What changed in this filing

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Item 1. Business

2023-02-27 compared with 2022-02-22 · 187 added, 373 removed, 45 unchanged (93% of the section changed)

Software developers are reinventing nearly every aspect of business today.

Yet as developers, we repeatedly encountered an area where we could not innovate—communications.

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 in 2008.

Twilio spent over a decade building the leading cloud communication platform, but communications is just the beginning.

Twilio's vision is to become the leading customer engagement platform, ultimately providing businesses with the holy grail—a single view of the customer journey and the ability to take action, delivering real-time, personalized communications.

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 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.

These APIs are focused on the business challenges that a developer is looking to address, allowing our customers to more quickly and easily build better ways to engage with their customers throughout their journey.

Our engagement platform also includes a set of APIs that enable developers to embed voice, messaging, video and email capabilities into their applications, and are designed to support almost all the fundamental ways humans communicate, unlocking innovators to address just about any communication market.

The Super Network is our software layer that allows our customers' software to communicate with connected devices globally.

It interconnects with communications networks and inbox service providers around the world and continually analyzes data to optimize the quality and cost of communications that flow through our platform.

The Super Network also contains a set of APIs giving our customers access to more foundational components of our platform, like phone numbers and session initiation protocol (“SIP”) Trunking.

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 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 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, enabling us to drive personalization at scale.

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.

In July 2021 we acquired Zipwhip, Inc., (“Zipwhip”) a leading provider of toll-free messaging in the United States.

Zipwhip’s customizable APIs enable organizations to text enable their existing toll-free phone numbers in minutes and seamlessly fit texting into their workflows.

We had over 256,000 Active Customer Accounts as of December 31, 2021, 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 differentiated customer engagement experiences.

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

For example, our customers' software applications use our platform to notify a diner when a table is ready, provide enhanced application security through two-factor authentication to safely recognize a customer, connect potential buyers to real estate agents, and power large, omni-channel contact centers.

The range of applications that developers build with the Twilio platform has proven to be nearly limitless.

Our goal is for Twilio to be in the toolkit of every software developer in the world, from small businesses to major enterprises.

Because big ideas often start small, we encourage developers to experiment and iterate on our platform.

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 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.

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”).

When we calculate Dollar‑Based Net Expansion Rate for periods longer than one quarter, we use the average of the applicable quarterly Dollar‑Based Net Expansion Rates for each of the quarters in such period.

Under the New DBNE Definition, our Dollar-Based Net Expansion Rate was 131% and 137% for the years ended December 31, 2021 and 2020, 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 unlock the imagination of builders.

Our plan is to be the leading customer engagement platform.

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

This enables businesses to create novel and creative new consumer experiences that delight their customers and differentiate their companies from their competitors.

Our platform approach enables developers to build this future.

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

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.

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 and Notifications.

From delivery notifications to critical emergency alerts, Twilio provides the building blocks to develop critical communications across messaging channels (short message service (“SMS”), multimedia message service (“MMS”), Short Codes, Toll-Free, WhatsApp, Facebook Messenger, and Google Business Messages), voice and email channels.

• User Identity 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 and 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.

• Marketing .

Email and SMS campaign support to target, nurture and develop new customer relationships.

• Customer Loyalty.

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

• Twilio For Good.

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.

When combined with Twilio's communication channels, 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”), by using first-party data, collected and privatized with Segment, instead of increasingly regulated third-party data.

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 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.

Our Channel APIs include:

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

We enable businesses of all sizes and across numerous industries to revolutionize how they engage with their customers.

Our leading customer engagement platform (“CEP”) comprises a suite of flexible software and communications solutions that allow businesses to deliver seamless, trusted and engaging customer experiences at scale.

The value proposition of our offerings has become stronger and our products have become more strategic to our customers as more and more businesses have prioritized building stronger, more personalized and more differentiated customer engagement experiences through digital channels.

Our CEP empowers businesses to create the tailored solutions needed to engage their customers at every step of the customer journey through real-time, relevant, personalized communications over the customers’ preferred communication channels.

With our platform, businesses can personalize every transaction with real-time data, build lasting loyalty, cut customer acquisition costs and increase customer lifetime value.

Our customized software products are designed to address specific use cases, including our customer data platform, virtual contact centers, personalized yet scalable marketing campaigns and advanced account security systems.

Our leading communications solutions, including our Application Programming Interfaces (“APIs”), are highly customizable and enable developers to embed numerous forms of voice, messaging, and email interactions into their customer-facing applications.

Our platform is designed to support all of the most important ways people communicate through technology and our global infrastructure is capable of supporting virtually any business at scale.

As indicated above, we have seen escalating enthusiasm for our offerings as businesses have increasingly prioritized delivering, and their customers have increasingly come to expect, personalized experiences through digital communication channels.

Such experiences require businesses to understand their customers on a deep level, with a comprehensive view of their customers across multiple digital touchpoints, that reveals what their needs are and which communications methods they prefer.

Our platform, which uniquely combines our highly customizable communications APIs with leading customer data management capabilities, allows businesses to do exactly that, breaking down data silos and building a comprehensive single source for their customer data organized into unique profiles and easily accessible by all their business teams.

Empowered with this information and the insights it enables, businesses using our platform can provide robust, personalized and effective communications to their customers at every stage of their customer relationships.

We have experienced substantial growth in our business since inception, and as of December 31, 2022, we had over 290,000 Active Customer Accounts that represent organizations big and small, old and young, across nearly every industry.

Our growth to this scale has predominantly been organic as a result of our customers increasing their usage of our products, extending their usage of our products to new applications, or adopting new products that we offer.

We have also fueled our growth through successful strategic acquisitions and integrations of businesses that complemented our pre-existing products and allowed us to expand our platform and to add new customer accounts.

Acquisitions of note have included Segment, the leading customer data platform we acquired in 2020, and Zipwhip, the leading toll-free messaging provider we acquired in 2021.

As we announced on February 13, 2023, moving forward we will operate as two separate business units:

Twilio Communications and Twilio Data & Applications (previously referred to as Software).

We believe that this strategic realignment will enable us to better execute on the key priorities for each side of our business—driving efficiencies for Twilio Communications and accelerating growth for Twilio Data & Applications—while accounting for each business unit’s unique economic, customer and product needs.

These two business units can execute toward their respective financial goals with more focus and independence—but they are also highly complementary.

Our Data & Applications business benefits from our underlying communications platform and our substantial active customer base.

Our success in Data & Applications also drives more intelligence for our Communications products.

Together, they address adjacent buyers and related problems that our customers have.

With this strategic realignment, we believe we are well-positioned to achieve our long-term plan of creating the market-leading customer engagement platform.

We aim to deliver the leading platform that intelligently orchestrates customer engagement across the entire customer life cycle.

Our platform provides developers tools to build, scale, and deploy real-time communications within software applications, while simultaneously offering technology that allows businesses to harness the power of first-party data to improve the experience of their customers.

The data our platform collects can inform every interaction across the customer journey to achieve more personalized, timely and impactful engagement.

This in turn empowers businesses to build productive one-to-one relationships, at scale, through both easy-to-use APIs and extensible software products like Twilio Flex and Twilio Engage.

The central pillars of our customer engagement platform, consistent with the new business unit structure referenced above, are described below.

Communications

Our Communications solutions consist of highly customizable APIs and products that can be used individually or in combination to build rich contextual communications within applications.

We offer easy-to-use flexible building blocks for developers to build omnichannel engagements with customers worldwide.

We also provide advanced compliance management to support success within a changing ecosystem of regulations.

Our Communications solutions include Programmable Messaging, Programmable Voice, Email, Account Security and more.

The majority of our communications products are offered on a usage basis.

Email is offered on a subscription basis.

Our platform is connected to our “ Super Network, ” a software layer that enables our customers’ applications to communicate with devices globally.

The Super Network interconnects communications networks and inbox services providers around the world and continually analyzes data to optimize the quality and cost of communications that flow through our platform.

The Super Network also contains a set of APIs that gives our customers access to additional foundational components offered through our platform, such as phone numbers and session initiation protocol (“SIP”) trunking.

Core offerings of our Communications business include:

• Programmable Messaging.

Twilio Programmable Messaging (MessagingX) is an API to send and receive SMS, MMS, Toll-Free SMS, High-Throughput Toll-Free SMS and over-the-top (“OTT”) (e.g., 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 many two-way and conversational use cases, such as 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.

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 the fingertips of our customers.

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 our customers 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 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 in multiple programming languages.

• 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 proprietary Mail Transfer Agent (“MTA”) optimizes for inbox placement while offering tools for sender reputation management and expert deliverability professional services.

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.

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.

With Video Insights, developers can monitor the performance of their video applications directly from the Twilio Console.

Twilio Live gives developers the tools to create immersive, interactive audio or video live streaming experiences.

Low-latency delivery enables speakers and audience members to engage via chat, polls, and inviting audience members “on stage” to speak.

Developers can build interactive shopping experiences, broadcast events such as conferences or concerts, fitness, and more using live streaming APIs, SDKs, and sample code optimized for iOS, Android, and all major browsers.

Conversations

The Twilio Conversations API allows developers to build rich, one-to-one and group interactions for customer support and commerce use cases.

The unified messaging API provides cross-channel support for SMS and MMS, Chat, WhatsApp, Facebook Messenger, and Google Business Messages – all while archiving message history, preserving participant identity, and reducing time to market with software development kits (“SDKs”) and pre-built mobile and web user interfaces.

As we observe the customer engagement 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 requiring advanced solutions to register, onboard and recognize customers.

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 Verify”), 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 Verify 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.

Our customers use this API to address numerous use cases, including account notifications, marketing, account security and order confirmations, as well as two-way and conversational use cases, such as conversational sales support and customer care.

• Programmable Voice.

Twilio Programmable Voice allows developers to build solutions to make, manage and receive phone calls globally through a browser, an app, a phone or anywhere else one can take a call.

Our voice software, which works over both the traditional public switched telephone network (“PSTN”) and over Internet Protocol (“VoIP”), allows developers to incorporate advanced voice functionality such as text-to-speech, global conferencing, emergency calling, call recording, media streams and others, as well as address use cases such as contact centers, call tracking, analytics solutions and anonymized communications.

Twilio SendGrid Email API (“Email API”) solves email delivery challenges at scale, enabling customers to build customized solutions and helpful shortcuts to streamline integration and optimize for inbox placement.

The Email API allows businesses to integrate with multiple leading development frameworks and client libraries in multiple languages as well as customize various links and domains.

It also provides sender authentication, security, mobile support and many other tools.

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

• Account Security.

Online fraud has evolved into a major concern that requires today’s businesses to have advanced solutions for registering, onboarding and recognizing customers.

Twilio Verify is a managed solution that effectively adds security at the point of new user activation and onwards, providing a seamless, consistent and secure login experience.

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

Data & Applications

We believe that a personalized, positive customer experience is the best path to long-term customer loyalty.

Our Data & Applications solutions enable businesses to create highly personalized experiences and campaigns across multiple channels using real-time customer data.

They also allow businesses to break down data silos across their organizations and to leverage a single unified source of customer data for their various business teams.

Our Data & Applications products are primarily offered on a subscription basis.

Our Communications products that are embedded into our Data & Applications products are charged separately on a usage basis.

Core offerings of our Data & Applications business include:

• Twilio Segment.

Twilio Segment is a leading customer data platform (“CDP”) that provides businesses with the tools to harness the power of first-party data by unifying information collected throughout each customer’s journey into a unique profile.

Twilio Segment collects, contextualizes and unlocks the potential of first-party data across the customer engagement stack by:

• collecting user data from interactions with websites, mobile apps, digital ads, and more;

• combining data from these different sources and systems to form a complete picture of each customer;

• creating from this a customer profile that can be accessed by every business team within the organization;

• integrating customer data into subsequent interactions to drive personalization across channels.

In addition to creating unified profiles that drive personalized customer interactions, Twilio Segment includes privacy and security features that help businesses comply with privacy laws, including the General Data Protection Regulation (“GDPR”) and the California Consumer Privacy Act of 2018 (“CCPA”).

• Twilio Engage.

Twilio Engage builds upon the unified profiles of Twilio Segment to enable marketers to create personalized campaigns and to manage, measure and scale them through a single platform.

Such campaigns can include personalized messages delivered via native SMS, email, and/or custom channels.

Through Twilio Engage, businesses can deepen their customer relationships and convert what might otherwise have been isolated interactions into continuous, long-term relationships.

• Twilio Flex.

Twilio Flex is a programmable virtual contact center built for the new world of tailored customer experiences and omnichannel communications.

Twilio Flex is a 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 solutions.

With Twilio Flex, businesses can rapidly deploy tailored cloud contact centers to create an exact omnichannel contact center experience that addresses their specific business needs.

• Marketing Campaigns.

Marketing Campaigns is built on top of SendGrid's proven email infrastructure to help digital marketers build and send email campaigns at scale - faster than ever.

Marketing Campaigns is built on top of our proven email infrastructure to help digital marketers build and send email campaigns at scale, 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

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.

• 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 U.S., 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

Our goal is to include Twilio in the toolkit of every developer in the world, from small businesses to major enterprises.

Because big ideas often start small, developers need the freedom and tools to experiment and iterate on their ideas.

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.

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

Developers can begin building with a free trial.

They have access to self-service documentation and free customer support to guide them through the process.

Once developers determine that our software meets their needs, they can flexibly increase consumption and pay based on usage.

In short, we acquire developers like consumers and enable them to spend like enterprises.

Our Growth Strategy

We are the leader in the cloud communications platform category based on revenue, market share and reputation and intend to continue to set the pace for innovation.

We also have the leading market share in the Customer Data Platform category.

Our overall strategy is to develop great APIs that developers love.

These developers are our champions and bring us “in” to companies of every type, most frequently utilizing our messaging and email tools as an entry point.

This “in” motion creates initial relationships with customers of all sizes including major enterprises that allow us to move “up” the software stack and provide those companies with software solutions that address their customer engagement requirements from marketing to sales and support.

Today, we offer Twilio Campaigns for marketing, Twilio Flex for customer support and Twilio Verify to onboard and recognize customers.

The more strategic nature of these software products also allows us to move up the organization chart, interacting with more senior and strategic purchasers.

This “in” and “up” strategy is a motion we work on improving every day.

We will also continue to invest aggressively in our platform approach, which prioritizes increasing our reach and scale.

We intend to pursue the following growth strategies:

• 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 customer engagement to a broader range of applications, geographies and customers.

We have a substantial research and development team, comprising approximately 39% of our headcount as of December 31, 2021.

• Grow Our Developer Community and Accelerate Adoption.

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, 2021, we had more than 256,000 Active Customer Accounts on our platform.

• 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 U.S.

are increasingly adopting our platform, and for the years ended December 31, 2021 and 2020, revenue from international customer accounts accounted for 34% and 27% 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 U.S.

and collaborating with international strategic partners.

• Further Penetrate the Enterprises.

We plan to drive greater awareness and adoption of Twilio from enterprises across industries.

We intend to further increase our investment in sales and marketing to meet evolving enterprise needs globally, in addition to extending our enterprise-focused use cases and platform capabilities, like our Twilio Enterprise Plan.

Additionally, we believe there is significant opportunity to expand our relationships with existing enterprise customers.

• Expand Our Partner Channel.

Our Twilio Build partner program is focused on growing our community of technology and consulting partners.

Twilio Build's ecosystem of partners offers customers both packaged applications and consulting expertise that make it possible for any customer to innovate with Twilio regardless of region, industry, business model or development resources.

To help our partners grow their businesses and innovate for their customers, this program provides go-to-market support, certification and training programs and a partner success team.

We have relationships with a number of technology partner customers that embed our products in the solutions that they sell to other businesses.

We intend to expand our relationships with existing technology partner customers and to add new technology partner customers.

We plan to invest in a range of

initiatives to encourage increased collaboration with, and generation of revenue from, technology partner customers.

We have developed relationships with consulting partners who provide consulting and development services for organizations that have limited software development expertise to build our platform into their software applications.

We intend to continue to invest in and develop the ecosystem for our solutions in partnership with consulting partners to accelerate awareness and adoption of our platform.

• Selectively Pursue Acquisitions and Strategic Investments.

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

From 2015 through 2021, 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, our acquisition of Segment in November 2020 allowed us to add the market-leading customer data platform to our product offerings and our acquisition of Zipwhip in July 2021 allowed us to expand the toll-free channel, offering developers and businesses another affordable, trusted, high-quality engagement option via messaging-enabled toll-free numbers.

We are a leader in the customer engagement platform category.

Retaining this position will require both continued innovation and discipline with respect to prioritization and focus.

We are concentrating our investments in the highest-impact product areas for our future, and we intend to pursue the following strategies:

• Accelerate Growth of our Data & Applications Business.

We are focusing on speeding up technological development and aggressively growing our market share for Twilio Segment and Twilio Engage by increasing the number of source channels and destinations we integrate with and by growing the number of new customers that can build their own solutions using our Data & Applications products.

We also continue to invest in the success path of Twilio Flex as a foundational application connecting communications and customer data.

• Continue Driving Simplification and Efficiencies in our Communications Business.

We are investing strategically into our core Communications solutions to improve profitability and maintain our market leadership position.

To drive efficiencies and reduce costs, we are adding additional self-service capabilities, emphasizing product-led growth and focusing on simplification of business processes and modernization of our infrastructure.

We believe that driving efficiencies and improving profitability in our Communications business and establishing it as our major profit engine will allow us to continue to invest in accelerating the growth of our Data & Applications business, capture market share and increase our gross margins.

• Driving Operating Leverage Across the Business.

We are implementing several organizational initiatives targeted at improving efficiencies of our processes, enhancing our fiscal discipline on all levels, optimizing utilization of our distributed workforce, driving agile decision making frameworks and more.

We expect that these initiatives will result in operating cost reductions, increase effectiveness and efficiency within our organization and ultimately accelerate our path to driving meaningful value for our stockholders.

From time to time, we evaluate opportunities to acquire or invest in adjacent technologies to complement our organic investments and to improve our products, our services and our customers’ experiences.

We expect to continue to selectively explore these types of strategic levers as opportunities arise.

The markets for customer engagement platforms are rapidly evolving and are increasingly competitive.

We believe that the principal competitive factors in our market are completeness of offering, credibility with customers, global reach, ease of integration and programmability, product features, platform scalability, reliability, security and performance, brand awareness and reputation, the strength of sales and marketing efforts, customer support, and the cost of deploying and using our products.

We believe that we compete favorably on the basis of the factors listed above and that none of our competitors currently compete directly with us across all of our product offerings.

In our Communications business, our competitors are primarily (i) regional network service providers that offer limited developer functionality on top of their own physical infrastructure, (ii) communications platform-as-a-service (“CPaaS”) companies that offer communications products and applications, and (iii) other software companies that compete with portions of our communications product line.

In our Data & Applications business our competitors are primarily (i) legacy on-premises vendors, (ii) software-as-a-service (“SaaS”) companies and marketing cloud platform vendors that offer bundled applications and platforms, and (iii) CRM and customer experience vendors.

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

Moreover, as we expand the scope of our platform, we may face additional competition.

Research and Development

Our research and development efforts are focused on building a trusted, comprehensive customer engagement platform while enhancing our existing products and developing new products and features.

Our research and development organization is predominantly built around small development teams.

Our small development teams foster greater agility, which enables us to develop new, innovative products and make rapid changes to our infrastructure that increase resiliency and operational efficiency.

Our development teams designed and built our customer engagement platform, our core platforms stack, as well as our Super Network.

These teams continue to focus on the highest impact product areas for our future.

As of December 31, 2022, we had 3,590 employees in our research and development organization.

Sales and Marketing

Our sales and marketing teams are focused on executing on our top priorities to accelerate growth of our Data & Applications business by accelerating customer acquisitions;

and maintain profitability and market leadership position of our Communications business by cross-selling communications and other products for account expansion.

Our sales organization includes sales development, inside sales, field sales, specialty sales and sales engineering personnel.

Our Data & Applications products require a strategic solution-oriented sales model and deep customer relationship building.

We are deliberate in developing these skills and customer relationships leveraging the trust and reputation we have built while solving new and broader problems for our customers.

Our Data & Applications products are primarily offered on a subscription basis.

Our Communications products that are integrated into our Data & Applications products are charged on a usage basis.

We are shifting our Communications sales model from one that is reliant on field sales to one that leverages digital inside sales, self-service and product-led growth.

We believe that this will significantly improve the profitability of our Communications business, contributing to materially improved operating margins, and enabling us to reinvest in the growth of our high margin Data & Applications business.

The majority of our Communications products are offered on a usage basis.

We offer an initial free trial period to developers to test their applications that they built with our products.

After the initial trial period, developers provide their credit card information and only pay for the actual usage of our products, for the majority of our communications products.

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, some enter into negotiated contracts with terms that dictate pricing and typically include some level of minimum revenue commitments.

Historically, we have acquired the substantial majority of our communications customers through this self-service model.

As customers expand their usage of our platform, we expand our relationships with them to include business leaders within their organizations.

We supplement our self-service model with account executives and customer success managers when such engagement is needed to provide value to our self-serving customers.

Our Email solution is offered on a subscription basis.

When potential customers do not have the available developer resources to build their own applications, we refer them to either our technology partners who embed our products in the solutions that they sell to other businesses (such as contact centers and marketing automation), our professional services team or outside consulting partners who provide consulting and development services for organizations that have limited software development expertise to build their software applications on our platform.

As of December 31, 2022, we had 3,605 employees in our sales and marketing organization.

Customer Support

To make it easy to learn how to use our products, we provide all of our users with comprehensive documentation, how-to guides and tutorials.

We supplement and enhance these tools with the participation of our engaged developer community.

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

All of our customers get free support and system status notifications.

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

We 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 throughout the world, with our larger offices located in the United States, Ireland, Colombia, India, and Singapore.

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

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.

For our Data & Applications products, offerings include services for implementing contact center solutions and customer data platform design.

For our Communications products, offerings include email implementation and deliverability, and configuration and integration of our communications channels.

Intellectual Property

We rely on a combination of patent, copyright, trademark, trade secret and other intellectual property laws in the United States and other jurisdictions, as well as license agreements, other contractual protections, and internal processes, procedures, and controls, to protect, establish, maintain, and enforce our intellectual property and other proprietary rights technology.

We also rely on a number of registered trademarks, applications for trademarks and common law protections afforded to certain unregistered trademarks to protect our brand.

As of December 31, 2022, in the United States, we had 232 issued patents, which expire between 2029 and 2041.

As of that date, we also had 36 issued patents in foreign jurisdictions, all of which are related to our U.S.

patents and patent applications.

We have also filed various applications in the United States and internationally to establish and protect our rights to certain aspects of our intellectual property portfolio.

In addition, as of December 31, 2022, we had 58 registered trademarks in the United States and 512 registered trademarks in foreign jurisdictions.

We currently, and will continue to, seek to protect our intellectual property and other proprietary rights by, among other things, implementing, maintaining, and enforcing a policy that requires our employees, independent contractors and certain suppliers involved in developing intellectual property for us or on our behalf to enter into agreements acknowledging that all work product or other forms of intellectual property generated, created, reduced to practice, conceived, or otherwise developed by them on our behalf are owned by us such that we can use the intellectual property they develop for our business purposes.

We are subject to a number of U.S.

federal, U.S.

state and foreign laws and regulations that involve matters central to our business.

These laws and regulations may involve privacy, data protection, intellectual property, competition, telecommunications, broadband, VoIP, consumer protection, export taxation and controls, or other subjects.

Many of the laws and regulations to which we are subject are still evolving and being tested in courts, and some could be interpreted in ways that could harm our business.

In addition, the application and interpretation of these laws and regulations often are uncertain, particularly in the new and rapidly evolving industry in which we operate.

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

For example, the General Data Protection Regulation (“GDPR”), the United Kingdom’s GDPR (“UK GDPR”), and the Swiss Federal Act on Data Protection impose strict requirements for processing the personal information of individuals protected by the legislation, whether their data is processed within or outside the European Economic Area (“EEA”), the United Kingdom (“UK”), and Switzerland, respectively.

For example, the GDPR imposes significant requirements regarding the processing of individuals’ personal information, including in relation to transparency, lawfulness of processing, individuals’ privacy rights, compliant contracting, data minimization, data breach notification, data re-usage, data retention, security of processing and international data transfers.

Noncompliance with the GDPR and UK GDPR can result in, for example, bans on data processing or data transfers, orders to delete data, and fines of up to the greater of 20 million euros (£17.5 million for the UK GDPR) or 4% of annual global revenue.

Further, individuals may initiate compensation claims or litigation related to our processing of their personal information.

Other privacy laws impose strict requirements around marketing communications and the deployment of cookies on users’ devices.

The breadth and depth of changes in data protection obligations has required significant time and resources, including a review of our technology and systems currently in use against the requirements of GDPR.

Our actual or perceived failure to comply with laws, regulations or contractual commitments regarding privacy, data protection and data security could lead to costly legal action, adverse publicity, significant liability and decreased demand for our services, which could adversely affect our business, results of operations and financial condition.

In addition, laws such as the Telephone Consumer Protection Act of 1991 (“TCPA”), restrict telemarketing and the use of automatic SMS text messages without explicit customer consent.

The scope and interpretation of the laws that are or may be applicable to the delivery of text messages are continuously evolving and developing.

If we do not comply with these laws or regulations, or if our customers fail to do so, 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.

The Twilio Magic

We believe there's a unique spirit to Twilio, manifested in who we are and how we work together.

We believe there is a unique spirit to Twilio, manifested in who we are and how we work together.

We value and invest in a positive culture of optimism, innovation, and accountability.

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We are Positrons .

We believe communications play a critical role in solving some of the world’s toughest social challenges.

Through Twilio.org, which is a part of our company and not a separate legal entity, we donate and sell our products at a reduced rate to social impact organizations and provide grant funding to help scale organizations' mission.

Communications play a critical role in solving some of the world’s toughest social challenges.

Nonprofits are meeting the increased demand for their support through communication technology and in doing so are helping more individuals build long term well-being and helping communities recover from humanitarian crises.

Through Twilio.org, which is a part of our company and not a separate legal entity, we donate and sell our products at a reduced rate to nonprofits and offer grant funding to help scale these organizations' missions.

In 2015, we reserved 1% of Twilio's common stock to fund Twilio.org.

We have periodically replenished that initial reserve and as of December 31, 2021, the number of shares of Twilio Class A common stock set aside for Twilio.org operations was 618,857.

We started Twilio.org so that more people around the world have the opportunity to thrive.

In 2021, over 7,500 social impact organizations used Twilio products and funding to reach more than 500 million people worldwide.

2021 marked another year of living through the COVID-19 pandemic and Twilio products and funding were used by over 1,200 organizations to provide more than 300 million people with vaccine and COVID-19 related information.

Information on our key Environmental, Social and Governance (“ESG”) programs, goals and commitments, and certain metrics can be found in our annual Impact Report, available on our website at https://investors.twilio.com/governance.

As of December 31, 2022, 530,449 shares of Twilio Class A common stock were set aside for Twilio.org operations.

In 2022, over 15,000 active social impact accounts used Twilio products and funding to reach more than 559 million people worldwide.

Information on our key ESG programs, goals and commitments, and certain metrics can be found in our annual Impact Report, available on our website at https://investors.twilio.com/governance.

Website references throughout this document are provided for convenience only, and the content on the referenced websites is not incorporated by reference into this report.

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Diversity, Equity and Inclusion

We are driving a diversity, equity and inclusion (“DEI”) strategy based on the principles of antiracism.

At Twilio, we use “antiracism” as an umbrella term for actively identifying and eliminating racism/oppression by changing systems, organizational structures, policies, practices, and attitudes, so that power is shared equitably.

By educating and empowering Twilions to think and operate through an antiracist lens, we’ll be able to build a more diverse workforce, promote equity for all communities in the workplace and foster safe, inclusive environments.

Following our commitment to become an antiracist organization, we began the work to embed and operationalize antiracism across the business, with a strong focus on education.

In 2021, over 100 senior Twilio executives participated in an antiracism workshop, with continued learning planned in 2022.

We are growing our partnerships with global organizations to help us find, grow, and keep diverse talent in various demographics, regions, and countries.

We are coordinating antiracist learning opportunities through employee resource group (“ERG”) specific programming and events.

Lastly, we continue to maintain healthy pay parity, ensuring that employees with the same job and location are paid fairly relative to one another, regardless of gender or race.

We will continue to grow our DEI resources and global footprint to make sure DEI scales along with the business.

Most recently, we expanded the DEI team and launched new ERG chapters globally.

This will ensure we are translating antiracism and amplifying DEI efforts across all teams and regions.

Following our organizational commitment to diversity, equity and inclusion (“DEI”) principles, we continue the work to embed and operationalize anti-racism and anti-oppression values across the business.

In 2022, we successfully expanded our voluntary self-identification campaign so that employees outside of the U.S.

can now share how they identify in various categories, giving us a better understanding of our employees to facilitate our DEI initiatives and to allow us to be more intentional in how we support underrepresented communities.

We also continue our anti-racist and anti-oppression learning opportunities through employee resource group specific programming and events.

Lastly, we have focused on pay parity, ensuring that employees with the same job and location are paid fairly relative to one another.

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 salaries, sales commissions for our sales teams, 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 are 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 salaries, equity, and in the case of our sales teams, commissions.

We generally offer full-time employees equity at the time of hire and through annual equity grants, as well as through an employee stock purchase plan, to foster a strong sense of ownership in and commitment 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.

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

In addition, we provide time off and we 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.

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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

Our research and development efforts are focused on building a trusted, smart engagement platform and enhancing our existing products and developing new products and features.

Our research and development organization is predominantly built around small development teams.

Our development teams designed, built and continue to expand our customer engagement platform, our core platforms stack and Super Network.

As of December 31, 2021, we had 3,103 employees in our research and development organization.

We intend to continue to invest in our research and development capabilities to extend our platform and bring the power of contextual communications to a broader range of applications, geographies and customers.

Sales and Marketing

Our sales and marketing teams work together closely to drive awareness and adoption of our platform, accelerate customer acquisition and generate revenue from customers.

We have a strategy to grow within our customers that we refer to as our “in and up” strategy.

We get in to new customers through our messaging and email products, often directly via developers, then build on those relationships to grow our footprint with broader adoption and higher value products.

Our go-to-market model is primarily focused on initiating customer relationships by reaching and serving the needs of developers.

We are a pioneer of developer evangelism and education and have cultivated a large global developer community.

We reach developers through community events and conferences, including our annual SIGNAL customer and developer conference, to demonstrate how every developer can create differentiated applications incorporating communications using our products.

Once developers are introduced to our platform, we provide them with a low-friction trial experience.

By accessing our easy-to-configure APIs, extensive self-service documentation and customer support team, developers can build our products into their applications and then test such applications during an initial free trial period that we provide.

Once they have decided to use our products beyond the initial free trial period, customers provide their credit card information and only pay for the actual usage of our products, for a majority of our products.

Our Flex contact center platform is generally offered on a per user, per month basis or on a usage basis per agent hour.

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 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.

Historically, we have acquired the substantial majority of our customers through this self-service model.

As customers expand their usage of our platform, we expand our relationships with them to include business leaders within their organizations.

We supplement our self-service model with account executives and customer success managers aimed at engaging customers through a direct sales approach to expand usage and ensure satisfaction.

To help increase our awareness in the enterprise, we have expanded our marketing efforts through programs like our Twilio Engage roadshow, where we seek to bring business leaders and developers together to discuss the future of customer engagement.

We have developed products to support this effort as well, like the Twilio Enterprise Plan, which provides capabilities for advanced security, access management and granular administration.

Our sales organization targets technical leaders and business leaders who are seeking to leverage software to drive superior customer engagement and competitive differentiation.

As we educate these leaders on the benefits of developing applications incorporating our products to differentiate their business, they often consult with their developers regarding implementation.

We believe that developers are often advocates for our products as a result of our developer-focused approach.

Our sales organization includes sales development, inside sales, field sales, specialty sales and sales engineering personnel.

When potential customers do not have the available developer resources to build their own applications, we refer them to either our technology partners who embed our products in the solutions that they sell to other businesses (such as contact centers and sales force and marketing automation), or our professional services team or outside consulting partners who provide consulting and development services for organizations that have limited software development expertise to build our platform into their software applications.

As of December 31, 2021, we had 3,661 employees in our sales and marketing organization.

Customer Support

We have designed our products and platform to be self-service and to require minimal customer support.

To enable this, we provide all of our users with helper libraries, comprehensive documentation, how-tos and tutorials.

We supplement and enhance these tools with the participation of our engaged developer community.

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

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 throughout the world, with our larger offices located in the U.S., Ireland, Colombia, India, and Singapore.

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

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

Offerings include services for implementing contact center solutions, email implementation and deliverability, customer data platform design, 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:

• completeness of offering;

• credibility with developers;

• global reach;

• ease of integration and programmability;

• product features;

• platform scalability, reliability, security and performance;

• brand awareness and reputation;

• the strength of sales and marketing efforts;

• customer support;

• the cost of deploying and using our products.

We believe that we compete favorably on the basis of the factors listed above.

We believe that none of our competitors currently competes directly with us across all of our product offerings.

Our competitors fall into four primary categories:

• 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;

• 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 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.

Moreover, as we expand the scope of our platform, we may face additional competition.

Intellectual Property

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, 2021, in the U.S., we had been issued 197 patents, which expire between 2029 and 2040.

As of such date, we also had 36 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 U.S.

and internationally.

In addition, as of December 31, 2021, we had 50 trademarks registered in the U.S.

and 416 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.

Despite our efforts to protect our technology and proprietary rights through intellectual property rights, licenses and other contractual protections, unauthorized parties may still copy or otherwise obtain and use our software and other technology.

In addition, we intend to continue to expand our international operations, and effective intellectual property, copyright, trademark and trade secret protection may not be available or may be limited in foreign countries.

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.

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.

We are subject to a number of U.S.

federal and state and foreign laws and regulations that involve matters central to our business.

These laws and regulations may involve privacy, data protection, intellectual property, competition, telecommunications, broadband, Voice over Internet Protocol (“VoIP”), consumer protection, export taxation or other subjects.

Many of the laws and regulations to which we are subject are still evolving and being tested in courts and by regulatory authorities and could be interpreted in ways that could harm our business.

In addition, the application and interpretation of these laws and regulations often are uncertain, particularly in the new and rapidly evolving industry in which we operate.

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, the General Data Protection Regulation (“GDPR”) and the United Kingdom’s GDPR (“UK GDPR”) impose strict requirements for processing the personal information of individuals located, respectively within the European Economic Area (“EEA”) and the United Kingdom (“UK”).

Noncompliance with the GDPR and UK GDPR can result in, for example, bans on data processing and fines of up to the greater of 20 million euros (£17.5 million for the UK GDPR) or 4% of annual global revenue.

Further, individuals may initiate litigation related to our processing of their personal information.

Given the breadth and depth of changes in data protection obligations, meeting the requirements of GDPR has required significant time and resources, including a review of our technology and systems currently in use against the requirements of GDPR.

In addition, laws such as the Telephone Consumer Protection Act of 1991 (“TCPA”), restrict telemarketing and the use of automatic SMS text messages without explicit customer consent.

The scope and interpretation of the laws that are or may be applicable to the delivery of text messages are continuously evolving and developing.

If we do not comply with these laws or regulations, or if our customers fail to do so, we could face direct liability.

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

was incorporated in Delaware in March 2008.

Our principal executive offices are located at 101 Spear Street, First Floor, San Francisco, California 94105, and our telephone number is (415) 390-2337.

Our principal executive offices are located at 101 Spear Street, Fifth Floor, San Francisco, California 94105, and our telephone number is (415) 390-2337.

Our website address is www.twilio.com.

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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