What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-11-09 compared with 2023-08-09 · 169 added, 155 removed, 624 unchanged (34% of the section changed)

1 unchanged sentence

Condensed Consolidated Balance Sheets

As of June 30, As of December 31,

As of September 30, As of December 31,

(In thousands)

4 unchanged sentences

Prepaid expenses and other current assets 326,968 281,510

Assets held for sale 65,667 —

Total current assets 4,741,578 4,984,086

12 unchanged sentences

Operating lease liability, current 51,926 54,222

Liabilities held for sale 25,075 —

Total current liabilities 726,117 808,158

15 unchanged sentences

Condensed Consolidated Statements of Operations

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2023 2022 2023 2022

16 unchanged sentences

Total other expenses, net ( 31,057 ) ( 21,750 ) ( 122,261 ) ( 36,666 )

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

(Provision for) benefit from income taxes ( 744 ) ( 2,594 ) ( 11,211 ) 264

Loss before provision for income taxes ( 139,960 ) ( 478,747 ) ( 637,075 ) ( 1,023,407 )

Provision for income taxes ( 1,747 ) ( 3,580 ) ( 12,958 ) ( 3,316 )

Net loss attributable to common stockholders $ ( 141,707 ) $ ( 482,327 ) $ ( 650,033 ) $ ( 1,026,723 )

3 unchanged sentences

Condensed Consolidated Statements of Comprehensive Loss

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2023 2022 2023 2022

6 unchanged sentences

forward exchange contracts ( 8,626 ) ( 19,196 ) ( 7,458 ) ( 34,154 )

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

Share of other comprehensive (loss) income from equity method

investment ( 2,764 ) ( 4,243 ) 17,030 ( 4,243 )

Total other comprehensive income (loss) 7,549 ( 47,782 ) 68,435 ( 147,042 )

3 unchanged sentences

Class A Common Stock

Class B Additional Paid-In Capital Accumulated Other Comprehensive Loss Accumulated Deficit Total Stockholders' Equity

Class B Additional Paid-In Capital Accumulated Other Comprehensive (Loss) Income

Accumulated Deficit Total Stockholders' Equity

Shares Amount Shares Amount

30 unchanged sentences

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

Condensed Consolidated Statements of Stockholders’ Equity

Class A Common Stock

Class B Additional Paid-In Capital Accumulated Other Comprehensive (Loss) Income Accumulated Deficit Total Stockholders' Equity

Shares Amount Shares Amount

(In thousands, except share amounts)

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

Net loss — — — — — — ( 141,707 ) ( 141,707 )

Exercises of vested stock options 100,000 — — — 871 — — 871

Vesting of restricted stock units 1,669,596 2 — — ( 2 ) — — —

Value of equity awards withheld for tax liability ( 417 ) — — — ( 27 ) — — ( 27 )

Shares of Class A common stock issued and donated to charity

22,102 — — — 1,339 — — 1,339

Unrealized gain on marketable securities

— — — — — 13,921 — 13,921

Repurchases of shares of Class A common stock including related costs ( 899,799 ) ( 1 ) — — — — ( 54,962 ) ( 54,963 )

Foreign currency translation — — — — — 5,018 — 5,018

Net change in market value of effective foreign currency forward exchange contracts — — — — — ( 8,626 ) — ( 8,626 )

Share of other comprehensive loss from equity method investment — — — — — ( 2,764 ) — ( 2,764 )

Stock-based compensation — — — — 189,293 — — 189,293

Stock-based compensation - restructuring — — — — 467 — — 467

Balance as of September 30, 2023 182,066,098 $ 182 — $ — $ 14,610,887 $ ( 52,726 ) $ ( 4,578,962 ) $ 9,979,381

See accompanying notes to condensed consolidated financial statements.

29 unchanged sentences

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

Condensed Consolidated Statements of Stockholders’ Equity

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

Net loss — — — — — — ( 482,327 ) ( 482,327 )

Exercises of vested stock options 38,368 — 35,187 — 2,056 — — 2,056

Vesting of restricted stock units 1,115,248 1 — — ( 1 ) — — —

Value of equity awards withheld for tax liability ( 125 ) — — — ( 11 ) — — ( 11 )

Conversion of shares of Class B common stock into shares of Class A common stock 35,187 — ( 35,187 ) — — — — —

Shares of Class A common stock issued and donated to charity

22,102 — — — 1,911 — — 1,911

Unrealized loss on marketable securities — — — — — ( 22,151 ) — ( 22,151 )

Foreign currency translation — — — — — ( 2,192 ) — ( 2,192 )

Net change in market value of effective foreign currency forward exchange contracts — — — — — ( 19,196 ) — ( 19,196 )

Share of other comprehensive loss from equity method investment — — — — — ( 4,243 ) — ( 4,243 )

Stock-based compensation — — — — 199,772 — — 199,772

Stock-based compensation - restructuring — — — — 15,274 — — 15,274

Balance as of September 30, 2022 174,482,722 $ 172 9,817,605 $ 12 $ 13,842,301 $ ( 165,183 ) $ ( 3,146,414 ) $ 10,530,888

See accompanying notes to condensed consolidated financial statements.

Condensed Consolidated Statements of Cash Flows

Six Months Ended

Nine Months Ended

September 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

1 unchanged sentence

Net loss $ ( 650,033 ) $ ( 1,026,723 )

Adjustments to reconcile net loss to net cash used in operating activities:

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Depreciation and amortization 218,968 207,880

4 unchanged sentences

Amortization of deferred commissions 54,428 41,322

Unrealized loss on equity securities 9,750 —

Allowance for doubtful accounts 41,454 21,786

Value of shares of Class A common stock issued and donated to charity 3,985 8,516

Share of losses from equity method investment 93,838 13,376

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

Loss on net assets divested 32,277 —

Impairment of strategic investments 46,154 —

9 unchanged sentences

Other long-term liabilities ( 2,436 ) ( 7,330 )

Net cash used in operating activities ( 14,220 ) ( 80,141 )

Net cash provided by (used in) operating activities 192,207 ( 195,913 )

CASH FLOWS FROM INVESTING ACTIVITIES:

Acquisitions, net of cash acquired and other related payments ( 170 ) ( 31,697 )

Acquisitions, net of cash acquired and payments related to prior period acquisitions ( 5,770 ) ( 32,853 )

Divestitures, net of cash divested 38,194 —

Purchases of marketable securities and other investments ( 1,391,975 ) ( 1,650,759 )

11 unchanged sentences

Effect of exchange rate changes on cash, cash equivalents and restricted cash 108 146

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 21,839 ( 844,668 )

6 unchanged sentences

Restricted cash in other current assets — 4,357

Restricted cash in other long-term assets — 12

Total cash, cash equivalents and restricted cash $ 677,917 $ 637,163

See accompanying notes to condensed consolidated financial statements.

Tabl e of Contents

Notes to Condensed Consolidated Financial Statements

30 unchanged sentences

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

Tabl e of Contents

(d) Remaining Performance Obligations

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.

Revenue allocated to remaining performance obligations for contracts with durations of more than one year was $ 128.8 million as of September 30, 2023, of which 68 % is expected to be recognized over the next 12 months and 96 % is expected to be recognized over the next 24 months.

(e) Deferred Revenue and Customer Deposits

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.

As of September 30, 2023, and December 31, 2022, the Company recorded $ 146.0 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 September 30, 2023 and 2022, the Company recognized $ 16.7 million and $ 17.5 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 nine months ended September 30, 2023 and 2022, the Company recognized $ 115.3 million and $ 112.2 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 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.

Total net capitalized commission costs as of September 30, 2023, and December 31, 2022, were $ 210.1 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 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.

As of September 30, 2023, and December 31, 2022, the allowance for doubtful accounts was $ 40.3 million and $ 27.0 million, respectively, and is recorded in accounts receivable, net, in the accompanying condensed consolidated balance sheets.

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

As of September 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.

The Company determines its operating and reportable segments in accordance with Accounting Standards Codification 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 had one operating and reportable segment.

As described in Note 8, in the second quarter of 2023, the Company determined that it operated in and, as such, started reporting 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.

2 unchanged sentences

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

Tabl e of Contents

(i) Recently Issued Accounting Guidance, Not yet Adopted

9 unchanged sentences

12 Months Fair Value Hierarchy as of

June 30, 2023 Aggregate

September 30, 2023 Aggregate

Level 1 Level 2 Level 3

3 unchanged sentences

Money market funds $ 418,098 $ — $ — $ — $ 418,098 $ — $ — $ 418,098

Commercial paper 23,311 — — — — 23,311 — 23,311

Total included in cash

6 unchanged sentences

Corporate debt securities and commercial paper 2,577,183 134 ( 9,810 ) ( 31,002 ) 16,690 2,519,815 — 2,536,505

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

Total debt securities 3,222,056 154 ( 10,870 ) ( 37,898 ) 653,627 2,519,815 — 3,173,442

Equity securities 6,050 — — — 6,050 — — 6,050

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

Total marketable

securities 3,228,106 154 ( 10,870 ) ( 37,898 ) 659,677 2,519,815 — 3,179,492

Total financial assets $ 3,669,515 $ 154 $ ( 10,870 ) $ ( 37,898 ) $ 1,077,775 $ 2,543,126 $ — $ 3,620,901

20 unchanged sentences

Total financial assets $ 3,854,067 $ 307 $ ( 13,504 ) $ ( 88,694 ) $ 664,021 $ 3,088,155 $ — $ 3,752,176

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 the corporate debt securities with unrealized losses was $ 2.3 billion as of September 30, 2023, of which $ 1.2 billion were in an unrealized loss position for more than 12 months and $ 1.1 billion 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.

Unrealized losses related to other investments as of September 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.

1 unchanged sentence

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.

As of September 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 September 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 $ 19.3 million and $ 53.2 million in the three and nine months ended September 30, 2023, respectively, and $ 16.3 million and $ 47.5 million in the three and nine months ended September 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 debt securities:

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

As of September 30, As of December 31,

Cost Aggregate

9 unchanged sentences

Strategic Investments

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.

As of September 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 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.

In the nine months ended September 30, 2023, the Company remeasured to fair value one of its strategic investments acquired in 2021 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.

The impairment loss of $ 46.2 million is recorded in other expenses, net, in the accompanying condensed consolidated statement of operations for the nine months ended September 30, 2023.

There were no other impairments or adjustments recorded in the three and nine months ended September 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 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

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

As of September 30, 2023, the fair value of the 2029 Notes and 2031 Notes were $ 419.0 million and $ 407.5 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.

1 unchanged sentence

Property and equipment consisted of the following:

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

As of September 30, As of December 31,

(In thousands)

11 unchanged sentences

____________________________________

( 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.

Tabl e of Contents

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.

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

Accumulated depreciation and amortization includes $ 52.4 million and $ 41.2 million of accumulated depreciation for assets held under finance leases as of September 30, 2023 and December 31, 2022, respectively.

Depreciation and amortization expense was $ 23.2 million and $ 18.4 million in the three months ended September 30, 2023 and 2022, respectively, and $ 67.5 million and $ 52.5 million in the nine months ended September 30, 2023 and 2022, respectively.

The Company capitalized $ 14.7 million and $ 19.3 million in internal‑use software development costs in the three months ended September 30, 2023 and 2022, respectively, and $ 43.7 million and $ 51.2 million in the nine months ended September 30, 2023 and 2022, respectively.

In July 2023, the Company completed the sale of its ValueFirst business, which operated an enterprise communications platform in India, for a total cash sales price of $ 45.5 million, or $ 38.2 million in proceeds, net of cash divested.

As part of the transaction, the Company divested $ 17.4 million of tangible net assets, $ 17.3 million of intangible assets and $ 34.6 million of goodwill.

The sale resulted in a loss of $ 28.8 million, which was recorded in the second quarter of 2023 when the assets and the liabilities were classified as held for sale.

The loss was recorded within general and administrative expenses in the accompanying condensed consolidated statement of operations for the nine months ended September 30, 2023.

The Company also recorded an additional $ 3.3 million of divestiture-related 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 loss on divestiture and related expenses were not significant.

In February 2023, the Company announced plans to close additional offices during 2023 as part of its previously announced 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 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.

In the three and nine months ended September 30, 2023, the Company recorded a $ 3.2 million and $ 34.3 million impairment, respectively, related to its permanently closed offices.

In the three and nine months ended September 30, 2022, the Company recorded a $ 97.7 million impairment in each period related to its permanently closed offices.

No other significant impairments were recorded in the three and nine months ended September 30, 2023 or 2022.

Restructuring Activities

1 unchanged sentence

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 restructuring charges recorded in the three months ended September 30, 2023 were not significant.

The cumulated restructuring charges recorded in the nine months ended September 30, 2023, were $ 140.3 million, which consisted of $ 129.2 million related to employee severance, benefits and facilitation costs, and $ 11.1 million related to vesting of employee stock-based compensation awards.

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:

Workforce Reduction Costs Facilitation Costs Total

3 unchanged sentences

Cash payments ( 107,997 ) ( 9,529 ) ( 117,526 )

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.

Balance as of September 30, 2023 $ 11,565 $ 94 $ 11,659

The remaining restructuring charges related to the restructuring plan effected in September 2022 (the “September 2022 Plan”) that were incurred in 2023, and the remaining liabilities related to the September 2022 Plan as of September 30, 2023 and December 31, 2022, were not significant.

In the three and nine months ended September 30, 2022, the Company recorded $ 72.5 million of restructuring charges in its accompanying condensed consolidated statements of operations related to the September 2022 Plan.

Reorganization and Segment Reporting

11 unchanged sentences

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

Tabl e of Contents

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.

Presented below is the discrete financial information by reportable segment for the three and nine months ended September 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.

2 unchanged sentences

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,

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

16 unchanged sentences

Loss before provision for income taxes $ ( 139,960 ) $ ( 478,747 ) $ ( 637,075 ) $ ( 1,023,407 )

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.

Depreciation and amortization expenses included in non-GAAP gross profit for the Communications reportable segment was $ 13.0 million and $ 7.7 million in the three months ended September 30, 2023 and 2022, respectively, and $ 36.1 million and $ 21.4 million in the nine months ended September 30, 2023 and 2022, respectively.

Depreciation and amortization expenses included in non-GAAP gross profit for the Data & Applications reportable segment was $ 3.2 million and $ 1.9 million in the three months ended September 30, 2023 and 2022, respectively, and $ 9.8 million and $ 4.7 million in the nine months ended September 30, 2023 and 2022, respectively.

Derivatives and Hedging

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.

As of September 30, 2023, the Company had outstanding foreign currency forward contracts designated as cash flow hedges with a total sell notional value of $ 237.7 million.

The notional value represents the amount that will be sold upon maturity of the forward contract.

As of June 30, 2023, these contracts had maturities of up to seventeen months .

As of September 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 June 30, Six Months Ended June 30,

Condensed Consolidated Statement of Operations and Statement of Comprehensive Loss Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

(In thousands)

(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 )

Tabl e of Contents

Losses recognized in OCI Net change in market value of effective foreign currency forward exchange contracts $ ( 8,626 ) $ ( 19,196 ) $ ( 7,458 ) $ ( 34,154 )

(Losses) gains recognized in income due to instruments maturing Cost of revenue $ ( 325 ) $ ( 16,357 ) $ 2,571 $ ( 25,520 )

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.

2 unchanged sentences

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

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

Goodwill and Intangible Assets

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

As described in Note 8, 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.

9 unchanged sentences

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:

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

Communications Twilio

6 unchanged sentences

Foreign currency adjustments 251 — 251

Goodwill divested or included in disposal group (2)

Goodwill divested (2)

( 41,164 ) — ( 41,164 )

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

Balance as of September 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.

(2) Represents goodwill related to the divestitures of IoT and ValueFirst.

See Note 5 for further details.

Tabl e of Contents

Intangible assets

Intangible assets consisted of the following:

As of June 30, 2023

As of September 30, 2023

Cost Accumulated Amortization Net

27 unchanged sentences

Total $ 1,440,726 $ ( 590,791 ) $ 849,935

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.

Amortization expense was $ 48.9 million and $ 51.7 million for the three months ended September 30, 2023 and 2022, respectively, and $ 150.0 million and $ 155.4 million for the nine months ended September 30, 2023 and 2022, respectively.

Total estimated future amortization expense is as follows:

As of June 30, 2023

As of September 30, 2023

Year Ended December 31, (In thousands)

2023 $ 97,845

2023 (remaining three months) $ 48,922

Thereafter 57,899

Total $ 673,506

Tabl e of Contents

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following:

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

As of September 30, As of December 31,

(In thousands)

3 unchanged sentences

Sales and other taxes payable 76,975 92,319

ESPP contributions 11,400 8,499

Finance lease liability 8,546 11,871

1 unchanged sentence

Employee sabbatical benefit accrual (1)

12,558 30,683

Accrued other expense 65,118 69,176

1 unchanged sentence

____________________________________

( 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 June 30, 2023, represents the accumulated benefit balance for the employees who remain eligible under this program through its termination date.

( 1 ) In February 2023, the Company announced that it will sunset its employee sabbatical program.

The accrued liability as of September 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 June 30, 2023 As of December 31, 2022

As of September 30, As of December 31,

(In thousands)

10 unchanged sentences

Total long-term debt, net $ 988,555 $ 987,382

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

Tabl e of Contents

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

Revenue by Geographic Area

2 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

7 unchanged sentences

International 33 % 34 % 34 % 34 %

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.

Long-lived assets outside of the United States were $ 43.3 million and $ 54.5 million as of September 30, 2023, and December 31, 2022, respectively.

Commitments and Contingencies

1 unchanged sentence

The Company has entered into various non-cancelable operating lease agreements for its facilities.

In the three and six months ended June 30, 2023, the Company did not enter into any significant new lease agreements.

In the three and nine months ended September 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 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.

In the three and nine months ended September 30, 2023, the Company entered into several such agreements with terms up to four years for a total purchase commitment of $ 24.3 million and $ 91.2 million, respectively.

(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.

In 2020, the City and County of San Francisco (“San Francisco”) 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.

3 unchanged sentences

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 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.

The previously set trial date remains vacated, and the parties have finalized a settlement agreement that was approved by San Francisco’s Board of Supervisors on November 7, 2023 and is currently before the Mayor for approval.

In the event the settlement is not formally approved and further litigation is necessary, the Company believes it has strong arguments against the assessments;

however, litigation is uncertain and there is no assurance that the Company 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.

1 unchanged sentence

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

Tabl e of Contents

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.

11 unchanged sentences

The terms of such obligations may vary.

As of June 30, 2023, and December 31, 2022, no amounts were accrued related to any outstanding indemnification agreements.

As of September 30, 2023, and December 31, 2022, no amounts were accrued related to any outstanding indemnification agreements.

(d) Other Taxes

7 unchanged sentences

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 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 September 30, 2023, the liabilities recorded for the non-income-based taxes were $ 32.2 million for domestic jurisdictions and $ 19.2 million for jurisdictions outside of the United States.

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

1 unchanged sentence

Preferred Stock

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.

Tabl e of Contents

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 September 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.

As of September 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 September 30, 2023, 182,066,098 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.

3 unchanged sentences

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

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

As of September 30, As of December 31,

Stock options issued and outstanding 1,778,852 2,277,379

5 unchanged sentences

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.

In February 2023, the Board of Directors of the Company authorized the repurchase of up to $ 1.0 billion in aggregate value of its outstanding Class A common stock through a share repurchase program.

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.

1 unchanged sentence

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 .

In the three and nine months ended September 30, 2023, the Company repurchased 0.9 million and 9.2 million shares of its Class A common stock, respectively, for an aggregate purchase price of $ 56.0 million and $ 551.0 million, respectively.

As of September 30, 2023, approximately $ 449.0 million of the originally authorized amount remained available for future repurchases.

Stock-Based Compensation

3 unchanged sentences

The ESPP provides for separate six-month offering periods beginning in May and November of each year.

Tabl e of Contents

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

As of June 30, 2023

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

As of September 30, 2023

Unrecognized Compensation Cost Weighted-average remaining period

8 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

9 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

4 unchanged sentences

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 June 30,

As of September 30,

Stock options issued and outstanding 1,778,852 2,488,072

5 unchanged sentences

Total 22,892,127 18,290,790

Tabl e of Contents

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.

1 unchanged sentence

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 $ 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.

The Company recorded an income tax provision of $ 1.7 million and $ 13.0 million for the three and nine months ended September 30, 2023, respectively, and an income tax provision of $ 3.6 million and $ 3.3 million for the three and nine months ended September 30, 2022, respectively.

The provision for income taxes recorded in the three and nine months ended September 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 and nine months ended September 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.

5 unchanged sentences

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.

Tabl e of Contents

For the three and nine months ended September 30, 2023, the value of the transactions that occurred between the Company and Syniverse were $ 40.1 million and $ 110.2 million, respectively.

The value of the transactions that occurred between the Company and Syniverse were $ 32.1 million for the three months ended September 30, 2022, and $ 54.1 million for the period from the investment closing date in May 2022 through September 30, 2022.

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

Special Note Regarding Forward-Looking Statements

4 unchanged sentences

• 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 on GAAP and non-GAAP bases, and the assumptions underlying such expectations;

• our future financial performance, including expectations regarding our revenue, cost of revenue, gross profit, 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;

13 unchanged sentences

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

Tabl e of Contents

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

9 unchanged sentences

• 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 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.

9 unchanged sentences

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

Tabl e of Contents

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