Q4 2020 Twilio Inc Earnings Call
Good afternoon, and welcome to Twilio Q4, 2020 earnings Conference call My.
My name is Jason and I will be your operator for today's call. At this time all participants are in a listen only mode. Later, we will conduct a question and answer session. I will now turn the call over to Andrew <unk>, Vice President of Investor Relations and Treasury. Mr. Dailey, you may begin.
Thanks, Good afternoon, everyone and thank you for joining us for Twilio is fourth quarter and full year 2020 earnings conference call. Our results press release, SEC filings and a replay of today's call can be found on our IR website at investors Dot Twilio dotcom.
Joining me virtually today are Jeff Lawson <unk> co founder and CEO George Hu CLO.
And because they must ship channel our CFO.
We also have Peter Reinhart CEO of Twilio segment, joining us for Q&A.
As a reminder of some of our commentary today will be of non-GAAP terms.
Conciliations between our GAAP and non-GAAP results and guidance can be found in our earnings press release.
Additionally, some of our discussion and responses may contain forward looking statements, which are subject to risks uncertainties and assumptions.
In particular, our expected business benefits and financial impacts from the segment acquisition and our expectations around the impact of the COVID-19 pandemic on our business results of operations and financial condition and none of our customers and partners is subject to change.
Should any of these risks materialize or should our assumptions prove to be incorrect actual financial results could differ materially from our projections or those implied by 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 SEC filings, including our most recent report on form 10-K, and subsequent reports 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 the assumptions only as of the day 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.
As required by law with that I'll hand, it over to you Jeff.
Thanks Ali and thanks, everybody for joining the call today I want to begin today's call by recognizing that it's black history month here in the United States doing the work of overcoming systemic racism is the work of understanding black history, not just the surface level of history or the story of the civil <unk>.
The movement, but understanding of the deep history of oppression and races in the manifest today in less overt less intentional ways, but it's just as impactful on black lives today black.
Black history isn't something of the past it continues through today and there's an acknowledgment that we're writing black history and the American history. Today Twilio is commitment to anti racism is the commitment to write a better future. That's how I'm contextualize the black history month in 2010.
The one differently than I've ever thought of it in the past.
Now on the company earnings.
Our fourth quarter continued the strength and momentum we saw throughout the year, Let me quickly touch on a few of the highlights for the full year, we delivered nearly one $8 billion in total revenue up 55% over last year incredible growth at this scale we acquired.
The segment, combining the market leading customer data platform with a leading communications platform. We ended the year with more than 221000 active customers and more than 10 million developer accounts.
We hosted our first ever virtual signal with more than 32000 registrations.
Our 2020 results reinforced the idea that there is a massive generational opportunity in front of US we have long known that there was a huge shift to more digital experiences and the ugly company is becoming a software company and that has been fueling our growth for more than a decade.
On what 'twenty 'twenty showed us is just how true. It is the companies that embrace building that embraced software agility that empower their developers are the companies that are prepared for the unknown, whether it's the pandemic more competition in the market or anything else that is threatening to disrupt and inc.
History of your business the companies that embrace software are able to accelerate their ability to respond to the changing conditions in their market.
The pandemic accelerated change overnight health care had to accelerate the adoption of telemedicine and Commerce company has accelerated their ecommerce plans company if the hired more developers and up the digital game. During the pandemic are not going back the pandemic was the booster and now they're even better.
Or at addressing the digital needs of their customers digital is here to stay and there are more and more digital businesses in the world that Twilio is powering that's why we are so excited about the opportunity ahead.
In fact, according to IDC investments in digital transformation will mute the double by 2023 to two point to be truly getting dollars representing more than 50% of total.
The spending worldwide.
And Deloitte recently released a report stating that during the next 18 to 24 months, they expect to see leading companies embrace the bespoke for billions of trend by exploring ways to use human centered design and digital technology to create personal lines digitally.
Enriched interactions at the.
Scale.
The OS annual state of customer engagement reports launching next Wednesday February 24th evidence of this change. The study found the digital engagement was critical to survival in 2020 with 96 per cent of business leaders reporting debt not digitizing the customer engagement would have negatively impacted.
<unk> their business, including making them less competitive, causing a loss of revenue and the inability to meet customer expectations.
And as the world seeks to find a new semblance of normal businesses are not going back given the increased importance of digital engagement to company's success moving forward newly all business leaders surveyed 95 per cent expect to increase or maintain the organization's investment the customer.
<unk> after the pandemic.
This is why we've been building out our customer engagement platform that truly serves the end to end lifecycle of all customer engagement and the enterprise. When you acquired segment the market leading customer data platform to provide a unified customer view the help companies better understand customers and.
<unk> more effectively over digital channels, why because companies need to understand who their customers are what products, they're looking for what products. They bought in winter of customers are interacting with their brand across multiple touch points and our platform allows the developers of the world to build.
If you take all of those bits of data that are siloed throughout the company build the cohesive picture of the customer build the world class customer service experience and deliver the right communication over the right channel at the right time.
The endgame is to meaningfully improve every interaction every business has with every customer that's incredibly valuable to enterprises, because it allows them to create differentiated customer experiences.
Our results validate that this is what the market wants.
Of course to make all of this work we have to empower developers, we have more than 10 million developers around the world using twilio to build the future of customer engagement and we're going to continue innovating to provide them the tools they need.
All of the developer ecosystem is one of the long term competitive advantages for Twilio and we're going to continue to focus on making them successful.
Before I turn it over to George I also wanted to highlight that we launched our first ever impact report today, which you can find on our website. The report cover several topics, including our focus on helping our neighbors and communities in fact in 2020 nonprofit social enterprises and local Gov.
The minutes using Twilio helped to reach 266 million people, you'll also find information on our latest diversity and inclusion staff as well and some new ESG initiatives and disclosures.
We also launched our we pledged movement for employee giving to the world.
Powering every individual employee to pledge, 1% of their time or income to do good.
That's truly owns we volunteered more than 7800 hours and donated more than $1 million in 2020, and the Atlassian zoom Okta and pledge, 1% all signed on to join the we pledged movement.
There were a couple of recent additions the twilio I'd like to welcome.
In Q4, we've hired Jeremiah brazeau as our CTO to lead our technology strategy and roadmap.
And last month, we added Deval, Patrick former Governor of Massachusetts to our board of Directors. In addition to his public sector experience does all of the hub senior executive roles at Texaco and Coca Cola and most recently founded the double impact fund at Bain capital.
Jeremiah and Deval are just the latest additions to our leadership in the last year as we brought on several new senior leaders, who will be critical of tour success as we continue to grow and scale of the company.
And finally, you may have seen in our press release that our Chief legal officer, Karen Smith will be leaving the company after six and a half years.
Kevin has been a tremendous leader for Twilio and such an important part of our success from building out our legal team to taking us public and more.
I'm extremely grateful for her contributions to the company during her tenure cash.
<unk> is going to stay on for a while while we find our next general counsel and ensure a smooth transition in the coming months.
Thank you to all totally on for helping deliver such outstanding results and doing so much to help our customers as well as the broader community during such a difficult year.
Streams of the excited for 'twenty 'twenty, one and beyond as we take advantage of this generational opportunity with that I'll hand, it over to you George.
Thanks, Jeff.
We're excited about the great performance of the team how to queue for wrapping up an outstanding year in 2020.
As you know in addition to growing our sales capacity.
Been focused on four core areas developers enterprise presence.
International expansion and growing our partner ecosystem.
Our tremendous success in these areas in 2020, we still believe we are in the early inning, we plan to continue to invest in these four areas for 2021.
On the marketing side, we continue to focus on developers, while also engaging more and more at the executive level.
Our team hosted 285 virtual events, including signal engage everywhere Super classes, Trulia engagement center sessions, and more connecting with nearly 40000 customers and developers to help them build the future of customer engagement using the twilio platform.
Oh per relations team posted the largest superclass events ever during the signal quadruple the number of users on Twilio Quest and launched the new developer podcast and Youtube channel to drive further engagement, they're expanding developer community.
And of course, Jeff New book after developer, which by the way is the Wall Street Journal business National Best seller is of great way to engage with enterprises and get them thinking about how they can empower their developers to build solutions for the future of customer engagement.
On the go to market side, our investments in the enterprise space are paying off as we become more strategic to the world's largest companies.
Back in 2020, the number of transactions with global 2000 customers was up 76% over last year and the number of seven figure deals overall was up 93 per cent from 2019.
We signed some great enterprise deals in Q4, including one with J P. Morgan Chase the largest bank in the U S. We chose twilio to enhance their customer service offering.
We also signed the deal with one of the world's largest retailers with the surge in traffic during the holiday season their on premise E mail solution couldn't scale of that support their volumes and they knew it was time to move to the cloud.
They selected Twilio, San grid of the deliverability and scale needed to support the billions of emails they expected per cent.
We expanded our relationship with the Fortune 500, P&C insurance company that was looking for a partner to support their multi channel digital engagement journeys based.
Selected Twilio for S. M S.
Aurify email on Whatsapp, the power of several new solutions for their customers.
We also expanded our relationship with H&R block of leading tax preparation of financial services company and a fortune 1000 company.
In preparation for the upcoming tax season, H&R block wanted to provide better virtual tax preparation experiences while leveraging a single platform.
The added Twilio video for all of my tax prep appointment and are also using the voice SMS and chat to provide a unified customer experience.
We are extremely excited about the addition of segment the Twilio.
And while it is still early we are seeing great traction as we signed the deal with camping World America's leading recreational vehicle on outdoor retailer at a fortune 1000 company.
Simon will enable camping world to quickly and easily understand who their most loyal customers are across the mi.
A lot of personalized reward the experience across all of camping world the physical touch points.
Internationally, we continue to invest to expand our presence in key markets and we're seeing great returns from those investments.
We entered into a new relationship with the GTK insurance provider. They were looking to accelerate their efforts to focus on the digital person engagement strategy in selected Twilio to build multiple solutions, including Whatsapp within flex for agent sales communication video solutions for sales agents to talk to the VIP clients and of video solutions for telemedicine appointment.
Our partner ecosystem plays a critical role in expanding our reach around the world and in different industries. The 2020 consulting partners influenced three times as much revenue of 2019, where the.
All of the 50% of our top flex deals and how the Forex increase of influence of GTK customers.
And of course, we welcomed the more digital as our first Premier Global systems integrator of already seen great results from that partnership of the closed several joint deal together in the fourth quarter.
Again I'm extremely pleased with the performance. This year, we've made great progress, but we are just getting started in each of our focus areas and that's what makes the opportunity. So exciting youre going to continue to invest in these areas going forward to address the huge opportunity ahead of us I couldnt be more thrilled for how we are positioned for 'twenty 'twenty, one and beyond with that.
I'll pass it over the course zama.
Thanks, George and good afternoon, everyone on.
I'll start by echoing, Jeff and George the sentiment.
I couldn't be prouder of Twilio was execution in 2020.
We saw a years' worth of digital acceleration during an unprecedented time.
And as we enter 2021, theres plenty of opportunity and plenty of work to be done to continue to grow and scale our business.
We have the right leadership and the right products in place to ensure we're successful to take advantage of this enormous opportunity as we continue building the leading customer engagement platform.
As I've mentioned on previous calls we're also very focused on scaling our systems and processes, which will ultimately lead to greater leverage in the future.
Delving in a bit further we're investing to create an enterprise data architecture internally, including our ERP business intelligence quote to cash as well as continuing to improve other core processes that allow us to scale the company.
Additionally, we continue to invest in people, both geographically and through the lens of dei further diversifying our employee base.
And as George mentioned the early returns from the segment acquisition are great.
The segment is running independently today as we continue our integration planning we are working on some integration on the G&A side as well as some exciting organically evolving innovation synergies on the product side.
As the executive sponsor for the integration work on heavily involved in the process and the integration is off to a terrific start.
The cultures and values are incredibly well aligned which we can sense from a distance but are seeing confirmed on a daily basis now.
We're also starting to see specific opportunities for joint products, which we will talk about in future quarters.
I continue to be excited and energized about the tremendous opportunity ahead for twilio.
Now onto the numbers.
Total revenue for Q4 grew 65% year over year to $548 million, including $23 million from segment, which closed on November two.
Dollar based net expansion rate was 139% as we continued to see broad based strength across the business.
Remember the segment does not have an impact on D. B E.
As expected political traffic had a strong quarter as a result of the election contributing $23 million to revenue ex.
Excluding segment and political traffic in Q4 2020 revenue grew 52%.
For the full year, we delivered $1 76 billion in revenue up 55% year over year and DBA of need for the full year was 137%.
Revenue from our top 10 active customer accounts represented 13% of revenue in Q4 compared to 14% both last quarter and Q4 of last year.
International revenue was 27% of total revenue in Q4 compared to 27% last quarter and 29% in Q4 2019.
Whatsapp contributed approximately 5% of revenue in Q4 down from 6% last quarter.
As a reminder, going forward, we will no longer break out whatsapp is the percentage of revenue.
We continue to have a great relationship with Whatsapp, However, as our business has scaled coupled with the strong revenue diversification.
Disclosing the contribution from the single customer is less meaningful.
Verizon the ADP fees contributed approximately $14 million per revenue.
As a reminder, this fee is the direct pass through to customers and does not impact gross profit dollars.
As we come up to the anniversary of the implementation of the Verizon fees, we will no longer be breaking out this metric.
However, we do believe another carrier will implement fees in the coming months and if that happens we will provide further information on an upcoming call.
Fourth quarter non-GAAP gross margin was approximately 56% and was negatively impacted by 150 basis points from eight P fees.
Twilio has gross margin ex segment was approximately flat quarter over quarter aided by political traffic in the United States.
As we've discussed recently organic gross margin continued to mix down as the growth of our messaging product has re accelerated a trend that continued in Q4 and a trade off we'll gladly accept.
Non-GAAP operating profit came in at approximately $13 million stronger than originally forecasted driven by higher than forecasted revenue.
Now moving onto guidance.
Let me quickly highlight a few items as it relates to different aspects of guidance.
First I'd like to remind everyone, we will only be providing quarterly guidance going forward.
Second this guidance does not include any additional ADP fees that may go into effect during the quarter.
And finally, we built this guidance off of our fourth quarter results, excluding the political traffic contribution.
So for Q1, we expect total revenue of $526 million to $536 million Inc.
<unk> segment for year over year growth of 44% to 47%.
And we expect our first quarter operating loss in the range of $15 million to $20 million.
With regards to our operating loss guidance for the first quarter as mentioned on previous calls some of the investments we planned on making last year did not materialize as we had originally forecast due to COVID-19.
We still intend to make these investments in 2021, primarily centered on people and systems.
To close we delivered very strong results in 2020, and we're excited about 2021 and the years beyond.
We are making the right investments today to scale the company and take advantage of a generational opportunity.
With that I wish everyone, well and thank you for joining operator, please open the line for questions.
Certainly at this time as a reminder, in order to ask a question. Please press Star then the number one on your telephone keypad. Once again, the the star of the number one on your telephone keypad. If you would like to ask a question to remove your question press the pound key.
We will now pause for just a moment to compile the Q&A roster.
Your first question comes from the line of Derrick Wood from Cowen and company. Your line is open.
Great. Thanks, and congratulations to everyone with the fantastic finish to the year and Jeff Congratulations on the the released of your New book.
But I wanted to ask a question along those lines in the book you focus a lot on on the rise of the importance of the developer and we've been hearing about developers getting more budget authority in today's digital era. So it'd be great to hear what youre seeing in terms of of changes in buying behavior, particularly when it comes to developer involved.
And how you see these trends, helping twilio gained more wallet share on the in the years ahead.
Thank you Derrick Yeah, I think one of the things the Twilio really bad upon when we founded the company was the developers would be.
I'm, even more influential as companies had to turn to digital had to become more agile and I didnt really build for this digital era, because developers of the ones, who know the tool chain and they know how to get things done and when the barriers come down I E. Instead of having to go spend tens of millions of dollars inside of the contract.
Up front for some giants multi year project, but rather get started with little risk spend a dollar or two building a prototype debt the outcome the benefits of being able to move quickly in that way of building of moving from a prototype of beta two of production rollout with ease of little treatment along the way that that would just take over.
And I think of that we were very right about that in the early days of Twilio along with other companies on this API economy, and that's why as the pace of business has accelerated and the importance of digital has grown to nearly every kind of business and every kind of industry, while developers able to pick up the tools on the new software supply chain. The twilio was the pipe.
Yeah.
The big logos and you also hear about the the digital native companies that adopt Twilio and we know of over 220000 companies look the vast majority of those we were brought in by a developer that's how the relationship started.
And and so they bring us in the build out prototypes I see that early success and then we follow in with with our sales team and we expand the relationship over time to make them successful on the first use case in the second and the third and that's really the power of the platform business model the combined.
A very efficient go to market engine, we spend less on on sales and marketing than a lot of other companies, especially anyone growing at our rate and scale, but then that allows us to not only get in the door, but also expand our presence in that account because we've got those technical champions and I think that's the trend. That's just going to continue as you look at Covid.
And you look at how the importance of building and staying agile in responding to changing conditions, whether it's something like a pandemic or just the normal competitive concerns that are out there that developers get even more prominent.
As time goes on.
Great. Thanks for that kind of if I could squeeze one for one on for it because they know the the <unk>.
Gross margin definitely trended better than we've seen sequentially in the last few quarters I know you've called out segment.
It helps the call out in terms of mixture of changes sequentially and how to think about the directional thoughts on gross margins for Q1.
No not really Derrick I mean, the way that we characterize it was that we've had kind of a flat quarter over quarter gross margin dynamic that was aided by political piece as we said in our prepared remarks. We've also talked about as most recently as the Investor day that we've had a re accelerating messaging.
Business as well and so that's created some downward pressure on gross margins.
But we like that trade off obviously, just given the <unk> that we've developed and messaging of the gross profit that's kicking off otherwise I mean, we kind of expect gross margins to sort of be in the mid to high Fifty's as we've said before and I think you should expect that to continue putting aside like ADP dynamics obviously.
Great. Thanks, again, congrats guys.
Your next question comes from the line of Mark Murphy from JP Morgan Your line is open.
Yes, thank you very much and congrats to all of the truly on.
Jeff on it.
Adjusted in the trend Youre seeing in Q or bidirectional messaging can you help us understand or just estimate what portion of messages youre processing today that are two a M.
Maybe what types of discussions are emerging to use it in the future because of that we're kind of sensing is starting to creep into some of our own experiences sporadically once in a while from the auto mechanic or after <unk>.
After I buy an appliance of just wondering if there's any tangible uplift there.
Yeah. Thank you very much Mark I think youre right. It is still very much at its infancy, though.
So a relatively small part of our traffic is two way, but it's been growing in recent years. So if you think about it.
Five maybe eight years ago. It was sort of the novel when the company could text you the status update of a flight or the packaged shipped or whatever and we saw a lot of customers building. Those types of use cases on top of Twilio. When you got that I was like Oh that was delightful but of course, if you applied to it usually the apply went nowhere.
And now Youre starting to get the next wave of innovation of messaging, which is actually certain times you can actually apply to it any of the robot or of human beings will actually the listening and be able to help you with that engagement.
And I'd say this is still very much emerging but it's of one of these surprising and delightful experiences you have with the brand that does the I remember at signal.
In 2019, I talked about some of these companies some of these experiences when you need the service appointment of Tesla and you can test with the service advisers to coordinate that appointment or with.
One of the one of the earlier actually use cases here of Morgan Stanley who is using twilio to enable their wealth advisers detached two way with their clients and a number of other such use cases, and so we continue to see more growth in this area because it is such a great experience and you think about how much companies spend to acquire of customer.
And to get their phone number and earn the right to communicate with them only the blast the message that the consumer can't reply to apply.
Apply its like cricket and how bad of an experience that is and that's why we've invested in products like Twilio conversations that are enabled those two way multi channel communications and flex for the contact center that enable those sophisticated messaging based conversations as a messaging native solution or even twilio.
Autopilot that brings the intelligence or the.
AI conversational engine. These are all designed to help companies to adopt and build two way messaging experiences that augment and improve the oftentimes. The first use case, which is that outbound notification.
Excellent. Thank you very much.
Your next question comes from the line of all of it will power from Baird. Your line is open.
Oh, great. Thanks for taking the question, Yes, I'd love to maybe start on segment and I'm just trying to try to get any color. We can on the early progress you're seeing there what the early use cases on a combined basis.
It looked like and I was kind of intrigued with the the comment around the.
The contract with camping world because it seems like you know one of the perfect examples of the opportunity to use that customer data.
To engage with those customers. So I'm just trying understand what does that cross sell look like to take it to the next engagement level.
Hey, Peter here, so if I kind of is still operating primarily independently just keep in mind the segments only been part of the Twilio for the last two months of the year. So it's still very early on.
Continuing to execute very well that had a strong finish to 2020.
In terms of the camping World specifically currently camping World has three brands camping world, Good Sam and Gander outdoors.
They always have disparate websites in the pilot customer data and so what segment is going to do is allow all of that customer data to be collected from the three digital properties in a consistent way and allow for camping world to drive new insights on all of their customers and enable increased personalization across web E mail and mobile experiences. So as we progress on the integration of that can provide more of.
On the sort of the long term.
On.
The potential to address kind of the generational opportunity ahead of us and continuing to work together to build the leading customer engagement platform.
Okay, Great I guess, if I can fit in one more quick one maybe for <unk> just looking at the strong Q4 upside and putting aside segment of the political traffic anything else you'd call out in terms of the significant upside driver of it sounds like the message there, but the between video flax and you know in particular.
The surprises.
Yes.
It was pretty broad based strength across the business I would say in Q4, the messaging products certainly did see a lot of acceleration that continued certainly in Q4. So that was the driver of the of upside and then I think just generally I mean, we had really strong net expansion as you heard in the numbers and great net new customer growth.
And I think what we're finding is is that as customers are looking for digital transformation, they're increasingly coming of Twilio. So just a great around the board performance for us.
Okay. Thank you.
Thanks, Paul.
Your next question comes from the line of fried of <unk> from Macquarie. Your line is open.
Alright. Thank you so much for taking my question and congratulations on such a strong quarter.
So I wanted to ask of the perspective of the developed this year because of go apps using twilio before and frankly the platform just makes sense for developers and the alignment of the segment also seems particularly natural considering how easy it is for developers to roll that out too. So along these lines I would like to ask what do you think could be the benefits in your approach to offering the customer experience.
<unk> platform to the platform up approach in comparison with some of the other software vendors out there we're approaching customer experience from the application down per cent per <unk>.
Got it.
Well, thank you Brad.
I think youre right right, we believe in the power of developers to influence of the technology decisions the companies pick the vendors they decided to use M.
And actually the strategies of the Companys on actually how they go about solving really hard problems for their customers.
And I don't think that's limited to just say SMS voice or Peter's World.
Customer data I think that the infrastructure to build great digital products and great digital experiences spans many categories inside of you as we think about our platform and on customer engagement I think that it is a rich area of opportunity for us to invest in order to unlock developer.
Developer influence and developers the ability to build the future of these companies in the same way the we have with communications and customer data, respectively, which is easy to adopt API is usage based pricing models published documentation and things like that that enable developers to come in rapidly build solutions too.
Two the things the Companys, new built and then take those prototypes of all the way through the production because that's the agile nature of business today, and I don't and I think that there is a lot of opportunity to find more and more areas that we see customers wanting this approach and applying our business model to more and more of the realm of customer engagement.
That's very helpful. Thank you.
Your next question comes from the line all of the meta Marshall from Morgan Stanley. Your line is open.
Great. Thanks.
Maybe the as the first question just as you expand your tsi and ISP networking and even your kind of enterprise sales force how is that informing the roadmap.
Or just the different pinpoint the ear of customers might be experiencing and then maybe as the second question just on.
And then the net expansion rate kind of picking back up or do you think that that speaks to the cohort is kind of accelerating in the ramp or is it too early to kind of say that overall customers are ramping into their use cases quicker. Thanks.
Yeah. This is George certainly on the the GSI in the IC front.
Glad you asked the question, we see a mass of opportunity and as I mentioned, we're still really in the early innings. I think that you know is largely aligns their requirements aligned to what the broader customers want which is obviously to support the digital transformation of their customers.
That's fully in line with what we see is this massive opportunity and there are some specific things that we are doing to make the product easier to deploy to bill and things like that where some of our RSV and Si partners and those are things that we're working on and just normal course and speed, but the big picture is that it's largely I think aligned with what our.
The broader customer base of once in terms of the the net expansion.
The net expansion side.
No I think that certainly a bit of that is because you haven't talked about seasonal but broadly I think we just have a lot of strength of our business as we've talked a lot about the digital acceleration.
Think of that we're seeing that.
That play out.
Wouldn't say that we're seeing a noticeable shift in individual customer deployment times I, just think that we're seeing the company.
The company is really realizing that they need to move to these new digital channels, new modes of digital engagement and that is supporting the broad near term results and more importantly, the long term opportunity that we're so excited about.
Great Thanks and congrats.
Your next question comes from the line of Michael turn from Wells Fargo Securities. Your line is open.
Hey, there thanks good afternoon.
On the Q1 guide for top line, you mentioned that builds on Q4 ex political looks like up just a bit sequentially from there and anything at all you can add around the segment contribution on what's the assumed I know you'll have an extra month, but wondering if there's anything from a seasonal or accounting related perspective for us to be aware of as we look at the implied run rate you've provided.
Start to extrapolate from there.
Hey, Michael it was because of him.
Not per Se I mean, we're obviously guiding 526 to $5 36 in revenue in the quarter that does include the contribution from segment, we're not breaking out the segment contribution at this time, but we will of course provide those results on the Q1 call, but theres nothing idiosyncratic to call out to answer your question directly okay.
And then on on Flex obviously, the contact center market seems to have reached the bigger tipping point towards cloud you called out strong traction with flex on the press release, but anything you can add.
Adding into the upcoming year around the demand the demand environment are there certain use cases or industry. As you are finding success with success with that you'd like to highlight here for us.
This is George look I think that you hit the nail on the head there is a massive shifts going on the contact center market towards cloud I think that's the story here.
And we are book.
The beneficiaries of that and we believe also helping to propel that forward with this fantastic product that we have the architecture. We have it's a real it's a really resident story with companies that are looking to move some of the cloud and don't want to use the.
The the legacy technologies and also on the new approach of much more flexible approach of much more.
On a much more shared risk approach and an approach that allows them to really deliver exactly what they need and not not more and not have to buy more than that so I think that's the that's the ultimate story here in terms of specific areas of strength.
We continue I think to work really well in that kind of mid enterprise sized contact center of that several thousand seat space.
Seems to be our sweet spot and you know we have strength and we mentioned insurance a few times in other industries as well so much of that.
But those are all I think honestly smaller trends in the context of just the bigger story.
Hang on.
Impressive close to the year, yet again nice work on thanks.
Your next question comes from the line of Matt Stotler from William Blair. Your line is open.
Hey, guys. Thanks for taking my questions.
I guess to start off maybe just touching on the Deloitte partnership obviously very very important as the first of kind of Premier GSI.
Last quarter, you talked about the rollout of the partnership being pretty early on my house customer share and consultants et cetera. It sounds like you started pulling some big deal. So are we kind of hitting on all cylinders here any other kind of color on early feedback.
You kind of mentioned that the the partnership last corner isn't necessarily exclusives, and we'd love to get some commentary around how twilio is being positioned relative to the other solutions on the delayed portfolio there.
Yes, great question.
I would say of the overall, we're on track with the way things are healthy strong going according to plan.
I don't think youre going to have a radical change in 90 days, but we talked about as you mentioned lighthouse customers. We did get some of several of those wins. So I think that if you talk to them. They would be excited about the partnership we're excited about the partnership.
And I think that things are going very very well and I think we are on track this year to hopefully on other.
FY names to our portfolio as well so I think everything is as healthy and going well and we're certainly seeing a lot of energy from part of ecosystem around flex on all of our products.
Great. That's helpful. And then maybe just one for cosma.
The middle of last year, you talked about the investments getting pause or pushed into 2021.
The hiring and infrastructure building in places like India. Since then some of those investments have been able to move forward like the opening of the <unk>.
Center of excellence in any of specifically how are you thinking about any remaining pent up investments if you will and how these kind of layer back into the model as we look forward to 2021.
Yes, I mean as I mentioned.
We guided to an operating loss in Q1, and we want to continue investing in several areas.
The enterprise is one international's another partner ecosystems systems processes, so kind of the same areas that we talked about last year that we hope to invest in in a more pronounced fashion all of that got delayed to some degree due to Covid. Obviously, you've also got segment, which came in at a loss position. So I think all of that is going to control.
Two our operating losses of little bit throughout the year, we're not providing the guidance for the year, but you can get a sense of it from.
What we're guiding to in Q1 and again the investments on anything out of the ordinary more just a continuation of the stuff that we wanted to work on last year.
Understood. Thank you very much.
Thanks Pat.
Your next question comes from the line of Parker Lane from Stifel. Your line is open.
Hi, Thanks for taking my question one of the dive in on the video opportunity for a moment. If you think about the explosive demand of that category and just how many different options that are out there for customers of what are you hearing in real time about your own product, what's resonating from a feature standpoint, and maybe your approach to video the top distancing you from some of the other offerings out there on the market.
Absolutely. Thank you parts of it and we're really excited about the video opportunity on I think this is an area where COVID-19 really invigorated. The number of use cases on the need for new types of video solutions and what we're seeing is a lot of new use cases that have been accelerated because of the events of the past year. One of them is when we've talked to.
On the past, which is telehealth and telemedicine.
And similar to all of our new counties of giving customers the ability to embed these experiences directly in the.
On the other software and create these experiences that are differentiated from just kind of a standalone.
Video platform like we probably will use every day in our in our meetings allows them to create these amazing new experiences and so on telemedicine is a great example, like last year, we announced epic the.
The company.
Embedding video directly into the EMR medical system. The doctors use every day, so that the charts on the and the the data on the patient information is all there of inside that one solution.
Solution, including things like scheduling, we're also seeing strength in areas like Procter Inc. Mike administering tests remotely. So people don't have to go into of physical storefront to take of task. That's an interesting area and we talked about prometric in a prior call on others and you know of.
The other one we talked about it as H&R block.
Doing tax prep and getting help with something like that and some of the convenience of your computer while not being limited to like I can only call some on or I can only chat with some of them actually on the face to face video, calling this is another interesting area of the health and the.
In terms of customer care, and really creating a high touch experience for customers and so these are the areas, where we're seeing a lot of investments and if you think about these use cases right. They require a lot of high availability they require scale. They require security they require compliance with things like yeah, if youre dealing with health care or tax information.
Want to know that these are secure that these are compliance that's on the.
The seas of the utmost importance of these use cases and these are areas, where we see customers really turning the twilio and implementing new solutions.
Got it that's really helpful. And then I know, it's early and remains of beta, but I'd love to hear of just the opportunity. You think there is for twilio of frontline of giving the new hybrid environment that we're seeing a lot of companies discussed theyre going to implement for their workforces going forward.
Yeah, absolutely. Thanks for the question, we're really excited about frontline obviously as you said, it's a new product for us. So it's still in the early stages of the adoption life cycle and as a reminder, when we of API products customers choose to adopt the implemented it bring it out rolling out to the customers and so it does take some time for.
For the customer wants to happen, but that said we are really pleased with the early start that frontline of seeing in the market and I think that there is certainly a change in how the work force, especially the frontline workers, who are actually using digital technologies to engage with their customers. We saw at signal. This past year, we have John Donahoe from Nike you talk about how their retail.
Sales associates people.
Who used to only work in the store and greet you. When you walked in the door are now able to help their customers from.
The E commerce customers from wherever the customers are sitting with the computer of their mobile phone and wherever the.
Athletes on the athletes what they call their salespeople and so they can be working from home and serving customers on working on the back of the store and so I think this trend whether it's delivery drivers whether it is retail sales people whether it is.
The knowledge desk workers working from a variety of places using omni channel communications.
To actually do two way communications build relationships and where the company wants to track those communications I'm on a record of it if they wanted to make sure it's compliant.
And in doing it all in a way where they can appeal to the history of that customer that's the opportunity that we're seeing with frontline and its like you said at the very early days of that product, but we're very happy with the the.
Reception, we've gotten so far from it's really customers of the adoption of rollout and so we're excited for what that's going to go.
Thanks, again and congrats on the quarter.
Your next question comes from the line of Rich Valera of affirmative you'd ever and company. Your line is open.
Thank you for taking the question.
A question on the portion of your business that was adversely impacted by Covid. I think you included kind of rideshare hospitality and travel on can you remind us kind of what percentage of the business that was coming into COVID-19 and where that cohort is today relative to pre COVID-19 levels.
Yes. This is because then I'll take the question, we hadn't broken out of that percentage of previously it's relatively small I think there was some investor concern around that back in Q1 and I think the results showed back then despite those industries being down the results were still pretty strong all of that said.
I'd say that we are seeing some modest rebound in.
And those industries travel hospitality in particular, and then ride sharing is still fairly well below.
Free COVID-19.
Less than 10 per cent is actually of what we said previously.
Got it and then just a quick follow up on.
One of them about Sip trunking, there's been a lot of talk about providing voice into the teams environment by some of the new cash vendors and I know you guys have of Sip trunking product that can also do that.
Just wanted to get your thoughts on the opportunity for Sip trunking broadly and maybe Microsoft teams voice more specifically for you guys.
Yeah.
Yes. This is Jeff I'll take the question Sip Trunking is an exciting product category for us where we've got a very flexible product works in many countries around the world view of one interface and also scales elastically. Unlike of lot of solutions, we have to pre buy of fixed amount of capacity, our elastic Sip trunking product, that's what we call it.
All of that for a reason and that it can scale up and down based on customers' needs and don't plan on that works really well in cloud environments right as opposed to like a fixed.
The location, where there's only a certain number of desks, let's say on the cloud environment, you may need that force capacity burst up and down and that's why we've seen a lot of traction with our Sip trunking products, especially with ice we use of our building cloud based software products also with enterprises, who need the power in a very flexible way there their workforce, whether it's on work from home inbound.
They need to be not that stuff of whether its offices, but they need a lot of flexibility.
And the elasticity to those appointments, that's where we see customers adopting sip trunking and so its the trucking.
It really nice business for us and particularly because it gives us also a nice I'll put on the door for customers, who aren't yet in the cloud to sell them something that they do already consumed for their on Prem installations, and then can often lead to them becoming interested in more players products. For example, maybe it leads to a contact center of conversation down the line.
And so that's why we think about the the opportunity and because of the Sip trunking is based on the Sip standards customers.
Customers can plug our Sip trunking product into a wide variety of deployments whether it is the cloud deployments, whether it is something on Prem. The Sip standards mean that we can interact with a wide variety of of hardware software and cloud based solutions that customers are buying.
Great. Thank you for that and congrats on the great results.
Your next question comes from the line of Ryan Koontz from Rosenblatt Securities. Your line is open.
Alright, Thanks for the question what if it could spotlight your international go to market efforts for my kind of limited perspective, I think you've you're hiring local feet on the ground are behind the screen with local contacts.
Targeting.
The developers that are in country.
Or are you using more of like of channel approach, where these are these are channel partners that have developers on staff to go after local companies or some of the bigger Isps I Wonder if you could help us kind of understand a little bit. Thank you.
Okay.
Sure.
I think that the.
The point on developers of spot on everything we do of Twilio starts with developers. It is really the source of our efficient go to market. It's the source of our.
Entry point into customers and so when we think about going into any market, whether it's domestic or international we start with developers and so our developer evangelism team is the global team we have events all around the world whether there are some of the engagements this past year being virtual of course, but if you. If you follow our developer of Angelus Youll see that I'm not only physic.
Okay.
These geographies, but also in all of the digital channels that are relevant for developers all around the world and we certainly see our developers active and producing content and trying to reach developers.
In multiple places in languages, and I think honestly, we can do even a much better job of that so I think there's a there's a huge greenfield opportunity for us to do even more of a developers out there behind that those efforts, we followed up with.
Our account teams that work with our strategic customers as well as emerging customers in these markets.
Hired some fantastic leadership, both prior to and as well as within 'twenty.
<unk> 20, and Thats, helping to grow our major theaters, whether that'd be EMEA or Asia Pacific or of Latin America.
We just the immense opportunity in all of them and so that is the playbook for now and then when you add in the partners, which is I would say, even more nascent probably internationally, but still a strategy that we're investing in the following up on them.
Think of that that is a net is a winning formula and certainly the of course doesn't leave room in the future for per channel as well, but that's our starting point.
Great really helpful. George Thank you and is there of different competitive environment. In these different regions you go into or is it fairly homogenous.
Well I think the certainly every market is a little bit different frankly, and the dynamics of a little bit different but the thing thats consistent.
Is the need for digital transformation the.
The energy and focus on the developer and that plays well in all markets and so that's what where I think the point of the consistency for us.
Cool Thanks, a lot guys congrats on the quarter.
Your next question comes from the line of Alex Kurtz from Keybanc capital markets. Your line is open.
Yeah. Thanks for taking the question.
If we were to look at your international business and the opportunity there to be a multiyear growth driver what's the the biggest one or two levers that you can pull whether it's investments this year for next year or maybe theres something happening right now with your developer ecosystem that could really accelerate it because obviously it is the go to market model that can reach.
Every week every country every region, so loved it sort of you frame that out.
Yeah, absolutely. Thank you for the question Alex So I think there's a lot of levers that we can pull and we have been pulling you know I think number one is the go to market investments that the George and team have been making to grow our presence abroad, including hiring great leaders for the theaters, which we have and so very proud of the progress we've been making on the go to market front.
The second thing I would say is product and continuing to grow our product presence in all of these places obviously, we serve customers all around the world who need to talk to their customers all around the world. So we are of very naturally global product just out of the gate, but then continuing to invest in those products to make them even better for the local audience is something that we've continued to do.
For many years.
Including things like adopting other channels like our investment in Whatsapp as a channel that enables customers to communicate with their end users over whatsapp instead of say SMS that's of great a marker of global market as well and we're very pleased with the progress we've been making with whatsapp at the channel as a lever to grow our international presence.
Thank you.
Your next question comes from the line of Patrick <unk> from JMP Securities. Your line is open.
Oh, great. Thank you.
And Jeff Let me add my congratulations to Karen Smith.
Was my boss when I start out of the lawyer on was the most confident organized boss ive ever had but here's my question for you.
Most companies slowed down as they get bigger.
But that really doesn't seem to be the case with twilio like if you just look at your dollar based net expansion rate.
So what's your secret how are you maintaining that level of energy and drive.
As the company keeps getting bigger.
Well. Thank you for the question sorry, I missed that we say Karin was your first of all of US. She was yeah. It Cooley godward. She was she was my boss of plenty of that.
No way that is hilarious.
That's all areas of anecdote.
So your question about maintaining the momentum at scale well I mean, I think first of all thank you for the question and monitoring the flatter, but like it's really about the team that we're building and it's not the market. We're serving so the team that we're building obviously, having great leaders throughout the company and organizing ourselves into the small teams and the small teams.
<unk> itself like a startup that's pursuing an opportunity to serve our customers and I think thats small teams of structure enables us to innovate and to continue to drive new products for our customers and to truly keep our ear to the ground and to keep our teams close to customers.
And the second thing I would say, it's great to operate in a very large market.
Because in a large market theres, so many opportunities to serve customers and some of the directions. You can take and that's closely related to our platform business model, which is on the platform business model. We provide building blocks that customers can use to build the wide variety of things in their customer engagement journey and then based on the activity and what we hear of customers coming to us on what the building they often.
So us on solve business problems that they need solved because of the very nature of the fact that they are building on the rate cuts and so that provides us tremendous visibility into the big unsolved problems that our customers need solved, which then drive our roadmap further you've got things like frontline M flex and the number of the other products that we built in recent years and so all in all I think those things all come together to be.
Build what we call this generational opportunity and it's like.
Like that those things come together of the platform business model the team the structure and the ability for us to innovate and get those products out to customers. It's like you know if you've got a quiet daily you want the Gallup. So that's what we're doing.
Great. Thank you.
Your final question on this afternoon comes from the line of Utah, The Kid Rock from Oppenheimer. Your line is open.
Thanks, maybe a couple.
Couple of questions George wants at the digging a little bit about the sales capacity clearly you've expanded the quite substantially last year maybe.
Maybe you could talk of but two things first of all of how did your productivity of the ramp is and how consistent is it across the higher base and then second from a customer standpoint, when you focus on the <unk> okay.
How is the starting point with them changing meaning how many of them are still starting with one product versus thinking about you are right from the bad is the platform and thinking about you as a multiple use case right right as the starting point.
<unk>.
Great questions on the on the <unk>.
First one you know.
Just think of it really speaks to the size of our opportunity and the size of the market movement that we've seen very very strong productivity, even as we have.
<unk> in our sales capacity and certainly we've made the the normal or maybe even the outsized investments in things like sales enablement and all of those kind of things that you do as you try to scale sales force, but I largely attributed to.
A great team and also it'd be just a fantastic market that we're playing in so I couldnt be more thrilled with how our sales team is performing.
It's a real fantastic.
The toxic result.
In terms of the GTK adoption I would say that we're making more progress of the <unk> seen in the numbers, we're still starting with a lot of them through the developer.
I think that it's unlikely we're going to abandon that honestly I mean that is just the heart of what we do and so a lot of times developers come in and they want to start with one product. They want start with one use case and honestly, we don't we don't see of negative and that we think that that is frankly of our competitive advantage and it leaves just a huge untapped opportunity for us going forward.
Are there more enterprises that are we're meeting with and saying Hey, we want to kind of talk to you at a more strategic level of day. One absolutely you know I've had multiple of those conversations recently, but I I don't want to state that as like the new the new go to market core motion for us because I think the develop promotion of so fruitful and so universal as some of the.
Other.
People on the call of mentioned.
Got it makes sense, maybe a follow up for you on the hiring side.
<unk>.
You seem to be chasing your tail here on youre, not able to catch up on the needless to say I mean, what's the business growing so fast I understand but I guess the question is.
Now what is it that needs to be done internally to remove whatever bottleneck exist to finally catching up we feel plans in.
What is the risk debt youre, not being able to catch up with your plans at some point catches up with your growth.
<unk> growth trajectory.
Yes, I don't think there is an internal issue and I don't think there's actually a lot that we have to do internally.
Necessarily solve it I mean, obviously, we had to contend with the global pandemic last year right. So that was hard and just in terms of navigating the the dynamics around hiring and stuff like that so I think we'll catch it up more or less through the first three quarters of this year and then I think we'll be back on track, so I'm not particularly worried about at each day.
Yes.
Very good.
Congrats guys great quarter.
Keep it up thanks.
But can you just Q&A today and also concludes today's conference call. Thank you everybody for joining you may now disconnect.
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And so on.
On.
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Your line.
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Great.
The conference.
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The free cash flow.
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Thanks.
Yes.
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