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Item 5. Market for Registrant’s Common Equity

2021-02-26 compared with 2020-03-02 · 72 added, 20 removed, 125 unchanged (42% of the section changed)

1 unchanged sentence

Market Price of Our Class A Common Stock

As of January 31, 2020, we had 111 holders of record of our Class A and Class B common stock.

Our Class A common stock is traded on The New York Stock Exchange under the symbol "TWLO." As of January 31, 2021, we had 269 holders of record of our Class A and Class B common stock.

The actual number of stockholders is greater than this number of record holders and includes stockholders who are beneficial owners but whose shares are held in street name by brokers and other nominees.

10 unchanged sentences

(a) Sales of Unregistered Securities

In February 2020, Twilio.org donated 22,102 shares of unregistered Class A common stock to an independent donor advised fund to further our philanthropic goals.

The shares are "restricted securities" for purposes of Rule 144 under the Securities Act and the fair market value of these shares on the date of the donation was $2.7 million.

This amount was recorded as general and administrative expense in February 2020 in our consolidated financial statements.

In February 2021, and in years ended December 31, 2020 and 2018, Twilio.org donated 22,102 shares, 88,408 shares and 62,338 shares of our unregistered Class A common stock, respectively, to an independent donor advised fund to further our philanthropic goals.

The shares are "restricted securities" for purposes of Rule 144 under the Securities Act and the fair market value of these shares on the date of donation was $9.4 million, $19.0 million and $6.0 million, respectively.

These amount were recorded as general and administrative expense in our consolidated statements of operations for February 2021 and the fiscal years 2020 and 2018, respectively.

In May 2018, we issued $550 million in aggregate principal amount of 0.25% Convertible Senior Notes due 2023 (the "Notes").

In connection with the offering of the Notes, we entered into privately-negotiated capped call transactions with certain counterparties (the "capped calls").

The capped calls each have an initial strike price of approximately $70.90 per share, subject to certain adjustments, which corresponds to the initial conversion price of the Notes.

The capped calls have initial cap prices of $105.04 per share, subject to certain adjustments.

The capped calls cover, subject to anti-dilution adjustments, approximately 7,757,200 shares of Class A Common Stock.

See Note 9 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information about the Notes and capped calls.

We offered and sold the Notes to the initial purchasers in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act, and for resale by the initial purchasers to qualified institutional buyers pursuant to the exemption from registration provided by Rule 144A under the Securities Act.

We relied on these exemptions from registration based in part on representations made by the initial purchasers in the purchase agreement dated May 14, 2018.

The shares of the Class A common stock issuable upon conversion of the Notes have not been registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.

In the year ended December 31, 2020, we converted $206.3 million aggregate principal of the Notes by issuing 2,902,434 shares of the Class A common stock issuable upon conversion of the Notes and the aggregate fair market value of these shares on the dates of conversion was $892.6 million.

To the extent that any further shares of the Class A common stock are issued upon conversion of the Notes, they will be issued in transactions anticipated to be exempt from registration under the Securities Act by virtue of Section 3(a)(9) thereof, because no commission or other remuneration is expected to be paid in connection with conversion of the Notes, and any resulting issuance of shares of the Class A common stock.

(b) Use of Proceeds

In June 2019, we closed our follow-on public offering, in which we sold 8,064,515 shares of Class A common stock at a price to the public of $124.00 per share, including shares sold in connection with the exercise of the underwriters' option to purchase additional shares.

In February 2021, we closed a follow-on public offering, in which we sold 4,312,500 shares of Class A common stock at a price to the public of $409.60 per share, including shares sold in connection with the exercise of the underwriters' option to purchase additional shares.

The offer and sale of all of the shares in the follow-on offering were registered under the Securities Act pursuant to a registration statement on Form S-3 (File No.

333-231794), which was declared effective by the SEC on May 29, 2019.

We raised $1.8 billion in net proceeds after deducting offering expenses paid and payable by us.

No payments were made by us to directors, officers or persons owning 10 percent or more of our capital stock or to their associates, or to our affiliates, other than payments in the ordinary course of business to officers for salaries.

There has been no material change in the planned use of proceeds from our follow-on offering as described in our final prospectus filed with the SEC on February 22, 2021 pursuant to Rule 424(b)(5).

The managing underwriters of our follow-on offering were Morgan Stanley & Co.

Morgan Securities LLC, Academy Securities, Inc., Cabrera Capital Markets LLC, and Siebert Williams Shank & Co., LLC.

In August 2020, we closed a follow-on public offering, in which we sold 5,819,838 shares of Class A common stock at a price to the public of $247.00 per share, including shares sold in connection with the exercise of the underwriters' option to purchase additional shares.

The offer and sale of all of the shares in the follow-on offering were registered under the Securities Act pursuant to a registration statement on Form S-3 (File No.

333-231794), which was declared effective by the SEC on May 29, 2019.

We raised $1.4 billion in net proceeds after deducting underwriting discounts and commissions and offering expenses paid by us.

There has been no material change in the planned use of proceeds from our follow-on offering as described in our final prospectus filed with the SEC on August 7, 2020 pursuant to Rule 424(b)(5).

We invested the funds received in accordance with our board-approved investment policy, which provides for investments in obligations of the U.S.

government, money market instruments, registered money market funds and corporate bonds.

The managing underwriters of our follow-on offering were J.P.

Morgan Securities LLC, Morgan Stanley & Co.

LLC, Goldman, Sachs & Co.

and BofA Securities, Inc.

In June 2019, we closed a follow-on public offering, in which we sold 8,064,515 shares of Class A common stock at a price to the public of $124.00 per share, including shares sold in connection with the exercise of the underwriters' option to purchase additional shares.

The offer and sale of all of the shares in the follow-on offering were registered under the Securities Act pursuant to a registration statement on Form S-3 (File No.

333-231794), which was declared effective by the SEC on May 29, 2019.

We raised $979.0 million in net proceeds after deducting underwriting discounts and commissions and offering expenses paid and payable by us.

There has been no material change in the planned use of proceeds from our follow-on offering as described in our final

prospectus filed with the SEC on May 31, 2019 pursuant to Rule 424(b).

There has been no material change in the planned use of proceeds from our follow-on offering as described in our final prospectus filed with the SEC on May 31, 2019 pursuant to Rule 424(b).

We invested the funds received in accordance with our board-approved investment policy, which provides for investments in obligations of the U.S.

6 unchanged sentences

The selected consolidated statements of operations data for the years ended December 31, 2017 and 2016 and the consolidated balance sheet data as of December 31, 2018, 2017 and 2016 are derived from audited consolidated financial statements not included in this Annual Report on Form 10-K.

We have included Twilio SendGrid in our results of operations prospectively after February 1, 2019, the date of acquisition.

We have included Twilio Segment in our consolidated results of operations prospectively from November 2, 2020, and Twilio SendGrid in our consolidated results of operations prospectively from February 1, 2019, the closing dates of each acquisitions, respectively.

Our historical results are not necessarily indicative of the results that may be expected in the future.

2 unchanged sentences

Year Ended December 31,

2020 2019 2018 2017 2016

(In thousands, except share and per share amounts)

Revenue $ 1,761,776 $ 1,134,468 $ 650,067 $ 399,020 $ 277,335

Cost of revenue (1) (2)

846,115 525,551 300,841 182,895 120,520

Gross profit 915,661 608,917 349,226 216,125 156,815

Operating expenses:

Research and development (1) (2)

530,548 391,355 171,358 120,739 77,926

Sales and marketing (1) (2)

567,407 369,079 175,555 100,669 65,267

General and administrative (1) (2)

310,607 218,268 117,548 60,791 54,937

Total operating expenses 1,408,562 978,702 464,461 282,199 198,130

Loss from operations (492,901) (369,785) (115,235) (66,074) (41,315)

Other income (expenses), net

Loss before benefit (provision) for income taxes

Other (expenses) income, net (11,525) 7,569 (5,923) 3,071 317

Loss before (provision) benefit for income taxes (504,426) (362,216) (121,158) (63,003) (40,998)

Benefit (provision) for income taxes 13,447 55,153 (791) (705) (326)

Deemed dividend to investors in relation to tender offer

Net loss attributable to common

stockholders $ (490,979) $ (307,063) $ (121,949) $ (63,708) $ (41,324)

Net loss per share attributed to common

6 unchanged sentences

Year Ended December 31,

2020 2019 2018 2017 2016

Number of Active Customer Accounts

(as of end date of period) (3) (4)

Base Revenue (in thousands) (3) (5)

Base Revenue Growth Rate (3)

221,000 179,000 64,286 48,979 36,606

Total Revenue (in thousands) (3)

$ 1,761,776 $ 1,134,468 $ 650,067 $ 399,020 $ 277,335

Total Revenue Growth Rate (3)

55 % 75 % 63 % 44 % 66 %

Dollar-Based Net Expansion Rate (5)

137 % 135 % 143 % 127 % 147 %

_________________________

(1) Includes stock-based compensation expense as follows:

Year Ended December 31,

2020 2019 2018 2017 2016

(In thousands)

3 unchanged sentences

General and administrative 76,301 70,297 26,254 16,339 6,016

Total $ 361,911 $ 264,318 $ 93,273 $ 49,619 $ 24,225

_________________________

(2) Includes amortization of acquired intangibles as follows:

Year Ended December 31,

2020 2019 2018 2017 2016

(In thousands)

3 unchanged sentences

General and administrative 78 — 375 84 110

(3) For the year ended December 31, 2019 , Active Customer Accounts, Base Revenue, and Base Revenue Growth Rate include the contribution from Twilio SendGrid, which acquisition closed on February 1, 2019.

Total $ 98,494 $ 72,807 $ 7,170 $ 5,620 $ 880

_________________________

(3) For the year ended December 31, 2020, Active Customer Accounts, Total Revenue, and Total Revenue Growth Rate include the partial year contribution from Twilio Segment, from the date of acquisition on November 2, 2020.

For the year ended December 31, 2019, Active Customer Accounts, Total Revenue and Total Revenue Growth Rate include the partial year contribution from Twilio SendGrid, from the date of acquisition on February 1, 2019.

Effective December 31, 2019, we round down the number of Active Customer Accounts to the nearest thousand.

(4) See Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations—Key Business Metrics—Number of Active Customer Accounts."

(5) See Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations—Key Business Metrics—Base Revenue."

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

1 unchanged sentence

As of December 31,

2020 2019 2018 2017 2016

(In thousands)

3 unchanged sentences

Property and equipment, net $ 183,239 $ 141,256 $ 63,534 $ 50,541 $ 37,552

Total assets $ 9,487,433 $ 5,150,516 $ 1,028,710 $ 449,782 $ 412,694

Total stockholders’ equity $ 8,452,665 $ 4,279,411 $ 438,235 $ 359,846 $ 329,447

8 unchanged sentences

Year Ended December 31,

2020 2019 2018 2017 2016

Reconciliation:

(In thousands)

Gross profit $ 915,661 $ 608,917 $ 349,226 $ 216,125 $ 156,815

Non-GAAP adjustments:

7 unchanged sentences

Year Ended December 31,

2020 2019 2018 2017 2016

Reconciliation:

4 unchanged sentences

Amortization of acquired intangibles (38,993) (27,540) (1,514) (976) (261)

Stock repurchase

Acquisition-related expenses (21,765) (15,713) (4,481) (310) (499)

5 unchanged sentences

Non-GAAP operating expenses $ 948,368 $ 663,170 $ 351,871 $ 241,482 $ 169,947

Non‑GAAP (Loss) Income from Operations and Non‑GAAP Operating Margin .

For the periods presented, we define non‑GAAP (loss) income from operations and non‑GAAP operating margin as GAAP loss from operations and GAAP operating margin, respectively, adjusted to exclude, as applicable, certain expenses as presented in the table below:

Non‑GAAP Income (Loss) from Operations and Non‑GAAP Operating Margin .

For the periods presented, we define non‑GAAP income (loss) from operations and non‑GAAP operating margin as GAAP loss from operations and GAAP operating margin, respectively, adjusted to exclude, as applicable, certain expenses as presented in the table below:

Year Ended December 31,

2020 2019 2018 2017 2016

Reconciliation:

4 unchanged sentences

Amortization of acquired intangibles 98,494 72,807 7,170 5,620 880

Stock repurchase

Acquisition-related expenses 21,765 15,713 4,481 310 499

4 unchanged sentences

Payroll taxes related to stock-based compensation 27,389 15,188 5,617 2,950 434

Non-GAAP (loss) income from operations

Non-GAAP income (loss) from operations $ 35,651 $ (1,759) $ 4,137 $ (20,063) $ (12,222)

Non-GAAP operating margin 2 % — % 1 % (5) % (4) %

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 5. Market for Registrant’s Common Equity