TWILIO INC 10-Q

Item 1. Financial Statements TWILIO INC. Condensed Consolidated Balance Sheets (Unaudited) As of March 31, As of December 31, 2023 2022 (In thousands) ASSETS Current assets: Cash and cash equivalents $ 634,824 $ 651,752 Short-term marketable securities 3,310,483 3,503,317 Accounts receivable, net 575,664 547,507 Prepaid expenses and other current assets 335,565 281,510 Total current assets 4,856,536 4,984,086 Property and equipment, net 254,062 263,979 Operating right-of-use assets 103,532 121,341 Equity method investment 684,144 699,911 Intangible assets, net 797,699 849,935 Goodwill 5,284,388 5,284,153 Other long-term assets 318,547 360,899 Total assets $ 12,298,908 $ 12,564,304 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 121,157 $ 124,605 Accrued expenses and other current liabilities 475,871 490,221 Deferred revenue and customer deposits 136,517 139,110 Operating lease liability, current 54,904 54,222 Total current liabilities 788,449 808,158 Operating lease liability, noncurrent 162,114 164,551 Finance lease liability, noncurrent 17,832 21,290 Long-term debt, net 987,769 987,382 Other long-term liabilities 23,878 23,881 Total liabilities 1,980,042 2,005,262 Commitments and contingencies (Note 13) Stockholders' equity: Preferred stock — — Class A and Class B common stock 186 186 Additional paid-in capital 14,233,590 14,055,853 Accumulated other comprehensive loss ( 71,945 ) ( 121,161 ) Accumulated deficit ( 3,842,965 ) ( 3,375,836 ) Total stockholders’ equity 10,318,866 10,559,042 Total liabilities and stockholders’ equity $ 12,298,908 $ 12,564,304 See accompanying notes to condensed consolidated financial statements. 3 TWILIO INC. Condensed Consolidated Statements of Operations (Unaudited) Three Months Ended March 31, 2023 2022 (In thousands, except share and per share amounts) Revenue $ 1,006,564 $ 875,363 Cost of revenue 515,874 450,292 Gross profit 490,690 425,071 Operating expenses: Research and development 238,595 240,611 Sales and marketing 259,885 287,906 General and administrative 112,568 114,362 Restructuring costs 121,942 — Impairment of long-lived assets 21,784 — Total operating expenses 754,774 642,879 Loss from operations ( 264,084 ) ( 217,808 ) Other expenses, net: Share of losses from equity method investment ( 30,419 ) — Impairment of strategic investments ( 46,154 ) — Other income (expenses), net 8,985 ( 6,677 ) Total other expenses, net ( 67,588 ) ( 6,677 ) Loss before (provision for) benefit from income taxes ( 331,672 ) ( 224,485 ) (Provision for) benefit from income taxes ( 10,467 ) 2,858 Net loss attributable to common stockholders $ ( 342,139 ) $ ( 221,627 ) Net loss per share attributable to common stockholders, basic and diluted $ ( 1.84 ) $ ( 1.23 ) Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted 186,403,349 180,898,713 See accompanying notes to condensed consolidated financial statements. 4 TWILIO INC. Condensed Consolidated Statements of Comprehensive Loss (Unaudited) Three Months Ended March 31, 2023 2022 (In thousands) Net loss $ ( 342,139 ) $ ( 221,627 ) Other comprehensive income (loss): Unrealized gain (loss) on marketable securities 30,750 ( 62,826 ) Foreign currency translation 483 ( 165 ) Net change in market value of effective foreign currency forward exchange contracts 3,335 ( 3,852 ) Share of other comprehensive income from equity method investment 14,648 — Total other comprehensive income (loss) 49,216 ( 66,843 ) Comprehensive loss attributable to common stockholders $ ( 292,923 ) $ ( 288,470 ) See accompanying notes to condensed consolidated financial statements. 5 TWILIO INC. Condensed Consolidated Statements of Stockholders’ Equity (Unaudited) Common Stock Class A Common Stock Class B Additional Paid-In Capital Accumulated Other Comprehensive Loss Accumulated Deficit Total Stockholders' Equity Shares Amount Shares Amount (In thousands, except share amounts) Balance as of December 31, 2022 176,358,104 $ 174 9,617,605 $ 12 $ 14,055,853 $ ( 121,161 ) $ ( 3,375,836 ) $ 10,559,042 Net loss — — — — — — ( 342,139 ) ( 342,139 ) Exercises of vested stock options 66,968 — 97,199 — 3,264 — — 3,264 Vesting of restricted stock units 1,516,634 2 — — ( 2 ) — — — Value of equity awards withheld for tax liability ( 36,965 ) — — — ( 2,456 ) — — ( 2,456 ) Conversion of shares of Class B common stock into shares of Class A common stock 97,199 — ( 97,199 ) — — — — — Shares of Class A common stock issued and donated to charity 22,102 — — — 1,599 — — 1,599 Unrealized gain on marketable securities — — — — — 30,750 — 30,750 Repurchases of shares of Class A common stock including related costs ( 1,902,124 ) ( 2 ) — — — — ( 124,990 ) ( 124,992 ) Foreign currency translation — — — — — 483 — 483 Net change in market value of effective foreign currency forward exchange contracts — — — — — 3,335 — 3,335 Share of other comprehensive income from equity method investment — — — — — 14,648 — 14,648 Stock-based compensation — — — — 164,999 — — 164,999 Stock-based compensation - restructuring — — — — 10,333 — — 10,333 Balance as of March 31, 2023 176,121,918 $ 174 9,617,605 $ 12 $ 14,233,590 $ ( 71,945 ) $ ( 3,842,965 ) $ 10,318,866 See accompanying notes to condensed consolidated financial statements. 6 TWILIO INC. Condensed Consolidated Statements of Stockholders’ Equity (Unaudited) Common Stock Class A Common Stock Class B Additional Paid-In Capital Accumulated Other Comprehensive Loss Accumulated Deficit Total Stockholders' Equity Shares Amount Shares Amount (In thousands, except share amounts) Balance as of December 31, 2021 170,625,994 $ 168 9,842,105 $ 12 $ 13,169,118 $ ( 18,141 ) $ ( 2,119,691 ) $ 11,031,466 Net loss — — — — — — ( 221,627 ) ( 221,627 ) Exercises of vested stock options 180,643 — 193,889 — 11,727 — — 11,727 Vesting of restricted stock units 877,089 1 — — ( 1 ) — — — Value of equity awards withheld for tax liability ( 5,804 ) — — — ( 1,065 ) — — ( 1,065 ) Conversion of shares of Class B common stock into shares of Class A common stock 215,389 — ( 215,389 ) — — — — — Shares of Class A common stock donated to charity 22,102 — — — 4,232 — — 4,232 Shares returned from escrow ( 152,239 ) — — — ( 387 ) — — ( 387 ) Unrealized loss on marketable securities — — — — — ( 62,826 ) — ( 62,826 ) Foreign currency translation — — — — — ( 165 ) — ( 165 ) Net change in market value of effective foreign currency forward exchange contracts — — — — — ( 3,852 ) — ( 3,852 ) Stock-based compensation — — — — 159,930 — — 159,930 Balance as of March 31, 2022 171,763,174 $ 169 9,820,605 $ 12 $ 13,343,554 $ ( 84,984 ) $ ( 2,341,318 ) $ 10,917,433 See accompanying notes to condensed consolidated financial statements. 7 TWILIO INC . Condensed Consolidated Statements of Cash Flows (Unaudited) Three Months Ended March 31, 2023 2022 CASH FLOWS FROM OPERATING ACTIVITIES: (In thousands) Net loss $ ( 342,139 ) $ ( 221,627 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 71,393 68,103 Non-cash reduction to the right-of-use asset 8,574 12,415 Net amortization of investment premium and discount 3,515 10,712 Impairment of long-lived assets due to office closures 21,784 — Stock-based compensation including restructuring 170,799 155,275 Amortization of deferred commissions 17,865 12,626 Value of shares of Class A common stock issued and donated to charity 1,599 4,232 Share of losses from equity method investment 30,419 — Impairment of strategic investments 46,154 — Other adjustments 15,367 1,418 Changes in operating assets and liabilities: Accounts receivable ( 35,215 ) ( 19,623 ) Prepaid expenses and other current assets ( 51,438 ) ( 14,176 ) Other long-term assets ( 21,481 ) ( 27,399 ) Accounts payable 66 1,247 Accrued expenses and other current liabilities ( 19,130 ) 18,148 Deferred revenue and customer deposits ( 2,611 ) ( 1,453 ) Operating lease liabilities ( 13,651 ) ( 13,058 ) Other long-term liabilities 264 ( 4,415 ) Net cash used in operating activities ( 97,866 ) ( 17,575 ) CASH FLOWS FROM INVESTING ACTIVITIES: Acquisitions, net of cash acquired and other related payments — ( 27,682 ) Purchases of marketable securities and other investments ( 136,119 ) ( 246,874 ) Proceeds from sales and maturities of marketable securities 355,195 442,753 Capitalized software development costs ( 9,860 ) ( 10,250 ) Purchases of long-lived and intangible assets ( 6,751 ) ( 6,980 ) Net cash provided by investing activities 202,465 150,967 CASH FLOWS FROM FINANCING ACTIVITIES: Payments of costs related to public offerings — ( 35 ) Principal payments on debt and finance leases ( 7,353 ) ( 6,520 ) Value of equity awards withheld for tax liabilities ( 2,456 ) ( 1,065 ) Repurchases of shares of Class A common stock and related costs ( 114,993 ) — Proceeds from exercises of stock options 3,264 11,727 Net cash (used in) provided by financing activities ( 121,538 ) 4,107 Effect of exchange rate changes on cash, cash equivalents and restricted cash 39 27 NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH ( 16,900 ) 137,526 CASH, CASH EQUIVALENTS AND RESTRICTED CASH—Beginning of period 656,078 1,481,831 CASH, CASH EQUIVALENTS AND RESTRICTED CASH —End of period $ 639,178 $ 1,619,357 Cash paid for income taxes, net $ 3,479 $ 1,443 Cash paid for interest $ 18,750 $ 19,011 RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH TO THE CONDENSED CONSOLIDATED BALANCE SHEETS Cash and cash equivalents $ 634,824 $ 1,617,022 Restricted cash in other current assets 3,916 1,970 Restricted cash in other long-term assets 438 365 Total cash, cash equivalents and restricted cash $ 639,178 $ 1,619,357 See accompanying notes to condensed consolidated financial statements. 8 Table of Contents TWILIO INC. Notes to Condensed Consolidated Financial Statements (Unaudited) 1. Organization and Description of Business Twilio Inc. (the “Company”) was incorporated in the state of Delaware on March 13, 2008. Today's leading companies trust Twilio's Customer Engagement Platform to build direct, personalized relationships with their customers everywhere in the world. Twilio enables companies to use communications and data to add intelligence and security to every step of their customers’ journey, from sales to marketing to growth, customer service and many more engagement use cases in a flexible, programmatic way. The Company’s headquarters are located in San Francisco, California, and the Company has subsidiaries across North America, South America, Europe, Asia and Australia. 2. Summary of Significant Accounting Policies (a) Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K filed with the SEC on February 27, 2023 (“Annual Report”). The condensed consolidated balance sheet as of December 31, 2022, included herein, was derived from the audited financial statements as of that date, but may not include all disclosures including certain notes required by U.S. GAAP on an annual reporting basis. In the opinion of management, the accompanying condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, comprehensive loss, stockholders’ equity and cash flows for the interim periods, but are not necessarily indicative of the results of operations to be anticipated for the full year 2023 or any future period. (b) Principles of Consolidation The condensed consolidated financial statements include the Company and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated. (c) Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates are used for, but not limited to, revenue allowances and sales credit reserves; recoverability of long-lived and intangible assets; impairment assessments of goodwill and indefinite-lived intangible assets; capitalization and useful life of the Company’s capitalized internal-use software development costs; fair value of acquired intangible assets and goodwill; accruals and contingencies. Estimates are based on historical experience and on various assumptions that the Company believes are reasonable under current circumstances. However, future events are subject to change and best estimates and judgments may require further adjustments, therefore, actual results could differ materially from those estimates. Management periodically evaluates such estimates and they are adjusted prospectively based upon such periodic evaluation. (d) Remaining Performance Obligations Revenue allocated to remaining performance obligations for contracts with durations of more than one year was $ 165.9 million as of March 31, 2023, of which 72 % is expected to be recognized over the next 12 months and 95 % is expected to be recognized over the next 24 months. 9 Table of Contents (e) Deferred Revenue and Customer Deposits As of March 31, 2023, and December 31, 2022, the Company recorded $ 136.5 million and $ 139.1 million as its deferred revenue and customer deposits, respectively, that are included in deferred revenue and customer deposits and other long-term liabilities in the accompanying condensed consolidated balance sheets. During the three months ended March 31, 2023 and 2022, the Company recognized $ 71.3 million and $ 64.9 million of revenue, respectively, that was included in the deferred revenue and customer deposits balances as of the end of the previous year. (f) Deferred Sales Commissions Total net capitalized commission costs as of March 31, 2023, and December 31, 2022, were $ 237.0 million and $ 239.1 million, respectively, and are included in prepaid expenses and other current assets and other long‑term assets in the accompanying condensed consolidated balance sheets. (g) Concentration of Credit Risk Financial instruments that potentially expose the Company to a concentration of credit risk consist primarily of cash, cash equivalents, restricted cash, marketable securities and accounts receivable. The Company maintains cash, restricted cash, cash equivalents and marketable securities with financial institutions. Certain balances held by such financial institutions exceed insured limits. The Company sells its services to a wide variety of customers. If the financial condition or results of operations of any significant customer deteriorates substantially, operating results could be adversely affected. To reduce credit risk, management performs credit evaluations of the financial condition of significant customers. The Company does not require collateral from its credit customers and maintains reserves for estimated credit losses on customer accounts when considered necessary. Actual credit losses may differ from the Company’s estimates. In the three months ended March 31, 2023 and 2022, no customer organization accounted for more than 10% of the Company’s total revenue. As of March 31, 2023, and December 31, 2022, no customer organization represented more than 10% of the Company’s gross accounts receivable. (h) Changes to Significant Accounting Policies Share Repurchases The Company elected to record the excess of the repurchase price over the par value of the repurchased shares of its Class A common stock in accumulated deficit, along with the associated transaction costs and excise taxes. Immediately upon repurchase, the shares are retired and returned to the status of unauthorized and unissued. On August 16, 2022, the Inflation Reduction Act of 2022 (the “IR Act”) was signed into federal law. The IR Act provides for, among other things, a new U.S. federal 1% excise tax on certain repurchases of stock by publicly traded U.S. domestic corporations and certain U.S. domestic subsidiaries of publicly traded foreign corporations occurring on or after January 1, 2023. The excise tax is imposed on the repurchasing corporation itself, not its shareholders from which shares are repurchased. The amount of the excise tax is generally 1% of the fair market value of the shares repurchased at the time of the repurchase. However, for purposes of calculating the excise tax, repurchasing corporations are permitted to net the fair market value of certain new stock issuances against the fair market value of stock repurchases during the same taxable year. In addition, certain exceptions apply to the excise tax. There have been no other changes to the Company’s significant accounting policies as described in its Annual Report. (i) Recently Issued Accounting Guidance, Not yet Adopted In June 2022, the Financial Accounting Standards Board issued Accounting Standards Update No. 2022-03, " Fair Value Measurements (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions, " which clarifies and amends the guidance of measuring the fair value of equity securities subject to contractual restrictions that prohibit the sale of the equity securities. The guidance will be effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. The Company is evaluating the impact of the adoption of this guidance on its condensed consolidated financial statements. 10 Table of Contents 3. Fair Value Measurements Financial Assets The following tables provide the financial assets measured at fair value on a recurring basis: Amortized Cost or Carrying Value Gross Unrealized Gains Gross Unrealized Losses Less Than 12 Months Gross Unrealized Losses More Than 12 Months Fair Value Hierarchy as of March 31, 2023 Aggregate Fair Value Level 1 Level 2 Level 3 Financial Assets: (In thousands) Cash and cash equivalents: Money market funds $ 289,997 $ — $ — $ — $ 289,997 $ — $ — $ 289,997 Total included in cash and cash equivalents 289,997 — — — 289,997 — — 289,997 Marketable securities: U.S. Treasury securities 416,493 — ( 650 ) ( 7,747 ) 408,096 — — 408,096 Non-U.S. government securities 149,510 — ( 22 ) ( 4,543 ) 144,945 — — 144,945 Corporate debt securities and commercial paper 2,815,621 1,372 ( 6,169 ) ( 53,382 ) 5,000 2,752,442 — 2,757,442 Total marketable securities 3,381,624 1,372 ( 6,841 ) ( 65,672 ) 558,041 2,752,442 — 3,310,483 Total financial assets $ 3,671,621 $ 1,372 $ ( 6,841 ) $ ( 65,672 ) $ 848,038 $ 2,752,442 $ — $ 3,600,480 Amortized Cost or Carrying Value Gross Unrealized Gains Gross Unrealized Losses Less Than 12 Months Gross Unrealized Losses More Than 12 Months Fair Value Hierarchy as of December 31, 2022 Aggregate Fair Value Level 1 Level 2 Level 3 Financial Assets: (In thousands) Cash and cash equivalents: Money market funds $ 46,610 $ — $ — $ — $ 46,610 $ — $ — $ 46,610 Reverse repurchase agreements 200,000 — — — — 200,000 — 200,000 Commercial paper 2,249 — — — 2,249 2,249 Total included in cash and cash equivalents 248,859 — — — 46,610 202,249 — 248,859 Marketable securities: U.S. Treasury securities 481,463 — ( 1,269 ) ( 11,347 ) 468,847 — — 468,847 Non-U.S. government securities 149,901 — ( 33 ) ( 6,304 ) 143,564 — — 143,564 Corporate debt securities and commercial paper 2,973,844 307 ( 12,202 ) ( 71,043 ) 5,000 2,885,906 — 2,890,906 Total marketable securities 3,605,208 307 ( 13,504 ) ( 88,694 ) 617,411 2,885,906 — 3,503,317 Total financial assets $ 3,854,067 $ 307 $ ( 13,504 ) $ ( 88,694 ) $ 664,021 $ 3,088,155 $ — $ 3,752,176 The aggregate related fair value of the corporate debt securities with unrealized losses was $ 2.4 billion as of March 31, 2023, of which $ 1.9 billion were in an unrealized loss position for more than 12 months and $ 420.2 million were in an unrealized loss position for less than 12 months. The aggregate related fair value of corporate debt securities with unrealized losses was $ 2.7 billion as of December 31, 2022, of which $ 2.0 billion were in an unrealized loss position for more than 12 months and $ 620.5 million were in an unrealized loss position for less than 12 months. Unrealized losses related to other investments as of March 31, 2023, and December 31, 2022, were not significant. The Company's primary objective when investing excess cash is preservation of capital, hence the Company's marketable securities primarily consist of U.S. Treasury Securities, non-U.S government securities, high credit quality corporate debt securities and commercial paper. Because the Company views its marketable securities as available to support current operations, it has classified all available for sale securities as short-term. As of March 31, 2023, and December 31, 2022, for all fixed income securities that were in unrealized loss positions, the Company has determined that (i) it does not have the intent to sell any of these investments, and (ii) it is not more likely than not that it will be required to sell any of these investments before recovery of the entire amortized cost basis. In addition, as of March 31, 2023, and December 31, 2022, the Company anticipates that it will recover the entire amortized cost basis of such fixed income securities before maturity. 11 Table of Contents Interest earned on marketable securities was $ 17.2 million and $ 15.6 million in the three months ended March 31, 2023 and 2022, respectively. The interest is recorded as other income (expenses), net, in the accompanying condensed consolidated statements of operations. The following table summarizes the contractual maturities of marketable securities: As of March 31, 2023 As of December 31, 2022 Amortized Cost Aggregate Fair Value Amortized Cost Aggregate Fair Value Financial Assets: (In thousands) Less than one year $ 2,155,152 $ 2,116,532 $ 1,943,836 $ 1,909,218 One to three years 1,226,472 1,193,951 1,661,372 1,594,099 Total $ 3,381,624 $ 3,310,483 $ 3,605,208 $ 3,503,317 Strategic Investments As of March 31, 2023, and December 31, 2022, the Company held strategic investments with a carrying value of $ 30.7 million and $ 76.9 million, respectively, recorded as other long-term assets in the accompanying condensed consolidated balance sheets. The carrying value of these securities is determined under the measurement alternative on a non-recurring basis and adjusted for observable changes in fair value or impairment. In the three months ended March 31, 2023, the Company remeasured one of its strategic investments that it acquired in 2021 to fair value due to an assessed impairment. The fair value measurement of the strategic investment is categorized under Level 2 in the fair value hierarchy and the primary input used in the fair value measurement was the publicly available stock price of the issuer’s unrestricted security of the same class. The impairment loss of $ 46.2 million is recorded in other income (expenses), net, in the accompanying condensed consolidated statement of operations for the three months ended March 31, 2023. There were no other impairments or adjustments recorded in the three months ended March 31, 2023 and 2022, related to these securities. Financial Liabilities The Company’s financial liabilities that are measured at fair value on a recurring basis consist of foreign currency derivative liabilities and are classified as Level 2 financial instruments in the fair value hierarchy. As of March 31, 2023, and December 31, 2022, the aggregate fair value of these liabilities and the associated unrealized losses were not significant. The Company’s financial liabilities that are not measured at fair value on a recurring basis are its Senior Notes due 2029 (“2029 Notes”) and its Senior Notes due 2031 (“2031 Notes”). As of March 31, 2023, the fair value of the 2029 Notes and 2031 Notes were $ 437.4 million and $ 427.5 million, respectively. As of December 31, 2022, the fair value of the 2029 Notes and 2031 Notes were $ 410.9 million and $ 399.4 million, respectively. 12 Table of Contents 4. Property and Equipment Property and equipment consisted of the following: As of March 31, 2023 As of December 31, 2022 (In thousands) Capitalized internal-use software developments costs $ 269,463 $ 257,983 Data center equipment (1) 101,178 100,207 Leasehold improvements 92,475 91,660 Office equipment 71,344 70,815 Furniture and fixtures 14,913 14,935 Software 14,832 14,675 Total property and equipment 564,205 550,275 Less: accumulated depreciation and amortization (1) ( 310,143 ) ( 286,296 ) Total property and equipment, net $ 254,062 $ 263,979 ____________________________________ ( 1 ) Data center equipment contains $ 72.4 million in assets held under finance leases as of March 31, 2023, and December 31, 2022. Accumulated depreciation and amortization includes $ 45.0 million and $ 41.2 million of accumulated depreciation for assets held under finance leases as of March 31, 2023, and December 31, 2022, respectively. Depreciation and amortization expense was $ 20.1 million and $ 16.6 million in the three months ended March 31, 2023 and 2022, respectively. The Company capitalized $ 14.2 million and $ 14.7 million in internal‑use software development costs in the three months ended March 31, 2023 and 2022, respectively. In the three months ended March 31, 2023, the Company signed an agreement to divest its Internet of Things (“IoT”) assets and liabilities to a third party. The Company recorded a $ 3.8 million loss on net assets held for sale related to this transaction and an additional $ 2.2 million of related costs. The assets and liabilities held for sale are not significant. 5. Impairment In February 2023, the Company announced plans to close additional offices as part of its 2022 strategy to become a remote-first company. The Company regularly assesses recoverability of all impacted right-of-use (“ROU”) assets and the related leasehold improvements and property and equipment for indicators of impairment. In the three months ended March 31, 2023, the Company recorded a $ 21.8 million impairment expense related to its permanent office closures. No other significant impairments were recorded in the three months ended March 31, 2023 and 2022. 6. Restructuring Activities On February 13, 2023, the Company committed to a workforce reduction plan (the “February 2023 Plan”) that eliminated approximately 17 % of the Company’s workforce. In the three months ended March 31, 2023, the Company recorded restructuring charges of $ 121.9 million, which consisted of $ 111.6 million related to employee severances, benefits and facilitation costs and $ 10.3 million related to vesting of stock-based awards of the impacted employees. The execution of the February 2023 Plan was substantially completed as of March 31, 2023. The estimated remaining expenses related to the February 2023 Plan are approximately $ 20.0 million and are expected to be incurred in 2023. The actual expenses may differ materially from the original estimates. 13 Table of Contents The following table summarizes the Company’s restructuring liability related to the February 2023 Plan that is included in accrued expenses and other current liabilities in the accompanying condensed consolidated balance sheet: Workforce Reduction Costs Facilitation Costs Total (In thousands) Balance as of December 31, 2022 $ — $ — $ — Restructuring charges 105,113 6,455 111,568 Cash payments ( 77,873 ) ( 539 ) ( 78,412 ) Balance as of March 31, 2023 $ 27,240 $ 5,916 $ 33,156 The $ 10.3 million vesting of the stock-based awards is recorded in the additional-paid-in capital in the accompanying condensed consolidated statement of stockholders’ equity. The activity and the remaining amounts related to the restructuring plan effected in September 2022 (the “September 2022 Plan”) were insignificant. 7. Reorganization and Segment Reporting In February 2023, concurrent with the announcement of the February 2023 Plan, the Company announced a reorganization of its business into two business units, Twilio Data & Applications and Twilio Communications, to enable the Company to better execute on the key priorities for each side of its business—accelerating growth for Twilio Data & Applications and driving efficiencies for Twilio Communications—while accounting for each business unit’s unique economic, customer and product needs (the “Reorganization”). Effective March 1, 2023, the Company’s Board of Directors appointed a president for each newly created business unit. Both presidents report directly to the Chief Operating Decision Maker (“CODM”), maintain regular contact with the CODM and are directly accountable for specific activities and financial results of their respective business units. The Company’s Chief Executive Officer is its CODM. An operating segment is a component of a public entity that has all of the following characteristics: – it engages in business activities from which it may recognize revenues and incur expenses, – its operating results are regularly reviewed by the public entity’s CODM to make decisions about resources to be allocated to the segment and assess its performance, and – its discrete financial information is available. With the Reorganization, the Company significantly changed the organizational structure of its business, including the way management will operate the business in the future. As such, in February 2023, the Company began making significant realignments to its internal processes and controls to build a financial reporting process within its enterprise reporting system that would enable consistent, comparable and reliable internal reporting of discrete financial information on a newly formed business unit level (the “Realignment”). The Realignment includes efforts, such as remapping of the Company’s functional cost centers to the newly formed business units, developing new allocation methodologies for various costs and reserves, redesigning employee compensation structure, including commissions plans, and other changes - most of which involve judgment and assumptions. Additionally, as of March 31, 2023, the Company was still in process of determining the optimal measure of profitability to be used by the CODM to assess performance of the newly formed business units. The Company expects to complete these efforts during 2023 in order to regularly provide the CODM with discrete financial information on the business unit level, which will also enable the Company to provide segment level disclosures. As this information was not yet available as of March 31, 2023, the Company concluded that it continued to have one operating and reportable segment in the first quarter of 2023. In connection with the expected shift from one operating segment to two operating segments in 2023, the Company will also shift into a multiple reporting unit structure. Once this occurs and the Company is able to allocate goodwill to each reporting unit, the Company will perform an impairment assessment for each newly formed reporting unit, which may result in goodwill and other asset impairments that could be material. 14 Table of Contents 8. Derivatives and Hedging As of March 31, 2023, the Company had outstanding foreign currency forward contracts designated as cash flow hedges with a total sell notional value of $ 286.8 million. The notional value represents the amount that will be sold upon maturity of the forward contract. As of March 31, 2023, these contracts had maturities of up to seventeen months . Gains and losses associated with these foreign currency forward contracts were as follows: Condensed Consolidated Statement of Operations and Statement of Comprehensive Loss Three Months Ended March 31, 2023 2022 (In thousands) Gains (Losses) recognized in OCI Net change in market value of effective foreign currency forward exchange contracts $ 3,335 $ ( 3,852 ) Gains (Losses) recognized in income due to instruments maturing Cost of revenue $ 735 $ ( 1,597 ) The Company is subject to master netting agreements with certain counterparties of the foreign exchange contracts, under which it is permitted to net settle transactions of the same currency with a single net amount payable by one party to the other. It is the Company’s policy to present the derivatives at gross in its condensed consolidated balance sheets. The Company’s foreign currency forward contracts are not subject to any credit contingent features or collateral requirements. The Company manages its exposure to counterparty risk by entering into contracts with a diversified group of major financial institutions and by actively monitoring its outstanding positions. As of March 31, 2023, the Company did not have any offsetting arrangements. 9. Goodwill and Intangible Assets Goodwill The goodwill balance as of March 31, 2023, and December 31, 2022, was as follows: Total (In thousands) Balance as of December 31, 2022 $ 5,284,153 Foreign currency adjustments 235 Balance as of March 31, 2023 $ 5,284,388 15 Table of Contents Intangible assets Intangible assets consisted of the following: As of March 31, 2023 Cost Accumulated Amortization Net Amortizable intangible assets: (In thousands) Developed technology $ 794,567 $ ( 363,631 ) $ 430,936 Customer relationships 538,223 ( 223,148 ) 315,075 Supplier relationships 56,971 ( 22,520 ) 34,451 Trade names 30,372 ( 21,622 ) 8,750 Order backlog 10,000 ( 10,000 ) — Patent 4,028 ( 756 ) 3,272 Total amortizable intangible assets 1,434,161 ( 641,677 ) 792,484 Non-amortizable intangible assets: Telecommunication licenses 4,920 — 4,920 Trademarks and other 295 — 295 Total $ 1,439,376 $ ( 641,677 ) $ 797,699 As of December 31, 2022 Cost Accumulated Amortization Net Amortizable intangible assets: (In thousands) Developed technology $ 795,753 $ ( 335,893 ) $ 459,860 Customer relationships 538,466 ( 204,241 ) 334,225 Supplier relationships 56,922 ( 19,846 ) 37,076 Trade names 30,342 ( 20,106 ) 10,236 Order backlog 10,000 ( 10,000 ) — Patent 4,028 ( 705 ) 3,323 Total amortizable intangible assets 1,435,511 ( 590,791 ) 844,720 Non-amortizable intangible assets: Telecommunication licenses 4,920 — 4,920 Trademarks and other 295 — 295 Total $ 1,440,726 $ ( 590,791 ) $ 849,935 Amortization expense was $ 50.8 million and $ 51.5 million for the three months ended March 31, 2023 and 2022, respectively. 16 Table of Contents Total estimated future amortization expense is as follows: As of March 31, 2023 Year Ended December 31, (In thousands) 2023 $ 152,782 2024 196,111 2025 192,538 2026 120,240 2027 72,221 Thereafter 58,592 Total $ 792,484 10. Accrued Expenses and Other Current Liabilities Accrued expenses and other current liabilities consisted of the following: As of March 31, 2023 As of December 31, 2022 (In thousands) Accrued payroll and related $ 60,215 $ 79,703 Accrued bonus and commission 20,764 35,449 Accrued cost of revenue 153,469 161,455 Sales and other taxes payable 90,901 92,319 ESPP contributions 19,981 8,499 Finance lease liability 10,108 11,871 Restructuring liability 33,469 1,066 Employee sabbatical benefit accrual (1) 15,714 30,683 Accrued other expense 71,250 69,176 Total accrued expenses and other current liabilities $ 475,871 $ 490,221 ____________________________________ ( 1 ) In February 2023, the Company announced that it will sunset its employee sabbatical program as of December 31, 2023. The accrued liability as of March 31, 2023, represents the accumulated benefit balance for the employees who remain eligible under this program through its termination date . 17 Table of Contents 11. Long-Term Debt Long-term debt, net, consisted of the following: As of March 31, 2023 As of December 31, 2022 (In thousands) 2029 Senior Notes Principal $ 500,000 $ 500,000 Unamortized discount ( 4,822 ) ( 5,001 ) Unamortized issuance costs ( 1,085 ) ( 1,126 ) Net carrying amount 494,093 493,873 2031 Senior Notes Principal 500,000 500,000 Unamortized discount ( 5,162 ) ( 5,299 ) Unamortized issuance costs ( 1,162 ) ( 1,192 ) Net carrying amount 493,676 493,509 Total long-term debt, net $ 987,769 $ 987,382 As of March 31, 2023, the Company was in compliance with all of its covenants under the related indentures. 12. Revenue by Geographic Area and Business Units Revenue by geographic area is based on the IP address or the mailing address at the time of registration. The following table sets forth revenue by geographic area: Three Months Ended March 31, 2023 2022 Revenue by geographic area: (In thousands) United States $ 662,092 $ 570,380 International 344,472 304,983 Total $ 1,006,564 $ 875,363 Percentage of revenue by geographic area: United States 66 % 65 % International 34 % 35 % Long-lived assets outside of the United States were $ 52.5 million and $ 54.5 million as of March 31, 2023, and December 31, 2022, respectively. The following table sets forth revenue by business unit: Three Months Ended March 31, 2023 2022 Revenue by business unit: (In thousands) Twilio Communications $ 846,658 $ 742,745 Twilio Data & Applications 120,142 101,086 Other 39,764 31,532 Total $ 1,006,564 $ 875,363 Twilio Communications includes a variety of application programming interfaces (“APIs”) and software solutions to optimize communications between Twilio customers and their end users. This is primarily concentrated within the Messaging, 18 Table of Contents Voice and Email communication channels. Twilio Data & Applications includes Twilio Segment, Twilio Engage, Twilio Flex and Marketing Campaigns. These products enable businesses to achieve more effective customer engagement by providing the tools necessary for customers to build direct, personalized relationships with their end users. Other consists of revenue from enterprise and support plans, professional services, IoT/wireless and other smaller products. As a result of the Realignment described in Note 6, the groups of products included in each of the above categories may be adjusted in future periods. 13. Commitments and Contingencies (a) Lease and Other Commitments The Company has entered into various non-cancelable operating lease agreements for its facilities. In the three months ended March 31, 2023, the Company did not enter into any significant new lease agreements. The Company has non-cancelable contractual commitments with its cloud infrastructure provider, network service providers and other vendors. In the three months ended March 31, 2023, the Company entered into several such agreements with terms up to two years for a total purchase commitment of $ 47.6 million. (b) Legal Matters The City and County of San Francisco (“San Francisco”) has assessed the Company for additional Telephone Users Tax (“TUT”) and Access Line Tax on certain of the Company’s services for the years 2009 through 2018. The assessments totaled $ 38.8 million, including interest and penalties. The Company paid the assessments under protest in the third quarter of 2020. On May 27, 2021, the Company filed a lawsuit against San Francisco in San Francisco Superior Court challenging the assessments. The Company raised numerous defenses to the assessments including that its services are not telecommunications services, application of the taxes to the Company’s services violates the Internet Tax Freedom Act and San Francisco does not have jurisdiction to impose tax on services provided outside of San Francisco. The Company is seeking refunds of the taxes paid, waivers of interest and penalties, cost of suit and reasonable attorneys’ fees, and other legal and equitable relief as the court deems appropriate. The previously set trial date was vacated, and a case management conference is scheduled for June 2023. The Company believes it has strong arguments against the assessments, but litigation is uncertain and there is no assurance that it will prevail in court. Should the Company lose on one or more of its arguments, it could incur additional losses associated with taxes, interest, and penalties that together, in aggregate, could be material. The Company regularly assesses the likelihood of adverse outcomes resulting from tax disputes such as this and examines all open years to determine the necessity and adequacy of any tax reserves. The Company’s tax reserves are further discussed in Note 13(d) of these condensed consolidated financial statements. In addition to the litigation discussed above, from time to time, the Company may be subject to legal actions and claims in the ordinary course of business. The Company has received, and may in the future continue to receive, claims from third parties asserting, among other things, infringement of their intellectual property rights. Future litigation may be necessary to defend the Company, its partners and its customers by determining the scope, enforceability and validity of third‑party proprietary rights, or to establish our proprietary rights. The results of any current or future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources and other factors. Legal fees and other costs related to litigation and other legal proceedings are expensed as incurred and are included in general and administrative expenses in the accompanying condensed consolidated statements of operations. (c) Indemnification Agreements The Company has signed indemnification agreements with all of its board members and executive officers. The agreements indemnify the board members and executive officers from claims and expenses on actions brought against the individuals separately or jointly with the Company for certain indemnifiable events. Indemnifiable events generally mean any event or occurrence related to the fact that the board member or the executive officer was or is acting in his or her capacity as a board member or an executive officer for the Company or was or is acting or representing the interests of the Company. 19 Table of Contents In the ordinary course of business and in connection with its financing and business combinations transactions, the Company enters into contractual arrangements under which it agrees to provide indemnification of varying scope and terms to business partners, customers and other parties with respect to certain matters, including, but not limited to, losses arising out of the breach of such agreements, intellectual property infringement claims made by third parties and other liabilities relating to or arising from the Company’s various products, or its acts or omissions. In these circumstances, payment may be conditional on the other party making a claim pursuant to the procedures specified in the particular contract. Further, the Company’s obligations under these agreements may be limited in terms of time and/or amount, and in some instances, the Company may have recourse against third parties for certain payments. The terms of such obligations may vary. As of March 31, 2023 and December 31, 2022, no amounts were accrued related to any outstanding indemnification agreements. (d) Other Taxes The Company conducts operations in many tax jurisdictions within and outside of the United States. In many of these jurisdictions, non-income-based taxes, such as sales, use, telecommunications and other local taxes are assessed on the Company’s operations. The Company carries reserves for certain of its non-income-based tax exposures in certain jurisdictions when it is both probable that a liability was incurred and the amount of the exposure could be reasonably estimated. These reserves are based on estimates which include several key assumptions including, but not limited to, the taxability of the Company’s services, the jurisdictions in which its management believes it had nexus and the sourcing of revenues to those jurisdictions. The Company continues to remain in discussions with certain jurisdictions regarding its prior sales and other taxes that it may owe. In the event any of these jurisdictions disagree with management’s assumptions and analysis, the assessment of the Company’s tax exposure could differ materially from management’s current estimates. For example, as described in Note 13(b), the Company is currently involved in legal proceedings with the City and County of San Francisco challenging their assessment of the Company’s estimated tax liability for a specific period. The $ 38.8 million assessment of taxes, including interest and penalties, that the Company paid as required in 2020, net of the $ 11.5 million reserve the Company had accrued for the same period, was recorded as a deposit in other assets in the accompanying condensed consolidated balance sheets. As of March 31, 2023, the liabilities recorded for the non-income-based taxes were $ 30.3 million for domestic jurisdictions and $ 21.8 million for jurisdictions outside of the United States. As of December 31, 2022, these liabilities were $ 29.1 million and $ 20.6 million, respectively. 14. Stockholders' Equity Preferred Stock As of March 31, 2023, and December 31, 2022, the Company had authorized 100,000,000 shares of preferred stock, par value $ 0.001 , of which no shares were issued and outstanding. Common Stock As of March 31, 2023, and December 31, 2022, the Company had authorized 1,000,000,000 shares of Class A common stock and 100,000,000 shares of Class B common stock, each with a par value of $ 0.001 per share. As of March 31, 2023, 176,121,918 shares of Class A common stock and 9,617,605 shares of Class B common stock were issued and outstanding. As of December 31, 2022, 176,358,104 shares of Class A common stock and 9,617,605 shares of Class B common stock were issued and outstanding. 20 Table of Contents The Company had reserved shares of common stock for issuance as follows: As of March 31, 2023 As of December 31, 2022 Stock options issued and outstanding 2,007,636 2,277,379 Unvested restricted stock units issued and outstanding 13,487,645 15,414,997 Class A common stock reserved for Twilio.org 508,347 530,449 Stock-based awards available for grant under 2016 Plan 29,755,557 19,851,399 Stock-based awards available for grant under ESPP 9,448,429 7,648,429 Total 55,207,614 45,722,653 Share Repurchase Program In February 2023, the Board of Directors of the Company authorized a share repurchase program pursuant to which the Company may repurchase up to $ 1.0 billion in aggregate value of its outstanding Class A common stock. Repurchases under this program will be made through open market, private transactions or other means, in compliance with applicable federal securities laws, and could include repurchases pursuant to Rule 10b5-1 trading plans. The Company has discretion in determining the conditions under which shares may be repurchased from time to time. The program is set to expire on December 31, 2024. In the three months ended March 31, 2023, the Company repurchased 1.9 million shares of its Class A common stock for an aggregate purchase price of $ 125.0 million, including related costs. As of March 31, 2023, approximately $ 875.0 million of the originally authorized amount remained available for future repurchases. Subsequent to March 31, 2023, the Company has repurchased additional shares of its Class A common stock for an aggregate purchase price of $ 125.0 million. 15. Stock-Based Compensation The Company’s 2016 Stock Option and Incentive Plan (the “2016 Plan”) provides for granting stock options, restricted stock units, restricted stock awards, stock appreciation rights, unrestricted stock awards, performance share awards, dividend equivalent rights and cash-based awards to its employees, directors and consultants. Certain of the Company’s outstanding equity awards were granted under equity incentive plans that are no longer active but continue to govern the outstanding equity awards granted thereunder. The Company also offers an Employee Stock Purchase Plan (“ESPP”) to eligible employees. The ESPP provides for separate six-month offering periods beginning in May and November of each year. As of March 31, 2023, total unrecognized compensation cost related to all outstanding equity awards was as follows: As of March 31, 2023 Unrecognized Compensation Cost Weighted-average remaining period (In thousands) (In years) Unvested stock options $ 31,238 1.7 Unvested restricted stock units and awards 1,427,132 2.8 ESPP 3,019 0.1 Class A shares in escrow subject to future vesting 1,822 1.3 Total $ 1,463,211 21 Table of Contents Stock-Based Compensation Expense The Company recorded total stock-based compensation expense as follows: Three Months Ended March 31, 2023 2022 (In thousands) Cost of revenue $ 5,290 $ 4,521 Research and development 78,093 79,369 Sales and marketing 48,129 47,586 General and administrative 28,954 23,799 Restructuring costs 10,333 — Total $ 170,799 $ 155,275 16. Net Loss Per Share Attributable to Common Stockholders The following table sets forth the calculation of basic and diluted net loss per share attributable to common stockholders during the periods presented: Three Months Ended March 31, 2023 2022 Net loss attributable to common stockholders (in thousands) $ ( 342,139 ) $ ( 221,627 ) Weighted-average shares used to compute net loss per share attributable to common stockholders, basic and diluted 186,403,349 180,898,713 Net loss per share attributable to common stockholders, basic and diluted $ ( 1.84 ) $ ( 1.23 ) The following outstanding shares of common stock equivalents were excluded from the calculation of the diluted net loss per share attributable to common stockholders because their effect would have been anti-dilutive: As of March 31, 2023 2022 Stock options issued and outstanding 2,007,636 2,709,573 Unvested restricted stock units issued and outstanding 13,487,645 7,745,115 Class A common stock reserved for Twilio.org 508,347 596,755 Class A common stock committed under ESPP 742,303 147,947 Class A common stock in escrow 31,503 31,503 Class A common stock in escrow and restricted stock awards subject to future vesting 15,936 76,080 Total 16,793,370 11,306,973 17. Income Taxes The Company computes its provision for income taxes for interim periods by applying an estimated annual effective tax rate to anticipated annual pretax income or loss. The estimated annual effective tax rate is applied to the Company’s year to date income or loss, and is adjusted for discrete items recorded in the period. The primary difference between the Company’s effective tax rate and the federal statutory rate is the full valuation allowance the Company has established on its federal, state and certain foreign net operating losses and credits. The Company recorded an income tax provision of $ 10.5 million for the three months ended March 31, 2023, and an income tax benefit of $ 2.9 million for the three months ended March 31, 2022. The provision for income taxes recorded in the three months ended March 31, 2023, consists primarily of income taxes and withholding taxes, partially offset by an income tax benefit from the release of tax liabilities related to uncertain tax positions for which the statute of limitation had lapsed. The benefit for income taxes recorded in the three months ended March 31, 2022, consists primarily of an income tax benefit from the reversal of U.S. valuation allowance related to acquired 22 Table of Contents intangible assets from business combinations, partially offset by income taxes and withholding taxes in foreign jurisdictions in which the Company conducts business. The Company is subject to taxation in the U.S. and various other state and foreign jurisdictions. Because the Company has net operating loss carryforwards for U.S. federal and state jurisdictions, the statute of limitations is open for all tax years. 18. Related Party Transactions In May 2022, the Company and Syniverse Corporation (“Syniverse”), an equity method investee, entered into a wholesale agreement, pursuant to which Syniverse will process, route and deliver application-to-person messages originating and/or terminating between the Company’s customers and mobile network operators. For the three months ended March 31, 2023, the value of the transactions that occurred between the Company and Syniverse were $ 33.5 million. These transactions were recorded as cost of revenue in the accompanying condensed consolidated statement of operations. 23 Table of Contents Special Note Regarding Forward-Looking Statements This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which statements involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may,” “can,” “will,” “would,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “forecasts,” “potential,” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about: • the impact of macroeconomic uncertainties and significant market volatility in the global economy on our customers, partners, employees and business; • our future financial performance, including expectations regarding our revenue, cost of revenue, gross margin and operating expenses, our ability to generate positive cash flow and ability to achieve and sustain profitability, and the assumptions underlying such expectations; • the benefits and efficiencies we expect to derive from recent workforce reductions and other cost-saving initiatives, including reducing our global office footprint; • our business unit reorganization, including its expected costs and benefits, related accounting determinations and changes to our leadership structure; • our expectations regarding our Data & Applications business, including increased investment and go-to-market focus to capture market share and increase revenue growth; • our expectations regarding our Communications business, including anticipated efficiencies and strategy for streamlining the customer experience, including increased focus on self-service capabilities; • our ability to retain and increase revenue from existing customers and attract new customers, including enterprises and international organizations; • our ability to maintain reliable service levels for our customers; • our anticipated investments in sales and marketing, research and development and additional systems and processes to support our growth; • our ability to compete effectively in an intensely competitive market, including our ability to set optimal prices for our products and adapt and respond effectively to rising costs, rapidly changing technology and evolving customer needs, requirements, and preferences; • potential harm caused by compromises in security, data and infrastructure, including cybersecurity protections; • our ability to comply with modified or new industry standards, laws and regulations applying to our business; • our ability to make progress on our environmental, social and governance (“ESG”) programs, goals and commitments; • our ability to manage changes in network service provider fees that we pay in connection with the delivery of communications on our platform; • investments and costs required to prevent, detect and remediate potential cybersecurity threats, incidents and breaches of ours or our customers’ systems or information; • our ability to optimize our network service provider coverage and connectivity; • our ability to work closely with email inbox service providers to maintain deliverability rates; 24 Table of Contents • the impact and expected results from changes in our relationships with our larger customers; • our ability to form and expand partnerships with technology partners and consulting partners; • anticipated technology trends, such as the use of and demand for cloud communications and customer engagement tools; • our ability to successfully enter into new markets and manage our international expansion; • the sufficiency of our cash and cash equivalents to meet our liquidity needs; • our expectations regarding our share repurchase program; • our ability to maintain, protect and enhance our intellectual property; • our ability to successfully defend litigation brought against us; • our ability to service the interest on our 3.625% senior notes due 2029 (“2029 Notes”) and on our 3.875% notes due 2031 (“2031 Notes,” and together with the 2029 Notes, the “Notes”), and repay such Notes; • our customers’ and other platform users’ violation of our policies or other misuse of our platform; and • our ability to successfully integrate and realize the benefits of our past or future strategic acquisitions, divestitures or investments, and our expectations regarding the impact of the pending divestiture of our Internet of Things (“IoT”) business. We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q. You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, results of operations and financial condition. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described below in Part II, Item 1A, “Risk Factors,” and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. We cannot assure you that the results, events and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements. The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make. 25 Table of Contents PART I - FINANCIAL INFORMATION