What changed in this filing

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Item 1. Financial Statements

2023-08-09 compared with 2023-05-10 · 280 added, 159 removed, 499 unchanged (47% of the section changed)

1 unchanged sentence

Condensed Consolidated Balance Sheets

As of March 31, As of December 31,

As of June 30, As of December 31,

(In thousands)

4 unchanged sentences

Prepaid expenses and other current assets 315,059 281,510

Assets held for sale 65,667 —

Total current assets 4,664,500 4,984,086

12 unchanged sentences

Operating lease liability, current 53,089 54,222

Liabilities held for sale 25,075 —

Total current liabilities 759,803 808,158

15 unchanged sentences

Condensed Consolidated Statements of Operations

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

2023 2022 2023 2022

(In thousands, except share and per share amounts)

22 unchanged sentences

Condensed Consolidated Statements of Comprehensive Loss

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

2023 2022 2023 2022

(In thousands)

3 unchanged sentences

Foreign currency translation 86 ( 2,289 ) 569 ( 2,454 )

Net change in market value of effective foreign currency forward exchange contracts 3,335 ( 3,852 )

Net change in market value of effective foreign currency

forward exchange contracts ( 2,167 ) ( 11,106 ) 1,168 ( 14,958 )

Share of other comprehensive income from equity method investment 5,146 — 19,794 —

22 unchanged sentences

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

Net loss — — — — — — ( 166,187 ) ( 166,187 )

Exercises of vested stock options 33,438 — 30,783 — 1,477 — — 1,477

Vesting of restricted stock units 1,144,112 1 — — ( 1 ) — — —

Value of equity awards withheld for tax liability ( 872 ) — — — ( 53 ) — — ( 53 )

Conversion of shares of Class B common stock into shares of Class A common stock 9,648,388 12 ( 9,648,388 ) ( 12 ) — — — —

Shares issued under ESPP 579,857 — — — 23,337 — — 23,337

Shares of Class A common stock issued and donated to charity 22,102 — — — 1,047 — — 1,047

Unrealized gain on marketable securities — — — — — 8,605 — 8,605

Repurchases of shares of Class A common stock including related costs ( 6,374,327 ) ( 6 ) — — — — ( 373,141 ) ( 373,147 )

Foreign currency translation — — — — — 86 — 86

Net change in market value of effective foreign currency forward exchange contracts — — — — — ( 2,167 ) — ( 2,167 )

Share of other comprehensive income from equity method investment — — — — — 5,146 — 5,146

Stock-based compensation — — — — 159,253 — — 159,253

Stock-based compensation - restructuring — — — — 296 — — 296

Balance as of June 30, 2023 181,174,616 $ 181 — $ — $ 14,418,946 $ ( 60,275 ) $ ( 4,382,293 ) $ 9,976,559

See accompanying notes to condensed consolidated financial statements.

10 unchanged sentences

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 of Class A common stock issued and donated to charity 22,102 — — — 4,232 — — 4,232

Shares returned from escrow ( 152,239 ) — — — ( 387 ) — — ( 387 )

4 unchanged sentences

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

Net loss — — — — — — ( 322,769 ) ( 322,769 )

Exercises of vested stock options 98,111 — 77,732 — 5,649 — — 5,649

Vesting of restricted stock units 1,049,640 1 — — ( 1 ) — — —

Value of equity awards withheld for tax liability ( 38 ) — — — ( 4 ) — — ( 4 )

Conversion of shares of Class B common stock into shares of Class A common stock 80,732 — ( 80,732 ) — — — — —

Shares issued under ESPP 258,221 1 — — 24,317 — — 24,318

Shares of Class A common stock issued and donated to charity 22,102 — — — 2,373 — — 2,373

Unrealized loss on marketable securities — — — — — ( 19,022 ) — ( 19,022 )

Foreign currency translation — — — — — ( 2,289 ) — ( 2,289 )

Net change in market value of effective foreign currency forward exchange contracts — — — — — ( 11,106 ) — ( 11,106 )

Stock-based compensation — — — — 247,412 — — 247,412

Balance as of June 30, 2022 173,271,942 $ 171 9,817,605 $ 12 $ 13,623,300 $ ( 117,401 ) $ ( 2,664,087 ) $ 10,841,995

See accompanying notes to condensed consolidated financial statements.

Condensed Consolidated Statements of Cash Flows

Three Months Ended

Six Months Ended

CASH FLOWS FROM OPERATING ACTIVITIES:

8 unchanged sentences

Amortization of deferred commissions 36,067 26,076

Value of shares of Class A common stock issued and donated to charity 1,599 4,232

Allowance for doubtful accounts 21,864 8,742

Share of losses from equity method investment 62,780 —

Loss on net assets divested and held for sale 32,277 —

Impairment of strategic investments 46,154 —

16 unchanged sentences

Purchases of long-lived and intangible assets ( 8,254 ) ( 10,779 )

Net cash provided by investing activities 202,465 150,967

Net cash provided by (used in) investing activities 509,777 ( 635,629 )

CASH FLOWS FROM FINANCING ACTIVITIES:

3 unchanged sentences

Repurchases of shares of Class A common stock and related costs ( 485,121 ) —

Proceeds from exercises of stock options 3,264 11,727

Proceeds from exercises of stock options and shares of Class A common stock issued under ESPP 28,078 41,694

Net cash (used in) provided by financing activities ( 469,356 ) 34,402

Effect of exchange rate changes on cash, cash equivalents and restricted cash 108 313

NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH ( 16,900 ) 137,526

NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH, including cash classified as held for sale 26,309 ( 681,055 )

CASH, CASH EQUIVALENTS AND RESTRICTED CASH CLASSIFIED AS HELD FOR SALE ( 7,306 ) —

NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH 19,003 ( 681,055 )

CASH, CASH EQUIVALENTS AND RESTRICTED CASH—Beginning of period 656,078 1,481,831

5 unchanged sentences

Restricted cash in other current assets — 2,151

Restricted cash in other long-term assets 438 365

Total cash, cash equivalents and restricted cash $ 675,081 $ 800,776

See accompanying notes to condensed consolidated financial statements.

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Notes to Condensed Consolidated Financial Statements

16 unchanged sentences

The condensed consolidated financial statements include the Company and its wholly owned subsidiaries.

All significant intercompany balances and transactions have been eliminated.

All intercompany balances and transactions have been eliminated.

3 unchanged sentences

recoverability of long-lived and intangible assets;

allocation of goodwill to reporting units;

impairment assessments of goodwill and indefinite-lived intangible assets;

5 unchanged sentences

Management periodically evaluates such estimates and they are adjusted prospectively based upon such periodic evaluation.

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(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.

Revenue allocated to remaining performance obligations for contracts with durations of more than one year was $ 123.4 million as of June 30, 2023, of which 68 % is expected to be recognized over the next 12 months and 95 % is expected to be recognized over the next 24 months.

(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.

As of June 30, 2023, and December 31, 2022, the Company recorded $ 139.4 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 June 30, 2023 and 2022, the Company recognized $ 27.2 million and $ 29.9 million of revenue, respectively, that was included in the deferred revenue and customer deposits balances as of the end of the previous year.

During the six months ended June 30, 2023 and 2022, the Company recognized $ 98.6 million and $ 94.7 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.

Total net capitalized commission costs as of June 30, 2023, and December 31, 2022, were $ 219.5 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

7 unchanged sentences

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.

In the three and six months ended June 30, 2023 and 2022, no customer organization accounted for more than 10% of the Company’s total revenue.

As of June 30, 2023, and December 31, 2022, no customer organization represented more than 10% of the Company’s gross accounts receivable.

(h) Significant Accounting Policies

Segment Information

The Company determines its operating and reportable segments in accordance with ASC 280 Segment Reporting (“ASC 280”), which requires financial information to be reported based on how the chief operating decision maker (“CODM”), who is the Company's Chief Executive Officer, reviews and manages the business, and establishes criteria for aggregating operating segments into reportable segments.

Historically, the Company concluded that it had a single operating and reportable segment.

As described in detail in Note 8, as of June 30, 2023, the Company concluded that it operated in and will report its results in two reportable segments.

In connection with changes in the segment reporting structure described in Note 8, in the second quarter of 2023, the Company concluded that it had multiple reporting units.

Accordingly, the Company reassigned assets and liabilities to the reporting units based on which reporting units’ operations the assets and liabilities were employed in or were related to.

The Company reassigned goodwill to each reporting unit using a relative fair value allocation approach.

There have been no other changes to the Company’s significant accounting policies as described in its Annual Report.

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(i) Recently Issued Accounting Guidance, Not yet Adopted

3 unchanged sentences

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.

The Company is evaluating the impact of the adoption of this guidance on its consolidated financial statements.

Fair Value Measurements

3 unchanged sentences

12 Months Fair Value Hierarchy as of

March 31, 2023 Aggregate

June 30, 2023 Aggregate

Level 1 Level 2 Level 3

6 unchanged sentences

Marketable securities:

Debt securities:

Treasury securities 356,379 1 ( 536 ) ( 5,875 ) 349,969 — — 349,969

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

government securities

166,324 — ( 96 ) ( 4,376 ) 161,852 — — 161,852

Corporate debt securities and commercial paper

2,536,521 56 ( 10,949 ) ( 40,762 ) — 2,484,866 — 2,484,866

Total debt securities 3,059,224 57 ( 11,581 ) ( 51,013 ) 511,821 2,484,866 — 2,996,687

Equity securities 12,200 — — — 12,200 — — 12,200

Total marketable securities 3,071,424 57 ( 11,581 ) ( 51,013 ) 524,021 2,484,866 — 3,008,887

Total financial assets $ 3,325,489 $ 57 $ ( 11,581 ) $ ( 51,013 ) $ 778,086 $ 2,484,866 $ — $ 3,262,952

20 unchanged sentences

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.

Tabl e of Contents

Debt Securities

The aggregate fair value of the corporate debt securities with unrealized losses was $ 2.3 billion as of June 30, 2023, of which $ 1.6 billion were in an unrealized loss position for more than 12 months and $ 777.5 million were in an unrealized loss position for less than 12 months.

The aggregate 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 June 30, 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 debt 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.

Interest earned on marketable securities was $ 17.2 million and $ 15.6 million in the three months ended March 31, 2023 and 2022, respectively.

Because the Company views its debt securities as available to support current operations, it has classified all available for sale securities as short-term.

As of June 30, 2023, and December 31, 2022, for all debt 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 June 30, 2023 and December 31, 2022, the Company anticipates that it will recover the entire amortized cost basis of such debt securities before maturity.

Interest earned on debt securities was $ 16.7 million and $ 33.9 million in the three and six months ended June 30, 2023, respectively, and $ 15.6 million and $ 31.2 million in the three and six months ended June 30, 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

The following table summarizes the contractual maturities of debt securities:

As of June 30, 2023 As of December 31, 2022

Cost Aggregate

6 unchanged sentences

Total $ 3,059,224 $ 2,996,687 $ 3,605,208 $ 3,503,317

Equity Securities

The equity securities consist of shares of a publicly traded company that were received as consideration in a divestiture transaction described further in Note 5.

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.

As of June 30, 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.

In the six months ended June 30, 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 classified as 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 expenses, net, in the accompanying condensed consolidated statement of operations for the six months ended June 30, 2023.

There were no other impairments or adjustments recorded in the three and six months ended June 30, 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.

As of June 30, 2023 and December 31, 2022, the aggregate fair value of these liabilities and the associated unrealized losses were not significant.

Tabl e of Contents

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 June 30, 2023, the fair value of the 2029 Notes and 2031 Notes were $ 433.3 million and $ 424.1 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.

1 unchanged sentence

Property and equipment consisted of the following:

As of March 31, 2023 As of December 31, 2022

As of June 30, 2023 As of December 31, 2022

(In thousands)

11 unchanged sentences

____________________________________

( 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.

( 1 ) Data center equipment contains $ 72.4 million in assets held under finance leases as of June 30, 2023 and December 31, 2022.

Accumulated depreciation and amortization includes $ 48.7 million and $ 41.2 million of accumulated depreciation for assets held under finance leases as of June 30, 2023 and December 31, 2022, respectively.

Depreciation and amortization expense was $ 24.3 million and $ 17.4 million in the three months ended June 30, 2023 and 2022, respectively, and $ 44.3 million and $ 34.0 million in the six months ended June 30, 2023 and 2022, respectively.

The Company capitalized $ 14.8 million and $ 17.2 million in internal‑use software development costs in the three months ended June 30, 2023 and 2022, respectively, and $ 29.0 million and $ 31.9 million in the six months ended June 30, 2023 and 2022, respectively.

Net Assets Held for Sale and Divested

The Company classifies assets and liabilities as held for sale (the “disposal group”) when management commits to a plan to sell the disposal group and meets all required criteria in ASC 360 Property, Plant, and Equipment .

Assets held for sale are measured at the lower of their carrying amount or fair value less costs to sell.

Any loss resulting from this measurement is recognized in the period the held for sale criteria are met.

Gains are not recognized until realized on the date of sale.

Long-lived assets classified as held for sale are not depreciated or amortized.

In June 2023, the Company entered into an agreement to sell its ValueFirst business, which operates an enterprise communications platform in India.

The sale was subsequently completed in July 2023, and the Company received $ 45.5 million in cash.

This divestiture allowed allocation of Company resources to other strategic priorities with a greater impact on the Company’s business.

The divestiture did not represent a strategic shift in operations that would have a major effect on the Company's business and financial results, and therefore, is not presented as a discontinued operation.

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The following table presents the major classes of assets and liabilities of the disposal group classified as held for sale as of June 30, 2023, in the accompanying condensed consolidated balance sheet:

As of June 30,

Assets held for sale:

(In thousands)

Total tangible assets $ 42,546

Intangible assets, net 17,294

Goodwill 34,604

Valuation allowance ( 28,777 )

Total assets held for sale $ 65,667

Total liabilities held for sale $ 25,075

The measurement of assets held for sale to fair value less costs to sell resulted in a loss of $ 28.8 million, which is recorded within general and administrative expenses in the accompanying condensed consolidated statements of operations for the three and six months ended June 30, 2023.

The Company recorded a valuation allowance to reduce the carrying amount of the disposal group to its fair value less costs to sell in the accompanying condensed consolidated balance sheet.

The Company also recorded an additional $ 3.1 million of divestiture expenses in the same period.

Separately, in the second quarter of 2023, the Company sold its Internet of Things (“IoT”) disposal group for stock consideration of $ 15.8 million.

The loss on divestiture and related expenses recorded in the three and six months ended June 30, 2023 were not significant.

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.

In the three and six months ended June 30, 2023, the Company recorded a $ 9.3 million and $ 31.1 million impairment, respectively, related to its permanently closed offices.

No other significant impairments were recorded in the three or six months ended June 30, 2023 or 2022.

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.

In February 2023, the Company announced a workforce reduction plan (the “February 2023 Plan”) that eliminated approximately 17 % of the Company’s workforce.

The execution of the February 2023 Plan was substantially complete in the first quarter of 2023.

In the three months ended June 30, 2023, the Company recorded additional restructuring charges of $ 14.9 million, which consisted of $ 14.6 million related to employee severance, benefits and facilitation costs and $ 0.3 million relating to vesting of stock-based awards of the impacted employees.

In the six months ended June 30, 2023, the cumulative restructuring charges of $ 136.8 million consisted of $ 126.2 million related to employee severance, benefits and facilitation costs, and $ 10.6 million related to vesting of employee stock based compensation awards.

The $ 10.6 million expense related to vesting of the employee stock-based compensation awards is recorded in additional-paid-in-capital in the accompanying condensed consolidated statement of stockholders’ equity.

The estimated remaining expenses related to the February 2023 Plan are not expected to be significant.

Tabl e 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:

4 unchanged sentences

Cash payments ( 99,888 ) ( 8,613 ) ( 108,501 )

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.

Balance as of June 30, 2023 $ 17,480 $ 234 $ 17,714

The activity and the remaining amounts related to the restructuring plan effected in September 2022 (the “September 2022 Plan”) were not significant.

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.

In February 2023, the Company announced a reorganization of its business into two business units, Twilio Communications and Twilio Data & Applications (the “Reorganization”).

With the Reorganization, the Company changed the organizational structure of its business, including the way management operates the business.

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.

In the second quarter of 2023, the Company began regularly providing the CODM with discrete financial information for each business unit, as presented below, which required a reevaluation of the Company’s operating and reportable segments in accordance with ASC 280.

The Company concluded that as of June 30, 2023, it had two operating and reportable segments:

Twilio Communications and Twilio Data & Applications.

Twilio Communications :

The Communications segment consists of a variety of application programming interfaces (“APIs”) and software solutions to optimize communications between Twilio customers and their end users.

The key products from which the segment derives its revenue are Messaging, Voice and Email.

Twilio Data & Applications :

The Data & Applications segment consists of software products that enable businesses to achieve more effective customer engagement by providing the tools necessary for customers to build direct, personalized relationships with their end users.

The key products from which the segment derives its revenue are Segment, Engage, Flex and Marketing Campaigns.

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Presented below is the discrete financial information by reportable segment for the three and six months ended June 30, 2023 and 2022, that is regularly reviewed by the CODM for performance assessment and resource allocation decisions.

Asset information is not presented below since it is not reviewed by the CODM on a segment by segment basis.

Revenue and costs of revenue are generally directly attributable to each segment.

Certain costs of revenue are allocated based on methodologies that best reflect the patterns of consumption of these costs.

Prior period comparative financial information presented below was restated to conform to the current period presentation.

Three Months Ended

June 30, Six Months Ended June 30,

2023 2022 2023 2022

(In thousands)

Communications $ 913,135 $ 832,305 $ 1,796,365 $ 1,604,158

Data & Applications 124,626 111,049 247,960 214,559

Total 1,037,761 943,354 2,044,325 1,818,717

Non-GAAP gross profit:

Communications 440,071 387,294 865,211 759,448

Data & Applications 101,810 93,469 202,806 181,543

Total $ 541,881 $ 480,763 $ 1,068,017 $ 940,991

Reconciliation of non-GAAP gross profit to gross profit:

Total non-GAAP gross profit $ 541,881 $ 480,763 $ 1,068,017 $ 940,991

Stock-based compensation (6,334) (3,996) (11,624) ( 8,517 )

Amortization of acquired intangibles (29,669) (31,236) (59,630) ( 61,872 )

Payroll taxes related to stock-based compensation (123) (242) (318) ( 242 )

Gross profit 505,755 445,289 996,445 870,360

Operating expenses ( 647,582 ) ( 757,225 ) ( 1,402,356 ) ( 1,400,104 )

Other expenses, net ( 23,616 ) ( 8,239 ) ( 91,204 ) ( 14,916 )

Loss before provision for income taxes $ ( 165,443 ) $ ( 320,175 ) $ ( 497,115 ) $ ( 544,660 )

Depreciation and amortization expenses included in non-GAAP gross profit for the Communications reportable segment was $ 13.9 million and $ 7.0 million in the three months ended June 30, 2023 and 2022, respectively, and $ 23.1 million and $ 13.8 million in the six months ended June 30, 2023 and 2022, respectively.

Depreciation and amortization expenses included in non-GAAP gross profit for the Data & Applications reportable segment was $ 3.5 million and $ 1.5 million in the three months ended June 30, 2023 and 2022, respectively, and $ 6.6 million and $ 2.8 million in the six months ended June 30, 2023 and 2022, respectively.

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.

As of June 30, 2023, the Company had outstanding foreign currency forward contracts designated as cash flow hedges with a total sell notional value of $ 261.0 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 .

As of June 30, 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,

Condensed Consolidated Statement of Operations and Statement of Comprehensive Loss Three Months Ended June 30, Six Months Ended June 30,

2023 2022 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 )

(Losses) gains recognized in OCI Net change in market value of effective foreign currency forward exchange contracts $ ( 2,167 ) $ ( 11,106 ) $ 1,168 $ ( 14,958 )

Gains (losses) recognized in income due to instruments maturing Cost of revenue $ 2,161 $ ( 7,566 ) $ 2,895 $ ( 9,163 )

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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.

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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.

As of June 30, 2023, the Company did not have any offsetting arrangements.

Goodwill and Intangible Assets

The goodwill balance as of March 31, 2023, and December 31, 2022, was as follows:

As described in Note 8, beginning in the second quarter of 2023, the Company concluded it had two operating and reportable segments.

In connection with the shift from one operating and reportable segment to two operating and reportable segments, the Company reevaluated its reporting unit structure and determined that it had multiple reporting units.

As such, during the second quarter of 2023, the Company reallocated goodwill to its newly formed reporting units.

The Company estimates the fair value of its reporting units using a weighting of fair values derived from an income and a market approach.

Estimating the fair value by these methods involves the use of a number of key assumptions including forecasted revenues and related growth rates, forecasted operating cash flows, the discount rate, and the selection of relevant market multiples of comparable publicly-traded companies with similar characteristics to the reporting unit.

Under the income approach, the Company determined the fair value of a reporting unit based on the present value of estimated future cash flows.

Cash flow projections are based on the Company’s best estimates of forecasted economic and market conditions over the period including growth rates and expected changes in operating cash flows.

The discount rate used is based on a weighted average cost of capital adjusted for the relevant risk associated with the characteristics of the business and the projected cash flows.

The market approach estimates fair value based on market multiples of current and forward 12-month revenue or adjusted EBITDA, as applicable, derived from comparable publicly traded companies with similar operating and investment characteristics as the reporting unit.

While these assumptions reflect management’s best estimates of future performance at the time, these estimates are inherently complex and uncertain and the Company’s actual results could differ materially from these estimates.

In connection with the goodwill reallocation, the Company assessed goodwill for impairment immediately before and immediately after the change in the reporting unit structure and related goodwill reallocation.

Both assessments concluded that the fair value of the reporting units were above their respective carrying amounts.

The following table presents the goodwill allocated to the Company’s reportable segments as of June 30, 2023, and December 31, 2022, and the changes during the period:

Communications Twilio

Data & Applications Total

(In thousands)

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Foreign currency adjustments 26

Balance as of March 31, 2023 $ 5,284,388

Reallocation to segments in the second quarter of 2023 (1)

4,321,130 963,049 —

Foreign currency adjustments 251 — 251

Goodwill divested or included in disposal group (2)

( 41,164 ) — ( 41,164 )

Balance as of June 30, 2023 $ 4,280,217 $ 963,049 $ 5,243,266

____________________________________

( 1 ) Represents reallocation of goodwill as a result of changes in segment structure in the second quarter of 2023.

(2) Represents goodwill related to the assets held for sale of the ValueFirst business and the divestiture of IoT.

See Note 5 for further details.

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Intangible assets

Intangible assets consisted of the following:

As of March 31, 2023

As of June 30, 2023

Cost Accumulated Amortization Net

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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.

Amortization expense was $ 50.2 million and $ 52.2 million for the three months ended June 30, 2023 and 2022, respectively, and $ 101.1 million and $ 103.7 million for the six months ended June 30, 2023 and 2022, respectively.

Total estimated future amortization expense is as follows:

As of March 31, 2023

As of June 30, 2023

Year Ended December 31, (In thousands)

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Total $ 722,429

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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

As of June 30, 2023 As of December 31, 2022

(In thousands)

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Sales and other taxes payable 78,533 92,319

ESPP contributions 19,981 8,499

Finance lease liability 9,541 11,871

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( 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 .

The accrued liability as of June 30, 2023, represents the accumulated benefit balance for the employees who remain eligible under this program through its termination date.

Long-Term Debt

Long-term debt, net, consisted of the following:

As of March 31, 2023 As of December 31, 2022

As of June 30, 2023 As of December 31, 2022

(In thousands)

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Total long-term debt, net $ 988,160 $ 987,382

As of March 31, 2023, the Company was in compliance with all of its covenants under the related indentures.

Revenue by Geographic Area and Business Units

As of June 30, 2023, the Company was in compliance with all of its covenants under the related indentures.

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Revenue by Geographic Area

Revenue by geographic area is based on the IP address or the mailing address at the time of registration.

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Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

Revenue by geographic area:

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International 33 % 35 % 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

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,

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.

Long-lived assets outside of the United States were $ 45.0 million and $ 54.5 million as of June 30, 2023, and December 31, 2022, respectively.

Commitments and Contingencies

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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.

In the three and six months ended June 30, 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.

In the three and six months ended June 30, 2023, the Company entered into several such agreements with terms up to four years for a total purchase commitment of $ 19.3 million and $ 66.9 million, respectively.

(b) Legal Matters

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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 previously set trial date remains vacated, and the parties expect to file an update with the Court on the status of the case in October 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.

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The Company’s tax reserves are further discussed in Note 14(d) of these condensed consolidated financial statements.

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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.

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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.

As of June 30, 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.

The Company conducts operations in multiple 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.

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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 June 30, 2023, the liabilities recorded for the non-income-based taxes were $ 31.8 million for domestic jurisdictions and $ 20.5 million for jurisdictions outside of the United States.

As of December 31, 2022, these liabilities were $ 29.1 million and $ 20.6 million, respectively.

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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.

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 June 30, 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.

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As of June 30, 2023, the Company had authorized 1,000,000,000 shares of Class A common stock and 3,170,181 shares of Class B common stock, each with a par value of $ 0.001 per share.

As of 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 June 30, 2023, 181,174,616 shares of Class A common stock and no 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.

On June 28, 2023, each outstanding share of the Company’s Class B common stock automatically converted (the “Conversion”) into one share of the Company’s Class A common stock pursuant to the terms of the Company’s amended and restated certificate of incorporation.

In addition, upon the Conversion, outstanding stock options that were exercisable for shares of Class B common stock prior to the Conversion became exercisable for shares of Class A common stock.

The Company filed a Certificate of Retirement with the Secretary of State of the State of Delaware effecting the retirement of all of the shares of its Class B common stock that were issued but not outstanding following the Conversion.

The Company had reserved shares of common stock for issuance as follows:

As of March 31, 2023 As of December 31, 2022

As of June 30, 2023 As of December 31, 2022

Stock options issued and outstanding 1,907,102 2,277,379

Unvested restricted stock units issued and outstanding 22,092,462 15,414,997

Class A common stock reserved for Twilio.org 508,347 530,449

Shares of Class A common stock reserved for Twilio.org 486,245 530,449

Stock-based awards available for grant under 2016 Plan 20,268,133 19,851,399

Stock-based awards available for grant under ESPP 9,448,429 7,648,429

Shares of Class A common stock reserved for issuance pursuant to ESPP 8,868,572 7,648,429

Total 53,622,514 45,722,653

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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.

Repurchases under this program can 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.

The program expires on December 31, 2024.

In the three and six months ended June 30, 2023, the Company repurchased 6.4 million and 8.3 million shares of its Class A common stock, respectively, for an aggregate purchase price of $ 370.0 million and $ 495.0 million, respectively.

As of June 30, 2023, approximately $ 505.0 million of the originally authorized amount remained available for future repurchases .

Stock-Based Compensation

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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.

In addition, pursuant to the Company’s 2016 Employee Stock Purchase Plan (“ESPP”), eligible employees may purchase shares of the Company’s Class A common stock at a discount of 15 % through payroll deductions of their eligible compensation.

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

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As of June 30, 2023, total unrecognized compensation cost related to all outstanding equity awards was as follows:

As of June 30, 2023

Unrecognized Compensation Cost Weighted-average remaining period

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ESPP 4,181 0.4

Class A shares in escrow subject to future vesting 1,822 1.3

Shares of Class A common stock in escrow subject to future vesting 1,469 1

Total $ 1,931,561

2 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

(In thousands)

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Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

Net loss attributable to common stockholders (in thousands) $ ( 166,187 ) $ ( 322,769 ) $ ( 508,326 ) $ ( 544,396 )

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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,

As of June 30,

Stock options issued and outstanding 1,907,102 2,654,461

Unvested restricted stock units issued and outstanding 22,092,462 14,496,487

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

Shares of Class A common stock reserved for Twilio.org 486,245 574,653

Shares of Class A common stock committed under ESPP 396,717 226,082

Shares of Class A common stock in escrow 31,503 31,503

Shares of Class A common stock in escrow and restricted stock awards subject to future vesting 15,936 76,080

Total 24,929,965 18,059,266

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.

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The Company computes its provision for income taxes for interim periods using an estimated annual effective tax rate based on 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

intangible assets from business combinations, partially offset by income taxes and withholding taxes in foreign jurisdictions in which the Company conducts business.

The Company recorded an income tax provision of $ 0.7 million and $ 11.2 million for the three and six months ended June 30, 2023, respectively, and an income tax provision of $ 2.6 million and an income tax benefit of $ 0.3 million for the three and six months ended June 30, 2022, respectively.

The provision for income taxes recorded in the three and six months ended June 30, 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 provision for income taxes recorded in the three months ended June 30, 2022 and the benefit for income taxes recorded in the six months ended June 30, 2022, consists primarily of income taxes and withholding taxes in foreign jurisdictions in which the Company conducts business, partially offset by an income tax benefit from the reversal of U.S.

deferred tax liabilities related to the acquired intangibles from business combinations.

The Company is subject to taxation in the U.S.

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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.

In May 2022, the Company and Syniverse Corporation (“Syniverse”), an equity method investee, entered into a wholesale agreement, pursuant to which Syniverse would process, route and deliver application-to-person messages originating and/or terminating between the Company’s customers and mobile network operators.

For the three and six months ended June 30, 2023, the value of the transactions that occurred between the Company and Syniverse were $ 37.3 million and $ 70.3 million, respectively.

The value of the transactions that occurred between the Company and Syniverse were $ 22.0 million for the period from the investment closing date in May 2022 through June 30, 2022.

These transactions were recorded as cost of revenue in the accompanying condensed consolidated statement of operations.

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Special Note Regarding Forward-Looking Statements

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• 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 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 on GAAP and non-GAAP bases, 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 and stock-based compensation expense;

• our business unit reorganization, including its expected costs and benefits, related accounting determinations and the shift in our segment reporting structure, and changes to our leadership structure;

• our expectations regarding our Data & Applications business, including new product releases, increased investment and go-to-market focus to capture market share, and increased 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;

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• our ability to work closely with email inbox service providers to maintain deliverability rates;

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• the impact and expected results from changes in our relationships with our larger customers;

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• anticipated technology trends, such as the use of and demand for cloud communications and customer engagement tools;

• our ability to leverage generative artificial intelligence (“AI”) and machine learning (“ML”) and develop and deliver products that incorporate generative AI and ML;

• our ability to successfully enter into new markets and manage our international expansion;

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• our customers’ and other platform users’ violation of our policies or other misuse of our platform;

• 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.

• 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 recent divestitures of our Internet of Things and ValueFirst businesses.

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.

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Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.

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PART I - FINANCIAL INFORMATION

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-Q

Item 1. Financial Statements