Good evening. My name is Chantelle, and I will be your conference operator today. At this time, I would like to welcome everyone to the Twilio fourth quarter and full year 2021 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star one again. Thank you. Andrew Zilli, Vice President of Investor Relations, you may begin your conference. Hey, Chantelle. Good evening, everyone, and thank you for joining us for Twilio's fourth quarter and full year 2021 earnings conference call. Our prepared remarks, earnings press release, investor presentation, SEC filings, and a replay of today's call can be found on our IR website at investors.twilio.com. Joining me today for Q&A are Jeff Lawson, Co-founder and CEO, Marc Boroditsky, CRO, and Khozema Shipchandler, COO. As a reminder, some of our commentary today may be in non-GAAP terms. Reconciliation between our GAAP and non-GAAP results and further information related to guidance can be found in our earnings press release. Additionally, some of our discussion responses may contain forward-looking statements which are subject to risks, uncertainties and assumptions. In particular, statements about Twilio's outlook for the quarter ending March 31, 2022, Twilio's goals regarding delivering non-GAAP operating profitability beginning in 2023, then meeting annual growth rates and long-term non-GAAP gross margin targets, Twilio's expectations regarding our products and solutions, Twilio's expectations regarding business benefits and financial impact from our acquisitions and our partnerships and investments, including the associated transactions, our expectations regarding the impact of recent and future privacy changes on certain third-party platforms on Twilio and our customers, and Twilio's 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 results on Form 10-Q. And our remarks today should be considered to incorporate this information by reference. Foward looking statements represents our be liefs and assumptions only as of the date such statements are made. We undertake no obligation to update any forward-looking statements made during this call to reflect events or circumstances after today or to reflect new information or the occurrence of unanticipated events, except as required by law. With all that out of the way, I'll hand it over to Jeff for some opening remarks, and we'll open the call for Q&A. Thank you, Zilli. I am very happy with our 2021 results, built on some great outcomes for customers that continue to generate the best-in-class growth for investors that you see today. I've never been more excited about the future of the company than I am sitting here right now. We have an awesome leadership team. The combination of our leading cloud communications platform with Twilio Segment's number one customer data platform gives Twilio an unparalleled view into the customer journey, setting us up as the company that can truly deliver on the customer engagement platform vision. We intend to become the software layer that digitally connects every business to their customers to introduce true personalized engagement and relationships in the next chapter of the cloud. We're builders, so our work is never done, and I'm incredibly eager to continue building the company in 2022 and beyond. With that, let's open the call for your questions. At this time, I would like to remind everyone, in order to ask a question, press star, then number one on your telephone keypad. Our first question comes from Samad Samana with Jefferies. Your line is open. Hi, good afternoon. Congrats on the strong finish to the year. It's great to see the organic growth. Maybe Jeff first for you. Just in reading over the prepared remarks, you know, I think the company really did a good job of expressing moving from just the infrastructure side to more of the solutions layer. I'm curious if you could maybe help us understand how the adoption is going for the more solution-based products that the company's rolling out and how we should think about maybe the traction changing. I know you guys call that IDFA in particular as a driver. Like, are we at an inflection where that's accelerating, or how should we think about the shape of that adoption? Yeah. Thank you, Samad. I think there's two parts to that question, which is essentially, first of all, really pleased with how the introduction of our software layer is going. You know, if you think about it, look at some of the customers that we're talking about in our earnings calls, not just this time, but really every quarter, right? We've got great companies who are adopting Flex and Segment. Like a lot of Vertu Motors example we talked about today, them bringing Flex and Segment together to make the contact center better. You look at Stripe adopting Flex for their contact center needs. You know, Flex expanding in Global 2000 financial services companies and a Global 2000 automaker and, you know, Nubank, many others, you know, the, Invisalign putting in Flex for their process. I mean, you know, we could come up with so many of these customer stories, but really the answer is that our approach, this land and expand strategy is a great one because Twilio is used by so many companies around the world, every industry, every shape and size, every continent. I mean, this really is the need for things like email and messaging is so ubiquitous, and developers doing this thing with so little friction. We're able to use those initial wins and that initial traction that we get to move up the value chain, move up org chart, and move up the software stack to then go address the things that our customers are trying to solve for, whether it's in their contact center or their sales process, their marketing inside their product. I mean, that is really what the land and expand strategy that we're talking about is all about, leveraging the ubiquity of Twilio across all these different kinds of companies into building this Customer Engagement Platform that from our conversations with customers, they all need because they all have to go build great relationships with their customers. The way you do that is by understanding the customer and then engaging with them. That's why Twilio having the leading CDP to understand customers and then the leading communications platform to go engage with them, I mean, that's why it's such a powerful combination. The second part of your question about IDFA and the tailwind provided by privacy. Look, I think society is on the right track, right? Investing in privacy, passing regulation and laws and things like deprecating tracking tokens that if most consumers knew what had happened on the internet, they'd be pretty horrified actually. We are on the right track. What this is doing is forcing customers, our customers, businesses, to focus on the fundamental business. The fundamental business. I think about my grandfather who sold paint to the hardware stores in Detroit. What did he have to do? You had to know your customer and then talk, you know, meaningfully to them about their business and about how you're gonna help them. Like, that's the fundamentals of business, understand your customer and talk to them. By investing in privacy means that companies have to actually use the first-party data they have. How people use their products, how people use their website, their mobile app, what they buy, what they return, et cetera, and use all that as signal for how they can digitally engage their customers and make that experience more personalized and compelling. I believe that is a tailwind. You know, that is a big trend, coupled with the whole direct-to-consumer market that's going on. Which again, is like two sides of the same coin, if you will. That means the companies have to build their customer base and then engage them and turn them into repeat happy loyal buyers instead of just churning through customers and going acquiring more by buying more ads. I think that's a big change that's going on in the ecosystem that we and Segment with the CDP and then with the rest of our products are helping them power that. Great. That's very helpful. Maybe just a quick follow-up for Khozema. First, appreciate the additional disclosures and the numbers around organic growth. That was very helpful by you and the IR team. The outlook for getting to profitability in 2023, I know we're still a ways out from that, but can you maybe help us understand what the assumptions are around? Is that gonna come on the gross margin line or is that mainly because of OpEx leverage or revenue mix? How should we think about what allows the company to get to that profitability and what you're assuming in that? Yeah. Thanks, Samad. Thanks Samad. Thanks for the question. I appreciate you asking. I think it's actually a combination of things. Some that'll play out in the shorter term, and then others that'll kinda play out in the medium to long term. The way to think about it, I think at least for the short term, is that the improvement is largely gonna come from operating expenses. One of the things that I mentioned in my prepared remarks, and that we've talked about in the past, is that we have been investing in a number of areas over the last several years. In particular, what we've been calling out historically has been Flex, enterprise go-to-market, international go-to-market, and then core infrastructure. We expect that our rate of cost growth in those areas just starts to moderate basically in the second half of the year. I think a good example of that is our ERP project, which goes live in the middle of the year. It's not to say that we're not going to invest in the other areas. We will, but I think the lower rate of growth in those investments will be a little bit lower than what we've seen historically. I would add that, you know, up to this point, we've really prioritized growth and scaling the company. I think growth certainly remains a priority for the company and we, you know, actively make that trade-off historically. I think we're at a point now where we've got enough scale that we can actually start reaping the benefits of that scale and just become more efficient in our operations. We see a real efficiency opportunity as we look out, and we're really confident in our ability to achieve non-GAAP profitability in 2023. I think over time, in the medium to long term, we do expect improvements in our gross margin line as well. Obviously, that number does bounce around from period to period in the short term, and that's a trade-off that we also actively make because we like the fact that we're onboarding customers and have an opportunity to grow with them. You know, very consistent with what Jeff said a moment ago, as we onboard those customers and really leverage this in and out strategy and bring them into higher levels of the software stack, I think we have a real opportunity to provide value to customers, and I think that will provide a margin improvement for us as a company, and that's why we stand by our 60%+ over time in the gross margin line. Thanks, Samad. Your next question comes from Derrick Wood with Cowen. Your line is open. Great, thanks. Nice to see a strong quarter. Congrats. Jeff or Marc, I mean, you guys have been on this journey to build out this kinda CRM suite of applications. You referenced this inbound and outbound motion, and the product portfolio has certainly matured quite a bit since. What would you like to see kick into a new gear in 2022? Derrick, thanks. Great question. This is Marc Boroditsky answering. It is front and center in the way that we are going to market in 2022. As a matter of fact, we're in the final days of our sales kickoff this week, and the primary objective that we're enabling the team on are the land-and-expand strategies. Leveraging our install base and access to customers efficiently through email and messaging to sell them more broadly platform. You may remember we announced the Customer Engagement Platform at SIGNAL this past quarter. It's driven by their desire to take more control over their digital engagement with customers. We're hearing interest across the entire arc of their end consumer engagement from top of funnel all the way through long-term loyalty. The training we're doing now, as we're looking out to 2022, is supporting our sales team to ensure that they're ready and able to approach the opportunity that we see as significant in the market today. Great. Great to hear. One for Khozema. Can you double-click on the change in your guidance philosophy? How has your approach changed versus what it was before? I guess what kinds of new insights have you gained or are more comfortable with, in order to better predict consumption behavior? Yeah, great question, Derek. So as you know, I mean, we run a usage-based business model for the most part. We do have a little bit of SaaS in there as well. I'd say with each passing year, we just have a lot more insight as to the way that customers end up using our platform, and we're just able to better predict usage patterns over time. What we end up doing with our FP&A team is basically fine-tune that forecasting model every year. As we can collect additional information, we're able to be more granular about the ways in which we can do that. For Q1, we are refining our guidance philosophy basically to provide guidance that is ultimately more consistent, not just with actuals, but also to give investors a better approximation of our expected performance. As you saw in our Q1 guide, you know, we're showing continued growth of 45-47 on a reported, and then also, 32%-34% organically. I think it was important for us to call that out. That obviously does include Segment now. You know, we have a lot of confidence that we'll be able to deliver on our 30%+ growth target over the next several years. Just lastly, I would say, Derek, that, you know, we obviously do get a lot of good feedback from our investors and from our analysts, and we take that into account too. I think this just provides for a more consistent setup over time. Great. Well done and great job on the disclosures. Thanks. Thanks, Derrick. Our next question comes from Michael Turrin with Wells Fargo Securities. Your line is open. Hey there. Thanks. Good afternoon. Appreciate you taking the questions. Maybe my least favorite question to ask on the call, but feels worth asking is on gross margin. Clearly, the growth is outstanding. The gross margins are stepping back here. It's clear international messaging strength is carrying forward. How should we think about the trade-offs and when app services can help flatten that trajectory? And maybe secondarily, we saw the Syniverse transaction ended this morning. Is there still a chance you can partner there or comment to improve the core gross margins, or is that no longer the right way to think about that relationship? Yeah, those are great questions, Michael. Let me take the second one first, and then I'll answer the gross margin question more fully in a moment. First of all, with respect to Syniverse, I know there is some press out there suggesting that we might buy Syniverse. We are definitively not doing that. What you probably did see in some of the press announcements this morning is that the merger agreement between M3 and Syniverse, you know, has come to a termination as a result of a mutual agreement between those parties, because that largely reflects, you know, market conditions as they stand today. The way that that agreement worked was it did also provide for an alternative path, which is a minority investment in Syniverse. That's now the path that we're gonna be pursuing. The commercial wholesale agreement that we also referenced historically, you know, that's very much in place. We have a great relationship with Syniverse. It's been very long-standing, and we intend to continue that. Frankly, that partnership gives us a great product, you know, for us to be able to leverage in the United States. I don't really see a significant impact in the near or medium term as a result of any of that. I just wanted to provide you a little bit more clarity on some of what has been reported or speculated and clean that up. With respect to gross margins, you know, more broadly, you know, for us, and we've had this conversation, you know, with you and a number of others in the past, obviously, we have this really, really high-growth messaging business. You know, we feel great about the way in which that business has been performing. You know, the way that it played out in Q4 was that our international volumes really, really took off. I mean, you're right, like, that part of the business carries a sort of lower gross margin structurally, certainly relative to some of the other products that Marc and Jack can allude to. That messaging business also cranks out, you know, really significant gross profits that we like and that we want to reinvest. I think most importantly, as Marc alluded to, it creates that install base, which is sort of that critical foot in the door for us to execute our end-to-end strategy. As you saw on the last page of the, you know, presentation disclosures, while all of that is going on, our application services are actually growing at a faster rate. You know, kind of the good problem that we have is that, you know, our messaging business organically also grew 52% last year. That's just kind of a trade-off that we wanna make as long as we continue to generate high gross profits, as long as we can generate great growth off of application services and Segment, we feel confident that over time, we will be able to grow into that 60%+ range that I talked about earlier. We have a lot of confidence in that. In the short term, you will see it bounce around a little bit up and down. Again, in our disclosures, we try to give you some sense of, you know, how the APIs and stuff like that impact as well. It's a very comprehensive answer. Appreciate it. Thank you. Thanks, Mike. Our next question comes from Mark Murphy with J.P. Morgan. Your line is open. Yes, thank you very much, and I'll add my congratulations. Khozema, I'm wondering if you can shed any light on any specific products that are growing materially above or materially below this organic growth level of about 39%. I would imagine Flex, Video, Segment are outpacing. I'm less certain about voice, email, Authy, some of those products. Just curious if you're able to comment on any of the major outliers there. Yeah, Mark, appreciate you asking the question. I mean, I'm not going to go through every single product and give the breakdown here, but here's what I will say in answer to your question. You know, again, just referencing the last page of our disclosures. If you look at our growth rate over the course of the prior year, you know, we grew our messaging business at incredibly high rates, 52% organically, you know, which on any basis is a really super performance. In spite of the fact that that part of the business is growing really fast, our application services category, which includes a number of those products that you just referenced a moment ago, basically pre-Segment, pre-SendGrid, non-telephony-based cost products, you know, that's growing at a faster rate. The good problem that we have is that messaging business, as you again can see on that page in terms of its revenue contribution, it's just really big. It's gonna take some time for, you know, this in and out to play out in our financial statements, even though it is playing out very much in real life with our customer base. You know, beyond that, you also saw in the prior quarter, you know, Segment had a really fantastic quarter, you know, really significant growth sequentially, you know, year over year. Obviously, we don't break that out because it was inorganic in the prior period, but you can see the sequential was really strong. Now that it's in our numbers, you know, we still have a tremendous amount of confidence in that 30% plus over the next three years, which, you know, quite frankly, is on a much higher base since we've consistently beaten that since the time that we announced that we could do that. Thank you. That's very helpful. As a quick follow-up, for Jeff, you had mentioned the land and expand strategy. I'm just wondering how rapidly perhaps your R&D investment is shifting toward products that might be sold more to a marketer rather than a developer. For instance, the customer journey insights, the Engage products, and kind of the orchestration of messages rather than the delivery of messages. Yeah. Thanks, Mark. I mean, you can see we've got investments in obviously our core communications products in Segment, the core customer data platform, as well as new products we're building above those two layers. The way I think about it, which is developers are assisting the sale, and for the communications APIs products, like, you know, developers can take us a long way, maybe even, you know, all the way there. But for a product aimed at a marketer or aimed at a contact center buyer, you're gonna have a line of business owner who's gonna make the final decision. But with Twilio, they get the support of their internal technical teams on the purchase. Meaning the developers, the technical people are there at the table telling the business decision maker like, "Yeah, that thing that we want to do, we believe we can do it with Twilio. In fact, we've already built a prototype." That supports the sale. It de-risks it. It adds momentum to the sale. As opposed to the world where, like, you know, I talk to a lot of our sales leaders and, like, in their, you know, yesteryear careers at, like, prior companies, they would be selling to a line of business owner, and the line of business owner would say, "Oh, this is great. Can we do this?" They turn to their IT team. The IT team, you know, with their arms folded is like, "No, no, it'll never work. Can't do it." You've got detractors on the technical team. I think the magical thing about Twilio is that we can have proponents of Twilio both on the technical side and now with more investment in the sort of application area, also in the line of business owners. I think it's a powerful combination, and that's why we focus so much on winning the hearts and minds of developers, having them bring us into the company, and then making them some of our biggest champions as we make our way through and up the org chart and pulling up the value stack of software. We are investing obviously in both. I also think of the application products that we're building are also very developer-centric in terms of customizability, flexibility, using code to really build what companies need is core to those products. We're not trying to provide just a turnkey and, like, you can't customize it type solution. We are trying to build products that while they do the things you want them to do out of the box, give you ample footprint to go in and turn them into the solution that the company needs for a long period of time. You don't get boxed in, and you're not stuck with something that's not serving your needs as markets evolve, as customers demand new things, et cetera. I think our approach is, as proven by the adoption by a wide variety of customers, whether they're the, you know, young digital disruptors or whether they're the, you know, Global 2000, Fortune 500 companies, I think we see across the spectrum this approach is working. Very helpful. Thank you. Our next question comes from Meta Marshall with Morgan Stanley. Your line is open. Great. Congrats. A couple of questions. One, you know, you noted disclosure of having about 36% of the Global 2000, and just wanted to get a sense of, is some of your confidence about the 30% growth rate for the next couple of years driven by room that there is within kind of this core customer set? Or is it by the opportunity to win some of the more of the Global 2000? Just trying to get a sense of, you know, how much of it you feel like you've already landed that gives you confidence of that 30% growth rate. The second question, you know, maybe building on what you just said, Jeff, you know, you've made a compelling argument at SIGNAL about, you know, why Twilio is best enabled to help customers on their customer journey versus kind of some of the competitors out there. I guess, are you finding with customers that you're even having to do some of this evangelism about why you versus others? Or it's still kind of in its infancy, where they're just happy to have a solution that you can provide and give them. Thanks. Yeah. Hey, Meta, thanks for the question. Let me take the first part of the 30%+ dynamic, and then I'll have Marc add to that, and we'll turn it over to Jeff. In terms of the 30%+, I mean, the reason we have such confidence in our ability to do that over multiple years is not just because we have relatively low concentration in G2K, but at the same time, I mean, we're able to do a ton of business that's really creative and innovative with digital disruptors as well. If you look at the way that the company has evolved over, you know, basically since the IPO, like, a couple dynamics have played out, which I think are really interesting and give us the level of confidence that we have in that number. The first is that if you look at the distribution and concentration of our customers, you know, it used to be relatively high, and since then we've taken on more business in our top 10, while that overall number has consistently shrunk over a number of different years. Certainly you have some large companies in that bucket. You also have, you know, some digital disruptors in that bucket who are really taking off. The real point is that that breadth of customer that we serve is massively wide, which means that we're not overly concentrated in any one customer. We're not overly concentrated in any one industry, and that breadth allows us, you know, to grow at scale now. I'd say the second thing is that, you know, we've talked a lot about in the call already, like our messaging business. In addition to our messaging business, like we sell a lot more other products that we're able to sell into these customers. Our ability to now kind of go up stack with our application services, with Segment, with email, I think allows for another interesting kind of upsell, cross-sell opportunity that we're able to do as well. I would say the third thing, and we've called this out in the past, is that we obviously have been making an investment in our international go-to-market efforts. We're starting to see that really pay off. You obviously saw a lot of takeoff velocity in the most recent quarter, with respect to that investment, and so I would expect to see that continue over time. Obviously, you know, there are a lot of customers out there in the world that we are really eager to serve. Marc, do you want to add anything to that? Yeah, absolutely. Great question, Meta. Picking up where Khozema left off, the opportunity for us is still very massive beyond our existing footprint. Primarily landing new logos remains an important part of our go-to-market execution. Landing with SMS or email and then being able to build a trustworthy relationship with the customer, as we've referenced a couple of times. That's a true situation across all of the market segments. As you pointed out, we still have a majority of the G2K out there where we have opportunity to build that initial relationship. The second dimension is expanding our footprint for reaching out to the full white space of the account. Across our entire base, we have that opportunity to go back to those customers and continue to build our relationship and expand the commercial results that we're generating. Lastly, we're recognizing that there are many enablers that are making a difference for us in the market. Like, as an example, we power quite a few ISVs that are selling package solutions against broad requirements. As partners, we're helping them to get into more of the base, like we are also pursuing with SIs and resellers that are projecting this into other kinds of opportunities, like what we shared in our disclosures in our pre-written statement. We are seeing traction with organizations like BPO. We shared with you on the last earnings announcement this relationship with HGS. We recently announced a relationship with Teleperformance. HGS has had significant progress with over 20 of their customers moving over to Flex. Now, these are accounts that are relying on a channel strategy, if you will, for us to become adopters of our platform. We're going to be pursuing growth in all those dimensions, and I think largely the opportunity is still in front of us. Hi, everybody, this is Jeff. I'll answer the last part of your question about, you know, to what extent are we evangelizing to our customers. I mean, the way I look at it is, you know, customers have what they need to accomplish, right? Like, they've got their challenges, they've got their market dynamics, their competitive pressures. What that is leading most companies to is realizing that they need to have these direct relationships with their customers. When I talk to, you know, executives at every kind of company you can imagine, understanding their customer, building that complete picture of their customer, and then acting on it to improve the outcome of their business, to spend less on marketing, to spend less on advertising in particular, to increase their retention rates, to increase their or decrease their customer acquisition costs and increase their lifetime value. I mean, these are the metrics that drive executives at pretty much every kind of company. I think in oftentimes what happens is the people, the more bottom-up motion that Twilio has are the people on the front lines who are tasked with solving these big problems, and they're the ones recognizing that Twilio can solve these problems. They bring Twilio in. Then we follow up with some more top-down education around the market, a new approach. I think that's working very well. We have both a bottom-up and a top-down approach to our customers. I'll share a quick story with you, which I think is definitely sort of illustrative of this. Interestingly, this week I was talking to the CEO of one of our customers, a pretty large company in the education space. You know, they've been using our products, so I was telling them about our engagement platform. I was telling them about Flex and Frontline and Engage and all these new products we've been bringing to market in the last several years. The CEO stopped me in my tracks. He goes, "Whoa, whoa, hold on. Hold on," and shared his screen on Zoom saying, "I, you know, I have this Gartner report here that says the old way of doing it was monolithic apps, and the new way is composable APIs. Jeff, you're not getting rid of APIs, are you?" Which I was like, "No, no, of course not. We're building all this with our own APIs. We're making it so that you can actually go build on top of these platforms and unlock the things that you're trying to unlock by integrating these experiences together and hiring developers to go building for your customers." And he was like, "Okay, okay, phew. I'm glad to hear that." It was so interesting to me to hear the CEO of, like, an education company evangelizing to me the value of APIs and the value of composability. That it was a moment where I said a lot of these ideas are now widespread. Right? Think about the fastest-growing companies in the software and technology space. You know, companies like AWS, like Twilio, like Stripe. I mean, these are APIs. These are the building blocks that allow companies to go build their future and innovate with their customers, increase the agility of their company. That is what customers want, and we are able to provide it to them. Well, but there's always some degree of evangelizing when you are kind of moving the technology ball forward. It's not like we're just, you know, selling guacamole, and everyone knows what that is. It's just a question of whether you want cilantro or not. Really, this is technology and how technology is enabling them to build their business, which does take more time and education than just selling guacamole, but I like the business that we're in. Perfect. Thank you so much. Our next question comes from Alex Zukin with Wolfe Research. Your line is open. Hey, guys. Thanks so much, Jeff, as I'd love to buy some guacamole because I'm sure it would be delicious. I want to ask you maybe two questions. First one on. I don't know if maybe somebody has already asked this, but I'll try it a different way. When you think about the major differences in the demand drivers between Q3 and Q4, obviously it was just two very different quarters. Khozema, you mentioned, you know, it's a consumption-based business, and inherent in that is some volatility. But just help us understand, if you can, or if you would, what were kind of the biggest differences. Like, what made Q4 just such a great quarter relative to Q3. Then the follow-up is just how to think about now, particularly with Segment going into the organic bucket, what's the right way for us to think about and model dollar-based net expansion going forward? I know that's not a metric you guide to, but any help there would, I think, you know, at least help set the right model framework going forward, to better understand the various components. Yeah. Hey, Alex. Those are good questions. Appreciate you asking. I would say in the demand driver space, I mean, there's nothing materially that really changed from one period to the next. I mean, you know, we've talked a lot about the fact that this is a usage-based business and, you know, being that kind of a business, you're always gonna see, like, a little bit of an up and down period to period. You're gonna see, you know, certain customers take off in certain periods. You're gonna see a little bit of domestic versus international mix. I'd say in the most recent period, international, like, really took off. You know, that was something that we feel really good about obviously because that's an investment that we've made over a number of different years. You know, it's not like we're trying to necessarily, like, tune the business so that international takes off one period and, you know, domestic goes a different way or that one product set goes one way or the other. I would just really kind of point to broad-based strength across the totality of the business. You know, we feel like the business was really good in Q3. We felt it was really good in Q4, and we really like the setup, you know, coming into 2022 and multiple years beyond. It's hard for me to like really point to, like, that one thing, which I think is really the basis of your question. There really isn't one other than we have broad-based strength across the business and feel good about the performance. I think with respect to, you know, the way that you should think about segments getting layered in, I mean, we obviously have provided separate disclosures on segments on a year-over-year basis. We haven't, you know, kind of broken out DBNE or the DBNR. I don't think I'm gonna guide to that spot here today. What I will tell you is that we feel really good about the growth prospects of that business. You can probably intuit from the fact that it was up 10% sequentially that we really like the growth trajectory of where it's headed. I think you probably can take from Mark's and Jeff's comments that we're seeing tremendous traction with customers there, not just in terms of what we can do in combining it with messaging, but also with respect to combining it with Flex, which is really, really exciting. We think that business has really, really strong growth prospects going forward. Great. Thank you. I'll just point out, Alex, one additional thing is that Segment is a consumption-based business. Indeed. Well, thank you, guys. Congratulations. Thanks, Alex. Our next question comes from Will Power with Baird. Your line is open. Okay, great. Thanks. Yeah, a couple of questions. First one perhaps for Khozema. You pointed this out, but international growth clearly accelerated. It looks like quite a bit, and it sounds like messaging was a big piece of that. You know, I'd love it if there's just any other color as to what the drivers behind that kind of surge in international messaging might have been, and what else you might have seen internationally that drove some of that acceleration. Yeah. Thanks for the question, Will. I'd say there's two dynamics. I think the first is that, you know, it's. You've been a long-term follower of ours, obviously, and we've talked a lot about our international go-to-market investments. Marc's built a really great team internationally, and I think we're really starting to see the fruits of that investment. You've seen that, I think, over multiple quarters now with our ability to grow in international markets. I think the second dynamic is that there was one customer in particular whose volumes really took off in Q4, which you know, we felt pretty good about as well. That happens from time to time, too. You know, obviously, there's a gross margin dynamic in all that as well. Feel great about the way the international lands, and we think there's continued strength over a long period of time. Okay, great. Maybe for Jeff, you know, just building on some of the other commentary, just looking at your, you know, your growing strategic position around first-party data, you know, the end-to-end strategy that you've referenced. You know, what are the pieces that you think could bolster that further? I mean, it doesn't sound like you necessarily need anything, but are there natural tangential areas that, you know, further solidify that? I guess more broadly, maybe how do we think about, you know, kind of the M&A pipeline and appetite here? Yeah. Thanks, Will. Appreciate the question. You know, first of all, just sort of like what are the pieces to bolster it? I think it's, you know, continued execution where we've got products that at great revenue scale will continue to expand very nicely. When I think about, you know, how are we continuing to make sure our messaging product is best in class or email product is best in class. Segment, I think, is fantastic for bringing customers in as well. Like, we've got a lot of best-in-class products. We've got a lot of the pieces, and we're in the process of bringing them together. When I think about what is ahead, it's like we're bringing these pieces together. We've got really three pillars of our engagement platform. You know, we've got Engage for the marketer, which is still very early in its cycle by the way. We just announced it in Q4. We've got Frontline, which can be used by frontline workers and even sales teams and things like that. You've got Flex for the contact center, right? Clearly, there's a lot of buyers there. There's a lot of TAM there already, and we're continuing to bring those together, bring those products to more and more and more customers. As far as M&A pipeline, you know, I'm gonna give you the answer that I always give because it's true, which is that, you know, we always have an active game board because obviously if there are acquisitions out there that are accelerating our roadmap, we should be willing to do them. We also, of course, maintain a high bar, great companies, great cultures, great products, and those are things that we're interested in. We don't have any particular strategic goal or anything that we're going after. You know, of course, like any company of our size and with our balance sheet, you know, we're aware of what's out there. Hey, Will. I'll just add one comment to what Jeff said at the end there, which is, obviously in the current market, there may be some attractive opportunities and we'll be on the lookout. But the reality is we're very, very focused on our organic growth rates right now and want to continue growing the business that we've got, and we don't see a burning need to necessarily do anything. I would just reiterate, for anyone that missed earlier, like there was a speculation that we might purchase Syniverse, and we're certainly not going to do that. Yeah. No, appreciate that. Thanks. Our next question comes from Ryan MacWilliams with Barclays. Your line is open. Thanks for taking the question. Looks like Twilio's presence in Global 2000 customers doubled since the end of 2020, so congrats. Jeff, I know it's still early, but love to hear about the strategy and expectations behind Engage and, you know, how customers so far are starting to come around to the idea of using Twilio as their, like, unified customer engagement platform. Absolutely. I'll start with Engage. I mean, the way we see the market is that, you know, historically, marketing automation products really focus on running a campaign, right? You have your credits in there, you have your send buttons, and you get to see how many people open it, how many people open the campaign. Like, that's the way they were designed, you know, 15, 20 years ago. That's still a product that most companies use today. Actually, the more modern marketing stack is one that is driven not by campaigns but by data. It's actually driven by a rich set of data about every customer and who they are and sort of what message is gonna actually resonate most with them. By the way, the outcome you're looking for isn't just did they open an email? It's like, did they make a purchase? Did they increase their lifetime value? Are they actually a more valuable customer? These end up being like, you know, complex sets of campaigns, multivariate analysis. Like, great marketers today are using data in incredibly interesting ways that the legacy, marketing software just really isn't set up to accommodate. That's the opportunity that we're going after. We're going after a very data-centric approach to marketing in the belief that, you know, many marketers are already there, and the ones who aren't are gonna get there very soon. I think this is already proven out by the traction that the Segment CDP has in the market. Because the CDP is actually how you raise all that data into actionable insights for the marketer. The last step is just kinda, you know, executing your campaign, and that's what we're adding on with Engage. The hard part about that whole equation is the data part, and we already do that. We're already leading the market in that. Adding actually the marketing execution side onto it is actually a relatively light lift compared. We're very excited by the feedback we're getting from our early customers. We think that we've got a really novel and attractive approach. Ultimately, at the end of the day, look, it is the same budget we're going after, the legacy products enjoy today because that's the marketer's budget. I think that it's where the market is going, and I think we're gonna have a leading product as the market is getting there. You already see traction inside the market going on. Is that any question you had? Can you repeat that, Ryan? No, that was great color. I appreciate it. Just my second one for Khozema, just pleased to hear about non-GAAP operating profitability for fiscal 2023. Just getting some questions here on gross margin. Like, I completely understand how it can vary from quarter to quarter, but as we think about the path forward from here, can we think about gross margin being higher on a yearly basis going forward, given the elevated growth in the higher margin application services business? Yeah. Hey, Ryan. I think it's a totally fair question. We're not going to guide on a year-to-year basis per se on gross margins. What I will say, though, is that we feel very, very good about the progress that we're making on application services. That's kind of the non-telephony-based cost product that we have, Segment, SendGrid. As you saw in our disclosure in the prior year, that grew at a much faster rate than even our very fast-growing messaging business. As that trajectory continues, we feel very good about the prospects to get to our 60%+ target. To which I would add, we feel really, really good about the way the segment is going. We feel very, very optimistic about how Engage has already started. The combination of those factors, I think, gives us very high confidence in 60% plus over time. In the meantime, as long as the messaging business that we put on generates high gross profits, we are comfortable from period to period with that gross margin number, you know, bouncing a little bit up and down. Over time, you know, we still feel very good about 60% plus. I think we have a great track record with investors of delivering what we say we'll do, and I think over time we will get to that 60% plus. It's a color. Thanks, guys. Thanks, Ryan. Our next question comes from Fred Havemeyer with Macquarie. Your line is open. Hey, thank you. You know, Jeff, Twilio's products and platform has certainly expanded a lot since, you know, I think its heritage as a platform and, you know, channel to be able to rickroll people back in 2008. I wanted to ask, you know, from your perspective as a founder, whenever you put on your coding gloves and you're thinking about, you know, what's exciting on Twilio's platform and what are the products that are disruptive or interesting or that you would use to build the next iteration of startups and growth businesses, what gets you most excited about what is happening with Twilio? Well, that's a fantastic question. You know, when I think about it really goes back to the mission of our company. If you notice, we updated our mission last year. We talked about it a little bit last year. We'll talk about it more in some upcoming venues. Like, we updated our mission to really reflect the reason why I and so many at Twilio get out of bed in the morning, and it's to unlock the imagination of the world's builders. What's so exciting about that mission is that people are, you know, humanity's been. You know, the world that we see today was created by people who build, and they've built for thousands and thousands of years. What you see now happening in the world of software and the internet is people building at a scale that was previously unimaginable. You know, a developer or a startup or a company can build a product, and if they build the right thing, millions or billions of people can become their customers practically overnight. That is a scale of execution and an idea that I think is underappreciated in the world, that with software and the internet and the distribution mechanisms that the internet provides, anybody can be a builder. Anybody can unlock a new idea. That goes for developers, that goes for a wide variety of builders inside of companies. It also goes for the companies themselves. I love seeing, you know, when a startup enters a market and comes out with some great new big idea, and then the incumbents follow suit, and actually they start coming up with the big new great ideas. Like, I've been loving watching what's going on in the, in the EV market, for example, with like, you know, Ford's doing a great job bringing out cool new EV products. Like, I'm from Detroit, so I pay attention to these things. It's really cool to see how the markets evolve and software ultimately becomes this vehicle, no pun intended, for companies and people to change the world. What gets me tremendously excited about the products that Twilio builds is that we get to unlock the imagination of the builders who are our customers. For so long, companies have been told, because they bought a bunch of apps to power their business. They bought an app for this, an app for that. Then they had this idea, they're like, "Oh, we want to go. Like, our customers want this. Let's go do that." When you're told, you're like, "Well, no, it doesn't do that." You're told, "No, we can't do it." What I love is giving our customers the path to yes. This idea that we have for how we're going to better serve our customers or we're going to out-innovate our competition, the answer is with Twilio, it's yes. That's our APIs, that's our platform approach, that's Flex, that's Frontline, that's Engage, that is Segment. This is unlocking the imagination of the world's developers. Like, you know, apart from the various TAMs of like, you know, marketing and contact centers and messaging and all that stuff, if you take a step back and you think about the addressable market of people who build, like, that's the story of humanity, and that's my favorite part about building Twilio. Thank you. You know, when Twilio Voice Intelligence is available to me, I'll spend a weekend hacking together a project to order guacamole. Thank you. Our next question comes from Matt VanVliet with BTIG. Your line is open. Yeah, thanks for taking the question, guys, and Sheldon, the quarter. You've kind of touched on parts of this, but wanted to maybe bring it together in one cohesive question. When you look at Segment and the rate of adoption across the enterprise, it seems like the idea maybe at the very high end, Jeff, to your point of talking to a CEO, it's a great idea. Everyone realizes that they need more data to be smarter and more individualistic in terms of their outreach. In reality, how many of these companies that you're talking to are ready to implement Segment? How much of sort of a customer education and maturity level is broadly out in the market? Maybe the follow-up to that is there potential that you could see this pretty dramatically accelerate over the next couple of years as companies get a little smarter, maybe our technology, a little more up to date across other parts of the organization to really leverage Segment? Matt, Marc Boroditsky. Great question. It's an added lens to the earlier question regarding the opportunity that's in front of us. The opportunity is, it cuts across the entire market. We see the interest that comes from small customers all the way to the largest customers. Your point about are they ready to adopt? We see requirements that start at the use case, where literally you need to be able to connect a couple of real-time data sources to be able to have an understanding of the customer and then provide whatever interaction that's gonna take place to progress customer relationships. Imagine, if you will, connecting to a CRM, connecting to a point-of-sale system, connecting to whatever the app is that the company runs their business on, to be able to get to that understanding and then be able to respond in the channels of the customer's choice in order to have that interaction. That logic can be across the entire arc of the customer relationship. What we see happen is that we can move from that use case orientation to strategically more and more of their customer requirements, and be able to address a greater set of commercial requirements that position CDP as a strategic part of the way that they think about building and expanding their relationship. Like, as an example, you know, we shared today the Vertu Motors example, where they have implemented Segment in order to understand the caller that's calling in to be able to look up and see that they're in fact a customer that bought from them in the past. To be able to see what car they bought, to know what the residual value is, to then prepare the agent to be able to have the right conversation with that customer and be able to more than likely sell them another car. We're seeing that kind of opportunity from use case to expanded strategic full customer lifecycle requirements. Great. I guess on the Flex side of the business, are you still traditionally going in and replacing or sort of augmenting and building on top of legacy on-prem solutions that have just, you know, maybe run their course of functionality? Or are you increasingly seeing opportunities where customers rush to get anything that was supposedly cloud or hosted at the beginning of the pandemic, but now realize that it's, you know, they can't configure it, they can't do actually what they wanted or what they thought it could, and are now looking at what Flex and Twilio more holistically can mean as a, you know, five, 10, 15-year partner from a technology perspective? In smaller customers, so think of this as like digital disruptors up to like a mid-market size account, we do have a fairly healthy portion of the business that is their first real implementation of a contact center type solution. They may not call it a contact center, by the way. They may call it their support solution or their customer engagement solution. As you move up to larger organizations with more legacy implementations, you are actually see a lot more of installed base. We have a fairly healthy augmentation business, as we called out in our remarks, that people are adding new channels and new capabilities in parallel with their legacy implementation. We're also winning more and more replacements of legacy implementation. The example that we shared in our prepared remarks regarding Align, which is a great customer example. You know, a very digital-oriented business that had a legacy supplier that actually faced some challenges. The customer was able to rapidly spin up a replacement implementation on Twilio that is now their standard for their requirements going forward. Now that's not the way that you're necessarily gonna win the business overall. We're not gonna wait for people to fail. We're showing up and helping customers recognize that the next generation of engagement can't be satisfied with the legacy player in the way that Flex can. We have many examples that range from, you know, Fortune 100 banks to Global Fortune 100. Pardon me, Global 2000 automotive manufacturers that have successfully implemented Flex to meet their full requirements. You know, Matt, this is Jeff, and I just thought I'd add one thing which I thought was interesting. You know, when I was first getting to know Segment and before we did the acquisition, I was really struck by their penetration into the enterprise. We've had a number of great enterprise customers speaking about their implementation of Flex. You know, just at our SIGNAL, we had Procter & Gamble, who's a great customer. We had Intuit, the CTO of Intuit, Marianna Tessel, on stage talking about their use of Segment across all their properties. You know, we have a Fortune 100 financial services company that we just announced in this quarter that we signed in Q4. Nike is a well-known customer. Right? So we've got great enterprise customers who are using Segment already. I'm struck by how early the need in enterprises has been apparent. When we think about the more complex the business is, the more subsidiaries there are, the more brands they run, the more, you know, systems they've implemented, the more the need is for a customer data platform to help them make sense of all of it. I've been really pleasantly surprised on the traction, even before the acquisition, that Segment already had in the market and therefore the need for CDP. All right. Great. Thankful. Thank you. Very helpful. Great. We are up at time. I know there's a lot of folks that still have questions in the queue. We will catch up with you this afternoon. Otherwise, thank you everybody for joining, and look forward to catching up over the rest of the quarter. This concludes today's conference call. You may now disconnect.