Twilio Inc.

Hello and welcome to the Twilio, Inc. First Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker 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 that your hand has been raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. It is now my pleasure to introduce Senior Vice President of Investor Relations and Corporate Development, Brian Vanneman.

Good afternoon, everyone, and thank you for joining us for Twilio's first quarter 2024 earnings conference call. Joining me today are Kazama Shipchandler, Chief Executive Officer, and Aiden Vigiano, Chief Financial 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 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 forthcoming Form 10-Q. 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 Kazema and Aiden, who will discuss our Q1 results, and then we'll open the call for Q&A.

Thank you, Brian. Good afternoon, everyone, and thank you for joining us today. Twilio had a solid start to the year, exceeding our Q1 guidance delivering $1.047 billion in revenue and $160 million in non-GAAP income from operations. Our team has executed well across the board in Q1, as evidenced by our record quarter of non-GAAP gross profit of $566 million, a 54% year-over-year increase in our non-GAAP income from operations, and another strong quarter of free cash flow of $177 million. We are in the early stages of reinvigorating the business and are optimistic about our progress thus far. In fact, we're executing with greater discipline, rigor, and focus on innovation than ever before. In the last five quarters, we've begun delivering significant non-gap operating profitability. In the last four quarters, that's been paired with significant free cash flow. And we are committed to additional operating leverage and accompanying free cash flow. In the meantime, we are also making new targeted R&D investments that we expect to re-accelerate growth over time. In March, we announced an accelerated target for GAAP operating profitability to Q4 2025, and we also announced that the Board authorized an additional $2 billion of share repurchases, bringing our total share repurchase authorization to $3 billion. This is a reflection of the Board's confidence in our strategy and the opportunity ahead. As of today, we've repurchased approximately a billion and a half of shares, and we're targeting to complete the remaining billion and a half of repurchases by the end of this year. At that same time, we also completed our operational review of Segment, and the team is focused on executing the plans we outlined, including more focused product innovation, embedding segments capabilities into communications products, and a commitment to getting Twilio's segment to break even on a non-GAAP operating income basis by Q2 2025. We are making progress in each area. Across the board, we're innovating and releasing new products, many of which are underpinned by customer AI, our predictive and generative AI layer. Finally, we welcomed a new bench of leaders to Twilio who will play an important role in shaping the next chapter of our company as we operate with greater financial discipline, operational rigor, and focus on innovation. And now let's turn to our business highlights. Our Twilio communications business had a strong first quarter with revenue of $972 million, up 7% on an organic basis year over year. and representing 93% of our overall revenue. During the quarter, communications landed meaningful customer wins, released new products, and deepened our relationships with ISVs, partners, and resellers. With this disciplined approach, we're focused on growth levers that we believe will drive reacceleration in both the short and long term. In the short term, our growth will be fueled by expanding our network of ISVs, and global partners, driving more self-service and cross-sell momentum, and extending the value that we're delivering to customers. In Q1, we signed a seven-figure partner agreement with China Unicom, one of China's wireless carriers who will resell a majority of our communications products for its enterprise customers across Singapore and Hong Kong. We also signed a partnership with Bloomreach, a leader in the marketing automation space and we'll be working with them to co-sell Twilio products. Over the long term, our focus on innovation will unlock more value for customers, creating stickier relationships, and ultimately expand Twilio into new markets and larger deal sizes. We made progress on a number of our AI products and are driving better synergies with our communications and segment products. In Q1, we announced Agent Copilot. our first of three launches in 2024, where Twilio will natively embed Segment into Twilio's communications products. With Agent Copilot, we've embedded unified profiles powered by Segment within Flex, giving agents deeper insights into their customers' behaviors and preferences. By accessing the real-time data from unified profiles, Agent Copilot assists in intelligent routing to agents and provides them with actionable insights for each customer interaction, automating and enhancing agent productivity while reducing resolution times. Agent Copilot and Unified Profiles are currently in public beta, and customers like Universidad UK are already leveraging these capabilities within their contact centers. As a result, they've driven a reduction in handle time by 30% And by using our embedded AI automation tools, they've been able to deflect 70% of support cases in just two months. While it's still early, these results are impressive as it illustrates how our customers are able to quickly realize tremendous business value at scale when combining segment within our communications capabilities. Our customers also continue to realize tangible benefits when using our other customer AI innovations, including voice intelligence, which has gotten a great response from our initial public beta customers. With voice intelligence, brands like PGA of America are leveraging transcriptions for their customer support interactions within their Flex instance, getting valuable data insights from call recordings. Of the hundreds of customers that have deployed voice intelligence, over half are using language operators. which allows brands to trigger an action based on any keyword, allowing for better personalized communications. We also recently introduced language operators that uses generative AI and large language models to determine the best sentiment for the overall conversation, so brands can get a better sense of where escalations or customer churn may take place. And we're continuing to embed AI capabilities into our verification products. We currently have over 11,000 customers leveraging Verify FraudGuard. And in Q1 alone, FraudGuard blocked more than 62 million fraudulent messages. We are not only saving our customers money, but we're also ensuring our customers' end users have a seamless experience. During the quarter, we signed a competitive deal with Blue Sky, a social media app which recently launched its app to the public. They chose Twilio's Verify API to ensure a seamless and secure signup process for new users. At launch, the company saw an impressive amount of signups, gaining almost 800,000 new users in one day. And FraudGuard not only helped save the company hundreds of thousands of dollars, but it ensured new users received secure authentication. Now, turning to our Twilio segment business. For Q1, segment revenue was $75 million, up 2% year over year. It was a challenging quarter, but we came out of our segment operational review in March with greater clarity around a short list of priorities that we believe will address the underperformance of segments. We will continue to focus on rationalizing our investments to right size segments cost base, accelerating time to value for customers by using AI to automate onboarding and enhancing data warehouse interoperability, delivering three products in 2024 that natively embed segment into communications and capitalizing on customer AI momentum. In the month following the review, We've already made meaningful progress against all of these areas, and we believe that we have the right set of plans in place to turn this business around, address churn and contraction, and improve its financial performance. We are also committed to getting Segment to break even on a non-GAAP operating income basis by Q2 2025. During the quarter, we deepened our partnerships with Databricks and Snowflake. With Databricks, we launched a new bidirectional integration that allows customers to seamlessly ingest and activate data. We are on track to deliver further enhancements to our data warehouse interoperability offerings across partners in Q2. And as mentioned earlier, we delivered focused product innovation like agent co-pilot that demonstrates segments value when it's natively embedded into communications. Customer AI predictions is continuing to get adopted by new customers. And since it's GA in Q3 2023, more customers are realizing the benefits and positive material impact to their businesses. For instance, XP Inc., a Brazilian investment management company, said that since implementing customer AI predictions and by using our out-of-the-box tools, they've been able to save their team four weeks of data science work and improved audience engagement and conversion rates. Looking ahead to Q2, we'll bring our second product that natively embeds segment into communications into beta, which further demonstrates the value we can deliver to our customers by combining segment data with our communications products. Before turning things over to Aidan, I want to take a moment to welcome the new leaders that have joined my management team. During the quarter, we welcomed Inval Shani as our Chief Product Officer for Twilio Communications and Thomas Wyatt as our President of Segment. And yesterday, Chris Keller joined as our Chief Marketing Officer. We've also taken a thoughtful approach to evolving our governance practices. First, we welcomed Andy Staffman, a partner at Sachem Head Capital Management, to Twilio's Board of Directors. And second, we announced in early April that we plan to hold an investor day within the next 12 months, at which time we'll share an updated medium-term financial framework and set of targets. And finally, we recently submitted a proposal for the declassification of our board, which will be voted upon at our annual shareholder meeting in June. In summary, we're making a lot of progress in a very short period of time, and we're continuing to drive significant change. We're maturing as a company and as a team. We're making deliberate decisions with discipline, rigor, and focus to deliver attractive levels of growth and profitability over the medium term. While we've started to see positive impacts from some of these changes in our recent financial results, others will take longer to bear fruit. But we are confident that the opportunities we pursue will create meaningful value for all of our stakeholders and allow us to deliver on our commitment to drive durable, profitable growth over the long term. And with that, I'll turn it over to Aiden.