What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-11-09 compared with 2023-08-09 · 194 added, 186 removed, 395 unchanged (49% of the section changed)

11 unchanged sentences

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

In the three months ended June 30, 2023 and 2022, our revenue was $1.0 billion and $943.4 million, respectively, and our net loss was $166.2 million and $322.8 million, respectively.

In the three months ended June 30, 2023 and 2022, our 10 largest Active Customer Accounts generated an aggregate of 11% and 12% of our total revenue, respectively.

In the three months ended September 30, 2023 and 2022, our revenue was $1.0 billion and $983.0 million, respectively, and our net loss was $141.7 million and $482.3 million, respectively.

In the three months ended September 30, 2023 and 2022, our 10 largest Active Customer Accounts generated an aggregate of 10% and 13% of our total revenue, respectively.

Recent Developments

2 unchanged sentences

Twilio Communications (“Communications”) and Twilio Data & Applications (“Data & Applications”).

In connection with the Reorganization, we appointed Khozema Shipchandler as President, Twilio Communications, and Elena Donio as President, Twilio Data & Applications, effective March 1, 2023.

We also appointed Aidan Viggiano as our Chief Financial Officer, effective March 1, 2023.

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

6 unchanged sentences

Concurrently, we were also in the process of determining the measure of profitability to be used by management to assess performance of its newly formed business units.

Tabl e of Contents

In the second quarter of 2023, we completed certain of the realignment efforts and began presenting non-GAAP gross profit by business unit to the Chief Operating Decision Maker (“CODM”) to be used to assess performance and make resource allocation decisions.

1 unchanged sentence

This shift in the way management started operating the business required us to reevaluate our operating segment structure under the applicable accounting guidance.

We determined that as of June 30, 2023, we had two operating and reportable segments:

We determined that as of the end of the second quarter we had two operating and reportable segments:

Twilio Communications and Twilio Data & Applications.

5 unchanged sentences

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

The shift in our segment structure also resulted in a shift in our reporting unit structure, under the applicable accounting guidance, which required us to assess our goodwill for impairment on a reporting unit level.

We concluded that our goodwill was not impaired and, further, that none of our reporting units was at risk of failing the goodwill impairment test.

Refer to Note 8 and Note 10 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional information on segment reporting and goodwill.

Refer to Note 8 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional information on segment reporting.

Share Repurchase Program.

2 unchanged sentences

We have discretion in determining the conditions under which shares may be repurchased from time to time.

In the six months ended June 30, 2023, we repurchased $495.0 million in aggregate value, or 8.3 million shares, of our Class A common stock under this program.

Approximately $505.0 million of the originally authorized amount remains available for future repurchases.

In the nine months ended September 30, 2023, we repurchased $551.0 million in aggregate value, or 9.2 million shares, of our Class A common stock under this program.

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

Workforce Reduction Plan.

1 unchanged sentence

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

In the three and six months ended June 30, 2023, we incurred $14.9 million and $136.8 million in restructuring expenses, respectively, related to employee severance, benefits, vesting of equity awards and facilitation costs.

In the three months ended September 30, 2023, the restructuring expenses were not significant.

In the nine months ended September 30, 2023, the cumulative restructuring expenses incurred under the February 2023 Plan were $140.3 million and were related to employee severance, benefits, vesting of equity awards and facilitation costs.

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

5 unchanged sentences

The discontinuation of this program and the reduction in force under our February 2023 Plan resulted in a $12.0 million cumulative one-time decrease to our accrued sabbatical liability in the first quarter of 2023.

As of June 30, 2023, the remaining liability of $12.6 million related to the accumulated benefits for employees who remain eligible under this program until its expiration on December 31, 2023.

As of September 30, 2023, the remaining liability of $8.3 million relates to the accumulated benefits for employees who remain eligible under this program until its expiration.

As of December 31, 2022, the accrued sabbatical liability was $30.7 million.

1 unchanged sentence

In 2022, we announced our decision to become a remote-first company allowing our employees the flexibility to work remotely on a permanent basis.

As part of our new operating strategy, we permanently closed several of our offices in 2022 and the first half of 2023.

As part of our new operating strategy, we permanently closed several of our offices in 2022 and 2023.

These office closures resulted in an impairment of several long-lived assets, including our operating lease assets, leasehold improvements and property and equipment.

In the three and six months ended June 30, 2023, we recorded a total impairment loss of $9.3 million and $31.1 million, respectively.

In the three and nine months ended September 30, 2023, we recorded a total impairment loss of $3.2 million and $34.3 million, respectively, related to our permanent office closures.

Impairment of Strategic Investment.

In the first quarter of 2023, we recorded a $46.2 million impairment loss associated with one of our investments from 2021 to reduce its carrying amount to fair value.

Tabl e of Contents

Divestiture of IoT Assets.

In the second quarter of 2023, we completed the sale of our Internet of Things (“IoT”) net assets for a 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 the second quarter of 2023, we completed the sale of our IoT net assets for a stock consideration of $15.8 million.

The loss on divestiture and related expenses recorded in the nine months ended September 30, 2023 were not significant.

Divestiture of ValueFirst Business .

In the second quarter of 2023, we entered into an agreement to sell our ValueFirst business, and we subsequently sold it in July 2023 for $45.5 million in cash.

In the third quarter of 2023, we completed the sale of our ValueFirst business for a total cash sales price of $45.5 million, or $38.2 million in proceeds, net of cash divested.

ValueFirst was our enterprise communications platform in India.

As of June 30, 2023, we recorded a $28.8 million loss on ValueFirst net assets held for sale and an additional $3.1 million in related expenses.

In the nine months ended September 30, 2023, we recorded a $28.8 million loss on divestiture and an additional $3.3 million in related expenses.

For additional details refer to Note 5 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Macroeconomic and Geopolitical Factors.

Our results of operations may be significantly affected by several macroeconomic and geopolitical factors, such as changes in global economic conditions, customer demand and spending, inflation, labor market constraints, uncertainty regarding the impacts of fluctuations in foreign exchange rates, world events, existing and new domestic and foreign laws and regulations, as well as those factors outlined in Part II, Item 1A, “Risk Factors.”

Our results of operations may be significantly affected by several macroeconomic and geopolitical factors, such as changes in global economic conditions, customer demand and spending, inflation, labor market constraints, uncertainty regarding the impacts of fluctuations in foreign exchange rates, world events, and existing and new domestic and foreign laws and regulations, as well as those factors outlined in Part II, Item 1A, “Risk Factors.”

Key Business Metrics

We review a number of operational and financial metrics, including Active Customer Accounts and Dollar-Based Net Expansion Rate, to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans and make strategic decisions.

The following table summarizes our year-over-year revenue growth and Dollar-Based Net Expansion Rate for the three months ended June 30, 2023 and 2022, and the number of Active Customer Accounts as of June 30, 2023 and 2022.

The following table summarizes our year-over-year revenue growth and Dollar-Based Net Expansion Rate for the three months ended September 30, 2023 and 2022, and the number of Active Customer Accounts as of September 30, 2023 and 2022.

Three Months Ended

September 30,

Active Customer Accounts (as of end date of period) 306,000 280,000

9 unchanged sentences

We believe that the number of Active Customer Accounts, on an aggregate basis and at the segment level, is an important indicator of the growth of our business, the market acceptance of our platform and future revenue trends.

We believe that use of our platform by customers at or above the $5 per month threshold is a stronger indicator of potential future engagement than trial usage of our platform or usage at levels below $5 per month.

The number of Active Customer Accounts is rounded down to the nearest thousand .

In the three months ended June 30, 2023 and 2022, revenue from Active Customer Accounts represented over 99% of total revenue in each period.

In the three months ended September 30, 2023 and 2022, revenue from Active Customer Accounts represented over 99% of total revenue in each period.

Dollar‑Based Net Expansion Rate

Our Dollar-Based Net Expansion Rate compares the total revenue from all Active Customer Accounts in a quarter to the same quarter in the prior year.

To calculate the Dollar-Based Net Expansion Rate, we first identify the cohort of Active Customer Accounts that were Active Customer Accounts in the same quarter of the prior year.

Our Dollar-Based Net Expansion Rate compares the total revenue from all Active Customer Accounts and customer accounts from Zipwhip, Inc.

in a quarter to the same quarter in the prior year.

To calculate the Dollar-Based Net Expansion Rate, we first identify the cohort of Active Customer Accounts and customer accounts from Zipwhip, Inc.

that were Active Customer Accounts or customer accounts from Zipwhip, Inc.

in the same quarter of the prior year.

The Dollar-Based Net Expansion Rate is the quotient obtained by dividing the revenue generated from that cohort in a quarter, by the revenue generated from that same cohort in the corresponding quarter in the prior year.

When we calculate Dollar-Based Net Expansion

Tabl e of Contents

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

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

Revenue from acquisitions does not impact the Dollar-Based Net Expansion Rate calculation until the quarter following the one-year anniversary of the applicable acquisition, unless the acquisition closing date is the first day of a quarter.

As a result, for the quarter ended June 30, 2023, our Dollar-Based Net Expansion Rate excludes the contributions from acquisitions made after April 1, 2022.

As a result, for the quarter ended September 30, 2023, our Dollar-Based Net Expansion Rate excludes the contributions from acquisitions made after July 1, 2022.

Revenue from divestitures does not impact the Dollar-Based Net Expansion Rate calculation beginning in the quarter the divestiture closed, unless the divestiture closing date is the last day of a quarter.

As a result, for the quarter ended June 30, 2023, our Dollar-Based Net Expansion Rate excludes the contributions from divestitures made after June 30, 2022.

Communications Dollar-Based Net Expansion Rate and Data & Applications Dollar-Based Net Expansion Rate are calculated using the same methodology, but using only revenue attributable to the respective segment and Active Customer Accounts for that respective segment.

As a result, for the quarter ended September 30, 2023, our Dollar-Based Net Expansion Rate excludes the contributions from divestitures made after September 30, 2022.

for that respective segment.

Revenue from customer accounts from Zipwhip, Inc., which we acquired on July 14, 2021, has been included in our Dollar-Based Net Expansion Rate beginning in the quarter ended December 31, 2022.

We believe that measuring Dollar-Based Net Expansion Rate, on an aggregate basis and at the segment level, provides a more meaningful indication of the performance of our efforts to increase revenue from existing customers.

6 unchanged sentences

Key Components of Statements of Operations

We derive the majority of our revenue from usage‑based fees earned from our Communications products when customers access our cloud-based platform.

Our usage‑based products primarily include offerings, such as Messaging, Voice, Twilio Verify and others.

Some examples of the usage‑based fees that we charge include fees related to the number of text messages sent or received using Messaging, minutes of call duration activity for Voice and the number of authentications for Twilio Verify.

In the three months ended June 30, 2023 and 2022, we generated 71% and 73% of our revenue, respectively, from usage‑based fees.

We earn monthly subscription-based fees from various of our Data & Applications products and solutions on our platform, such as our customer data platform Segment, our customer engagement solution Engage, our cloud contact center Flex;

as well as certain of our Communications fee‑based products, such as Email.

When our usage-based Communications products are embedded into our Data & Applications and other products, we charge for them separately on a usage basis.

Revenue is generally directly attributable to each segment.

Customers gain access to our products and solutions either through an e-commerce self service sign-up format which requires an upfront prepayment via credit card that is drawn down as they use our products;

or for our larger customers, including enterprise customers, a negotiated contract is established for at least 12 months that contain minimum revenue commitments and which may contain more favorable pricing.

We recognize revenue from our products on either a usage basis or a subscription basis, depending on the nature of the product and the type of customer contract.

Our reportable segments contain products that may follow either revenue recognition model.

The majority of the revenue in our Communications segment is derived from usage‑based fees.

These fees are earned when customers access our cloud-based platform.

Some examples of our usage-based products are Messaging and Voice.

For our Messaging products, we primarily charge fees related to the number of text messages sent or received.

For our Voice products, we primarily charge fees for minutes of call duration.

In the three months ended September 30, 2023 and 2022, we generated 71% and 73% of our revenue, respectively, from usage‑based fees.

We earn monthly subscription-based fees from various products in both Communications and Data & Applications segments.

Some examples of our primarily subscription-based products are Segment, Engage, Flex and Email.

For our subscription-based products we recognize revenue evenly over the contract term.

When our usage-based Communications products are embedded into our subscription-based products, such as into Flex, we charge for those separately on a usage basis and record the revenue into the reportable segment in which the usage-based product resides.

Customers gain access to our products and solutions either through an e-commerce self-service sign-up format which requires an upfront prepayment via credit card that is drawn down as they use our products or for our larger customers, including enterprise customers, through a negotiated contract established for at least 12 months that typically contains minimum revenue commitments and may contain more favorable pricing.

Customers on such contracts are typically either invoiced monthly in arrears for products used or invoiced in advance at the start of the term.

4 unchanged sentences

We define international revenue as revenue from customers with IP addresses or mailing addresses at the time of registration outside of the United States.

Tabl e of Contents

Cost of Revenue and Gross Margin

26 unchanged sentences

Sales and marketing expenses consist primarily of personnel costs, including commissions and bonuses to our sales employees.

Sales and marketing expenses also include expenditures related to advertising, marketing, our brand awareness activities, costs related to our SIGNAL customer and developer conferences, credit card processing fees, professional services fees, depreciation, amortization of acquired intangible assets and an allocation of our general overhead expenses.

Sales and marketing expenses also include expenditures related to advertising, marketing, brand awareness activities, costs related to our SIGNAL customer and developer conferences, credit card processing fees, professional services fees, depreciation, amortization of acquired intangible assets and an allocation of our general overhead expenses.

We focus our sales and marketing efforts on generating awareness of our company, platform and products, creating sales leads and establishing and promoting our brand, both domestically and internationally.

2 unchanged sentences

General and administrative expenses also include costs related to business acquisitions and dispositions, legal and other professional services fees, certain taxes, depreciation and amortization, charitable contributions and an allocation of our general overhead expenses.

We expect that we will incur costs associated with supporting the growth of our business and to meet the increased compliance requirements associated with our operations.

We expect that we will incur costs associated with supporting the growth of our business.

We may also incur higher than usual losses related to deterioration of quality of certain financial assets caused by macroeconomic conditions.

2 unchanged sentences

Restructuring costs also include stock-based compensation expense related to vesting of stock-based awards of the impacted employees.

Tabl e of Contents

Impairment of Long-Lived Assets.

Impairment of long-lived assets consists primarily of impairment charges allocated to the carrying amount of certain operating right-of-use assets and the associated leasehold improvements and property and equipment when the carrying amounts exceed their respective fair values.

Other Income (Expenses), Net

Our other income (expenses), net consist primarily of our share of losses from our equity method investment;

Other Expenses, Net

Our other expenses, net consist primarily of our share of losses from our equity method investment;

impairment charges and gains and losses related to our strategic investments and marketable securities;

and debt-related costs.

(Provision for) Benefit from Income Taxes

Our (provision for) benefit from income taxes consists primarily of income taxes and withholding taxes in foreign jurisdictions in which the Company conducts business.

Provision for Income Taxes

Our provision for income taxes consists primarily of income taxes and withholding taxes in foreign jurisdictions in which the Company conducts business.

The primary difference between our effective tax rate and the federal statutory rate relates to the valuation allowance the Company established on the federal, state and certain foreign net operating losses and credits.

8 unchanged sentences

Three Months Ended

September 30,

Reconciliation:

8 unchanged sentences

Non-GAAP gross margin 53 % 51 %

Tabl e of Contents

Non‑GAAP Operating Expenses

1 unchanged sentence

Three Months Ended

September 30,

Reconciliation:

5 unchanged sentences

Acquisition and divestiture related expenses (183) (121)

Loss on net assets held for sale (28,453) —

Payroll taxes related to stock-based compensation (3,156) (4,210)

6 unchanged sentences

Three Months Ended

September 30,

Reconciliation:

6 unchanged sentences

Acquisition and divestiture related expenses 183 121

Loss on net assets held for sale 28,453 —

Payroll taxes related to stock-based compensation 3,337 4,425

4 unchanged sentences

Non-GAAP operating margin 13 % (4) %

Tabl e of Contents

Results of Operations

The following table sets forth our results of operations for the periods presented.

We have included results of operations for acquisitions closed after January 1, 2022, from the closing date of each such acquisition.

We have included results of operations for divestitures closed after January 1, 2022, through the closing date of each such divestiture.

The period-to-period comparison of our historical results are not indicative of the results that may be expected in the future.

Three Months Ended Six Months Ended

June 30, June 30,

The period-to-period comparisons of our historical results are not indicative of the results that may be expected in the future.

Three Months Ended Nine Months Ended

September 30, September 30,

2023 2022 2023 2022

22 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)

6 unchanged sentences

(1) Includes stock-based compensation expense as follows:

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

Total $ 185,474 $ 208,895 $ 509,367 $ 606,260

Tabl e of Contents

____________________________________

(2) Includes amortization of acquired intangibles as follows:

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

The following table sets forth our results of operations for each of the periods presented as a percentage of our total revenue:

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 (3) (2) (4) (1)

Loss before (provision for) benefit from income taxes (16) (34) (24) (30)

(Provision for) benefit from income taxes * * (1) *

Loss before provision for income taxes

(14) (49) (21) (37)

Provision for income taxes

Net loss attributable to common stockholders (14 %) (49 %) (21 %) (37 %)

2 unchanged sentences

** Columns may not add up to 100% due to rounding.

Tabl e of Contents

Comparison of the Three Months Ended June 30, 2023 and 2022

Comparison of the Three Months Ended September 30, 2023 and 2022

Three Months Ended

September 30,

2023 2022 Change

3 unchanged sentences

Consolidated total revenue $ 1,033,670 $ 983,030 $ 50,640 5 %

In the three months ended June 30, 2023, Communications revenue increased by $80.8 million, or 10%, compared to the same period last year.

This increase was primarily attributable to the increased usage of our products by our existing customers, as reflected in our Communications Dollar‑Based Net Expansion Rate of 103%, as well as an 11% increase in the number of Communications Active Customer Accounts from over 260,000 as of June 30, 2022 to over 289,000 as of June 30, 2023.

In the three months ended June 30, 2023, Data & Applications revenue increased by $13.6 million, or 12%, compared to the same period last year.

This increase was primarily attributable to a 4% increase in the number of Data & Applications Active Customer Accounts from over 26,000 as of June 30, 2022 to over 27,000 as of June 30, 2023.

Our Data & Applications Dollar‑Based Net Expansion Rate was 99% for the three months ended June 30, 2023.

In the three months ended June 30, 2023, consolidated total revenue increased by $94.4 million, or 10%, compared to the same period last year.

This increase was attributable to the increased usage of our products by our existing customers, as reflected in our Dollar‑Based Net Expansion Rate of 103%, as well as an 11% increase in the number of Active Customer Accounts from over 275,000 as of June 30, 2022 to over 304,000 as of June 30, 2023.

In the three months ended June 30, 2023, U.S.

In the three months ended September 30, 2023, Communications revenue increased by $40.5 million, or 5%, compared to the same period last year.

This increase was primarily attributable to a 10% increase in the number of Communications Active Customer Accounts from over 264,000 as of September 30, 2022 to over 291,000 as of September 30, 2023, as well as the increased usage of our products by our existing customers, as reflected in our Communications Dollar‑Based Net Expansion Rate of 101%.

These increases were offset by a decrease of $28.5 million related to revenue from our ValueFirst and IoT businesses, which we divested during 2023.

In the three months ended September 30, 2023, Data & Applications revenue increased by $10.1 million, or 9%, compared to the same period last year.

This increase was primarily attributable to a 6% increase in the number of Data & Applications Active Customer Accounts from over 31,000 as of September 30, 2022 to over 33,000 as of September 30, 2023 1 .

Our Data & Applications Dollar‑Based Net Expansion Rate was 96% for the three months ended September 30, 2023 due to higher contraction and customer churn compared to the same period last year.

In the three months ended September 30, 2023, consolidated total revenue increased by $50.6 million, or 5%, compared to the same period last year.

This increase was primarily attributable to a 9% increase in the number of Active Customer Accounts from over 280,000 as of September 30, 2022 to over 306,000 as of September 30, 2023, as well as the increased usage of our products by our existing customers, as reflected in our Dollar‑Based Net Expansion Rate of 101%.

In the three months ended September 30, 2023, U.S.

revenue and international revenue represented $688.1 million, or 67%, and $345.5 million, or 33%, respectively, of total revenue.

In the three months ended June 30, 2022, U.S.

In the three months ended September 30, 2022, U.S.

revenue and international revenue represented $650.5 million, or 66%, and $332.5 million, or 34%, respectively, of total revenue.

Tabl e of Contents

1 In our Quarterly Report on Form 10-Q for the three months ended June 30, 2023 (the “Q2’23 10-Q”), we disclosed that we had over 27,000 Data & Applications Active Customer Accounts as of June 30, 2023, an increase of 4% compared to over 26,000 Data & Applications Active Customer Accounts as of June 30, 2022.

Due to an inadvertent exclusion of certain accounts, the number of Data & Applications Active Customer Accounts as of June 30, 2023 and June 30, 2022 was understated.

Including the inadvertently excluded accounts, we had over 33,000 Data & Applications Active Customer Accounts as of June 30, 2023, an increase of 6% compared to over 31,000 Data & Applications Active Customer Accounts as of June 30, 2022.

Our consolidated Active Customer Accounts as of June 30, 2023 and June 30, 2022, and our Data & Applications Dollar-Based Net Expansion Rate for the three and six months ended June 30, 2023, in each case as disclosed in our Q2’23 10-Q, were not affected by the above understatement.

Cost of Revenue and Gross Margin

Three Months Ended

September 30,

2023 2022 Change

9 unchanged sentences

Gross margin 50 % 47 %

In the three months ended June 30, 2023, Communications cost of revenue increased by $27.8 million, or 6%, compared to the same period last year.

The increase in cost of revenue was primarily attributable to a $32.9 million increase in network service providers’ costs, which support the growth in usage of our products driven by the growth in Communications Active Customer Accounts and the increase in usage of our products by existing customers as described above.

In the three months ended June 30, 2023, Data & Applications cost of revenue increased by $6.2 million, or 18%, compared to the same period last year.

In the three months ended September 30, 2023, Communications cost of revenue decreased by $11.4 million, or 2%, compared to the same period last year.

Fluctuations in cost of revenue categories were not significant either individually or in the aggregate.

In the three months ended June 30, 2023, consolidated total cost of revenue increased by $33.9 million, or 7%, compared to the same period last year.

The increase in cost of revenue was primarily attributable to a $32.9 million increase in network service providers’ costs, which support the growth in usage of our products driven by the growth in Active Customer Accounts and the increase in usage of our products by existing customers as described above.

In the three months ended June 30, 2023, Communications gross margin percentage increased compared to the same period last year.

This increase was primarily driven by a 170 basis point increase due to the network service providers’ costs increasing at a lower rate relative to revenue, net of the impact of hedging instruments.

This is due to a higher proportion of revenue being derived from the United States, where margins are higher.

In the three months ended June 30, 2023, Data & Applications gross margin percentage decreased compared to the same period last year.

This decrease was primarily driven by a 160 basis point decrease due to the increase in amortization of capitalized internal-use software development costs.

In the three months ended June 30, 2023, consolidated total gross margin percentage increased compared to the same period last year.

This increase was primarily driven by an increase in the gross margin of the Communications segment, as described above.

Tabl e of Contents

In the three months ended September 30, 2023, Data & Applications cost of revenue increased by $7.8 million, or 22%, compared to the same period last year.

The increase was primarily attributable to a $4.5 million increase in hosting fees, a $1.3 million increase in stock-based compensation, and a $1.2 million increase in amortization of capitalized internal-use software development costs.

In the three months ended September 30, 2023, Communications gross margin percentage increased compared to the same period last year.

This increase was primarily driven by a 300 basis point increase due to the network service providers’ costs increasing at a lower rate relative to revenue, net of the impact of hedging instruments, as a result of a higher proportion of revenue being derived from the United States, where margins are higher.

The increase was also partially driven by a 70 basis point increase due to the divestiture of our ValueFirst and IoT businesses during the first half of 2023, which historically had lower gross margins than Communications as a whole.

In the three months ended September 30, 2023, Data & Applications gross margin percentage decreased compared to the same period last year.

This decrease was primarily driven by a 350 basis point decrease due to an increase in hosting costs, a 110 basis point decrease due to an increase in stock-based compensation, and a 100 basis point decrease due to an increase in amortization of capitalized internal-use software development costs, partially offset by a 9% increase in total revenue, as discussed in the Revenue section above.

Operating Expenses

Three Months Ended

September 30,

2023 2022 Change

6 unchanged sentences

Total operating expenses $ 625,222 $ 919,072 $ (293,850) (32) %

In the three months ended June 30, 2023, research and development expenses decreased by $52.7 million, or 19%, compared to the same period last year.

The decrease was attributable to our efforts to manage our cost structure, including the restructuring of our workforce in September 2022 and February 2023, and the sunsetting of our employee sabbatical program in the three months ended March 31, 2023.

As a result, total personnel costs decreased by $54.8 million, driven by a 13% average decrease in research and development headcount.

In the three months ended September 30, 2023, research and development expenses decreased by $43.1 million, or 15%, compared to the same period last year.

The decrease was primarily attributable to a $46.5 million decrease in total personnel costs compared to the prior period, which was primarily attributable to the restructuring of our workforce in September 2022 and February 2023, which contributed to a 25% decrease in average research and development headcount during the period, and to the sunsetting of our employee sabbatical program in the three months ended March 31, 2023.

This decrease was partially offset by increases in other operating expense categories that were not significant either individually or in the aggregate.

In the three months ended June 30, 2023, sales and marketing expenses decreased by $73.4 million, or 22%, compared to the same period last year.

As a result, total personnel costs decreased by $61.0 million, driven by a 24% average decrease in sales and marketing headcount.

The lower sales and marketing expenses were also due to a $8.3 million decrease in advertising expenses.

In the three months ended June 30, 2023, general and administrative expenses decreased by $7.8 million, or 5%, compared to the same period last year.

As a result, total personnel costs decreased by $34.6 million, driven by a 35% average decrease in general and administrative headcount.

This decrease was partially offset by a $28.8 million loss on net assets held for sale related to the sale of our ValueFirst business.

For further detail refer to Note 5 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

In the three months ended June 30, 2023, we incurred $14.9 million in restructuring costs primarily as a result of our February 2023 Plan.

In the three months ended September 30, 2023, sales and marketing expenses decreased by $65.9 million, or 20%, compared to the same period last year.

The decrease was primarily attributable to a $63.1 million decrease in total personnel costs compared to the prior period, which was primarily attributable to the restructuring of our workforce in September 2022 and February 2023, which contributed to a 31% decrease in average sales and marketing headcount during the period, and to the sunsetting of our employee sabbatical program in the three months ended March 31, 2023.

The impacts of other operating expense categories were not significant either individually or in the aggregate.

In the three months ended September 30, 2023, general and administrative expenses decreased by $21.3 million, or 16%, compared to the same period last year.

The decrease was primarily attributable to a $21.2 million decrease in total personnel costs compared to the prior period, which was primarily attributable to the restructuring of our workforce in September 2022 and February 2023, which contributed to a 39% decrease in average general and administrative headcount during the period, and to the sunsetting of our employee sabbatical program in the three months ended March 31, 2023.

The impacts of other operating expense categories were not significant either individually or in the aggregate.

In the three months ended September 30, 2023, restructuring costs decreased by $69.0 million, or 95%, compared to the same period last year.

The decrease is due to costs incurred in the prior period related to the workforce reduction effected during September 2022.

For further detail refer to Note 7 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

In the three months ended June 30, 2023, we incurred $9.3 million in impairment charges related to certain of our operating lease assets and other long-lived assets as a result of permanently closing several offices in the second quarter of 2023.

In the three months ended September 30, 2023, impairment of long-lived assets decreased $94.6 million, or 97%, compared to the same period last year.

The decrease is due to a larger number of office closures that occurred in the three months ended September 30, 2022, which was the first period in which we incurred such charges.

For further detail refer to Note 6 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Tabl e of Contents

Segment Results of Operations

Our CODM evaluates the performance of our Communications and Data & Applications segments based on several factors, of which the primary financial measures of segment profitability are total revenue and non-GAAP gross profit.

The following table presents the non-GAAP gross profit measure for each segment, as presented to our CODM for the three months ended June 30, 2023:

Our CODM evaluates the performance of our Communications and Data & Applications segments based on several factors, of which the primary financial measures are total revenue and non-GAAP gross profit, o ur segment profitability measure.

The following table presents the non-GAAP gross profit measure for each segment, as presented to our CODM for the three months ended September 30, 2023:

Three Months Ended

September 30,

(Dollars in thousands)

2 unchanged sentences

Consolidated total non-GAAP gross profit $ 552,598 $ 499,133 $ 53,465 11 %

In the three months ended June 30, 2023, Communications non-GAAP gross profit increased by $52.8 million, or 14%, compared to the same period last year.

The increase in non-GAAP gross profit was primarily driven by the same factors impacting Communications segment’s total revenue and cost of sales, as described above, adjusted for a $0.3 million net decrease, in aggregate, in stock-based compensation, payroll taxes related to stock-based compensation and amortization of acquired intangibles.

In the three months ended June 30, 2023, Data & Applications non-GAAP gross profit increased by $8.3 million, or 9%, compared to the same period last year.

The increase in non-GAAP gross profit was primarily driven by the same factors impacting Data & Applications segment’s total revenue and cost of sales, as described above, adjusted for a $0.9 million net increase, in aggregate, in stock-based compensation, payroll taxes related to stock-based compensation and amortization of acquired intangibles.

Comparison of the Six Months Ended June 30, 2023 and 2022

Six Months Ended

In the three months ended September 30, 2023, Communications non-GAAP gross profit increased by $50.1 million, or 12%, compared to the same period last year.

The increase in Communications non-GAAP gross profit was primarily driven by the same factors impacting Communications revenue and Communications cost of revenue, as described in the Revenue and Cost of Revenue and Gross Margin sections above, adjusted for a $1.8 million net decrease, in aggregate, in stock-based compensation, payroll taxes related to stock-based compensation and amortization of acquired intangibles.

In the three months ended September 30, 2023, Data & Applications non-GAAP gross profit increased by $3.4 million, or 3%, compared to the same period last year.

The increase in Data & Applications non-GAAP gross profit was primarily driven by the same factors impacting Data & Applications revenue and Data & Applications cost of revenue, as described in the Revenue and Cost of Revenue and Gross Margin sections above, adjusted for a $1.0 million net increase, in aggregate, in stock-based compensation, payroll taxes related to stock-based compensation and amortization of acquired intangibles.

Comparison of the Nine Months Ended September 30, 2023 and 2022

Nine Months Ended

September 30,

2023 2022 Change

3 unchanged sentences

Consolidated total revenue $ 3,077,995 $ 2,801,747 $ 276,248 10%

In the six months ended June 30, 2023, Communications revenue increased by $192.2 million, or 12%, compared to the same period last year.

This increase was primarily attributable to the increased usage of our products by our existing customers, as reflected in our Communications Dollar‑Based Net Expansion Rate of 105%, as well as an 11% increase in the number of Communications Active Customer Accounts from over 260,000 as of June 30, 2022 to over 289,000 as of June 30, 2023.

In the six months ended June 30, 2023, Data & Applications revenue increased by $33.4 million, or 16%, compared to the same period last year.

This increase was primarily attributable to the increased usage of our products by our existing customers, as reflected in our Data & Applications Dollar‑Based Net Expansion Rate of 101%, as well as a 4% increase in the number of Data & Applications Active Customer Accounts from over 26,000 as of June 30, 2022 to over 27,000 as of June 30, 2023.

In the six months ended June 30, 2023, consolidated total revenue increased by $225.6 million, or 12%, compared to the same period last year.

This increase was primarily attributable to the increased usage of our products by our existing customers, as reflected in our Dollar‑Based Net Expansion Rate of 105%, as well as an 11% increase in the number of Active Customer Accounts from over 275,000 as of June 30, 2022 to over 304,000 as of June 30, 2023.

Tabl e of Contents

In the six months ended June 30, 2023, U.S.

revenue and international revenue represented $1.4 billion or 66%, and $689.6 million, or 34%, respectively, of total revenue.

In the six months ended June 30, 2022, U.S.

In the nine months ended September 30, 2023, Communications revenue increased by $232.7 million, or 9%, compared to the same period last year.

These increases were partially offset by a decrease of $29.9 million related to revenue from our ValueFirst and IoT businesses, which we divested during 2023.

In the nine months ended September 30, 2023, Data & Applications revenue increased by $43.5 million, or 13%, compared to the same period last year.

This increase was attributable to a 6% increase in the number of Data & Applications Active Customer Accounts from over 31,000 as of September 30, 2022 to over 33,000 as of September 30, 2023 2 .

Our Data & Applications Dollar‑Based Net Expansion Rate was 100% for the nine months ended September 30, 2023.

2 In our Q2’23 10-Q, we disclosed that we had over 27,000 Data & Applications Active Customer Accounts as of June 30, 2023, an increase of 4% compared to over 26,000 Data & Applications Active Customer Accounts as of June 30, 2022.

Due to an inadvertent exclusion of certain accounts, the number of Data & Applications Active Customer Accounts as of June 30, 2023 and June 30, 2022 was understated.

In the nine months ended September 30, 2023, consolidated total revenue increased by $276.2 million, or 10%, compared to the same period last year.

In the nine months ended September 30, 2023, U.S.

revenue and international revenue represented $2.0 billion, or 66%, and $1.0 billion, or 34%, respectively, of total revenue.

In the nine months ended September 30, 2022, U.S.

revenue and international revenue represented $1.8 billion, or 66%, and $964.4 million, or 34%, respectively, of total revenue.

Cost of Revenue and Gross Margin

Six Months Ended

Nine Months Ended

September 30,

2023 2022 Change

9 unchanged sentences

Gross margin 49 % 48 %

In the six months ended June 30, 2023, Communications cost of revenue increased by $86.1 million, or 10%, compared to the same period last year.

The increase in cost of revenue was primarily attributable to a $91.3 million increase in network service providers’ costs, which support the growth in usage of our products driven by the growth in Communications Active Customer Accounts and the increased usage of our products by existing customers as described above.

In the six months ended June 30, 2023, Data & Applications cost of revenue increased by $13.5 million, or 21%, compared to the same period last year.

Fluctuations in cost of revenue categories were not significant either individually or in the aggregate.

In the six months ended June 30, 2023, consolidated total cost of revenue increased by $99.5 million, or 10%, compared to the same period last year.

The increase in cost of revenue was primarily attributable to a $91.3 million increase in network service providers’ costs, which support the growth in usage of our products driven by the growth in Active Customer Accounts and the increase in usage of our products by existing customers as described above.

In the six months ended June 30, 2023, Communications gross margin percentage increased compared to the same period This increase was primarily driven by a 90 basis point increase due to the network service providers’ costs increasing at a lower rate relative to revenue, net of the impact of hedging instruments.

In the nine months ended September 30, 2023, Communications cost of revenue increased by $74.7 million, or 5%, compared to the same period last year.

This increase was primarily attributable to a $62.3 million increase in network service providers’ costs, net of the impact of hedging instruments, which support the growth in usage of our products driven by the growth of Communications Active Customer Accounts and the increased usage of our products by our existing customers.

In the nine months ended September 30, 2023, Data & Applications cost of revenue increased by $21.2 million, or 21%, compared to the same period last year.

The increase was primarily driven by an $8.1 million increase in hosting fees, a $5.4 million increase in support and professional service fees, and a $4.9 million increase in amortization of capitalized internal-use software development costs.

In the nine months ended September 30, 2023, Communications gross margin percentage increased compared to the same period last year.

This is due to a higher proportion of revenue being derived from the United States, where margins are higher.

In the six months ended June 30, 2023, Data & Applications gross margin percentage decreased compared to the same period last year.

This decrease was primarily driven by a 150 basis point decrease due to the increase in amortization of capitalized internal-use software development costs.

In the six months ended June 30, 2023, consolidated total gross margin percentage increased compared to the same period last year.

This increase was primarily driven by an increase in the gross margin of the Communications segment as described above.

Tabl e of Contents

The increase was also partially driven by a 30 basis point increase due to the divestiture of our ValueFirst and IoT businesses during the first half of 2023, which historically had lower gross margins than Communications as a whole.

In the nine months ended September 30, 2023, Data & Applications gross margin percentage decreased compared to the same period last year.

This decrease was primarily driven by a 220 basis point decrease due to an increase in hosting fees, a 140 basis point decrease due to an increase in support and professional service fees, and a 130 basis point decrease due to an increase in amortization of capitalized internal-use software development costs, partially offset by a 13% increase in total revenue, as discussed in the Revenue section above.

Operating Expenses

Six Months Ended

Nine Months Ended

September 30,

2023 2022 Change

6 unchanged sentences

Total operating expenses $ 2,027,578 $ 2,319,176 $ (291,598) (13) %

In the six months ended June 30, 2023, research and development expenses decreased by $54.8 million, or 11%, compared to the same period last year.

The decrease was attributable to our efforts to manage our cost structure, including the restructuring of our workforce in September 2022 and February 2023, and sunsetting of our employee sabbatical program in the three months ended March 31, 2023.

As a result, in the six months ended June 30, 2023, the average research and development headcount.decreased by 2% compared to the same period last year.

Total personnel costs decreased by $57.5 million, primarily driven by a $36.2 million decrease in stock-based compensation expense, an $8.3 million decrease related to the sunsetting of our employee sabbatical program and a $13.0 million decrease in other personnel costs.

These decreases were partially offset by increases in other operating expense categories that were not significant either individually or in the aggregate.

In the six months ended June 30, 2023, sales and marketing expenses decreased by $101.4 million, or 16%, compared to the same period last year.

As a result, total personnel costs decreased by $79.5 million, driven by a 14% average decrease in sales and marketing headcount.

The lower sales and marketing expenses were also due to a $12.5 million decrease in advertising expenses.

In the six months ended June 30, 2023, general and administrative expenses decreased by $9.6 million, or 4%, compared to the same period last year.

As a result, total personnel costs decreased by $38.2 million, driven by a 26% average decrease in general and administrative headcount.

This decrease was partially offset by a $32.3 million loss on net assets held for sale and divestiture related to the sale of our ValueFirst business and our IoT assets and liabilities.

For further detail refer to Note 5 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

In the six months ended June 30, 2023, we incurred $136.8 million in restructuring costs primarily as a result of our February 2023 Plan.

In the nine months ended September 30, 2023, research and development expenses decreased by $97.8 million, or 12%, compared to the same period last year.

The decrease was primarily attributable to a $99.5 million decrease in total personnel costs compared to the prior period, which was primarily attributable to the restructuring of our workforce in September 2022 and February 2023, which contributed to a 10% decrease in average research and development headcount during the period, and to the sunsetting of our employee sabbatical program in the three months ended March 31, 2023.

In the nine months ended September 30, 2023, sales and marketing expenses decreased by $167.3 million, or 18%, compared to the same period last year.

The decrease was primarily attributable a $142.6 million decrease in total personnel costs compared to the prior period, which was primarily attributable to the restructuring of our workforce in September 2022 and February 2023, which contributed to a 19% decrease in average sales and marketing headcount during the period, and to the sunsetting of our employee sabbatical program in the three months ended March 31, 2023.

The lower sales and marketing expenses were also partially due to a $17.4 million decrease in advertising expenses.

In the nine months ended September 30, 2023, general and administrative expenses decreased by $30.8 million, or 8%, compared to the same period last year.

The decrease was primarily attributable to a $59.4 million decrease in total personnel costs compared to the prior period, which was primarily attributable to the restructuring of our workforce in September 2022 and February 2023, which contributed to a 27% decrease in average general and administrative headcount during the period, and to the sunsetting of our employee sabbatical program in the three months ended March 31, 2023.

This decrease was partially offset by a $32.3 million loss on divestiture related to the sale of our ValueFirst business and our IoT assets and liabilities.

For further detail on the divestitures, refer to Note 5 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

In the nine months ended September 30, 2023, restructuring costs increased by $67.8 million, or 94%, as compared to the same period last year.

The increase was primarily a result of our February 2023 Plan, which had a more substantial impact than our September 2022 restructuring plan in the comparable period.

For further detail refer to Note 7 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

In the six months ended June 30, 2023, we incurred $31.1 million in impairment charges related to certain of our operating lease assets and other long-lived assets as a result of permanently closing several offices in the first half of 2023.

In the nine months ended September 30, 2023, impairment of long-lived assets decreased by $63.4 million, or 65%, as compared to the same period last year.

The decrease was primarily driven by a larger number of office closures that occurred in 2022 when our remote-first policy was initially enacted.

For further detail refer to Note 6 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Tabl e of Contents

Other Expenses, net

Nine Months Ended

September 30,

2023 2022 Change

(Dollars in thousands)

Share of losses from equity method investment $ 93,838 $ 13,376 $ 80,462 602 %

Impairment of strategic investments 46,154 — $ 46,154 100 %

Other (income) expenses, net

(17,731) 23,290 $ (41,021) (176) %

Total other expenses, net $ 122,261 $ 36,666 $ 85,595 233 %

In the nine months ended September 30, 2023, other expenses, net increased by $85.6 million, or 233%, compared to the same period last year.

The increase is primarily related to an increase of $80.5 million in our share of losses from our equity method investment.

Segment Results of Operations

The following table presents the results for non-GAAP gross profit for each of our Communications and Data & Applications segments for the six months ended June 30, 2023:

Six Months Ended

The following table presents the results for non-GAAP gross profit for each of our Communications and Data & Applications segments for the nine months ended September 30, 2023:

Nine Months Ended

September 30,

(Dollars in thousands)

2 unchanged sentences

Consolidated total non-GAAP gross profit $ 1,620,615 $ 1,440,124 $ 180,491 13 %

In the six months ended June 30, 2023, Communications non-GAAP gross profit increased by $105.8 million, or 14%, compared to the same period last year.

The increase in non-GAAP gross profit was primarily driven by the same factors impacting Communications segment’s total revenue and cost of sales, as described above, adjusted for a $0.4 million net decrease, in aggregate, in stock-based compensation, payroll taxes related to stock-based compensation and amortization of acquired intangibles.

In the six months ended June 30, 2023, Data & Applications non-GAAP gross profit increased by $21.3 million, or 12%, compared to the same period last year.

The increase in non-GAAP gross profit was primarily driven by the same factors impacting Data & Applications segment’s total revenue and cost of sales, as described above, adjusted for a $1.3 million net increase, in aggregate, in stock-based compensation, payroll taxes related to stock-based compensation and amortization of acquired intangibles.

In the nine months ended September 30, 2023, Communications non-GAAP gross profit increased by $155.9 million, or 13%, compared to the same period last year.

The increase in Communications non-GAAP gross profit was primarily driven by the same factors impacting Communications revenue and cost of revenue in the nine months ending September 30, 2023, as described above, adjusted for a $2.2 million net decrease, in aggregate, in stock-based compensation, payroll taxes related to stock-based compensation and amortization of acquired intangibles.

In the nine months ended September 30, 2023, Data & Applications non-GAAP gross profit increased by $24.6 million, or 9%, compared to the same period last year.

The increase in Data & Applications non-GAAP gross profit was primarily driven by the same factors impacting Data & Applications revenue and cost of revenue in the nine months ending September 30, 2023, as described above, adjusted for a $2.3 million net increase, in aggregate, in stock-based compensation, payroll taxes related to stock-based compensation and amortization of acquired intangibles.

Liquidity and Capital Resources

As of June 30, 2023, we had cash and cash equivalents of $675.1 million and short-term marketable securities of $3.0 billion.

As of September 30, 2023, we had cash and cash equivalents of $677.9 million and short-term marketable securities of $3.2 billion.

In any given period, cash and cash equivalents may consist of money market funds, reverse repurchase agreements and commercial paper.

12 unchanged sentences

There can be no assurance that additional credit lines or financing instruments will be available in amounts or on terms acceptable to us, if at all.

Tabl e of Contents

We believe that our cash, cash equivalents and marketable securities balances, as well as the cash flows generated by our operations, will be sufficient to satisfy our anticipated cash needs for working capital and capital expenditure needs, including authorized share repurchases, for the next 12 months and beyond.

9 unchanged sentences

The program expires on December 31, 2024.

In the three and six months ended June 30, 2023, we purchased $370.0 million in aggregate value, or 6.4 million shares, and $495.0 million in aggregate value, or 8.3 million shares, respectively, of our Class A common stock on the open market under this program.

Approximately $505.0 million of the originally authorized amount remains available for future repurchases.

In the three and nine months ended September 30, 2023, we purchased $56.0 million in aggregate value, or 0.9 million shares, and $551.0 million in aggregate value, or 9.2 million shares, respectively, of our Class A common stock on the open market under this program.

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

2029 Notes and 2031 Notes

2 unchanged sentences

The following table summarizes our cash flows:

Six Months Ended

Nine Months Ended

September 30,

(In thousands)

Cash used in operating activities $ (14,220) $ (80,141)

Cash provided by (used in) operating activities

$ 192,207 $ (195,913)

Cash provided by (used in) investing activities 365,745 (682,153)

1 unchanged sentence

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)

Tabl e of Contents

Cash Flows from Operating Activities

In the six months ended June 30, 2023, cash used in operating activities consisted primarily of our net loss of $508.3 million adjusted for non-cash items, including $323.9 million of stock-based compensation expense which included the impact of our February 2023 Plan, $146.4 million of depreciation and amortization expense, $62.8 million of our share of losses from an equity method investment, $46.2 million of impairment of an investment that we acquired in 2021, $36.1 million amortization of deferred commissions, $31.1 million of impairment of operating lease assets and other long-lived assets, $32.3 million loss on net assets held for sale or divested, $16.1 million of non-cash reduction in our operating right-of-use asset, and $241.2 million of cumulative changes in operating assets and liabilities.

In the nine months ended September 30, 2023, cash provided by operating activities consisted primarily of our net loss of $650.0 million adjusted for non-cash items, including $509.4 million of stock-based compensation expense which included the impact of our February 2023 Plan, $219.0 million of depreciation and amortization expense, $93.8 million of our share of losses from an equity method investment, $54.4 million of amortization of deferred commissions, $46.2 million of impairment of an investment that we acquired in 2021, $34.3 million of impairment of operating lease assets and other long-lived assets, $32.3 million loss on net assets divested, $21.8 million of non-cash reduction in our operating right-of-use asset, and $240.3 million of cumulative changes in operating assets and liabilities.

With respect to changes in operating assets and liabilities, accounts receivable and prepaid expenses increased $125.6 million primarily due to revenue growth, timing of cash receipts and prepayments and certain operating expenses.

Accounts payable and other current liabilities decreased $57.9 million primarily driven by an $18.1 million decrease in the sabbatical benefit accrual as a result of lower headcount and sunsetting of the program.

Accounts payable and other current liabilities decreased $62.3 million primarily driven by a $22.3 million decrease in the sabbatical benefit accrual as a result of lower headcount and sunsetting of the program, and a decrease in personnel-related accruals due to lower headcount.

Operating lease liabilities decreased $41.4 million due to payments made against our operating lease obligations.

Other long-term assets increased $15.4 million primarily due to an increase in the sales commissions balances related to the growth of our business.

The loss on net assets held for sale and divested, the impairment of operating lease assets and other long lived assets, and the details of the February 2023 Plan are described further in Note 5, Note 6, and Note 7, respectively, to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

In the six months ended June 30, 2022, cash used in operating activities consisted primarily of our net loss of $544.4 million adjusted for non-cash items, including $397.4 million of stock-based compensation expense, $137.7 million of depreciation and amortization expense, $25.5 million of non-cash reduction to our operating right-of-use asset, $26.1 million amortization of deferred commissions and $160.0 million of cumulative changes in operating assets and liabilities.

respect to changes in operating assets and liabilities, accounts receivable and prepaid expenses increased $149.8 million primarily due to revenue growth, the timing of cash receipts and prepayments of our cloud infrastructure fees and certain operating expenses.

Accounts payable and other current liabilities increased $85.1 million primarily due to increases in transaction volumes.

The loss on net assets divested, the impairment of operating lease assets and other long lived assets, and the details of the February 2023 Plan are described further in Note 5, Note 6, and Note 7, respectively, to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

In the nine months ended September 30, 2022, cash used in operating activities consisted primarily of our net loss of $1.0 billion adjusted for non-cash items, including $606.3 million of stock-based compensation expense, $207.9 million of depreciation and amortization expense, $100.7 million of impairment of operating lease assets and other long-lived assets, $38.7 million of non-cash reduction in our operating right-of-use asset, $41.3 million of amortization of deferred commissions, $27.9 million of net amortization of investment premium and discount, and $235.8 million of cumulative changes in operating assets and liabilities.

With respect to changes in operating assets and liabilities, accounts receivable and prepaid expenses increased $202.4 million primarily due to revenue growth, timing of cash receipts and pre-payments of our cloud infrastructure fees and certain operating expenses.

Accounts payable and other current liabilities increased $134.0 million primarily due to increases in transaction volumes, the impacts from our September 2022 restructuring plan and the sabbatical employee benefit, which was introduced during 2022.

Operating lease liabilities decreased $42.2 million due to payments made against our operating lease obligations.

1 unchanged sentence

Cash Flows from Investing Activities

In the six months ended June 30, 2023, cash provided by investing activities was $509.8 million primarily consisting of $538.3 million of proceeds from sales and maturities of marketable securities, net of purchases of marketable securities and other investments;

$20.1 million related to capitalized software development costs and $8.3 million related to purchases of long-lived assets.

In the six months ended June 30, 2022, cash used in investing activities was $635.6 million primarily consisting of $570.8 million of proceeds from sales and maturities of marketable securities, net of purchases of marketable securities and other investments, which includes $750.0 million paid to acquire our equity method investment in Syniverse;

$31.7 million of net cash paid to acquire other businesses, $22.4 million related to capitalized software development costs and $10.8 million related to purchases of long-lived assets.

In the nine months ended September 30, 2023, cash provided by investing activities was $365.7 million primarily consisting of $372.9 million of proceeds from sales and maturities of marketable securities, net of purchases of marketable securities and other investments, and $38.2 million of proceeds from divestitures, net of cash divested, partially offset by $30.5 million related to capitalized software development costs and $9.0 million related to purchases of long-lived assets.

In the nine months ended September 30, 2022, cash used in investing activities was $682.2 million primarily consisting of $584.8 million of purchases of marketable securities and other investments, net of maturities and sales, $32.9 million of net cash paid to acquire other businesses, $35.9 million related to capitalized software development costs and $28.6 million related to purchases of long-lived assets.

Cash Flows from Financing Activities

In the six months ended June 30, 2023, cash used in financing activities was $469.4 million primarily consisting of $485.1 million of cash paid to repurchase 8.3 million shares of our Class A common stock in the open market, including related costs, and $9.8 million in principal payments on debt and finance leases, offset by $28.1 million in proceeds from stock options exercised by our employees and shares issued under our employee stock purchase plan.

In the six months ended June 30, 2022, cash provided by financing activities was $34.4 million primarily consisting of $41.7 million in proceeds from stock options exercised by our employees, offset by $6.2 million in principal payments on debt and finance leases.

Tabl e of Contents

In the nine months ended September 30, 2023, cash used in financing activities was $536.2 million primarily consisting of $548.9 million of cash paid to repurchase 9.2 million shares of our Class A common stock in the open market, including related costs, and $13.8 million in principal payments on debt and finance leases, offset by $28.9 million in proceeds from stock options exercised by our employees and shares issued under our employee stock purchase plan.

In the nine months ended September 30, 2022, cash provided by financing activities was $33.3 million primarily consisting of $43.8 million in proceeds from stock options exercised by our employees and shares issued under our employee stock purchase plan, offset by $9.4 million in principal payments on debt and finance leases.

Critical Accounting Policies and Estimates

17 unchanged sentences

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 2. Management’s Discussion and Analysis