What changed in this filing

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Item 1. Financial Statements

2024-05-08 compared with 2023-11-09 · 167 added, 345 removed, 448 unchanged (53% of the section changed)

1 unchanged sentence

Condensed Consolidated Balance Sheets

As of September 30, As of December 31,

As of March 31, As of December 31,

(In thousands)

27 unchanged sentences

Preferred stock — —

Class A and Class B common stock 182 186

Class A common stock

Additional paid-in capital 14,960,837 14,797,723

Accumulated other comprehensive loss ( 52,726 ) ( 121,161 )

Accumulated other comprehensive (loss) income ( 4,941 ) 619

Accumulated deficit ( 5,508,343 ) ( 5,065,972 )

3 unchanged sentences

Condensed Consolidated Statements of Operations

Three Months Ended Nine Months Ended

September 30, September 30,

2023 2022 2023 2022

Three Months Ended

(In thousands, except share and per share amounts)

13 unchanged sentences

Impairment of strategic investments — ( 46,154 )

Other income (expenses), net 1 ( 8,374 ) 17,731 ( 23,290 )

Other income, net 27,918 8,985

Total other expenses, net ( 1,657 ) ( 67,588 )

5 unchanged sentences

See accompanying notes to condensed consolidated financial statements.

Condensed Consolidated Statements of Comprehensive Loss

Three Months Ended Nine Months Ended

September 30, September 30,

2023 2022 2023 2022

Condensed Consolidated Statements of Comprehensive (Loss) Income

Three Months Ended

(In thousands)

Net loss $ ( 55,349 ) $ ( 342,139 )

Other comprehensive income (loss):

Unrealized gain (loss) on marketable securities 13,921 ( 22,151 ) 53,276 ( 103,999 )

Other comprehensive (loss) income:

Unrealized (loss) gain on marketable securities ( 5,193 ) 30,750

Foreign currency translation — 483

Net change in market value of effective foreign currency

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

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 )

Net change in market value of effective foreign currency forward exchange contracts ( 4,505 ) 3,335

Share of other comprehensive income from equity method investment 4,138 14,648

Total other comprehensive (loss) income ( 5,560 ) 49,216

Comprehensive loss attributable to common stockholders $ ( 60,909 ) $ ( 292,923 )

1 unchanged sentence

Condensed Consolidated Statements of Stockholders’ Equity

Class A Common Stock

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

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

Accumulated Deficit Total Stockholders' Equity

Shares Amount Shares Amount

Shares Amount

(In thousands, except share amounts)

Balance as of December 31, 2023

181,945,771 $ 182 $ 14,797,723 $ 619 $ ( 5,065,972 ) $ 9,732,552

Net loss — — — — ( 55,349 ) ( 55,349 )

2 unchanged sentences

Value of equity awards withheld for tax liability ( 26,757 ) — ( 1,918 ) — — ( 1,918 )

Conversion of shares of Class B common stock into shares of Class A common stock 97,199 — ( 97,199 ) — — — — —

Shares of Class A common stock issued and donated to charity 22,102 — 1,295 — — 1,295

Unrealized gain on marketable securities — — — — — 30,750 — 30,750

Shares returned from escrow ( 696 ) — ( 192 ) — — ( 192 )

Unrealized loss on marketable securities

— — — ( 5,193 ) — ( 5,193 )

Repurchases of shares of Class A common stock including related costs ( 6,128,298 ) ( 6 ) — — ( 387,022 ) ( 387,028 )

Foreign currency translation — — — — — 483 — 483

Net change in market value of effective foreign currency forward exchange contracts — — — ( 4,505 ) — ( 4,505 )

3 unchanged sentences

Balance as of March 31, 2024

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

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

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

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

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

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

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

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

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

Foreign currency translation — — — — — 86 — 86

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

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

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

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

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

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

177,471,887 $ 177 $ 14,960,837 $ ( 4,941 ) $ ( 5,508,343 ) $ 9,447,730

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.

1 unchanged sentence

Class A Common Stock

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

Shares Amount Shares Amount

(In thousands, except share amounts)

Balance as of December 31, 2021 170,625,994 $ 168 9,842,105 $ 12 $ 13,169,118 $ ( 18,141 ) $ ( 2,119,691 ) $ 11,031,466

Net loss — — — — — — ( 221,627 ) ( 221,627 )

Exercises of vested stock options 180,643 — 193,889 — 11,727 — — 11,727

Vesting of restricted stock units 877,089 1 — — ( 1 ) — — —

Value of equity awards withheld for tax liability ( 5,804 ) — — — ( 1,065 ) — — ( 1,065 )

Conversion of shares of Class B common stock into shares of Class A common stock 215,389 — ( 215,389 ) — — — — —

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

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

Unrealized loss on marketable securities — — — — — ( 62,826 ) — ( 62,826 )

Foreign currency translation — — — — — ( 165 ) — ( 165 )

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

Stock-based compensation — — — — 159,930 — — 159,930

Balance as of March 31, 2022 171,763,174 $ 169 9,820,605 $ 12 $ 13,343,554 $ ( 84,984 ) $ ( 2,341,318 ) $ 10,917,433

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

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

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

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

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

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

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

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

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

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

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

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

Condensed Consolidated Statements of Stockholders’ Equity

Class A Common Stock

Class B Additional Paid-In Capital Accumulated Other Comprehensive Loss

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

Accumulated Deficit Total Stockholders' Equity

1 unchanged sentence

(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

Balance as of December 31, 2022 176,358,104 $ 174 9,617,605 $ 12 $ 14,055,853 $ ( 121,161 ) $ ( 3,375,836 ) $ 10,559,042

Net loss — — — — — — ( 342,139 ) ( 342,139 )

4 unchanged sentences

Shares of Class A common stock issued and donated to charity 22,102 — — — 1,599 — — 1,599

22,102 — — — 1,911 — — 1,911

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

Unrealized gain on marketable securities — — — — — 30,750 — 30,750

Repurchases of shares of Class A common stock including related costs ( 1,902,124 ) ( 2 ) — — — — ( 124,990 ) ( 124,992 )

Foreign currency translation — — — — — 483 — 483

Net change in market value of effective foreign currency forward exchange contracts — — — — — 3,335 — 3,335

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

Share of other comprehensive income from equity method investment — — — — — 14,648 — 14,648

Stock-based compensation — — — — 164,999 — — 164,999

Stock-based compensation - restructuring — — — — 10,333 — — 10,333

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

Balance as of March 31, 2023 176,121,918 $ 174 9,617,605 $ 12 $ 14,233,590 $ ( 71,945 ) $ ( 3,842,965 ) $ 10,318,866

See accompanying notes to condensed consolidated financial statements.

Condensed Consolidated Statements of Cash Flows

Nine Months Ended

September 30,

Three Months Ended

CASH FLOWS FROM OPERATING ACTIVITIES:

5 unchanged sentences

Net amortization of investment premium and discount ( 6,029 ) 3,515

Impairment of long-lived assets due to office closures 34,278 97,722

Impairment of long-lived assets — 21,784

Stock-based compensation including restructuring 158,606 170,799

Amortization of deferred commissions 18,829 17,865

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

Provision for doubtful accounts 6,204 7,220

Share of losses from equity method investment 29,575 30,419

Loss on net assets divested 32,277 —

Impairment of strategic investments — 46,154

11 unchanged sentences

CASH FLOWS FROM INVESTING ACTIVITIES:

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 ( 435,590 ) ( 136,119 )

2 unchanged sentences

Purchases of long-lived and intangible assets ( 1,671 ) ( 6,751 )

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

Net cash provided by investing activities

189,770 202,465

CASH FLOWS FROM FINANCING ACTIVITIES:

Payments of costs related to public offerings — ( 35 )

Principal payments on debt and finance leases ( 4,832 ) ( 7,353 )

1 unchanged sentence

Repurchases of shares of Class A common stock and related costs ( 356,900 ) ( 114,993 )

Proceeds from exercises of stock options and shares of Class A common stock issued under ESPP 28,949 43,750

Net cash (used in) provided by financing activities ( 536,221 ) 33,252

Proceeds from exercises of stock options 421 3,264

Net cash used in financing activities ( 363,229 ) ( 121,538 )

Effect of exchange rate changes on cash, cash equivalents and restricted cash — 39

39 unchanged sentences

accruals and contingencies.

Estimates are based on historical experience and on various assumptions that the Company believes are reasonable under current circumstances.

Estimates are based on historical experience and on various assumptions that the Company believes are reasonable under then current circumstances.

However, future events are subject to change and best estimates and judgments may require further adjustments, therefore, actual results could differ materially from those estimates.

1 unchanged sentence

(d) Remaining Performance Obligations

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.

Revenue allocated to remaining performance obligations for contracts with durations of more than one year was $ 150.6 million as of March 31, 2024, of which 63 % is expected to be recognized over the next 12 months and 91 % is expected to be recognized over the next 24 months.

(e) Deferred Revenue and Customer Deposits

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 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

Financial instruments that potentially expose the Company to a concentration of credit risk consist primarily of cash, cash equivalents, restricted cash, marketable securities and accounts receivable.

The Company maintains cash, restricted cash, cash equivalents and marketable securities with financial institutions.

As of March 31, 2024, and December 31, 2023, the Company recorded $ 142.4 million and $ 144.5 million as its deferred revenue and customer deposits, respectively.

During the three months ended March 31, 2024 and 2023, the Company recognized $ 65.4 million and $ 71.3 million of revenue, respectively, that was included in the deferred revenue and customer deposits balances as of the end of the previous year.

(f) Concentration of Credit Risk

Financial instruments that potentially expose the Company to a concentration of credit risk consist primarily of cash, cash equivalents, marketable securities and accounts receivable.

The Company maintains cash, cash equivalents and marketable securities with financial institutions.

Certain balances held by such financial institutions exceed insured limits.

1 unchanged sentence

If the financial condition or results of operations of any significant customer deteriorates substantially, operating results could be adversely affected.

To reduce credit risk, management performs credit evaluations of the financial condition of significant customers.

To reduce credit risk, management performs credit evaluations of the financial condition of significant customers and periodic re-evaluations, as needed, of existing customers.

The Company does not require collateral from its credit customers and maintains reserves for estimated credit losses on customer accounts when considered necessary.

Actual credit losses may differ from the Company’s estimates.

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 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.

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

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

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

(i) Recently Issued Accounting Guidance, Not yet Adopted

In June 2022, the Financial Accounting Standards Board issued Accounting Standards Update No.

2022-03, " Fair Value Measurements (Topic 820):

As of March 31, 2024, and December 31, 2023, the allowance for doubtful accounts was $ 37.7 million and $ 42.0 million, respectively, and is recorded in accounts receivable, net, in the accompanying condensed consolidated balance sheets.

In the three months ended March 31, 2024 and 2023, no customer organization accounted for more than 10% of the Company’s total revenue.

As of March 31, 2024 and December 31, 2023, no customer organization represented more than 10% of the Company’s gross accounts receivable.

(g) Restructuring Costs

The Company records restructuring expenses when (i) management commits to a restructuring plan, (ii) the restructuring plan identifies all significant actions, (iii) the period of time to complete the restructuring plan indicates that significant changes to the plan are not likely, and (iv) employees who are impacted have been notified of the pending involuntary termination.

The Company enacted workforce reduction plans in February 2023, December 2023 and March 2024.

In the three months ended March 31, 2024, restructuring charges incurred and cash paid related to these plans were not significant.

The estimated remaining expenses related to these plans are not expected to be significant.

(h) Recently Adopted Accounting Guidance

In June 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No.

(“ASU”) 2022-03, " Fair Value Measurements (Topic 820):

Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions, " which clarifies and amends the guidance of measuring the fair value of equity securities subject to contractual restrictions that prohibit the sale of the equity securities.

The guidance will be effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years.

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

The Company adopted ASU 2022-03 in the first quarter of 2024 with no material impact to the Company’s condensed consolidated financial statements.

(i) Recently Issued Accounting Guidance, Not yet Adopted

In November 2023, the FASB issued ASU 2023-07, “ Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures ,” which is intended to improve reportable segment disclosures.

The ASU expands segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the CODM and included within each reported measure of segment profit or loss.

It also requires disclosure of the amount and description of the composition of other segment items and interim disclosures of a reportable segment's profit or loss and assets.

ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with retrospective application required.

Early adoption is permitted.

The Company expects to adopt ASU 2023-07 upon its effective date.

The adoption will require certain additional disclosure in the notes to the Company’s consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, “ Income Taxes (Topic 740):

Improvements to Income Tax Disclosures, ” which requires disclosure of disaggregated income taxes paid, prescribes standard categories for the components of the effective tax rate reconciliation and modifies other income tax related disclosures.

ASU 2023-09 is effective for annual periods beginning after December 15, 2024 and may be applied on a prospective basis.

Early adoption is permitted.

The Company expects to adopt ASU 2023-09 upon its effective date.

The adoption will require certain additional disclosure in the notes to the Company’s consolidated financial statements.

Fair Value Measurements

3 unchanged sentences

12 Months Fair Value Hierarchy as of

September 30, 2023 Aggregate

March 31, 2024 Aggregate

Level 1 Level 2 Level 3

25 unchanged sentences

Money market funds $ 408,696 $ — $ — $ — $ 408,696 $ — $ — $ 408,696

Reverse repurchase

agreements 200,000 — — — — 200,000 — 200,000

Commercial paper 2,249 — — — 2,249 2,249

Total included in cash

1 unchanged sentence

Marketable securities:

Debt securities:

Treasury securities 410,665 2,162 ( 7 ) ( 1,665 ) 411,155 — — 411,155

securities 149,901 — ( 33 ) ( 6,304 ) 143,564 — — 143,564

Corporate debt securities and

commercial paper 2,973,844 307 ( 12,202 ) ( 71,043 ) 5,000 2,885,906 — 2,890,906

government securities

83,576 55 ( 111 ) ( 1,209 ) 82,311 — — 82,311

Corporate debt securities and commercial paper 2,859,071 15,366 ( 10,818 ) ( 5,922 ) 16,690 2,841,007 — 2,857,697

Total debt securities 3,353,312 17,583 ( 10,936 ) ( 8,796 ) 510,156 2,841,007 — 3,351,163

Equity securities 4,901 — — — 4,901 — — 4,901

Total marketable

1 unchanged sentence

Total financial assets $ 3,766,909 $ 17,583 $ ( 10,936 ) $ ( 8,796 ) $ 923,753 $ 2,841,007 $ — $ 3,764,760

Debt Securities

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 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 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.

Interest earned on debt securities was $ 27.2 million and $ 17.2 million in the three months ended March 31, 2024 and 2023, respectively.

The interest is recorded as other income, net, in the accompanying condensed consolidated statements of operations.

The following table summarizes the contractual maturities of debt securities:

As of September 30, As of December 31,

As of March 31, As of December 31,

Cost Aggregate

6 unchanged sentences

Total $ 3,157,413 $ 3,150,070 $ 3,353,312 $ 3,351,163

Equity Securities

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

Strategic Investments

As of 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.

As of March 31, 2024 and December 31, 2023, the Company held strategic investments with a carrying value of $ 31.1 million and $ 30.7 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 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 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.

There were no impairments or significant adjustments recorded in the three months ended March 31, 2024 related to these investments.

During the three months ended March 31, 2023, the Company recorded an impairment loss of $ 46.2 million related to one of these investments in other expenses, net, in the accompanying condensed consolidated statement of operations.

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

As of March 31, 2024 and December 31, 2023, 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 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.

As of March 31, 2024, the fair values of the 2029 Notes and 2031 Notes were $ 449.7 million and $ 437.1 million, respectively.

As of December 31, 2023, the fair values of the 2029 Notes and 2031 Notes were $ 462.4 million and $ 452.3 million, respectively.

Property and Equipment

Property and equipment consisted of the following:

As of September 30, As of December 31,

As of March 31, 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 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 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 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

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

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

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.

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 sheets:

Workforce Reduction Costs Facilitation Costs Total

(In thousands)

Balance as of December 31, 2022 $ — $ — $ —

Restructuring charges 119,562 9,623 129,185

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

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

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

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

The Company’s Chief Executive Officer is its CODM.

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

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

Twilio Communications and Twilio Data & Applications.

( 1 ) Data center equipment contains $ 72.4 million in assets held under finance leases as of March 31, 2024 and December 31, 2023.

Accumulated depreciation and amortization includes $ 59.3 million and $ 55.9 million of accumulated depreciation for assets held under finance leases as of March 31, 2024, and December 31, 2023, respectively.

Depreciation and amortization expense was $ 23.8 million and $ 20.1 million in the three months ended March 31, 2024 and 2023, respectively.

The Company capitalized $ 16.1 million and $ 14.2 million in internal‑use software development costs in the three months ended March 31, 2024 and 2023, respectively.

Segment Reporting

As of March 31, 2024, the Company had two operating and reportable segments:

Twilio Communications (“Communications”) and Twilio Segment (“Segment”).

Twilio Communications :

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

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

Twilio Data & Applications :

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

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

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.

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

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

Twilio Segment :

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

The key products from which the segment derives its revenue are Segment and Engage.

Presented below is the discrete financial information by reportable segment for the three months ended March 31, 2024 and 2023, that is regularly reviewed by the Chief Operating Decision Maker (“CODM”) for performance assessment and resource allocation decisions.

Prior period amounts were reclassified to conform to the current period’s presentation.

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

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

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

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

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

2023 2022 2023 2022

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

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

Corporate costs consist of costs that support company-wide processes and are managed on the company-wide level, and include costs related to corporate governance and communication, global brand awareness, information security, and certain legal, human resources, finance and accounting expenses.

Three Months Ended

(In thousands)

Communications $ 972,005 $ 932,948

Data & Applications 126,956 116,837 374,916 331,397

Segment 75,045 73,616

Total $ 1,047,050 $ 1,006,564

Non-GAAP gross profit:

Non-GAAP income (loss) from operations:

Communications $ 249,010 $ 180,464

Data & Applications 101,268 97,897 304,074 279,441

Segment ( 20,994 ) ( 17,217 )

Corporate costs ( 68,406 ) ( 59,460 )

Total $ 159,610 $ 103,787

Reconciliation of non-GAAP gross profit to gross profit:

Total non-GAAP gross profit $ 552,598 $ 499,133 $ 1,620,615 $ 1,440,124

Reconciliation of non-GAAP income (loss) from operations to loss from operations:

Total non-GAAP income (loss) from operations $ 159,610 $ 103,787

Stock-based compensation ( 156,158 ) ( 160,466 )

Amortization of acquired intangibles ( 28,939 ) ( 50,774 )

Acquisition and divestiture related expenses — ( 2,235 )

Loss on net assets held for sale — ( 3,824 )

Payroll taxes related to stock-based compensation ( 6,776 ) ( 5,247 )

Gross profit 516,319 462,075 1,512,764 1,332,435

Operating expenses ( 625,222 ) ( 919,072 ) ( 2,027,578 ) ( 2,319,176 )

Charitable contributions ( 1,295 ) ( 1,599 )

Restructuring costs ( 9,946 ) ( 121,942 )

Impairment of long-lived assets — ( 21,784 )

Loss from operations ( 43,504 ) ( 264,084 )

Other expenses, net ( 1,657 ) ( 67,588 )

Loss before provision for income taxes $ ( 45,161 ) $ ( 331,672 )

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 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.

As of March 31, 2024, the Company had outstanding foreign currency forward contracts designated as cash flow hedges with a total sell notional value of $ 206.8 million.

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

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 September 30, Nine Months Ended September 30,

2023 2022 2023 2022

(In thousands)

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 )

As of March 31, 2024, these contracts had maturities of up to 17 months.

Gains and losses associated with these foreign currency forward contracts were not significant.

The Company is subject to master netting agreements with certain counterparties of the foreign exchange contracts, under which it is permitted to net settle transactions of the same currency with a single net amount payable by one party to the other.

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The Company manages its exposure to counterparty risk by entering into contracts with a diversified group of major financial institutions and by actively monitoring its outstanding positions.

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

As of March 31, 2024, the Company did not have any offsetting arrangements.

Goodwill and Intangible Assets

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.

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

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

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

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

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

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

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

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

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

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

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

Communications Twilio

Data & Applications Total

(In thousands)

Balance as of December 31, 2022 $ — $ — $ 5,284,153

Foreign currency adjustments 26

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

4,321,130 963,049 —

Foreign currency adjustments 251 — 251

Goodwill divested (2)

( 41,164 ) — ( 41,164 )

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 divestitures of IoT and ValueFirst.

See Note 5 for further details.

As of March 31, 2024 and December 31, 2023, the balance of the Company’s goodwill was $ 5.2 billion, of which $ 4.9 billion relates to the Communications reportable segment and $ 306.1 million relates to the Segment reportable segment.

There was no goodwill activity during the three months ended March 31, 2024.

Intangible assets

Intangible assets consisted of the following:

As of September 30, 2023

As of March 31, 2024

Cost Accumulated Amortization Net

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Total $ 841,454 $ ( 490,964 ) $ 350,490

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.

Amortization expense was $ 29.0 million and $ 50.8 million for the three months ended March 31, 2024 and 2023, respectively.

Total estimated future amortization expense is as follows:

As of September 30, 2023

As of March 31, 2024

Year Ended December 31, (In thousands)

2023 (remaining three months) $ 48,922

2024 (remaining nine months) $ 83,053

Thereafter 38,837

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Accrued expenses and other current liabilities consisted of the following:

As of September 30, As of December 31,

As of March 31, As of December 31,

(In thousands)

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Restructuring liability 12,841 29,086

Employee sabbatical benefit accrual (1)

Share repurchase costs payable 30,989 3,526

Accrued other expense 54,366 55,508

Total accrued expenses and other current liabilities $ 442,133 $ 424,311

____________________________________

( 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 September 30, As of December 31,

As of March 31, As of December 31,

(In thousands)

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Total long-term debt, net $ 989,356 $ 988,953

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

As of March 31, 2024, the Company was in compliance with all of its covenants under the related indentures.

Revenue by Geographic Area

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

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

The following table sets forth revenue by geographic area:

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Revenue by geographic area:

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International 34 % 34 %

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

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

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

In the three months ended March 31, 2024, 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 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.

In the three months ended March 31, 2024, the Company did not enter into any significant non-cancelable contractual commitments.

(b) Legal Matters

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.

The Company paid the assessments under protest in the third quarter of 2020.

On May 27, 2021, the Company filed a lawsuit against San Francisco in San Francisco Superior Court challenging the assessments.

The Company raised numerous defenses to the assessments including that its services are not telecommunications services, application of the taxes to the Company’s services violates the Internet Tax Freedom Act and San Francisco does not have jurisdiction to impose tax on services provided outside of San Francisco.

The Company is seeking refunds of the taxes paid, waivers of interest and penalties, cost of suit and reasonable attorneys’ fees, and other legal and equitable relief as the court deems appropriate.

The previously set trial date 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.

The Company regularly assesses the likelihood of adverse outcomes resulting from tax disputes such as this and examines all open years to determine the necessity and adequacy of any tax reserves.

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

In addition to the litigation discussed above, from time to time, the Company may be subject to legal actions and claims in the ordinary course of business.

The Company has received, and may in the future continue to receive, claims from third parties asserting, among other things, infringement of their intellectual property rights.

Future litigation may be necessary to defend the Company, its partners and its customers by determining the scope, enforceability and validity of third‑party proprietary rights, or to establish our proprietary rights.

The results of any current or future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources and other factors.

From time to time, the Company may be subject to legal actions, claims, and government investigations or inquiries arising in the ordinary course of business.

These matters may include, but are not limited to, matters involving privacy, data protection, data security, intellectual property, competition, telecommunications, consumer protection, taxation, securities, employment, and contractual rights.

While the Company currently believes that the final outcomes of these matters will not have a material adverse effect on its business, the results of any current or future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources and other factors.

The Company accrues for contingencies when the Company believes that a loss is probable and that it can reasonably estimate the amount of any such loss.

To the extent there is a reasonable possibility that a loss exceeding amounts already recognized may be incurred and the amount of such additional loss would be material, the Company will either disclose the estimated additional loss or state that such an estimate cannot be made.

Significant judgment is required to determine the probability of a loss and to estimate the amount of any probable loss.

Legal fees and other costs related to litigation and other legal proceedings are expensed as incurred and are included in general and administrative expenses in the accompanying condensed consolidated statements of operations.

The Company has signed indemnification agreements with all of its board members and executive officers.

The agreements indemnify the board members and executive officers from claims and expenses on actions brought against the individuals separately or jointly with the Company for certain indemnifiable events.

Indemnifiable events generally mean any event or occurrence related to the fact that the board member or the executive officer was or is acting in his or her capacity as a board member or an executive officer for the Company or was or is acting or representing the interests of the Company.

In the ordinary course of business and in connection with its financing and business combinations transactions, the Company enters into contractual arrangements under which it agrees to provide indemnification of varying scope and terms to business partners, customers and other parties with respect to certain matters, including, but not limited to, losses arising out of the breach of such agreements, intellectual property infringement claims made by third parties and other liabilities relating to or arising from the Company’s various products, or its acts or omissions.

In these circumstances, payment may be conditional on the other party making a claim pursuant to the procedures specified in the particular contract.

Further, the Company’s obligations under these agreements may be limited in terms of time and/or amount, and in some instances, the Company may have recourse against third parties for certain payments.

The terms of such obligations may vary.

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

In the ordinary course of business and in connection with its financing and business combination transactions, the Company enters into contractual arrangements under which it agrees to provide indemnification of varying scope and terms to business partners, customers and other parties with respect to certain matters, including, but not limited to, losses arising out of the breach of such agreements, intellectual property infringement claims made by third parties and other liabilities relating to or arising from the Company’s products or its acts or omissions.

The Company has also signed indemnification agreements with all of its board members and executive officers and certain employees that may require the Company to indemnify them for certain events in connection with their services to the Company or its direct or indirect subsidiaries.

As of March 31, 2024, and December 31, 2023, no amounts were accrued related to any outstanding indemnification agreements.

(d) Other Taxes

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In the event any of these jurisdictions disagree with management’s assumptions and analysis, the assessment of the Company’s tax exposure could differ materially from management’s current estimates.

For example, as described in Note 14(b), the Company is currently involved in legal proceedings with the City and County of San Francisco challenging their assessment of the Company’s estimated tax liability for a specific period.

The $ 38.8 million assessment of taxes, including interest and penalties, that the Company paid as required in 2020, net of the $ 11.5 million reserve the Company had accrued for the same period, was recorded as a deposit in other assets in the accompanying condensed consolidated balance sheets.

As of 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 March 31, 2024, the liabilities recorded for the non-income-based taxes were $ 18.2 million for domestic jurisdictions and $ 20.0 million for jurisdictions outside of the United States.

As of December 31, 2023, these liabilities were $ 18.0 million and $ 22.2 million, respectively.

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Preferred Stock

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 March 31, 2024, and December 31, 2023, the Company had authorized 100,000,000 shares of preferred stock, par value $ 0.001 , of which no shares were issued and outstanding.

As of March 31, 2024, 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 March 31, 2024, 177,471,887 shares of Class A common stock and no shares of Class B common stock were issued and outstanding.

As of December 31, 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, 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.

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

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

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

As of December 31, 2023, 181,945,771 shares of Class A common stock and no shares of Class B common stock were issued and outstanding.

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

As of September 30, As of December 31,

As of March 31, As of December 31,

Stock options issued and outstanding 1,584,426 1,722,861

4 unchanged sentences

Total 58,991,310 49,331,401

Share Repurchase Program

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.

Share Repurchase Programs

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

In March 2024, the board of directors of the Company authorized a second share repurchase program for an additional $ 2.0 billion in aggregate value of its outstanding Class A common stock.

Repurchases under these programs can be made through open market, private transactions or other means, in compliance with applicable federal securities laws, and could include repurchases pursuant to Rule 10b5-1 trading plans.

The Company has discretion in determining the conditions under which shares may be repurchased from time to time.

The program expires on December 31, 2024.

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.

The programs each expire on December 31, 2024.

In the three months ended March 31, 2024 and 2023, the Company repurchased 6.1 million and 1.9 million shares of its Class A common stock, respectively, for an aggregate purchase price of $ 384.3 million and $ 125.0 million, respectively.

As of March 31, 2024, approximately $ 1.9 billion of the aggregate amount authorized under the stock repurchase programs remained available for future repurchases.

Stock-Based Compensation

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

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

(In thousands) (In years)

Unvested stock options $ 18,058 1.6

Unvested restricted stock units and awards 1,678,691 2.9

ESPP 1,296 0.1

Shares of Class A common stock in escrow subject to future vesting 1,114 0.8

Total $ 1,699,159

As of March 31, 2024, total unrecognized compensation cost related to unvested restricted stock units was $ 1.2 billion, which will be amortized over a weighted-average period of 2.6 years.

As of March 31, 2024, total unrecognized compensation cost related to unvested stock options, the ESPP, and shares of Class A common stock in escrow subject to future vesting was not significant.

Stock-Based Compensation Expense

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Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

(In thousands)

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Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Net loss attributable to common stockholders (in thousands) $ ( 55,349 ) $ ( 342,139 )

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The following outstanding shares of common stock equivalents were excluded from the calculation of the diluted net loss per share attributable to common stockholders because their effect would have been anti-dilutive:

As of September 30,

As of March 31,

Stock options issued and outstanding 1,584,426 2,007,636

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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 $ 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.

The Company recorded an income tax provision of $ 10.2 million and $ 10.5 million for the three months ended March 31, 2024 and 2023, respectively.

The provision for income taxes recorded in the three months ended March 31, 2024 consists primarily of federal, state and foreign income taxes, withholding taxes in foreign jurisdictions in which the Company conducts business, and income tax expense from a foreign audit settlement.

The provision for income taxes recorded in the three months ended March 31, 2023 consists primarily of federal, state and foreign income taxes and withholding taxes in foreign jurisdictions in which the Company conducts business, 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 Company is subject to taxation in the U.S.

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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 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.

For the three months ended March 31, 2024 and 2023, the value of the transactions that occurred between the Company and Syniverse were $ 34.0 million and $ 33.5 million, respectively.

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

5 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 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;

• our future financial performance, including expectations regarding our revenue, revenue growth, 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, the factors affecting our results of operations, the timing of future expenses, the end dates for certain types of expenses, and the assumptions underlying such expectations;

• the benefits and efficiencies we expect to derive from workforce reductions and other cost-saving initiatives, including reducing our global office footprint and stock-based compensation expense;

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

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

• the impact on our business, corporate culture, and employees as a result of our recent leadership transition;

• our expectations regarding our Segment (formerly known as Data & Applications) business, including the targets set as a result of our recent operational review of Segment, new product releases, increased investment and go-to-market focus to capture market share, and increased revenue growth;

• our expectations regarding our Communications business, including anticipated efficiencies and strategy for streamlining the customer experience, including increased focus on self-service capabilities;

2 unchanged sentences

• our anticipated investments in sales and marketing, research and development and additional systems and processes to support our growth;

• the anticipated results of our foreign currency hedging activities;

• our ability to compete effectively in an intensely competitive market, including our ability to set optimal prices for our products and adapt and respond effectively to rising costs, rapidly changing technology and evolving customer needs, requirements, and preferences;

9 unchanged sentences

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

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

• our ability to leverage artificial intelligence (“AI”) and machine learning (“ML”) and develop and deliver products that incorporate AI and ML and our expectations about CustomerAI and its potential;

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

• the sufficiency of our cash and cash equivalents to meet our liquidity needs;

• our expectations regarding our share repurchase program;

• our expectations regarding our share repurchase programs;

• our ability to maintain, protect and enhance our intellectual property;

2 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 (“IoT”) and ValueFirst businesses.

• our ability to successfully integrate acquired businesses and realize the benefits of our past or future strategic acquisitions, divestitures or investments.

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.

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