Q1 2025 Twilio Inc Earnings Call

May 1, 2025

Yeah.

Bryan Vaniman: Good day, and thank you for standing by. Welcome to the Twilio Q1 2025 Earnings 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 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I will now like to hand the conference over to your first speaker today, Bryan Vaniman, Senior Vice President, Investor Relations. Please go ahead.

Speaker Change: Good day and thank you for standing by. Welcome to the Twilio First Quarter 2025 Ernie's call. Welcome to the Twilio Show.

Speaker Change: At this time, all participants aren't a listen only mode. After the speaker's presentation, there will be a question and answer session. That's a question and answer session. You need to press star 11 on your telephone. You then hear an automated message advising your hand is raised. That's a question and answer session. That's a question and answer session. That's a question and answer session.

Bryan Vaniman: Good afternoon, everyone, and thank you for joining us for Twilio's Q1 2025 earnings conference call. Joining me today are Khozema Shipchandler, Chief Executive Officer, Aidan Viggiano, Chief Financial Officer, and Thomas Wyatt, Chief Revenue Officer. As a reminder, we will disclose non-GAAP financial measures on this call. Definitions and reconciliations between our GAAP and non-GAAP results can be found in our earnings release and our earnings presentation posted on our IR website at investors.twilio.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 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: To withdraw your question, please press star 101 again. Please be advised that today's conference is being recorded. I don't know if I can have the conference. Over to you, first speaker today, Brian Vaniman, senior vice president and vice relations, please go ahead. Thank you.

Bryan Vaniman: Good afternoon everyone and thank you for joining us for Twilio's first quarter 2025 earnings conference call Joining me today are Kazema Shipchandler, Chief Executive Officer, Aidan Medjiano, Chief Financial Officer, and Thomas Wyatt, Chief Revenue Officer Aidan Medjiano, Chief Executive Officer,

Bryan Vaniman: We will also make forward-looking statements on this call, including statements about our future outlook and goals.

Bryan Vaniman: Such statements are subject to known and unknown risks and uncertainties that could cause actual results to different materially from those described. .

Bryan Vaniman: 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. With that, I'll hand it over to Khozema and Aidan, who will discuss our Q1 results, and we'll then open the call for Q&A.

Bryan Vaniman: Many of those risks and uncertainties are described in our SEC filings, including our most recent form 10K and our forthcoming form 10Q.

Speaker Change: Four Looking Statements represent our beliefs and assumptions only as of the date such statements are made. We disclaim any obligation to update any four Looking Statements except is required by law. And with that, I'll hand it over to Kazaman Aidan who will discuss our Q1 results and will then open the call for Q&A.

Bryan Vaniman: Thank you, Bryan. Good afternoon, everyone, and thank you for joining us today. Twilio had a strong Q1, reaching $1.172 billion in revenue, a 12% increase year-over-year. This marked another quarter of year-over-year revenue growth acceleration and double-digit growth. We also delivered another solid quarter of non-GAAP income from operations and continued to generate meaningful levels of free cash flow. I'm very pleased with our solid execution in Q1, and I'm encouraged by the momentum we've established to start the year. Our commitment to operating with more rigor, discipline, and focus continues. All things being equal, I feel good about the setup for Q2 and the remainder of the year. Clearly, it's a dynamic macro environment, and while we have not yet seen any notable adverse impacts to our business through the end of April, we're continuing to monitor the situation closely.

Khozema Shipchandler: Thank you, Bryan. Good afternoon, everyone, and thank you for joining us today. Twilio had a strong Q1, reaching $1.172 billion in revenue, a 12% increase year-over-year. This marked another quarter of year-over-year revenue growth acceleration and double-digit growth. We also delivered another solid quarter of non-GAAP income from operations and continued to generate meaningful levels of free cash flow. I'm very pleased with our solid execution in Q1, and I'm encouraged by the momentum we've established to start the year. Our commitment to operating with more rigor, discipline, and focus continues. All things being equal, I feel good about the setup for Q2 and the remainder of the year. Clearly, it's a dynamic macro environment, and while we have not yet seen any notable adverse impacts to our business through the end of April, we're continuing to monitor the situation closely.

Khozema: Thank you, Brian . Good afternoon, everyone, and thank you for joining us today.

Twilio had a strong Q1, reaching 1.172 billion in revenue.

A 12% increase year-of-year. [inaudible]

Khozema: This marked another quarter of your over-year revenue growth acceleration in double-digit growth.

Khozema: We also delivered another solid quarter of non-GAAP income from operations.

and continued to generate meaningful levels of free cash flow.

Khozema: I'm very pleased with our solid execution in Q1, and I'm encouraged by the momentum we've established to start the year.

Khozema: Our commitment to operating with more rigor, discipline, and focus continues.

Khozema: And, all things being equal, I feel good about the setup for Q2 and the remainder of the year.

Bryan Vaniman: In the meantime, we're focused on what's in our control. On the innovation front, we're laser-focused on shipping great products from a single platform that are purpose-built for today and for the future that AI is creating. In go-to-market, we're continuing to make good progress with our key growth levers, including ISVs and self-serve. We also saw solid growth in cross-sell as well as multi-product adoption. And finally, we're focused on taking care of our customers by ensuring the Twilio platform will aid them in creating enriching relationships with their own customers. In fact, recent conversations validate that during these uncertain times, our customers are leaning on the Twilio platform to drive revenue, recognize further operating efficiencies, and ultimately deliver higher ROI. During the quarter, we released a number of new products and introduced new partnerships to help customers realize the full potential of the Twilio platform.

Khozema Shipchandler: In the meantime, we're focused on what's in our control. On the innovation front, we're laser-focused on shipping great products from a single platform that are purpose-built for today and for the future that AI is creating. In go-to-market, we're continuing to make good progress with our key growth levers, including ISVs and self-serve. We also saw solid growth in cross-sell as well as multi-product adoption. And finally, we're focused on taking care of our customers by ensuring the Twilio platform will aid them in creating enriching relationships with their own customers. In fact, recent conversations validate that during these uncertain times, our customers are leaning on the Twilio platform to drive revenue, recognize further operating efficiencies, and ultimately deliver higher ROI. During the quarter, we released a number of new products and introduced new partnerships to help customers realize the full potential of the Twilio platform.

Khozema: Clearly, it's a dynamic macro environment, and while we have not yet seen any notable adverse impacts to our business through the end of April , we're continuing to monitor the situation closely. [inaudible]

In the meantime, we're focused on what's in our control.

Khozema: On the innovation front, laser focused on shipping great products from a single platform that are purpose-built for today and for the future that AI is creating.

Khozema: In Go To Market, we're continuing to make good progress with our key growth lovers, including ISVs and self-serve.

Khozema: We also saw solid growth in cross cell as well as multi-product adoption.

Khozema: And finally, we're focused on taking care of our customers. By ensuring the Twilio platform will aid them in creating enriching relationships with their own customers. [inaudible]

Khozema: In fact, recent conversations validate that during these uncertain times, our customers are leaning on the Twilio platform to drive revenue, recognize further operating efficiencies and ultimately deliver higher ROI. Thank you very much.

Bryan Vaniman: Today, we're at a major inflection point across industries where Twilio is at the center of the technology value chain, helping our hundreds of thousands of active customer accounts capitalize on the profound shifts in the age of AI. For example, our new ConversationRelay product is proving to be a key tool in helping developers easily build AI voice agents. In Q1, we entered into a partnership with ElevenLabs, an AI audio research and deployment company bringing premium, natural-sounding voices to Twilio's ConversationRelay. With this collaboration, brands can now gain access to over 1,000 voices across 40 languages, delivering low-latency, high-fidelity conversational experiences. Cedar, the leading patient financial experience platform for healthcare providers, recently announced that their new AI voice agent, Quora, was built using Twilio's ConversationRelay. With Twilio's technology, Cedar projects Quora will automate 30% of inbound calls by the end of 2025.

Khozema Shipchandler: Today, we're at a major inflection point across industries where Twilio is at the center of the technology value chain, helping our hundreds of thousands of active customer accounts capitalize on the profound shifts in the age of AI. For example, our new ConversationRelay product is proving to be a key tool in helping developers easily build AI voice agents. In Q1, we entered into a partnership with ElevenLabs, an AI audio research and deployment company bringing premium, natural-sounding voices to Twilio's ConversationRelay. With this collaboration, brands can now gain access to over 1,000 voices across 40 languages, delivering low-latency, high-fidelity conversational experiences. Cedar, the leading patient financial experience platform for healthcare providers, recently announced that their new AI voice agent, Quora, was built using Twilio's ConversationRelay. With Twilio's technology, Cedar projects Quora will automate 30% of inbound calls by the end of 2025.

Khozema: During the quarter, we released a number of new products and introduced new partnerships to help customers realize the full potential of the Twilio platform. The Twilio platform.

Today, we're at a major inflection point across industries. [inaudible]

Khozema: Where Twilio is at the center of the technology value chain helping our hundreds of thousands of active customer accounts capitalize on the profound shifts in the age of AI. Thank you very much.

Khozema: For example, our new conversation relay product is proving to be a key tool in helping developers easily build AI voice agents.

Khozema: In Q1, we entered into a partnership with 11 Labs, an AI audio research and deployment company bringing premium natural sounding voices to Twilio's conversation relay. Thank you very much.

Khozema: With this collaboration, brands can now gain access to over 1000 voices across 40 languages.

Delivering low latency, high fidelity, conversational experiences. [inaudible]

Speaker Change: Cedar, the leading patient financial experience platform for healthcare providers recently announced that their new AI voice agent, Kora, was built using Twilio's conversation relay.

Bryan Vaniman: Additionally, ConversationRelay became HIPAA eligible, supporting healthcare use cases. With all the new AI workloads we've released, customers are using these AI-enabled voice capabilities to unlock more value. We also introduced a new Voice Intelligence feature that's powered by generative AI called Generative Custom Operators, which allows brands to use natural language to describe what you want to understand from customer interactions. While it just went into public beta a few weeks ago, we're excited about the opportunity to help customers automate complex tasks, as we've already seen customers deploy a variety of use cases spanning custom call scoring, conversation topic detection, compliance monitoring, and tailored summarization. Twilio continues to receive high praise for our innovation. This quarter, Twilio was recognized as a leader in the IDC MarketScape, Worldwide CPaaS 2025 vendor assessment, and a leader by Omdia for its CDP universe leadership.

Khozema Shipchandler: Additionally, ConversationRelay became HIPAA eligible, supporting healthcare use cases. With all the new AI workloads we've released, customers are using these AI-enabled voice capabilities to unlock more value. We also introduced a new Voice Intelligence feature that's powered by generative AI called Generative Custom Operators, which allows brands to use natural language to describe what you want to understand from customer interactions. While it just went into public beta a few weeks ago, we're excited about the opportunity to help customers automate complex tasks, as we've already seen customers deploy a variety of use cases spanning custom call scoring, conversation topic detection, compliance monitoring, and tailored summarization. Twilio continues to receive high praise for our innovation. This quarter, Twilio was recognized as a leader in the IDC MarketScape, Worldwide CPaaS 2025 vendor assessment, and a leader by Omdia for its CDP universe leadership.

Speaker Change: With Twilio's technology, Cedar projects, Kora will automate 30% of inbound calls by the end of 2025. Additionally, Conversation Relay became HIPAA eligible supporting healthcare use cases.

Speaker Change: With all the new AI workloads we've released, customers are using these AI-enabled voice capabilities to unlock more value.

Speaker Change: We also introduced a new voice intelligence feature that's powered by generative AI called generative custom operators.

Speaker Change: which allows brands to use natural language to describe what you want to understand from customer interactions. [inaudible]

Speaker Change: While it just went into public beta a few weeks ago, we're excited about the opportunity to help customers automate complex tasks. [inaudible]

Speaker Change: as we've already seen customers deploy a variety of use cases spanning custom call scoring.

conversation topic detection, compliance monitoring, and tailored summarization. [inaudible]

Twilio continues to receive high praise for our innovation.

Speaker Change: This quarter, Twilio was recognized as a leader in the IDC market scape, worldwide CPAS 2025 vendor assessment, and a leader by Amdia for its CDP universe leadership. This quarter, Twilio was recognized as a leader in the IDC market and a leader in the IDC market.

Bryan Vaniman: In a few weeks, we're hosting our user conference, Signal, where we'll share more details on our innovations across communications, data, plus AI, and new partnerships that will fuel our aggressive roadmap. The growth acceleration that we delivered in Q1 reflects a combination of continued progress across our key go-to-market levers and the overall broad-based strength of our business. Additionally, we saw customer enthusiasm for our AI products and software add-ons. During the quarter, we had notable wins across Twilio. We landed an eight-figure deal with a leading identity and access management platform to continue leveraging Twilio messaging for two-factor authentication. And we signed a Segment partnership with the Chelsea Football Club, who will use Twilio Segment to create highly personalized experiences for its 615 million-strong global fanbase. During Q1, we saw solid traction with our ISV customers as this cohort delivered another quarter of strong revenue growth.

Khozema Shipchandler: In a few weeks, we're hosting our user conference, Signal, where we'll share more details on our innovations across communications, data, plus AI, and new partnerships that will fuel our aggressive roadmap. The growth acceleration that we delivered in Q1 reflects a combination of continued progress across our key go-to-market levers and the overall broad-based strength of our business. Additionally, we saw customer enthusiasm for our AI products and software add-ons. During the quarter, we had notable wins across Twilio. We landed an eight-figure deal with a leading identity and access management platform to continue leveraging Twilio messaging for two-factor authentication. And we signed a Segment partnership with the Chelsea Football Club, who will use Twilio Segment to create highly personalized experiences for its 615 million-strong global fanbase. During Q1, we saw solid traction with our ISV customers as this cohort delivered another quarter of strong revenue growth.

Speaker Change: and in a few weeks, we're hosting our user conference signal, where we'll share more details on our innovations across communications, data, plus AI, and new partnerships that will fuel our aggressive roadmap. Thank you very much.

Speaker Change: The growth acceleration that we delivered in Q1 reflects a combination of continued progress.

Speaker Change: across our key go-to-market levers and the overall broad-based strength of our business. [inaudible]

Speaker Change: Additionally, we saw customer enthusiasm for our AI products and software add-ons.

Speaker Change: During the quarter, we had notable wins across Twilio. We landed an eight-figure deal with a leading identity and access management platform to continue leveraging Twilio messaging for two-factor authentication.

Speaker Change: and we signed a segment partnership with the Chelsea Football Club who will use Twilio segment to create highly personalized experiences for its 615 million strong global fan base.

Bryan Vaniman: As a result of our superior reliability, ability to scale globally, and value-added software add-ons, we're continuing to see success in landing competitive takeout wins with new ISV customers, including Ylopo, a real estate digital marketing platform that's leveraging Twilio's voice to enhance its calling capabilities, and Textus, an SMS engagement company that has consolidated all of their messaging traffic onto Twilio. In self-serve, we're leveraging AI to help builders get started on our platform faster. This quarter, our AI-enabled technology and automation that we developed in-house drove significant efficiency for our sales team and better experiences for customers. In Q1, we handled 85% of inbound leads with AI and also used ESA, our AI assistant, to serve as a personal concierge post-sales by helping customers set up their accounts and encouraging new customers to upgrade to a paid account.

Khozema Shipchandler: As a result of our superior reliability, ability to scale globally, and value-added software add-ons, we're continuing to see success in landing competitive takeout wins with new ISV customers, including Ylopo, a real estate digital marketing platform that's leveraging Twilio's voice to enhance its calling capabilities, and Textus, an SMS engagement company that has consolidated all of their messaging traffic onto Twilio. In self-serve, we're leveraging AI to help builders get started on our platform faster. This quarter, our AI-enabled technology and automation that we developed in-house drove significant efficiency for our sales team and better experiences for customers. In Q1, we handled 85% of inbound leads with AI and also used ESA, our AI assistant, to serve as a personal concierge post-sales by helping customers set up their accounts and encouraging new customers to upgrade to a paid account.

Speaker Change: During Q1, we saw solid traction with our ISV customers as this cohort delivered another quarter of strong revenue growth.

Speaker Change: As a result of our superior reliability, the ability to scale globally and value added software add-ons were continuing to see success in landing competitive takeout wins with new ISV customers.

Speaker Change: including Yolopo, a real estate digital marketing platform that's leveraging Twilio's voice to enhance its calling capabilities and textus, an SMS engagement company that has consolidated all of their messaging traffic onto Twilio.

Speaker Change: This quarter, our AI-enabled technology and automation that we developed in-house drove significant efficiency for our sales team and better experiences for customers.

Speaker Change: In Q1, we handled 85% of inbound leads with AI, and also used Issa, our AI assistant to serve as a personal concierge post sales.

Bryan Vaniman: As a result, customers that engaged with our AI assistant were 3x more likely to upgrade from a free trial to a paid account. As we continue to make it easier for builders to get started on Twilio, we're seeing AI startups, particularly those with AI voice needs, bring their workloads to us. One example that helps bring this to life is Bland AI, an AI agent platform. The integration provides the scalability and reliability Bland AI needs to support larger and more complex customer engagements. Bland AI originated as a self-serve customer from a single developer signup just a few quarters ago. By leveraging our targeted activation and expansion strategies within self-serve, we've scaled this customer into a significant account. In summary, I'm very pleased with the hard work of our team and our Q1 results and equally excited about the future.

Khozema Shipchandler: As a result, customers that engaged with our AI assistant were 3x more likely to upgrade from a free trial to a paid account. As we continue to make it easier for builders to get started on Twilio, we're seeing AI startups, particularly those with AI voice needs, bring their workloads to us. One example that helps bring this to life is Bland AI, an AI agent platform. The integration provides the scalability and reliability Bland AI needs to support larger and more complex customer engagements. Bland AI originated as a self-serve customer from a single developer signup just a few quarters ago. By leveraging our targeted activation and expansion strategies within self-serve, we've scaled this customer into a significant account. In summary, I'm very pleased with the hard work of our team and our Q1 results and equally excited about the future.

Speaker Change: by helping customers set up their accounts and encouraging new customers to upgrade to a paid account.

Speaker Change: As a result, customers that engaged with our AI assistant were 3X more likely to upgrade from a free trial to a paid account.

Speaker Change: As we continue to make it easier for builders to get starters on Twilio, we're seeing AI startups. Particularly those with AI voice needs bring their workloads to us. [inaudible]

Speaker Change: One example that helps bring this to life is bland.ai, an AI agent platform.

Speaker Change: The integration provides the scalability and reliability, bland AI needs to support larger and more complex customer engagements.

Speaker Change: Blanda AI, originated as a self-serve customer from a single developer sign-up just a few quarters ago. .

Speaker Change: By leveraging our targeted activation and expansion strategies within self-serve, we've scaled this customer into a significant account.

Bryan Vaniman: We're demonstrating that we can drive improved top-line performance with continued operating leverage and strong cash flow while delivering meaningful product innovation. As we continue to execute against our plans, we'll continue to partner with our customers and help them unlock the power of communications, contextual data, plus AI. Now I'd like to turn it over to Aidan, who will walk you through our financial results.

Khozema Shipchandler: We're demonstrating that we can drive improved top-line performance with continued operating leverage and strong cash flow while delivering meaningful product innovation. As we continue to execute against our plans, we'll continue to partner with our customers and help them unlock the power of communications, contextual data, plus AI. Now I'd like to turn it over to Aidan, who will walk you through our financial results.

Speaker Change: In summary, I'm very pleased with the hard work of our team and our Q1 results and equally excited about the future.

Speaker Change: We're demonstrating that we can drive improved top-line performance with continued operating leverage and strong cash flow while delivering meaningful product innovation. Thank you for your attention.

Aidan Viggiano: Thank you, Khozema, and good afternoon, everyone. Twilio had a strong start to 2025, delivering our third consecutive quarter of double-digit revenue growth and year-over-year growth acceleration. For Q1, we generated revenue of $1.172 billion, up 12% year over year, record Non-GAAP income from operations of $213 million, and $178 million of free cash flow. Revenue in our communications business for the quarter was $1.097 billion, up 13% year over year. This was driven by the continued progress we're making across our go-to-market growth levers, including ISVs, self-serve, cross-sell, and international expansion. We also saw strong growth in messaging both in the US and internationally. Segment revenue for the quarter was $76 million, up 1% year over year.

Thank you, Khozema and good afternoon everyone.

Speaker Change: Twilio had a strong start to 2025, delivering our third consecutive quarter of double-digit red new growth and year-over-year growth acceleration. [inaudible]

Speaker Change: Revenue in our communications business for the quarter was 1.097 billion up 13% year-over-year [inaudible]

Speaker Change: This was driven by the continued progress we're making across our go-to-market growth levers, including ISD's self-serve, cross-sell and international expansion.

Aidan Viggiano: We are seeing continued improvement in leading indicator metrics, including AE productivity and win rates, as well as a meaningful reduction in churn, and contraction in the quarter, which hit its lowest level since Q1 2023. Our Q1 dollar-based net expansion rate was 107%, reflecting the improving growth trends we've seen in our communications business over the last several quarters. Our dollar-based net expansion rate for communications was 108%, and the dollar-based net expansion rate for Segment was 94%. We delivered non-GAAP gross profit of $602 million, up 6% year over year. This represented a non-GAAP gross margin of 51.3%, down 270 basis points year over year and 60 basis points quarter over quarter. The year-over-year decline in gross margin was primarily driven by non-recurring hosting credits we received in the year-ago quarter, as well as a higher mix of international messaging revenue, and communications in the quarter.

Speaker Change: We also saw strong growth in messaging, both in the U.S. and internationally.

Speaker Change: Segment revenue for the quarter was 76 million up 1% year-over-year.

Speaker Change: We are seeing continued improvement in leading indicator metrics, including AE productivity and wind rates, as well as a meaningful reduction in turning contraction in the quarter, which hit its lowest level since Q-1 2023 2003.

Speaker Change: Our Q1 dollar-based net expansion rate was 107%. Reflecting the improving 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 108 percent and the dollar-based net expansion rate for segment was 94 percent [inaudible]

Speaker Change: We delivered non-GAAP gross profit of 602 million, up 6% year-rear. This represented a non-GAAP gross margin of 51.3%, down 270 basis points year-over-year, and 60 basis points quarter-over-quarter

Aidan Viggiano: The sequential decline was driven by the acceleration in international messaging in Q1. Despite the mixed effect on gross margins, international unit economics remained strong. Non-GAAP gross margin for Communications was 49.8%, and Non-GAAP gross margin for Segment was 74%. Non-GAAP income from operations came in ahead of expectations at a record $213 million, up 34% year-over-year, driven by strong revenue growth and ongoing cost discipline. Our Non-GAAP operating margin of 18.2% was up 300 basis points year-over-year and 170 basis points quarter-over-quarter. In addition, we generated $23 million in GAAP income from operations. Non-GAAP income from operations for Communications was $277 million, and Non-GAAP loss from operations for Segment was $2 million.

Speaker Change: The year over year decline in Grossmargin was primarily driven by non-recurring hosting credits we received in the year ago quarter, as well as a higher mix of international messaging revenue and communications in the quarter. [inaudible]

Speaker Change: Despite the mixed effects on gross margins, international unit economics remain strong. [inaudible]

Speaker Change: non-GAAP Gross Margin for Communications was 49.8% and non-GAAP Gross Margin for Segment was 74%.

Speaker Change: non-GAAP income from operations came in ahead of expectations at a record 213 million, a 34% year-over-year, driven by strong revenue growth and ongoing cost discipline. [inaudible]

Speaker Change: Our non-GAAP operating margin of 18.2% was up 300 basis points year over year and 170 basis points quarter over quarter.

Speaker Change: In addition, regenerated $23 million in gap income from operations. [inaudible]

Aidan Viggiano: Segment operating losses improved sequentially as a result of ongoing cost discipline and gross margin improvement in the quarter, and we remain on track to achieve break-even non-GAAP income from operations for segment in Q2. Stock-based compensation as a percentage of revenue was 11.9%, down 120 basis points quarter-over-quarter and 330 basis points year-over-year as we continue our efforts to reduce equity compensation. We anticipate a modest increase in this percentage in Q2 due to the timing of our annual refresh grants. We generated free cash flow of $178 million in the quarter despite making a $122 million payment related to the payout of our annual cash bonus program. This headwind was partially offset by strong collections and timing of payments during the quarter.

Speaker Change: non-GAAP income from operations for communications was $277 million, and non-GAAP loss from operations for segment was $2 million.

Speaker Change: Segment operating losses improve sequentially as a result of ongoing cost discipline and gross margin improvement in the quarter and we remain on track to achieve break even non-GAAP income from operations for segment in Q2.

Aidan Viggiano, Bryan Vaniman

Speaker Change: We anticipate a modest increase in this percentage in Q2 due to the timing of our annual refresh grants.

Speaker Change: We generated free cash flow of $178 million in the quarter despite making $122 million payment related to the payout of our annual cash bonus program.

Aidan Viggiano: Finally, in January, our board authorized a $2 billion share repurchase program expiring at the end of 2027, and we are targeting to return an average of 50% of our annual Free Cash Flow to shareholders from 2025 through 2027. We began executing on this program following our Q4 earnings release in February. We repurchased $130 million of shares in Q1, and we executed more than $90 million of additional repurchases in April. Moving to guidance, we're encouraged by the growth acceleration we've delivered over the last three quarters, and as we look ahead, we're optimistic about our ability to execute against the things we can control. We're also mindful of rising macro uncertainty and the potential impact it could have on the health of our customers' businesses and our own.

Speaker Change: This headwind was partially offset by strong collections and timing of payments during the quarter.

Speaker Change: Finally, in January , our board authorized a $2 billion share repurchase program expiring at the end of 2027, and we are targeting to return an average of 50% of our annual free cash flow to shareholders from 2025 through 2027.

Speaker Change: We began executing on this program following our Q4 earnings release in February .

Speaker Change: We repurchased $130 million of shares in the first quarter and we executed more than $90 million of additional repurchases in April .

Speaker Change: Moving to guidance, we're encouraged by the growth acceleration we've delivered over the last three quarters and as we look ahead we're optimistic about our ability to execute against the things we can control.

Aidan Viggiano: As Khozema mentioned, we have not seen any impact on our business through the end of April, and we'll continue to monitor this situation closely. Customer engagement and usage remain healthy, but we're taking a prudent approach to our outlook and only flowing through a portion of our Q1 beat into our full-year outlook, allowing us to navigate any potential macro risk over the balance of the year. For Q2, we're initiating a revenue target of $1.18 billion to $1.19 billion, representing year-over-year growth of 9% to 10%. Based on our Q1 performance and Q2 guidance, we're raising our full-year 2025 organic revenue growth guidance to a range of 7.5% to 8.5%, up from 7% to 8% previously. Turning to our profit outlook.

Speaker Change: and we're also mindful of rising macro uncertainty and the potential impact it could have on the health of our customers' businesses and our own.

Speaker Change: As Khozema mentioned, we have not seen any impact on our business through the end of April and will continue to monitor the situation closely.

Speaker Change: Customer engagement and usage remain healthy, that we're taking a prudent approach to our outlook and only falling through a portion of our Q1 beat into our full year outlook, allowing us to navigate any potential macro risk over the balance of the year.

Speaker Change: For Q2, we're initiating a revenue target of $1.18 billion to $1.19 billion, representing year-over-year growth of 9-10%.

Speaker Change: Based on our Q1 performance in Q2 guidance, we're raising our full year 2025 organic revenue growth guidance to a range of 7.5% to 8.5% up from 7% to 8% previously.

Aidan Viggiano: For Q2, we expect non-GAAP income from operations of $195 million to 205 million, reflecting incremental costs associated with our annual merit increases along with expenses for our Signal conference, which we're hosting later this month. We're also raising our full-year non-GAAP income from operations to the range of $850 million to 875 million. Similarly, we're raising our full-year free cash flow to the range of $850 million to 875 million. I'm very pleased with the accelerated revenue growth we delivered in the first quarter, as well as our ongoing cost discipline that is driving strong profitability and free cash flow. We had a strong start to the year, and we will continue to focus on what we can control as we seek to drive durable revenue growth, continued operating leverage, and strong free cash flow generation throughout 2025. With that, we'll now open it up to questions.

Turning to our profit outlook.

Speaker Change: For Q2, we expect non-Yap income from operations of $195 million to $205 million, reflecting incremental costs associated with our annual merit increases, along with expenses for our signal conference, which we're hosting later this month.

Speaker Change: We're also raising our full-year non-GAAP income from operations to the range of 850 million to 875 million.

Speaker Change: Similarly, we're raising our full-year free cash flow to the range of 850 to 875 million.

Speaker Change: We had a strong start to the year and we will continue to focus on what we can control as we speak to drive durable revenue growth continued operating leverage and strong free cash flow generation throughout 2025. . .

Operator: Thank you. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for a name to be announced. To withdraw your question, please press star 11 again. Please limit yourself to one question and one follow-up. Please stand by. We'll compile the Q&A roster. One moment for our first question. Our first question will come from the line of Meta Marshall from Morgan Stanley. Your line is open. One moment for our next question. Next question will come from the line of Michael Turin from Wells Fargo Securities. Your line is open.

And with that, we'll now open it up to questions.

Speaker Change: Thank you. As a reminder to ask a question, you need to press Star 1-1 on your telephone and wait for a name to be announced. To withdraw your question, please press Star 1-1 again. Please do yourself to one question and one follow up. Please stand by, we can buy the Q&A roster.

One moment for our first question. Thank you.

Speaker Change: Our first question comes line of Meta Marshall from Morgan Stanley . Your line is open.

Michael Turrin: Hey, great. Thanks. Appreciate you taking the question and nice job with the results. I think the overall question is just tied back to some of the items you're mentioning, specifically on drivers of upside to growth in the communications segment you saw in Q1. And then just in terms of lining up what we have Q1 and Q2 with the rest of your guidance, the second half is sort of a more conservative growth assumption. I'm wondering if that's tough comparisons, if there's anything macro embedded there, or just anything else for us just to consider as we work throughout the course of the year and are updating our models accordingly as well. Thank you.

One moment for our next question.

Speaker Change: Next question will come from the Michael Turrin, from Most Fargo Securities, your line is open.

Michael Turin: Very great. Thanks. Appreciate you taking the question and nice job with the results. I think...

Michael Turin: The overall question is just tied back to some of the items you're mentioning specifically on drivers of upside-to-grows from the communication segment you saw in Q1 and then just in terms of lining up what we have Q1 and Q2 at the rest of your guidance

Michael Turin: The second half as sort of a more conservative growth assumption, I'm wondering if that's tough compares that there's anything macro embedded there, just anything else for us just to consider as we work throughout the course of the year and are updating our models accordingly as well. Thank you.

Aidan Viggiano: Sure. Yeah. So in terms of starting with Q1, I'd say it was similar to what we saw in Q4 and Q3. It was our third consecutive quarter of double-digit revenue growth. Messaging, in particular, was strong, both US and internationally. And when you look at it by industry, we saw all of our top five verticals grow: financial services, tech, professional services, retail, and e-commerce. And we saw those trends continue through April. And so you're seeing that kind of influence our guidance for Q2. We're guiding to 9% to 10%. That's up from 8% to 9% last quarter. Now, while customer engagement, usage of our products remain healthy, we are taking a prudent approach to our forecast.

Sure.

Speaker Change: Yeah, so in terms of starting with Q1, I'd say it was similar to what we saw in Q4 and Q3. It was pretty broad in terms of the strength that we saw across the business. It was our third consecutive quarter of double digit revenue growth.

Speaker Change: Massaging in particular were strong, both US and internationally. And when you look at it by industry, we saw all of our top five verticals grow, you know, financial services, tech, professional services, retail, e-commerce. [inaudible]

Aidan Viggiano: We only flow through a portion of our Q1 revenue beat, which we think allows us to navigate macro risks as we think about the balance of the year. To be clear, we're not trying to signal that the second half looks weaker today than it did when we gave guidance a quarter ago. The implied reduction in the second half revenue is simply conservatism related to factors beyond our control. That's kind of what you're seeing there, Michael.

Speaker Change: Now while customer engagement uses of our products remain healthy, we are taking a prudent approach to our forecast and we only flow through a portion of our Q1 revenue beat.

Speaker Change: Which we think allows us to navigate macro risks as we think about the balance of the year.

Michael Turin: To be clear, we're not trying to signal that the second half looks weaker today than it did when we gave guidance a quarter ago. The implied reduction in the second half revenue is simply conservatism related to factors beyond our control so that's kind of what you're seeing there Michael. Thank you very much.

Michael Turrin: Thanks very much.

Operator: Thank you. One moment for our next question. Our next question will come from the line of Nick Altman from Scotiabank. Your line is open.

Nick Altmann: Awesome. Thank you. Khozema, I wanted to ask about the resurgence in voice driven by generative AI. You outlined Conversation Relay, a win with Sierra, and then some new Voice Intelligence features, which is all really interesting. Can you maybe just talk about how you see voice playing out over the medium term? I mean, today, it seems like it's more of a driver on the generative AI-native customer side, but perhaps you're seeing greater interest from some of your long-time customers, which can surface cross-sell opportunities. So any broader thoughts on the resurgence in voice would be great, and just kind of any medium-term, high-level thoughts as you guys start to see kind of more voice traction here. Thank you.

Thanks very much [inaudible]

Thank you, one moment for our next question.

Speaker Change: Our next question, cuffline of Nick Altmann from Scotia Bank. Your line is open.

Awesome. Thank you.

Speaker Change: Khozema, I wanted to ask about the resurgence, the resurgence in boys driven by gender to the eye. You outline conversation real eye.

Speaker Change: Owen with Sierra, and then some new voice intelligence features, which is all really interesting, but he may be his talk about. [inaudible]

Speaker Change: How You See Voice Playing Out Over The Medium Term I mean today it seems like it's more of a driver on the generative AI-nated customer side but perhaps you're seeing

Speaker Change: Greater interest from some of your long-time customers, which can surface, you know, cross-style opportunities. So any broader thoughts on the resurgence in boys would be great and just kind of any medium-term high-level thoughts as you guys start to see kind of more voice traction here. Thank you . . .

Khozema Shipchandler: Yeah. Sure, Nick. I mean, I'd say by and large, today, what you're seeing play out is really animated by AI. Voice still has some of the hangover, right, from robocalling and stuff like that in terms of a pure-play channel. But as it relates to AI, so many of these interactions take place through voice that I think that's what ends up driving a lot of the recent resurgence, a lot of the interest. Obviously, you've got thousands of startups who are building their own voice AI capabilities. And so I think that's pretty exciting and very interesting for the channel. So I think that that is kind of the basis of really what we're seeing. And I think we're seeing it in a number of different pockets.

Speaker Change: Yeah, sure, Nick. I mean, I'd say by and large today what you're seeing play out is really animated by AI.

Speaker Change: As it relates to AI, so many of these interactions take place through voice that I think that's what ends up driving. I think that's what's going on right now.

Speaker Change: A lot of the recent resurgence, a lot of the interest. Obviously you've got thousands of startups who are

Khozema Shipchandler: I think that what's exciting for me about it is that much in the same way that you saw for the preponderance of our business, that's going to end up translating into more meaningful interactions through SMS and email over time as well. So I think voice is interesting, at least right now, and I think it will be for a sustainable period of time. But I think even more interesting is some of the cross-channel applicability that goes beyond that. One last thing I'll add is we talked a little bit about, I think Thomas did during our investor day, about how customers see higher ROI when they use multiples of our products. I think one other anecdote with voice there is that we do see much higher ROI with customers when they're using voice in conjunction with one of our other channels.

Speaker Change: Building their own voice AI capabilities and so I think that's pretty exciting and very interesting.

Speaker Change: for the channel. So I think that that is kind of the basis of really what we're seeing and I think we're seeing it in a number of different pockets. I think that what's exciting for me about it is is that. That's it.

Speaker Change: Much in the same way that you saw for the preponderance of our business, that's going to end up translating into more meaningful interactions through SMS and email over time as well. So...

Speaker Change: I think voice is interesting at least right now and I think it will be for a sustainable period of time but I think even more interesting is...

Speaker Change: Some of the cross-channel applicability that goes beyond that. One last thing I'll add is, you know, we talked a little bit about, I think, Thomas did during an investor day, about how customers see higher ROI when they use multiples of our products, and I think one other...

Khozema Shipchandler: And so we have seen some ongoing and increased, I would say, customer interest along those lines. And so I think that's pretty interesting too. And then finally, as Branded really takes off, I think that's ultimately what becomes the defense against stuff like Robo. And I think that allows the channel to kind of come back overall.

Speaker Change: anecdote with voice there is is that we do see much higher ROI with customers when they're using voice in conjunction with one of our other channels and so we have seen [inaudible]

Speaker Change: Some ongoing and increased I would say customer interest along those lines and so I think that's pretty interesting too and then finally as branded really takes off I think that's ultimately what becomes the defense against stuff like Robo and I think that allows the channel to kind of come back overall. Thank you very much.

Nick Altmann: Great. Thank you.

Operator: Thank you. One moment for our next question. Our next question will come from the line of Meta Marshall from Morgan Stanley. Your line is open.

Meta Marshall: All right. It's got the unmute to work instead of hang up. Appreciate the question. Maybe first question, just can you give a sense of you've seen this uptick in kind of multi-product adoption, just kind of where you're seeing kind of that greatest attach? And then maybe second, just particularly with these ISV relationships expanding and kind of continuing to have better growth kind of internationally, does it change your perspective on kind of what markets internationally are the most attractive? Thanks.

Great, thank you.

Thank you. One moment for an excursion.

Speaker Change: Our next question will confline a Meta Marshall for Morgan Stanley . Your line is open.

Speaker Change: All right. It's got the unmuted to work. It's going to hang up. Appreciate the question. Maybe first question, just can you give a sense of, you know, you've seen this uptick and kind of multi-product adoption, just kind of where you're seeing kind of that greatest attach and then maybe second. Yeah.

Speaker Change: You know, just particularly with these ISV relationships expanding and kind of continuing to have better growth kind of internationally. Does it change your perspective on kind of what markets internationally are the most attractive? Thanks.

Thomas Wyatt: Hey, Mita. It's Thomas Wyatt here. So just to touch on the multi-product adoption, we're seeing it broadly, both in terms of customers adding second and third channels. For example, if they were voice, they're adding messaging, email, and a lot of consolidation of spend there. And the other big area that we're seeing it is the add-on software, the advanced features on our voice products, as well as our messaging, like SMS Pumping Protection and Verify, are growing much faster than the company average. So those combination is really what's driving a lot of the cross-sell and solutions motion. And then in the ISV channel, we're definitely seeing more expansion. Again, another example where Khozema mentioned before around voice, a lot of our ISVs that were primarily messaging customers are now adding voice for customer care use cases, as an example, and broadening out their spend with us.

Speaker Change: Hey, Meta, it's Thomas Wyatt here. So just to touch on the multi-product adoption, we're seeing it broadly both in terms of

Mita: Products as well as our messaging like SMS pumping protection and verify are growing much faster than the company average so those combination is really what's driving a lot of the cross cell and solutions motion.

Speaker Change: And then on the ISV channel, we're definitely seeing more expansion. Again, another example was Khozema mentioned before around voice. A lot of our ISVs that were primarily messaging customers.

Thomas Wyatt: And that's happening in international markets as well as domestically.

Operator: Thank you. One moment for our next question. Our next question will come from the line of Mark Murphy from JP Morgan. Your line is open.

Speaker Change: are now adding voice for customer care use cases as an example in broadening out their spend with us and that's happening in international markets as well as domestically.

Michael Turrin: Thank you. It's nice to see the revenue acceleration in this kind of an environment and coming with the margin expansion. So congrats on that. Khozema, I wanted to ask you on the communications side. It's great to see all these multiple new AI logos, and I think especially Sierra because it's just a coveted logo in a high-growth company. Can you help us understand in a case like that, how exactly are they using Twilio? What I mean is, is it tied to the front end of the launch cycle through authentication, or is it something that's going to align more with ongoing usage, whether it's for Sierra or for other AI companies? And I have a quick follow-up.

Thank you. One moment for the next question.

Mark Murphy: Our next question will come from Mark Murphy, from JP Morgan. Galen is open.

Mark Murphy: Thank you. It's nice to see the revenue acceleration in this kind of an environment.

Speaker Change: and coming with the margin expansion so congrats on that. Khozema, I wanted to ask you on the communication side. It's great to see all these.

Speaker Change: Multiple New AI Logos, and I think especially see area, excuse me, see area, because it's just a coveted logo, and a high growth company, can you help us understand in a case like that? How exactly are the...

Speaker Change: using Twilio. What I mean is it tied to the front end of the launch cycle through authentication or is it something that's going to align with more with ongoing usage? Whether it's for Sierra or for other AI companies that never quick follow up?

Khozema Shipchandler: Yeah. Good question, Mark. So it varies a little bit from customer to customer. I would say that in the majority of use cases, especially as companies are getting started, they are very eager to get their products out into the marketplace. They need infrastructure, and our voice infrastructure is obviously very strong. And because of our well-known brand and our high quality, I think a lot of these AI companies end up attaching themselves to our voice stack. So I would say that that is a very initial kind of entry point where customers attach themselves. Thomas alluded to another one of them, which is once they start using it, a lot of these companies end up being voice AI agents. Voice Intelligence is very powerful in that environment. A lot of these deployments end up being customer care.

Yeah, good question, Mark, so. Let's go.

Speaker Change: It varies a little bit from customer to customer. I would say that...

Speaker Change: In the majority of use cases, especially as companies are getting started, they are...

Speaker Change: and because of our well-known brand and our high quality, I think a lot of these AI companies end up attaching themselves to our voice stack. So, I would say that that is like a very initial kind of entry point where customers attach themselves. Thomas alluded to another one of them, which is...

Khozema Shipchandler: And during the course of those customer care engagements, you obviously do want to learn a lot about those interactions so that you can end up serving your consumer base a lot better over time. And so I think that provides an avenue for us effectively to cross-sell Voice Intelligence and then fundamentally incorporate more of our Segment capabilities over time too. And then I would say kind of the third version of it is, and this is sort of on the other side of the continuum, but increasingly where we're getting excited as well is where a customer, and this is kind of irrespective of channel, but I'll just stick with voice right now, where they're using voice, they're using our unified profile vis-à-vis Segment.

Thomas Wyatt: Once they start using it, a lot of these companies end up being voice AI agents, voice intelligence is very powerful. [inaudible]

Speaker Change: in that environment, like a lot of these deployments end up being customer care.

Speaker Change: During the course of this customer care engagement, you obviously do want to learn a lot about... [inaudible]

Speaker Change: Those interactions so that you could end up serving your consumer base a lot better over time and so I think that provides an avenue for us effectively to cross-cell voice intelligence and then fundamentally incorporate more of our segment capabilities over time too. And then I would say you know kind of the third version of it is and this is sort of on the other side of the continuum but increasingly you know where we're getting excited as well is where you are.

Khozema Shipchandler: And then whether it's our technology, whether it's one of our partners' technology, they're combining it with AI to be able to put their own capabilities out there in the world. And Cedar, which was one of the customer references that we provided this time, I'd say they're a very good example of being able to solve patient care in their environment by using that full string of capabilities.

Speaker Change: a customer, and this is kind of irrespective of channel, but I'll just stick with voice right now.

Speaker Change: where they're using voice, they're using our unified profile vis-a-vis segment.

Speaker Change: And then whether it's our technology, whether it's one of our partners' technology, they're combining it with AI to be able to put their own capabilities out there in the world. And like Cedar, which was one of the customer references that we provided this time, I'd say they're a very good example of being able to solve patient care in their environment by using that full string of capabilities. Thank you very much.

Michael Turrin: Okay. That's very helpful. Then Aidan, I was listening closely to all your comments on the macro environment and appreciate the way you're handling kind of the de-risking going forward. But when we think about transactional volume level, there's obviously a lot of companies having issues: JetBlue, Southwest, Delta, Starbucks, McDonald's, Lululemon. Shipping freight is down. So I mean, I'm just trying to understand, are you not seeing any impact of less consumers taking flights or less people dining out or anything like the transactional confirmation messages, even the marketing messages via email? Because I think you said even in April, are you saying there is some slowdown there? You're just making up for it in some of the stronger vectors.

Okay, that's very helpful, then Aidan...

Aidan: You know, listening closely to all your comments on the macro environment and appreciate the way you're handling kind of the de-risking going forward.

Aidan: But when we think about, you know, transactional volume level, there's obviously, there's a lot of companies having issues, JetBlue, Southwest, Delta, Starbucks, McDonalds, Lulu Levin, you know, shipping freight is down. So, I mean, I'm just trying to understand, are you not seeing...

Aidan: Any impact of less consumers taking flights or less people dining out or anything like the transactional confirmation messages even the marketing messages via email or

Aidan Viggiano: No, we're not seeing a slowdown, Mark. And obviously, different industries make up a different portion of our revenue. I'd say travel tends to be one that's a bit smaller in terms of our overall revenue mix. But we're obviously looking at the business in-depth daily, right? Daily volumes by country, daily volumes by industry, by sales channel, by customer-level kind of trending. So it's really grounded in data, and it incorporates what we're seeing through April. And it's still quite robust. But we know that we're operating in a nuanced environment for sure. And given that, we believe it's prudent to build in a sensible amount of conservatism. And that's what you're seeing in the back half of the year, right? We only flow through a portion of our Q1 revenue beat. We're not yet seeing impacts on our business, but we're watching it very, very closely.

Aidan: Because I think you said even in April or are you saying there is some slowdown there, you're just making up for it in some of the stronger vectors?

Mark Murphy: We're not seeing a slowdown, Mark. Obviously, different industries make up a different portion of our revenue. I'd say travel tends to be one that's a bit smaller in terms of our overall revenue mix, but we're obviously looking at the business in depth daily, daily volumes by country, daily volumes by industry, by sales channel, by customer level kind of trending. Thank you.

Mark Murphy: We know that we're operating in a nuanced environment, you know, for sure. And given that, we believe it's prudent to build an essential amount of conservatism. And that's what you're seeing in the back half of the year, right? We only flow through a portion of our Q1 revenue beat. We're not yet seeing impacts on our business, but we're watching it very, very closely. Thank you very much.

Michael Turrin: Okay. Appreciate it. Thank you.

Operator: Thank you. One moment for our next question. Our next question will come from the line of Alex Zukin from Wolf Research. Your line is open.

Alex Zukin: Hey, guys. Thanks for taking the question. I guess maybe a quick one for me is maybe just double down or double-click on some of the gross margin headwinds that you saw in the quarter. I ask about that because if I look at the delta this quarter between gross profit dollar growth and top-line growth, it's a lot larger than we've seen in the last few quarters. I know that we usually don't kind of talk about guiding to that metric going forward. Just given that divergence, I want to understand, if it's possible, how do we see that trending over the course of the next few quarters such that better kind of appreciating kudos to everything you guys have done on the operating margin front. It's been amazing.

Okay, appreciate it. Thank you.

Thank you. One moment for our next question.

Speaker Change: Our next question will come from the line of Alex Zukin from Wolf Research. Your line is open.

Speaker Change: Hey guys, thanks for taking the question. I guess maybe a quick one for me.

Speaker Change: is maybe just double down or double click on some of the gross margin headwinds that you saw in the quarter. And I asked about that because if I look at the Delta, this quarter between gross profit, dollar growth and top line growth.

Speaker Change: It's a lot larger than we've seen in the last few quarters, so I know that we usually don't kind of talk about guiding to that metric going forward, but just given that divergence, I want to understand if it's possible, how do we see that trending over the course of the next few quarters, such that...

Alex Zukin: But just wanting to understand kind of quality of revenue as we look, quality of revenue dollar growth as we look at the rest of the year, how that should shape and flow based on what you're seeing today.

Better kind of appreciating Aidan. [inaudible]

Speaker Change: Kudos to everything you guys have done on the operating margin front, it's been amazing, but just wanting to understand kind of quality of revenue as we look quality of revenue dollar growth as we look at the rest of the year, how that should shape and float based on what you're seeing today.

Aidan Viggiano: Yeah. Let me describe a little bit what happened on gross margin. So importantly, we continue to be disciplined in the pursuit of the business that we go after, including maintaining price discipline. We look at unit economic threshold, and we shared some of that at our investor day earlier this year. The lower gross margins in the quarter were primarily a function of two things. So we had some non-repeat of hosting credits that occurred in the first quarter of last year. Then we had higher international messaging mix. That's a growth priority for Thomas and the team. We know that we're underpenetrated from an international perspective. So that's a focus for the team. We saw good performance there in the quarter.

Speaker Change: Yeah, let me describe a little bit what happened on Gross Margin, so...

Speaker Change: Importantly, we continue to be disciplined in the pursuit of the business that we go after including maintaining price discipline. And we look at unit economic threshold and we shared some of that at our investor day earlier this year.

Speaker Change: The lower gross margins in the quarter were primarily a function of two things. So we had some non-repeat of hosting credits that occurred in the first quarter of last year. And then we had higher international messaging mix. And that's a growth priority for Thomas and the team. We know that we're under penetrated from an international perspective. Good show.

Aidan Viggiano: In particular, we saw that this is the first quarter in over two years where international termination mix increased year-over-year versus the US. So you're seeing that kind of impact the gross margins. As we think about it going forward, so long as messaging makes up more than half of our revenue, it's going to be the primary driver of gross margins in any given quarter. Over time, as we cross-sell into non-messaging products, as we continue to innovate, we do think there's the opportunity to expand to higher gross margins. But in the near term, messaging will be the factor. And it's really a function of where our customers are terminating their messages, which we don't have control over.

Speaker Change: That's a focus for the team, and we saw good performance there in the quarter. And in particular, we saw that this is the first quarter and over two years were international termination that increased year over year versus the US. So you're seeing that kind of impact the growth margins. [inaudible]

as we think about it going forward.

Speaker Change: You know, so long as messaging makes up more than half of our revenue, it's going to be the primary driver of Gross margins in any given quarter.

Speaker Change: Over time, as we cross sell into non-messaging products, as we continue to innovate, we do think there's an opportunity to expand to higher-growth margins but in the near term, like messaging will be the factor and it's really a function of where our customers are terminating their messages which we don't have control over. [inaudible]

Alex Zukin: Got it. Then just any trends to kind of walk through in terms of how to shape that for the rest of the year?

Aidan Viggiano: Yeah. We don't guide to gross margins. So there will be a little bit of variability quarter-over-quarter. I'll just say again, it comes down to messaging and termination mix. But we don't give a forecast on gross margins.

Speaker Change: God and then just any trends to kind of walk through in terms of how to shape that for the rest of the year. [inaudible]

Alex Zukin: Got it. Thank you, guys.

Operator: One moment for our next question. Our next question will come from the line of Joshua Rayleigh from Needham. Your line is open.

Speaker Change: We don't guide to growth margins, so there will be a little bit of variability quarter of a quarter I'll just say again it comes down to messaging and determination next but we don't give up forecast on growth margins. [inaudible]

Michael Turrin: Yeah. Thanks for taking my questions here. So I guess, what are you seeing in terms of carrier support for RCS messaging outside the US versus here domestically? And maybe any thoughts on how this channel will scale between the US and international markets?

Joshua Reilly: Yeah. Thanks for taking my questions here. So I guess, what are you seeing in terms of carrier support for RCS messaging outside the US versus here domestically? And maybe any thoughts on how this channel will scale between the US and international markets?

Gotta thank you guys.

One moment for our next question.

Speaker Change: Our next question will come from the line of Joshua Rayleigh from Needham. Your line is open.

Joshua Raley: Yes, thanks for taking my questions here. So I guess, you know, what are you seeing in terms of carrier support for RCS messaging outside the US versus here domestically? And maybe any thoughts on how this channel will scale between the US and international markets?

Khozema Shipchandler: Yeah. I think it's relatively early days still. I think we're investing, from our perspective, in the channel. We are seeing a little bit of customer adoption. My guess is that you personally don't receive a lot of RCS-capable messages sort of in the rich context that has been promised. I mean, they're labeled a little bit differently, especially on an Android device. But in terms of the rich capabilities, those aren't really coming across yet. I think they're compelling, obviously, if they really start to kind of take off. And I think we are seeing some instances in which, when you pair it both with branding as well as some of those rich capabilities, it does deliver a pretty awesome experience. All of that said, I think that from our perspective, we're cautiously optimistic about the way that that ends up contributing over time.

Joshua Raley: Yeah, I think it's relatively early days still. I think we're investing from our perspective in the channel. We are seeing a little bit of customer adoption. My guess is that you personally don't receive a lot of RCS capable messages sort of in the rich context that

Joshua Raley: Has been promised. I mean, they're labeled a little bit differently, especially on an Android device, but in terms of the rich capabilities, those aren't really coming across yet. That's it.

Joshua Raley: I think they're compelling obviously if they really start to kind of take off and I think we are seeing some instances in which...

Khozema Shipchandler: I think it's really the ecosystem that's got to mature. Carrier support is in different places, I would say. Apple is in a slightly different place in terms of the way that it ends up working with iOS. And so I think until such time that there's broad supportability from carriers, which there's not yet, until there's kind of broad support from various other technology ecosystem partners, which there's not yet, I think it's still going to be relatively muted. But I think over time, there's potential there. And again, we've talked to a number of investors about this over the years. We're cautiously optimistic. I do think Twilio, with communications data and AI, is well-positioned when that time comes. But that's kind of where we are today.

Joshua Raley: The Deliver a pretty awesome experience. All of that said, I think that from our perspective, [inaudible]

Joshua Raley: We're cautiously optimistic about the way that that ends up contributing over time. I think it's really the ecosystem that's got a mature carrier support is in different places I would say. Thank you very much.

Joshua Raley: Apple is in a slightly different place in terms of the way that it ends up working with iOS and so I think in till such time that

Joshua Raley: There's broad supportability from carriers which there's not yet until there's kind of broad support from...

Joshua Raley: Various other technology ecosystem partners which there's not yet I think it's still going to be relatively muted but I think over time there's potential there and again you know we've talked to a number of investors about this over the years we're cautiously optimistic

Michael Turrin: Got it. That's helpful. And then just a quick follow-up on Free Cash Flow. How should we think about the linearity for the balance of the year here and any factors we should be considering as we balance out our models? Thanks, guys.

Joshua Raley: I do think Twilio with communications data and AI is well positioned when that time comes, but that's kind of where we are today.

Aidan Viggiano: Yeah. So as it relates to free cash flow, we increased our guidance range for the year by $25 million. So it's $850 million to $875 million. We delivered $175 million in the first quarter. It was slightly better than expected, but a relatively lower cash quarter just given the timing of our bonus payout. As we think about Q2, we would expect we did see some working capital tailwinds in Q1. That was what drove kind of the slightly better-than-expected performance. I'd expect some of that to come back in Q2. So I would expect Q2 free cash flow to be more in line with Q2 non-GAAP income guidance. And then as we think about the balance of the year, you could obviously then do the math on what it implies for the second half, given the $850 million to $875 million for the year.

Joshua Raley: Got it, that's helpful, and then just a quick follow up on free cash flow. How should we think about the linearity for the balance of the year here in any factor we should be considering as we balance out our models? Thanks guys.

Speaker Change: Yeah, so as it relates to pre-cash flow, we increased our guidance range for the year by 25 million, so it's 850 to 875, we delivered $175 million. In the first quarter it was slightly better than expected, but a relatively lower cash quarter just given the timing of our bonus payout. [inaudible]

as we think about Q2.

Speaker Change: We would expect, we did see some working capital tailwinds in Q1, that was what drove kind of the slightly better than expected performance. I'd expect some of that to come back in Q2. So I would expect Q2 free cash flow to be more in line with Q2 non-GAAP income guidance. [inaudible]

Michael Turrin: Understood. Thank you.

Aidan Viggiano: Yep.

Speaker Change: and then as you think about the balance of the year, you know, you could obviously then do the math on what implies for the second half, given the 8.50 to 8.75 for the year. [inaudible]

Operator: One moment for our next question. Our next question will come from the line of Samad Samana from Jefferies. Your line is open.

Billy Fitzsimmons: Hey, guys. This is Billy Fitzsimons on for Samad. A two-part question here. First, it's been a little over 2 years since we saw this level of active customers added quarter over quarter. Can we kind of break down what's driving that? Khozema, was that primarily a result of the AI self-serve investments you made and called out in the prepared remarks? Was that ISV momentum, was that strength with adding new logos, something else, or kind of all of the above? And then second, and kind of expanding on that, and I'm not asking for guidance here, just generally and qualitatively, to what extent did the macro dynamics in early April, so early Q2, that we're seeing other companies call out impact or not impact the momentum you're seeing with getting new customers on the platform?

Understood, thanks, thank you.

Yep. One moment for the next question.

Speaker Change: Our next question will come from Lionel Samad Samana from Jeffries, Your Line Is Open.

Speaker Change: Again, this is Billy Fitzsimmons on for Samad, a two-part question here. First, it's been a little over two years since we saw this level of active customers added quarter over quarter.

Speaker Change: Can we kind of break down what's driving that? Khozema was that primarily a result of the AI self-serve investment you made in and called out in the prepare remarks with that ISV momentum, with that strength of adding new logos, something else or kind of all of the above? What's going on here?

Speaker Change: and then second and kind of expanding on that and I'm not asking for guidance here just generally and qualitatively.

Khozema Shipchandler: Hey, Billy. This is Thomas here. I just want to touch on the first part of the question, which is where we're seeing the customer growth. Absolutely, we are really pleased with the growth we had in the quarter, although we have 300,000-plus customers. So a lot of our revenue comes from the existing customer base. But we've seen the self-service channel is really accelerating. We touched about a lot of the reasons why. Some of that is the AI startups. Some of it is just a lot of people are building more voice-enabled applications, and they're using Twilio to do it. Some of those are larger direct customers of ours as well that are new. So our new business machine is working better than it's been in years. So we're pretty excited about the momentum from a customer's perspective.

Speaker Change: To what extent did the macro dynamics in early April , so early second quarter, that were seeing other companies call out, impact or not impact the momentum you're seeing with getting new customers on the platform.

Speaker Change: Hey Billy, this is Thomas here. I just want to touch on the first part of the question, which is the...

Speaker Change: where we're seeing the customer growth and absolutely we are really pleased with the...

Speaker Change: The growth we had in the quarter, although you know we have 300,000 plus. [inaudible]

Speaker Change: We've got customers, so a lot of our revenue comes from the existing customer base but we've seen that the self-service channel is really accelerating and we've talked about a lot of the reasons why. Some of that is the AI startups and some of it is just. [inaudible]

Speaker Change: A lot of people are building more voice-enabled applications and they're using Twilio to do it and some of those are larger direct customers of ours as well that are new business machine is working better than it's been in years and so we're pretty excited about momentum from customers perspective. .

Aidan Viggiano: Yeah. And as it relates to April, I'll just kind of reiterate what I said before. We're looking at the business on a number of different dimensions. We're really not seeing any kind of slowdown relative to the macro. It's grounded in data through yesterday, and it incorporates kind of, again, country views, industry views, customer-level views. So that's the latest we have. We're continuing to monitor it daily, just given the usage-based nature of our business. But there's really not anything I'd specifically call out through April.

Speaker Change: Yeah, and as it relates to April , I'll just kind of reiterate what I said before, we're looking at the business on a number of different dimensions.

Speaker Change: We're really not seeing any kind of slowdown relative to the macro.

Speaker Change: You know, it's grounded in data through yesterday and it incorporates kind of, again, interviews, industry reviews, customer level views.

Michael Turrin: Perfect. Thank you very much.

Speaker Change: So that's the latest we have. We're continuing to monitor it, monitor it daily, just given the uses page nature of our business but there's really not anything I'd specifically call out through April . April .

Operator: One moment for our next question. Our next question will come from the line of Jim Fish from Piper Sandler. Your line is open.

Alex Zukin: Hey, guys. Thanks for the questions here. One of your ISVs announced their own CDP solution, and it kind of brings in the coopetition question. I guess, how are you framing this relationship now in that it won't disrupt the Segment strategy while keeping everybody happy on the API side of things?

James Fish: Hey, guys. Thanks for the questions here. One of your ISVs announced their own CDP solution, and it kind of brings in the coopetition question. I guess, how are you framing this relationship now in that it won't disrupt the Segment strategy while keeping everybody happy on the API side of things?

Perfect, thank you very much.

One moment for our next question.

Speaker Change: Our next question will come flying out of a Jim Fish from Pipe Percentler. The line is open.

Jim Pitfish: Hey guys, thanks to the questions here. One of your ISVs announced their own CEP solution and it kind of brings in the co-option question I guess. How are you framing this relationship now and that it won't disrupt the segment strategy while keeping everybody happy on the API side of things?

Khozema Shipchandler: I don't think it's going to disrupt it much, honestly. I think there's always been coopetition in the space in a number of different ways. I just don't think it's a material dynamic in the way that we think about the business. I don't think it's material in the way that we think about our forecasts with customers. It's obviously our job to make sure that we're providing compelling solutions. But in terms of impact, I think it'd be pretty de minimis.

Please see the complete disclaimer at https://sites.google.com

Jim Pitfish: I don't think it's going to disrupt it much honestly. Like I think there's always been co-opitation in the space in a number of different ways. And I just don't think it's like a material dynamic in the way that we think about the business. I don't think it's material in the way that we think about our forecasts with customers. And you know, it's obviously our job to make sure that we're providing compelling solutions. But in terms of impact, I think it'd be pretty de minimis.

Alex Zukin: Got it. And Aidan, for you, just on capital use here, we're roughly $2 billion net cash. You guys have said, "Hey, we want to be smart about how we use it and kind of earn the right around M&A." But as you think about that international arena around messaging in particular, does it start to make sense to look into tuck in there to get you a stronger foothold internationally on the message routing side? Or how are you thinking about even accelerating the buyback opportunity given sort of the market reset? Thanks, guys.

Jim Pitfish: Got it, and Aidan for you, just on capital use here, we're roughly $2 billion in that cash.

Speaker Change: You guys have said, hey, we want to be smart about how we use it and kind of earn the right around M&A. But as you think about that international arena around messaging in particular, does it start to make sense to look into tuck in there to get you a stronger foothold internationally on the message routing side? Or how are you thinking about even accelerating the buyback opportunity given sort of the market reset? Thanks, guys.

Aidan Viggiano: Yep. So from a buyback perspective, we've been out in market. We've, to date, year to date, I'd say, purchased $220 million plus, maybe $225 million worth of shares back. We have some flexibility in the timing of that as it relates to the $2 billion authorization that goes through 2027. So we're in market, and we disclose those numbers. So we'll continue forward there so long as we think it makes sense and is attractive for the company. From an M&A perspective, we kind of talked about it at investor day as well. We're being opportunistic from an M&A perspective. There's nothing in particular that we'll signal today or call out. We're always looking at what might make sense for the business. But we'll be disciplined, really focused more right now on kind of tech or talent tuck-ins that help accelerate our roadmap.

Speaker Change: Yeah, you know, so from a buyback perspective, you know, we've we've been out in market, we've to date your to date I'd say purchased you know 220 million dollars plus I mean 225 million dollars worth of

Speaker Change: Shares Back, you know we have some flexibility in the timing of that as it relates to the $2 billion authorization that goes through 2027 so we're in market and we disclose those numbers so we'll continue forward there so long as we think it makes sense and is attracted for the company. Thank you very much.

Speaker Change: You know, from an M&A perspective, we kind of talked about it. [inaudible]

Speaker Change: at Investor Day as well. We're being opportunistic from an M&A perspective. There's nothing in particular that we'll signal today or call out. We're always looking at what might make sense for the business, but we'll be disciplined. And...

Aidan Viggiano: But nothing more really to offer beyond that today, Jim.

Alex Zukin: Got it. Thanks.

Operator: Thank you. One moment for our next question. Our next question will come from the line of Arjun Bhatia from William Blair. Your line is open.

Speaker Change: I'm really focused more right now on kind of tech or talent tuck-ins that help accelerate our road map, but nothing more really to offer beyond that today, Jim.

Alex Zukin: Perfect. Thank you. And yeah, congrats on my start to the year. One question for you, Khozema. If we just zoom out for a second, I think Twilio has evolved quite a bit over the past several years. Now, if we go into this more volatile macro environment and we do start to see consumption trends and transactional volumes get impacted, how should we think about Twilio in terms of the use cases that you're powering now? What portion, whether qualitatively or quantitatively, is more sticky, more strategic, more recurring versus a portion of your usage that's maybe a little bit more susceptible to macro, maybe something like factor authentication? I'm curious how you would break apart the business along those two dimensions there.

Arjun Bhatia: Perfect. Thank you. And yeah, congrats on my start to the year. One question for you, Khozema. If we just zoom out for a second, I think Twilio has evolved quite a bit over the past several years. Now, if we go into this more volatile macro environment and we do start to see consumption trends and transactional volumes get impacted, how should we think about Twilio in terms of the use cases that you're powering now? What portion, whether qualitatively or quantitatively, is more sticky, more strategic, more recurring versus a portion of your usage that's maybe a little bit more susceptible to macro, maybe something like factor authentication? I'm curious how you would break apart the business along those two dimensions there.

Thanks.

Thank you, one moment for next question.

Speaker Change: The next question will come flying off Arjun Bhatia from William Blair. The line is open.

Arjun Bhatia: Perfect, thank you and congrats on my start of the year. One question for you because if we just zoom out for a second, I think Twilio has evolved quite a bit over the past several years.

Arjun Bhatia: Now, if we go into this more volatile macro environment and we do start to see consumption trends and then transactional volumes get impacted.

How should we think about Twilio in terms of... [inaudible]

Arjun Bhatia: More sticky, more strategic, more recurring, versus the portion of your usage, that's maybe a little bit more susceptible to macro, maybe something like defector authentication, I'm curious how you would break apart the business along those two dimensions there.

Khozema Shipchandler: Yeah. It's a fair question. I mean, I guess I'll give you as much color as I can. I think, first of all, just to kind of reiterate a point that Aidan's made a few times, at least through April, we haven't really seen any impacts to the business. No one here is pretending that there wouldn't be any impacts if the economy kind of went in a really different direction. But at least based on the trends that we're seeing in our business, we're just not seeing it materialize yet. I think there's going to be puts and takes depending on how it plays out. I mean, I think the one thing, and this is not the perfect analogy, so just bear with me.

Yeah, it's a fair question. I mean, I guess...

Arjun Bhatia: I'll give you as much color as I can. I think first of all just to kind of reiterate a point that Aidan's made a few times. It's like...

Arjun Bhatia: At least through April , we haven't really seen any impacts to the business. No one here is pretending that...

Arjun Bhatia: You know, we it would be not a that there wouldn't be any impacts if you know the economy kind of went in a really different direction but at least based on the trends that we're seeing in our business like we're just not seeing it.

Khozema Shipchandler: But if you look back to what transpired during COVID, and a lot of companies were forced to change their engagement models and the ways in which they were kind of deploying, we were obviously a beneficiary of that. Now, a lot of that was driven by moving from sort of the physical world to the digital world. But the reality is that companies have to engage with their customers in some form or fashion to be able to sustain their own businesses, right? And so to the extent that we're super tied to transactional volumes and those begin to fall, yeah, I mean, I think we would probably see an impact to our business in some ways.

Arjun Bhatia: It materialized yet. I think there's going to be puts and takes, depending on how it plays out. I mean, I think...

Arjun Bhatia: The one thing, and it's not the perfect analogy to just bear with me, but...

Arjun Bhatia: If you look back to what transpired during COVID and a lot of companies were forced to change...

Arjun Bhatia: They're engagement models and the ways in which they were kind of deploying like you know we were obviously a beneficiary of that now a lot of that was driven by moving from sort of the physical world to the digital world but the reality is is that we're going to be able to do that.

Arjun Bhatia: companies have to engage with their customers in some form or fashion to be able to sustain their own businesses, right? And so to the extent that we're super tied to transactional volumes and those begin to fall, yeah, I mean, I think we would probably see an impact to our business in some ways.

Khozema Shipchandler: On the other hand, I do think that there's also an opportunity for, especially in the age of AI, right, as a lot of things are starting to happen, there's also an opportunity for elevated volumes as it relates to things like customer care, where you're using a combination of voice, our unified profile, and some AI to kind of activate. So I think it's kind of balanced going forward. I mean, we're innovating on sort of the basis that the macro is going to be hard to call, and we're going to kind of plan for the things that are under our control. But I think it's a mixed bag. And I do think that there are going to be some puts and takes. And we're not macroeconomists ourselves. And so that's why we're watching it all carefully. But so far, so good.

Arjun Bhatia: On the other hand, I do think that there's also an opportunity for, especially in the age of AI, right, as a lot of things are starting to happen. There's also an opportunity for elevated volumes as it relates to

Arjun Bhatia: You know, things like customer care where you're using a combination of voice and our unified profile and some AI to kind of activate. [inaudible]

Arjun Bhatia: So, I think it's kind of balanced going forward. I mean, we're innovating on sort of the basis that

Arjun Bhatia: You know, the macro is going to be hard to call and we're going to kind of plan for the things that are under our control . . . .

Khozema Shipchandler: I think based on the stuff that we've got, I think there's a real opportunity for it to kind of play out in that way too. All of that said, we obviously put out a financial framework, and we feel pretty good about it. We're going to make sure that we manage the business with discipline. You'll continue to see that from us going forward.

Arjun Bhatia: But I think it's a mixed bag and I do think that there are going to be some puts and takes and you know we're not macro economists ourselves and so that's why we're watching it all carefully but you know so far so good and I think based on the stuff that we've got

Arjun Bhatia: I think there's a real opportunity for it to kind of play out in that way too. All of that said, we obviously put out a financial framework and we feel pretty good about it and we're going to make sure that we manage the business with discipline and you'll continue to see that from us going forward.

Alex Zukin: Okay. Perfect. Yep. That's helpful. Thank you. And then just maybe a question on the cross-sell motion. Clearly, it's something you're focusing on, and you're incentivizing your sales team to go after that motion. I'm curious how the sales team is reacting to it, how well-equipped you feel they are to sell other products like Verify and others, and how that's impacting the size of customer that you're going after, your move up market into the enterprise. Any color there would be helpful. Thank you.

Speaker Change: Okay, perfect. That's helpful. Thank you. And then just maybe a question on the cross-on-motion fairly, you know, something you're focusing on and you're incentivizing. Thank you very much.

Speaker Change: Jaluria, your sales team to go after that. Motion curious how the sales team is reacting to it, how well equipped.

Khozema Shipchandler: Yeah. So this is definitely a multi-year journey that we're on around cross-sell motion. We just get better at it every quarter incrementally. A lot of it is starting with enablement and making sure that all of our AEs are ramped up on all of the products in the portfolio. And more importantly, though, customers are coming inbound and have demand and interest in consuming more of Twilio across multiple channels, across some of our advanced add-ons and the features. So that actually makes it pretty easy for the AEs to be able to have those conversations. And then from an R&D perspective, we're putting a lot of investment into integrating the technologies more deeply together to make the experience more frictionless. So like I said, we're seeing really strong growth in the most popular mature add-ons that we have around Voice Intelligence, Verify, and SMS Pumping Protection.

Speaker Change: and others and how that's impacting the size of customer that you're going after you move up market into the enterprise. Any color there would be awful. Thank you.

Speaker Change: Yeah, so this is definitely a multi-year journey that we're on around cross-cell motion. We just get better at every quarter incrementally. A lot of it is starting with enablement and making sure that all of our AEs have...

Speaker Change: Across some of our advance add-ons in the future, so that actually makes it pretty easy for the AES to be able to have those conversations.

Speaker Change: and then from an R&D perspective, we're putting a lot of investment into integrating the technologies. [inaudible]

Khozema Shipchandler: We're really excited about bringing personalization in as well from our unified profile capability and connecting that to use cases like we've talked about around voice, conversational relay, and AI assistance. We're pretty pleased, but it's a multi-year journey. We think this is one of the most, I think, productive growth levers we have over the next three years.

Deep, more deeply together to make the experience more frictionless. So,

Speaker Change: Like I said, we're seeing a really strong growth and the most popular mature add-ons that we have around voice intelligence

Speaker Change: Our Unified Profile Capability, and connecting that to use cases like we talked about around voice and conversational relay and AI assistance. So, we're pretty pleased, but it's a multi-year journey, but we think this is one of the most I think productive growth levers we have over the next three years. Thank you very much.

Alex Zukin: Got it. Perfect. Thank you very much.

Operator: Thank you. And as a reminder, that's star 11 for questions, star 11. Our next question will come from the line of Patrick Walravens from Citizens. Your line is open.

Billy Fitzsimmons: Oh, great. Thanks. And congratulations on the third quarter of acceleration. So at Investor Day, you shared with us that for Q3, hopefully, I have this right, growth by product was led by email at 11%, smaller products at 10%, messaging 8%, and voice 6%. And then growth by industry was led by retail 14%, healthcare 13%, financial services 12%, professional services 12%, and IT 10%. I was just wondering if you could share with us how those things have changed.

Patrick Walravens: Oh, great. Thanks. And congratulations on the third quarter of acceleration. So at Investor Day, you shared with us that for Q3, hopefully, I have this right, growth by product was led by email at 11%, smaller products at 10%, messaging 8%, and voice 6%. And then growth by industry was led by retail 14%, healthcare 13%, financial services 12%, professional services 12%, and IT 10%. I was just wondering if you could share with us how those things have changed.

Thank you very much.

Speaker Change: Thank you. As a reminder that Star 1-1 for questions, Star 1-1. Our next question to go for a line of Patrick Walravens from Citizens. Your line is open.

Speaker Change: So at the investor day, you shared with us that for Q3. [inaudible]

Speaker Change: Hopefully I have this right. Growth by product was led by email 11% smaller products at 10 messaging 8 and voice 6.

Aidan Viggiano: Yeah. So those were Q3 LTM. We don't provide those quarter-over-quarter. We do provide products.

Speaker Change: And then growth by industry was led by retail 14 health care 13 natural services 12. .

Billy Fitzsimmons: Yeah. No, I don't expect the numbers. Just if the orders change.

Speaker Change: Special Services, 12 and 19, 10. I'm just wondering if you could share with us how those things have changed?

Aidan Viggiano: Yeah. I would say that on the industries, we saw strength in those top five. We called out our top five communications verticals. You mentioned them: technology, financial services, professional services, healthcare, and then retail and e-commerce. In Q1, they all grew very well. From a product perspective, I'd say messaging was in particular very strong this quarter. We saw both US and international messaging grow quite well. Beyond that, I would say pretty much in line with what you saw at Investor Day.

Speaker Change: Yeah, so those were Q3, LTM. We don't provide this quarter to quarter. We do provide. Yeah, I don't expect a number. It's just, you know, it's the order of things. Yeah.

Speaker Change: Yeah, I would say that on the industries we saw strength in those top five. So we called out our top five communications verticals. You mentioned them technology, financial services, professional services, health care, and then retailing commerce. [inaudible]

Speaker Change: and in the first quarter, they all grew very well. From a product perspective, I'd say messaging was in particular very strong this quarter, and we saw both US and international messaging grow quite well. So beyond that, I would say pretty much in line with what you saw at investor day. [inaudible]

Alex Zukin: Awesome. Thank you, Aidan.

Billy Fitzsimmons: And I think that. Oh, go ahead.

Bryan Vaniman: Aidan, one more point I think it's worth noting. We've talked a lot about the growth of self-service in the quarter, which was excellent. But also large deals in the quarter. Our communications business in particular, 500,000 plus customers grew 37% year-over-year. So that's another good motion that we're seeing as well.

Speaker Change: One more point I think it's worth noting. We've talked a lot about the growth of self-service in the quarter which was excellent but also large deals.

Billy Fitzsimmons: Actually, Thomas, this is for you. How should investors think about competition? When you have these big deals, how does the competition play out?

Speaker Change: in the quarter, our communications business particular, 500K plus customers grew 37% year over year, so that's another grid motion that we're seeing as well.

Khozema Shipchandler: I think it's interesting because from a Twilio perspective, competitors, depending on what channel you are talking about, may be different. And so a lot of the conversations that when we have around platform and how Twilio can be a partner for the largest brands, we're having a conversation that spans multiple channels and a set of software capabilities that are differentiated. For example, if you want to personalize your communications, really, there isn't any other player that can do that with the combination of what Segment can do plus the communication channels that we do have. So when we think about it, there's always going to be the tactical competitors and individual channels. But our strategy is to really tell the bigger story and differentiate through the capabilities that are more broad. And that sets us up for above-average win rates against our competitors.

Speaker Change: And actually, Tom, maybe this is for you. So how should investors think about competition? So when you have these big deals, you know, how does the competition play out? [inaudible]

Speaker Change: I think it's interesting because from a Twilio perspective, competitors depending on what channel you are talking about may be different. And so a lot of the conversations that when we have around platform and how Twilio can be a partner for our largest brands, we're having a conversation that spans multiple channels and a set of software capabilities that are differentiated. For example, if you want to personalize your communications, really there isn't

Speaker Change: and any other player that can also do that with the combination of, you know, segment can do plus the communication channels that we do have. So when we think about it, you know, there's always going to be the tactical competitors and individual channels but our strategy is to really tell the bigger story and differentiate through the capabilities that are more broad and that sets us up for above average win rates against our competitors. Thank you very much.

Billy Fitzsimmons: Okay. Thank you both.

Operator: Thank you. One moment for our next question. Our next question will come from the line of Michael Funk from Bank of America. Your line is open.

Michael Funk: Great. Hi. Yeah, this is Matt from Mike. Appreciate you taking the question. And congrats on the strong start of the year. Maybe just one for Khozema. Voice, obviously, transactional, and then email, more marketing-driven. But can you help us better understand the breakdown of use case mix across transactional versus marketing in the messaging product line? Thanks.

Okay, thank you both.

Thank you, one moment for our next question.

Ittai

Michael Funk: Our next question will confline the Michael Funk from Bank of America. Your line is open.

Aidan Viggiano: Yeah. So we haven't given that number. What we've said historically, this is Aidan, by the way, Matt. Not that you couldn't tell that from the email voice, but we've said it's roughly kind of evenly split between verification use cases, customer notification-type use cases, as well as marketing. So it's roughly 1/3, 1/3, 1/3. And that's kind of roughly the same today.

Michael Funk: Email More Marketing Driven, but can you help us better understand the breakdown of use case mix across transactional versus marketing in the messaging product line? Thanks

Thank you.

Michael Funk: Yeah, so we haven't given that, when we set it historically, this is Aidan, by the way, Matt.

Michael Funk: Understood. Thank you.

Operator: Thank you. And with that, this concludes the question-and-answer session. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone, have a great day.

On, Thunderstead, thank you.

Michael Funk: Thank you. And with that, this concludes the question and answer session. Thank you for your participation in today's conference. This doesn't include the program. You may now disconnect everyone. Have a great day. Thank you very much.

The End

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Q1 2025 Twilio Inc Earnings Call

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