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Item 5. Market for Registrant’s Common Equity

2022-02-22 compared with 2021-02-26 · 18 added, 152 removed, 45 unchanged (79% of the section changed)

1 unchanged sentence

Market Price of Our Class A 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.

Our Class A common stock is traded on the New York Stock Exchange and, as of August 2021, the Long-Term Stock Exchange under the symbol “TWLO.” As of January 31, 2022, we had 196 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.

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(a) Sales of Unregistered Securities

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.

In each of the years ended December 31, 2021 and 2020, Twilio.org donated 88,408 shares of our unregistered Class A common stock to an independent donor advised fund to further our philanthropic goals.

The shares were “restricted securities” for purposes of Rule 144 under the Securities Act of 1933, as amended (the "Securities Act"), and had an aggregate fair market value on the date of donation of $31.2 million and $19.0 million, respectively.

In 2018, we issued $550.0 million in aggregate principal amount of 0.25% Convertible Senior Notes due 2023 (the “Convertible Notes”).

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

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

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

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

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

We offered and sold the Convertible 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.

On May 18, 2021, we issued a notice of redemption for our Convertible Notes and in June 2021, we redeemed all of the remaining outstanding principal amount of the Convertible Notes and settled all related capped call arrangements.

These transactions are described in detail in Note 10 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

In connection with our acquisition of Zipwhip in July 2021, we issued an additional 526 shares of unregistered Class A common stock on November 15, 2021, pursuant to a post-closing adjustment.

These issuances were exempt from registration under the Securities Act by virtue of Section 4(a)(2) of the Securities Act and Rule 506 of Regulation D promulgated thereunder.

(b) Use of Proceeds

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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.

We raised $1.8 billion in net proceeds after deducting offering expenses paid 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).

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 Morgan Stanley & Co.

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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.

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

5 unchanged sentences

Selected Financial and Other Data

We have derived the selected consolidated statements of operations data for the years ended December 31, 2020, 2019 and 2018 and the balance sheet data as of December 31, 2020 and 2019 from our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

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 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.

The following selected consolidated financial and other data should be read in conjunction with Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations", and our consolidated financial statements and the related notes appearing in Part II, Item 8, "Financial Statements and Supplementary Data", of this Annual Report on Form 10-K to fully understand factors that may affect the comparability of the information presented below.

Consolidated Statements of Operations Data:

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 (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)

Net loss attributable to common

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

Net loss per share attributed to common

stockholders, basic and diluted $ (3.35) $ (2.36) $ (1.26) $ (0.70) $ (0.78)

Weighted-average shares used in

computing net loss per share

attributable to common stockholders,

basic and diluted 146,708,663 130,083,046 97,130,339 91,224,607 53,116,675

Key Business Metrics:

Year Ended December 31,

2020 2019 2018 2017 2016

Number of Active Customer Accounts

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

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)

Cost of revenue $ 8,857 $ 7,123 $ 1,126 $ 650 $ 291

Research and development 173,303 126,012 42,277 22,808 12,946

Sales and marketing 103,450 60,886 23,616 9,822 4,972

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)

Cost of revenue $ 59,501 $ 45,267 $ 5,656 $ 4,644 $ 619

Research and development — — 22 139 151

Sales and marketing 38,915 27,540 1,117 753 —

General and administrative 78 — 375 84 110

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—Dollar- Based Net Expansion Rate."

Consolidated Balance Sheet Data:

As of December 31,

2020 2019 2018 2017 2016

(In thousands)

Cash and cash equivalents $ 933,885 $ 253,660 $ 487,215 $ 115,286 $ 305,665

Marketable securities $ 2,105,906 $ 1,599,033 $ 261,128 $ 175,587 $ —

Working capital $ 2,924,029 $ 1,814,109 $ 735,138 $ 274,738 $ 279,676

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

Non-GAAP Financial Measures:

We use the following non‑GAAP financial information, collectively, to evaluate our ongoing operations and for internal planning and forecasting purposes.

We believe that non‑GAAP financial information, when taken collectively, may be helpful to investors because it provides consistency and comparability with past financial performance, facilitates period‑to‑period comparisons of results of operations, and assists in comparisons with other companies, many of which use similar non‑GAAP financial information to supplement their GAAP results.

Non‑GAAP financial information is presented for supplemental informational purposes only, should not be considered a substitute for financial information presented in accordance with generally accepted accounting principles, and may be different from similarly‑titled non‑GAAP measures used by other companies.

Whenever we use a non‑GAAP financial measure, a reconciliation is provided to the most closely applicable financial measure stated in accordance with generally accepted accounting principles.

Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non‑GAAP financial measures to their most directly comparable GAAP financial measures.

Non‑GAAP Gross Profit and Non‑GAAP Gross Margin.

For the periods presented, we define non‑GAAP gross profit and non‑GAAP gross margin as GAAP gross profit and GAAP gross 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:

(In thousands)

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

Non-GAAP adjustments:

Stock-based compensation 8,857 7,123 1,126 650 291

Amortization of acquired intangibles 59,501 45,267 5,656 4,644 619

Payroll taxes related to stock-based compensation — 104 — — —

Non-GAAP gross profit $ 984,019 $ 661,411 $ 356,008 $ 221,419 $ 157,725

Non-GAAP gross margin 56 % 58 % 55 % 55 % 57 %

Non‑GAAP Operating Expenses .

For the periods presented, we define non‑GAAP operating expenses (including categories of operating expenses) as GAAP operating expenses (and categories of operating expenses) adjusted to exclude, as applicable, certain expenses as presented in the table below:

Year Ended December 31,

2020 2019 2018 2017 2016

Reconciliation:

(In thousands)

Operating expenses $ 1,408,562 $ 978,702 $ 464,461 $ 282,199 $ 198,130

Non-GAAP adjustments:

Stock-based compensation (353,054) (257,195) (92,147) (48,969) (23,934)

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

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

Release of tax liability upon obligation settlement — — — 13,365 805

Charitable contributions (18,993) — (7,121) (1,172) (3,860)

Legal settlements/accruals — — (1,710) — —

Gain on lease termination — — — 295 —

Payroll taxes related to stock-based compensation (27,389) (15,084) (5,617) (2,950) (434)

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

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:

(In thousands)

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

Non-GAAP adjustments:

Stock-based compensation 361,911 264,318 93,273 49,619 24,225

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

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

Release of tax liability upon obligation settlement — — — (13,365) (805)

Charitable contributions 18,993 — 7,121 1,172 3,860

Legal settlements/accruals — — 1,710 — —

Gain on lease termination — — — (295) —

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

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