Okay, good morning, everyone. Welcome to the conference. I'm Mark Murphy, software analyst with JP Morgan. It is a wonderful honor to be here with Jeff Lawson, who is the founder and CEO of Twilio. First of all, Jeff, thank you for making the long trek out here. Thank you. The longest trek was actually getting down from the seventh floor the elevator crew. That can be the case. Yeah. I've encountered that myself. So welcome to the conference. Maybe you could begin by just giving a very brief introduction of yourself and Twilio for the benefit of anyone out there in the audience who's not aware. Yeah, absolutely. Hi, everybody, I'm Jeff Lawson. I'm the CEO and cofounder of Twilio. Twilio is a Customer Engagement Platform. We allow companies to understand their customers and then connect with their customers across all the different parts of a business that talks to a customer, whether it's sales, service, marketing, support. We're building this platform that allows companies to understand customers based on every data point that a company has about its customer. Everything they buy, everything they scroll, every visit, every click, and then use that to go create more engaging interactions over emails, calls, texts. Every touch point a company has with their customer, be able to make those into greater lifetime value, creating conversations with those customers. We're the leader. Where we started is in communications. We're the leader in this market called CPaaS, which is Communications Platform as a Service. We power over 1 trillion interactions between companies and their customers last year, between calls, texts, emails. Then we acquired the leading Customer Data Platform called Segment that has powered over 10 trillion data points between companies and their customers in the past year. Now we're marrying those two together to build this Customer Engagement Platform. We helped take the company public back in 2016. At that time, less than $300 million in revenue. The business boomed every year all the way through the pandemic. You're approaching $4 billion in revenue today, over 300,000 customers. When you look at where we stand, the economy has slowed, right? The cost of capital has changed pretty materially. You've done some substantial layoffs. You've split the company into these two divisions. From your perspective, where do you think we are in the evolution of Twilio, and can you help us maybe to envision where you see this business heading a couple of years down the road? Yeah, absolutely. Right. We've got this more mature three and a half billion dollar communications business. The goal we've set for that communications business is to throw off a substantial amount of profit. Where we are in terms of the company, you know, that was where we started 15 years ago. It's a large business. We expect that it can throw off a substantial amount of profit. We're focused on that with that part of the business. Now, the flip side is our data and applications business is a newer set of products. It's about $400 million. Those are in market capture mode. We're really focused on scaling up the go-to-market activities for the data and applications business in order to grow that side of the business much faster. We've split the business in these two business units to be able to separately pursue those two goals, right? Efficiency, and growth for Comms, as well as, market capture and higher growth for our data and applications business. That was a change that we made early this year, February of this year, when we did a restructuring of the business and split into these two. I believe that this helps us to go accelerate our ability to achieve this goal that we have of building this one Customer Engagement Platform. You think about talking to your customer over one of these channels and actually understanding them and knowing what to say and being really smart about how you engage with that customer, right? Those are two sides of the same coin. Because, you know, if you, if you have a channel open with a customer in terms of being able to talk to them, you don't know what to say, guess what? Customers close that channel. They're like, "You're irrelevant. Stop. Unsubscribe. Go away." Right? These are two sides of the same coin. Now you think about, well, where are we going? Well, we're going into a world where artificial intelligence, and I'm sure that's the buzzword everyone's weaving into their presentations today. Look, it's absolutely true that the amount of excitement out there in terms of customers, buyers, but also what's gonna be possible, like we have reached that inflection point. I am absolutely confident. I'm a software developer by background. I'm a technologist. I've been doing... You know, I've been in the industry for 30 years, and I think this is the next big platform shift. I think a lot of other people are saying this too. I'm not alone in this, that this is the next platform shift. Shift like PC to web or web to mobile. Well, AI is going to be the next platform shift. What that implies is that when the platform shift occurs, every market experiences this, like, reset button moment where what buyers want, what customers want changes based on now what is possible. The decisions that you made two, three, five, ten years ago about your technology stack or the decisions you made are suddenly all up for grabs again. Like, that's what happens in a platform reset moment. You know, you saw it when mobile came out, where, you know, what was possible changed all of our expectations about, you know, getting into a stranger's car or renting someone's, you know, spare air mattress or what. Like, all sorts of new things became possible that you didn't even imagine, and therefore where you'd stay when you went on a vacation or how you got around town completely changed. That's the consumer world. In a B2B world, what it does is it resets all of the technology decisions that a company has made, You say suddenly, "Well, now we're gonna optimize for a new set of things that are possible that obviate a lot of the decisions that we made a while ago." I think that is happening now for all different categories of B2B software. We have an amazing set of assets to go into companies because the data that we have about our customer's customers, their end users, to me is the most important thing that companies are going to need as they think about building out AI to go serve those customers. Like I think about a world where let's say you've got a variety of AI doing a number of tasks for your customer, whether it's sales, service, marketing, support, like all of those fields are going to get revolutionized because of what machine learning can do. In any one of those scenarios, if I'm like, "I've got an automated thing that is trying to do marketing or sales or service for a customer," and in one universe, that thing does not know anything about who it's talking to. "Hello. Hello, customer. How can I help you today?" Right? Versus the version of that where they know exactly everything there is to know about that customer because you've been able to take every data point about that customer, coalesce it into one golden profile, and then use that profile to teach the language model that whatever AI it is to understand that customer to serve it differently, you're gonna get a very different outcome. "Hello, Mr. Murphy. I see you're a longtime customer who's a high likelihood of churn. How can I help you today? Oh, now you got my attention. You know what I mean, right? All sorts of things. The interesting thing is the last generation, you know, the mind naturally goes towards, oh, conversation for, say, service and support, right? Our minds as consumers or as business people often go towards like, well, that's an obvious use case for this technology, right? Well, when you think about those interactions, it used to be that you would build it out very intentionally. You'd be like, okay, this decision tree, and a company would say, "Oh, well, if they say this, then you're gonna say that," and they kinda model these interactions out very tightly because that was how the technology worked, right? They called it intents. You know, what's your intent? Your intent is to buy. Your intent is to, you know, change your flight. You narrowly model these very discrete activities. Well, now you just hand all the context of that customer to a large language model and it's just gonna figure it out. That's the amazing thing that changed in the last six months with the advent of these large language models. The it figures it out world that we're now in changes everything. you have 10 trillion of those data points in Segment, I believe you said earlier. Yeah. Last year alone. Yeah. Last year alone. Okay. I didn't even have to ask you about AI. We went there naturally. I wanna come back and double-click on that in, in a few minutes. Before we do that, I can hear the excitement in your voice, right? I've known you a long time. You, you personally bought Twilio shares, years ago in the $20s. You did that again recently, at a little higher level. The company has authorized a $1 billion share repurchase program. You used it pretty actively, right, in Q1. The stock is trading around 1.5 times revenues. You have $16 a share in cash. You have much more than that per share in NOL, so it feels a bit washed out. Where do you see investor disconnects at this point in time that are? Well driving, that are driving your buying activity? Given the fact pattern you just stated, wouldn't it make sense for why we'd be buying and I'd be buying? Just saying. Yeah. What's the disconnect? I think. So when you sit down and speak with investors- Yeah. what do you think at this level they're underestimating? If I could rephrase it. I think there's two things. One is I think there's certainly disappointment in our guide, 'cause we got into a low growth guide in Q2. I think part of this is we are with a usage-based model, so the $3.5 billion of communications revenue is a usage-based model that in economy it'll mirror in some ways the economic activity of what's going on outside of the walls. Right? During the high growth era of the last decade, we were able to show industry-leading dollar-based revenue expansion and growth numbers at our scale. Now we're seeing the flip side of that, which is, you know, the headwind does disproportionately impact us in terms of seeing less economic activity outside of our walls. I was just telling the story upstairs to some buy side about how I was trying to buy the new Zelda game. I went to Best Buy and I got a text message that, you know, the game was gonna get delivered. I had to get on my flight and it hadn't come in time. I canceled it, and I got another text message saying, "Canceled your order." Right? That transaction equals two text messages. Mm-hmm. If there's less transactions going on in the world because consumers are not spending as much at, say, a retailer, it would be fewer communications, right? Kinda makes sense, right? The, the communications that come out of this customer is often a function of how much transaction volume is going on out there. We're gonna see an accelerated headwind during this period of time. I also look at it and say, okay, well, two things are going on. One is when the macro economy turns, then I have the opportunity to see an accelerated tailwind again, which is, I think, one of the benefits of the platform and usage-based model. Number two is, during this period of time, we are seeing the, we are seeing all of the core KPIs of the business, for communications look really good. Like, we are not losing share. We are not feeling price pressure. Like, our pricing power is holding up. These are all the things that you want to see during a period of time like this to say, "Hey, is the business fundamentally healthy, but yes, there's some macro headwinds, or is there anything else going on?" We called out several industries. First of all, crypto, right? Yeah. We disclosed last year 3% of our revenue is crypto, was from crypto companies, not is crypto. To have an industry that represents 3% of revenue just completely implode over the course of six months, like, obviously that sucks. Yeah. That's gonna present a headwind for you, which we're certainly seeing. We've also talked about how we're gonna lap most of that in Q3 of this year, that represents a 300 bps headwind of growth for us, right? There's that. We looked at the other industries. You know, we called out retail, we called out, you know, social media, we called out a couple others. Kind of like what we did is we squared away, here's what we're seeing in the usage patterns, we went and looked at the top five companies in each one of those sectors, and what are they saying in their public earnings calls? You know, like we compared, these things squared away really well. Mm-hmm In terms of what growth rates were they talking about a year ago versus today. What were we seeing a year ago versus today. When we look at these industries, we say, "Yep, you know, so there's some macro headwinds going on, but we're well situated to be able to capture that." When we look at our medium-term growth target that we put out of 15%-25% year-over-year over the medium term, where medium term is 2025 through 2027, we feel very confident that we are going to be able to hit those growth rates because of really four reasons. You know, number 1 is we are seeing our usage volumes stabilize. Through the end of last year and the beginning of this year, we saw continual degradation of those usage volumes, right? In terms of, hey, this is what we think the platform is gonna be doing in terms of volume. Oh, the actuals that are materializing are less, we have to keep bringing down our estimates of what's gonna happen, right? Mm-hmm. Well, now we are seeing those stabilize as we're in Q2, which feels good. Second is what I mentioned in terms of the core KPIs of the communications business being solid, right? We're not losing market share. We're not losing to competitors. We're not seeing price erosion or anything like that. In fact, if anything, we look at our publicly traded comps, we are much larger and growing faster in terms of our Q2 guide or Q1 results than anyone else out there. If anything, we're taking share in this market. Again, good things to see. Third is we are working on the go-to-market investments for our data and applications business. Those are coming together nicely. It's still early, but we're really invested in the reconstitution of our go-to-market for our data and applications business post our restructuring. That is going very well. Then fourth is obviously the tailwinds that AI and all the things our customers wanna do with AI now that are driving a lot of the conversations with our customers. I mean, I see a tremendous opportunity ahead. Those are the four reasons why I look at it. I'm just like, look, we put out this 15%-25% annual growth goal for the medium term. I think investors out there are saying, "Well, are you really gonna be able to do that?" Because we guided to, you know, single digits for Q2, which I get it, that sucks. We are confident in this medium-term guide because of all those reasons I just gave you. Jeff, when you made this comment here that you're seeing usage volumes stabilize as we're in Q2, I just wanna clarify. You're talking about core SMS text, or you're talking about email, or you're talking about video? You're talking about? Communications the whole aggregation, the entire communications platform. Mm-hmm. Yep. You've been operating, as you've just described, in this quite challenging business climate. Software companies are seeing that left and right all over the place. Very quietly under the radar, you have announced some customer wins that, you know, we think are rather head-turning. You closed your largest email deal ever in Q1, right? One of the largest verified deals. You closed a Flex deal with Sanofi. Largest Silent Network Authentication deal to date with a Fortune 100 company. What do you think we should read into that? Why are there companies that are leaning in with some of these larger commitments even during this environment? Yeah. A large Segment deal that we announced on our Q4 earnings call with J.P. Morgan. I'm familiar with that one as well. Yeah. You heard of them? I have. What's happening? Thank you for advertising some of our big customer wins. What's happening out there in the market? Well, look, the services that we offer, right, of helping connect a company to its customer by better understanding that customer and then using all this digital technology to build a digital relationship with that customer, and doing so, to increase the lifetime value of that customer relationship or to decrease the cost of acquiring that customer, that's the... Everything that people do at Twilio ladders up to one of those two. It ladders up to acquiring customers more cost efficiently. We have these amazing stories. You know, one of my favorites is Domino's Pizza, where they took Segment and they said, "We're gonna understand our customers better, and then based on that, we're going to target ads better." They ran this experiment in Mexico where they said, "We're gonna target our customers, who are most likely to buy." In doing so, they had a 700% increase in return on ad spend. Right? You talk about acquiring customers and revenue and getting a 700% return on ad spend increase. That's the kind of story that customers wanna hear in this type of macro environment, right? We've got all these different stories about customers getting more efficient, in terms of, like, understanding your customers allows you to acquire them more efficiently, it allows you to retain them more efficiently, and it allows you to unlock more lifetime value from those customers. I think that the way that we've been able to position our platform, during this period of time has been really fruitful in terms of aligning to the things that our customers care about during this economic cycle. I think that's what. Look, the personal conversations that I'm having with a lot of companies, you know, a lot of the more hand-wavy type outcomes that a few years ago maybe customers were interested in talking about, now have gotten very much focused on ROI, and we have gone straight there with our customers, I think, to great success. You're talking about the economic cycle. There's also this, the customer experience investment cycle itself. I recall this during the pandemic. You had run a customer survey. You found that organizations were saying they had accelerated their communication engagement strategies by 6 years, right? We did go through a wave where you had the pandemic as an accelerant. Could you walk us through how customers are thinking about the category today? If we try to map it to the durability of Twilio's core offerings, because they had gotten into this digestion mode, right? Certainly for front office revenue generating software, they've been in a digestion period. How do you think that, kind of rolls forward and when do you think they sort of reengage or reprioritize? Well, I think there's two different things you have to think about. One is the usage-based model for use cases that have already been deployed, right? That's not an active decision by a company. You know, a lot of software companies during this period of time might be saying things like, "Oh, well, we're not seeing the renewals that we, you know, maybe historically said." That's not what is driving Twilio, right? For us, if a company put in that use case of like, you know, hey, we'll, you know, text you when your e-commerce purchase is made, then generally speaking, it's like if there's fewer purchases, there's fewer text messages. Mm-hmm. You know, to be blunt. It's not an active decision that a buyer has made. It's just a fact of the matter, which is, you know, both good and bad, right? It's bad in the terms of like, oh, well, you know, what's in your control, Jeff? Well, what's in our control is can we go use this period of time to go win more market share from our customers? Can we go close new relationships? Can we go help our customers, you know, consolidate vendors and do things like that? Like, I think there's a lot that we can do, and we are doing in terms of vendor consolidation during a period of time like this. The other thing is, you know, as usage rebounds, you know, usage for us grows, and revenue therefore grows. That's having a usage-based model. The flip side on the software model is in terms of bridging what it is that we do to the things that customers care about most. Look, you would say, "Well, isn't that what go-to-market always does?" Yes, but it's even more important that you're focused because people don't have the time or attention to work on side projects today, right? There may be a, you know, in a couple years ago, maybe there were more hobbies going on in terms of ideas that executives and companies were pursuing... Mm-hmm ... that may bear fruit one day. The ROI of those types of initiatives is now much more scrutinized and much closer than it has been in the past. When I think about it, the use cases that got installed during COVID, except for the ones that are literally only about the pandemic, like those use cases are still out there, and they are going to be subject to macro. When macro grows, they're gonna grow. If macro shrinks, they're gonna shrink, whatever. You know, and there's a small number of use cases like vaccinating people, and we helped power the messages to help get about half a billion people vaccinated around the world. You know, I'm really proud of those use cases. We helped educate and coordinate the logistics of people getting life-saving vaccines, but those use cases are gonna go away, and that's a good thing. Mm-hmm. Right? Like, kind of celebrate. That's a great thing. That's not. You're right. Exactly, right? That's a win. That's a relatively small amount of our revenue. Now, there is some of that going on, but the vast majority of everything that like companies like, you know, say a retailer or hospitality or real estate or transportation or any of those companies deployed, you know, those use cases live on, and if anything, the pandemic brought us into new customer relationships with new companies that therefore we have the ability to go in and expand those relationships, expand the use cases, and the pandemic got us in the door with those types of, those types of organizations. I think that's the opportunity that we look at. Now, we just have to align what it is we do with the things they care about today. If two years ago it was about responding to the pandemic and digitizing all these processes, like, well, you know, we did a good job I think capturing a lot of the demand. Now, let's go in and figure out, okay, well, what are the other use cases in that customer today? How do we, over the course of time, end up going wall to wall inside that customer when the relationship began because of the pandemic. Okay. Can you give us a few words on the challenges and opportunities that you may see coming out of the headcount actions? As everyone in the audience knows, it's been a very widespread trend across the software landscape. It's a, it's a subset that have done, you know, multiple rounds of the headcount actions. You have parted ways with 26% of employees, so there is a real magnitude here. Can you comment on why you took such aggressive action and how would you kind of steer us to look at the challenges and opportunities that arise from that? Well, you know, like I said before, we are focused on building profitable growth into the company now, right? I think that, like, if I look at the first, you know, 13, 14 years of the company, we were focused on market capture and doing so responsibly, but really growing our presence in the market. In that course of time, we built a nearly $4 billion revenue business, which I'm extraordinarily proud of. I think that's the right thing to do during the expansionary phase of a market, right? When the cost of capital is low, you go take the market. Now we're on the other side of that curve, which is to take your leadership position and turn it into a profitable growth story and take that leadership position and turn it into the next era of the company, which is to go then solidify your position in that market and then expand out from there. That's what we're doing. The cost actions that we took in terms of restructuring or the reductions in force were a part of turning the corner from, for us, from a purely growth-oriented company to a profitable growth company. Like, when I look at it, I you know, for a long time, we did put off the notion of driving and focusing on profit. We told investors, "Look, we are focused on top line growth, not bottom line growth." At the time, you know, we said it at our, in our IPO in 2016 and multiple times after that, and it's the right decision to make. To go capture that growth, and we did. We went from the year before our IPO, I think we were $140 million revenue- Mm-hmm To now, you know, $4 billion. I think that's the right thing to do during that period of time. Now we take that leadership position, and we parlay it into, you know, the next era of profitable growth. We've committed this year to profit in terms of throwing off amount of profit this year. We've also committed to 300 to 400 basis points of sustained growth year after year after this. We have also said that we feel confident that we can hit those growth goals in any macro environment. We have our hand on the wheel in terms of moderating our spend, and our biggest source of spending, as you can imagine, most technology companies, is headcount. We are moderating any of our hiring or backfilling of employees based on the performance of the company, so that in any economic environment in this period of time, we feel very confident that we can hit not just our 2023 profit goals, but also our medium-term goals that we've set out over the next several years. It's good to hear that confidence. I, and I've heard investors ask, like, "Hey, you know, how committed to that are you?" I'm here today to say, look, we are absolutely committed to those goals, and we have our hand on the wheel to be able to accomplish those in any macro environment. Yep. That's a come hell or high water type of situation. Yeah, totally. There were some comments, though, kinda tucked in the Q& earnings call about potential to accelerate growth in the back half of the year, right? Actually, it related to both divisions of the business. There was a comment on the communication side of the business, right? I read that as a real-time, usage-based kind of revenue type of a comment. Then there was a bookings comment about the potential to reaccelerate in the back half of the year on the other side of the business, the data and app side of the business. Can you touch on that for a moment? Because you'd probably get. There's probably some debate around, well, what is gonna happen in the trending of the actual, the environment and the economy in the back half of the year. What is, what is underpinning, that type of an uptick? Yeah. Well, I mean, first there's just some technical things going on in terms of lapping some hard comparers. Lapping, you know, crypto, which I think peak crypto was Q2, Q3 last year. Lapping that. You know, some of other factors that just made some hard comparers. There's a technical aspect of that, and we've disclosed a lot of the details of that. The second thing is when I look at, okay, first of all, do I think that, you know, macro is going to be up or down from here? Look, I don't have that crystal ball. I don't know for sure. That's why I think we have to be prudent in how we think about, you know, guiding for the year. I think that we are doing the right things to capture the market as it exists today and to go capture more market. We're not necessarily just betting on, oh, we're gonna have a macro recovery. No. Like, in the macro environment that we're in, we are going to optimize to go serve our customers, win market share, and go help our customers through this period of time as well. The second thing I look at is on the data and application side of the business, really making the investments that we need to do to get the go-to-market machine humming again. We talked about last year about how we had combined our go-to-market teams, which turns out was the wrong answer. We split them apart, and our business unit structure now solidifies that in terms of the entire business units. Now we have a rebuild of a lot of the go-to-market capabilities. We talked about that at our Analyst Day last year in November, and we are well on our way. Now we sit here, we've got our butts in seats in terms of our sales team, and we are training, enabling, and making those folks productive. As we do that, we would expect the productivity of that sales team to follow. That's where I look at the latter half of this year. I, you know, I look at the things that we're doing in terms of hiring great folks, enabling them to go build pipeline and go sell our data and applications products. Our products there are fantastic. Enabling that team is the key to making them productive in the market, and that's exactly what we're doing. I see all the right things happening, in order to get us to that productivity that we want, in order to show the revenue growth, which is obviously the outcome of doing all those things well. Great to hear. Slightly delayed. It's great to hear that optimism as well. We're, we're down to about two and a half minutes. I wanted to do a quick check and see if there's any quick question in the audience, and we do have to get you a microphone. Let's go to Imran right here. Jeff, huge fan of you and what you have done. You know, looking at the company, it feels like that, you know, you have a high growth business, you have a mature business, and investors are not necessarily looking at the, at least at the valuation aligned having both companies together. Does it make sense to spin up the communication business? I think that would be a big mistake, right? There's a reason why we're building this as one platform, because I believe we can unlock more value than either part alone. That's the point here. Now, we've got a lot, obviously a lot of work to do to make those two pieces come together. If anything, I would say a lot of the advancements that are going on right now in AI and machine learning make the case for a integrated platform even stronger than they were before the advancements of, say, the last year. The reason is because understanding your customers and then engaging with them are two sides of the same coin. We can make every communications more valuable by infusing understanding into those communications. Likewise, we can make the data asset all that much more valuable by taking the content of all of those trillion communications and helping them to accelerate the building of those profiles of the customers. This is a nice flywheel, 'cause when you understand your customers really well by taking all that data, turning it into insights, personalization, and making every touch point you have with that customer more relevant and insightful. Well, what happens? Customers are more likely to engage with you. They're more likely to click on that email, go to your website, browse, buy. They're more likely to respond to you versus saying, "Stop. Unsubscribe. Go away." And the more engagement you get from that customer, the more data you have. The more data you have, the better you understand them. This is the virtuous cycle that companies like Google, Amazon, Facebook, they know. Your and my Amazon home pages are completely different. Why? Because they take every bit of data about us, they use it to personalize that service. As a result, we say, "Thank you. What a great product. I'm gonna buy more stuff from Amazon, not less." That's the virtuous cycle, that data turns into understanding, which turns into more engagement, which turns into more data. That's what we're building, and in doing so, we can unlock more value for both communications and for the data than those being independent entities. More importantly, we can unlock more value for our customers in integrating those things together into one flywheel. Perfect timing. The clock hit zero. I I don't know how you did that so well, Jeff, but can't thank you enough for being here. That was super engaging, and thank you for taking the time to be with us. Thank you, Mark. Thank you, everybody.