What changed in this filing

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Item 1. Business

2021-02-26 compared with 2020-03-02 · 227 added, 195 removed, 197 unchanged (68% of the section changed)

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Because communication is a fundamental human activity and vital to building great businesses, we wanted to incorporate communications into our software applications, but the barriers to innovation were too high.

Twilio was started to solve this problem.

We believe the future of communications will be written in software, by the developers of the world—our customers.

By empowering them, our mission is to fuel the future of communications.

Cloud platforms are a new category of software that enable developers to build and manage applications without the complexity of creating and maintaining the underlying infrastructure.

Twilio was started to solve this problem in 2008.

Twilio spent the last 12 years building the leading cloud communication platform, but communications is just the beginning.

Twilio's vision is to be the leading customer engagement platform, ultimately providing businesses with the holy grail—a single view of the customer journey.

We believe the future of customer engagement will be written in software, by the developers of the world—our customers.

Cloud platforms are a category of software that enable developers to build and manage applications without the complexity of creating and maintaining the underlying infrastructure.

These platforms have arisen to enable a fast pace of innovation across a range of categories, such as computing and storage.

We are the leader in the cloud communications platform category.

We enable developers to build, scale and operate real-time communications within software applications.

We enable developers to build, scale and operate real-time customer engagement within software applications.

We offer a customer engagement platform with software designed to address specific use cases, like account security and contact centers, and a set of Application Programming Interfaces ("APIs") that handles the higher-level communication logic needed for nearly every type of customer engagement.

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The Super Network also contains a set of APIs giving our customers access to more foundational components of our platform, like phone numbers.

In February 2019, we acquired SendGrid, the leading email API platform.

Email is an important channel for businesses to communicate with their customers, and incorporating SendGrid's products into our platform allows us to enable businesses to engage with their customers via email effectively and at scale.

In February 2019 we acquired SendGrid, Inc.

("SendGrid"), the leading email API platform.

Email is an important channel for businesses to communicate with their customers.

Incorporating SendGrid's products into our platform allows us to enable businesses to engage with their customers via email effectively and at scale.

In November 2020 we acquired Segment io, Inc.

("Segment"), the market-leading customer data platform.

Segment provides businesses a unified customer view to better understand their customers and engage more effectively.

The acquisition expands and strengthens use cases across customer service, marketing, sales, product and analytics and accelerates Twilio’s journey to build the world’s leading customer engagement platform.

We had over 221,000 Active Customer Accounts as of December 31, 2020, representing organizations big and small, old and young, across nearly every industry, with one thing in common:

they are competing by using the power of software to build differentiation through communications.

they are competing by using the power of software to build differentiated customer engagement experiences.

With our customer engagement platform, our customers are disrupting existing industries and creating new ones.

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We love when developers explore what they can do with Twilio, because one day they may have a business problem that they will use our products to solve.

As our customers succeed, we share in their success through our usage-based revenue model.

As our customers succeed, we share in their success primarily through our usage-based revenue model.

Our revenue grows as customers increase their usage of a product, extend their usage of a product to new applications or adopt a new product.

We believe the most useful indicator of this increased activity from our existing customer accounts is our Dollar-Based Net Expansion Rate, which for historical periods through December 31, 2019, compares the revenue from a cohort of Active Customer Accounts, other than Variable Customer Accounts, in a period to the same period in the prior year.

Dollar-Based Net Expansion Rate was 136% and 140% for the years ended December 31, 2019 and 2018 , respectively.

As previously announced in our Annual Report on Form 10-K filed with the SEC on March 2, 2020, commencing with the three-month period ended March 31, 2020, we calculate our Dollar-Based Net Expansion Rate by comparing total revenue from a cohort of Active Customer Accounts in a period to the same period in the prior year (the "New DBNE Definition").

Under the new DBNE Definition, our Dollar-Based Net Expansion Rate was 137% and 135% for the years ended December 31, 2020 and 2019, respectively.

See Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations—Key Business Metrics—Dollar-Based Net Expansion Rate."

Our Platform Approach

Twilio's mission is to fuel the future of communications.

We enable developers to build, scale and operate real-time communications within software applications.

We believe every application can be enhanced through the power of communication.

Over time, we believe that all of our communications that do not occur in person will be integrated into software applications.

Twilio's mission is to be the leading customer engagement platform.

We enable developers to build, scale and operate real-time communications within software applications, ultimately empowering every developer and company to improve their interactions with their customers through software.

We believe that by giving developers the power to build with software at every level of their business we enable businesses to create novel and creative new consumer experiences that delight their customers and enable them to differentiate from their competitors.

Our platform approach enables developers to build this future.

Using our software, developers are able to incorporate communications into applications that span a range of industries and functionalities.

Our technology partner customers, which embed our products in the solutions they sell to other businesses, are also able to leverage our products to deliver their applications.

Common Use Cases

Anonymous Communications.

Enabling users to have a trusted means of communications where they prefer not to share private information like their telephone number.

Examples include conversations between drivers and riders or texting after meeting through a dating website.

Alerts and Notifications.

Alerting a user that an event has occurred, such as when a table is ready, a flight is delayed or a package is shipped.

Our technology partner customers also embed our products in solutions they sell to other businesses.

Part of our core strategy is to provide a broad set of lower-level building blocks that can be used to build practically any digital experience.

By doing this, we allow developers' creativity to flourish across the widest set of use cases—some of which have not even been invented yet.

What are some of the common customer problems we are solving?

• Contact Center.

Improving customer support by powering customer care teams with voice, messaging and video capabilities that integrate with other systems to add context, such as a caller's support ticket history or present location.

Call Tracking.

Using phone numbers to provide detailed analytics on phone calls to measure the effectiveness of marketing campaigns or lead generation activities in a manner similar to how web analytics track and measure online activity.

Integrating messaging and email with marketing automation technology, allowing organizations to deliver targeted and timely contextualized communications to consumers.

User Security.

Verifying user identity through two-factor authentication prior to log-in or validating transactions within an application's workflow.

This adds an additional layer of security to any application.

Twilio gives companies complete control and flexibility to rapidly deploy remote agents, digital channels, self-service and integrations for lower costs and higher productivity.

• Alerts & Notifications.

From delivery notifications to critical emergency alerts, Twilio provides the building blocks to develop critical communications across short message service ("SMS"), voice and email channels.

• User Verification.

Customers can use a globally optimized multi-channel user verification solution to combat fraud, reduce fake user sign-ups and authorize sensitive account actions.

• Field services & contactless delivery.

Our customers can use Twilio Conversations to ensure privacy with masked communications, provide granular session control over user permissions, session duration and roles and keep private information private.

• Customer Loyalty.

Customers can send reminders about reward programs through email or SMS to drive repeat purchases through loyalty incentives.

• Twilio For Good.

Partnering with nonprofit organizations through Twilio.org, to use the power of communications to help solve social challenges, such as a short message service ("SMS") hotline to fight human trafficking, an emergency volunteer dispatch system and appointment reminders for medical visits in developing nations.

Part of our core strategy is to provide a broad set of lower level building blocks (i.e.

our Channel APIs and Super Network) that can be used to build virtually any use case.

By doing this, we allow developers' creativity to flourish across the widest set of use cases — some of which haven't even been invented yet.

As we observe what use cases are most common, and the workflows our customers find most challenging, we create Solutions to bring these learnings to a broader audience.

While developers can build a broad range of applications on our platform, certain use cases are more common.

Our Solutions APIs build upon our Channel APIs to offer more fully implemented functionality for a specific purpose, such as two-factor authentication or a contact center, thereby saving developers significant time in building their applications.

The higher level APIs we have created in this layer of our platform are focused on addressing a massive opportunity to recreate and modernize the field of customer engagement.

The means by which most companies engage with their customers is archaic and disjointed, made more glaring by the pace of development in other areas of communication.

Our products combine the flexibility provided by our platform model with the learnings we've gained since the company was founded focused on driving success at tens of thousands of customers.

Our Channel APIs provide a range of products that enable developers to embed voice, messaging, video and email capabilities into their applications.

Twilio partners with nonprofit organizations through Twilio.org, our social impact division, to use the power of communications to help solve social challenges, such as an SMS hotline to fight human trafficking, an emergency volunteer dispatch system, appointment reminders for medical visits in developing nations and more.

Segment Customer Data Platform

Our acquisition of Segment added the leading customer data platform to Twilio's platform.

While every business needs a complete view of their customers, data is typically siloed across many disparate systems.

Segment's platform and APIs allow companies to collect, clean and control their customer data, providing a single view of customers across channels for more effective engagement.

This insight enables businesses to delight their customers with personalized, timely and impactful communications on the right channel at the right time.

The Segment platform includes:

• Connections.

Collect event data from mobile apps, websites and servers with one API, then pull in contextual data from cloud-based apps like customer relationship management (“CRM”), payment systems and internal databases to build a unified picture of the customer.

Use identity resolutions to take event data from across devices and channels, merge the data together, and create unified customer profiles to build and enrich audiences, and activate audiences across marketing tools with a single view of the customer.

Comply with laws and regulations, such as General Data Protection Regulation (“GDPR”) and the California Consumer Privacy Act of 2018 ("CCPA"), using Segment’s privacy tools.

Standardize data collection to create a single source of truth for customer data that is clean, consistent, and compliant, and adheres to a well thought out tracking plan.

Our Channel APIs consist of software products that can be used individually or in combination to build rich contextual communications within applications.

We do not aim to provide complete business solutions, rather to offer flexible building blocks that enable our customers to build what they need.

Our easy-to-use developer APIs provide a programmatic channel to access our software.

Developers can utilize our intuitive programming language, TwiML, to specify application functions, such as <Dial>, <Record> and <Play>, leveraging our software to manage the complexity of executing the specified functions.

Our Channel APIs consist of software products that can be used individually or in combination to build rich contextual communications within applications.

We do not aim to provide complete business solutions;

rather to offer flexible building blocks that enable our customers to build what they need.

Our Channel APIs include:

Programmable Voice.

Our Programmable Voice software products allow developers to build solutions to make and receive phone calls globally, and to incorporate advanced voice functionality such as text-to-speech, conferencing, recording and transcription.

Programmable Voice, through our advanced call control software, allows developers to build customized applications that address use cases such as contact centers, call tracking and analytics solutions and anonymized communications.

Programmable Messaging.

Our Programmable Messaging software products allow developers to build solutions to send and receive messages globally, through channels like SMS, multimedia messaging service ("MMS"), short codes, Rich Communication Services ("RCS") messaging, WhatsApp, Facebook Messenger, and LINE, and incorporate advanced messaging functionality such as emoji, picture messaging and localized languages.

Our customers use Programmable Messaging, through software controls, to power use cases, such as appointment reminders, delivery notifications, order confirmations and customer care.

Programmable Video.

Our Programmable Video software products enable developers to build next-generation mobile and web applications with embedded video, including for use cases such as customer care, collaboration and physician consultations.

Our email products serve as a digital communication platform that enables businesses to engage with their customers via email reliably, effectively and at scale.

Businesses use the email products for both transactional and marketing emails.

Transactional emails include shipping notifications, friend requests, password resets, and sign-up confirmations.

Marketing emails include newsletters, advertising, announcements, and related communications to large audiences.

Twilio Programmable Messaging is an API to send and receive SMS, multimedia message service ("MMS") and over-the-top ("OTT") (WhatsApp and Facebook Messenger) messages globally.

It uses intelligent sending features to ensure messages reliably reach end users wherever they are.

Our customers build use cases, such as appointment reminders, delivery notifications, order confirmations and customer care.

Programmable Messaging includes:

Programmatically send and receive SMS messages around the world, supporting localized languages in nearly every market.

This includes support for the new 10-digit long code routes in the United States ("U.S.").

Exchange picture messages and more over U.S.

and Canadian phone numbers from customer applications with built-in image transcoding and media storage.

• Toll-Free SMS.

Send and receive text messages with the same toll-free number used for voice calls in the U.S.

• High-Throughput Toll-Free SMS.

Starting at 25 messages per second, High-Throughput Toll Free SMS lets you send and receive a higher volume of messages with the same toll-free number used for voice calls in the U.S.

• OTT channels.

Programmatically send, receive and track messages to messaging apps such as WhatsApp and Facebook Messenger globally.

We charge on a per-message basis for most of our Programmable Messaging products.

Twilio Programmable Voice allows developers to build solutions to make and receive phone calls globally.

They can make, manage and route calls to a browser, an app, a phone or anywhere else one can take a call.

Developers can also incorporate advanced voice functionality such as text-to-speech, conferencing, recording and transcription.

Through advanced call control software, developers can build customized applications that address use cases such as contact centers, call tracking and analytics solutions and anonymized communications.

Our voice software works over both the traditional public switched telephone network ("PSTN") and over Internet Protocol ("VoIP").

Programmable Voice includes:

• Twilio Voice.

Initiate, receive and manage phone calls globally, end to end through traditional voice technology or between web browsers and landlines or mobile phones.

• Call Recording.

Securely record, store, transcribe and retrieve voice calls in the cloud.

• Global Conference.

Integrate audio conferencing that intelligently routes calls through cloud data centers in the closest geographic region to reduce latency.

• Voice Insights.

Call quality and performance data at your fingertips.

Beyond details of a single call, every account on Twilio has access to the Voice Insights Dashboard, a powerful tool in Twilio Console that provides out-of-the-box visibility to key performance indicators and data to understand changes in call behavior.

• Media Streams.

Allows for real-time access to the raw audio stream of your phone calls.

Through Media Streams you can fork the media of a phone call in real-time, effectively creating a copy of the initial audio stream that can be routed to your own application or to a third party to power advanced capabilities of your choosing.

• SHAKEN/STIR.

Signature-based Handling of Asserted Information Using toKENs ("SHAKEN") and Secure Telephone Identity Revisited ("STIR") standards (together, "SHAKEN/STIR") is a protocol mandated by the Federal Communications Commission ("FCC") to combat the rise in unwanted robocalls and unlawful caller ID spoofing.

When adopted, carriers can present a trust indicator, like “Caller Verified”, to recipients’ phones.

SHAKEN/STIR is free to all Twilio customers and allows them to increase answer rates for their calls by giving their calls the highest attestation under the SHAKEN and STIR caller authentication framework.

• Programmable Voice Session Initiation Protocol (" SIP") Interfaces.

Enables voice infrastructure to be augmented with cloud capabilities.

• Emergency Calling.

Twilio’s Emergency Calling for SIP API enables emergency call routing to Public Safety Answering Points ("PSAPs") in the U.S., Canada and the United Kingdom ("UK").

• Bring Your Own Carrier Trunking ("BYOC").

Enables connection of customer’s PSTN carrier to Twilio’s programmable platform.

The Twilio SendGrid Email API solves email delivery challenges at scale and ensures our customers’ email program lives up to their product experience.

Our Email API provides the flexibility for our customers to build customized solutions, as well as helpful shortcuts to streamline integration and optimize their inbox placement.

Businesses use our email products for both marketing messages as well as transactional emails, including shipping notifications, friend requests, password resets and sign-up confirmations.

Twilio SendGrid Email API includes:

• Integrations.

Businesses can integrate our email API with multiple leading development frameworks and client libraries, including Node.js, Ruby, Python, Go, Hypertext Preprocessor, Java and C#.

• Internet Protocol (“IP”) Management.

Domains and links can be customized, whether sending from shared IP address pools or from a dedicated IP address, to improve reputation management and delivery.

• Deliverability.

Our real-time email address validation API checks email address legitimacy before sending to improve deliverability.

• Sender Authentication.

Our custom Sender Policy Framework and DomainKeys Identified Mail record creation is designed to eliminate domain spoofing and phishing.

• Mobile support.

Our deep linking functionality enables email engagement for mobile apps.

Our two-factor authentication, API key permissions and Event Webhook Security helps enable secure management of our Email API by our customers.

Conversations

Twilio Conversations is a unified conversational API that is pre-integrated with SMS, MMS, WhatsApp and Chat and supports cross-channel, multiparty conversations.

It includes software that support groups, cross-channel orchestration and conversation durations.

This extends the functionality of our Messaging channels and enables developers to use one API regardless of the channel their end-users support.

Programmable Video provides developers with the building blocks to add voice and video to web and mobile applications.

Developers can address multiple use cases such as video consultations, telemedicine, distance learning, recruiting, social networking and more by using Programmable Video’s global cloud infrastructure to build on WebRTC.

They can use our JavaScript, iOS or Android SDKs, quickstarts and open source sample code to launch applications in minutes, then customize them to meet the unique needs of their use case.

As we observe the customer use cases that are most common and the workflows our customers find most challenging, we create Solutions.

We bring these Solutions to a broader audience, including non-technical customers, in the form of higher level APIs.

These solutions are built on top of our Channel APIs to offer more fully implemented functionality for a specific purpose, such as contact center or two-factor authentication.

This saves developers significant time in building their applications.

The higher level APIs in this layer of our platform are focused on addressing a massive opportunity to recreate and modernize the field of customer engagement.

We charge on a per-seat or per-use basis for our Solutions, which include:

Contact Center

Businesses must continually adapt to stay ahead of customers’ changing expectations.

Twilio Flex is the industry’s only fully programmable contact center platform that allows companies to deploy a broad array of customer engagement channels while providing the tools to easily create, change or extend any part of their custom solution.

Twilio Flex enables businesses to rapidly deploy tailored cloud contact centers free from the limitations of software-as-a-service ("SaaS") applications.

User Verification

Online fraud has exploded from a minor nuisance to a major factor in how businesses operate today.

Twilio Verify is a managed solution that takes care of channel orchestration and management as well as security and business logic.

Using our two-factor authentication APIs ("Twilio Authy"), developers can add an extra layer of security to their applications with second-factor passwords sent to a user via SMS, voice, email or push notifications.

Twilio Authy provides user authentication codes through a variety of formats based on the developer’s needs.

Codes can be delivered through the Authy app on registered mobile phones, desktop or smart devices or via SMS and voice automated phone calls.

In addition, authentication can be determined through a push notification on registered smartphones.

To allow developers to know exactly who they are sending messages to, Twilio Lookup allows developers to validate number format, device type and provider prior to sending messages or initiating calls.

Marketing Campaigns

Marketing Campaigns help digital marketers build and send email campaigns at scale and faster than ever.

With drag and drop editing, approachable automation and powerful contacts management, Marketing Campaigns help marketers attract and retain customers more efficiently.

Marketing Campaigns include email design and templates, list management, dynamic content and email testing.

Super Network

Our Solutions and Channel APIs are built on top of our global software layer, which we call our Super Network.

Our Super Network interfaces intelligently with communications networks globally.

We use software to construct a high performance network that continuously optimizes quality and deliverability for our customers.

Our Super Network breaks down the geopolitical boundaries and scale limitations of physical network infrastructure and provides our customers that use our Customer Engagement Platform access to over 180 countries.

The Super Network also contains a set of API's giving our customers access to more foundational components of our platform, such as phone numbers.

We have strategically built out our global infrastructure and operate in more than 25 cloud data centers in nine geographically distinct regions.

These data centers serve as interconnection points with network service providers and customers alike, giving us a truly global reach and a redundant means to connect businesses with billions of customers all over the world.

Our provider relationships and deployed infrastructure have allowed us to catalogue the many different communications standards that exist today and offer them up to businesses as one consolidated platform with simple, easy-to-use APIs.

We are continually adding new network service provider relationships as we scale, and we are not dependent upon any single network service provider to conduct our business.

The strength of Twilio's Super Network comes from the software intelligence we've embedded throughout our communications network.

By leveraging our software expertise, we eliminate the traditional complexities and uncertainties of telecommunications and deliver a consistent and high quality communications platform for our customers.

This allows customers to spend less time focusing on mastering the highly specialized and complex telecommunications industry and more time focusing on building best-in-class customer engagement experiences.

Our proprietary technology selects which network service providers to use and routes the communications in order to optimize the quality and cost of the communications across our product offerings.

Our Super Network analyzes massive volumes of data from our traffic, the applications that power it, and the underlying provider networks in order to optimize our customers' communications for quality and cost.

As such, with every new message and call, our Super Network becomes more robust, intelligent and efficient, enabling us to provide better performance and deliverability for our customers.

Our Super Network's sophistication becomes increasingly difficult for others to replicate over time as it is continually learning, improving and scaling.

While developers build applications with our software, Twilio manages the connections between the internet and the global telecommunications network.

We call this the Twilio Super Network and it is a global network of connections with numerous carriers globally to provide connectivity in approximately 80 countries.

We do not own any physical network infrastructure.

We use software to build a high performance network that optimizes performance for our customers, provides resiliency and redundancy to our platform and helps to minimize disruption from carrier delays or outages.

Through handling massive volumes of traffic, we are able to detect issues often before our customers or carrier partners do.

We receive real-time feedback on handset deliverability through a number of carriers and destinations and we use this data for our own routing decisions.

The Twilio Super Network operates a 24/7 global operations center that constantly monitors the carrier networks, alongside Twilio’s dedicated communications engineers who optimize for changing traffic patterns.

The Super Network also contains a set of APIs giving our customers access to more foundational components of our platform, like phone numbers, and SIP Trunking.

The Super Network features include:

• Phone Number Provisioning.

Acquire local, national, mobile and/or toll-free phone numbers on demand in approximately 80 countries and connect them into the customers’ applications.

• Short Codes.

Typically five to six digit phone number used to send and receive a high-volume of messages per second.

• Elastic SIP Trunking.

Connect legacy voice applications to our Super Network over IP infrastructure with globally available phone numbers and pay-as-you-go pricing.

Twilio’s Emergency Calling for SIP Trunking feature enables emergency call routing to PSAPs in the US, Canada and the UK.

• Interconnect.

Connect privately to Twilio to enable enterprise grade security and quality of service for Twilio Voice and Elastic SIP Trunking.

We charge on a per-minute or per-phone number basis for most of our Super Network products.

The most challenging aspect of connecting previously unconnected devices lies in making the connection reliable and secure enough to perform and add value for years on end.

Twilio’s IoT offerings therefore make connectivity simpler and coding of connected devices more reliable so that our customers can focus on building differentiated IoT experiences versus building and maintaining the required infrastructure underneath.

Our customers use Twilio IoT for use cases, such as asset or fleet tracking, smart building management, consumer wearables (often pulling in other Twilio products such as Voice, Video, and Flex), predictive maintenance and inventory management.

Our Business Model for Innovators

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In order to empower developers to experiment, our developer-first business model is low friction, eliminating the upfront costs, time and complexity that typically hinder innovation.

We call this approach our Business Model for Innovators, which empowers developers by reducing friction and upfront costs, encouraging experimentation, and enabling developers to grow as customers as their ideas succeed.

Additionally, our model encourages experimentation and enables developers to grow as customers as their ideas succeed.

Developers can begin building with a free trial.

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• Continue Significant Investment in our Technology Platform.

We will continue to invest in building new software capabilities and extending our platform to bring the power of contextual communications to a broader range of applications, geographies and customers.

We will continue to invest in building new software capabilities and extending our platform to bring the power of contextual customer engagement to a broader range of applications, geographies and customers.

We have a substantial research and development team, comprising approximately 42% of our headcount as of December 31, 2020.

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We will continue to enhance our relationships with developers globally and seek to increase the number of developers on our platform.

In addition to adding new developers, we believe there is significant opportunity for revenue growth from developers who already have registered accounts with us but have not yet built their software applications with us, or whose applications are in their infancy and will grow with Twilio into an Active Customer Account.

As of December 31, 2020, we had more than 221,000 Active Customer Accounts on our platform.

In addition to adding new developers, we believe there is significant opportunity for revenue growth from developers who have already registered accounts with us but have not yet built their software applications with us, or whose applications are in their infancy and will grow with Twilio into an Active Customer Account.

• Increase Our International Presence.

Our platform serves over 180 countries today, making it as simple to communicate from São Paulo as it is from San Francisco.

Customers outside the United States are increasingly adopting our platform, and for the years ended December 31, 2019 and 2018 , revenue from international customer accounts accounted for 29% and 25% of our total revenue, respectively.

Customers outside the U.S.

are increasingly adopting our platform, and for the years ended December 31, 2020 and 2019, revenue from international customer accounts accounted for 27% and 29% of our total revenue, respectively.

We are investing to meet the requirements of a broader range of global developers and enterprises.

We plan to grow internationally by continuing to expand our operations outside of the United States and collaborating with international strategic partners.

We plan to grow internationally by continuing to expand our operations outside of the U.S.

and collaborating with international strategic partners.

• Further Penetrate the Enterprises.

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We may selectively pursue acquisitions and strategic investments in businesses and technologies that strengthen our platform.

From 2015 through 2019, we

made several acquisitions which have allowed us to expand our platform and service offerings to include features such as a cloud-based API to seamlessly embed two-factor authentication and phone verification into any application, Web Real-Time-Communication ("Web RTC") media processing technologies, contact center analytics, software mobile network infrastructure and language recognition capabilities.

In addition, our acquisition of SendGrid in February 2019 allowed us to add a leading e-mail API platform to our product offerings.

From 2015 through 2020, we made several acquisitions which have allowed us to expand our platform and service offerings to include features such as a cloud-based API to seamlessly embed two-factor authentication and phone verification into any application, Web Real-Time-Communication ("Web RTC") media processing technologies, contact center analytics, software mobile network infrastructure and language recognition capabilities.

In addition, our acquisition of SendGrid in February 2019 allowed us to add a leading e-mail API platform to our product offerings and our acquisition of Segment in November 2020 allowed us to add the market-leading customer data platform to our product offerings.

The Twilio Magic

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Twilio.org's mission is to fuel communications that give hope, power, and freedom with a 10-year goal to help one billion people every year.

In 2015, we reserved 1% of our common stock to fund social impact at Twilio.

In March 2019, we increased the Twilio.org share reserve by 203,658 shares to account for a similar program previously operated by SendGrid.

In 2015, we reserved 1% of our common stock to fund our social impact at Twilio.org.

In March 2019, we increased the Twilio.org share reserve by 203,658 shares of Class A common stock to account for a similar program previously operated by SendGrid, Inc., one of our wholly owned subsidiaries, which we acquired in February 2019.

Since 2015, Twilio.org has made several donations consistent with its philanthropic goals, which were treated as charitable contributions and recorded in general and administrative expenses in our consolidated statements of operations included elsewhere in this Annual Report on Form 10-K.

As of December 31, 2019 , the total remaining shares reserved for Twilio.org was 795,673 .

Solutions APIs

While developers can build a broad range of applications on our platform, certain use cases are more common.

Flex is a fully programmable cloud contact center platform designed to give businesses the ability to build and improve upon customer and agent experiences using tools and frameworks they are already familiar with.

With Flex, customers can quickly deploy an omnichannel contact center platform and programmatically customize every element of the experience including the interface, communication channels, agent routing, and reporting to meet the unique needs of the business.

Account Security

Identity and communications are closely linked, and this is a critical business need for our customers.

Using our two-factor authentication APIs, developers can add an extra layer of security to their applications with second-factor passwords sent to a user's phone via SMS, voice, email or push notifications.

Our Account Security products include:

Provides user authentication codes through a variety of formats based on the developer's needs.

Authentication codes can be delivered through the Authy app on registered mobile phones, desktop, or smart devices or via SMS and voice automated phone calls.

In addition, authentication can be determined through a push notification on registered smartphones

Allows developers to validate number format, device type, and provider prior to sending messages or initiating calls.

Allows developers to deliver a one-time passcode through SMS or voice to verify that a user is in possession of the device being registered

We charge on a per-seat or per-use basis for our Solutions APIs.

Our Channel APIs consist of software for voice, messaging, video and email authentication that empower developers to build applications that can communicate with connected devices globally.

We do not aim to provide complete business solutions;

rather, our Channel APIs offer flexible building blocks that enable our customers to build what they need.

Programmable Voice

Our voice software works over both the traditional public switch telephone network and over Internet Protocol.

Programmable Voice includes:

Twilio Voice.

Initiate, receive and manage phone calls globally, end to end through traditional voice technology or between web browsers and landlines or mobile phones.

Voice calling can also be integrated natively in Apple iOS and Google Android apps.

Call Recording.

Securely record, store, transcribe and retrieve voice calls in the cloud.

Global Conference.

Integrate audio conferencing that intelligently routes calls through cloud data centers in the closest of nine geographic regions to reduce latency.

Scales from Basic, for a limited number of participants, to Epic, for an unlimited number of participants.

We charge on a per-minute basis for most of our Programmable Voice products.

Programmable Messaging

Our Programmable Messaging software products allow developers to build solutions to send and receive messages globally, and incorporate advanced messaging functionality such as emoji, picture messaging and localized languages.

Our customers use Programmable Messaging, through software controls, to power use cases, such as appointment reminders, delivery notifications, order confirmations and customer care.

We offer core channels like SMS, Push and Chat;

over-the-top channels like WhatsApp and Facebook Messenger;

support for next-generation rich messaging like RCS Business Messaging;

and over IP through our Android, iOS and JavaScript software development kits.

Programmable Messaging includes:

Programmatically send, receive and track SMS messages around the world, supporting localized languages in nearly every market.

Exchange picture messages and more over U.S.

and Canadian phone numbers from customer applications with built-in image transcoding and media storage.

Intelligent software layer that handles tasks, such as dynamically sending messages from a phone number that best matches the geographic location of the recipient based on a global pool of numbers.

Programmable Chat.

Deploy contextual, in-app messaging at global scale.

Programmatically send, receive and track messages to messaging apps such as WhatsApp, Facebook Messenger and LINE globally.

Toll-Free SMS.

Send and receive text messages with the same toll-free number used for voice calls in the United States and Canada.

We charge on a per-message basis for most of our Programmable Messaging products.

Programmable Video

Programmable Video provides developers with the building blocks to add voice and video to web and mobile applications.

Developers can address multiple use cases such as remote customer care, multi-party collaboration, video consultations and more by leveraging Programmable Video's global cloud infrastructure and powerful SDKs to build on WebRTC.

Programmable Video includes:

Twilio Video.

Create rich, multi-party video experiences in web and mobile applications with features such as one-to-one and multi-party video calling, cloud based recordings, screen sharing etc.

Network Traversal.

Provide low-latency, cost-effective and reliable Session Traversal Utilities for Network Address Translation ("STUN") and Traversal Using Relay for Network Address Translation ("TURN") capabilities distributed across five continents.

This functionality allows developers to initiate peer-to-peer video sessions across any internet-connected device globally.

We charge on a per-connected-endpoint, per-active-endpoint and per-gigabit basis for our Programmable Video products.

Our email products serve as a digital communication platform that enables businesses to engage with their customers via email reliably and effectively, at scale.

Businesses use our email products for both transactional and marketing emails.

Transactional emails include shipping notifications, friend requests, password resets, and sign-up confirmations.

Marketing emails include newsletters, advertising, announcements, and related communications to large audiences.

Integrations.

Businesses can integrate our email API with multiple leading development frameworks and client libraries, including Node.js, Ruby, Python, Go, Hypertext Preprocessor, Java, and C#.

Internet Protocol ("IP"), Management.

Domains and links can be customized, whether sending from shared IP address pools or a dedicated IP address, for improved reputation management and delivery.

Deliverability.

Our custom Sender Policy Framework and DomainKeys Identified Mail record creation is designed to eliminate domain spoofing and phishing.

Mobile support.

Our deep linking functionality enables email engagement for mobile apps.

Our two-factor authentication, API key permissions, and IP Address Access Management helps enable secure management of our email API by our customers.

Super Network

Our Customer Engagement Platform is built on top of our Super Network, which powers Twilio’s global connectivity and is the foundation for our trusted communications platform.

It is a global network of connections with numerous carriers globally to provide connectivity and phone numbers in approximately 100 countries.

We do not own any physical network infrastructure.

We use software to build a high performance network that optimizes performance for our customers, providing resiliency and redundancy to our platform, helping to minimize disruption from carrier delays or outages.

The Super Network also contains a set of API's giving our customers access to more foundational components of our platform, like phone numbers and Session Initiation Protocol ("SIP") Trunking.

Phone Number Provisioning.

Acquire local, national, mobile and/or toll-free phone numbers on demand in approximately 100 countries and connect them into the customers' applications.

A five to seven digit phone number in the United States, Canada and the United Kingdom used to send and receive a high-volume of messages per second.

Elastic SIP Trunking.

Connect legacy voice applications to our Super Network over IP infrastructure with globally available phone numbers and pay-as-you-go pricing.

Interconnect.

Connect privately to Twilio to enable enterprise grade security and quality of service for Twilio Voice and Elastic SIP Trunking.

We charge on a per-minute or per-phone-number basis for most of our Super Network products.

Our Employees

As of December 31, 2019 , we had a total of 2,905 employees, including 720 employees located outside of the United States.

As of December 31, 2020, the total remaining shares of Class A common stock reserved for Twilio.org was 707,265.

Our Employees and Human Capital Resources

As of December 31, 2020, we had a total of 4,629 employees, including 1,369 employees located outside of the U.S.

None of our U.S.

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We consider our relations with our employees to be good and have not experienced interruptions of operations or work stoppages due to labor disagreements.

Diversity and Inclusion

At Twilio, we strive to build a diverse workforce, promote equity in our practices, and create inclusive communities for all Twilions to thrive.

Our mission is to foster an equitable approach to hiring, delivering on a promise of equality for all in career development, compensation and growth, and to continuously improve a sense of inclusion for everyone at Twilio.

In the wake of this summer's racial injustices, which continue to plague the country, we created a Racial Justice and Equity accountability priority that included a commitment to becoming an anti-racist company.

We believe that a company culture focused on equity and driving toward being anti-racist is a key driver in being better corporate citizens, creating a more inclusive workplace, attracting the best talent, and ultimately delivering better business performance.

Some of the programs that came out of this accountability priority included “Be Inclusive” diversity and inclusion training for People Managers.

We also developed a “RiseUp” professional development program for our top Black and Latinx managers.

Our Black and Latinx managers also received an opportunity for professional coaching through the “Better Up Coaching” platform as a way to continue career development.

This platform provided access to coaches of color and various backgrounds to offer support and development.

We were also able to hire our first Chief Diversity Officer who sits on the executive team, with a reporting line to our CEO.

In addition, we work hard to maintain and enhance our diverse and inclusive environment, creating a workplace where people are highly valued and are empowered to do their best work.

Our employee resource groups, such as Black Twilions, Latinx @ Twilio, Remoties, Asians @ Twilio, Spectrum, the Family Nest, Warriors, Twilipinos, Women @ Twilio, and Wonder offer our employees support, mentoring and networking opportunities and help to foster a friendly and diverse workplace.

Compensation and Benefits

Twilio is committed to delivering a comprehensive compensation and benefits program that provides support for all of our employees’ well-being.

We provide competitive compensation and benefits to attract and retain talented employees, including offering market-competitive salary, bonuses or sales commissions, and equity.

We generally offer full-time employees equity at the time of hire and through annual equity grants, as well as provide an employee stock purchase plan, to foster a strong sense of ownership and engage our employees in being committed to our long-term success.

We ensure that our compensation is fair for all employees, regardless of classifications, such as race and gender.

We routinely run a rigorous statistical analysis to ensure compensation is fair, taking into account factors that should impact pay, like role, level, location and performance.

Our full-time employees are eligible to receive, subject to the satisfaction of certain eligibility requirements, our comprehensive benefits package including our medical, dental and vision insurance and life and disability insurance plans.

In addition, we provide time off, as well as maintain a tax-qualified 401(k) retirement plan that provides eligible U.S employees with an opportunity to save for retirement on a tax-advantaged basis.

In 2020, we matched 50% of the first 6% of contributions by plan participants, subject to annual contribution limits set forth in the Internal Revenue Code of 1986, as amended.

In structuring these benefit plans, we seek to provide an aggregate level of benefits that are comparable to those provided by similar companies.

COVID-19 Response

To support employee well-being, Twilio established a number of new programs in response to the COVID-19 pandemic and the transition to full-time work from home.

We established No Meeting Fridays, created flexible work schedule options, gave employees a home office stipend, a caregiver stipend, free Care.com membership and paid time off through our COVID-19 Support Leave to care for themselves or family members impacted by COVID-19.

Research and Development

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Our email API is offered on a monthly subscription basis, while our Marketing Campaigns product is priced based on the number of email contacts stored on our platform and the number of monthly emails sent to those contacts through our email API.

Our self-serve pricing matrix is publicly available and it allows for customers to receive automatic tiered discounts as their usage of our products increases.

Our self-serve pricing matrix is publicly available and it allows for customers to receive tiered discounts as their usage of our products increases.

As customers' use of our products grows larger, some enter into negotiated contracts with terms that dictate pricing, and typically include some level of minimum revenue commitments.

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In addition, we provide support options to address the individualized needs of our customers.

All developers get free email-based support with API status notifications.

Our developers can also engage with the broader Twilio community to resolve certain issues.

We also offer three paid tiers of email and phone support with increasing levels of availability and guaranteed response times.

Our highest tier personalized plan is intended for our largest customers and includes guaranteed response times that vary based on the priority of the request, a dedicated support engineer, a duty manager and quarterly status review.

Our support model is global, with 24x7 coverage and support offices located in the United States, the United Kingdom, Estonia and Singapore.

All developers get free support and system status notifications.

Our developers can also engage with the broader Twilio community to resolve issues.

We also offer three paid tiers of support with increasing levels of availability and guaranteed response times.

Our highest tier plan, intended for our largest customers, includes a dedicated support engineer, duty manager coverage and quarterly status reviews.

Our support model is global, with 24x7 coverage and support offices located in the U.S., Ireland, Colombia, India, and Singapore.

We currently derive an insignificant amount of revenue from fees for customer support.

The market for Cloud Communications Platform is rapidly evolving and increasingly competitive.

We also offer professional services which provide in-depth, hands-on, fee-based packages of advisory, software architecture, integration and coding services to existing and prospective customers and partners to optimize their use of the Twilio platform.

Our goal is to help our customers achieve business results faster.

Offerings include services for implementing contact center solutions, email implementation and deliverability, and configuration and integration of communications capabilities.

The market for cloud communication platforms is rapidly evolving and increasingly competitive.

We believe that the principal competitive factors in our market are:

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Our competitors fall into four primary categories:

legacy on-premises vendors, such as Avaya and Cisco;

• legacy on-premises vendors;

• regional network service providers that offer limited developer functionality on top of their own physical infrastructure;

• smaller software companies that compete with portions of our product line;

software-as-a-service ("SaaS") companies and cloud platform vendors that offer prepackaged applications and platforms.

• SaaS companies and cloud platform vendors that offer prepackaged applications and platforms.

Some of our competitors have greater financial, technical and other resources, greater name recognition, larger sales and marketing budgets and larger intellectual property portfolios.

As a result, certain of our competitors may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, standards or customer requirements.

In addition, some competitors may offer products or services that address one or a limited number of functions at lower prices, with greater depth than our products or geographies where we do not operate.

In addition, some competitors may offer products or services that address one or a limited number of functions at lower prices, with greater depth than our products or in geographies where we do not operate.

With the introduction of new products and services and new market entrants, we expect competition to intensify in the future.

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Intellectual Property

We rely on a combination of patent, copyright, trademark and trade secret laws in the United States and other jurisdictions, as well as license agreements and other contractual protections, to protect our proprietary technology.

We rely on a combination of patent, copyright, trademark and trade secret laws in the U.S.

and other jurisdictions, as well as license agreements and other contractual protections, to protect our proprietary technology.

We also rely on a number of registered and unregistered trademarks to protect our brand.

As of December 31, 2019 , in the United States, we had been issued 131 patents, which expire between 2029 and 2037 .

As of December 31, 2020, in the U.S., we had been issued 157 patents, which expire between 2029 and 2039.

As of such date, we also had 33 issued patents in foreign jurisdictions, all of which are related to U.S.

patents and patent applications.

We have also filed various applications for protection of certain aspects of our intellectual property in the United States and internationally.

In addition, as of December 31, 2019 , we had 32 trademarks registered in the United States and 163 trademarks registered in foreign jurisdictions.

We have also filed various applications for protection of certain aspects of our intellectual property in the U.S.

and internationally.

In addition, as of December 31, 2020, we had 41 trademarks registered in the U.S.

and 257 trademarks registered in foreign jurisdictions.

We further seek to protect our intellectual property rights by implementing a policy that requires our employees and independent contractors involved in development of intellectual property on our behalf to enter into agreements acknowledging that all works or other intellectual property generated or conceived by them on our behalf are our property, and assigning to us any rights, including intellectual property rights, that they may claim or otherwise have in those works or property, to the extent allowable under applicable law.

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Any significant impairment of our intellectual property rights could harm our business or our ability to compete.

Further, companies in the

communications and technology industries may own large numbers of patents, copyrights and trademarks and may frequently threaten litigation, or file suit against us based on allegations of infringement or other violations of intellectual property rights.

Further, companies in the communications and technology industries may own large numbers of patents, copyrights and trademarks and may frequently threaten litigation, or file suit against us based on allegations of infringement or other violations of intellectual property rights.

We currently are subject to, and expect to face in the future, allegations that we have infringed the intellectual property rights of third parties, including our competitors and non-practicing entities.

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Because U.S., federal, state and foreign laws and regulations have continued to develop and evolve rapidly, it is possible that we or our products or our platform may not be, or may not have been, compliant with each such applicable law or regulation.

For example, GDPR, which took full effect on May 25, 2018, enhanced data protection obligations for businesses and requires service providers (data processors) processing personal data on behalf of customers to cooperate with European data protection authorities, implement security measures and keep records of personal data processing activities.

For example, the General Data Protection Regulation ("GDPR"), which took full effect on May 25, 2018, enhanced data protection obligations for businesses and requires service providers (data processors) processing personal data on behalf of customers to cooperate with European data protection authorities, implement security measures and keep records of personal data processing activities.

Noncompliance with the GDPR can trigger fines equal to the greater of €20 million or 4% of global annual revenue.

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If we do not comply with these laws, or regulations or if we become liable under these laws or regulations due to the failure of our customers to comply with these laws by obtaining proper consent, we could face direct liability.

Compliance with these laws and regulations has not had, and is not expected to have, a material effect on our capital expenditures, results of operations and competitive position as compared to prior periods, and we do not currently anticipate material capital expenditures for environmental control facilities, of which we currently have none.

For additional information about government regulation applicable to our business, see Part I, Item 1A, “Risk Factors” in this Annual Report on Form 10-K.

Corporate Information

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Information contained on, or that can be accessed through, our website does not constitute part of this Annual Report on Form 10-K.

Twilio, the Twilio logo and other trademarks or service marks of Twilio appearing in this Annual Report on Form 10-K are the property of Twilio.

Trade names, trademarks and service marks of other companies appearing in this Annual Report on Form 10-K are the property of their respective holders.

Twilio, the Twilio logo and other trademarks or service marks of Twilio appearing in this Annual Report on Form 10-K are the intellectual property of Twilio.

Trade names, trademarks and service marks of other companies appearing in this Annual Report on Form 10-K are the intellectual property of their respective holders.

Information about Geographic Revenue

Information about geographic revenue is set forth in Note 11 of our Notes to our Consolidated Financial Statements included in Part II, Item 8, "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.

Information about geographic revenue is set forth in Note 11 of our Notes to Consolidated Financial Statements included in Part II, Item 8, "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.

Available Information

The following filings are available through our investor relations website after we file them with the Securities and Exchange Commission ("SEC"):

Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and our Proxy Statement for our annual meeting of stockholders.

These filings are also available for download free of charge on our investor relations website.

Our filings are available to be viewed and downloaded free of charge through our investor relations website after we file them with the Securities and Exchange Commission ("SEC").

Our filings include our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, our Proxy Statement for our annual meeting of stockholders, Current Reports on Form 8-K and other filings with the SEC.

Our investor relations website is located at http://investors.twilio.com.

The SEC also maintains an Internet website that contains reports, proxy statements and other information about issuers, like us, that file electronically with the SEC.

The SEC also maintains an Internet website that contains periodic and current reports, proxy statements and other information about issuers, like us, that file electronically with the SEC.

The address of that website is www.sec.gov.

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Additionally, we provide notifications of news or announcements regarding our financial performance, including SEC filings, investor events, press and earnings releases, and blogs as part of our investor relations website.

Further corporate governance information, including our corporate governance guidelines and code of business conduct and ethics, is also available on our investor relations website under the heading "Corporate Governance." The contents of our websites are not intended to be incorporated by reference into this Annual Report on Form 10-K or in any other report or document we file with the SEC, and any references to our websites are intended to be inactive textual references only.

Further corporate governance information, including our corporate governance guidelines and code of business conduct and ethics, is also available on our investor relations website under the heading "Governance." The contents of our websites are not intended to be incorporated by reference into this Annual Report on Form 10-K or in any other report or document we file with the SEC, and any references to our websites are intended to be inactive textual references only.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business