode. Later, we will conduct a question and answer session. I will now turn the call over to Andrew Philly Vice President Investor Relations Mr. Silly you may begin.
Thanks, Good afternoon, everyone and thank you for joining us for Twilios fourth quarter and full year 2019 earnings conference call.
Our results press release, SEC filings and a replay of todays call. It can be found an IR website at investors Dot Twilio dot com.
Joining me today or Jeff Watson, co founder and CEO, George who COO and 'cause membership Chandler CFO.
As a reminder, some of our commentary today will be a non-GAAP terms reconciliations between GAAP and non-GAAP results and guidance can be found in our earnings press release a.
Additionally, some of our discussion in responses may contain forward looking statements, which are subject to risks uncertainties and assumptions.
Should any of these materialize or should our assumptions prove to be an incorrect actual company results could differ materially from these forward looking statements.
A description of these risks uncertainties and assumptions and other factors that could affect our financial results are included in our STC filings, including our most recent report on form 10-Q, and our remarks during todays discussion should be considered to incorporate this information by reference.
Forward looking statements represent our beliefs and assumptions only as of the date such statements are made.
We undertake no obligation to update any forward looking statements made during this call to reflect events or circumstances after today or to reflect new information or the occurrence of unanticipated events, except as required by law with that I'll hand, it over to you Jeff.
Exactly and welcome to our call today everybody.
One of the core principles of our culture. The Trillium Magic is inclusive so not spirit I wanted to note that this week kicks off Black Hills Fremont here in the United States and of course at Twilio. In addition, last week was the celebration of lunar new year. So all those listening happy Black is Fremont and happy lunar new year no.
Onto the results of fourth quarter was a strong finish to a big here for Twilio, Let me quickly touch on a few highlights for the four year, we delivered more than $1.1 billion in total revenue, our first year of more than $1 billion and revenue and a milestone that we're very proud of.
We had record second grid, our largest acquisition to date, bringing a world class team and product into the Twilio family.
We powered nearly 800 billion interactions we ended the year with more than 179000 active customers ended August we hosted our largest ever signal well, we announced several new products, including conversations media screens same grid ads and more.
I spend a lot of time with customers around the world from startups in Silicon Valley Berlin, Singapore more to global 2000 companies reinventing themselves as software companies in finance healthcare hospitality retail and beyond.
It's well all of these discussions there's a common theme companies are looking for new ways to build on the breakable relationships with their customers to build the best engagement experience.
It is still day, one for most companies as they reimagine their customer engagement, which leads to a generational opportunity for Tulio to help every company adopt digital engagement strategies for their customers our portfolio of leading communications channels messaging voice video.
No and more combined with higher level application platform products like what is driving deeper more strategic relationships with new and existing customers away, we're eager to modernize their engagement strategy and even with the success. We've seen we know that this is still just beginning.
And we know this success wouldn't be possible without our developer community. They other builders the ones, who take our platform and create new solutions and lead us into new product areas. They continue to drive our growth.
What is a great example of this and enough first full year with flux of the portfolio. We're very excited about the progress we've made and the opportunity ahead, we continue to hear great feedback from customers, including one customer who signed and went live with several hundred agents in less than a month in Q4, who said.
Quote Oh prior vendor gave us Christmas presents toil gave us a working contact center.
Oh product team has done a great job delivering the features our customers are asking for at a 29 team delivered more than 70 feature enhancements to flux and complimentary products like Twilio studio.
This quarter, we're planning to introduce a highly requested feature the programmable dialed pad for outbound calling this enhancement will bring outbound dialing it scale as a native out to the box feature to flex contact center customers.
As you know 2019 was also the first year with same grid as part of Twilio and we couldn't be happier with the success and trajectory that business and customers are real they have the E mail channel available as part of their customer engagement tool kit and we're happy to have an added to our customer engagement platform.
The 27 grid team delivered a great quarter, both in terms of deals as well as overall performance and scale George will discuss some of the customer wins, but I wanted to highlight a couple of numbers from the holiday shopping season on Black Friday, we processed 4.1 billion emails.
Which we thought was a lot until we delivered another 4.2 billion emails on cyber Monday, 45% more than 2018.
This is an impressive results and speaks to the success from the entire team in scaling our infrastructure to ensure uptime and deliverability.
I'm proud of the entire Twilio team, which more than doubled in 2019 to over 2900 employees at the end of the year and in November we were named one of America's most just companies of Twentytwenty ranking in the top 100 out of US I was in the largest publicly traded companies in l.
He is including their pay ethical leadership customer treatment and more and more specifically trillium was recognized for providing a diverse and inclusive workplace protecting customer privacy and creating quality jobs. This recognition is a credit to total young everywhere for creating such.
Just strong culture, and I couldn't be more crowd.
But as always I believe this is Dave one of 12 iOS opportunity.
We started to deal with a simple idea make the complex world of communications simpler and by providing a tool set to developers we've created new software categories in voice messaging and email communications all over the world.
But as it turns out that communications platform was just the beginning.
Using our platform our customers illuminated an even larger access to for the company, it's not just communications, which needs to be broken down into <unk> and lease on the developers the world to enable their innovation no. It's the out of engagement as well.
We began the next leg of our journey in 2018 with flux, taking the idea of an application platform into the contact center and what we've seen customers build an accomplished in the last two years is astounding reaffirming that when we can help 'em, we software developers to innovate for their customers coming.
And he's when we're seeing this response in companies big and small new and old across nearly every industry and now it's clear that while the market opportunity for a cloud communications platform is huge customer engagement, even larger opportunity as we move forward as we all know customer.
It's been doesn't begin and end in the contact center. It's all of the touch points a company has with their customers from marketing and sales to service and support and so in the limits of time.
We envision enabling our customers with our platform approach across all of these software categories, becoming a wall to wall platform for customer engagement.
And it's this opportunity that makes us so excited about our future and why we are continuing to invest today to capture more of this massive market.
As I'm sure you've noticed we have an ambitious investment plan for 2020, while we could take a profit this year I think that would've been a long decision with a generational opportunity to disrupt not just communications, but also customer engagement software. The right decision is to invest for long term growth.
Market capture and that's what we intend to do.
Our priorities for 2020 reflect our goal of truly capturing this generational opportunity.
First we continue to invest in our products to become the leading customer engagement platform trusted by developers and enterprises globally second continue to scale, our systems and infrastructure to support our customers and enable our employees to do their best work and third continue to deliver incredible.
Gross.
We're excited for 2020 and setting ourselves up for the next decade of growth and customer success with that let me turn it over to George George.
Thanks, Jeff the go to market team delivered outstanding year in 2019, as our investments continue to produce great results.
That's for the full year, we more than doubled our number of seven figure deals compared to 2018, a great sign that we are becoming more strategic to our customers.
We hosted more than 20 engage in supercross events around the world and held several enterprise Hackathons onsite hackathon hosts at a customer's office, where their developers break into teams and build prototypes to solve business challenges.
Our developer relations team attended nearly 400 event and welcome more than 150, new members into the Trulia Champions program, where we recognized developers for their dedication to the Twilio platform and community.
And of course in August we hosted our biggest signal about ever it was a great here and I want to thank the entire team for delivering new spectacular results.
We continue to see tremendous momentum in the fourth quarter. So let me highlight just a few of the wins the team closed.
We signed a new deal with tape out the global digital payments company with more than 300 million customers as their SMS traffic increased pay Pal thought a new mobile messaging platform that would scale with the company's growth.
After tending to create or submit a signal pay pal selected trolio as its SMS delivery platform to engage with their customers in a more efficient and cost effective manner. This was a fantastic team effort and we're thrilled to be working with this customer.
We formed a new relationship with a fortune 50 media company that is using trulia into different parts of their business, one, replacing an internally developed solution with our programmable video and too it's a power click to call services in their proprietary customer experience platform allowed fuel Tech's agents and management to reach customers quickly.
Easily provide higher levels of customer service.
This was also our first full year with flux and we're extremely happy with the progress and momentum were seeing here or just a few of the flux deals we signed in the quarter.
Yes, I did you deal with southwest Airlines, the world's largest low cost carrier with more than 60000 employees.
What is integrating flux with their existing platform their internal IP helped us, bringing alerts screen Pops self service and reporting to their agents ultimately reducing call volume in total costs.
We expanded our relationship with Hubspot, a leading provider of marketing sales and customer service software for growing businesses. In addition to expanding its use of waste functionality built into their sales hub product. Hubspot is also using flux with parts of their global sales and sports teams to improve productivity and provide omnichannel communications with domestic and international audiences.
We also signed a great new Flexsteel to Fortune 100 company that was looking for a new way to engage with their customers using conversational commerce, but needed a solution that would provide the ability to handle interactions with millions of customers.
It was selected to become the backbone of their new conversational commerce engine with plans to ultimately roll out the solution to all of their global experts and in store employees.
A key focus for us has been expanding our international footprint, where we are strategically targeting named countries with strong developer ecosystems, coupled with large software spreads.
The international opportunity is tremendous and our early investments in these regions are paying off.
Back in the quarter, we announced the opening of our Paris office and on the heels of that announcement, we signed a greatly relationship with Loblaw car the European Carpooling leader headquartered in Paris for years Blah Blah car had been deal with multiple vendors connect with customers and wanted to consolidate already a great send grid customer they chose trulia with our extend.
It's Super network and easy to use estimates if you try to help them innovate on their customer engagement as they continue to scale.
We also extended our relationship with Woolworths, the leading Australian supermarket, and a global 2000 company.
Well worth developed will it go an application that allows communication between their fulfillment delivery drivers and customers. The app user trillium proxy until the of voice for calls between driver in customer until you SMS for account notifications longer delivery lifecycle.
Yes, I did you would ropey the first Unicorn out of Latin America that connects and network of careers to deliver anything or meals to medications to cash.
Ill already a great proxy send grid and voice customer now ropey is expanding to use trulia messaging for SMS marketing as well as our verify apiay to protect their new payment service for happy to.
This is a great example of a company building on Phileo experiencing great success and expanding to more use cases.
We're excited to continue to support Ropey and their outstanding growth.
Jeff mentioned, we're extremely happy with the performance of Trulia separate and our cross sell efforts.
We've made great strides in our integration and during the fourth quarter unified the buying process by bringing Twilios Ingrid products onto the same order form as our core products. This is an important step for streamlining our customers purchase process.
In addition to the cross sell expansions with Black card Robby. We also started working with a fortune 200 bank.
Like many financial institutions. They are undergoing significant digital transformation and turned its really I would help Howard and new customer communications hub will be the front end of communications across banking credit mortgage payments.
Selected messaging, an email to turbocharged their customer communication efforts across SMS and email with additional channels plan for the future.
My focus for 2020 remains on extending our enterprise an international reach and continuing to build out our partner ecosystem. The early investments in these areas are paying off but there's still a lot of room for us to go overall to go to market team delivered a great quarter to finish off another strong year with our investments over the last couple of years, we're well positioned for 2020 to continue to move up.
Market and build more strategic relationships.
Yes, again to the entire team and with that I'll pass it over to consumer.
Thanks, George and good afternoon, everyone 29 team is another great year for the business.
Leo continues to enhance customer engagement strategies for leading companies around the world and be the communication platform of choice for developers.
Before getting into the numbers, let me quickly touch on a couple of items.
First we published a quarterly earnings deck, which can be found on our investor Relations website.
As a reminder, starting with our Q1 2020 report, we will no longer be disclosing separate base and variable revenue categories.
This reporting change will impact our calculation of dollar based net expansion, which historically was calculated using based revenue.
In order to help with your models in this presentation. We've provided our historical expansion raids using total revenue back to Q2 2016 the quarter we IPO.
We also provided with DB any would have looked like resend grid included in all prior periods as well.
This is an important view as you consider the combined DB any rate going forward.
We also provided a slide for revenue that adjusts our Q4 results from the impact from the two onetime items in Q4 18.
As a reminder, those two items were related to stronger than expected political traffic and the ramp of a large international customer.
We intend to provide a quarterly earnings deck on our IR website going forward.
Now jumping into the quarter.
Before based revenue, including Twilio send grid grew 65% year over year to nearly 307 million.
Organic base revenue was 253 million up 36% year over year strong growth against a difficult comparison from last year.
As you've heard truly ascend grid had a great finished the year delivering nearly 54 million of revenue in the fourth quarter up more than 30% over last year.
Total Q4 revenue was 331 million.
Up 62% year over year and 36% organically.
For the full year, we delivered total revenue of 1.13 billion up 75% over last year and 47% on an organic basis.
Then grid contributed 177 million since the February Onest acquisition date, this will be the last quarter that we break us and good revenue separately.
Dollar based net expansion calculated using based revenue was 124% in Q4 for the full year dollar based and expansion was 136%.
The remained a total of six variable customer accounts in the fourth quarter consistent with prior quarters.
What's SAP represented approximately 6% of revenue in the fourth quarter, because we will no longer be breaking out base in variable going forward, we expect to provide whats EPS contribution to revenue in 2020.
We finished the year with more than 179000 active customer accounts revenue from our top 10 active customer accounts contributed 14% of total revenue in Q4 compared to 13% last quarter and 20% in Q4 2018.
Gross margins came in at 57% for Q4, consistent with the mid to high Fiftys that we've discussed in the past it was down slightly from last quarter due to some increased international usage, we saw in the quarter along with the normal puts and takes including customer product in country mix carrier fees, FX and others for 2020.
We expect gross margins to continues to be in the mid to high Fiftys.
Looking at 2020, we are expecting revenue of 1.475 billion to 1.490 billion for growth of 30% to 31%.
Driven by strength in our core products and continued high growth of newer products like E Mail and flex.
Importantly, while the Verizon ATP program went live over the weekend. Our guidance does not include any revenue benefit or margin impact from ATP fees. We are also guiding to a non-GAAP operating loss of 50 to 60 million for 2020.
Let me walk through the progression you should see throughout the year to help with your models as well as talk about the rationale behind these figures.
You can see our guidance of a loss of 20 to 25 million in Q1, and we currently expect Q2 to show a higher loss given that signal falls in May this year.
Afterwards, we expect smaller losses in Q3, and then get back to breakeven in Q4.
Now after the drivers behind these investments summer transitory in nature that we believe will benefit the business greatly in the long run and one is a bit more structural first we are opening and R&D center of excellence in India to provide a force multiplier to our R&D efforts getting this office off the ground will drive a good deal of investment in early 2020.
But we believe the long term benefits of these investments are substantial.
Second we are stepping up our investments and our systems and infrastructure to drive further efficiencies in our internal processes and position us for scale with the anticipated growth in the coming years.
We have discussed or billing system. This example, previously we've also identified opportunities to enhance the system supporting our quote to cash procure to pay and engineering processes with the objective of improving efficiencies in achieving higher optimization in these areas.
This step up in our investments here in 2020 will ensure infrastructure is ready as we continue to deliver elevated growth.
Third we are continuing to invest aggressively in our go to market team and flex in particular.
We have maintained efficient sales and marketing as a percentage of revenue and as we've said previously so long as we can continue to make those investments in an efficient fashion. We will continue to invest in this area in particular, we see significant opportunities in the enterprise internationally and in flex.
On flex specifically over the last several quarters, we scored significant wins with digitally native and enterprise customers and we continue to see tremendous interest in the marketplace.
Jeff mentioned, the programmable dial pad and there are also a number of other investments that will add significant features and functionality to our existing product.
Finally, you May recall I mentioned, we were looking at making changes to our stock based compensation philosophy on the call last quarter, we've heard investor feedback regarding SBC and dilution and to address this we have begun implementing certain structural changes around stock based compensation.
These changes will take time to flow through the numbers, but we expect a near term cost that is more than offset by reduced dilution overtime.
We're not going to go into detail on these changes today. However, we believe these changes will help us drive stock based compensation expense as a percentage of revenue down overtime as the company scales.
These investments will enable twilio to continue to deliver elevated levels of growth scale, the business and create leverage over the next several years.
Before we open the call for questions I want to dimension that we plan to hold an investor day. This year on Thursday May 20, Onest during our signal conference in San Francisco.
Stay tuned for more information from the IR team.
Close 2019, it was another strong year of growth and innovation portfolio after a little more than a year at the company I'm, even more excited be here and hopefully this company as we continue to disrupt this massive market and deliver our customers continued innovation with our customer engagement platform.
Thank you to everyone for joining operator, please open the line for questions.
Your last question. Please press star one on your telephone keypad. The first question comes from Heather filling of Goldman Sachs. Please go ahead. Your line is open.
Great. Thank you so much guides for taking my question.
I wanted to ask a little bit view you cited the ambitious plan for investments in 2020, you talked a little bit about where theyre focused with the with the R&D Center in India. For example, but also wanted to ask a little bit if you could share with us some color on how we should think about that increased investment from a direct sales perspective, and if maybe.
You could share kind of.
Direct sales growth that maybe you had or sales capacity growth you've had in 2019, and if you're actually thinking about accelerating that growth into 2020, and then just just a follow up I think George you commented about the unified buying process and getting to that between Twilio and send for Q4.
How significant is that streamlined purchase process and how important couldn't be for 2020. Thank you.
So Heather Hey, this is because amethyst couple questions in there so just to take the first one.
I wouldn't say, there's a step up per se in ourselves investment I mean, we've been investing in that area pretty significantly over the last couple of years, we found that.
That investment has had a pretty strong payback we've been efficient in terms of the way that we've spent that money I think weve maintained really strong inefficient.
Percentages in terms of sales as a percentage of overall revenue and so I think as long as we see the efficiencies that we've been seeing over the last several years are going to continue making those investments. It has stepped up a little bit from year to year over the last couple of years, but nothing really markedly.
And I think as we explained earlier in in our prepared remarks, I think what we find is is that as long as that efficiency exists as long as it delivers elevated growth, we're just going to keep making that investment.
So that's kind of the first part of the question and then let me turn it over to George to answer the second part of the question.
In terms of streamline the sales December Twilio sales motion. That's gone I think that's going very well, we had integrating systems and the the teams we had a plan of integrating.
The specialist overlay team, which we turned our sangria team into an email specialist team that has gone very well, we've actually seen the results of that some of the deals we talked about on the call and then what we've been doing over the last quarter is really bid.
To remind the infrastructure below that and into the order forms and order processing and I think that our customers are going to benefit from that as well. So I think that puts us in a very good position for 2020 to do even better.
Thank you.
Your next question just from Mehta Marshall of Morgan Stanley. Please go ahead. Your line is open.
Great. Thanks.
In terms of kind of some of the DNA improvements that you've made.
Just on kind of.
How many like when should we see the impact of that and just.
Completion of a grand to review.
Some of the billing issues last quarter, just kind of any direction as to where are those investments our focus and then maybe a second question just on flex and just progress the system integrators any insight there would be helpful. Thanks.
Yeah. So there's a couple of things in their met it let me just.
Let me hit the billing piece of it first then I'll call. It kinda talk about some of the other one so.
In billing in General I'm sure. This question is going to come up later and I think in terms of whether or not we have seen any issues relative to what we saw last quarter. The answer in short is no.
It is an area that we've obviously made a number of investments and our confidence in that process and in our people is extremely high and I think any future issues that we might anticipate in that particular area. We do not think are going to have a material impact on any of the guidance that we are providing today I would say in addition.
On to that we continue adding feature and functionality some additional controls as well to ensure that that process is robust and continued scaling with the balance of the company, there's sort of a broader point around systems process and infrastructure more broadly.
We pointed to quote to cash for example, engineering tools and systems. As another example, and then a third being around procure to pay I think these are all brought processes. Obviously, we think that they're good investments that we can make in both the processes and systems associated with those.
And we think Theres. This now is the right tend to make some of those investments and we think thats going to provide long term leveraged to the piano. The third thing you mentioned Gionee I don't think we particularly called it out per se in our prepared remarks, but just a note on it since you mentioned it is we have had some leverage in the DNA.
And over the last couple of years I think some things that we're doing along the lines of processes and systems I think the India investment not necessarily DNA related but will help overtime and then we alluded to some of that things were doing around SBC. All of those things, we think structurally will drive long term improvements in the piano.
All the flux ESI side I feel very good about the progress that we've made our goal has always been to grow the ecosystem of partners has a place where it's doesn't hold us back from a sales side of being able to make house for successful and if you look at some of the logos that we close both in the current quarter as well as previous quarter that we announced I would have a global customers will deploy.
Vince.
That speaks to increasing ESI coverage.
And I'm also very excited about.
Our.
Recent higher up our new Chief customer Officer, Brian Weinstein the comes to us out of a major global aside and that I think we'll continue to turbocharge our direction as he brings his experience and leadership to continue to accelerate our efforts to work with the community.
Great. Thank you guys.
Your next question comes from Alex Zukin RBC. Please go ahead, Sir your line is open.
Hey, guys. Thanks for taking my question. So so maybe just to all I'll try to maybe ask the.
Heather's question different way around sales rep hiring I think given the level of investments that you're making in the business and given the opportunity said should we assume that 2020 I could see the same type of rep hiring acceleration, maybe as 20 team and then on the on dollar base that retention if we.
We look at the trend line.
How should we think about that rate.
As we start to.
Kind of look at the back half of next year, obviously, there's a there's a tailwind in the first quarter, but just curious what your updated thinking is about the trajectory of that rate.
Over the course of the year.
Yes, let me take the the second part first in terms of GB any I mean, obviously, it's not something that we've historically guided too and we're not going to guide to it today for the balance of the year with that said I mean, I think one of the things that we try to do so that you guys could.
Work with appropriate numbers for your models is that we put a page into the investor deck that illustrates what DDB any would have looked like had sent grid been a part of the business since the IPO the company and so that gives you a pretty good run rate sense in terms of what some of your expectation should be around that number that we've.
Also pretty consistently said that you know as the business is growing and getting so much larger that we do anticipate that that number is going to fade a little bit over time, just given the law of large numbers, but otherwise I mean, we feel good about the number that we put up certainly for the quarter certainly for the year and have have good expectations relative to our.
Guidance into 2020 in terms of.
The sales investments maybe I can start and then if George has anything to add he can do that I wouldn't say that theres anything sort of extraordinarily out of the ordinary in terms of those sales investments I think what we tried to do is provide a bridge around there's a number of different investments, we're making all the same time in the current year that's why.
One of them. That's one of them that we found a lot of efficiency and so I think we have an opportunity to continue investing there in a in a market way and we're going to keep doing so as long as insufficient it's not.
An uptick relative to where we've been it's not an uptick relative to.
What you saw maybe from a few years ago, I think it's kind of steady state, but that in conjunction with some of the other areas as the step up invest in investment.
I think because as I said, it well honest a a view us as mostly continue to higher on a our gross sales capacity are very steady.
But as long as the efficiency as good we'll continue to do that and.
We will honestly a lot of the 22020 numbers are going to reflect hiring that we have done already in 2019, especially the back half of 2019 and so.
I think of a lot of that's already baked in so it doesn't speak to just a 2020 different it's just a lot of the 20, Tom or 2020 numbers reflect activated even happen in 2019.
Your next question comes from Nikolay Beliov of Bank of America. Please go ahead. Your line is open.
Hi, I have a couple of questions for for George George You mentioned seven figure deals were up two loftier versus the prior year I was hoping you can give us some more color and maybe anecdotes on why you guys winning those deals what are the main driver customers are choosing twilio et cetera.
My second question, there seems to be more of a streamlining of the sale process around solutions are on marketing operations customer service and mall use case based selling.
If you can talk to us little bit more detailed color you're setting up the sales organizations to do that which contract in the but im just setting SMS or voice or video now it's more use case than solutions by setting and called that might be back the sales cycle. Thanks. So much.
Yes. Thanks for the question. So in terms of the larger transactions I think that mostly it's a product of us growing our capacity as well as growing more strategic conversations I think if you came to signal this past year, our creator summits, which is our kind of executive track grew significant.
The independence right I think speak to us having larger conversations.
And we mentioned on the call our bench on the call that paid how came out of that.
That was a factor in the Paypal conversation. So I think it's really just a factor of capacity plus more strategic conversations as well as the product set evolving to have those more strategic conversations with technologies like flagstone conversations.
And I think that that's the product of our positioning around customer engagement frankly versus.
Versus kind of where we've been.
In terms of the other use case selling.
Certainly look we are costly evolving the way we talk to our customers. If you followed us in our engage roadshow and kind of the way we articulate the customer engagement message I think we're getting smarter about pitching used cases solutions, absolutely, but fundamentally our approach to sales is pretty straightforward, which is that we believe that because we pay.
Position as a customer engagement platform, we want to have.
One account team that owns the broad relation with the customer is able to sell multiple products multiple.
Multiple solutions versus having a lot of separate Salesforce is going after you know different like like on a messaging versus voice Salesforce. We have one team that really is there to work with a customer to understand our end to end customer engagement vision and then help use the till the a platform to really help bring that vision to life and will support that with a small number of specialists teams.
But the heart of our conversation with customers is a broad based multi product.
And and solution oriented conversation with.
With the customer.
Your next question is from Brent Bracelin of Piper Sandler. Please go ahead. Your line is open.
Thanks, everyone for because I mean, one for Jeff if I could cause Emma.
Just trying to go back to the the investment ambitious plans here and the question really is why now is this is.
Is this really about investing ahead for scale and scaling the business or is there something you should hearing from customers and customer pull that theyre asking you to do more so external versus internal.
Yeah, I mean, I think it's a little bit of both honestly I mean, I think in large part I mean, just to kind of answer the question broadly we see a lot of opportunity.
And I think you always want to invest behind that opportunity and the kind of implicit trade that we've always made with investors is that so long as our investments yield elevated growth that we feel like those are the right investments to make.
Now more specifically in terms of internally, we obviously lapped a billion dollars in 2029 gene, which we feel great about and just given the rate at which we are growing and the scale of the company. It sure feels like right now is the right time to invest in all the different systems and processes and infrastructure.
That go with scaling the company a certainly if we're to wait and do this several years from now that would be a lot more difficult and so this is kind of a and advanced investment on our ambitions in that respect.
Think the other dynamic is as you heard from both Jeff and George Theres, a lot of enthusiasm in the marketplace relative to our products flex is the one that we called out specifically, but the same goes.
For all of our other offerings and we have an opportunity on the back of that enthusiasm to be able to really capture market share and thats exactly what we want to do and I think if we can do that in a in a smart inefficient way. We kinda talk you through a progression that we expect in terms of the personnel for the year. We feel like now is exactly the right time to make those.
Yes.
Helpful Color and then Jeff just one quick one here conversations.
You, obviously talked about that there was quite a buzz once you release that product any color relative to adoption uptake is that trending in line with your expectations above your expectations any color there on conversations would be helpful.
Yes. Thank you Brad for the question, it's nice to be able to talk innocuous section.
We were excited to launch a comfort conversations it signal last year and the quick reminder of this is a product that is designed to enable multichannel and multi party conversations across channels like SMS MMS Whatsapp chat more and we see use cases across a wide variety of industry.
These places where you essentially one of plurality of people inside of a company being able to engage with the customers single long running conversation scenarios like in retail you might have historically talking to a customer as well as they contact center agents talking customer order delivery scenario equity you have a delivery person delivering an item that was propelled by a restaurant that is supported by contact center.
All right. These are complex interactions that are now increasingly happening over messaging type channels and so this product is there to address it.
As such this a beta products. So it's new in the market. It's only been in the market since August when we announced it at signal and so we own the early phases were getting customers.
Educated about the product, we're seeing customers adopt it and we're seeing them give us feedback and so it's doing exactly what I'd expect as a beta product which is.
Getting customers onboard getting them educated and having them show us where we should take the products. In addition to getting into GA and where it is going to continue to grow in the future. So we're very happy with the progress. So far we think this is a large untapped opportunity because a lot of these workflows that I mentioned actually brand news look close didnt exist five or 10 years ago as.
Specialty over messaging and so to be able to bring a leading product to the market that is addressing this new use cases for which there has really not been a solution in the past is really exciting we continue to look with customers and looking forward to bring that product to GA and growing Smith.
Your next question from Mark Murphy of JP Morgan. Please go ahead, Sir your line is helping.
Thank you Jim you're commenting on plan for not just contact center, but also joining marketing sales service and support those are monster markets. They have these huge applications that can.
Could you share insights on.
How you can complement what salesforce offers in those areas and just how you plan to innovate there to kind of change the game like you have a flex and then cozy am I was wondering what are your assumptions for election.
Traffic this year given it looks like there's going to be less of that activity that will happen on.
Litter and Google.
And in the past.
Oh, absolutely Mark Thanks for the question. So I'll start by answering your question about the engagement platform. What we're seeing is basically a different approaches needed by certain customers way platform approach as opposed to an app centric approach for certain customers in certain needs.
It's really benefiting them and that's what we've learned from plus what flexibility design for companies want to build and four companies, we're putting the developers on the front lines of a winning the hearts minds customers by using technology using software and importantly, using digital channels to go out and when the market and.
And be able to build what the customers wanting to build and we don't think that that opportunity is limited to just the contact center, we see opportunities across a wide body of customer touch points to really bring that.
Platform approach to enable the innovation of our customers now that said we are really focused on flights flex is a big undertaking we are in the early days of that product, we're very excited with the progress.
So as a company we are very focused on the success of flex in the short term, but we want to point out is the bigger picture here is that we do feel there's an opportunity as we listen to customers and their customers guide us to use a similar approach to tackle a wider variety of problems now I think this is a very different approach than anyone in the market I think very complimentary to existing.
Such as that are out there today.
And so I'm really not thinking about anything from the perspective of what other companies are doing I'm really just thinking about how are we listening to our customers and providing something that customers need in order to unlock their innovation with a different approach than the will to see before.
Mark this because AMA on the political traffic we are building in some expectation of revenue from political in the 22 any guidance.
But we're not breaking it out I would say that we expect some return to what we saw traffic wise back in 18, and I think depending on how it plays out during the course of the year, we may or may not for that provide updates on that but there is a little bit in there in terms of the guide.
Your next question comes from Rishi Jaluria D.A. Davidson. Please go ahead your line is open.
Hi, guys.
Thanks for taking my question.
Just following up on the previous question.
It's good to hear you guys have been having success.
I know, it's still early but could you talk about any changes you've seen in the competitive environment.
Especially.
Now I'd like program.
I think that I don't think its chips have massive change and the competitive environment I think what we've seen is.
Our our playbook for essentially being able to close a flex transaction I think has gotten more sophisticated and I think it's much more predictable now at this point we've brought on.
You know we've grown our specialist team in this area and they booked really close with our customers to build something that's repeatable I think we have a good at this point of which type of customers are the builders are the best fit for the product have the have been need and the and the the internal DNA to be a great fit for flux and so I think were more productive frankly with our sales calories.
On flex than we were lets say this time a year ago. So I feel like that is really be at us be much more.
Well to predictably and successfully.
Work with flux customers and grow that business over time, and that's why I think were very positive about the product.
Your next question from Michael turn of Wells Fargo. Please go ahead. Your line is open.
Hey, there thanks good afternoon.
Last quarter, you called out.
Newer expansion agreements I think the reference number was 52 case and I just thought that's useful in terms of classification I don't want to sort of puts you into guiding the that on a regular basis are providing that color, but I think would be useful given some of the questions here around investment spend would be just wondering if theres a thumbnail sketch you could maybe give us in terms of how you view.
Core Gieck two k. penetration today, whether it's in terms of greenfield opportunity and landing some new customers or just even where you view penetration within existing customers relative to what's possible given kind of the evolution of the platform you're describing here today.
I think that it's very clear from.
Matter, how you slice the data that we have a massive greenfield opportunity the genes UK. The vast majority of the GTK today is not spending material dollars today with us and even the ones that we have that are we have and we also have many that are very small customers one of the.
Leading a car rental players in the World. For example, you know today probably spend like.
$4, a month with us and not the customer that we're working with and we think over time could probably be spending hundreds of thousands of dollars with us and that's that's just an example, so.
There's really no shortage of opportunity and every time that we talk to a small customer or greenfield prospects. There is theres typically opportune for Twilio and I think thats one of the reasons why we are.
We're excited about this investment because we believe now that over the past few years, we've proven that we have a playbook that can successfully go into the enterprise can go to that UK and as we've hired capacity, it's proven to be productive. So that gives us confidence that we can continue extends and and brings playbook to more customers and more opportunity.
Michael will think about incorporating that metric on the Investor day, and there's a number of ones that it will probably breakout.
I'm not going stay with as our obviously today, but but we'll take that into account.
Your next question is from Derrick Wood Cowen. Please go ahead. Your line is open.
Oh, great 'cause, Jamie you guided for 44% to 45% growth in Q1, and 30% to 31% for the year, which does imply a good amount of deceleration and even the share around.
Assumptions with the progression across the year, and whether or not you're expecting any change in run rate from some of your larger customers.
Does that just as a follow up on flex.
When you guys launched a flex and Q4 of 18. It was a one dato solution just curious how much it's which hurt how to think about the major milestones in 2020 or what you guys think that could do for demand for the year. Thanks.
Yep. Thanks Derek.
So for Q1, I think the one big thing that you have to bear in mind is is that we get the benefit of an extra month San grid relative to the compare in Q1 of 19, and so that elevates the number a little bit on an inorganic basis relative to what it would look like on organic basis as for the remainder of the year I mean, we feel good about the.
And so we provided at this time and think that.
Well, we'll be able to get those numbers and feel good about our overall expectations.
Your next question comes from Patrick Walravens JMP. Please go ahead your line is open.
Oh, great. Thanks very much.
Because even when we met with you.
Back in November you were talking about.
All the projects that you would like to be able to fund and if I remember him right. There was ordered a cash which was the billings and then there was.
Customer experience, which was basically a lot of interfaces and connections and then there was you know maybe procure to pay and may be the data architecture.
So I'm just wondering are it does this plan funds all four of those areas.
Hey, Pat good to hear from Yeah, I think it Doesnt mean, I think as we called out earlier in the prepared remarks I mean.
These are these are big areas. There are cross functional they require a number of different systems and processes to work efficiently and.
Our investment areas that we're stepping up our spending in to be able to scale. The company for the future and I think as we do so we think that these investments will allow us to more efficiently deliver elevated growth scale. The business and then ultimately create leverage so I would say relative to the wish list that you alluded to.
Two.
Certainly and 90% plus of that is is included in our investment level.
Your next question comes from buff on sorry of William Blair. Please go ahead. Your line is open.
Hey, guys. Thanks for taking my question I just want as George.
Jeff maybe a little bit here.
But if you look at your your due to kick customers or just in a large enterprise and you talk about the greenfield opportunity and let's exclude flex for a second.
The use cases, he really different right, so private wealth messaging application.
The card ride sharing application the.
No.
Pizza delivery application as we can go through all of these.
But one thing that happened to the platform is the column used cases allow you to sell faster easier into that industry or the vertical I loved systems on how you guys and seeing what kinds of common use cases are peering across verticals, but allow that sort of pace.
That's why are these going as you guys should do this will benefit of doing that lie to penetrate the on top players in the same verticals.
They are more cross selling as well obviously the problem is great.
Flexing.
The core offering and even for programmable wireless obviously, just obviously common use cases, and how you guys think about using those sort of drive penetration within those specific verticals.
Amazon. Thank you. This is Jeff I'll take the question. So you know I think it's interesting. If you think about every company no big and small new and old good doesn't have the vertical every company is looking to engage with their customers across all the various touch points they have with that customer.
And then connect the dots like make it so it's not a bunch of disparate disconnected experiences, but it really feels like a customer journey that close together.
And so when we talk to customers.
Typically there is something that is the starting point some place where they are really trying to increase the customer.
Engagement that is obvious as some pain points no product or in their customer experience and that's the starting point and we start working with them and then from that starting point, we have assumption or do you have like the foot in the door in so what's the best of the customer journey and what's the next big pain points and that's part of the company that is trying to improve that customer experience. So I'll give you. An example life. This is.
It's a pretty common type flow, where customer might come to us and say well you know the first thing we want to do is really just alert or customer wins, such and such happens what my package. That's when the cars right and when the food is ready when your table is ready when you're trying to login whatever it is miseq groups, we will come in that first use case.
But then the natural next question is great what happens when people are quite a message Oh, that's a really good question and so that starts getting a conversation about how we're using messaging in for example that contact center or reply that message ought to be rounded to the delivery personal the retail store agent to rather it is that can get conversation about conversations no pun intended.
And so you can see how it naturally leads from like the obvious use cases that often like the lowest hanging fruit and side of the company to create a better.
Type of engagement and then expand it out from there and so I think you know there's like every account is a little bit different like what some their mind when they come to us what their pain point isn't what it is theyre trying to sell for but there is a common playbook in many ways of going in and saying after we solve that how do we ultimately in the focus of time.
Connect all these thoughts together to create a really compelling customer engagement model of customer journey.
In this area that you are coming to us for is just the starting point.
Yeah I think.
Yes.
Just add on to that I think look I think what Jeff said it absolutely true I think at the same time, we're always looking to streamline our cost of sales by reusing patterns that are leverageable across use cases and also across verticals. So I think you'll see over time over the next few years, you'll see us start to add some.
Vertical orientation, let's say to some of our sales efforts.
We have like some really I think very small like kind of green shoots on that front.
And then I do think that Oh, Jeff said across industry. There really are some common patterns and there's you know depending on which industry six to nine used cases that we typically promote over to over again and train our salesforce I think pretty rigorous Leon.
And I think all about makes more confident that we continue to ultimately long term scaled investment and maintained good productivity, which is what ultimately this is all helping us do.
Your next question is from David Hynes of Canaccord. Please go ahead. Your line is open.
Hey, Thanks, very much so maybe for Josh one topic that hasn't come up on the call is the opportunity with IP.
All got.
The applicant applicability for connected or balls and home security stuff, but maybe what are some of the less obvious areas, where you're seeing customers innovate.
And then big picture.
Is this opportunity just a nice to have or do you think it could be a material contributor to the business at some point.
Absolutely. Thank you David for the question, we tend to the latter part of your question first I think I have to use as a fantastic opportunity.
I think it can be an enormous business for us I kind of think of it as a the next platform that we're starting to build the tool back to talk 12 years. When we started the company we started with voice and that we added messaging and that really led us to customer engagement as the big.
Area of the company.
But we're planting seeds now for the next big platform that will expose the next great set of use cases and that has now achieved domain.
And that's what we're doing without Cleo I O two product.
Well they did your question like what are the non obvious use cases that is interesting. When you think of Aiotv people often jump to the stuffy, where the splits in your house because that's what we as consumers see but actually I think a much bigger area, both existing market opportunity isn't a lot of the industrial type applications and in the smart city type applications one.
Customer we had onstage at signaled last year is in the smart garbage space, which is one that I don't know about you like I never really thought about a lot my life, but when the customer explains the problem there solving it makes us on a sense right you've got garbage trucks that drive around.
Blindly just wanting the same route every week stopping it every garbage can and helping them are empty and the other half of them overflowing and so with their solution. They can put a smart sensor inside of a deleverage dumpster that says the still level, and then notify essentially which dumpsters need to be MTN, which ones don't and then the trucks can drive around too.
Just the dumpsters that need emptying.
And it saves fuel because we're not driving the dumpsters that don't you dumping it customers are happier because they're dumpsters run through in the need to be everybody wins and they save a lot of money in environmental impacts of rates, there's a lot of different aspects of it and that's a good example to use case that like I never would have thought out before we launch this product yet now we see in the domain of smart cities.
And industrial type use cases fleet tracking their tremendous opportunities in two and we're seeing new use cases arise because of the narrowband opportunity in fact, the smart garbage.
Customer some sale is really enabled by the fact that NB Iot she has the very.
Right weight battery drain profile, but it does which means they can put the sensor wireless we connected to the internet's, India garbage dumpster and not have to recharge at all is it will last for years on a single battery and that's a key enabler of some of these by new use cases.
Your last question comes from a tie Accutron of Oppenheimer. Please go ahead your line is helping.
Thanks, Dan.
I guess I want to focus a lot.
Our new George does the salesforce or the build out there I mean to portfolio is clearly growing quite extensively in the range of discussions we have which companies is.
Oh, it's almost like a colleague basis on a quarterly basis is expanding or help me understand.
How do you think about productivity with such a moving goalpost and how do you think about the efficiency of the Salesforce that you have how do you measure that what kind of gains you expect there.
And that there will be great I mean, I I figured out a lot people I'm just trying to push into the enterprise.
Probably a little bit longer sales cycles.
But help me understand what could one person really deliver what weve in the portfolio you have right now.
So has a good question, obviously, we're not going to go into like all the details of all our our sales metrics I just at a high level. You know are conceptual level look we look for.
How much incremental revenue and margin and a sales person bring it.
Relative to their costs I mean, it's not that complex a a calculation when you think about it that way and our goal is to we have.
Very good productivity right now and our goal is to overtime as we scale the salesforce.
Scale it as long as we see that efficiency that productivity staying high and ideally try and maintain it where it is I think it's very hard as you scale to large numbers to actually grow the productivity of your salesforce dramatically.
Wouldn't use that term, but I think if we can maintain high productivity and certainly clear our hurdle rate for investments that I think we feel good about it and we're at that point right now still so we're we're expanding.
We have completed the allotted time for questions. Thank you for participating in today's conference you may now disconnect.
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