Item 9A. Controls and Procedures
Item 9A. Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of the end of the period covered by this Annual Report on Form 10-K.
Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2020, our disclosure controls and procedures were effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.
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(b) Management's Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting and for the assessment of the effectiveness of internal control over financial reporting as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act. Internal control over financial reporting is a process designed under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, to provide reasonable assurance regarding the reliability of financing reporting and the preparation of financial statements for external purposes in accordance with U.S generally accepted accounting principles.
Under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer and oversight of the board of directors, our management conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2020, based on the criteria set forth in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based on this evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2020.
The Company acquired Segment.io, Inc. ("Segment") on November 2, 2020. Management excluded Segment from its assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2020. Segment's total assets excluded from this assessment was $253.6 million, representing 3% of the Company’s consolidated total assets as of December 31, 2020, and Segment's total revenue of $ 23.0 million represented 1% of the Company’s consolidated revenue for the year ended December 31, 2020.
The effectiveness of our internal control over financial reporting as of December 31, 2020 has been audited by KPMG LLP, an independent registered public accounting firm, as stated in their report which is included in Part II, Item 8, "Financial Statements and Supplementary Data", of this Annual Report on Form 10-K.
(c) Changes in Internal Control
On November 2, 2020, the Company acquired Segment. As a result of this acquisition, the Company is reviewing the internal controls of Segment and is making appropriate changes as deemed necessary. Except for the changes in internal controls related to Segment, there were no changes in our internal control over financial reporting in connection with the evaluation required by Rule 13a-15 (d) and 15d-15 (d) of the Exchange Act that occurred during the quarter ended December 31, 2020 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
(d) Inherent Limitations on Effectiveness of Controls
Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost‑effective control system, misstatements due to error or fraud may occur and not be detected.
Item 9B. Other Information
Not applicable.
PART III
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Item 10. Directors, Executive Officers and Corporate Governance
The information required by this item is incorporated by reference to our Proxy Statement relating to our 2021 Annual Meeting of Stockholders. The Proxy Statement will be filed with the Securities and Exchange Commission within 120 days of the fiscal year ended December 31, 2020.
Codes of Business Conduct and Ethics
Our board of directors has adopted a Code of Business Conduct and Ethics that applies to all officers, directors and employees, which is available on our website at (investors.twilio.com) under "Governance Documents". We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding amendments to, or waiver from, a provision of our Code of Business Conduct and Ethics and by posting such information on the website address and location specified above.
Item 11. Executive Compensation
The information required by this item is incorporated by reference to our Proxy Statement relating to our 2021 Annual Meeting of Stockholders. The Proxy Statement will be filed with the Securities and Exchange Commission within 120 days of the fiscal year ended December 31, 2020.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this item is incorporated by reference to our Proxy Statement relating to our 2021 Annual Meeting of Stockholders. The Proxy Statement will be filed with the Securities and Exchange Commission within 120 days of the fiscal year ended December 31, 2020.
Item 13. Certain Relationships and Related Transactions and Director Independence
The information required by this item is incorporated by reference to our Proxy Statement relating to our 2021 Annual Meeting of Stockholders. The Proxy Statement will be filed with the Securities and Exchange Commission within 120 days of the fiscal year ended December 31, 2020.
Item 14. Principal Accountant Fees and Services
The information required by this item is incorporated by reference to our Proxy Statement relating to our 2021 Annual Meeting of Stockholders. The Proxy Statement will be filed with the Securities and Exchange Commission within 120 days of the fiscal year ended December 31, 2020.
PART IV
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Item 15. Exhibits and Financial Statement Schedules
(a) The following documents are filed as part of this report:
1. Financial Statements
See Index to Financial Statements at Item 8 herein.
2. Financial Statement Schedules
Schedules not listed above have been omitted because they are not required, not applicable, or the required information is otherwise included.
3. Exhibits
The exhibits listed below are filed as part of this Annual Report on Form 10-K or are incorporated herein by reference, in each case as indicated below.
EXHIBIT INDEX
Exhibit
Number Incorporated by Reference
Description Form File No. Exhibit Filing Date
2.1+ Agreement and Plan of Merger and Reorganization, dated October 15, 2018, by and among Twilio Inc., a Delaware corporation, SendGrid, Inc., a Delaware corporation, and Topaz Merger Subsidiary, Inc., a Delaware corporation
8-K 011-37806 2.1 October 16, 2018
2.2 First Amendment to Agreement and Plan of Merger and Reorganization, dated December 13, 2018, by and among Twilio Inc., a Delaware corporation, SendGrid, Inc., a Delaware corporation, and Topaz Merger Subsidiary, Inc., a Delaware corporation
10-K 001-37806 2.2 March 1, 2019
2.3 Agreement and Plan of Reorganization, dated October 12, 2020, by and among Twilio Inc., a Delaware corporation, Scorpio Merger Sub, Inc., a Delaware corporation, Segment,io, Inc., a Delaware corporation, and Shareholder Representative Services LLC, a Colorado limited liability company
S-3
333-249889
2.1 November 5, 2020
3.1 Amended and Restated Certificate of Incorporation of Twilio Inc.
S-1A 333-211634 3.1 June 13, 2016
3.2 Second Amended and Restated Bylaws of Twilio Inc.
10-Q 001-37806 3.1 August 4, 2020
4.1 Form of Class A Common Stock Certificate of Twilio Inc.
S-1 333-211634 4.1 May 26, 2016
4.2 Amended and Restated Investors' Rights Agreement, dated April 24, 2015, between Twilio Inc. and certain of its stockholders
S-1 333-211634 4.2 May 26, 2016
4.3 Indenture, dated as of May 17, 2018, between Twilio Inc. and Wilmington Trust, National Association, as trustee
8-K 001-37806 4.1 May 18, 2018
4.4 Form of 0.25% Convertible Senior Notes due 2023 (included in Exhibit 4.3)
8-K 001-37806 4.2 May 18, 2018
4.5 Description of the Registrant's Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934
Filed herewith
10.1* Form of Indemnification Agreement
Filed herewith
10.2*
Twilio Inc. Amended and Restated 2008 Stock Option Plan and forms of Stock Option Agreement and form of Stock Option Grant Notice
Filed herewith
10.3*
Twilio Inc. Amended and Restated 2016 Stock Option and Incentive Plan, and forms of Agreements thereunder
Filed herewith
10.4* Twilio Inc. 2019 France Sub-Plan to the 2016 Stock Option and Incentive Plan
10-Q 001-37806 10.2 October 31, 2019
10.5* Segment.io, Inc. Fifth Amended and Restated 2013 Stock Option and Grant Plan and related form agreements
Filed herewith
10.6* SendGrid, Inc. Amended and Restated 2012 Equity Incentive Plan
Filed herewith
10.7* SendGrid, Inc. Amended and Restated 2017 Equity Incentive Plan
Filed herewith
10.8* Twilio Inc. Amended and Restated 2016 Employee Stock Purchase Plan
10-Q 001-37806 10.1 October 31, 2019
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10.9 Office Lease, dated January 8, 2016, as amended January 8, 2016, between Twilio Inc. and Bay Area Headquarters Authority
S-1 333-211634 10.6 May 26, 2016
10.10 Sublease, dated as of August 30, 2018, by and between Salesforce.com, Inc. and Twilio Inc.
10-Q 001-37806 10.1 November 8, 2018
10.11 Consent to Sublease Agreement, dated as of September 25, 2018, by and among Hudson Rincon Center, LLC, Salesforce.com Inc. and Twilio Inc.
10-Q 001-37806 10.2 November 8, 2018
10.12* Offer letter with George Hu, dated February 28, 2017
8-K 001-37806 10.1 March 3, 2017
10.13* Offer letter with Khozema Shipchandler, dated August 20, 2018
8-K 001-37806 10.1 October 25, 2018
10.14* Chief Executive Officer Severance Plan dated March 28, 2018 and form of participation letter
10-Q 001-37806 10.1 May 10, 2018
10.15* Key Executive Severance Plan, dated March 28, 2018 and form of participation letter
10-Q 001-37806 10.2 May 10, 2018
10.16 Form of Capped Call Confirmation
8-K 001-37806 10.1 May 18, 2018
21.1 List of subsidiaries of the Registrant
Filed herewith
23.1 Consent of KPMG, LLP, Independent Registered Public Accounting Firm
Filed herewith
31.1 Certification of the Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Filed herewith
31.2 Certification of the Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Filed herewith
32.1** Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Furnished herewith
101.INS Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document Filed herewith
101.SCH Inline XBRL Taxonomy Extension Schema Document. Filed herewith
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document. Filed herewith
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document. Filed herewith
101.LAB XBRL Taxonomy Extension Label Linkbase Document. Filed herewith
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document. Filed herewith
104 Cover Page with Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101).
__________________________________________
+ Schedules and other similar attachments have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The registrant hereby undertakes to furnish supplemental copies of any of the omitted schedules and other similar attachments upon request by the Securities and Exchange Commission.
* Indicates a management contract or compensatory plan or arrangement.
** The certifications furnished in Exhibit 32.1 hereto are deemed to accompany this Annual Report on Form 10-K and will not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that the registrant specifically incorporates it by reference.
Item 16. Form 10-K Summary
None.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Twilio Inc.
February 25, 2021 /s/ JEFF LAWSON
Jeff Lawson
Director and Chief Executive Officer (Principal Executive Officer)
February 25, 2021 /s/ KHOZEMA Z. SHIPCHANDLER
Khozema Z. Shipchandler
Chief Financial Officer (Principal Accounting and Financial Officer)
February 25, 2021 /s/ RICHARD L. DALZELL
Richard L. Dalzell
Director
February 25, 2021 /s/ BYRON B. DEETER
Byron B. Deeter
Director
February 25, 2021 /s/ ELENA A. DONIO
Elena A. Donio
Director
February 25, 2021 /s/ DONNA L. DUBINSKY
Donna L. Dubinsky
Director
February 25, 2021 /s/ JEFFREY EPSTEIN
Jeffrey Epstein
Director
February 25, 2021 /s/ JEFFREY R. IMMELT
Jeffrey R. Immelt
Director
February 25, 2021 /s/ DEVAL L. PATRICK
Deval L. Patrick
Director
February 25, 2021 /s/ ERIKA ROTTENBERG
Erika Rottenberg
Director
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