Q3 2024 Twilio Inc Earnings Call
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Good day and thank you for standing by. Welcome to Twilio Inc. 3rd quarter, 2024 earnings conference call. At this time, a participant is on a list and only mode. After the speaker's presentation, there will be a question and answer session.
To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again.
Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today. Bryan Vaniman, SVP of Investor Relations, please go ahead.
Good afternoon everyone and thank you for joining us for Twilio's third quarter, 2024 earnings conference call.
Joining me today are Khozema Shipchandler, Chief Executive Officer, and Aidan Viggiano, Chief Financial Officer.
As a reminder, we will disclose non-gap financial measures on this call. Definitions and reconcilations between our gap and non-gap results can be found in our earnings release and our earnings presentation posted on our IR website at investors.tulio.com
We will also make forward looking statements on this call, including statements about our future outlook and goals. Such statements are subject to known and unknown risks and uncertainties that could cause actual results to differ material from those described.
Many of those risks and uncertainties are described in our SEC filings, including our most recent form 10K and our forthcoming form 10K.
Forward-looking statements, pre-Besend our beliefs and assumptions only as of the date such statements are made. We display him in any obligation to update any forward-looking statements except is required by law. And with that, I'll hand it over to Khozema and we'll discuss our two three results and then we'll open the call for Q&A.
Thank you, Bryan. Good afternoon everyone and thank you for joining us today.
Twilio delivered a strong third quarter.
We exceeded our key three guidance delivering 1.134 billion in revenue, up 10% year over year, and generated $182 million in non-gap income from operations.
We also delivered another strong quarter of cash generation with $189 million of free cash flow.
I'm encouraged to see the acceleration to double-digit revenue growth this quarter, alongside strong operating leverage and continued product innovation.
Our commitment to financial discipline, operating rigor and innovation, remain key guideposts for the team, and I'm proud of what we accomplished in Q3.
Since becoming CEO at the start of the year, I've met with hundreds of customers in nearly every industry across the globe.
In my conversations with customers, many of the problems their encountering can be solved by greater personalization vis-a-vis communications plus contextual data plus AI.
are concerted focus on embedding AI and machine learning throughout the Twilio platform has resulted in a differentiated offering that strategically positions us to capture a massive opportunity as we leverage the strength of our platforms.
The leading CPAS supported by unmatched data tools, including segment, to minimize complexity and create better customer outcomes.
More customers are turning to Twilio because we deliver a stronger ROI.
Driving demonstrable results that help customers increase their revenue and reduce their costs.
By integrating AI with our core product suite, we're able to automate capabilities, boost productivity, and drive personalization at scale.
As an example, a longtime customer that is a global business supplies retailer has been using our AI recommendations product.
which leverages machine learning to automatically determine a specific product, brand or category. A customer is most likely to purchase.
The company recently ran an email campaign targeting customers most likely to purchase Apple products and saw a 592% increase in sales per email.
This is just one of the many examples of the unique value that Twilio offers.
Helping brands create better engagement, deliver greater value, and build more trusted customer experiences.
AI presents a huge opportunity to improve and expand the impact of CPAS solutions to truly enhance the customer experience.
We're well positioned to win in the age of AI, because unlike other CPAS players, our true value comes from the integration of communications with data.
Twilio uniquely combines communications and customer data to help brands drive deeper customer engagement.
What sets Twilio apart is our ability to unify this valuable contextual data, whether it's real time, triggered by customer interactions, or stored in a data warehouse or a system of record, and help brands to activate it.
With our platform, we're already powering these intelligent interactions at scale. Whether it's personalized engagement via unified profiles on IVR and flex or fraud prevention with our security products.
We're powering over a trillion emails and billions of messages annually and ingesting hundreds of thousands of events per second.
We recently announced our integration with OpenAI's new real-time API, making it easier for Twilio's customers and developers to build powerful conversational virtual agents.
As the world of conversational AI evolves rapidly, this is an exciting milestone.
It enables customers to take advantage of open AI's flagship multi-lingual and multi-modal GPT-4O model to create solutions and build virtual agents.
for IVRs that feel more human, making these advanced tools accessible for businesses of all sizes.
Now, let's turn to our business highlights.
Arturlio Communications Business had a strong third quarter, with revenue of 1.060 billion, up 10% year over year.
Our quarter-over quarter, growth acceleration was driven predominantly by strengths in both messaging and email.
As we've referenced on previous calls, our near-term growth will be fueled by our ISV customers, cell service enhancements, and cross-cell opportunities.
We're seeing good performance in each of these areas and a continued bright spot is our ability to deliver increased value through software capabilities built on top of Twilio's core channels.
Verify SMS pumping protection, engagement suite, and voice intelligence, leverage AI and machine learning to drive better outcomes, which include things like combating fraud and providing better data analytics in real time.
These products are designed to deliver smarter and more trusted communications, which is key to unlocking more value for our customers.
Furthermore, as we focused on integrating our communications products.
with segments products and contextual data.
I've been excited to see how products like personalized virtual agent leverage Twilio's unified profiles to help brands better understand their customers and make incremental changes to improve the customer experience through every interaction.
Another area driving improved messaging volumes is our platform feature updates that now give customers greater transparency into communications deliverability and engagement.
Within our console, messaging customers now receive a deliverability score with personalized actionable instructions from our AI agent so that they can immediately take action to immediately messaging deliverability errors.
By providing analytics, we're radically simplifying the messaging experience for developers, leading to better engagement and ensuring that the message they intend to send are delivered error-free.
In addition to enhancing our current products, in Q3, we release new innovations to support branded communications.
RCS Business Messaging went into public beta, which is key for brands who want to deliver a more custom personalized experience.
In a recent Twilio survey, we found that 75% of consumers who received a branded text said it increased their trust in the communication.
RCS Business Messaging improves the branded experience through rich content and interactive messaging features, including carousels, high-quality media, content cards, and location sharing.
Customers like Fresha have deployed RCS capabilities to build brand trust and increase message open rates.
and one of our ISV partners, Hive, will leverage RCS to enhance marketing campaigns for their customers in the live event industry, driving greater fan engagement and boosting ticket sale conversion rates.
We also saw exciting winds with Brandon Calling.
which allows brands to display their name, logo, and call reason when placing calls to customers.
Care Signal, LightBeams, Device List Remote Patient Monitoring Company, needed a cost-effective way to improve patient pick-up rates, and achieve health outcomes in the process.
With Twilio branded calling, they've been able to improve call pick-up rates by 67% in just three months.
In the future, we expect this type of incremental value will accelerate. As we continue to help brands use their contextual data to unlock smarter and more personalized experiences.
Turning towards really a segment business, segment delivered revenue of $73 million, flat year every year, as we continue to focus on and make progress against the priorities we outlined in the operational review earlier this year.
We ended the quarter with an increase in our wind rate, both quarter over quarter and year over year and a reduction in turning contraction.
While there is more work to be done, we're encouraged by the progress that we're making, and segment remains part of our long-term strategy, enabling us to differentiate our communications products by infusing contextual data while we continue to innovate for standalone CDP buyers.
With respect to product innovation, we continue to enhance our data warehouse interoperability capabilities.
and Improved Customer Time to Value by graduating many features to GA.
For example, with segment products like data graph and linked audiences, we are addressing key pain points that our customers are trying to solve such as removing data silos and disjointed customer profiles.
We have advanced our data warehouse integrations with Databricks, Snowflake, Google Big Query, and Amazon Redshift. So that customers can activate their data in meaningful ways to drive more personalized touchpoints with consumers.
This is an important step in our unified profiles offering as we're making it easier for customers to leverage.
They're existing data from websites and mobile apps and combining it with data in their warehouse from systems of record, like CRM, contact centers or ERP, to deliver personalized emails and communications.
We are seeing promising results and we're excited to add additional integrations with other major data warehouses moving forward.
Our new features and integrations for advertisers to create targeted campaigns began delivering promising results.
First, a generative audience's feature that uses generative AI to create audiences with natural language prompts is significantly reducing the time and resources required to build targeted audiences for customer engagement campaigns.
Over 25% of our segment CDP customers have already started taking advantage of this new capability in the few weeks it's been made globally available.
Second, we've expanded and created new integrations with Amazon, Google, LinkedIn, and Mehta, giving marketers the ability to activate their data in campaigns across these platforms and reduce their customer acquisition costs.
As an example, the Motley Fool needed an out-of-the-box integration to help build, manage, and activate audiences.
With segment, the Motley Fool was able to increase its operational efficiencies by automating processes.
Accurately Target paid ad campaigns to decrease its cost per acquisition and make the experience more relevant for its premium members, helping with retention and lifetime value.
Speaker Change: I am incredibly energized about the opportunities ahead. The solid quarter that we delivered and significant progress we made against our financial goals is a testament to the hard work and focus of our team.
Speaker Change: As we look to create a world in which every digital interaction between businesses and consumers is amazing.
I firmly believe that Twilio has the right strategy, leaders, and innovative platform to unleash the full potential of communications plus contextual data plus AI. And with that, I'll turn it over to Aidan.
Thank you, Khozema and good afternoon, everyone. We're pleased with our performance in the third quarter, delivering record revenue, non-gap growth profit, and non-gap income from operations.
Revenue of 1.134 billion was up 10% year over year.
Communication Revenue was 1.06 billion, up 10% year over year, and segment revenue was 73 million, flat year over year.
We saw encouraging volume trends in our communications business with growth, acceleration and messaging and strong performance in email.
Speaker Change: Our efforts with ISDs and on self-serve and cross-sellen initiatives continue to yield good results.
Speaker Change: We also implemented several new features, including the messaging, deliverability dashboard that Khozema mentioned, that helped drive volume and revenue in the quarter.
In addition, our new AI enabled products and features such as verify and SMS pumping protection are helping to drive faster growth.
While we had higher political revenue in the quarter, those contributions were fairly immaterial and contributed roughly 90 basis points to our reported revenue growth rate.
This was offset by a 90 basis point headwind associated with sunsetting the software component of our diplomat business.
Speaker Change: Our Q3 Dollar-based net expansion rate was 105% representing our best performance since Q1 of 2023 and reflecting the improved growth trends we've seen in our communications business over the last several quarters.
Speaker Change: Our dollar-based net expansion rate for communications was 106%. And the dollar-based net expansion rate for segment was 91%.
As Khozema mentioned, while we're encouraged by the early progress that we've made with segment since the operational review in March, there's more work to be done and it will take time to improve dollar-based net expansion given it's a trailing metric.
We delivered record non-gap growth profit of 600 million, up 9% year over year.
Speaker Change: This represented a non-gap growth margin of 52.9%. Down 50 basis points year over year, and 40 basis points quarter over quarter, both driven by our segment in for structure migration efforts.
Non-Gap Gross Margin for our Communications Business Unit was 51.8% flat both sequentially and zero-rear.
As in previous years, we expect higher hosting costs in the fourth quarter associated with the holiday shopping season. And as a result, we would expect a modest sequential decline in communications and consolidated gross margins in Q4.
Non-Gap Gross Margarine for our segment business unit was 69.8%. Down 350 basis points sequentially.
As we noted in Q1, we are migrating part of segment architecture to new infrastructure providers this year to recognize greater efficiencies.
We are continuing to make progress on this project and we expect to complete the migration during the fourth quarter After which we expect segment gross margins will begin to improve
Non-Gap's income from operations came in ahead of expectations at a record 182 million, up 34% year over year driven by strong revenue growth and ongoing cost discipline.
Our non-gap operating margin of 16.1% was up to 190 basis points year over year and down to 10 basis points, eventually.
Speaker Change: Our Q3 results reflect an additional $18 million in expenses for our company-wide performance-based cash bonus program, representing roughly $6 million of expense for each of the first three quarters of the year.
This increase reflects a higher anticipated bonus payout as a result of our year-to-date outperformance on non-gap operating income and increased outlook for the year.
We are proud of the operating margin improvement we've achieved over the last two years and we continue to see opportunities for additional operating leverage over the next several years.
NonGap income from operations for our communications business was $268 million and nonGap lost from operations for our segment business was $16 million.
St.man operating losses were flat sequentially primarily as a result of the incremental bonus expenses I referenced.
We remain committed to segment achieving break-even on a non-gap operating income basis by Q2 of 2025.
Gap Laws from Operations was $5 million.
We continue to make solid progress on our path towards gap operating profitability and we are tracking ahead of our previous target to achieve gap operating profitability by Q4 of 2025.
Stock base compensation as a percentage of revenue was 13.6% excluding restructuring costs, which was flat quarter-recorder and down 430 basis points year over year as we continue our efforts to reduce equity compensation.
We generated free cash flow of $189 million in the quarter and over the last 12 months we generated free cash flow of $775 million.
We remain focused on driving strong free cash flow margins going forward.
Finally, we're continuing to execute on our $3 billion share-reported programs.
Speaker Change: Since initiating the programs, we've repurchased more than $2.7 billion of shares, and we intend to complete the remaining balance of the authorized repurchases by year-end.
Our total shares outstanding as a September 30th was 155 million, down 15% year to date.
Speaker Change: Moving to guidance.
Speaker Change: We're encouraged by this trend we're seeing across the business and we're continuing to plan proven given our usage based revenue model and the dynamic market backdrop.
Speaker Change: For Q4, we're initiating a revenue target of 1.15 billion to 1.16 billion, representing year-over-year growth of 7 to 8 percent on both a reported and organic basis.
Based on our year-to-date performance and Q4 outlook, we're increasing our full-year organic growth guidance range to 7.5% to 8%.
Turning to our profit outlook for Q4, we expect non-GAAP income from operations of 185 to 195 million and we're raising our full year non-GAAP income from operations guidance to 700 to 710 million.
As it relates to free cash flow, year to date we've generated $564 million, which has outpaced our non-gap income from operations.
However, we are anticipating higher prepamments in the fourth quarter, which we expect will drive us to quench your decline in free cash flow.
Speaker Change: As we said previously, we periodically pay certain vendors early to secure favorable terms and pricing.
As a result for the full year 2024, we expect free cash flow in the range of 650 to 675 million.
Before we open up the call for questions, give in the various tailwinds and headwinds that have influenced the business over the past several quarters. We also want to provide a preliminary outlook on how we would expect a more normalized fiscal 2025 to play out.
We are encouraged by the volume and growth stabilization we have seen in our communications business over the last several quarters and we continue to make progress on the operational goals in segment.
Based on the trends in the business and assuming a neutral macro environment, we would expect full year 2025 revenue growth in a range of 7 to 8%.
We also expect to generate meaningful, non-gap operating margin expansion over the course of the full year.
Finally, we would expect to achieve gap-opening profitability for the full year.
Speaker Change: We will provide more commentary on both our fiscal 2025 and longer-term outlook at our upcoming investor day, which we're currently targeting for late January.
I'm very pleased with the accelerated red and new growth we delivered in the third quarter, as well as our ongoing cost discipline that is driving strong profitability and free cash flow.
Speaker Change: I'm also encouraged by the innovation we are delivering and the impact new products and features are having both for our customers and on our revenue growth.
Speaker Change: We are tracking well ahead of our target to reach gap operating profitability and we are confident in our plans to drive durable growth, continued margin expansion, and free cash flow growth over the next several years.
I'm looking forward to finishing 2024 strong and seeing you all at our investor day in Q1.
and with that we'll now open it up to questions.
Thank you. As a reminder to ask a question, please press star 1-1 on your telephone and wait for your name to be announced.
To withdraw your question, please press star 1-1 again.
Speaker Change: Please stand by when we compile the Q&A roster.
Speaker Change: Our first question comes from the line of our gen body from William Blair.
I'm sorry. Thank you, and congrats on the nice quarter here. I wanted to maybe start with just the open AI partnership. I think you can just touch a little bit on what exactly that entails and how that might play out across your customer base. Are these agents going to be built?
Largely on the voice side, do you see this expanding into the messaging front as well? And then I'm curious to hear just about timing of how long this might take to play out across your customer base. Thank you.
Yeah, good questions, thanks, Arjan. So I would say maybe to start with it's built off of the voice side of things, but I wouldn't anticipate.
Whether it's with OpenAI or one of the other partners that we have out there that you should expect to see it across all channels over time That's probably not a surprise to you like the way that we would want to approach it ultimately is
Speaker Change: In more of a multi-channel way, I think that's the most optimal way to end up reaching consumers vis-a-vis the customers that we serve. As it relates specifically to the partnership, it is voice-based as I said, basically what it allows for is for us to use
Open AI's capabilities as it relates to their large language models and then apply them using a Twilio API visa V, our voice capabilities. And I think where it gets really interesting and as we kind of alluded to in our earlier remarks.
Speaker Change: If you compare that with some of the contextual data that we would have about our customers' consumers, like you end up with a really personalized, lively and very easy to implement interaction.
between one of our customers and a consumer. In terms of time frame around revenue, I mean, obviously AI is all happening very rapidly. I wouldn't anticipate that it shows up materially in our revenues.
Speaker Change: for a little while, still that said like we are very excited about the partnership, we're very excited about what's going on with AI. In particular I would really point to the combination of communications and contextual data when paired with AI is a really valuable combination.
Perfect. That's very helpful. I'm Aidan, if I can ask you one, I'm sure we'll hear more about this in the last day, but since you gave the initial guidance or the initial outlook on fiscal 25, I think you mentioned you were assuming a neutral macro for the 708%.
Growth Target. Is that neutral compared to what we're in right now in 2024? Or is it like a headwind set of right now in 2024 and that neutral goes to neutral in 2025 and applying site improvement? Just I would be curious how you're thinking about that.
Speaker Change: Yeah, I'd say, Arjun, it's kind of in line with what we're seeing right now. So I'd say neutral to kind of what we're experiencing today.
Okay, perfect. Thank you.
Thank you. One moment for our next question.
Our next question comes from the line of Jim Fish from Piper Sandler.
Speaker Change: Thank you. Bye-bye.
Jim Fish: Hey guys, great quarter. Just in terms of the go-to-market side, is there any color you guys can provide as to how big the ISV channel is for Twilio at this point and what that is growing relative to the overall business?
Jim Fish: and many more. Thank you. Thank you.
We haven't, Jim this is Khozema, I can start and then Aidan can provide some additional commentary. So we've never broken out the kind of number, the quantum of how much business that we're doing with ISVs. Obviously it's a meaningful contributor to us.
But I will give you two data points. One is that it does grow faster than the consolidated revenue base, which is obviously very exciting for us.
the Consolidated Revenue Base, and so that's actually pretty encouraging as well.
And just given our ability to get leveraged distribution in the way that we end up serving these ISVs, I think it's just a very important channel and ultimately a very important partnership and we wanna be able to help these guys grow and that'll help us grow.
Got it. And on the RCS side of the major airline, when...
Is there a way to understand how this will potentially change volumes for that customer, be it on the SMS side versus RCS, and what that sort of gross margin profile looks like for RCS relative to SMS at this point?
a channel and you know obviously in this channel being messaging.
I think I would imagine that fundamentally you'll probably see something relatively consistent with where we are now. Like, our expectation is not necessarily that RCS will end up supplanting a bunch of the other activities. I think it works really, really well for an airline use case. And so with respect to airlines, I think my expectation would be that given that it's something where we each tend to have apps, where it's something that we tend to use on sort of a repeat basis.
I would imagine that that's a category, more broadly, that ends up using RCS. I would certainly hope they avail themselves of some of the features and capabilities there, but I don't necessarily expect that it's going to change the dynamics of our underlying business. And then, more broadly,
We're not anticipating, at least sitting here today, that RCS really has an impact on either revenues or margins in terms of the dynamics in our business.
Jim Fish: and many more. Thank you. Thank you.
Speaker Change: Thanks, Khazim.
Jim Fish: Thanks, Jim.
Thank you. One moment for our next question.
Our next question comes from the line of Ryan Kuntz from Neatham & Co.
Ryan Kuntz: Great, thanks for the question and great quarter there.
Ryan Kuntz: certainly.
Khozema, can you outline kind of where you are in your self-service journey? It really sounds like that's a nice gross driver. I'm sure it's, you know...
Can you maybe explain where you are from a milestone perspective and where you might be headed in the future?
Ryan Kuntz: Thanks.
Yeah, I mean like not to be kind of cliche about it I would say at some level like it's always like sort of a day one style approach that we're trying to take to self-serve I mean, I think as you know like being sort of a long-term follower of us like
The developers attraction to the platform, to the tools and capabilities that we offer has always been sort of a hallmark of the company.
Ryan Kuntz: you know, over the last several years, like to ensure that there's additional trust and compliance and things of that nature on the platform. We've almost on purpose had to introduce
certain levels of friction in the signup process to be able to onboard new customers. And so in sort of that landscape, what we want to be able to do is, is that for every new developer, for every new startup, for a super established company that's just getting started, we want to make it fundamentally
As easy as possible as can possibly be for a developer to attach themselves to the platform to be able to get up and running with a use case.
and then then to start promulgating that inside of.
their consumer base. And so I would say we're never done. I mean, our milestone list is actually quite long. We're very, very happy with the progress that we've made to date, but I think we will constantly look for ways in which we can continue to improve the experience for developers.
Ryan Kuntz: And in that spirit, I would say it's kind of still day one.
When you talk about that friction you're talking about malicious use you want to make sure you want to qualify these folks or is that the reason for it?
Yeah, I mean, that's definitely one reason I think you're also familiar with, like, I think it was last summer, if memory serves me correctly, where we went through like, the 10 DLC onboarding process where, you know, we had to kind of put customers through that, right? We're, we obviously got through the other side of it without
any real impact to the business. But, you know, ultimately, like, you know, you're a consumer of this stuff, right? Like, you don't want to be receiving stuff. You certainly don't want your children to be receiving stuff that they shouldn't be.
And trust is kind of, you know, always been one of the number one things that we sell around here. And I think creating a platform in which there's both trust as well as ease of use has always been a hallmark of Twilio.
Great, congrats on the results.
Speaker Change: Thank you.
Ryan Kuntz: Subs by www.zeoranger.co.uk
Speaker Change: Thank you.
Our next question comes from the line of Alex Zukin from Wolfe Research.
Speaker Change: Hey guys, you have Rich Magnuson for Alex. Question on free cash flow. Should we expect free cash flow margin expansion to outpace operating margin expansion next year given the prepayments affecting free cash flow in the fourth quarter? Can you help sort of quantify that headwind in 4Q? Thanks.
Yeah, hey Rich, thanks for the question. So we're not yet providing explicit free cash flow guidance or commentary for 2025. I'd say in general
You know, the way I think about it is, it tracks fairly closely with our non-GAAP operating income. Over time, like, you know, within quarters, there might be some variability, but over time, an annual cycle or something like that, they track fairly closely.
And as we said in our prepared remarks, as it relates to Q4, as we've said previously, we do have these episodic kind of prepayments from time to time. We will experience some of them in Q4. But as we think about free cash flow going forward, I'd kind of think about them generally in line. And then we'll talk about more as it relates to 2025 specifically at our Investor Day.
Thanks. And then one more on, is there anything we should think about regarding political traffic and 4Q from these final election pushes? And how does that sort of compare to the prior cycles? Thanks, guys.
Speaker Change: Yeah, so as we called out in the prepared remarks, in the third quarter, we did have some political traffic. It contributed about 90 basis points to our growth rate. It was offset by a product that we're sunsetting on the ZipWhip side or ZipWhip software business. So it really didn't contribute.
to the revenue growth. I'd expect Q4 to be similar in material. There will be some political traffic, but we don't expect it to contribute much.
If you go back several years, we did have more political traffic on the platform, but we made a decision a couple of years ago to limit that just based on our acceptable use policy and what we're willing to carry on the platform.
Speaker Change: Thanks a lot. Congrats on the quarters, guys.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Taylor McGinnis from UBS.
yeah hi congrats on the quarter and thanks so much for taking my questions the the first one is
Speaker Change: Just given like the acceleration that we saw in revenue in the quarter and it sounded like particularly the the messaging business
anything in particular I guess you would flag as really driving that and then as we look into 4Q it seems like you guys only raised the guide modestly so anything that was maybe specific to 3Q with the messaging business
Speaker Change: or anything we should keep in mind, you know, seasonality as we look into 4Q.
Yeah, why don't I cover a little bit on Q3, then talk a little bit about the guide. So, we're really pleased with the acceleration that we saw.
Speaker Change: maybe first, just to be clear, reported and organic are now equal. We lapped all the acquisitions, so the 10% is both our reported and organic growth number, and we saw really a combination of strength across the business. Messaging, as you highlighted, it accelerated in the quarter from a growth perspective.
Email continued to be strong from a growth perspective. We also saw a strength in our ISV platform, Khozema kind of talked about that on one of the previous questions, as well as self-serve.
And then when you think about it by industry,
We saw pretty good healthy volumes, I'd say, revenue growth kind of in our largest industries, tech, health care, financial services.
retail, e-commerce. I would say social and messaging kind of continue to be softer for us, but that's a relatively smaller portion of our revenue nowadays. And then from a geographic perspective, I'd say the U.S. continued to be strong.
And we did see international volumes and revenue trends improve for the second straight quarter. So I guess, boiling it up, not one thing, a number of different things that kind of drove the strength in the quarter.
And then as it relates to the guides, we guided seven to eight percent. That's actually two points higher than what we guided in Q3. So you are seeing some of that favorability flow through to our forecast. And then, you know, I guess last thing is that, you know, we are usage-based.
that is a dynamic that we deal with so we just continue to guide prudently just given that's that's our revenue model.
Perfect, thanks. And then maybe last one for me would just be on the margin outlook. So, you guys have had pretty amazing upside to margins over the last several quarters, but it looks like, you know, the pace of that expansion on a year-over-year basis, I think we're starting to see that come down a bit. So, just as we think into next year, and I think you made a comment about, you know, continuing to expect expansion, anything you can share at a high level, like how to think about that maybe versus what we've seen? I know segment reaching break-even is one of the drivers, but as we look across the model, any other areas of, you know, potential efficiency that you guys are looking at?
Yeah, I'm not going to give a specific number for next year, but I do want to call out a couple of things. So in Q3, the reason you didn't see as much leverage quarter over quarter is we did have additional bonus accrual that we did in the quarter. It was $18 million. It was a catch-up, you know, for Q1, Q2, Q3, just based on where our forecast is now.
for Profit for the Year. So with that forecast...
being higher, we had to accrue some additional expenses. So that did impact the quarter.
Speaker Change: and you should factor that in in terms of thinking about the underlying operating margin expansion.
As it relates to leverage going forward, you know, we're pretty confident in our ability to continue to get leverage. We've proved it now consistently. I'd say next year, some of the levers are as you called out segment, right, we lost $16 million in the quarter on segment. So if you annualize that, that's
Speaker Change: $64,000,000
And then the other two areas where we're intently focused is, first, automation, and then second, what we're calling kind of workforce planning, and just optimizing, you know, the org structures as well as the geographic locations of each of our teams. And those are the two, I'd say, big efforts we have underway to continue to drive margin expansion.
Great, thank you so much.
Thank you.
Speaker Change: One moment for our next question.
Our next question comes from the line of Ryan McWilliams from Barclays.
Hey, thanks for taking the question. And I appreciate the color on the 2025 numbers. Are there any trends in your business that's given you more visibility to provide this out-year guidance at this point? Like, are your customers feeling better about their own messaging volumes? Just love to hear more detail on your buildup to that 2025 revenue guide. Thanks.
Yeah, I don't. I'll give you a couple things. I think first of all, I mean, we we've been working on a number of efforts inside the business. We've kind of characterized those in three different buckets, right, discipline, rigor and focus.
That kind of ranges from a series of financial things that we're doing, as well as the number of investments that we're making on the innovation side.
Speaker Change: And what I would say is, is that what used to be kind of a stabilization in trends that's transpired really over the last several quarters has now kind of started to
Speaker Change: you know, albeit modestly, started to kind of reaccelerate into slightly better growth, obviously, in Q3. You heard Aidan's color a moment ago in terms of Q4 and our ability to kind of consistently raise the guide over several quarters.
So all of that feels pretty good.
And as we kind of look out into 2025, it's not just an extrapolation of trends, obviously, it's also a lot of conversations that we're having with our customers as well. Again, in a kind of a neutral macro, what I would say is self-serve has been particularly strong and that's been a bright spot.
I think the volumes that we've seen from our ISV partners, that certainly seems like it's...
Speaker Change: quite sustainable. And then that's kind of on a channel basis, if you kind of then break it down by product. You know, the products have generally been performing well. Obviously, even beyond kind of messaging and email, we called out a number of products.
from which we have seen a certain amount of strength over the last couple quarters.
We've seen some new innovations take hold as well like the kind of messaging deliverability.
dynamics that we talked about earlier. We obviously have a number of innovations that we're also planning on.
And then I guess finally, I would add to kind of everything that I've said, like there's some...
things around AI, especially as it relates to contextual data and communications.
that we're also pretty excited about. You know, one of those was referenced on the call today in terms of our partnership. We're clearly working on a number of other areas in which we believe that we're extraordinarily well positioned to deliver on personalization at scale. And so
I guess, you know, Ryan, when you add all that up, yeah, I mean, we have some level of visibility, given that we are a usage-based business, it's always tough, but that totality of things
Speaker Change: feels like a pretty solid setup in terms of the preliminary guidance that we provided for 2025.
Excellent. Thanks for that, Khozema. And just on RCS, you know, for Twilio, this has kind of always been the catalyst that's, like, two years away from being two years away.
But now, it does seem more realistic with Apple rolling it out on iPhone. So, how do you think about just the timeline for RCS adoption in the U.S.? Like, are the carriers ready for RCS at this point?
And I know it's super early, but do you think it's possible generative AI does move the needle here for RCS adoption? As two-way messaging use cases at scale was like very hard to service, like over hundreds of thousands of messages, but could become easier with a more sophisticated bot or with AI? Thanks.
Those are all great questions. I think it's really unclear, honestly, what exactly happens with RCS in the near term. I mean, we're obviously excited to support the technology. I think if you've used it yourself with certain use cases, it's really cool, and it really does deliver kind of the rich content that's always been promised.
I'm not, I'm not really sure how it's going to play out kind of longer term. And the reason that I say that is, is that I think it's really, really well suited for certain companies.
and certain use cases. So, for example, you know, the airline example that we cited, I think that's an industry that's perfect for it because these are frequent purchases. These are repeat buys in which
You probably do want to be able to interact with the message in that way, and you want to have the content displayed in a certain fashion.
Speaker Change: I think when it's just a simple but traditional notification, it's not necessary, right? And so I think that would be kind of one maybe obvious example or, you know, certainly two-factor authentication would be another obvious example in which it's not necessary. But even beyond that, like when it gets into kind of more one-time purchases or when you want to do a lot of things
Speaker Change: inside of the application itself versus necessarily through the channel. But then on the other side, you know, of course, you have to have an email or an SMS to confirm it. I think all of that makes the picture, to be honest, like fairly confusing. I think that from our perspective,
Speaker Change: All of that, no matter how it plays out, will ultimately be accreted to Twilio. And then lastly, relating to kind of Gen-AI and the way that you posed it, I think in all scenarios,
Whether it's two-way, whether it's RCS, whether it's some of the voice things that we talked about, we're quite bullish on generative AI. I think it really works well.
Speaker Change: when paired with contextual data, which is really where we're hanging our hat, especially as it relates to the combination of what we can do with segment and communications, and that we're very bullish on.
It all makes sense. Appreciate the gallery. Thank you. Thank you.
Thank you. One moment for our next question.
Our next question comes from the line of Mehta Marshall from Morgan Stanley.
Great. Thanks. And echoing by congrats.
Thank you.
Maybe just on the DB&E pick up on the communications side of the business, understanding ISBs kind of helped bring in a lot of new customers, but just
Speaker Change: wondering, you know...
Do you think that part of the messaging gains or part of the DV&E improvement is kind of gaining share within your customers of their share wallet with some of the verified products and some of the other enhancements you've made to the portfolio or just kind of marketing budgets have gotten better and that's overall led to more volumes?
Just as a second question, just, you know, where do you guys think you are on kind of go-to-market improvements within the segment business now kind of being, you know, nine months into some of those changes? Thanks.
and many more. Thank you. Thank you.
Yeah, hey, Mita, this is Khozema. I'll start and then if Aidan wants to add some additional color, she certainly can. I think
Speaker Change: Let me start with the second question actually first in terms of segment and go-to-market. So I would say we've actually made a number of improvements on the go-to-market side.
We do feel better about kind of where we are relative to where we've been, I think.
improvements in churn and contraction, improvements in contract lifecycle, improvements in our ability to get customers faster time to value.
That said, I mean, there's a lot of work left here, right? And obviously, it's not quite shown up in certainly the reported numbers.
and you still see it weighing on our net retention rates. And so I think it's gonna take some time, but I do feel like the milestones that we set out for ourselves.
We're meeting those, if not exceeding some of those. But for that to bleed into revenue, it's just going to take some time. I will say just one other thing related to segment before I get to the other part of your question is the one thing that I think has gone quite well is.
Speaker Change: the pairing of communications with segment. So, you know, there were some use cases that we talked about where we rolled up products earlier in the year, both with Flex as well as with Voice.
And those have proven to gain a certain amount of customer traction, to the extent that now, especially as we kind of contemplate a future in which generative AI is going to be present.
Aidan Vaniman, Khozema Shipchandler, Aidan Viggiano, Jeffrey Lawson, Jeffrey Lawson,
It's on us now to really deliver what we're referring to as a unified profile that
doesn't just serve those two products, but actually serves every single one of our products.
Speaker Change: right out of the box. So as a customer gets up and running, they can avail themselves of the inherent data capabilities that Segment offers. And I think, you know, you've followed us obviously for a long time. That's always sort of been the promise.
of having segment with Twilio. And I think we're starting to make that a reality. And in a generative AI world, having contextual data is really gonna matter. And so we think we're well positioned there.
Speaker Change: Back to DB&E for a second. You're right, like there are some of these areas in which we are picking up new customers.
Speaker Change: But I wouldn't say it's per se macro related like that. That's not the trend that we're necessarily seeing. I think what we've seen really for the balance of the year is kind of a neutral macro and Aidan kind of alluded to that in terms of the way that we're planning for the business.
next year. I don't think we're seeing share loss within the business or cannibalization, maybe a different way of saying that. I think instead what we're seeing is
customers starting to implement additional products in conjunction with one's
that they were already using. I mean, we made a modest improvement in DB&E from period to period.
So I don't want to like read too much into it necessarily, but you know we're obviously encouraged by what we're seeing. It's not necessarily a metric that we guide to, but so far so good and we're going to continue our efforts in a number of these areas with probably a concentrated effort as we always do on self-serve.
Speaker Change: Great, thanks so much.
Thank you. One moment for our next question.
Speaker Change: and many more. Thank you. Thank you.
Our next question comes from the line of Michael Turin from Wells Fargo.
Speaker Change: Khozema Vaniman, Khozema Shipchandler, Aidan Viggiano, Jeffrey Lawson
Hey, this is Rich Polin on for Michael. Thanks for taking my question. So just one on the ISV side of things. I think you had mentioned at one point that you walked away from Engage Premier, and that kind of helped avoid directly competing with some of those ISV partners.
I just wanted to, I guess, get some insight on, are there any areas where you could look to do that further, or how has kind of that played out into the ISB strength that you're seeing? Any context there would be helpful.
To maybe start with, you're kind of correcting the assertion there. We did decide that we wanted to sunset Engage Premier. I think that was the right decision. That was kind of paired.
with two things. I'd say, you know, we've talked about ongoing operating rigor and discipline, and I think part of that is just focusing on the right things.
and so it made sense through that lens. But I think the other side of it was the partnerships, in particular as it relates to Premier at least, that we have with other leading marketing automation companies.
It allowed us to really focus on those partnerships in a different way versus, you know, kind of
ending up in competition with them instead.
allowing us to grow and thrive together and so I'd say many of those companies have for a long time been great customers of ours.
And we're engaging across the board, whether it's Airship or Bloom Ridge or Braze.
or Insider or Klaviyo, like there's a number of these that we have lined up currently.
We've got really strong technology integrations with each of them, and we're excited about not just the business that's kind of running through our platform, but our ability to grow with those companies together, to partner together, to be able to solve customers' needs.
Speaker Change: saying that that's very helpful. And then I guess this is a follow-up on
the AI side of that. It's really interesting to hear about the real-time API integration and being kind of the feature partner there. When we think about, I guess, like other areas in the core comms or API side of things where, you know, Twilio can kind of serve as that building block, are there any use cases out there that you're starting to see kind of really pick up or see meaningful traction aside from that partnership there?
Yeah, I would position it slightly differently as it relates to AI. Like, I don't think it's just about communications and I don't think it's actually just about segment, but I think it's really the combination of contextual data with communications. And I think
Speaker Change: for the companies that we serve and the ones that we aspire to serve.
It's that combination that really activates AI.
Speaker Change: the reason being that a lot of the most interesting interactions like when we talk about personalization at scale
Like, it happens because we have contextual data about our customers, consumers, and
Speaker Change: That's an incredibly, incredibly important form of IP. Our customers want that to not travel over into an LLM, but instead to be stored in a data warehouse, to be secure in a data warehouse.
but then to be combined with the other things that we're doing. And so I think the way that you'll hear us talk about it going forward, Rich, is really through the lens of like this unified profile.
Speaker Change: which allows us to see exactly what it is that's most interesting about a consumer on behalf of our customers that we can then go and activate against.
whether it's in a voice contact with a virtual agent, whether it's in an IVR, whether it's in Flex, whether it's in a security product, whether it's in the fraud prevention things that we've done.
and then, you know, ultimately even email. Like, I think it's going to really run the gamut of every single one of our products, and I think we'll start to probably talk less about them through the lens of, like, just products, but really this combined interaction of communications with contextual data.
Awesome. Thanks.
Speaker Change: Thank you. One moment for our next question.
and many others. Thank you. Thank you.
Our next question comes in the line of Nick Altman from Scotiabank.
Hey, awesome. Thank you. In your prepared remarks,
You guys noted an eight-figure ISB deal.
that was consolidating some volume from three different vendors.
Nick Altman: Anatoly on the SMS side, can you maybe just talk about what the unlock there for that particular customer, for them to consolidate, and then when you look at your installed base, whether it's large customers or ISVs who are multi-sourcing, you know, CPaaS or SMS, how much of an opportunity is that and how much of a focus is it on a billboard basis? Thank you.
consolidation or kind of multi-sourcing I think that's that's the word you used I think that
It happens from time to time, and we certainly see customers.
Speaker Change: experiment with it from time to time. But I think the reality is, is that the way that, you know, that the platform is built and the way that we've kind of always prided ourselves is, is that we fundamentally offer a superior product relative to the other partners in the marketplace. And so
Speaker Change: I think in particular, we're very, very strong in terms of upfront.
availing yourself of use on the platform in the first place.
Speaker Change: like getting up and running, getting activated, getting started, using our tooling, using our documentation, like that's a really, really easy go. And then I think the other side of it is, is
We're also quite strong in terms of our ability to...
ensure that our customers are able to deliver what they need to be delivered, need to be delivered on the other side. And so these are mission critical workloads for a lot of our customers. And so our ability to do that for them, especially in a way in a world in which
You know, most people don't realize this, actually, that
Supply is constrained.
to be able to moderate between messages that have to get across at one specific moment.
versus others, you know, that can wait just a handful of seconds even, like that's a really important differentiator for us. We deliver that through our engagement suite and that's pretty impactful. So that's kind of that part of the question and I think that a lot of that volume ends up coming back to us. In terms of the ISV question that you asked specifically,
the three vendor consolidation. So I think all of what I said a moment ago remains true, right? Like we have stronger deliverability, we have better quality, we have high trust.
and getting up and running on Twilio in the first place is very attractive. In addition to all of those things, I think what's very exciting in this example and I think what's exciting more generally is that
They found Twilio very easy as a means to do that. I think in addition to that what a lot of our ISVs, and I'd say customers writ large, this is not just limited to ISVs,
find is that being able to engage their customers, especially through multiple channels and then using them kind of off and on to engage with customers on the other side has been really powerful, and I wouldn't be surprised if we see more of that over time.
and many others. Thank you. Thank you.
Speaker Change: Great, thank you.
Thank you. One moment for our next question.
Our next question comes from the line of Samad Samana from Jeffreys.
Hi, this is Billy Fitzsimmons on for Samad. Khozema, in the prepared remarks, you highlighted the AI opportunity with Flex and highlighted the potential for customers to create intelligent IVRs and, more broadly, AI agents. The contact center seems like an area of focus for the traditional comms vendors, given the number of customers that are involved in the process. And I'm wondering if you could talk a little bit about how you're going to be able to do that
Speaker Change: agent turnover, high volumes, there's an opportunity to kind of layer in AI to make things easier for customers, but increasingly it seems like vendors who maybe traditionally didn't address the contact center are kind of targeting the market, whether other large-cap software vendors or the hyperscalers.
Just be curious how Flex has performed in recent quarters, early customer feedback on the integration of AI solutions in Flex, and then how you're thinking about pricing and differentiation as you add in those AI features into the solution.
Yeah, those are good questions. So, I guess, Billy, the way that I would kind of characterize it is that it's not per se about flex as such. I mean, I think the way that this is going to play out is that
whatever the channel, and in this case, since we're kind of talking about voice in a way, I think it's going to be driven. On the one hand, it's going to be very outcome-oriented in terms of like what you're able to deliver for a customer on the other side. I think that probably ends up breaking some of the seat dynamics in terms of...
of SAS and licenses and stuff like that.
I think the second thing is, is that a lot of the well, I'm certainly aware of what you're talking about in terms of various entrants in the market.
I think your ability to be able to drive differentiated value
actually happens through having contextual data.
So, having a generic model that happens to use a virtual agent...
like without any underlying understanding of what's happening with that customer in the first place.
Like, it's really, really difficult to end up solving their problem. Like, it's easy for, like...
kind of the basic stuff. But like, as soon as you bore down into like, an actual purchase or an actual promotion or a renewal or a customer care problem, like you've got to start knowing something about
that customer. And certainly something that we believe is that that contextual data is highly proprietary to the customers that we serve. I cannot imagine a scenario in which
they start turning over that proprietary data to the large LLMs and helping them train up their models. And so I think that advantage actually accrues to us, our ability to use
Speaker Change: the communications capabilities that we already have, which include Flex, obviously.
but also pair that with contextual data that we deliver vis-a-vis segment.
and then use AI as a means to then solve customer problems. That's really how we see it playing out.
certainly could happen with Flex, could happen with an IVR, could happen through simple, more simple interfaces, depending on how complex the problem is, through any one of the channels that we offer, and since we offer most of them, I think that positions us quite well.
Super helpful. Thank you very much.
Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.
Hello, everybody. Now just a couple more days left until COVID-19 is detected. Thank you all for staying in your faloumpyoom tions.
Good day and thank you for standing by. Welcome to Twilio Inc. 3rd Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session.
To ask a question during the session, you will need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised.
Speaker Change: To withdraw your question, please press star 11 again.
Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Brian Vanaman, SVP of Investor Relations. Please go ahead.
Brian Vanaman: Good afternoon, everyone, and thank you for joining us for Twilio's third quarter 2024 earnings conference call.
Joining me today are Khozema Shipchandler, Chief Executive Officer, and Aidan Viggiano, Chief Financial Officer.
We will also make forward-looking statements on this call, including statements about our future outlook and goals. Such statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those described.
Many of those risks and uncertainties are described in our SEC filings, including our most recent Form 10-K and our forthcoming Form 10-Q.
Speaker Change: Forward-looking statements represent our beliefs and assumptions only as of the date such statements are made. We disclaim any obligation to update any forward-looking statements except as required by law. And with that, I'll hand it over to Khozema and Aidan, who will discuss our Q3 results, and then we'll open the call for Q&A.
For more information visit www.FEMA.gov
Speaker Change: Thank you, Brian. Good afternoon, everyone, and thank you for joining us today.
Twilio delivered a strong third quarter. We exceeded our Q3 guidance delivering $1.134 billion in revenue, up 10% year-over-year, and generated $182 million in non-GAAP income from operations.
We also delivered another strong quarter of cash generation with $189 million of free cash flow.
I'm encouraged to see the acceleration to double-digit revenue growth this quarter, alongside strong operating leverage and continued product innovation.
Our commitments to financial discipline, operating rigor, and innovation remain key guideposts for the team, and I'm proud of what we accomplished in Q3.
Since becoming CEO at the start of the year, I've met with hundreds of customers in nearly every industry across the globe.
In my conversations with customers, many of the problems they're encountering can be solved by greater personalization vis-a-vis communications, plus contextual data, plus AI.
Our concerted focus on embedding AI and machine learning throughout the Twilio platform has resulted in a differentiated offering that strategically positions us to capture a massive opportunity as we leverage the strength of our platforms.
the leading CPaaS, supported by unmatched data tools, including Segment, to minimize complexity and create better customer outcomes.
and many more. Thank you. Thank you.
Speaker Change: More customers are turning to Twilio because we deliver a stronger ROI [inaudible]
driving demonstrable results that help customers increase their revenue and reduce their costs.
By integrating AI with our core product suite, we're able to automate capabilities, boost productivity, and drive personalization at scale.
As an example, a long-time customer that is a global business supplies retailer has been using our AI Recommendations product, which leverages machine learning to automatically determine a specific product, brand, or category a customer is most likely to purchase.
The company recently ran an email campaign targeting customers most likely to purchase Apple products and saw a 592% increase in sales per email.
This is just one of the many examples of the unique value that Twilio offers.
Helping brands create better engagement, deliver greater value, and build more trusted customer experiences.
AI presents a huge opportunity to improve and expand the impact of CPaaS solutions to truly enhance the customer experience.
We're well positioned to win in the age of AI, because unlike other CPaaS players, our true value comes from the integration of communications with data.
Twilio uniquely combines communications and customer data to help brands drive deeper customer engagement.
What sets Twilio apart is our ability to unify this valuable contextual data, whether it's real-time, triggered by customer interactions, or stored in a data warehouse or a system of record, and help brands to activate it.
Speaker Change: With our platform, we're already powering these intelligent interactions at scale, whether it's personalized engagement via unified profiles on IVR and Flex, or fraud prevention with our security products.
Speaker Change: We're powering over a trillion emails and billions of messages annually and ingesting hundreds of thousands of events per second.
Speaker Change: We recently announced our integration with OpenAI's new Realtime API, making it easier for Twilio's customers and developers to build powerful conversational virtual agents.
As the world of conversational AI evolves rapidly, this is an exciting milestone.
Speaker Change: It enables customers to take advantage of OpenAI's flagship multilingual and multimodal GPT-4.0 model to create solutions and build virtual agents for IVRs that feel more human, making these advanced tools accessible for businesses of all sizes.
Now, let's turn to our business highlights.
Speaker Change: Our Twilio Communications business had a strong third quarter, with revenue of $1.060 billion, up 10% year over year.
Our quarter-over-quarter growth acceleration was driven predominantly by strength in both messaging and email.
Speaker Change: As we've referenced on previous calls, our near-term growth will be fueled by our ISV customers, self-service enhancements, and cross-sell opportunities.
We're seeing good performance in each of these areas, and a continued bright spot is our ability to deliver increased value through software capabilities built on top of Twilio's core channels.
Speaker Change: Verify, SMS Pumping Protection, Engagement Suite, and Voice Intelligence leverage AI and machine learning to drive better outcomes.
which include things like combating fraud and providing better data analytics in real-time.
These products are designed to deliver smarter and more trusted communications, which is key to unlocking more value for our customers.
Furthermore, as we focused on integrating our communications products,
with Segments Products and Contextual Data, I've been excited to see how products like Personalized Virtual Agent leverage Twilio's unified profiles to help brands better understand their customers and make incremental changes to improve the customer experience through every interaction.
Another area driving improved messaging volumes is our platform feature updates that now give customers greater transparency into communications deliverability and engagement.
Within our console, messaging customers now receive a deliverability score with personalized actionable instructions from our AI agent so that they can immediately take action to remediate messaging deliverability errors.
By providing analytics, we're radically simplifying the messaging experience for developers, leading to better engagement and ensuring that the messages they intend to send are delivered error-free.
Speaker Change: In addition to enhancing our current products, in Q3, we released new innovations to support branded communications.
Speaker Change: RCS business messaging went into public beta, which is key for brands who want to deliver a more custom, personalized experience.
In a recent Twilio survey, we found that 75% of consumers who received a branded text said it increased their trust in the communication.
and many more. Thank you. Thank you.
Speaker Change: RCS Business Messaging improves the branded experience through rich content and interactive messaging features including carousels, high-quality media, content cards, and location sharing.
Customers like Fresha have deployed RCS capabilities to build brand trust and increase message open rates.
And one of our ISV partners, Hive, will leverage RCS to enhance marketing campaigns for their customers in the live events industry.
driving greater fan engagement and boosting ticket sale conversion rates.
We also saw exciting wins with branded calling, which allows brands to display their name, logo, and call reason when placing calls to customers.
CareSignal, Lightbeam's deviceless remote patient monitoring company, needed a cost-effective way to improve patient pickup rates and achieve health outcomes in the process.
With Twilio branded calling, they've been able to improve call pickup rates by 67% in just three months.
In the future, we expect this type of incremental value will accelerate as we continue to help brands use their contextual data to unlock smarter and more personalized experiences.
Speaker Change: Turning to our Twilio Segment business, Segment delivered revenue of $73 million flat year over year as we continue to focus on and make progress against the priorities we outlined in the operational review earlier this year.
We ended the quarter with an increase in our win rate, both quarter-over-quarter and year-over-year, and a reduction in churn and contraction.
While there is more work to be done, we're encouraged by the progress that we're making and Segment remains part of our long-term strategy, enabling us to differentiate our communications products by infusing contextual data while we continue to innovate for stand-alone CDP buyers.
With respect to product innovation, we continue to enhance our data warehouse interoperability capabilities.
and improve customer time-to-value by graduating many features to GA.
For example, with segment products like Datagraph and Linked Audiences, we are addressing key pain points that our customers are trying to solve, such as removing data silos and disjointed customer profiles.
We have advanced our data warehouse integrations with Databricks, Snowflake, Google BigQuery, and Amazon Redshift so that customers can activate their data in meaningful ways to drive more personalized touchpoints with consumers.
This is an important step in our Unified Profiles offering as we're making it easier for customers to leverage.
their existing data from websites and mobile apps, and combining it with data in their warehouse from systems of record, like CRM, contact centers, or ERP, to deliver personalized emails and communications.
Speaker Change: Aidan Vaniman, Khozema Shipchandler, Aidan Viggiano, Jeffrey Lawson
Our new features and integrations for advertisers to create targeted campaigns began delivering promising results.
First, our Generative Audiences feature that uses Generative AI to create audiences with natural language prompts is significantly reducing the time and resources required to build targeted audiences for customer engagement campaigns.
Speaker Change: Over 25% of our segment CDP customers have already started taking advantage of this new capability in the few weeks it's been made globally available.
As an example, The Motley Fool needed an out-of-the-box integration to help build, manage, and activate audiences.