Twilio : Prepared Remarks (opens in new window)

Q1 2021 Earnings Prepared Remarks

May 5, 2021

Legal Disclaimer

This document contains forward-looking statements that are subject to known and unknown risks, uncertainties, assumptions and other factors that may cause actual results or outcomes to be materially different from any future results or outcomes expressed or implied by the forward-looking statements. In particular, our expected business benefits and financial impacts from the Segment and ValueFirst acquisitions and the Syniverse partnership, including the associated transactions, our expectations around the impact of the COVID-19 pandemic on our business, results of operations and financial condition and that of our customers and partners is subject to change, and our ability to manage changes in network service provider fees that we pay in connection with the delivery of communications on our platform and the impact of those fees on our gross margin are subject to change. Should any of these risks materialize, or should our assumptions prove to be incorrect, actual financial results could differ materially from our projections or those implied by these forward-looking statements. A description of these risks, uncertainties and assumptions and other factors that could affect our financial results are included in our SEC filings, including our most recent report on form 10-K and subsequent reports on form 10-Q.Forward-looking statements represent our beliefs and assumptions only as of the date such statements are made. We undertake no obligation to update any forward-looking statements made in this document or during the earnings call to reflect events or circumstances after today, or to reflect new information or the occurrence of unanticipated events, except as required by law.

This document also includes certain non-GAAP financial measures. Reconciliations between our GAAP and non-GAAP results and guidance can be found in our earnings press release.

Jeff Lawson, co-founder and CEO

Twilio delivered another quarter of outstanding growth in Q1, as companies across industries and around the world continue to turn to our customer engagement platform to drive their digital transformation. As we have worked with companies over the last year to build new solutions to adapt to the changing environment, one thing has been extremely clear: we are in the midst of a massive shift in the way companies engage with their customers that is

driving a generational opportunity for Twilio.

Consumer expectations are constantly evolving. They are no longer tied to just one form of communication, and they expect companies to pull together disparate interactions to deliver increasingly personalized content based on what they're doing -- anytime, anywhere, and over their preferred channels. As a result, companies are accelerating their digital transformation efforts to adapt to these changing expectations.

This was evident in our annual State of Customer Engagement Report, published in February. The study showed that digitizing customer engagement is key to staying relevant. To address the new demands of consumers, 95% of respondents reported plans to increase or maintain their current communication channel offerings, with companies looking to add an average of four new channels (think live chat, IVR, video, etc.). However, great digital experiences don't come prepackaged in a box, which is why 92% of C-level executives reported developers were crucial to solving business challenges brought on over the last year. Twilio has always been focused on empowering developers to build for the future using our customer engagement platform. However, even with the tremendous amount of transformation that took place in the last year, we are just scratching the surface of what is possible.

While the pandemic accelerated digital transformation for companies, governments, non-profits, and many others around the world, the focus is now shifting to getting people vaccinated and finding safe ways to reopen. With more people being vaccinated, companies are looking for platforms to help them build for the new normal and to create solutions to allow for a safe return to work. We're working with a Fortune 100 food and beverage company that is using Twilio to provide SMS notifications for all COVID-19 related communications to their more than 200,000 employees globally. This is just one example of many, and for companies who are searching for ways to get back to work

safely, Twilio is here to help. Perhaps more importantly, this type of customer relationship provides us with an opportunity to showcase our technology and help businesses understand more ways to use it. This is part of the reason why our dollar-based net expansion rate continues to be strong: generally speaking, neither companies nor their consumers go backwards once they've experienced new ways of engaging one another. When our customers use our tools to improve their relationships with employees and their own customers, it often provides an opening to a broader relationship with Twilio.

We hear from customers every day that they are looking to do even more with Twilio, and this trend aligns with the shift taking place in the market. The benefit of being a platform is that our technology is applicable in areas we never anticipated when we started the company. Whether it's healthcare companies adopting the permanent shift to mobile engagement and telemedicine, or travel and hospitality companies looking to reclaim customers and grow their business again, or retail companies around the world embracing e-commerce and curbside pickup, these experiences are here to stay and we are seeing incredible demand as these companies look to Twilio's customer engagement platform to build solutions for the future.

What gets me excited is how our product strategy is working. Our core business has never been stronger, as we're seeing tremendous demand in channels like messaging. We're also excited about the great traction within our emerging products, like Flex and Video, where we are building the next growth levers for the company. And finally, what I'm most excited about is that customers have given overwhelmingly positive feedback about where we are going with Twilio Segment, and we're seeing strong demand for Segment's Customer Data Platform to drive greater personalization based on real-time customer data.

Providing the tools for developers to build is core to who Twilio is. We spent the last 10+ years building the leading cloud communication platform, but our vision is about more than communication: it's about end-to-end customer engagement, ultimately providing businesses with the holy grail - a single, actionable view of the customer journey. The digital acceleration spurred by the last year reinforced how critical this is to our customers, and it's clear to us that there's a permanent shift happening. Companies are seeking to harness data from disparate systems to understand their customers, and then use the best digital channels to successfully engage them. The reason this is so powerful is because when done well, this results in more effective acquisition, higher satisfaction and longer retention of customers.

This new approach to customer engagement is happening faster than ever before.

To learn more about how leading organizations are using Twilio's customer engagement platform to build for the future, mark your calendars for our annual SIGNAL developer and customer conference, taking place October 20-21, 2021.

We also announced today that we've decided to reorganize our R&D group to better serve our growing market and customer base. Instead of one R&D organization, we will have three units all reporting directly to me. These consist of the Twilio Communications Platform, the Twilio Data Platform, and the Twilio Core Platform. Simon Khalaf, currently the GM of Twilio's Messaging Business, is being promoted to SVP & GM of our overall Communications Platform, and Peter Reinhardt, CEO of Twilio Segment, is also taking on expanded responsibilities overseeing the Twilio Data Platform. As a result of this change, our Chief Product Officer, Chee Chew, has decided to leave Twilio as of May

17. Over the last two years, Chee has played an important role in helping Twilio scale our products and infrastructure to keep up with the demand in the market. I'd like to thank Chee for everything he did for Twilio during his tenure, and wish him the best in his future endeavors.

I'm pleased to note that for the first time, Twilio was named one of the Fortune 100 Best Companies to Work For®! We are proud to be recognized for our efforts to build a consistent employee experience for all Twilions and for the effective programs we created to support our employees, customers, and communities in response to the COVID-19 pandemic.

I'd like to thank all Twilions for making Twilio a great place to work, for bringing the Twilio Magic to life, and for supporting our customers through their digital transformation efforts. The first quarter was a great start to the year, and I'm excited for the future as we address this generational opportunity.