Twilio Inc.

Good day and thank you for standing by. Welcome to Twilio Inc. Second Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising you your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Brian Veneman, SVP, Investor Relations. Please go ahead, sir.

Good afternoon, everyone, and thank you for joining us for Twilio's second quarter 2024 earnings conference call. Joining me today are Kozema 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 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. 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 Kozema and Naden, who will discuss our Q2 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 delivered a good second quarter. We are driving durable, profitable growth as we exceeded our Q2 guidance with $1.1 billion in revenue and $175 million in non-GAAP income from operations, both record levels. We also delivered nearly $200 million of free cash flow, another strong quarter of cash generation. We're running the business with increased rigor, which we are confident will drive improved growth rates and additional operating leverage over time. The communications business is performing very well. And in our segment business, we're focused on executing on our commitments while reducing non-GAAP operating losses. In Q2, we saw continued signs that communications growth is stabilizing, including quarter-over-quarter improvement in international trends. And I'm encouraged that our more disciplined approach is unlocking teams to innovate on the critical areas that will enable Twilio to power the future of customer engagement. What's true across the board is that in the world of AI, contextual data is paramount. According to Twilio's annual state of customer engagement report, we found 84% of businesses said they provide good or excellent customer engagement. yet only 54% of consumers agree. That disconnect is because brands need help contextualizing the data they have. By combining our leading communications capabilities, our rich and contextual data, and the power of AI, we are uniquely positioned to unlock smarter and more personalized interactions for brands that enable them to reimagine customer engagement and drive more revenue at a lower cost. Let's turn to our business highlights. Our Twilio Communications business had a strong quarter with revenue of $1.01 billion, up 7% on an organic basis year over year on the back of solid performance in messaging, acceleration in email growth, and strong ISV contributions. During the quarter, we also focused on a number of initiatives that we believe will deliver improved growth rates over time. In the near term, we expect our growth to be fueled by our expanded network of partners and ISVs, self-service enhancements, and cross-sell opportunities. While we have made meaningful progress in all these areas, I'm particularly pleased with our success in securing new partners and ISVs. During the quarter, we achieved an eight-figure renewal with a leading customer experience provider who will continue to embed Twilio Voice within their customer service software solution. Additionally, we signed a new partnership with OmniSend, an omni-channel marketing platform targeting the SMB retail market, who will help Twilio expand its footprint into new geographies. We also extended our co-sell partnerships with Airship, Bloomreach, Braze, Insider, and Klaviyo, into new geographical territories to power a data-enriched end-to-end marketing experience. During the quarter, we delivered the strongest revenue growth in our self-service business since Q1 of 2023, and we continued to make enhancements to simplify the onboarding experience for customers. For example, we introduced a new console experience that helps make recommendations guiding customers to which products they should be using based on their desired use cases and outcomes. And our new one signup streamlines the login process by having one login for a customer to access all of their Twilio accounts and products. In the medium term, product innovation will be an important growth lever as we deliver on our vision to unlock smarter, more personalized interactions for brands. In the quarter, We've started to see success with our newer, higher margin software products. These are products that leverage AI, such as Verify and Voice Intelligence, as well as platform innovations that natively embed AI and machine learning, such as Traffic Optimization Engine and Engagement Suite, to drive greater deliverability and better customer engagement. These products are rapidly gaining adoption and can become meaningful growth drivers over time. One customer, a leading mortgage lender, adopted both Voice and Verify in the quarter and expanded their messaging usage. Twilio won this competitive cross-sell deal as our platform enabled the customer to have a single console with both voice and messaging for the thousands of bankers who are using it on a daily basis to better connect with customers. Since deploying Twilio, the company is already seeing a 38% increase in SMS response rates and a 20% increase in banker productivity. More importantly, these products are gaining adoption because they are simple to use, trusted, and intelligent. Verify is a great example. Not only is it growing quickly, it is saving our customers millions of dollars by mitigating fraud at the source. And to continue to deliver better outcomes for our customers leveraging AI, our SMS pumping protection product went GA during the quarter, which can be enabled with one click and automatically detects and blocks fraudulent messages, a growing issue in certain international markets. We're continuing to deliver on our promise of natively integrating segment capabilities into our communications business. This quarter, we released Personalized Virtual Agent into private beta, marking Twilio's second product that natively embeds segment into communications. With Personalized Virtual Agent, our customers receive a truly personalized interactive voice response. Each caller receives a custom menu of options based on their recent interactions with the company, purchase history, recent support inquiries, and responses to marketing emails, among others. The product combines voice, virtual agent with Google Dialogflow agent, studio and unified profiles into one simple product that is guided with a wizard setup. We're excited with this release as it marks the next chapter for how IVR is evolving in the world of AI. Lastly, Twilio's communications products continue to receive recognition. as we were named a leader in the Gartner Magic Quadrant for CPaaS for the second year in a row, positioned highest for ability to execute, and ranked number one in four of six use cases in the Gartner Critical Capabilities Report. Trilio was also named a leader in IDC's Marketscape Worldwide Contact Center as a service. Turning to our Trilio segment business, Segment delivered revenue of $75 million, up 3% year over year, as we continued to focus on delivering against the priorities that we outlined in our operational review in March. We made solid progress in improving customer time to value and executing on data warehouse interoperability. We also made significant improvements in our cost profile in Q2 and lowered our non-GAAP operating losses by 25% quarter over quarter. We also continued to focus on driving efficiencies in our go-to-market, which yielded an increase in sales productivity. And in Q2, over 40% of our new bookings were multi-year deals versus 17% in the prior year period. A key win for Segment included our largest deal of the quarter, a seven-figure deal with IBM. On the product front, we delivered on new capabilities to further enhance our interoperability with data platforms and data warehouses. In Q2, we released Data Graph and Linked Audiences into public beta, which seamlessly integrate with data warehouses, including Databricks and Snowflake. With Linked Audiences, marketers can now activate centralized data in the warehouse and combine it with real-time events and predictive AI traits to generate unified customer profiles and audience cohorts to deliver targeted, personalized experiences. We've gotten a great response and we're excited to have customers like LegalZoom and TradeMe deploy and realize the benefits and efficiencies. We are also improving time to value for customers. During the quarter, our use case in-product onboarding went live, guiding customers through a customized onboarding experience focused on their specific business goals. Additionally, Our CDP co-pilot is reducing instrumentation and development time. Customers can now deploy and get value from segments four times faster, and we are seeing early signs that we're able to accelerate business wins for our customers. Overall, I'm very pleased with the progress we've made so far this year. We're continuing to deliver durable, profitable growth while driving strong free cash flow And we have a number of organic initiatives underway that we believe will re-accelerate revenue growth over time. I'm incredibly energized about our opportunity to become the leading customer engagement platform, combining communications, contextual data, and AI to deliver intelligent engagement and outsized outcomes for our customers. And I remain very confident in our ability to deliver accelerated growth and continued improvements in our free cash flow profile over the coming quarters. And with that, I'll turn it over to Aiden.